Opus Genetics, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of Ocuphire’s financial condition and results of operations together with Ocuphire’s financial statements and the related notes included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to Ocuphire’s plans and strategy for Ocuphire’s business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this annual report, Ocuphire’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview Ocuphire is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of refractive and retinal eye disorders. Ocuphire’s pipeline currently includes two small molecule product candidates targeting several of such indications. Its 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. As a result, Nyxol can potentially be used for the treatment of multiple indications such as reversal of pharmacologically-induced mydriasis (“RM”) (dilation of the pupil), presbyopia (age-related blurry near vision) and dim light or night vision disturbances (“NVD”) (halos and glares). Ocuphire’s management believes these multiple indications potentially represent a significant market opportunity. Nyxol has been studied in a total of 9 clinical trials (3 Phase 1, 5 Phase 2 and 1 Phase 3) in a total of over 560 patients (with over 330 Nyxol-treated) and has demonstrated promising clinical data for use in the multiple ophthalmic indications mentioned above. Ocuphire reported positive top-line data from the first Phase 3 trial (MIRA-2) for RM, completed enrollment in a 2 nd Phase 3 RM trial (MIRA-3) in February 2022, and completed enrollment on a pediatric safety study (MIRA-4) for RM in March 2022. Ocuphire also reported positive top-line data from a Phase 2 trial of Nyxol for treatment of presbyopia, both alone and with low-dose pilocarpine ( pilocarpine hydrochloride 0.4% ophthalmic solution, “LDP”) as adjunctive therapy. Ocuphire announced completion of enrollment of its NVD Phase 3 trial (LYNX-1) in January 2022. Ocuphire expects to report top-line results from the MIRA-3 RM Phase 3 study by end of the first quarter of 2022, followed by the LYNX-1 NVD Phase 3 study and the MIRA-4 RM pediatric study in the second quarter of 2022. Assuming successful and timely completion of the RM trials, Ocuphire anticipates submitting a new drug application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) in late 2022 under the 505(b)(2) pathway for its drug led combination product. Ocuphire has started pre-commercialization planning and activities in anticipation of a successful RM approval. Ocuphire’s second product candidate, APX3330, is a twice-a-day oral tablet designed to target multiple pathways relevant to retinal and choroidal (the vascular layer of the eye) diseases such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”) which, if left untreated, can result in permanent visual acuity loss and eventual blindness. DR is a disease resulting from diabetes in which chronically elevated blood sugar levels cause progressive damage to blood vessels in the retina. DME is a severe form of DR which involves leakage of protein and fluid into the macula, the central portion of the retina, causing swelling and vascular damage. Prior to Ocuphire’s in-licensing of the product candidate, APX3330 had been studied by other sponsors in a total of 11 clinical trials (6 Phase 1 and 5 Phase 2) in a total of over 420 healthy volunteers or patients (with over 340 APX3330-treated) for inflammatory and oncology indications, and had demonstrated evidence of tolerability, pharmacokinetics, durability, and target engagement. Ocuphire has also in-licensed APX2009 and APX2014, which are second-generation product candidates and analogs of APX3330. Ocuphire initiated a Phase 2 trial for APX3330 in April 2021 for the treatment of patients with DR, including moderately severe non-proliferative DR (“NPDR”) and mild proliferative DR (“PDR”), as well as patients with DME without loss of central vision. In January 2022, Ocuphire reported masked safety data from the ongoing Phase 2 trial in DR/DME on 68 patients enrolled at the time. These safety data are consistent with safety data from the prior 11 clinical trials with total exposure experience of over 5000 subject days with 600 mg daily dose of APX3330. Ocuphire also reported enrollment completion of 103 patients in the ZETA-1 trial in March 2022, and expects to report top-line results from the ZETA-1 DR/DME Phase 2b study in the second half of 2022. 103 Table of Contents As part of its strategy, Ocuphire will continue to explore opportunities to acquire additional ophthalmic assets and seek strategic partners for late-stage development, regulatory preparation, and commercialization of drugs in key global markets. Merger with Rexahn On November 5, 2020, Rexahn Pharmaceuticals, Inc., or Rexahn, now known as Ocuphire Pharma, Inc., completed its reverse merger or, the “Merger”, with what was then known as “Ocuphire Pharma, Inc.,” or “Private Ocuphire”, in accordance with the terms of the Agreement and Plan of Merger and Reorganization dated as of June 17, 2020, as amended on June 29, 2020 (“Merger Agreement”). Rexahn’s shares of common stock listed on The Nasdaq Capital Market, previously trading through the close of business on November 5, 2020 under the ticker symbol “REXN,” commenced trading on The Nasdaq Capital Market, under the ticker symbol “OCUP,” on November 6, 2020. Immediately following the Merger, Private Ocuphire became a wholly-owned subsidiary of Rexahn. Upon consummation of the Merger, Rexahn adopted the business plan of Private Ocuphire. Although Rexahn was the legal acquirer and issued shares of its common stock to effect the Merger with Ocuphire, Ocuphire was considered the accounting acquirer. In accordance with the accounting guidance under Accounting Standards Update (“ASU”) 2017-01, the Merger was accounted for as an asset acquisition. Accordingly, the assets and liabilities of Rexahn were recorded as of the closing of the Merger at the purchase price of the accounting acquirer, Ocuphire. Ocuphire allocated the total purchase price among the individual assets acquired on a fair value basis or carrying value as appropriate. A final determination of these estimated fair values was based on the actual net tangible assets of Rexahn that existed as of the date of the completion of the transaction. As of the completion of the Merger, the net assets of Rexahn were recorded at their acquisition-date relative fair values in the consolidated financial statements of Ocuphire and the reported operating results prior to the Merger are those of Private Ocuphire. 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 (“Exchange Ratio”) of 1.0565 shares of Common Stock for each share of Private Ocuphire common stock. Strategic Outlook As part of its strategy, Ocuphire will continue to explore opportunities to acquire additional ophthalmic assets and to seek strategic partners for late-stage development, regulatory preparation and commercialization in key global markets. To date, Ocuphire’s primary activities have been conducting research and development activities, planning clinical trials, performing business and financial planning, recruiting personnel and raising capital. Ocuphire does not have any products approved for sale and has not generated any significant amounts of revenue. Ocuphire does not expect to generate significant revenues until, and unless, the FDA or other regulatory authorities approve Nyxol or APX3330 and Ocuphire successfully commercializes its product candidates. Until such time, if ever, as Ocuphire can generate substantial product revenue, Ocuphire expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Through December 31, 2021, Ocuphire has funded its operations primarily through equity financings that totaled $49.6 million in gross proceeds, of which $21.15 million was received in connection with the Merger, net cash at Rexahn, a minor amount of license fee payments earned under license agreements related to Rexahn’s RX-3117 drug compound, and through the issuance of convertible notes in private placements that totaled $8.5 million in gross proceeds. Ocuphire’s net losses were $56.7 million and $24.6 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, Ocuphire had an accumulated deficit of $89.4 million. Ocuphire anticipates that its expenses will increase substantially as it: • continues clinical trials for Nyxol, APX3330 and for any other product candidate in its future pipeline; 104 Table of Contents • continues preclinical studies for Nyxol, APX3330 and for any other product candidate in its future pipeline; • develops additional product candidates that it identifies, in-licenses or acquires; • seeks regulatory approvals for any product candidates that successfully complete clinical trials; • contracts to manufacture its product candidates; • maintains, expands and protects its intellectual property portfolio; • hires additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan; • adds operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts; • continues to operate as a public company; and • establishes on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which Ocuphire may obtain regulatory approval; Ocuphire’s net losses may fluctuate significantly from quarter–to quarter and year–to year, depending on the timing of its preclinical studies, clinical trials and its expenditures on other research and development activities as well as level of license fee payments received under license agreements in connection with the former Rexahn drug compounds. Recent Developments Clinical and CMC Milestones In November 2021, clinical data on Nyxol and APX3330 was featured in poster sessions as presentations at the American Academy of Ophthalmology (AAO) 2021 annual meeting. On January 5, 2022, it was announced that enrollment was complete in LYNX-1, a Phase 3 clinical trial evaluating the safety and efficacy of Nyxol eye drops for the treatment of NVD in 145 subjects. On January 31, 2022, Ocuphire hosted a virtual investor R&D Day for the investment community. It featured six ophthalmic Key Opinion Leaders (KOLs) from refractive surgery, optometry and retina practice areas who shared their thoughts on three large unmet indications addressed by Ocuphire’s two late-stage clinical drug assets. New masked safety data were presented that the Phase 2 ZETA-1 clinical trial demonstrated a favorable safety profile consistent with prior studies for the first-in-class APX3330 oral drug with additional exposure data in diabetic patients with retinal disease. In addition, new data from the Phase 2 VEGA-1 clinical trial were presented that show that Nyxol alone had statistically significant improvement in efficacy and long durability compared to placebo at 12 hours post-dosing supporting future clinical development as a single daily drop. A recording of the R&D Day is available under the News and Events section of Ocuphire’s website. On February 8, 2022, it was announced that enrollment was complete in MIRA-3, the second Phase 3 FDA registration trial evaluating the safety and efficacy of Nyxol eye drops to reverse pharmacologically-induced mydriasis (RM) in 368 subjects. On March 8, 2022, it was announced that enrollment was complete in the MIRA-4 trial evaluating the safety and efficacy of Nyxol eye drops for RM in 23 pediatric subjects. On March 16, 2022, it was announced that enrollment was complete in the ZETA-1 trial evaluating the safety and efficacy of oral APX3330 in 103 DR/DME subjects. 105 Table of Contents Regulatory Update On February 14, 2022, Ocuphire completed a Type-C meeting with the FDA from which it obtained guidance regarding the design of pivotal studies for Nyxol both as a single agent and with LDP as adjunct eye drops for the treatment of presbyopia. In addition, the FDA provided clarification of CMC and other data requirements for filing an NDA to seek approvals of Nyxol. COVID-19 As a result of the COVID-19 pandemic, Ocuphire has experienced, and will likely continue to experience, delays and disruptions in our clinical trials, as well as interruptions in our manufacturing and analytical lab operations, global supply chain and shipping, and clinical development operations. Ocuphire’s plans for further testing or clinical trials may be further impacted by the continuing effects of COVID-19. The global outbreak of COVID-19 continues to rapidly evolve. The extent to which the COVID-19 pandemic may further impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the effect of the pandemic on our suppliers and distributors and the global supply chain, the ultimate geographic spread of the disease, 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. The COVID-19 pandemic may also continue to impact our business as a result of employee illness, school closures, and other community response measures. The COVID-19 pandemic may also impact our ability to secure additional financing. 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 the Company’s results of future operations, financial position, and liquidity in for fiscal year 2022 and beyond. See “Risk Factors—Risks Related to Our Business—The COVID-19 pandemic has and could continue to adversely impact Ocuphire’s business, financial condition, cash flows, liquidity, and result in stock price volatility.” Financial Operations Overview Collaborations Revenue Collaborations revenue to date was derived from fees earned from license agreements with BioSense Global LLC (“BioSense”) and Processa Pharmaceuticals, Inc. (“Processa”) in connection with the Rexahn RX-3117 drug compound. We anticipate that we may earn additional revenues stemming from additional milestone and royalty payments from this or other license agreements related to Rexahn’s legacy drug compounds; however, the attainment of milestones or level of sales required to earn royalty payments is highly uncertain for the reasons explained below. To date, outside of the limited collaborations revenue referenced above, Ocuphire does not expect to generate significant revenue unless or until it obtains regulatory approval of and commercializes Nyxol or APX3330. If Ocuphire fails to complete the development of Nyxol, APX3330, or any other product candidate it may pursue in the future, in a timely manner, or fails to obtain regulatory approval, Ocuphire’s ability to generate significant revenue would be compromised. 106 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation costs, for personnel in functions not directly associated with research and administrative activities. Other significant costs include insurance coverage for directors and officers and other property and liability exposures, legal fees relating to intellectual property and corporate matters, professional fees for accounting and tax services, and other services provided by business consultants and legal settlements. Ocuphire anticipates that its general and administrative expenses will significantly increase in the future to support its continued research and development activities and costs associated with operating as a public company. These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional services as well as other public-company related costs. Research and Development Expenses To date, Ocuphire’s research and development expenses have related primarily to the clinical stage development of Nyxol and APX3330. Research and development expenses consist of costs incurred in performing research and development activities, including compensation and benefits for research and development employees and costs for consultants, costs associated with preclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, nonlegal patent costs, fees paid to external service providers that conduct certain research and development, and an allocation of overhead expenses. Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed. Ocuphire accrues for costs incurred as the services are being provided by monitoring the status of the study or project, and the invoices received from its external service providers. Ocuphire adjusts its accrual as actual costs become known. Research and development activities are central to Ocuphire’s business model. Ocuphire expects that Nyxol and APX3330 will have higher development costs during their later stages of clinical development, as compared to costs incurred during their earlier stages of development, primarily due to the increased size and duration of the later-stage clinical trials. Ocuphire expects its research and development expenses to significantly increase over the next several years. However, it is difficult for Ocuphire to determine with certainty the duration, costs and timing to complete its current or future preclinical programs and clinical trials of Nyxol, APX3330, and other product candidates. The duration, costs and timing of clinical trials and development of Nyxol, APX3330 and other product candidates will depend on a variety of factors that include, but are not limited to, the following: • per patient trial costs; • the number of patients that participate in the trials; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies; • the duration of patient follow-up; • the phase of development of the product candidate; • arrangements with contract research organizations and other service providers; and • the efficacy and safety profile of the product candidates. Acquired In-Process Research and Development Expenses Ocuphire includes costs to acquire or in-license product candidates as acquired in-process research and development expenses. These costs are immediately expensed provided that the payments do not also represent processes or activities that would constitute a “business” as defined under accounting standards generally accepted in the United States of America (“U.S. GAAP”) or provided that the product candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. Royalties owed on future sales of any licensed product will be expensed in the period the related revenues are recognized. The costs associated with the Merger and the Apexian Sublicense Agreement were recorded as acquired in-process research and development expenses (“IPR&D”). 107 Table of Contents Interest Expense Interest expense consists of interest costs related largely to interest on principal and to amortization of debt discount attributed to the Ocuphire convertible notes while these instruments were outstanding. The Ocuphire convertible notes had an annual interest rate of 8%. This category also includes interest on principal related to a short-term loan (related to financing an insurance policy) having an annual interest rate of 5.5%. Fair Value Change in Warrant Liabilities and Premium Conversion Derivatives The fair value change in warrant liabilities and premium conversion derivatives includes the change in the fair value of the warrant liabilities and the premium conversion derivatives during the period the premium conversion derivatives and warrant liabilities are outstanding. Gain on Note Extinguishment Gain on note extinguishment includes the gain associated with modifications made to the Ocuphire convertible notes that are accounted for as note extinguishments. Other (Expense) Income, net Other (expense) income, net reflected in this line item includes payments made by us in connection with the Contingent Value Rights Agreement (the “CVR Agreement”) with former Rexahn shareholders. In addition, Other (expense) income, net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and reimbursements in connection with grants and other sources. Provision for Income Taxes Provision for income taxes consists of federal and state income taxes in the United States, as well as deferred income taxes and changes in related valuation allowance reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Currently, there is no provision for income taxes, as Ocuphire has incurred operating losses to date, and a full valuation allowance has been provided on the net deferred tax assets as of December 31, 2021 and 2020. 108 Table of Contents Results of Operations The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands): For the Year Ended December 31, 2021 2020 Change Collaborations revenue $ 589 $ — $ 589 Operating expenses: General and administrative 8,121 2,818 5,303 Research and development 15,173 6,648 8,525 Acquired in‑process research and development — 10,502 (10,502 ) Total operating expenses 23,294 19,968 3,326 Loss from operations (22,705 ) (19,968 ) (2,737 ) Interest expense (2 ) (6,847 ) 6,845 Fair value change in derivative and warrant liabilities (33,829 ) (1,486 ) (32,343 ) Gain on note extinguishment — 3,672 (3,672 ) Other (expense) income, net (157 ) 9 (166 ) Loss before income taxes (56,693 ) (24,620 ) (32,073 ) Provision for income taxes — — — Net loss $ (56,693 ) $ (24,620 ) $ (32,073 ) Comparison of Years Ended December 31, 2021 and 2020 Collaborations Revenue Collaborations revenue was $0.6 million for the year ended December 31, 2021. Revenue during 2021 was derived from the collaboration and license agreements with Processa and BioSense related to certain technology transfers in connection with the Rexahn RX-3117 drug compound, a legacy asset not under development by Ocuphire. There was no collaborations revenue recognized during the prior year period. General and Administrative General and administrative expenses for the year ended December 31, 2021 were $8.1 million compared to $2.8 million for the year ended December 31, 2020. The $5.3 million increase was primarily attributable to administrative employee headcount in the amount of $0.8 million, stock-based compensation of $0.4 million, insurance of $0.9 million, legal costs of $0.5 million, non-cash settlement costs of $1.6 million with certain investors, costs associated with operating as a public company subsequent to the reverse merger of $0.8 million, and professional services and other operating costs of $0.3 million on a net basis. General and administrative expenses included $1.1 million and $0.7 million in stock-based compensation expense during the years ended December 31, 2021, and 2020, respectively. Research and Development Research and development expenses for the year ended December 31, 2021 were $15.2 million compared to $6.6 million for the year ended December 31, 2020. The $8.5 million increase was primarily attributable to clinical trials of $4.6 million, manufacturing activities to support clinical advancement of Nyxol and APX3330 of $1.9 million, consulting services of $1.1 million as well as regulatory and other research and development efforts of $0.9 million on a net basis. Research and development expenses also included $0.8 million in stock-based compensation expense during each of the years ended December 31, 2021 and 2020. Acquired In-Process Research and Development Expenses On January 21, 2020, Ocuphire entered into a sublicense agreement with Apexian for continued research and development and potential commercialization of its lead product, APX3330. Ocuphire issued 843,751 shares of its common stock to Apexian related to the Apexian Sublicense Agreement. The fair value of the common stock issued to Apexian was $2.1 million and was recorded as IPR&D expense during the year ended December 31, 2022. In addition, research and development projects of Rexahn which were in-process at the Merger date were expensed as IPR&D and amounted to $8.4 million. Current accounting standards require that the fair value of IPR&D with no alternative future use be charged to expense on the acquisition date. There were no IPR&D costs during the comparable current year period. 109 Table of Contents Interest Expense Interest expense for the year ended December 31, 2021 of $2,000 was attributable to a short-term loan (related to financing an insurance policy). Interest expense for the year ended December 31, 2020 was $6.8 million (of which $6.1 million was non-cash) and was primarily attributable to the amount by which the fair value of the Series A Warrants issued in connection with the Pre-Merger Financing exceeded proceeds, or $4.7 million, as the Series A Warrants are classified as warrant liabilities. In addition, cash financing costs attributed to the Series A warrants in the amount of $0.7 million also increased interest cost year-over-year. Lastly, interest on principal and amortization of debt discounts, in the aggregate of $1.5 million, in connection with the Ocuphire convertible notes compromised the balance of interest expense during the year ended December 31, 2020. Fair Value Change in Derivative and Warrant Liabilities The fair value change in derivative and warrant liabilities was an expense of $33.8 million for the year ended December 31, 2021 compared to an expense of $1.5 million for the year ended December 31, 2020. The $32.3 million change was due primarily to the issuance of the Series A warrants in connection with the Pre-Merger Financing and to the fluctuations in Ocuphire’s common stock fair value and the number of potential shares of common stock issuable upon conversion of the underlying Ocuphire warrant liabilities and convertible notes that were outstanding during the relevant periods. Gain on Note Extinguishment Non-cash gain on note extinguishment for the year ended December 31, 2020 was $3.7 million as a result of both the Note Conversion Agreement (as defined and further described below) of $1.3 million and the conversion of the Ocuphire convertible notes in connection with the Merger. The Note Conversion Agreement was deemed to be a substantial modification to the Ocuphire convertible notes (as defined below), and as such, we recorded the modification as a note extinguishment. In addition, given that the Ocuphire convertible notes contained embedded derivatives, the conversion of the Ocuphire convertible notes into equity upon close of the Merger was also treated as a note extinguishment of $2.4 million. There were no Ocuphire convertible notes outstanding during the current year period. Other (Expense) Income, net During the year ended December 31, 2021, Ocuphire had other expense of $91,000 stemming from payments due in connection with the CVR Agreement and $70,000 stemming principally from net unrealized losses from our short-term investments. Other expense during the year ended December 31, 2020 was negligible. Other income during the year ended December 31, 2021 and 2020 was $4,000 and $9,000, respectively. Other income consisted primarily of interest earnings on our cash and cash equivalent investments during the year ended December 31, 2021. During the year ended December 31, 2020, Ocuphire had other income from cash and cash equivalent investments and from a grant received from the U.S. Small Business Administration for economic relief stemming from the COVID-19 pandemic. Liquidity and Capital Resources Capital Resources As of December 31, 2021, Ocuphire’s principal sources of liquidity consisted of cash and cash equivalents of $24.5 million. Ocuphire believes that its cash on hand at the end of 2021 will be sufficient to fund its operations into the second quarter of 2023. The Company’s cash and cash equivalents are invested primarily in cash deposits at a large, long-standing financial institution. Ocuphire has not generated any revenue and anticipates that it will continue to incur losses for the foreseeable future. Future capital requirements depend on many factors, including the need for the following: • continued clinical trials and preclinical studies for Nyxol, APX 3330 and for any other product candidate in its future pipeline; 110 Table of Contents • developing additional product candidates that it identifies, in-licenses or acquires; • seeking regulatory approvals for any product candidates that successfully complete clinical trials; • contracts to manufacture its product candidates; • establishing on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which it may obtain regulatory approval; • maintaining, expanding and protecting its intellectual property portfolio; • hiring additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan; • adding operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts; and • operating as a public company. Historical Capital Resources Ocuphire’s primary source of cash to fund its operations has been various equity offerings in the amount of $50.0 million and the issuance of convertible notes in the amount of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes. 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 share and 0.50 RDO Warrants, for gross proceeds of $15.0 million, before deducting AGP’s fees and related offering expenses in the amount of $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 RDO Warrants have an exercise price of $6.09 per share, are exercisable upon the initial issuance date of June 8, 2021, and will expire five years following the initial exercise date. Subject to 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 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%. As of December 31, 2021, 1,538,461 RDO Warrants were still outstanding. The offering of the Securities was made pursuant to the Company’s effective shelf registration statement on Form S-3. 111 Table of Contents At-The-Market Program On February 4, 2021, Ocuphire filed a Form S-3 shelf registration under the Securities Act 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 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 ATM”). During the year ended December 31, 2021, 2,778,890 shares of common stock were sold under the 2021 ATM for gross proceeds in the amount of $13.5 million before deducting issuance expenses in the amount of $0.4 million. Pre-Merger Financing 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 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 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 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. Waiver Agreements Effective February 3, 2021, each investor that invested in the Pre-Merger Financing (each, a “Holder”) entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”). Pursuant to the Waiver Agreements, the Holders 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 Holders, grant certain registration rights for the shares underlying the warrants. The Waiver Agreements provide for the permanent waiver 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 Holders. 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). As of December 31, 2021, 5,665,838 Series A Warrants were still outstanding. At issuance, the Series A Warrants contained certain provisions that could have resulted in a downward adjustment of the initial exercise price and an upward adjustment in the number of shares underlying the warrants if Ocuphire were to have issued or sold, or made an agreement to issue or sell, any shares of common stock for a price lower than the exercise price then in effect. Pursuant to the terms of the Waiver Agreements, these provisions are no longer in effect. 112 Table of Contents 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 were initially exercisable for 665,836 shares of Common Stock in the aggregate (without giving effect to any limitation on exercise contained therein) and ultimately became exercisable for 1,708,334 shares of Common Stock upon execution of the Waiver Agreements. As of December 31, 2021, 78,700 Series B Warrants were still outstanding. At issuance, the Series B Warrants contained certain provisions that could have resulted in the issuance of additional Series B Warrants depending on the dollar volume-weighted average prices of a share of Common Stock during a 45-trading day Reset Period. Pursuant to the terms of the Waiver Agreements, those provisions are no longer in effect. Ocuphire Convertible Notes From May 2018 through March 2020, Ocuphire issued convertible notes (the “Ocuphire convertible notes”) for aggregate gross proceeds of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes. The final closing of the Ocuphire convertible notes occurred on March 10, 2020. The Ocuphire convertible notes had an interest an interest rate of 8% per annum. On November 4, 2020, all of Ocuphire’s outstanding notes were converted into 977,128 shares of Ocuphire common stock as adjusted for the Exchange Ratio in connection with the completion of the Merger. The original Convertible Note Purchase Agreement (the “Note Purchase Agreement”) was dated May 25, 2018. Under the original terms of the Note Purchase Agreement, the Ocuphire convertible notes were payable on demand on July 31, 2019 unless converted earlier pursuant to their terms. Such conversion would automatically occur if Ocuphire (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 Ocuphire of at least $5.0 million (“Qualified Financing”), or (iv) completed a reverse merger transaction (“Reverse Merger”), each a “Conversion Event”. Upon a Conversion Event, the Ocuphire convertible notes would have automatically converted into the following: • Qualified Financing or IPO: An amount of shares of Ocuphire common stock equal to 135% of the Note Value divided by the per share price of Ocuphire common stock issued to purchasers in the Qualified Financing or IPO. • CIC: An amount of shares of Ocuphire common stock equal to 200% of the Note Value divided by the per share price of Ocuphire common stock based on the valuation of such CIC. • Reverse Merger: Either (i) shares of Ocuphire common stock issued in the Reverse Merger or (ii) equity securities of the Reverse Merger counterparty, in an amount equal to 135% of the Note Value divided by the per share price at which such shares were issued to either stockholders of Ocuphire or stockholders of the Reverse Merger counterparty. The Note Purchase Agreement was amended and restated on January 22, 2019 (the “Amended and Restated Mezz Note Purchase Agreement”). Under the Amended and Restated Mezz Note Purchase Agreement, the demand date of the Ocuphire convertible notes was extended to December 31, 2019 and the conversion provisions under the Ocuphire convertible notes were restated such that, upon a Conversion Event, the Ocuphire convertible notes would have automatically converted into the following: 113 Table of Contents • IPO: An amount of shares of Ocuphire common stock equal to the greater of: (i) 150% of the Note Value divided by the per share price of Ocuphire common stock issued to purchasers in the IPO, and (ii) 100% of the Note Value divided by the per share price of $10.37. • CIC: An amount of shares of Ocuphire common stock equal to the greater of: (i) 200% of the Note Value divided by the per share price of Ocuphire common stock based on the valuation of such CIC, and (ii) 100% of the Note Value divided by the per share price of $10.37. • Qualified Financing : An amount of shares of Ocuphire common stock equal to 150% of the Note Value divided by the per share price of Ocuphire common stock issued to purchasers in the Qualified Financing. • Reverse Merger : Either shares of Ocuphire common stock issued in the Reverse Merger or equity securities of the Reverse Merger counterparty, in an amount equal to the greater of: (i) 150% of the Note Value divided by the per share price at which such shares were issued to either stockholders of Ocuphire or stockholders of the Reverse Merger counterparty, and (ii) 100% Note Value divided by the per share price of $10.37. The Amended and Restated Mezz Note Purchase Agreement was further amended on November 20, 2019 (the “First Amendment”). The terms under the First Amendment reflect the current terms in effect for the Ocuphire convertible notes as of the date of this Annual Report, except as further amended by the Note Conversion Agreement (defined below). The First Amendment extended the demand date of the Ocuphire convertible notes from December 31, 2019 to September 30, 2020, and changed the basis of interest from a 360-day year, 30-day month basis to a 365-day year basis. In addition, the First Amendment increased the automatic conversion factor applied to the Note Value to 175% in the event of an IPO, Qualified Financing or Reverse Merger and removed the fixed conversion option provision of $10.37 per share in the event of an IPO, CIC or Reverse Merger. On June 8, 2020, holders of the Ocuphire convertible notes entered into the Note Conversion Agreement with Ocuphire (the “Note Conversion Agreement”). The Note Conversion Agreement provided that prior to the consummation of the merger, following the Rexahn special meeting, all of the Ocuphire convertible notes would automatically convert into an amount of shares of Ocuphire common stock equal to 175% of the Note Value divided by the Fully Diluted Shares. “Fully Diluted Shares” for this purpose means as of the Conversion Date the sum of the following: (1) all of the issued outstanding shares of Ocuphire common stock; and (2) the aggregate number of shares of Ocuphire common stock reserved for issuance under all outstanding options or other awards under equity incentive plans of Ocuphire in effect as of the date of conversion. The Note Conversion Agreement further provided that upon the issuance of shares of Ocuphire common stock in the conversion, each convertible note would be cancelled and extinguished without the need for surrender of such notes and all obligations of Ocuphire, including any obligations for payment of principal and interest on the convertible notes, would be unconditionally and irrevocably discharged. Cash Flows The following table summarizes Ocuphire’s cash flows for the periods indicated (in thousands): For the Year Ended December 31, 2021 2020 Net cash used in operating activities $ (19,370 ) $ (6,797 ) Net cash (used in) provided by investing activities (100 ) 539 Net cash provided by financing activities 27,605 21,120 Net increase in cash and cash equivalents $ 8,135 $ 14,862 114 Table of Contents Cash Flow from Operating Activities For the year ended December 31, 2021, cash used in operating activities of $19.4 million was attributable to a net loss of $56.7 million, partially offset by $37.1 million in non-cash operating expenses and a net change of $0.2 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted largely of stock-based compensation of $1.9 million, fair value change in warrant liabilities in the amount of $33.8 million, a share settlement with certain investors in the amount of $1.6 million and non-cash impact from the receipt of common stock stemming from the fulfillment of revenue milestones ($0.2) million. The change in operating assets and liabilities was primarily attributable to an overall net increase in Ocuphire’s accounts payable offset in part by both an increase in prepaid expenses and a decrease in accrued expenses associated with the fluctuations of Ocuphire’s operating expenses. For the year ended December 31, 2020, cash used in operating activities of $6.8 million was attributable to a net loss of $24.6 million, partially offset by $16.7 million in non-cash operating expenses and a net change of $1.1 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted of IPR&D in the amount $10.5 million, day-one interest attributed to the issuance of Series A Warrants in the amount of $4.7 million, stock-based compensation of $1.5 million, non-cash interest and discount amortization related to the Ocuphire convertible notes of $1.5 million, a fair value change in derivative and warrant liabilities in the amount of $1.5 million, a reclassification of issuance costs to financing activities in the amount of $0.7 million and depreciation expense of $8,000, offset by a non-cash gain on note extinguishment of $3.7 million. The change in operating assets and liabilities was primarily attributable to an overall net increase in Ocuphire’s accrued liabilities and accounts payable offset in part by an increase in prepaid expenses associated with the fluctuations of Ocuphire’s operating expenses and in connection with transaction costs attributed to the Merger. Cash Flow from Investing Activities During the years ended December 31, 2021 and 2020, net cash (used in) provided by investing activities was $(0.1) million and $0.5 million, respectively. Investing activities during the current year period related to the payment of the remaining transaction costs associated with the Merger. During the prior year period ended December 31, 2020, investing activities consisted of cash acquired, net of transaction costs paid, in connection with the Merger. Cash Flow from Financing Activities Net cash provided by financing activities during the year ended December 31, 2021 was $27.6 million relating principally to proceeds received in connection with both the Registered Direct Offering and 2021 ATM, net of issuance costs, in the amount of $27.0 million. Proceeds, net of payments, received in connection with a short-term loan in the amount of $0.5 million and the exercise of stock options in the amount of $0.1 million comprised the balance of financing activities during the period. Net cash provided by financing activities during the year ended December 31, 2020 was $21.1 million, consisting primarily of net proceeds as a result of the Pre-Merger Financing in the amount of $19.4 million and from the issuance of the Ocuphire convertible notes in the amount of $2.2 million, offset in part by the cash settlement of Rexahn warrants post-Merger in the amount of $0.5 million. Liquidity and Capital Resource Requirements Ocuphire has no current source of revenue to sustain its present activities, and Ocuphire does not expect to generate revenue until, and unless, the FDA or other regulatory authorities approve Nyxol or APX3330 and it successfully commercializes its product candidates. Until such time, if ever, as Ocuphire can generate substantial product revenue, it expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Ocuphire does not have any committed external source of funds. To the extent that Ocuphire raises additional capital through the sale of equity or convertible debt securities, the ownership interest of Ocuphire’s stockholders will be diluted, and the terms of these securities may include liquidation, warrants, or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting Ocuphire’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Ocuphire raises additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, Ocuphire may have to relinquish valuable rights to its technologies, future revenue streams or grant licenses on terms that may not be favorable to Ocuphire. If Ocuphire is unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, Ocuphire may be required to delay, limit, reduce or terminate its product development, future commercialization efforts, or grant rights to develop and market its product candidates that Ocuphire would otherwise prefer to develop and market itself. 115 Table of Contents Future Capital Requirements Ocuphire’s independent registered public accounting firm included an explanatory paragraph in its report on Ocuphire’s financial statements as of and for the years ended December 31, 2021 and 2020, noting the existence of substantial doubt about its ability to continue as a going concern. This uncertainty arose from management’s review of Ocuphire’s results of operations and financial condition and its conclusion that, based on Ocuphire’s operating plans, Ocuphire did not have sufficient existing working capital to sustain operations substantially beyond twelve months following the date of this filing. To continue to fund operations, Ocuphire will need to raise capital. Ocuphire may obtain additional financing in the future through the issuance of common stock, through other equity or debt financings or through collaborations or partnerships with other companies. Ocuphire may not be able to raise additional capital on terms acceptable to it, or at all, and any failure to raise capital as and when needed could compromise Ocuphire’s ability to execute on its business plan. The development of Nyxol and APX3330 is subject to numerous uncertainties, and Ocuphire has based these estimates on assumptions that may prove to be substantially different than what Ocuphire currently anticipates and could result in cash resources being used sooner than what Ocuphire currently expects. Additionally, the process of advancing early-stage product candidates and testing product candidates in clinical trials is costly, and the timing of progress in these clinical trials is uncertain. Ocuphire’s ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support its cost structure. Ocuphire cannot give any assurance that it will ever be profitable or generate positive cash flow from operating activities. Contractual Obligations and Commitments Facility Lease Ocuphire leases a facility under a non-cancellable operating lease that commenced on June 8, 2019 and expires on December 31, 2022, as amended, for a base rent in the amount of $3,000 per month. Apexian Sublicense Agreement On January 21, 2020, Ocuphire entered into the Apexian Sublicense Agreement, 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 Ocuphire intends to develop as an oral tablet therapeutic to treat DR and diabetic macular edema, and potentially wAMD. In connection with the Apexian Sublicense Agreement, Ocuphire issued 843,751 shares of Private Ocuphire common stock to Apexian and certain of Apexian’s affiliates. The share issuance transaction was recorded in the amount of $2.1 million as IPR&D expense for the year ended December 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. Ocuphire also reimbursed Apexian $0.4 million of Ref-1 Inhibitor program costs during 2020. Ocuphire 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. 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, each of which net sales milestone payments is payable once, upon the first achievement of such milestone. 116 Table of Contents Lastly, Ocuphire also agreed to make royalty payments equal to a single-digit percentage of its net sales of products covered by the patents under the Apexian Sublicense Agreement. None of the milestone or royalty payments were triggered as of the date of this Annual Report. Other Commitments In the course of normal operations, Ocuphire entered into cancellable purchase commitments with its suppliers for various key research, clinical and manufacturing services. The purchase commitments covered by these arrangements are subject to change based on Ocuphire’s research and development efforts. Other Funding Requirements As noted above, certain of our cash requirements relate to the funding of our ongoing research and development of Nyxol and APX3330, inclusive of any potential milestone and royalty obligations under our intellectual property licenses. See “Part I, Item 1— Business—Nyxol and APX3330 Clinical Experience Summaries —Ocuphire Clinical Development Plan —Future Planned Nyxol Trials—Potential Clinical Plans for APX3330—Future In-Licensing and Acquisition Opportunities—Manufacturing—Apexian Sublicense Agreement— Review and Approval of Drugs in the United States ” in our Annual Report for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are able to estimate such costs. Our other cash requirements within the next twelve months include accounts payable, accrued expenses, purchase commitments and other current liabilities. Our other cash requirements greater than twelve months from various contractual obligations and commitments may include operating leases and contractual agreements with third-party service providers for clinical research, product development, manufacturing, supplies, payroll, equipment maintenance, and audits for periods into calendar year 2023. Refer to Note 3 – Commitments and Contingencies included in “Part II, Item 8 – Financial Statements and Supplementary Data” in this Annual Report for further detail of our lease obligation and license agreements with regard to the timing of expected future payments. We expect to satisfy our short-term and long-term obligations through cash on hand and from future equity and debt financings until we generate an adequate level of revenue from commercial sales to cover expenses, if ever. Critical Accounting Policies and Estimates Ocuphire’s financial statements are prepared in accordance with U.S. GAAP. These accounting principles require Ocuphire to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. Ocuphire believes that the estimates and judgments upon which it relies are reasonably based upon information available to Ocuphire at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, Ocuphire’s financial results will be affected. The accounting policies that reflect Ocuphire’s more significant estimates and judgments and which it believes are the most critical to aid in fully understanding and evaluating its reported financial results are described below. Our significant accounting policies are discussed in Note 1 — Company Description and Summary of Significant Accounting Policies, included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report. We believe that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates require our most difficult, subjective, or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with the Audit Committee of our Board of Directors. We have not made any material changes to date, nor do we believe there is a reasonable likelihood of a material future change to the accounting methodologies for the areas described below. 117 Table of Contents Collaborations Revenue We account for collaborations revenue in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . The guidance provides a unified model to determine how revenue is recognized. We have entered into license agreements which have revenue recognition implications. For discussion about the determination of collaborations revenue, see Note 10 — Collaboration and License Agreements included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report. To date, we have not had, nor do we expect to have in the future, significant variable consideration adjustments related to our collaborations revenue. Warrant Liabilities Following the Merger, Ocuphire issued the Series A Warrants in connection with the Pre-Merger Financing, and assumed Rexahn warrants issued prior to the Merger. Ocuphire accounts for these warrants as a liability at fair value as long as certain provisions precluding equity accounting treatment are present. Upon the execution of the Waiver Agreements described in Note 9 — Stockholders’ Equity (Deficit) included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report, the Series A Warrants were no longer subject to cash settlement or indexation provisions precluding equity classification, and as a result, not subject to fair value remeasurement. Ocuphire will continue to adjust the Rexahn warrant liability for changes in fair value until the earlier of the exercise, expiration, or until such time that cash settlement or indexation provisions are no longer in effect for the Rexahn warrants. We do not expect that the fluctuations in fair value attributed to the Rexahn warrant liability will be significant. Share-based Compensation Ocuphire accounts for share-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value which is not subject to remeasurement. We record equity instrument forfeitures when they occur. For discussions about the application of grant date fair value associated with our share-based compensation, see Note 9 — Share-based Compensation included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report. Income Tax Assets and Liabilities Currently, there is no provision for income taxes, as we have incurred operating losses to date, and a full valuation allowance has been provided on our net deferred tax assets. For additional information, see Note 12 — Income Taxes included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report. Contingencies We are subject to numerous contingencies arising in the ordinary course of business, including obligations related to certain license agreements. For additional information, see Note 3 — Commitments and Contingencies included in “Part II, Item 8 – Financial Statements and Supplementary Data” of this Annual Report. Recent Accounting Pronouncements From time to time the FASB, or other standard-setting bodies, issue new accounting pronouncements. Where applicable, Ocuphire adopts these new standards according to the specified effective dates. Unless otherwise disclosed in the notes to the financial statements appearing in this annual report, Ocuphire believes that the impact of any recently issued standard(s) that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. See Note 1, “Company Description and Summary of Significant Accounting Policies,” in the notes to Ocuphire’s financial statements for a more in-depth discussion of recently issued accounting standard(s). 118 Table of Contents ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included in this Annual Report beginning on page F-1 and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.