What changed in this filing

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Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 387 added, 651 removed, 227 unchanged (82% of the section changed)

1 unchanged sentence

Ocuphire Pharma, Inc.

Condensed Consolidated

Balance Sheets

(in thousands, except share amounts and par value)

September 30 ,

Current assets:

Cash and cash equivalents

Prepaids and other current assets

Short-term investments

Prepaids and other assets

Total current assets

Property and equipment, net

Liabilities and stockholders’ equity (deficit)

Liabilities and stockholders’ equity

Current liabilities:

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Accrued expenses

Short-term loan

Total current liabilities

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Total liabilities

Commitments and contingencies (Note 3)

Stockholders’ equity (deficit)

Commitments and contingencies (Note 4 and Note 9)

Stockholders’ equity

Preferred stock, par value $ 0.0001 ;

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

no shares issued and outstanding at September 30, 2021

and December 31, 2020 .

10,000,000 shares authorized as of March 31, 2022 and December 31, 2021 ;

no shares issued and outstanding at March 31, 2022 and

December 31, 2021 .

Common stock, par value $ 0.0001 ;

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

17,295,434 and 10,882,495 shares issued and outstanding at September 30, 2021 and December 31, 2020 , respectively.

75,000,000 shares authorized as of March 31, 2022 and December 31, 2021 ;

19,213,651 and 18,845,828 shares issued and outstanding at

March 31, 2022 and December 31, 2021 , respectively.

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes.

Ocuphire Pharma, Inc.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of

Comprehensive Loss

(in thousands, except share and per share amounts)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Collaborations revenue

Three Months Ended

Operating expenses:

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Research and development

Acquired in‑process research and development

Total operating expenses

1 unchanged sentence

Interest expense

Fair value change of warrant liability and premium conversion derivatives

Gain on note extinguishment

Other income, net

Fair value change in warrant liabilities

Other (expense) income, net

Loss before income taxes

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Ocuphire Pharma, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Changes in

Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

1 unchanged sentence

Balance at December 31, 2020

Issuance of common stock in exchange for in-process research and development

Share–based compensation

Net and comprehensive loss

Balance at March 31, 2020

Gain on note extinguishment (Note 4)

Share–based compensation

Net and comprehensive loss

Balance at June 30, 2020

Share–based compensation

Net and comprehensive loss

Balance at September 30, 2020

Balance at December 31, 2020

Reclassification of Series A warrant liability to equity

Share–based compensation

Stock–based compensation

Exercise of stock options

1 unchanged sentence

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

Balance at December 31, 2021

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

Issuance costs

Share–based compensation

Exercise of options

Stock–based compensation

Exercise of stock options

Net and comprehensive loss

Balance at September 30, 2021

Balance at March 31, 2022

See accompanying notes.

Ocuphire Pharma, Inc.

Condensed Consolidated Statements of

Condensed Consolidated

Statements of

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation

Non-cash acquired in-process research and development

Non-cash interest on convertible notes

Non-cash interest on convertible notes – related party

Non-cash discount amortization on convertible notes

Non-cash discount amortization on convertible notes – related party

Fair value change in warrant liabilities and premium conversion derivatives

Non-cash share settlement with investors

Receipt of investments related to license agreement

Unrealized gain from short-term investments

Gain on note extinguishment

Stock-based compensation

Fair value change in warrant liabilities

Unrealized loss from short-term investments

Change in assets and liabilities:

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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

Proceeds from issuance of common stock in connection with the at-the-market program

Issuance costs

Deferred offering costs

Payments made in connection with short-term loan

Exercise of stock options

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Non-cash reclassification of Series A warrant liability to equity

Bifurcation of premium conversion derivative related to convertible notes

Unpaid deferred offering and issuance costs

Net change in proceeds receivable from convertible note issuance

Unpaid issuance and deferred offering costs

See accompanying notes.

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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.

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 other product candidates including second-generation product candidates

and analogs of APX3330, including APX2009 and APX2014.

(the "Company" or "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.

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 (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.

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

The Company has sustained operating losses since inception and expects

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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”).

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

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.

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 as well as impacts to financial position 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

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

As a result of the COVID-19 pandemic, the Company has experienced, and may continue to experience, delays and disruptions in our

clinical trials, as well as interruptions in our manufacturing, supply chain, shipping and research and development operations.

The Company’s plans for further testing or clinical trials may be further impacted by the continuing effects of COVID-19.

outbreak of COVID-19 continues to 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 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.

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 the Company’s ability to secure additional financing.

Although the Company 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 fiscal year 2022 and

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”).

The accompanying condensed consolidated 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 consolidated balance sheet was derived from audited financial

statements, and may not include all disclosures required by GAAP;

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

The December 31, 2021 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.

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, 2021.

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

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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.

On December 31, 2021, the Company merged its wholly-owned subsidiary, OcuSub Inc,

with and into the Company, with the Company remaining as the surviving entity.

The merger of the Company’s wholly-owned subsidiary did not have a financial impact in the periods presented.

Upon close of this merger, the Company did not

have any remaining entities that required consolidation for financial statement reporting purposes.

All significant intercompany accounts and transactions were eliminated in the preparation of the condensed financial statements prior to

the December 31, 2021 merger with OcuSub Inc .

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.

To continue to fund operations, Ocuphire will need to raise capital.

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

capital requirements.

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 and debt instruments to finance operating and working capital requirements, including additional issuances under the 2021 at-the-market

program discussed further below.

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.

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

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit

risk are cash and cash equivalent balances in bank accounts.

The Company keeps its cash and cash equivalent balances with high quality financial institutions in excess of federally insured limits.

The Company has not experienced any

losses in such accounts and believes that no significant concentration of credit risk exists with respect to those cash and cash equivalent balances.As of September 30, 2021, the Company had deposits that exceeded federally insured

amounts by $ 21.8 million.

Short-term Investments

The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and

are recorded on a settlement date basis.

The Company’s investments are comprised of equity securities, which in accordance with the fair value hierarchy described below are recorded at fair value using Level l inputs on the condensed

consolidated balance sheets.

Subsequent changes in fair values are recorded in other income, net on the condensed consolidated statements of comprehensive loss.

The Company classifies investments available to fund current operations

as current assets on its condensed consolidated balance sheets.

The Company did no t recognize any impairments on its

investments during the three and nine months ended September 30, 2021 and 2020.

Common Stock Valuation

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.

Use of Estimates

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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.

Notes to Condensed Consolidated Financial Statements

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.

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 approvals) .

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

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Accordingly, the Company has a single reporting segment.

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 two long-standing financial institutions in the United States.

Amounts on deposit may at times exceed

federally insured limits.

Management believes that the financial institutions are financially sound, and accordingly, minimal credit risk exists with respect to the financial institutions.

As of March 31, 2022, the Company had deposits

that exceeded federally insured amounts by $ 18.7 million.

Short-term Investments

The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and

are recorded on a settlement date basis.

The Company’s short-term investments are comprised of equity securities, which in accordance with the fair value hierarchy described below are recorded at fair value using Level l inputs on the

balance sheets.

Subsequent changes in fair values are recorded in other (expense) income, net on the condensed consolidated statements of comprehensive loss.

The Company classifies investments available to fund current operations as

current assets on its balance sheets.

The Company did no t recognize any impairments on its investments to date through March

General and Administrative Expenses

General and administrative expenses (“G&A”) consist primarily of personnel-related costs, including salaries and

stock-based compensation costs, for personnel in functions not directly associated with research and development activities.

Other significant costs include legal fees relating to intellectual property and corporate matters, professional

fees for accounting and tax services, settlement costs with third parties and other services provided by business consultants.

Research and Development

Research and development expenses (“R&D”) consist of costs incurred in performing research and development activities, including

compensation for research and development employees and consultants, costs associated with preclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, fees paid to

external service providers that conduct certain research and development, and an allocation of R&D related overhead expenses.

Other (Expense) Income, net

Other (expense) income, net includes payments made by the Company in connection with the

Contingent Value Rights Agreement discussed further below with former stockholders of Rexahn Pharmaceuticals, Inc.

In addition, Other (expense) income, net includes interest earned from cash and cash equivalent investments,

realized and unrealized gains (losses) from equity investments, and when they occur, reimbursements in connection with grants and other sources.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of the Financial Accounting Standards Board

(“FASB”) Accounting Standards Codification (“ASC 718”), Compensation — Stock Compensation.

Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value.

The Company records forfeitures

when they occur.

Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718.

Notes to Condensed Consolidated Financial Statements

Warrant Liabilities

The Company issued Series A Warrants in connection with the Pre-Merger Financing (see Note 3 – Pre-Merger Financing) and assumed

Rexahn warrants issued prior to the Merger.

The Company accounts for these warrants as a liability while outstanding at fair value during periods when certain provisions preclude equity accounting treatment for these instruments.

Additionally, issuance costs associated with the warrants classified as liabilities are expensed as incurred and reflected as interest expense in the accompanying consolidated statements of comprehensive loss.

The change in fair value of

the warrant liabilities while outstanding was recognized as a component of the fair value change in derivative and warrant liabilities line item in the condensed consolidated statements of comprehensive loss.

Fair Value Measurements

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Level 1 inputs:

Unadjusted quoted prices for identical

assets or liabilities in active markets;

Unadjusted quoted prices for identical assets

or liabilities in active markets;

Level 2 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 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 September 30, 2021 and December 31, 2020, the

fair values of cash and cash equivalents, 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 short-term investments, while outstanding, were based on observable Level 1 inputs in the form of

quoted market prices from a major stock exchange.

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 nine months ended September 30, 2021 and 2020.

Notes to Condensed Consolidated Financial Statements

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;

Level 3 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, 2022 and December 31, 2021, the fair

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

The fair value of the

short-term investments, while outstanding, were based on observable Level 1 inputs in the form of quoted market prices from a major stock exchange.

The fair value of the warrant liabilities, 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, 2022 and 2021.

The fair value of financial instruments measured on a

recurring basis is as follows (in thousands):

As of September 30, 2021

As of March 31, 2022

Short-term investments

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As of December 31, 2021

Warrant liabilities

Total liabilities at fair value

Short-term investments

Total assets at fair value

The following table provides a roll-forward of short-term investments measured at fair value on a recurring basis using observable level

1 inputs for the nine months ended September 30, 2021 and 2020 (in thousands):

1 inputs for the three months ended March 31, 2022 and 2021 (in thousands):

Short-term investments

Balance as of beginning of period

Receipt of investments related to license agreement

Unrealized gain

Unrealized loss

Balance as of end of period

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 nine months ended September 30, 2021 and 2020 (in thousands):

warrant liabilities measured at fair value on a recurring basis using unobservable level 3 inputs for the three months ended March 31, 2022 and 2021 (in thousands):

Warrant liabilities

Balance as of beginning of period

Change in fair value of warrant liability

Change in fair value of warrant liabilities

Reclassification of Series A warrants from liability to equity

Balance as of end of period

Premium conversion derivatives

Balance as of beginning of period

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

Balance as of end of period

There were no financial instruments measured on a non-recurring basis for any of the periods presented.

Notes to Condensed Consolidated Financial Statements

Recent Accounting Pronouncements

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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.

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

The Company does not expect that the adoption of this ASU on January 1, 2023 will have a significant impact 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):

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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.

Notes to Condensed Consolidated Financial Statements

The amendments in this ASU are effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for

fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within

those fiscal years.

The Company is currently evaluating the impact of ASU 2020-06 on its condensed consolidated financial statements .

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the

effect of the assistance on an entity’s financial statements.

The amendments in this ASU are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021.

adopted this guidance on January 1, 2022 and it did not have a material impact to our financial statements.

Merger and Contingent Value Rights Agreement

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.

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 held.

completed its merger transaction (the “Merger”) with Rexahn.

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 terms of the Merger

and the CVR Agreement, Rexahn stockholders of record as of immediately prior to the effective time of the Merger received one

contingent value right (“CVR”) for each share of Rexahn common stock held.

Each CVR entitles such holders to

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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.

As of September 30, 2021, $ 91 ,000

was due under the CVR Agreement and was recorded in the other income, net line item in the condensed consolidated statements of comprehensive loss.

As of the November 5, 2020, the

Merger closing date, and September 30, 2021, no milestones under the license agreements subject to the CVR Agreement had

been accrued as there were no potential milestones yet considered probable.

Former Rexahn Warrants

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 September 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 2.2

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 March 31, 2022, no milestones had been accrued as there were no

additional potential milestones yet considered probable beyond those previously reported in the second and third quarter of calendar year 2021.

Notes to Condensed Consolidated Financial Statements

Former Rexahn Warrants

Following the closing of the Merger,

231,433 outstanding, 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 March 31, 2022, 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 1.7

Pre-Merger Financing

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 Ocuphire Pharma, Inc.,

prior to the Merger and one director of Rexahn upon closing of the Merger (the “Pre-Merger Financing”).

The Pre-Merger Financing also

included the issuance of Series A Warrants and Series B Warrants discussed further below.

Waiver Agreements

Effective February 3,

2021, each investor that invested in the Pre-Merger Financing 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 Agreements, 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 in the aggregate with respect to all

investors, eliminating any future resets.

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 March 31, 2022.

the execution of the Waiver Agreements, the Series A Warrants were accounted for and classified as liabilities on the accompanying condensed 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 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 outstanding as of March 31, 2022 were exercisable for 78,700 shares of common stock.

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

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 September 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.

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 March 31, 2022, there was sufficient uncertainty with regard to any future cash milestone payments under the sublicense agreement, and as such, no liabilities were recorded related

to the sublicense agreement .

Notes to Condensed Consolidated Financial Statements

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.

The Lease, as amended, has extended the term to December 31, 2022.

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

The HQ Lease, as amended, has extended the term to December 31, 2022.

Additionally, Ocuphire leased office space in Rockville, Maryland through June 30, 2021 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, as amended, for the Lease is approximately $ 3 ,000.

monthly base rent for the Rexahn Lease was $ 13 ,000.

The rent expense associated with the Lease amounted to $ 9 ,000 and $ 12 ,000 during the

three months ended September 30, 2021 and 2020, respectively.

The rent expense associated with the Lease and Rexahn Lease amounted to $ 107 ,000

and $ 30 ,000 during the nine months ended September 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 HQ Lease and the Rexahn Lease qualified for the short-term lease exception under ASC 842, Leases .

The monthly base rent, as amended, for the HQ Lease is approximately $ 3,000 .

The monthly base rent for the Rexahn

Lease was $ 13,000 .

The rent expense associated with the HQ Lease and Rexahn Lease amounted to $ 12,000 and $ 48,000

during the three months ended March 31, 2022 and 2021, respectively.

Total remaining expected rental payments under the HQ Lease amount to $ 27,000

through its December 31, 2022 expiration date .

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.

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

1 unchanged sentence

Prepaid and other assets consist of the following (in

September 30,

Total prepaids and other assets

2 unchanged sentences

presented in the following table (in thousands):

September 30,

Total property and equipment

1 unchanged sentence

Property and equipment, net

expense was $ 1,000 for the three months ended September 30, 2021 and 2020, and $ 3,000 and $ 7,000 for the nine

months ended September 30, 2021 and 2020, respectively.

Notes to Condensed Consolidated Financial Statements

expense was $ 1 ,000 during each of the three months ended March 31, 2022 and 2021.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

September 30,

R&D services and supplies

Professional services

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 nine months ended September 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 the milestone payments under the BioSense License

and Assignment Agreement were probable of payment as of September 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 with a value of $ 342 ,000

and a $ 200 ,000 cash payment.

The Company is restricted from selling the Processa common stock for a period of one year .

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 License Agreement.

Company determined that none of the milestone payments under the Processa License Agreement were probable of payment as of September 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

Notes to Condensed Consolidated Financial Statements

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 September 30,

2021, the Company has fulfilled its performance obligations with respect to the upfront payment under the Processa License Agreement and has recognized the associated licensing revenue in connection with the payment.

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

Convertible Notes

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).

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 Merger.

Prior to the completion of the Merger, on June 8, 2020, the Company amended the Convertible Notes (the “Conversion Agreement”).

Under the Conversion Agreement, upon such date selected by the Company

following Rexahn’s receipt of the required Rexahn stockholder vote and prior to the effectiveness of the Merger, each Convertible Note shall automatically and without any action required by any purchaser or the Company be cancelled and,

simultaneously with such cancellation, convert into that number of fully paid and non-assessable shares of the Company’s common stock that is equal to 175 % times the outstanding principal and accrued but unpaid interest (“Note Value”) divided by the conversion price (the “Conversion Price”), rounded to the nearest whole share.

The Conversion Price

has the meaning of the per share price resulting from the quotient of (1) $ 100,000 ,000 less the aggregate amount of 175 % times the Note Value of all of the Convertible Notes divided by (2) the fully diluted shares (the “Fully Diluted Shares”).

Diluted Shares has the meaning of:

(1) all of the issued outstanding shares of the Company’s common stock;

and (2) the aggregate number of shares of the Company’s common stock reserved for issuance under all outstanding options or other

awards under equity incentive plans of the Company in effect as of such date of determination.

The addition of the new conversion feature under the Conversion Agreement represented a substantial modification to the Convertible Notes, and as such, the Company recorded the

modification as a note extinguishment.

On the modification date, the fair value of the Convertible Notes (inclusive of the embedded features) was $ 1,260 ,000

lower upon modification than the aggregate of the carrying value of the Convertible Notes and the fair value of the embedded features;

the difference was recorded as a gain on note extinguishment in the accompanying condensed

consolidated statements of comprehensive loss for the nine months ended September 30, 2020.

Lastly, an increase to additional paid-in capital in the amount of $ 971 ,000 was recorded in connection with the Conversion Agreement to account for the excess of the Convertible Notes’ fair value over the aggregate value of outstanding note principal,

accrued interest and fair value of the premium conversion derivatives upon execution of the Conversion Agreement.

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 nine months ended September 30, 2020 was $ 171 ,000 and $ 478 ,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 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

Notes to Condensed Consolidated Financial Statements

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

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

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 $ 831 ,000 during the nine months ended September 30, 2020.

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

There were no outstanding premium conversion derivatives as of September 30, 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 the fair value change of warrant liability and premium conversion derivatives line item in the accompanying condensed consolidated

statements of comprehensive loss which amounted to a benefit of $( 879 ,000) and $( 158 ,000) during the three and nine months ended September 30, 2020, respectively.

recorded a discount to the Convertible Notes, attributed to

both third party costs

in connection with the note extinguishment and note issuance costs, of $ 10 ,000 during the nine months ended September 30, 2020.

The note discounts associated with the bifurcation of derivatives, note extinguishment and issuances costs were amortized to interest expense over the term of the Convertible Notes using the straight-line method which approximated the effective interest method and amounted to $ 8 ,000 and $ 944 ,000 during the three and

nine months ended September 30, 2020, respectively.

Stockholders’ Equity (Deficit)

Short-Term Loan

The Company entered into an unsecured short-term loan (the “Loan”) agreement in the amount of

$ 0.6 million in November 2021 related to financing an insurance policy.

The Loan is payable in six monthly installments of $ 108 ,000

beginning in December 2021.

The Loan has an annual interest rate of 5.5 % per annum.

Interest expense in the amount of $ 5 ,000 was recognized in connection with the Loan during the three months ended March 31, 2022.

Related Party Transactions

Financing and Waiver Agreements

Five directors of Ocuphire Pharma, Inc., prior to the Merger, 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 of common stock, 53,189 converted shares of additional common stock, 80,366

Series A Warrants and 9,444 Series B Warrants.

In connection with the Pre-Merger Financing, 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.

S tockholders’ Equity

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 nine months ended September 30, 2021, 332,600 and 1,233,543 shares, respectively, were sold under the 2021 ATM for gross proceeds in the amount of approximately $ 1.7 million and $ 5.8 million, respectively, before deducting issuance

expenses in the amount of approximately of $ 0.1 million and $ 0.3 million, respectively.

On 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.

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 three months ended March 31, 2022, 336,544 shares of common stock were sold under the

2021 ATM for gross proceeds in the amount of $ 1.2 million before deducting issuance expenses, including the placement agent’s

fees, legal and accounting expenses, in the amount of $ 35 ,000.

There were no sales of common stock under the 2021 ATM during the three-month period ended March 31, 2021.

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.

Notes to Condensed Consolidated Financial Statements

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:

a 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 September 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

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.

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.

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 nine months ended September 30, 2021.

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

remeasurement.

Notes to Condensed Consolidated Financial Statements

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 September 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

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 nine month periods indicated below

(in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

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”).

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 issuance date.

As of March 31, 2022, 1,538,461

RDO Warrants were outstanding.

Stock-based Compensation

General and administrative

Research and development

Total share-based compensation

Total stock-based compensation

Ocuphire Stock Options

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

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.

The stockholders of the Company approved the 2020 Equity

Incentive Plan (the “2020 Plan”) for stock-based awards.

The 2020 Plan 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.

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

The 2020 Plan permits the grant of incentive and nonstatutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock and net loss

awards, and other stock‑based awards.

2018 Equity Incentive Plan

Prior to the 2020 Plan, the Company adopted a 2018

Prior to the 2020 Plan, the Company had adopted a 2018

Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,175,000 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.

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.

Notes to Condensed Consolidated Financial Statements

2020 Plan Evergreen Provision

for issuance to employees, directors and consultants.

Upon the effective date of the 2020 Plan, no additional shares were

available for issuance under the 2018 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

increase on January 1 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

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 1

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, 2022, 942,291 shares were added to the 2020 Plan as a result of the evergreen provision.

During the three and nine months ended September 30, 2021, 128,000 and 387,800 stock

options were granted to newly-hired consultants and employees, respectively, generally vesting over a six ( 6 ) to forty-eight

( 48 ) month period.

During the three and nine months ended September 30, 2020, 22,397 and 233,989 stock options to consultants were

granted, respectively, generally vesting over an immediate to twenty-eight ( 28 ) month period.

The Company recognized $ 452 ,000 and $ 616 ,000 in

share-based compensation expense related to stock options during the three months ended September 30, 2021 and 2020, respectively, and $ 1,331 ,000

and $ 993 ,000 during the nine months ended September 30, 2021 and 2020, respectively.

During the three and nine months ended

September 30, 2021, 66,056 and 73,442

stock options were exercised, respectively, with an intrinsic value of $ 271 ,000 and $ 345 ,000, respectively.

There were no

exercises during the comparable prior year periods.

The weighted average fair value per share of options granted during the

three and nine months ended September 30, 2021 was $ 3.69 and $ 4.47 , respectively.

The weighted average fair value per share of options granted during the three and nine months ended September 30, 2020 was $ 6.27 and $ 6.01 , respectively.

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.

Company does not have adequate 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.

During the three months ended March 31, 2022 and 2021, 552,305 and 41,800 options were

granted to officers, and employees and consultants, respectively, generally vesting over a six ( 6 ) to forty-eight ( 48 ) month period.

The Company recognized $ 417 ,000

and $ 446 ,000 in stock-based compensation expense related to stock options during the three months ended March 31, 2022 and 2021,

respectively.

As of March 31, 2022 and December 31, 2021, 2,616,544 and 2,096,836 stock options were outstanding, respectively.

The weighted average fair value per share of options

granted during the three months ended March 31, 2022 and 2021 was $ 2.29 and $ 6.71 , respectively.

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 sufficient share trading 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

1 unchanged sentence

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.

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 and nine months ended September 30, 2021 and 2020:

Three Months Ended

September 30,

Nine Months Ended

September 30,

The weighted average assumptions used in the

Black‑Scholes option pricing model are as follows during the three months ended March 31, 2022 and 2021:

Expected stock price volatility

2 unchanged sentences

Risk free interest rate

During the three and nine months ended September 30, 2021, 95,949 and 328,893 stock options vested, respectively.

During the three and nine months ended September 30, 2020, 188,230 and 269,428 stock options vested (as

adjusted for the Exchange Ratio), respectively.

During the three and

nine months ended September 30, 2021, zero and 25,558 options were forfeited, respectively.

During the three and nine months ended September 30, 2020, 22,399 and 30,323 options were forfeited, respectively.

September 30, 2021, 922,300 shares were available for future issuance under the 2020 Plan and Inducement Plan.

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

share-based compensation cost was $ 2.8 million as of September 30, 2021.

The unrecognized share-based expense is expected to be

three months ended March 31, 2022 and 2021, 62,698 and 118,217 stock options vested, respectively.

The weighted average fair value per share of options vesting during the three months ended March 31, 2022 and 2021 was $ 2.90 and $ 3.66 , respectively.

During the three months ended March 31, 2022 and 2021, 24,309 and 7,386 stock options were exercised, respectively, with an intrinsic value of $ 59 ,000 and $ 74 ,000, respectively.

three months ended March 31, 2022 and 2021, 8,288 and zero options were forfeited, respectively.

As of March 31, 2022, 1,280,792

shares were available for future issuance under the 2020 Plan and Inducement Plan in the aggregate.

No shares were available for

future issuance under the 2018 Plan.

stock-based compensation cost was $ 3.3 million as of March 31, 2022.

The unrecognized stock-based expense is expected to be

recognized over a weighted average period of 1.5 years.

Notes to Condensed Consolidated Financial Statements

Ocuphire Restricted Stock Awards

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 nine months ended September 30, 2021 and 2020, 40,000 and zero RSAs vested, respectively, and no

The Company 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 three months ended March 31, 2022 and 2021, zero and 40,000 RSAs vested, respectively, and no

RSAs were forfeited during the periods presented.

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

Notes to Condensed Consolidated Financial Statements

Ocuphire Stock Awards

granted stock awards in the amount of 5,047 and 14,444 common shares to two board members in lieu

of cash payments for services performed during the three and nine months ended September 30, 2021 , respectively.

The stock-based compensation related to these awards amounted to $ 26 ,000 and $ 82 ,000 during the three and nine months ended September

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

September 30, 2021 and December 31, 2020, respectively.

D uring the nine months ended September 30, 2021, 41 options expired .

price related to the outstanding options granted under the Rexahn 2003 Plan was $ 182.40 per share with an average remaining

contractual life of 0.7 years.

The stock-based compensation expense attributed to the RSAs during the three months ended March 31, 2022 and 2021 was zero and $ 22 ,000, respectively.

Common Stock Issued for Services

granted stock for services in the amount of 8,024 and 4,474 common shares to two board members who elected

to receive their board retainers in the form of stock for services performed during the three months ended March 31, 2022 and 2021, respectively.

The stock-based compensation related to these services amounted to $ 28 ,000 and $ 26 ,000 during the

three months ended March 31, 2022 and 2021, respectively.

Former Rexahn Options

There were 82 outstanding, unexercised and vested options to purchase common stock granted under the Rexahn Pharmaceuticals Stock Option Plan, as

amended (the “Rexahn 2003 Plan”), as of March 31, 2022 and December 31, 2021.

The exercise prices related to the outstanding options granted under the Rexahn 2003 Plan was $ 182.40 per share with an average remaining contractual life of 0.2

Apexian Sublicense Agreement

3 unchanged sentences

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.

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

million as IPR&D expense for the nine months ended September 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.

In connection with the Apexian Sublicense

Agreement, the Company issued a total of 891,422 shares of its common stock to Apexian and to certain affiliates of Apexian

in calendar year 2020.

As a result of the common stock issued pursuant to the Apexian Sublicense Agreement, Apexian is considered by Ocuphire to be a related party.

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.

of several 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

5 unchanged sentences

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 criteria to recognize milestone or royalty obligations were met

during the nine-month period ended September 30, 2021.

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 September 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.

See Note 6 – Convertible

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.

Notes to Condensed Consolidated Financial Statements

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).

None of the milestone or royalty

payments were triggered or deemed probable as of March 31, 2022 or December 31, 2021.

Net loss per share

3 unchanged sentences

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.

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 Company’s warrants, unissued common stock for services and

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

Diluted earnings is computed utilizing the treasury method for the warrants, unissued common stock for services and stock options.

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 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 nine month periods ended presented below:

September 30,

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, Series B and RDO warrants

Stock options

Unissued stock awards

Unissued common stock for services

Former Rexahn warrants

Former Rexahn options

Notes to Condensed Consolidated Financial Statements

The effective

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

As of September 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.

tax rate for the three months ended March 31, 2022 and 2021 was zero percent.

As of March 31, 2022, 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, 2019 and 2020 tax years for federal income tax purposes and subject to examination for the 2018, 2019 and 2020 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.

are subject to examination for tax years beginning in 2018 for federal income tax purposes and subject to examination in various state jurisdictions.

The Company does not have any reserves for income taxes that represent the Company’s

potential liability for uncertain tax positions.

Deferred Compensation Plan

Effective October 1 st, 2021, the Company began offering a 401 (k) plan (“ 401 K Plan”) to its employees.

All employees are eligible to participate in the 401 K

The Company makes matching contributions equal to 100 % on the first 3 % of compensation that is deferred as an elective deferral and an additional 50 % on the next 2 % of compensation.

The Company’s matching

contributions are made on a payroll-by-payroll basis.

During the three months ended March 31, 2022, the Company contributed $ 25,000 to the 401 K

Subsequent Events

On April 8, 2022, Ocuphire entered into a consulting agreement with Jay Pepose, a director of the Company.

consulting agreement provides for $ 10,000 a month in cash payments, effective as of April 1, 2022.

Additionally, on April 8,

2022, in connection with the consulting arrangement, Dr.

Pepose received a stock option grant for 50,000 options, 25 % of which will vest on March 31, 2023, with the remainder vesting in equal monthly installments over 36 months .

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