What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-07 · 624 added, 385 removed, 191 unchanged (84% of the section changed)

1 unchanged sentence

Ocuphire Pharma, Inc.

Condensed Consolidated Balance Sheets

Condensed Consolidated

Balance Sheets

(in thousands, except share amounts and par value)

1 unchanged sentence

Cash and cash equivalents

Collaborations

Prepaids and other assets

Deferred costs

Total current assets

Property and equipment, net

Liabilities and stockholders’ deficit

Liabilities and stockholders’ equity (deficit)

Current liabilities:

7 unchanged sentences

Preferred stock, par value $ 0.0001 ;

10,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

no shares issued and outstanding at March 31, 2021 and December 31, 2020.

10,000,000 shares authorized as of June 30, 2021 and December 31, 2020 ;

no shares issued and outstanding at June 30, 2021 and

December 31, 2020 .

Common stock, par value $ 0.0001 ;

75,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

10,929,881 and 10,882,495 shares issued and outstanding at March 31, 2021 and

December 31, 2020, respectively.

75,000,000 shares authorized as of June 30, 2021 and December 31, 2020;

16,891,855 and 10,882,495 shares issued and outstanding at June 30, 2021

and December 31, 2020 , respectively.

Additional paid-in-capital

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended

For the Three Months Ended

For the Six Months Ended

Collaborations

Operating expenses:

5 unchanged sentences

Interest expense

Fair value change in warrant liabilities and premium conversion derivatives

Fair value change of warrant liability and premium conversion derivatives

extinguishment

Loss before income taxes

16 unchanged sentences

Balance at March 31, 2020

Gain on note extinguishment

Share–based compensation

Net and comprehensive loss

Balance at June 30, 2020

Balance at December 31, 2020

4 unchanged sentences

Balance at March 31, 2021

Issuance of common stock and warrants in connection with registered direct offering

Issuance of common stock in connection with the at-the-market program

Issuance of common stock in connection with settlement with investors

Issuance costs

Share–based compensation

Exercise of Series B warrants

Net and comprehensive loss

Balance at June 30, 2021

See accompanying notes.

Ocuphire Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

Condensed Consolidated Statements of

(in thousands)

Three Months Ended

Six Months Ended

Operating activities

7 unchanged sentences

Fair value change in warrant liabilities and premium conversion derivatives

Non-cash share settlement with investors

Gain on note extinguishment

Change in assets and liabilities:

Collaborations receivable

Prepaid expenses and other assets

5 unchanged sentences

Financing activities

Proceeds from issuance of common stock – registered direct offering

Proceeds from issuance of common stock – at-the-market program

Proceeds from issuance of convertible notes

Issuance costs

Deferred offering costs

Exercise of stock options

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

13 unchanged sentences

Ocuphire Pharma, Inc.

(together with its subsidiary OcuSub, Inc., the "Company" or "Ocuphire”) is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the

treatment of several eye disorders.

(together with its subsidiary OcuSub, Inc., the

"Company" or "Ocuphire”) is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of several eye disorders.

The Company’s pipeline currently includes two small molecule product candidates targeting front and back of the eye indications.

The Company’s lead product candidate, Nyxol® Eye Drops (“Nyxol”), is a once-daily

eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity.

The Company’s second product candidate, APX3330, is a twice-a-day oral tablet, designed to target multiple pathways relevant to retinal and

choroidal vascular diseases, such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”).

The Company has also in-licensed additional second-generation product candidates, analogs of APX3330, including APX2009 and APX2014.

The Company has sustained operating losses since inception and expects such losses to continue indefinitely until a sustained revenue source is realized.

Management plans to continue financing the Company’s

operations through additional issuances of the Company’s equity and debt securities.

If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate part or all of its research and development programs.

The Company’s lead product candidate, Nyxol® Eye Drops

(“Nyxol”), is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity.

The Company’s second product candidate, APX3330, is a twice-a-day oral tablet, designed to target multiple

pathways relevant to retinal and choroidal vascular diseases, such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”).

The Company has also in-licensed additional second-generation product candidates, analogs of APX3330,

including APX2009 and APX2014.

The Company has sustained operating losses since inception and expects

such losses to continue indefinitely until a sustained revenue source is realized.

Management plans to continue financing the Company’s operations primarily through additional issuances of the Company’s equity and debt securities.

adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate part or all of its research and development programs.

Reverse Merger with Rexahn

On June 17, 2020, Ocuphire, Rexahn Pharmaceuticals, Inc.

(“Rexahn”), and Razor Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Rexahn (“Merger Sub”), entered into an Agreement and Plan of

Merger and Reorganization, as amended on June 29, 2020 (as amended, the “Merger Agreement”), pursuant to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub would

merge with and into Ocuphire, with Ocuphire continuing as a wholly-owned subsidiary of Rexahn and the surviving corporation of the merger (the “Merger”).

(“Rexahn”), and

Razor Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Rexahn (“Merger Sub”), entered into an Agreement and Plan of Merger and Reorganization, as amended on June 29, 2020 (as amended, the “Merger Agreement”), pursuant

to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub would merge with and into Ocuphire, with Ocuphire continuing as a wholly-owned subsidiary of Rexahn

and the surviving corporation of the merger (the “Merger”).

The Merger closed on November 5, 2020.

Upon completion of the Merger, Rexahn changed its name

to Ocuphire Pharma, Inc.

and changed its ticker symbol on the Nasdaq Capital Market to "OCUP".

Upon completion of the Merger, Rexahn changed its name to Ocuphire Pharma, Inc.

and changed its ticker symbol on the Nasdaq Capital Market

The Company’s headquarters is located in Farmington Hills, Michigan.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States and around the world.

As a result of the COVID-19

pandemic, Ocuphire has experienced a few disruptions in its manufacturing, supply chain, research and development operations, regulatory process, and financial position.

These disruptions include the acceleration of shipment of active

pharmaceutical ingredient supply from overseas, increased costs of supply ingredients, the convening of an FDA EOP2 meeting via teleconference, and difficulties in obtaining more favorable financing terms.

The global outbreak of COVID-19 continues

to rapidly evolve.

The extent to which the COVID-19 pandemic may impact Ocuphire’s business and preclinical and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the

duration of the outbreak, travel restrictions and social distancing in the U.S.

and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S.

On March 11, 2020, the World Health Organization declared the outbreak of

COVID-19 as a global pandemic.

As a result of the COVID-19 pandemic, Ocuphire has experienced, and will likely continue to experience, disruptions in its manufacturing, supply chain, research and development operations, clinical enrollment,

regulatory process, financial position and financing terms.

The global outbreak of COVID-19 continues to rapidly evolve.

The extent to which the COVID-19 pandemic may impact Ocuphire’s business and preclinical and clinical trials will

depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions and social distancing in the U.S.

and other countries, business closures or

business disruptions and the effectiveness of actions taken in the U.S.

and other countries to contain and treat the disease.

Although Ocuphire cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on Ocuphire’s results of future operations, financial position, and

liquidity over the next 12 or more months.

Notes to Condensed Consolidated Financial Statements

Although Ocuphire cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if

the pandemic continues, it may have a material adverse effect on Ocuphire’s results of future operations, financial position, and liquidity over the next 12 or more months.

Basis of Presentation

The accompanying condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Certain information and

footnote disclosures normally included in financial statements prepared in accordance with U.S.

generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.

The December 31, 2020 condensed balance sheet was derived from audited financial statements, and may not include all disclosures required by GAAP;

however, the Company believes that the disclosures are adequate to

make the information presented not misleading.

These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2020.

In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim

periods, have been made.

The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

The condensed consolidated financial statements of the Company include a subsidiary, OcuSub, Inc., which is fully owned by the Company.

All significant intercompany accounts and transactions have been eliminated in

the preparation of the financial statements.

All of the share and per share amounts presented were adjusted, on a retroactive basis, to reflect the exchange of the shares of Ocuphire pre-Merger (“Private Ocuphire”) into 1.0565 shares of the Company (the

“Exchange Ratio”), except for par value and share authorizations of Private Ocuphire for periods presented prior to the Merger.

The accompanying condensed financial statements have been prepared by the Company, without

audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

generally accepted

accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.

The December 31, 2020 condensed balance sheet was derived from audited financial statements,

and may not include all disclosures required by GAAP;

however, the Company believes that the disclosures are adequate to make the information presented not misleading.

These unaudited condensed financial statements should be read in

conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2020.

In the opinion of management, all adjustments, consisting of only normal recurring adjustments

that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made.

The results of operations for the interim periods are not necessarily indicative of the operating

results for the full fiscal year or any future periods.

The condensed consolidated financial statements of the Company include a subsidiary, OcuSub,

Inc., which is wholly owned by the Company.

All significant intercompany accounts and transactions have been eliminated in the preparation of the condensed consolidated financial statements.

All of the share and per share amounts presented were adjusted, on a retroactive basis, to

reflect the exchange of each share of Ocuphire pre-Merger (“Private Ocuphire”) into 1.0565 shares of the Company (the “Exchange

Ratio”), except for par value and share authorizations of Private Ocuphire for periods presented prior to the Merger.

Notes to Condensed Consolidated Financial Statements

Going Concern

The Company’s ability to continue operating as a going concern is contingent upon, among other things, its ability to secure additional financing and to achieve and maintain profitable operations.

The Company plans

to issue additional equity instruments and possibly debt to finance operating and working capital requirements.

While the Company expects to obtain the additional financing that is needed, there is no assurance that the Company will be successful

in obtaining the necessary funding for future operations.

These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments that might

result from the outcome of these uncertainties.

The Company’s ability to continue operating as a going concern is contingent upon, among other

things, its ability to secure additional financing and to achieve and maintain profitable operations.

The Company plans to issue additional equity instruments and possibly debt to finance operating and working capital requirements.

the Company expects to obtain the additional financing that is needed, there is no assurance that the Company will be successful in obtaining the necessary funding for future operations.

These factors raise substantial doubt as to the

Company’s ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original

maturity of 90 days or less at the time of deposit to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and

cash equivalents.

The Company’s cash is held by one financial institution in the United States.

Amounts on deposit may at times exceed federally insured limits.

Management believes that the financial institution is financially sound, and

accordingly, minimal credit risk exists with respect to the financial institution.

As of June 30, 2021, the Company had deposits that exceeded federally insured amounts by $ 23.9 million.

Common Stock Valuation

Prior to the close of the Merger, due to the absence of an active market for the Private Ocuphire’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of

Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , to estimate the fair value of Private Ocuphire common stock.

The valuation

methodology included estimates and assumptions that required the Company’s judgment.

These estimates and assumptions included a number of objective and subjective factors, including external market conditions affecting the biotechnology industry

sector, and the likelihood of achieving a liquidity event, such as an initial public offering (“IPO”), reverse merger or sale.

Significant changes to the key assumptions used in the valuations resulted in different fair values of common stock at

each valuation date.

Prior to the close of the Merger, due to the absence of an active market for Private

Ocuphire’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held

Company Equity Securities Issued as Compensation , to estimate the fair value of Private Ocuphire common stock.

The valuation methodology included estimates and assumptions that required the Company’s judgment.

These estimates and

assumptions included a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, and the likelihood of achieving a liquidity event, such as an initial public offering

(“IPO”), reverse merger or sale.

Significant changes to the key assumptions used in the valuations resulted in different fair values of common stock at each valuation date.

Allowances for Doubtful Accounts

The Company records a provision for doubtful accounts, when appropriate, based on historical experience and a detailed assessment of the collectability of its accounts receivable.

In estimating the allowance for doubtful

accounts, the Company considers, among other factors, the aging of the accounts receivable, its historical write-offs, the credit worthiness of each customer, and general economic conditions.

Account balances are charged off against the

allowance when the Company believes that it is probable that the receivable will not be recovered.

Actual write-offs may be in excess of the Company’s estimated allowance.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial

statements and accompanying notes.

The preparation of condensed consolidated financial statements in conformity with GAAP

requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

Revenue Recognition

The Company follows the provisions of Accounting Standards Codification (“ASC”) 606 , Revenue from Contracts with Customers.

The guidance provides a five step model to determine how

revenue is recognized.

The Company has entered into license agreements which have revenue recognition implications.

(See Note 5 – Collaboration License Agreements.)

In determining the appropriate amount of revenue to be recognized, the Company performs the following steps:

(i) identification of the contracts with a

(ii) determination of the performance obligations in the contract;

(iii) measurement of the transaction price, including potential constraints on variable consideration;

(iv) allocation of the transaction price to the

performance obligations based on estimated stand-alone selling prices;

and (v) recognition of revenue when (or as) the Company satisfies a performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or

service to the customer and is the unit of account in ASC 606.

Performance obligations may include license rights, development services, and services associated with regulatory submission and approval processes.

Significant management

judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement.

If the Company cannot reasonably estimate

when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates.

Revenue is then recognized over the remaining estimated period

of performance using the cumulative catch-up method.

Notes to Condensed Consolidated Financial

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price

of each performance obligation identified in the contract.

The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs,

discount rates and probabilities of technical and regulatory success.

The Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised goods or

service underlying each performance obligation.

Licenses of intellectual property:

If the license to the Company’s intellectual property is determined to be distinct from the other performance

obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license.

For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in

time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts

the measure of performance and related revenue recognition.

Milestone payments:

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered

probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the value of the associated milestone

(such as a regulatory submission) is included in the transaction price.

Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until such contingency occurs (such as receipt of those

When the Company’s assessment of probability of achievement changes and variable consideration becomes probable, any additional estimated consideration is allocated to each performance obligation based on the

estimated relative standalone selling prices of the promised goods or service underlying each performance obligation and recorded in license, collaboration, and other revenues based upon when the customer obtains control of each element.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed

to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has

been satisfied (or partially satisfied).

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate

resources and assessing performance.

Operating segments are components of an enterprise for which separate financial information

is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance.

The Company’s chief operating decision maker is its Chief Executive Officer.

The Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is the

business of development and commercialization of products related to vision performance and health.

Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is

the business of development and commercialization of products related to vision performance and health.

Accordingly, the Company has a single reporting segment.

Fair Value Measurements

The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity-specific measurement.

Fair value is defined as “the price that would be received to sell an asset

or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements are defined on a three-level hierarchy:

Level 1 inputs:

Unadjusted quoted prices for identical assets or liabilities in active markets;

Notes to Condensed Consolidated Financial Statements

The Company follows accounting guidance that emphasizes that fair value is a market-based

measurement, not an entity-specific measurement.

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

Fair value measurements are defined on a three-level hierarchy:

Level 1 inputs:

Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, whether directly or indirectly, for substantially the full term of the asset or

Unadjusted quoted prices for identical

assets or liabilities in active markets;

Level 2 inputs:

Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which

there is little, if any, market activity for the asset or liability at the measurement date.

As of March 31, 2021 and December 31, 2020, the fair values of cash and cash equivalents, prepaid and other assets, deferred costs, accounts payable and accrued expenses approximated their carrying values because of

the short-term nature of these assets or liabilities.

The estimated fair value of the Company’s convertible notes while outstanding were based on amortized cost which was deemed to approximate fair value.

The fair value of the warrant liabilities

and premium conversion derivatives, while outstanding, were based on cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar

instruments and were based on Level 3 inputs.

There were no transfers between fair value hierarchy levels during the three months ended March 31, 2021 and 2020.

The fair value of financial instruments measured on a recurring basis is as follows (in thousands):

As of March 31, 2021

Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not

active, or inputs which are observable, whether directly or indirectly, for substantially the full term of the asset or liability;

Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the

measurement date.

As of June 30, 2021 and December 31, 2020, the fair

values of cash and cash equivalents, accounts receivable prepaid and other assets, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these assets or liabilities.

The estimated fair

value of the Company’s convertible notes while outstanding were based on amortized cost which was deemed to approximate fair value.

The fair value of the warrant liabilities and premium conversion derivatives, while outstanding, were based

on cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and were based on Level 3 inputs.

There were no transfers between fair value hierarchy levels during the three and six months ended June 30, 2021 and 2020.

Notes to Condensed Consolidated Financial Statements

The fair value of financial instruments measured on a

recurring basis is as follows (in thousands):

As of June 30, 2021

Warrant liabilities

3 unchanged sentences

Total liabilities at fair value

The following table provides a roll-forward of the warrant liabilities and premium conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the three months ended March

31, 2021 and 2020 (in thousands):

The following table provides a roll-forward of the

warrant liabilities and premium conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the six months ended June 30, 2021 and 2020 (in thousands):

Warrant liabilities

6 unchanged sentences

Value assigned to the underlying derivatives in connection with convertible notes

Revaluation due to convertible note extinguishment

Change in fair value of premium conversion derivatives

2 unchanged sentences

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses” .

The ASU sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit

losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of

credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures.

Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023.

Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which, among other things, provides guidance on how to account for contracts on an entity’s own equity.

This ASU eliminates the beneficial conversion

and cash conversion accounting models for convertible instruments.

Accounting for Convertible Instruments and Contracts in an Entity’s

Own Equity , which, among other things, provides guidance on how to account for contracts on an entity’s own equity.

This ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.

It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions.

this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

The amendments in this ASU are effective for smaller reporting companies (as defined by the

SEC) for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

In addition, this ASU modifies how particular convertible instruments

and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

The amendments in this ASU are effective for smaller reporting companies (as defined by the SEC) for fiscal years beginning after December 15,

2023, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company is currently evaluating the

impact of ASU 2020-06 on its consolidated financial statements.

The Company is currently evaluating the impact of ASU 2020-06 on its consolidated

financial statements.

Notes to Condensed Consolidated Financial Statements

On November 5, 2020, the Company completed its merger transaction with Rexahn in accordance with the terms of the Merger Agreement.

Immediately after the Merger, there were approximately 7,091,878 shares of the

Company’s common stock, par value $0.0001 per share (the “Common Stock”) outstanding (not including 3,749,992 Additional Shares under the Securities Purchase Agreement that were held in escrow subject to final adjustment).

The former stockholders

and option holders of Private Ocuphire (including the Investors under the Securities Purchase Agreement) owned, or held rights to acquire, in the aggregate approximately 86.6% of the fully-diluted Common Stock, which for these purposes is defined

as the outstanding Common Stock, plus outstanding options of the Company, and not including any Additional Shares (the “Fully-Diluted Common Stock”), with the former Rexahn stockholders immediately prior to the Merger owning approximately 13.4% of

the Fully-Diluted Common Stock.

Pursuant to the Merger Agreement, the number of shares of Common Stock issued to Private Ocuphire’s stockholders for each share of Ocuphire’s common stock outstanding immediately prior to the Merger was calculated

using an Exchange Ratio of approximately 1.0565 shares of Common Stock for each share of Private Ocuphire common stock.

Immediately following the Merger, the stockholders of Private Ocuphire owned approximately 86.6% of the outstanding common stock

of the Company.

The transaction was accounted for as an asset acquisition in accordance with GAAP.

On November 5, 2020, the Company

completed its merger transaction with Rexahn in accordance with the terms of the Merger Agreement.

Immediately after the Merger, there were approximately 7,091,878 shares of the Company’s common stock, par value $ 0.0001 per

share (the “Common Stock”) outstanding (not including 3,749,992 Additional Shares under the Securities Purchase Agreement that

were held in escrow subject to final adjustment).

The former stockholders and option holders of Private Ocuphire (including the Investors under the Securities Purchase Agreement) owned, or held rights to acquire, in the aggregate

approximately 86.6 % of the fully-diluted Common Stock, which for these purposes is defined as the outstanding Common Stock, plus

outstanding options of the Company, and not including any Additional Shares (the “Fully-Diluted Common Stock”), with the former Rexahn stockholders immediately prior to the Merger owning approximately 13.4 % of the Fully-Diluted Common Stock.

Pursuant to the Merger Agreement, the number of shares of Common Stock issued to Private Ocuphire’s

stockholders for each share of Ocuphire’s common stock outstanding immediately prior to the Merger was calculated using an Exchange Ratio of approximately 1.0565 shares of Common Stock for each share of Private Ocuphire common stock.

Immediately following the Merger, the stockholders of Private Ocuphire owned approximately 86.6 % of the outstanding common stock of the Company.

The transaction was accounted for as

an asset acquisition in accordance with GAAP.

Under this method of accounting, Private Ocuphire was deemed to be the accounting acquirer for financial reporting purposes.

determination was primarily based on the facts that, immediately following the Merger:

(i) Private Ocuphire’s stockholders owned substantially all of the voting rights in the combined company, (ii) Private Ocuphire designated all, but one, of the

members of the initial board of directors of the combined company, and (iii) Private Ocuphire’s senior management holds all key positions in the senior management of the combined company.

As a result, as of the closing date of the Merger, the net

assets of Rexahn were recorded at their acquisition-date relative fair values in the consolidated financial statements of the Company and the reported operating results prior to the Merger are those of Private Ocuphire.

This determination was primarily based on the facts that, immediately

following the Merger:

(i) Private Ocuphire’s stockholders owned substantially all of the voting rights in the combined company, (ii) Private Ocuphire designated all, but one , of the members of the initial board of directors of the combined company, and (iii) Private Ocuphire’s senior management held all key positions in the senior management of the

combined company.

As a result, as of the closing date of the Merger, the net assets of Rexahn were recorded at their acquisition-date relative fair values in the consolidated financial statements of the Company and the reported operating

results prior to the Merger are those of Private Ocuphire.

Contingent Value Rights Agreement

On November 5, 2020, in connection with the Merger, the Company, Shareholder Representatives Services LLC, as representative of the Rexahn stockholders prior to the Merger, and Olde Monmouth Stock Transfer Co., Inc.,

as the rights agent, entered into a Contingent Value Rights Agreement (the “CVR Agreement”).

Pursuant to the Merger Agreement and the CVR Agreement, Rexahn stockholders of record as of immediately prior to the Effective Time received one contingent value right (“CVR”) for each share of Rexahn Common Stock

Each CVR entitles such holders to receive, for each calendar quarter (each, a “CVR Payment Period”) during the 15-year period after the Closing (the “CVR Term”), an amount equal to the following:

90% of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of BioSense Global LLC (“BioSense”) pursuant to that certain License and Assignment Agreement, dated as of February 25, 2019, by

and between BioSense and Rexahn, as amended by Amendment No.

On November 5, 2020, in connection

with the Merger, the Company, Shareholder Representatives Services LLC, as representative of the Rexahn stockholders prior to the Merger, and Olde Monmouth Stock Transfer Co., Inc., as the rights agent, entered into a Contingent Value

Rights Agreement (the “CVR Agreement”).

Pursuant to the Merger Agreement and

the CVR Agreement, Rexahn stockholders of record as of immediately prior to the Effective Time received one contingent value

right (“CVR”) for each share of Rexahn Common Stock held.

Each CVR entitles such holders to

receive, for each calendar quarter (each, a “CVR Payment Period”) during the 15 -year period after the Closing (the “CVR Term”),

an amount equal to the following:

90 % of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of BioSense Global LLC (“BioSense”) pursuant to that

certain License and Assignment Agreement, dated as of February 25, 2019, by and between BioSense and Rexahn, as amended by Amendment No.

1, dated August 24, 2019, and as further amended by Amendment No.

2, dated March 10, 2020, minus certain permitted deductions;

2, dated March 10, 2020,

minus certain permitted deductions;

90 % of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of Zhejiang HaiChang Biotechnology Co., Ltd.

(“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of

February 8, 2020, by and between HaiChang and Rexahn, minus certain permitted deductions;

75% of the sum of (i) all cash consideration paid by a third party to Rexahn or its affiliates during the applicable CVR Payment Period in connection with the grant, sale or transfer of rights to Rexahn’s pre-Closing intellectual

property (other than a grant, sale or transfer of rights involving a sale or disposition of the post-Merger combined company) that is entered into during the 10-year period after the Closing (“Parent IP Deal”), plus (ii) with respect to

any non-cash consideration received by Rexahn or its affiliates from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn and its affiliates for such non-cash

consideration at the time such non-cash consideration is monetized by Rexahn or its affiliates, minus (iii) certain permitted deductions.

The CVRs are not transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading

on any exchange.

The CVR Agreement will continue in effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder.

As of the November 5, 2020, the Merger closing date, and March 31, 2021, no milestones had been

accrued as there were no potential milestones yet considered probable.

(“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of February 8, 2020, by and between HaiChang and Rexahn, minus certain permitted deductions;

75 % of the sum of (i) all cash consideration paid by a third party to Rexahn or its affiliates during the applicable CVR Payment Period in connection with the

grant, sale or transfer of rights to Rexahn’s pre-Closing intellectual property (other than a grant, sale or transfer of rights involving a sale or disposition of the post-Merger combined company) that is entered into during the 10 -year period after the Closing (“Parent IP Deal”), plus (ii) with respect to any non-cash consideration received by Rexahn or its

affiliates from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn and its affiliates for such non-cash consideration at the time such non-cash

consideration is monetized by Rexahn or its affiliates, minus (iii) certain permitted deductions.

The Processa License Agreement is a Parent IP Deal.

The CVRs are not transferable,

except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading on any exchange.

The CVR Agreement will continue in

effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder.

No payments were due under the CVR Agreement as of June 30, 2021.

As of the November 5, 2020, the

Merger closing date, and June 30, 2021, no milestones under the Merger Agreement had been accrued as there were no potential milestones yet considered probable.

Former Rexahn Warrants

Following the closing of the Merger, 231,433 outstanding, unexercised Rexahn warrants to purchase Common Stock remained outstanding upon close of the Merger, the majority of which were subsequently repurchased according to the terms of the

original warrant agreements.

As of March 31, 2021, 66,538 of the Rexahn warrants remained outstanding with exercise prices ranging from $38.40 to $198.00 per share with an average remaining contractual life of 2.7 years.

Upon the closing of the Merger, 231,433 unexercised Rexahn warrants to purchase Common Stock remained outstanding, the majority of which were subsequently repurchased

according to the terms of the original warrant agreements.

As of June 30, 2021, 66,538 of the Rexahn warrants remained

outstanding with exercise prices ranging from $ 38.40 to $ 198.00 per share with an average remaining contractual life of 2.4

Notes to Condensed Consolidated Financial Statements

Pre-Merger Financing

Waiver Agreements

Effective February 3, 2021, each investor that invested in the Pre-Merger Financing (as defined below) entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”).

Pursuant to the Waiver

Agreements, the investors and the Company agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate certain financing restrictions, extend the term of certain leak-out agreements,

and, in the case of certain investors, grant certain registration rights for the shares underlying the warrants.

The Waiver Agreements provide for the elimination of the full ratchet anti-dilution provisions, contained in the Series A Warrants (as certain of the anti-dilution provisions had previously caused liability

accounting treatment for the Series A Warrants).

Upon the effective date of the Waiver Agreement, the Series A Warrants were reclassified to equity.

Pursuant to the Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed to 1,708,334 in the aggregate with respect to all investors, eliminating any future resets.

Securities Purchase Agreement

On June 17, 2020, Ocuphire, Rexahn and certain investors entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the “Securities

Purchase Agreement”).

Pursuant to the Securities Purchase Agreement, the investors invested a total of $21.15 million in cash, including $300,000 invested by five directors of Private Ocuphire and one director of Rexahn, upon closing of the Merger

(the “Pre-Merger Financing”).

Pursuant to the Pre-Merger Financing, (i) Ocuphire issued and sold to the investors shares of Private Ocuphire common stock (the “Initial Shares”) which converted pursuant to the exchange ratio in the Merger into an

aggregate of approximately 1,249,996 shares (the “Converted Initial Shares”) of common stock, (ii) Ocuphire deposited into escrow, for the benefit of the Investors, additional shares of Private Ocuphire common stock (the “Additional Shares”) which

converted pursuant to the exchange ratio in the Merger into an aggregate of approximately 3,749,992 shares of common stock (the “Converted Additional Shares”), which Converted Additional Shares were delivered (or became deliverable) to the

investors on November 19, 2020, and (iii) the Company agreed to issue to each investor on the tenth trading day following the consummation of the Merger (x) Series A Warrants representing the right to acquire shares of common stock equal to the sum

of (A) the Converted Initial Shares purchased by the investor, (B) the Converted Additional Shares delivered or deliverable to the investor, without giving effect to any limitation on delivery contained in the Securities Purchase Agreement and (C)

the initial number of shares of common stock, if any, underlying the Series B Warrants issued to the Investor and (y) additional warrants to purchase shares of common stock.

Series A Warrants

The Series A Warrants were issued on November 19, 2020 at an initial exercise price of $4.4795 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance.

A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein).

Prior to the execution of the Waiver Agreements, the Series A Warrants were accounted for and

classified as liabilities on the accompanying condensed consolidated balance sheets given certain price reset provisions not used for a fair valuation under a fixed for fixed settlement scenario as required for equity balance sheet classification.

Upon the February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity.

A final fair valuation of the Series A Warrants was performed utilizing a Black Scholes model to estimate the aggregate fair value

of the Series A Warrants prior to being re-classified as equity.

Input assumptions used were as follows:

risk-free interest rate 0.4%;

expected volatility of 86.6%;

expected life of 4.8 years;

and expected dividend yield zero percent.

underlying stock price used was the market price as quoted on Nasdaq as of February 3, 2021, the effective date of the Waiver Agreement.

The fair value change of the Series A Warrants was $33.8 million and was recorded to the fair value change in

warrant liabilities and premium conversion derivatives line item on the accompanying condensed consolidated statements of comprehensive loss for the three months ended March 31, 2021.

As a result of the reclassification to equity, the Series A

Warrants are no longer subject to remeasurement.

Series B Warrants

The Series B Warrants have an exercise price of $0.0001, were exercisable upon issuance and will expire on

the day following the later to occur of (i) the Reservation Date (as defined therein), and (ii) the date on which the investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein)

and no shares remain issuable thereunder.

The Series B Warrants are fixed and were exercisable for 1,708,334 shares of Common Stock, as of the effective date of the Waiver Agreement, in the aggregate (without giving effect to any limitation on

exercise contained therein).

The Series B Warrants were accounted for and classified as equity on the accompanying condensed consolidated balance sheets.

Commitments and Contingencies

Apexian Sublicense Agreement

On January 21, 2020, the Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc., pursuant to which it obtained exclusive worldwide patent and other intellectual property rights.

for the patent and other intellectual rights, the Company agreed to certain milestone payments and royalty payments on future sales (See Note 9 — Apexian Sublicense Agreement).

As of March 31, 2021, there was sufficient uncertainty with regard to

both the outcome of the relevant clinical trials and the ability of the Company to obtain sufficient funding to support any of the cash milestone payments under the sublicense agreement, that no liabilities were recorded related to the sublicense

Notes to Condensed Consolidated Financial Statements

On January 21, 2020, the Company entered into a

sublicense agreement with Apexian Pharmaceuticals, Inc., pursuant to which it obtained exclusive worldwide patent and other intellectual property rights.

In exchange for the patent and other intellectual rights, the Company agreed to

certain milestone payments and royalty payments on future sales (See Note 9 — Apexian Sublicense Agreement).

As of June 30, 2021, there was sufficient uncertainty with regard to both the outcome of the relevant clinical trials and the

ability of the Company to obtain sufficient funding to support any of the cash milestone payments under the sublicense agreement that no liabilities were recorded related to the sublicense agreement.

Facility Leases

In May 2019, the Company entered into a short-term non-cancellable facility lease (the “Lease”) for its operations and headquarters for a seven-month term beginning in June 2019.

In October 2019 and November 2020,

the Lease was amended to ultimately extend the term to December 31, 2021.

Additionally, Ocuphire is leasing office space in Rockville, Maryland previously occupied by Rexahn (the “Rexahn Lease”).

The Lease and the Rexahn Lease qualified for the

short-term lease exception under ASC 842.

The monthly base rent is approximately $3,000 and $13,000 for the Lease and Rexahn Lease, respectively.

The rent expense associated with the Lease and Rexahn Lease in the aggregate amounted to $48,000 and

$9,000 during the three months ended March 31, 2021 and 2020, respectively.

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations, patent infringement and other claims.

addition, the Company from time to time may be potentially committed to reimburse third parties for costs incurred associated with business development related transactions upon the achievement of certain milestones.

The Company establishes

accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated.

To date, no loss contingency for such matters and potential commitments have been recorded.

Although it is not possible to

predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material adverse effect on its results of operations

or financial position.

In May 2019, the Company entered into a short-term

non-cancellable facility lease (the “Lease”) for its operations and headquarters for a seven-month term beginning in June 2019.

In October 2019 and November 2020, the Lease was amended to ultimately extend the term to December 31, 2021.

Additionally, Ocuphire leased office space in Rockville, Maryland through June 30, 2021 previously occupied by Rexahn (the “Rexahn

The Lease and the Rexahn Lease qualified for the short-term lease exception under ASC 842.

The monthly base rent is approximately $ 3,000

and $ 13,000 for the Lease and Rexahn Lease, respectively.

The rent expense associated with the Lease and Rexahn Lease in the

aggregate amounted to $ 50,000 and $ 9,000 during the three months ended June 30, 2021 and 2020, respectively.

The rent expense associated with the Lease and Rexahn Lease amounted to $ 98,000 and $ 18,000 during the six months ended June 30, 2021 and 2020, respectively.

Issuance of Settlement Shares

On May 6, 2021, the Company issued 350,000

shares of common stock of the Company to three accredited investors pursuant to a settlement agreement, dated May 6, 2021, in

exchange for a release of potential claims.

The fair value of the share settlement of $ 1,614,000 was based on the closing

Ocuphire stock price for that day.

The fair value of the share settlement was recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive loss.

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that

relate to contractual allegations, patent infringement and other claims.

In addition, the Company from time to time may be potentially committed to reimburse third parties for costs incurred associated with business development related

transactions upon the achievement of certain milestones.

The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated.

To date, no loss contingency for

such matters and potential commitments have been recorded.

Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these

matters and potential commitments will not have a material adverse effect on its results of operations or financial position.

Supplemental Balance Sheet Information

Prepaid and Other Assets

Prepaid and other assets consist of the following (in thousands):

Prepaid and other assets consist of the following (in

Total prepaids and other assets

Property and Equipment, net

Property and equipment held for use by category are presented in the following table (in thousands):

Property and equipment held for use by category are

presented in the following table (in thousands):

Total property and equipment

1 unchanged sentence

Property and equipment, net

Depreciation expense was $1,000 and $5,000 for the three months ended March 31, 2021 and 2020, respectively.

expense was $ 1,000 for the three months ended June 30, 2021 and 2020, and $ 2,000 and $ 6,000 for the six

months ended June 30, 2021 and 2020, respectively.

Notes to Condensed Consolidated Financial Statements

Accrued Expenses

2 unchanged sentences

Professional services

Deferred issuance costs

Collaboration and License Agreements

BioSense License and Assignment Agreement

On March 10, 2020, pre-Merger, Rexahn entered into an amendment to its collaboration and license agreement, (as amended, the “BioSense License and Assignment Agreement”) with BioSense to advance the development and

commercialization of RX-3117 for all human uses in the Republic of Singapore, China, Hong Kong, Macau, and Taiwan (the “BioSense Territory”).

Under the terms of the BioSense License and Assignment Agreement, the Company (i) granted BioSense an exclusive license to develop and

commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the BioSense Territory and (ii) assigned and transferred all of the former Rexahn patents and patent applications related to RX-3117 in the

BioSense Territory.

The upfront payment consisted of an aggregate of $ 1,650,000 ,

of which $ 1,550,000 was paid to Rexahn prior to the Merger.

During the three months ended June 30, 2021, the Company satisfied a performance obligation for the $ 100,000 payment that was remaining and recorded this amount as collaboration revenue.

The Company received payments from BioSense of $ 50,000 in April 2021 and $ 50,000 in

Under the BioSense License and Assignment Agreement, the Company is eligible to receive additional milestone payments in an aggregate of up to $ 84,500,000 upon the achievement of development, regulatory and commercial goals and will also be eligible to receive tiered royalties at low double-digit rates on annual net sales in the BioSense Territory.

The Company determined that none of milestone payments under the BioSense License and

Assignment Agreement were probable of payment as of June 30, 2021, and as a result, no revenue related to the milestones was

recognized as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control.

Future sales-based royalties related to the exclusive license to develop RX-3117

will be recognized in the period the underlying sales transaction occurs.

Payments received under the BioSense License and Assignment Agreement are subject to the CVR Agreement described in Note 2 – Merger.

Processa License Agreement

On June 16, 2021, the Company entered into a license agreement (the “Processa License Agreement”) with Processa Pharmaceuticals, Inc.

(“Processa”), pursuant to which the Company has agreed to grant Processa an exclusive license to develop, manufacture and commercialize RX-3117 globally, excluding the BioSense Territory.

As consideration for the Processa License Agreement, the Company received an upfront payment in July 2021 consisting of 44,689 shares of Processa common stock and a $ 200,000 cash

As additional consideration, Processa will make payments to the Company upon the achievement of

certain development and regulatory milestones, which primarily consist of dosing a patient in pivotal trials or having a drug indication approved by a regulatory authority in the United States or another country.

In addition, Processa will

pay the Company mid-single-digit royalties based on annual sales under the license and will make one -time sales milestone payments

based on the achievement during a calendar year of certain thresholds for annual sales.

Processa is also required to give the Company 32 %

of any milestone payments received based on any sub-license agreement Processa may enter into

with respect to the Processa Licensing Agreement.

Processa is required to use commercially reasonable efforts, at its sole cost and expense, to conduct development activities in one or more countries, including meeting specific diligence milestones that consist of:

(i) first patient administered drug in a clinical trial of a

licensed product prior to the three ( 3 )

year anniversary of the effective date;

and (ii) first patient administered drug in a pivotal clinical trial of a licensed product or first patient administered drug in a clinical trial for a second indication of a licensed product prior to the

five ( 5 ) year

anniversary of the effective date.

Either party may terminate the agreement in the event of a material breach of the agreement that has not been cured following written notice and a 120 -day opportunity to cure such breach, and Processa may terminate the agreement for any reason upon 120 days prior written notice to Ocuphire.

As of June 30,

2021, the Company has not yet fulfilled its performance obligations under the Processa License Agreement and has no t recognized any

related revenue.

Payments received under the Processa License Agreement will be subject to the CVR Agreement described in Note 2 – Merger.

Notes to Condensed Consolidated Financial Statements

Convertible Notes

The Company entered into a series of unsecured convertible note financings (the “Convertible Notes”) with certain investors beginning on May 25, 2018.

The total issuance of Convertible Notes amounted to $8.5 million

(see Note 7 - Related Party Transactions).

On November 4, 2020, all of Ocuphire’s outstanding Convertible Notes were converted into 977,128 shares of Ocuphire common stock as adjusted for the Exchange Ratio in connection with the completion of the

The Convertible Notes accrued interest at a rate of 8% per annum, calculated on a 365-day year basis.

Interest expense on principal during the three months ended March 31, 2020 was $138,000.

The outstanding principal of, and accrued interest on, the Convertible Notes were payable on demand, in the absence of the Merger closing discussed above, at any time as of the first to occur of (i) September 30,

2020 or (ii) an event of default (each defined by the Convertible Notes as a Payoff Event).

If, prior to a Payoff Event, the Company (i) completed an initial public offering (“IPO”), (ii) completed a change in control (“CIC”), (iii) completed a

sale and issuance of its capital stock resulting in gross proceeds to the Company of at least $5 million (“Qualified Financing”), or (iv) completed a reverse merger transaction (Reverse Merger), then the outstanding principal of, and accrued but

unpaid interest on the Convertible Notes would have automatically converted upon the earliest of such events to occur as follows:

The Convertible Notes would have automatically converted into the number of fully paid and non-assessable shares of the Company’s common stock equal to One Hundred and Seventy-Five Percent

(175%) times Note Value divided by the per share price such shares were issued to purchasers of the Company’s equity securities in the IPO rounded to the nearest whole share.

The Convertible Notes would have automatically converted prior to the effectiveness of such CIC into that number of fully paid and non-assessable shares of the Company’s common stock equal to

Two Hundred Percent (200%) of the Note Value divided by the per share price of the Company’s common stock at which the Company’s common stock was valued in such CIC (after giving effect to such conversion).

The Convertible Note holder would

have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as the other stockholders of the Company in such CIC.

entered into a series of unsecured convertible note financings (the “Convertible Notes”) with certain investors beginning on May 25, 2018.

The total issuance of Convertible Notes amounted to $ 8.5 million (see Note 10 - Related Party Transactions).

The Convertible

Notes accrued interest at a rate of 8 % per annum, calculated on a 365-day year basis.

Interest expense on principal during the

three and six months ended June 30, 2020 was $ 169,000 and $ 307,000 , respectively.

The outstanding

principal of, and accrued interest on, the Convertible Notes were payable on demand, in the absence of the Merger closing discussed above, at any time as of the first to occur of (i) September 30, 2020 or (ii) an event of default (each

defined by the Convertible Notes as a Payoff Event).

If, prior to a Payoff Event, the Company (i) completed an initial public offering (“IPO”), (ii) completed a change in control (“CIC”), (iii) completed a sale and issuance of its capital

stock resulting in gross proceeds to the Company of at least $ 5 million (“Qualified Financing”), or (iv) completed a reverse

merger transaction (“Reverse Merger”), then the outstanding principal of, and accrued but unpaid interest on the Convertible Notes would have automatically converted upon the earliest of such events to occur as follows:

The Convertible Notes would have automatically

converted into the number of fully paid and non-assessable shares of the Company’s common stock equal to One Hundred and Seventy-Five Percent ( 175 %) times Note Value divided by the per share price such shares were issued to purchasers of the Company’s equity securities in the IPO rounded to the nearest whole

The Convertible Notes would have automatically

converted prior to the effectiveness of such CIC into that number of fully paid and non-assessable shares of the Company’s common stock equal to Two Hundred Percent ( 200 %) of the Note Value divided by the per share price of the Company’s common stock at which the Company’s common stock was valued in such CIC (after giving effect to such

The Convertible Note holder would have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as the other stockholders of the Company in such CIC.

Qualified Financing :

The Convertible Notes would have automatically converted into that number of fully paid and non-assessable shares of the Company that were issued by the Company in the

Qualified Financing, determined by dividing an amount equal to One Hundred and Seventy-Five Percent (175%) times the Note Value by the per share price such shares of the Company were issued to purchasers of the Company’s equity securities

in the Qualified Financing, rounded to the nearest whole share.

The Convertible Note holder would have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as the other purchasers

of shares in the Qualified Financing.

A Qualified Financing was defined as a sale and issuance of capital stock of the Company (or its successor) in a single transaction or series of related transactions resulting in gross proceeds to the

Company of not less than $5,000,000 (including new equity investment of at least $1,000,000 plus the sum of the outstanding principal amount of the Convertible Notes being so converted under this provision).

Reverse Merger (excluding close of Merger with Rexahn) :

The Convertible Notes would have automatically converted into that number of fully paid and non-assessable shares of the Combined Company

whose shares were publicly traded in the United States or other jurisdiction following the completion of the Reverse Merger (the “Reverse Merger Parent”), determined by dividing an amount equal to One Hundred and Seventy-Five Percent (175%)

times the Note Value divided by the per share price at which such shares were issued by the Reverse Merger Parent in such Reverse Merger, rounded to the nearest whole share.

The Convertible Note holder would have been entitled to the same

contractual rights and would have been bound by the same restrictions and obligations as the other stockholders of the Company in the Reverse Merger.

The Company was not permitted to prepay the Convertible Notes prior to a Payoff Event.

The Convertible Notes contained default provisions, and when triggered, the holders of the Convertible Notes could have

immediately accelerated payment of the Convertible Notes and the outstanding principal and interest would have become payable immediately.

The Convertible Notes would have automatically

converted into that number of fully paid and non-assessable shares of the Company that were issued by the Company in the Qualified Financing, determined by dividing an amount equal to One Hundred and Seventy-Five Percent ( 175 %) times the Note Value by the per share price such shares of the Company were issued to purchasers of the Company’s equity

securities in the Qualified Financing, rounded to the nearest whole share.

The Convertible Note holder would have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as

the other purchasers of shares in the Qualified Financing.

A Qualified Financing was defined as a sale and issuance of capital stock of the Company (or its successor) in a single transaction or series of related transactions

resulting in gross proceeds to the Company of not less than $ 5,000,000 (including new equity investment of at least $ 1,000,000 plus the sum of the outstanding principal amount of the Convertible Notes being so converted under this provision).

Reverse Merger

(excluding close of Merger with Rexahn) :

The Convertible Notes would have automatically converted into that number of fully paid and non-assessable shares of the Combined Company whose shares were publicly traded in the United States or other jurisdiction

following the completion of the Reverse Merger (the “Reverse Merger Parent”), determined by dividing an amount equal to One Hundred and Seventy-Five Percent ( 175 %) times the Note Value divided by the per share price at which such shares were issued by the Reverse Merger Parent in such Reverse Merger, rounded to the nearest whole

The Company was

not permitted to prepay the Convertible Notes prior to a Payoff Event.

The Convertible Notes contained default provisions, and when triggered, the holders of the Convertible Notes could have immediately accelerated payment of the

Convertible Notes and the outstanding principal and interest would have become payable immediately.

During a period of default, interest would have been assessed at a 12 % per annum rate.

Redemption Features

The Company determined that all of the conversion provisions, except for the conversion provision upon Merger close, were redemption features that qualified as embedded derivatives.

The qualifying embedded

derivatives were collectively separated from their debt host upon the issuance of the Convertible Notes.

The bifurcation of the embedded derivatives from the debt host resulted in a discount to the Convertible Notes in the amount of $0.8 million

during the three months ended March 31, 2020.

determined that all of the conversion provisions, except for the conversion provision upon Merger close, were redemption features that qualified as embedded derivatives.

The qualifying embedded derivatives were collectively separated from

their debt host upon the issuance of the Convertible Notes.

The bifurcation of the embedded derivatives from the debt host resulted in a discount to the Convertible Notes in the amount of $ 0.8 million during the three and six months ended June 30, 2020.

The embedded derivatives were accounted for separately on a fair market value basis.

There were no outstanding premium conversion derivatives as of March 31, 2021 or December 31, 2020 given the

conversion of the Convertible Notes.

The Company recorded the fair value changes of the premium conversion derivatives while outstanding to fair value change in derivative and warrant liabilities in the accompanying condensed consolidated

statements of comprehensive loss which amounted to a benefit of $0.2 million during the three months ended March 31, 2020.

There were no outstanding premium conversion derivatives as of June 30, 2021 or December 31, 2020 given the conversion of the Convertible Notes.

Company recorded the fair value changes of the premium conversion derivatives while outstanding to fair value change in derivative and warrant liabilities in the accompanying condensed consolidated statements of comprehensive loss which

amounted to an expense of $ 0.9 million and $ 0.7 million during the three and six months ended June 30, 2020, respectively.

The note discounts were

amortized to interest expense over the term of the Convertible Notes using the straight-line method which approximates the effective interest method and amounted to $ 0.5 million

and $ 0.9 million during the three and six months ended June 30, 2020, respectively.

Notes to Condensed Consolidated Financial Statements

The note discounts were amortized to interest expense over the term of the Convertible Notes using the straight-line method which approximates the effective interest method and amounted to $0.4 million during the three months ended March 31, 2020.

Related Party Transactions

Convertible Notes with Related Parties

The Company entered into Convertible Notes with certain investors beginning on May 25, 2018.

Through March 31, 2020, Convertible Notes in the principal aggregate amount equal to $0.7 million were issued to four board

members and to two officers, one of which was also a board member of the Company.

See Note 6 – Convertible Notes.

Apexian Sublicense Agreement

On January 21, 2020, as amended on June 4, 2020, the Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc.

(“Apexian”) and issued a total of 891,422 shares of common stock (as adjusted for

the Exchange Ration) to Apexian and to certain affiliates of Apexian, following which Apexian became a holder of over 5% of the Company’s common stock.

See Note 9 – Apexian Sublicense Agreement.

Pre-Merger Financing

Five directors of Private Ocuphire and one director of Rexahn participated in the Pre-Merger Financing, investing an aggregate of $300,000.

Following the closing of the Merger, these directors received 17,729

Converted Initial Shares, 53,189 Converted Additional Shares, 80,366 Series A Warrants and 9,444 Series B Warrants.

See Note 3 – Pre-Merger Financing.

Stockholders’ Equity (Deficit)

At-The-Market Program

February 4, 2021, Ocuphire

filed a Form S-3 shelf registration under the Securities Act of 1933 which was declared effective by the SEC on February 12, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion,

securities having an aggregate offering price of up to $ 125 million.

In connection with the 2021 Shelf, on March 11, 2021,

Ocuphire entered into a Capital on DemandTM Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which the Company may offer and sell, from time to time at its sole discretion, to or through JonesTrading,

acting as agent and/or principal, shares of its common stock having an aggregate offering price of up to $ 40 million (the “2021

During the three and six months ended June 30, 2021, 900,943 shares were sold under the 2021 ATM for gross proceeds

in the amount of approximately $ 4.1 million, before deducting issuance expenses in the amount of approximately $ 0.2 million.

Registered Direct Offering

On June 4, 2021 , the Company entered into a placement

agency agreement with A.G.P./Alliance Global Partners (“AGP”).

Pursuant to the terms of the placement agency agreement, AGP on June 8, 2021 sold an aggregate of 3,076,923 shares of the Company’s common stock and warrants to purchase 1,538,461

shares of the Company’s common stock (the “RDO Warrants”) at an offering price of $ 4.875 per one share and 0.50 RDO Warrants, for gross proceeds of approximately $ 15,000,000 , before AGP’s fees and related offering expenses in the amount of approximately $ 1.1 million.

The purchase agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of

the Company, other obligations of the parties and termination provisions.

The offering of the Securities (the “Registered Direct Offering”) was made pursuant to the Company ’s 2021 Shelf.

The RDO Warrants have an exercise price of $ 6.09 per share, are exercisable from the initial

issuance date of June 8, 2021, and will expire five years following the initial exercise date.

The fair value of the RDO Warrants

was determined to be $ 6.4 million based on the Black-Scholes pricing model.

Input assumptions used were as follows:

risk-free interest rate of 0.8 %;

expected volatility of 99.2 %;

expected life of 5 years ;

expected dividend yield of 0 %;

and the underlying fair market of the common stock.

The RDO Warrants were classified in stockholders’ equity (deficit) as the number of

shares were fixed and determinable, no cash settlement was required and no other provisions precluded equity treatment.

As of June 30, 2021, 1,538,461

RDO Warrants were outstanding.

limited exceptions, a holder of a RDO Warrant will not have the right to exercise any portion of its RDO Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99 % (or, at the election of a holder prior to the date of issuance, 9.99 %) of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise;

provided, however, that upon prior notice to the

Company, the holder may increase or decrease the beneficial ownership limitation, provided further that in no event shall the beneficial ownership limitation exceed 9.99 %.

Waiver Agreements

Six directors of the Company signed Waiver Agreements, waiving certain reset provisions and financing restrictions.

These directors did not receive any of the additional Series B Warrants that were issued in

connection with the Waiver Agreements.

See Note 3 – Pre-Merger Financing.

Effective February 3, 2021,

each investor that invested in the Pre-Merger Financing (as defined below) entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”).

Pursuant to the Waiver Agreements, the investors and the Company

agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate certain financing restrictions, extend the term of certain leak-out agreements, and, in the case of certain

investors, grant certain registration rights for the shares underlying the warrants.

Agreements provide for the elimination of the full ratchet anti-dilution provisions, contained in the Series A Warrants (as certain of the anti-dilution provisions had previously caused liability accounting treatment for the Series

Upon the effective date of the Waiver Agreement, the Series A Warrants were reclassified to equity.

Pursuant to the

Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed to 1,708,334 in the aggregate

with respect to all investors, eliminating any future resets.

Notes to Condensed Consolidated Financial Statements

Purchase Agreement

On June 17, 2020, Ocuphire, Rexahn and certain investors

entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the “Securities Purchase Agreement”).

Pursuant to the Securities Purchase Agreement, the investors

invested a total of $ 21.15 million in cash, including $ 300,000 invested by five directors of Private Ocuphire and one director of Rexahn, upon closing of the Merger (the “Pre-Merger Financing”).

Pursuant to the Pre-Merger Financing, (i) Ocuphire issued and

sold to the investors shares of Private Ocuphire common stock (the “Initial Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of approximately 1,249,996 shares (the “Converted Initial Shares”) of common stock, (ii) Ocuphire deposited into escrow, for the benefit of the Investors, additional shares of Private Ocuphire common

stock (the “Additional Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of approximately 3,749,992

shares of common stock (the “Converted Additional Shares”), which Converted Additional Shares were delivered (or became deliverable) to the investors on November 19, 2020, and (iii) the Company agreed to issue to each investor on the tenth trading day following the consummation of the Merger (x) Series A Warrants representing the right to acquire shares of common stock equal

to the sum of (A) the Converted Initial Shares purchased by the investor, (B) the Converted Additional Shares delivered or deliverable to the investor, without giving effect to any limitation on delivery contained in the Securities Purchase

Agreement and (C) the initial number of shares of common stock, if any, underlying the Series B Warrants issued to the Investor and (y) additional warrants to purchase shares of common stock.

Series A Warrants

The Series A Warrants were issued on November 19, 2020

at an initial exercise price of $ 4.4795 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance.

The Series A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and were outstanding as of June 30, 2021.

execution of the Waiver Agreements, the Series A Warrants were accounted for and classified as liabilities on the accompanying condensed consolidated balance sheets given certain price reset provisions not used for a fair valuation under a

fixed for fixed settlement scenario as required for equity balance sheet classification.

Upon the February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity.

A final fair valuation of the

Series A Warrants was performed utilizing a Black Scholes model to estimate the aggregate fair value of the Series A Warrants prior to being re-classified as equity.

Input assumptions used were as follows:

risk-free interest rate 0.4 %;

expected volatility of 86.6 %;

expected life of 4.8 years;

and expected dividend yield zero percent.

The underlying stock price used was the market price as quoted on Nasdaq as of February 3, 2021, the effective date of the Waiver Agreement.

The fair value change of

the Series A Warrants was $ 33.8 million and was recorded to the fair value change in warrant liabilities and premium conversion

derivatives line item on the accompanying condensed consolidated statements of comprehensive loss for the six months ended June 30, 2021.

As a result of the reclassification to equity, the Series A Warrants are no longer subject to

remeasurement.

Series B Warrants

The Series B Warrants have an exercise

price of $ 0.0001 , were exercisable upon issuance and will expire on the day following the later to occur of (i) the Reservation

Date (as defined therein), and (ii) the date on which the investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder.

Series B Warrants are fixed and were exercisable for 1,708,334 shares of Common Stock, as of the effective date of the Waiver

Agreement, in the aggregate (without giving effect to any limitation on exercise contained therein).

In April 2021, investors exercised Series B Warrants for a total of 1,629,634

As of June 30, 2021, 78,700 Series B warrants were outstanding.

The Series B Warrants were accounted for

and classified as equity on the accompanying condensed consolidated balance sheets.

Share-based Compensation

Share-based compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed consolidated statements of comprehensive loss for the three

month periods indicated below (in thousands):

compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed consolidated statements of comprehensive loss for the three and six month periods indicated below

(in thousands):

Three Months Ended

Six Months Ended

General and administrative

1 unchanged sentence

Total share-based compensation

Notes to Condensed Consolidated Financial

Ocuphire Stock Options

2020 Equity Incentive Plan

The stockholders of the Company approved the 2020 Equity Incentive Plan (the “2020 Plan”) for stock-based awards, which became effective on November 5, 2020.

Under the 2020 Plan, (i) 1,000,000 new shares of common

stock were reserved for issuance and (ii) up to 70,325 additional shares of common stock may be issued, consisting of (A) shares that remain available for the issuance of awards under prior equity plans and (B) shares of common stock subject to

outstanding stock options or other awards covered by prior equity plans that have been cancelled or expire on or after the date that the 2020 Plan became effective.

Incentive Plan

The stockholders of the Company approved the 2020

Equity Incentive Plan (the “2020 Plan”) for stock-based awards, which became effective on November 5, 2020.

Under the 2020 Plan, (i) 1,000,000

new shares of common stock were reserved for issuance and (ii) up to 70,325 additional shares of common stock may be issued,

consisting of (A) shares that remain available for the issuance of awards under prior equity plans and (B) shares of common stock subject to outstanding stock options or other awards covered by prior equity plans that have been cancelled

or expire on or after the date that the 2020 Plan became effective.

2018 Equity Incentive Plan

Prior to the 2020 Plan, the Company adopted a 2018 Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,241,387 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants upon the

amendment of the 2018 Plan in December 2019.

Prior to the 2020 Plan, the Company adopted a 2018

Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,241,387 shares of the Company’s common stock were reserved

for issuance to employees, directors and consultants upon the amendment of the 2018 Plan in December 2019.

The reserve of common stock for the 2018 Plan has been adjusted to give effect to the Exchange Ratio.

Inducement Plan

On February 22, 2021, the Company adopted the Ocuphire Pharma, Inc.

Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 325,258 shares of its common stock to be used exclusively for grants

of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

Notes to Condensed Consolidated Financial Statements

The 2020 Plan, 2018 Plan and Inducement Plan permit the grant of stock options, appreciation rights, restricted stock, restricted stock units, performance stock and cash awards, and other share‑based awards.

Incentive and non‑statutory stock

options may be granted under the 2020 and 2018 Plans.

On February 22, 2021, the Company adopted the Ocuphire

Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 325,258 shares of its common

stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of

Rule 5635(c)(4) of the Nasdaq Listing Rules.

The 2020 Plan, 2018 Plan and

Inducement Plan permit the grant of stock options, appreciation rights, restricted stock, restricted stock units, performance stock and cash awards, and other share‑based awards.

Incentive and non‑statutory stock options may be

granted under the 2020 and 2018 Plans.

Only non-statutory options may be granted under the Inducement Plan.

2020 Plan Evergreen Provision

Under the 2020 Plan, the shares reserved automatically increase on January 1st of each year, for a period of not more than ten years from the date the 2020 Plan is approved by the stockholders of the Company,

commencing on January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to 5% of the shares of common stock outstanding as of December 31st of the preceding calendar year.

Notwithstanding the foregoing, the Board of

Directors may act prior to January 1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common

stock than would otherwise occur pursuant to the preceding sentence.

Under the 2020 Plan, the shares reserved automatically

increase on January 1st of each year, for a period of not more than ten years from the date the 2020 Plan is approved by the

stockholders of the Company, commencing on January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to 5 %

of the shares of common stock outstanding as of December 31st of the preceding calendar year.

Notwithstanding the foregoing, the Board of Directors may act prior to January 1st of a given year to provide that there will be no January 1st

increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence.

On January 1, 2021, 544,125 shares were added to the 2020 Plan as a result of the evergreen provision.

During the three months ended March 31, 2021 and 2020, 41,800 and zero stock options were granted to newly-hired consultants (as adjusted for the Exchange Ratio), respectively, generally vesting over a six (6) to

forty-eight (48) month period.

The Company recognized $446,000 and $61,000 in share-based compensation expense related to stock options during the three months ended March 31, 2021 and 2020, respectively.

The weighted average fair value per share of options granted during the three months ended March 31, 2021 was $6.71.

The Company measures the fair value of stock options with service‑based and performance‑based

vesting criteria to employees, directors, consultants and directors on the date of grant using the Black‑Scholes option pricing model.

The Company does not have history to support a calculation of volatility and expected term.

As such, the Company

has used a weighted‑average volatility considering the volatilities of several guideline companies.

For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle.

The assumed dividend yield was based on the Company’s expectation of not paying dividends

in the foreseeable future.

The average expected life of the options was based on the contractual term for agreements that allow for exercise of vested options through the end of the contractual term upon termination of continuous service, and for

all other agreements, was based on the mid‑point between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110.

The risk‑free interest rate is determined by reference

to implied yields available from U.S.

During the three and six months ended June 30, 2021, 218,000 and 259,800 stock options were granted to newly-hired consultants and employees, respectively, generally vesting over a six ( 6 ) to forty-eight ( 48 ) month

During the three and six months ended June 30, 2020, 211,592 stock options to consultants were granted,

generally vesting over a twelve ( 12 ) to twenty-one ( 21 ) month period.

The Company recognized $ 434,000 and $ 316,000 in share-based compensation expense related to stock options during the three months ended June 30, 2021 and 2020, respectively, and

$ 880,000 and $ 377,000

during the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, 7,386 stock

options were exercised with an intrinsic value of $ 74,000 .

The weighted average fair value per share of options granted during the three and six months ended June 30, 2021 was $ 4.50 and $ 4.85 , respectively.

The weighted average fair value per

share of options granted during the three and six months ended June 30, 2020 was $ 5.98 .

The Company measures the fair

value of stock options with service‑based and performance‑based vesting criteria to employees, directors, consultants and directors on the date of grant using the Black‑Scholes option pricing model.

The Company does not have history to

support a calculation of volatility and expected term.

As such, the Company has used a weighted‑average volatility considering the volatilities of several guideline companies.

For purposes of identifying similar entities, the

Company considered characteristics such as industry, length of trading history, and stage of life cycle.

The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future.

expected life of the options was based on the contractual term for agreements that allow for exercise of vested options through the end of the contractual term upon termination of continuous service, and for all other agreements, was

based on the midpoint between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110.

The risk‑free interest rate is determined by reference to implied

yields available from U.S.

Treasury securities with a remaining term equal to the expected life assumed at the date of grant.

The Company records forfeitures when they occur.

The weighted‑average assumptions used in the Black‑Scholes option‑pricing model are as follows during the three months ended March 31, 2021 and 2020:

The weighted‑average assumptions used

in the Black‑Scholes option‑pricing model are as follows during the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Expected stock price volatility

2 unchanged sentences

Risk free interest rate

During the three months ended March 31, 2021 and 2020, 118,217 and 66,601 stock options vested (as adjusted for the Exchange Ratio), respectively.

The weighted average fair value per share of options vesting during

the three months ended March 31, 2021 and 2020 was $3.66 and $0.87, respectively.

During the three months ended March 31, 2021 and 2020, zero and 7,923 options were forfeited, respectively.

As of March 31, 2021, 1,274,408 shares were available for

future issuance under the 2020 Plan and Inducement Plan.

Notes to Condensed Consolidated Financial

During the three and six months ended June 30, 2021, 114,727 and 232,944 stock options vested, respectively.

three and six months ended June 30, 2020, 14,586 and 81,198 stock options vested (as adjusted for the Exchange Ratio), respectively.

During the three and six months ended June 30, 2021, 25,558 options were forfeited.

During the three and six months ended June 30, 2020, zero

and 7,924 options were forfeited, respectively.

As of June 30, 2021, 1,047,011 shares were available for future issuance under the 2020 Plan and Inducement Plan.

No shares were available for future issuance under the 2018 Plan.

Unrecognized share‑based compensation cost was $2.3 million as of March 31, 2021.

The unrecognized share‑based expense is expected to be recognized over a weighted average period of 1.4 years.

share‑based compensation cost was $ 2.8 million as of June 30, 2021.

The unrecognized share‑based expense is expected to be

recognized over a weighted average period of 1.3 years.

Ocuphire Restricted Stock Awards

The Company did not grant any restricted stock awards (RSAs) during any of the periods presented.

The RSAs granted in previous periods were subject to various vesting schedules.

During the three months ended March

31, 2021 and 2020, 40,000 and zero RSAs vested, respectively, and no RSAs were forfeited during the periods presented.

The share-based compensation expense attributed to the RSAs during the three months ended March 31, 2021 and 2020 was $22,000 and

zero, respectively.

did no t grant any restricted stock awards (RSAs) during any of the periods presented.

The RSAs granted in previous periods

were subject to various vesting schedules.

During the six months ended June 30, 2021 and 2020, 40,000 and zero RSAs vested, respectively, and no

RSAs were forfeited during the periods presented.

The share-based compensation expense attributed to the RSAs during the six months ended June 30, 2021 and 2020 was $ 22,000 and zero , respectively.

Ocuphire Stock Awards

The Company granted stock awards in the amount of 4,474 common shares to two board members for services performed during the first quarter of 2021.

The stock-based compensation related to these awards amounted to

$26,000 during the three months ended March 31, 2021.

Notes to Condensed Consolidated Financial Statements

Former Rexahn Options

Following the closing of the Merger, 123 outstanding, unexercised and vested options to purchase Common Stock granted under the Rexahn Pharmaceuticals Stock Option Plan, as amended (the “Rexahn 2003 Plan”),

remained outstanding as of March 31, 2021 and December 31, 2020.

The exercise prices related to the outstanding options granted under the Rexahn 2003 Plan ranged from $182.40 to $600.00 per share with an average remaining contractual life of 0.9

granted stock awards in the amount of 4,923 and 9,397 common shares to two board members for services performed

during the three and six months ended June 30, 2021 , respectively.

The stock-based compensation related to these awards amounted to $ 29,000 and $ 55,000 during the three and six months ended June 30, 2021, respectively.

Rexahn Options

the closing of the Merger, 82 and 123 outstanding, unexercised and vested options to purchase Common Stock granted under the Rexahn Pharmaceuticals Stock Option Plan, as amended (the “Rexahn 2003 Plan”), remained

outstanding as of June 30, 2021 and December 31, 2020 respectively.

D uring the three and six months ended June 30, 2021, 41 options expired .

The exercise price related to the outstanding options granted under the Rexahn 2003 Plan was $ 182.40 per share with an average remaining contractual life of 1.0 years.

Apexian Sublicense Agreement

On January 21, 2020, the Company entered into a sublicense agreement (as amended on June 4, 2020, the “Apexian Sublicense Agreement”) with Apexian, pursuant to which it obtained exclusive worldwide patent and other

intellectual property rights that constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions.

The lead compound in the Ref-1 Inhibitor program is APX3330,

which the Company intends to develop as an oral pill therapeutic to treat diabetic retinopathy and diabetic macular edema initially, and potentially later to treat wet age-related macular degeneration.

January 21, 2020, the Company entered into a sublicense agreement (as amended on June 4, 2020, the “Apexian Sublicense Agreement”) with Apexian, pursuant to which it obtained exclusive worldwide patent and other intellectual property

rights that constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions.

The lead compound in the Ref-1 Inhibitor program is APX3330, which the

Company intends to develop as an oral pill therapeutic to treat diabetic retinopathy and diabetic macular edema initially, and potentially later to treat wet age-related macular degeneration.

As a result of the Sublicense Agreement,

Apexian is considered by Ocuphire to be a related party.

In connection with the Apexian Sublicense Agreement, the Company issued a total of 891,422 shares (as adjusted for the Exchange Ratio) of its common stock to Apexian and to certain affiliates of Apexian.

issuance transaction was recorded in the amount of $2.1 million as IPR&D expense for the three months ended March 31, 2020 based on the fair market value of the common shares issued since no processes or activities that would constitute a

“business” were acquired and none of the rights and underlying assets acquired had alternative future uses or reached a stage of technological feasibility.

Additionally, in accordance with the Apexian Sublicense Agreement, the Company paid the

balance remaining of $0.4 million of Ref-1 Inhibitor program costs to Apexian following the Company’s listing on a major stock exchange.

The Company also agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication for the Development and

Regulatory milestones, and once for each of the Sales milestones.

These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and the first Phase 3 pivotal

trial in the United States, and filing and achieving regulatory approval from the FDA for the first New Drug Application for a compound) totaling up to $11 million in the aggregate and (ii) payments for specified sales milestones of up to $20

million in the aggregate, which net sales milestone payments are payable once, upon the first achievement of such milestone.

Lastly, the Company also agreed to make a royalty payment equal to a single-digit percentage of its net sales of products

associated with the covered patents under the Apexian Sublicense Agreement.

In connection

with the Apexian Sublicense Agreement, the Company issued a total of 891,422 shares (as adjusted for the Exchange Ratio) of its

common stock to Apexian and to certain affiliates of Apexian.

The share issuance transaction was recorded in the amount of $ 2.1

million as IPR&D expense for the six months ended June 30, 2020 based on the fair market value of the common shares issued since no processes or activities that would constitute a “business” were acquired and none of the rights and

underlying assets acquired had alternative future uses or reached a stage of technological feasibility.

also agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication for the Development and Regulatory milestones, and once for each

of the Sales milestones.

These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and the first Phase 3 pivotal trial in the United States, and

filing and achieving regulatory approval from the FDA for the first New Drug Application for a compound) totaling up to $ 11

million in the aggregate and (ii) payments for specified sales milestones of up to $ 20 million in the aggregate, which net sales

milestone payments are payable once, upon the first achievement of such milestone.

Lastly, the Company also agreed to make a royalty payment equal to a single-digit percentage of its net sales of products associated with the covered patents

under the Apexian Sublicense Agreement.

If it is not terminated pursuant to its terms, the Apexian Sublicense Agreement shall remain in effect until expiration of the last to expire of the covered patents.

None of the milestone or royalty payments were triggered as of March 31, 2021.

None of the criteria to recognize milestone or royalty obligations were met

during the six-month period ended June 30, 2021.

Notes to Condensed Consolidated Financial Statements

Related Party Transactions

CVR Agreement

entered into a CVR Agreement with the former Rexahn stockholders.

See Note 2 – Merger.

Convertible Notes

with Related Parties

The Company entered into Convertible Note Purchase

Agreements with certain investors beginning on May 25, 2018.

Through June 30, 2020, Convertible Notes in the principal aggregate amount of $ 0.7

million were issued to four board members and to two officers, one of which was also a board member of the Company.

Note 6 – Convertible Notes.

Sublicense Agreement

On January 21, 2020, as amended on June 4, 2020, the

Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc.

(“Apexian”) and issued a total of 891,422 shares

of common stock (as adjusted for the Exchange Ratio) to Apexian and to certain affiliates of Apexian, following which Apexian became a holder of over 5 % of the Company’s common stock.

See Note 9 – Apexian Sublicense Agreement.

Five directors of Private Ocuphire and one director of Rexahn

participated in the Pre-Merger Financing, investing an aggregate of $ 300,000 .

Following the closing of the Merger, these

directors received 17,729 Converted Initial Shares, 53,189 Converted Additional Shares, 80,366 Series A Warrants and 9,444 Series B Warrants.

See Note 7 – Stockholders’ Equity (Deficit).

Waiver Agreements

Six directors of the Company signed Waiver Agreements, waiving certain reset provisions and financing restrictions.

These directors did not receive any of the additional Series B

Warrants that were issued in connection with the Waiver Agreements.

See Note 7 – Stockholders’ Equity (Deficit).

Net loss per share

Basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings or loss per share of common stock is computed similarly to basic

earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive.

The Company’s warrants, convertible notes, restricted stock

awards and stock options while outstanding are considered common stock equivalents for this purpose.

Basic loss per

share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings or loss per share of common stock is computed similarly to basic earnings or

loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive.

The Company’s warrants, restricted stock awards and stock

options while outstanding are considered common stock equivalents for this purpose.

Diluted earnings is computed utilizing the treasury method for the warrants, restricted stock awards and stock options.

Diluted earnings with

respect to the convertible notes utilizing the if-converted method was not applicable during the periods presented as no conditions required for conversion had occurred.

No incremental common stock equivalents were included in calculating diluted

loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.

The historical share and per share data for periods prior to the November 5, 2020 closing of the Merger have been adjusted to give

effect to the Exchange Ratio.

The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three month periods ended presented below:

Series A Warrants and Series B Warrants

No incremental common stock

equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.

The historical share and per share data for periods prior to the November

5, 2020 closing of the Merger have been adjusted to give effect to the Exchange Ratio.

The following

potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three and six month periods ended presented below:

Stock options

Restricted stock awards

Unissued stock awards

Former Rexahn warrants

Former Rexahn options

The effective tax rate for the three months ended March 31, 2021 and 2020 was zero percent.

As of March 31, 2021, a full valuation allowance has been established to reduce the Company’s net deferred income tax

As such, no tax benefit related to the Company’s pre-tax loss was recognized for any of the periods presented.

Notes to Condensed Consolidated Financial Statements

The Company’s corporate returns are subject to examination for the 2018 and 2019 tax years for federal income tax purposes and subject to examination for the 2018 and 2019 tax years in one state jurisdiction.

The Company does not have any reserves

for income taxes that represent the Company’s potential liability for uncertain tax positions.

Subsequent Events

Warrant Exercise

In April 2021, investors exercised Series B Warrants for a total of 1,629,634 shares, for total proceeds of $163.

Issuance of Settlement Shares

On May 6, 2021, the Company issued 350,000 shares of common stock of the Company to three accredited investors pursuant to a settlement agreement, dated May 6, 2021, in exchange for a release of potential claims.

The effective

tax rate for the three and six months ended June 30, 2021 and 2020 was zero percent.

As of June 30, 2021, a full valuation

allowance has been established to reduce the Company’s net deferred income tax assets.

As such, no tax benefit related to

the Company’s pre-tax loss was recognized for any of the periods presented.

The Company’s corporate returns

are subject to examination for the 2018 and 2019 tax years for federal income tax purposes and subject to examination for the 2018 and 2019 tax years in one state jurisdiction.

The Company does not have any reserves for income taxes that

represent the Company’s potential liability for uncertain tax positions.

Ocuphire Pharma, Inc.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements