R
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2008
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OR
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£
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period
from to
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Delaware
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11-3516358
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(State
or other jurisdiction of
incorporation or
organization)
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(I.R.S.
Employer
Identification
No.)
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9620
Medical Center Drive
Rockville,
Maryland
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20850
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(Address of principal
executive offices)
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(Zip
Code)
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Title of Each
Class
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Name of Each Exchange on Which
Registered
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Common Stock,
$.0001 par value per
share
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NYSE Alternext US
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Large
accelerated filer £
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Accelerated
filer R
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Non-accelerated
filer £
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Smaller
reporting company R
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(Do
not check if a smaller reporting
company)
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Class
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Outstanding at March 16,
2009
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Common
Stock, $.0001 par value per share
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56,025,649 shares
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Document
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Parts Into Which
Incorporated
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Portions
of the registrant’s Proxy Statement for the Annual Meeting of Stockholders
to be held on June 1, 2009
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Part III
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·
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our
lack of profitability and the need for additional capital to operate our
business;
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·
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our
ability to obtain the necessary U.S. and worldwide regulatory
approvals for our drug candidates;
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·
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successful
and timely completion of clinical trials for our drug
candidates;
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·
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demand
for and market acceptance of our drug
candidates;
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·
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the
availability of qualified third-party researchers and manufacturers for
our drug development programs;
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·
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our
ability to develop and obtain protection of our intellectual property;
and
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·
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other
risks and uncertainties, including those set forth herein under the
caption "Risk Factors" and those detailed from time to time in our filings
with the Securities and Exchange
Commission.
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PAGE
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PART I
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5
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Item 1.
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5
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Item 1A.
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19
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Item 1B.
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30
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Item 2.
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30
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Item 3.
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31
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Item 4.
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31
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PART II
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32
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Item 5.
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32
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Item 6.
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33
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Item 7.
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33
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Item 7A.
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44
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Item 8.
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44
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Item 9.
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44
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Item 9A.
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44
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Item 9B.
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46
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PART III
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49
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Item 10.
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49
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Item 11.
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49
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Item 12.
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49
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Item 13.
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49
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Item 14.
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50
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Item 15.
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51
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54
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1
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Cancer,
2007 (Datamonitor).
|
2
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Pipeline
Insight: Cancer Overview Emerging Therapeutic and Market Opportunities,
July 2006
(Datamonitor).
|
3
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IMS
Report 2007; CNS Drug Discoveries, 2008 by
ESPICOM
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4
|
Commercial
Insight: Depression, June 2007; Stakeholder Insight: Major Depressive
Disorder (MDD), March 2006 (Datamonitor). Delay in onset of relief is
associated with SSRIs and SNRIs, MAOIs, and TCAs (selective
serotonin or serotonin-norepinephrine reuptake inhibitors, monoamine
oxidase inhibitors, tricyclic antidepressants). The SSRIs are linked to
side effects insomnia, weight gain, and sexual
dysfunction. Medication compliance rates range from 40% to 65%.
The proportion of patients achieving remission after antidepressant
treatment ranges from 35% to 55% depending on severity of depression.
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5
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NIH
Consensus Development Panel and Conference: Impotence. JAMA 1993;
270:83-90.
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6
|
Ayta
et al. The likely worldwide increase in erectile dysfunction between 1995
and 2025. BJU Int. 1999; 84:50-56.
|
7
|
Pharmaventures,
PharmaDeals May 2005: 16-17.
|
8
|
Benet
and Melman. The epidemiology of erectile dysfunction. Urol Clin North Am
1995; 22:699–709.
|
9
|
Feldman,
et al. Impotence and its medical and psychosocial correlates: Results of
the Massachusetts Male Aging Study. J. Urol. 1994;
151:54–61.
|
|
·
|
Long-term management of
cancers: Surgery, chemotherapy or radiation therapy may
not result in long-term remission, though surgery and radiation therapies
are considered cure methods. Therefore, there is a need for
more effective drugs and adjuvant therapies to treat relapsed and
refractory cancers.
|
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·
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Multi-drug resistance:
Multi-drug resistance is a major obstacle in successful clinical
outcomes.
|
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·
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Debilitating toxicity by chemotherapy:
Chemotherapy as a mainstay of cancer treatment induces severe
adverse reactions and toxicities, affecting quality of life or life
itself.
|
10
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Mekhail
et al, 2005.
|
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·
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Faster onset of action.
Current antidepressants take four to six weeks to relieve depression
symptoms. The delay in onset of antidepressant activity is associated with
the most common antidepressant drug classes including: selective serotonin
reuptake inhibitors (SSRIs), serotonin-norepinephrine reuptake inhibitors
(SNRIs), monoamine oxidase inhibitors (MAOIs), and tricyclic
antidepressants (TCAs).
|
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·
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Fewer side effects. The
most widely used antidepressants, SSRIs, are linked with side effects of
insomnia, weight gain and sexual dysfunction. The safety of SSRIs has also
been called into question over concerns about inducing suicidal ideations.
Use of benzodiazepines is linked with side effects of cognitive deficit
and motor impairment.
|
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·
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Improved compliance. High rate of serious
side effects among patients taking anti-depressant drugs leads many to
stop taking the prescribed medicines, resulting in high non-compliance
rates of 40% to 65%.
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·
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Need for greater
efficacy. Remission is one key objective of depression
treatment. The proportion of patients achieving remission after
antidepressant treatment ranges from 35% to 55% depending on the severity
of depression.12 New
drugs with much higher efficacy as well as wider coverage of the
depression patients are needed.
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·
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Reduced MDD
relapse. High relapse rate of about 35% and lingering
symptoms are serious problems in antidepressant
treatment.
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11
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Depression,
June 2007; Stakeholder Insight: Major Depressive Disorder (MDD), March
2006 (Datamonitor).
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12
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Remission
rates tend to vary based on factors such as: treatment algorithm and drugs
prescribed, patient geographic population or country, prescribing doctor
(primary care, psychiatrist), and time at which remission rates are
measured (3, 6, 8, or 10 weeks of treatment). Depression, June 2007; MDD,
March 2006 (Datamonitor).
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·
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Need for Greater
Efficacy- An estimated 30% of US men are refractory to the leading
PDE-5 inhibitor drugs (Viagra®, Cialis®, and Levitra®), which work
peripherally and mechanically.
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·
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Reduced Side Effects-
Certain segments of the ED patient population that respond less to PDE-5
inhibitors include diabetics, obese or post-surgical prostatectomy or
coronary risk patients.15 PDE-5 inhibitors
have significant drawbacks of cardiovascular risks and other side effects
(e.g., priapism, severe hypotension, myocardial infarction, ventricular
arrhythmias, sudden death and increased intraocular
pressure).
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13
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Erectile
Dysfunction, 2006 (Datamonitor).
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14
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Gresser U
and Gleiter CH. Erectile Dysfunction: Comparison of efficacy and side
effects of the PDE-5 inhibitors sildenafil, vardenafil and tadalafil
(Review of Literature). Eur J Med Res (2002)
7:435-46.
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·
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Favorable Environment for
Formulary Access and Reimbursement. Cancer drugs with
proven efficacy or survival benefit, and cost-effective clinical outcomes
would be expected to gain rapid market uptake, formulary listing and payer
reimbursement. In addition, drugs that have orphan designations are
generally reimbursed by insurance companies given that there are few,
if any, alternatives. Because mental disorders affect more than
55 million estimated Americans, the burden of illness is significant for
insurance companies as well as for employers. Given the
significant cost of treating behavioral health problems, there is a
favorable environment for formulary access and reimbursement for effective
products that treat multiple
disorders.
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·
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Focus on Specialty
Markets. The marketing of new drugs to specialty
physicians can be accomplished with a specialty sales force that requires
fewer personnel and lower related costs than a typical sales force that
markets to primary care physicians and general
practitioners.
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·
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Expedited Regulatory or
Commercialization Pathways. Drugs for life-threatening
diseases such as cancer are often treated by the FDA as candidates for
fast track, priority and accelerated reviews. Expedited
regulatory review may lead to clinical studies that require fewer
patients, or expedited clinical trials. Our lead products, Serdaxin™ and
Zoraxel™, are also expected to have expedited or shortened clinical
development timelines because their active pharmaceutical ingredient, or
API, have extensive and well established safety in
humans.
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(1)
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Archexin™:
First-in-class anticancer Akt
inhibitor
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(2)
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Serdaxin™:
Antidepressant and CNS Disorders
drug
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(3)
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Zoraxel™:
Erectile Dysfunction (ED) and sexual dysfunction
drug
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(1)
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RX-0201-Nano:
Nanoliposomal anticancer Akt-1
inhibitor
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(2)
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RX-0047-Nano:
Nanoliposomal anticancer HIF-1 alpha
inhibitor
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(3)
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Nano-polymer
Anticancer Drugs: HPMA-docetaxel and
HPMA-gemcitabine
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(4)
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RX-0183:
Small molecule targeted anticancer drug
candidate
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(5)
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RX-5902:
Small molecule microtubule inhibitor anticancer drug
candidate
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(6)
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RX-3117:
Small molecule anti-metabolite nucleoside anticancer drug
candidate
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·
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continued
pre-clinical development and clinical trials for our current and new drug
candidates;
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·
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efforts
to seek regulatory approvals for our drug
candidates;
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·
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implementing
additional internal systems and
infrastructure;
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·
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licensing
in additional technologies to develop;
and
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·
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hiring
additional personnel.
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·
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conducting
pre-clinical and clinical trials;
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·
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participating
in regulatory approval processes;
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·
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formulating
and manufacturing products; and
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·
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conducting
sales and marketing activities.
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·
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unforeseen
safety issues;
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·
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determination
of dosing issues;
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·
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lack
of effectiveness during clinical
trials;
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·
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reliance
on third party suppliers for the supply of drug candidate
samples;
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·
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slower
than expected rates of patient
recruitment;
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·
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inability
to monitor patients adequately during or after
treatment;
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·
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inability
or unwillingness of medical investigators and institutional review boards
to follow our clinical protocols;
and
|
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·
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lack
of sufficient funding to finance the clinical
trials.
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·
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awareness
of the drug's availability and
benefits;
|
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·
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perceptions
by members of the health care community, including physicians, about the
safety and effectiveness of our
drugs;
|
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·
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pharmacological
benefit and cost-effectiveness of our product relative to competing
products;
|
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·
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availability
of reimbursement for our products from government or other healthcare
payers;
|
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·
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effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any; and
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·
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the
price at which we sell our
products.
|
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·
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We
may be unable to identify manufacturers on acceptable terms or at all
because the number of potential manufacturers is limited and the FDA must
approve any replacement contractor. This approval would require
new testing and compliance inspections. In addition, a new
manufacturer would have to be educated in, or develop substantially
equivalent processes for, the production of our products after receipt of
FDA approval, if any.
|
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·
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Our
third-party manufacturers might be unable to formulate and manufacture our
drugs in the volume and of the quality required to meet our clinical needs
and commercial needs.
|
|
·
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Our
contract manufacturers may not perform as agreed or may not remain in the
contract manufacturing business for the time required to supply our
clinical trials or to successfully produce, store and distribute our
products.
|
|
·
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Drug
manufacturers are subject to ongoing periodic unannounced inspection by
the FDA, the Drug Enforcement Agency ("DEA"), and corresponding state
agencies to ensure strict compliance with good manufacturing practice and
other government regulations and corresponding foreign
standards. We do not have control over third-party
manufacturers' compliance with these regulations and standards, but we may
be ultimately responsible for any of their
failures.
|
|
·
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If
any third-party manufacturer makes improvements in the manufacturing
process for our products, we may not own, or may have to share, the
intellectual property rights to the
innovation.
|
|
·
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developing
drugs;
|
|
·
|
undertaking
pre-clinical testing and human clinical
trials;
|
|
·
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obtaining
FDA and other regulatory approvals of
drugs;
|
|
·
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formulating
and manufacturing drugs; and
|
|
·
|
launching,
marketing and selling drugs.
|
|
·
|
the
degree and range of protection any patents will afford us against
competitors, including whether third parties will find ways to invalidate
or otherwise circumvent our licensed
patents;
|
|
·
|
if
and when patents will issue;
|
|
·
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whether
or not others will obtain patents claiming aspects similar to those
covered by our licensed patents and patent applications;
or
|
|
·
|
whether
we will need to initiate litigation or administrative proceedings which
may be costly whether we win or
lose.
|
|
·
|
obtain
licenses, which may not be available on commercially reasonable terms, if
at all;
|
|
·
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redesign
our products or processes to avoid
infringement;
|
|
·
|
stop
using the subject matter claimed in the patents held by others, which
could cause us to lose the use of one or more of our drug
candidates;
|
|
·
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pay
damages; or
|
|
·
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defend
litigation or administrative proceedings which may be costly whether we
win or lose, and which could result in a substantial diversion of our
management resources.
|
|
·
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the
announcement of new products or product enhancements by us or our
competitors;
|
|
·
|
developments
concerning intellectual property rights and regulatory
approvals;
|
|
·
|
variations
in our and our competitors' results of
operations;
|
|
·
|
changes
in earnings estimates or recommendations by securities analysts;
and
|
|
·
|
developments
in the biotechnology industry.
|
|
·
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a
limited ability of market quotations for our
securities;
|
|
·
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a
determination that our common stock is a “penny stock” which will require
brokers trading in our common stock to adhere to more stringent rules and
possibly resulting in a reduced level of trading activity in the secondary
trading market for our common
stock;
|
|
·
|
a
limited amount of news and analyst coverage for our company;
and
|
|
·
|
a
decreased ability to issue additional securities or obtain additional
financing in the future.
|
Period
|
High
|
Low
|
||||||
2007
|
||||||||
First
Quarter
|
1.85 | 1.10 | ||||||
Second
Quarter
|
2.52 | 1.25 | ||||||
Third
Quarter
|
2.20 | 1.01 | ||||||
Fourth
Quarter
|
2.45 | 1.05 | ||||||
2008
|
||||||||
First
Quarter
|
2.50 | 1.35 | ||||||
Second
Quarter
|
9.99 | 1.85 | ||||||
Third
Quarter
|
3.50 | 0.51 | ||||||
Fourth
Quarter
|
1.35 | 0.66 |
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted
average exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity compensation plans
|
||||||||||
Equity
compensation plans approved by stockholders
|
7,760,795 | $ | 1.01 | 8,912,500 | ||||||||
Equity
compensation plans not approved by stockholders
|
- | - | - | |||||||||
Total
|
7,760,795 | $ | 1.01 | 8,912,500 |
For the years ended December
31
|
||||
2009
|
$ | 112,972 |
|
·
|
the
progress of our product development
activities;
|
|
·
|
the
number and scope of our product development
programs;
|
|
·
|
the
progress of our pre-clinical and clinical trial
activities;
|
|
·
|
the
progress of the development efforts of parties with whom we have entered
into collaboration agreements;
|
|
·
|
our
ability to maintain current collaboration programs and to establish new
collaboration arrangements;
|
|
·
|
the
costs involved in prosecuting and enforcing patent claims and other
intellectual property rights; and
|
|
·
|
the
costs and timing of regulatory
approvals.
|
|
●
|
Pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and the dispositions of the assets of the
Company;
|
|
●
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with authorization of management and the
board of directors of the Company;
and
|
|
●
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
Chang H. Ahn
|
Tae Heum
Jeong
|
|
Chairman
and Chief Executive Officer
|
Chief
Financial Officer, Secretary and
Director
|
2008
|
2007
|
|||||||
Audit
Fees
|
$ | 125,5002 | $ | 83,000 | ||||
Audit-Related
Fees
|
- | - | ||||||
Tax
Fees
|
- | - | ||||||
All
Other Fees
|
- | - |
(a)
The following documents are filed as a part of this Annual Report on Form
10-K:
|
||||
(b)
|
||||
(1)
|
Financial
Statements:
|
Page
|
||
Report
of Parente Randolph, LLC
|
F-1
|
|||
Report
of Lazar Levine & Felix LLP
|
F-2
|
|||
Balance
Sheets at December 31, 2008 and December 31, 2007
|
F-3
|
|||
Statement
of Operations for the years ended December 31, 2008 and December 31, 2007
and
cumulative from March 19, 2001 (Inception) to December 31,
2008
|
F-4
|
|||
Statement
of Stockholders’ Equity and Comprehensive Loss from March 19, 2001
(Inception) to December 31, 2008
|
F-5
|
|||
Statement
of Cash Flows for the years ended December 31, 2008 and December 31, 2007
and cumulative from March 19, 2001 (Inception) to December 31,
2008
|
F-7
|
|||
Notes
to Financial Statements
|
F-8
|
|||
(2)
|
||||
All
schedules for which provision is made in the applicable accounting
regulations of the SEC are omitted because the required information is
either presented in the financial statements or notes thereto, or is not
applicable, required or material.
|
||||
(3)
|
Exhibits:
|
|||
The
documents listed below are filed with this Annual Report on Form 10-K as
exhibits or incorporated into this Annual Report on Form 10-K by reference
as
noted:
|
Exhibit
Number
|
Exhibit Description
|
|
3.1.
|
Amended
and Restated Certificate of Incorporation, filed as Appendix G to the
Company's Definitive Proxy Statement on Schedule 14A (File No.
000-50590) dated April 29, 2005, is incorporated herein by
reference.
|
|
3.2.
|
Amended
and Restated Bylaws, filed as Appendix H to the Company's Definitive
Proxy Statement on Schedule 14A (File No. 000-50590) dated
April 29, 2005, is incorporated herein by
reference.
|
|
4.1.
|
Specimen
Certificate for the Company's Common Stock, par value $.0001 per
share, filed as Exhibit 4.3 to the Company's Registration Statement
on Form S-8 (File No. 333-129294) dated October 28, 2005, is
incorporated herein by reference.
|
|
*10.1.1.
|
Rexahn
Pharmaceuticals, Inc. Stock Option Plan, as amended, filed as
Exhibit 4.4 to the Company's Registration Statement on Form S-8
(File No. 333-129294) dated October 28, 2005, is incorporated herein
by reference.
|
|
*10.1.2.
|
Form
of Stock Option Grant Agreement for Employees, filed as Exhibit 4.5.1
to the Company's Registration Statement on Form S-8 (File No.
333-129294) dated October 28, 2005, is incorporated herein by
reference.
|
*10.1.3.
|
Form
of Stock Option Grant Agreement for Non-Employee Directors and
Consultants, filed as Exhibit 4.5.2 to the Company's Registration
Statement on Form S-8 (File No. 333-129294) dated October 28,
2005, is incorporated herein by reference.
|
|
*10.2.
|
Employment
Agreement, dated September 12, 2005, by and between Rexahn
Pharmaceuticals, Inc. and C. H. Ahn, filed as Exhibit 10.1
to the Company's Current Report on Form 8-K filed on
September 12, 2005, is incorporated herein by
reference.
|
|
*10.3.
|
Employment
Agreement, effective September 12, 2007, by and between Rexahn
Pharmaceuticals, Inc. and T. H. Jeong, filed as Exhibit 10
to the Company's Current Report on Form 8-K filed on October 9, 2007
is incorporated herein by reference.
|
|
10.4.
|
Research
Collaboration Agreement dated February 6, 2003 by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd., filed as Exhibit 10.5
to the Company’s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2005, is incorporated herein by reference.
|
|
10.5.
|
Revaax
License Agreement, dated February 8, 2005, by and between Rexahn
Pharmaceuticals, Inc. and Revaax Pharmaceuticals LLC, filed as Exhibit
10.6 to the Company’s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005, is incorporated herein by
reference.
|
|
10.6
|
Lease
Agreement, dated April 26, 2004, by and between Red Gate III LLC and
Rexahn Corporation, filed as Exhibit 10.6 to the Company’s Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2007, is
incorporated herein by reference.
|
|
10.7
|
Securities
Purchase Agreement, dated as of November 19, 2007, by and between Rexahn
Pharmaceuticals, Inc. and KT&G Corporation, filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed on November 21, 2007, is
incorporated herein by reference.
|
|
10.8
|
Securities
Purchase Agreement, dated as of November 20, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd, filed as Exhibit 10.4
to the Company’s Current Report on Form 8-K filed on November 21, 2007, is
incorporated herein by reference.
|
|
10.9
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd, filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K filed on December 18, 2007, is
incorporated herein by reference.
|
|
10.10
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Kumho Investment Bank, filed as Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed on December 18, 2007, is
incorporated herein by reference.
|
|
10.11
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and the several parties thereto, filed as Exhibit
10.3 to the Company’s Current Report on Form 8-K filed on December 18,
2007, is incorporated herein by reference.
|
|
10.12
|
Warrant,
dated December 24, 2007, issued to KT&G Corporation, filed as Exhibit
10.6 to the Company’s Current Report on Form 8-K filed on December 26,
2007, is incorporated herein by reference.
|
|
10.13
|
Warrant,
dated December 24, 2007, issued to Rexgene Biotech Co., Ltd., filed as
Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on December
26,2007, is incorporated herein by reference.
|
|
10.14
|
Form
of Warrant, dated December 24, 2007, issued to the purchasers pursuant to
the Jungwoo Securities Purchase Agreement, the Kumho Securities Purchase
Agreement, the Individual Investor Securities Purchase Agreement and to a
consultant, filed as Exhibit 10.4 to the Company’s Current Report on Form
8-K filed on December 18, 2007, is incorporated herein by
reference.
|
10.15
|
Registration
Rights Agreement, dated as of December 24, 2007, by and among Rexahn
Pharmaceuticals, Inc. and the purchasers pursuant to the KT&G
Securities Purchase Agreement, the Rexgene Securities Purchase Agreement,
the Jungwoo Securities Purchase Agreement, the Kumho Securities Purchase
Agreement, the Individual Investor Securities Purchase Agreement and a
consulting Services Agreement, filed as Exhibit 10.9 to the Company
Current Report on Form 8-K filed on December 26, 2007, is incorporated
herein by reference.
|
|
10.16
|
Securities
Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd. (the "Jungwoo
Securities Purchase Agreement”), filed as Exhibit 10.1 to the Company's
current report on Form 8-K filed on March 26, 2008, is incorporated herein
by reference.
|
|
10.17
|
Securities
Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Super Bio Co. Ltd., (the "Super Bio Securities
Purchase Agreement"), filed as Exhibit 10.2 to the Company's current
report on Form 8-K filed on March 26, 2008, is incorporated herein by
reference.
|
|
10.18
|
Form
of Warrant for issuance pursuant to the Jungwoo Securities Purchase
Agreement and the Super Bio Securities Purchase Agreement, filed as
Exhibit 10.3 to the Company's current report on Form 8-K filed on March
26, 2008, is incorporated herein by reference.
|
|
*10.19
|
Employment
Agreement, dated July 14, 2008, by and between Rexahn Pharmaceuticals,
Inc. and Rakesh Soni, filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on July 16, 2008, is incorporated
herein by reference.
|
|
*10.20
|
Consulting
Agreement, dated August 12, 2008, by and between Rexahn Pharmaceuticals,
Inc. and Y. Michelle Kang, filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on August 27, 2008, is
incorporated herein by reference.
|
|
14.
|
Code
of Ethics and Business Conduct.
|
|
23.1
|
Consent
of Parente Randolph, LLC, independent registered public accounting
firm.
|
|
23.2
|
Consent
of Lazar Levine & Felix LLP, independent registered public accounting
firm.
|
|
24.
|
Power
of Attorney.
|
|
31.1.
|
Certification
of Chief Executive Officer of Periodic Report Pursuant to Pursuant to
Rule 13a-15(e) or Rule 15d-15(e).
|
|
31.2.
|
Certification
of Chief Financial Officer of Periodic Report Pursuant to Pursuant to
Rule 13a-15(e) or Rule 15d-15(e).
|
|
32.1
|
Certification
of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
|
32.2
|
Certification
of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
REXAHN
PHARMACEUTICALS, INC.
|
|
By: /s/
Chang H. Ahn
|
|
Chang H. Ahn
|
|
Chairman
and Chief Executive
Officer
|
Name
|
Title
|
|
/s/ Chang H. Ahn*
|
Chairman
and Chief Executive Officer
|
|
Chang
H. Ahn
|
||
/s/ Tae Heum Jeong*
|
Chief
Financial Officer, Secretary and Director
|
|
Tae
Heum Jeong
|
||
/s/ Freddie Ann Hoffman*
|
Director
|
|
Freddie
Ann Hoffman
|
||
/s/ David McIntosh*
|
Director
|
|
David
McIntosh
|
||
/s/ Charles Beever*
|
Director
|
|
Charles Beever
|
||
/s/ Kwang Soo Cheong*
|
Director
|
|
Kwang Soo Cheong
|
||
/s/ Y. Michele Kang*
|
Director
|
|
Y.
Michele Kang
|
December 31,
2008
|
December 31,
2007
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 369,130 | $ | 3,809,571 | ||||
Marketable
securities (note 3)
|
2,999,750 | 3,550,000 | ||||||
Prepaid
expenses and other (note 4)
|
366,765 | 717,205 | ||||||
Total
Current Assets
|
3,735,645 | 8,076,776 | ||||||
Equipment, Net (note
5)
|
92,212 | 102,951 | ||||||
Intangible Assets, Net
(note 6)
|
286,132 | 303,943 | ||||||
Total
Assets
|
$ | 4,113,989 | $ | 8,483,670 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses (note 7)
|
$ | 358,894 | $ | 606,832 | ||||
Total
Current Liabilities
|
358,894 | 606,832 | ||||||
Deferred Revenue (note
8)
|
1,050,000 | 1,125,000 | ||||||
Total
Liabilities
|
1,408,894 | 1,731,832 | ||||||
Commitment and Contingencies
(note 12)
|
||||||||
Stockholders' Equity
(note 9):
|
||||||||
Preferred
stock, par value $0.0001, 100,000 authorized shares, none issued and
outstanding
|
- | - | ||||||
Common
stock, par value $0.0001, 500,000,000 authorized shares, 56,039,854 (2007
– 55,306,996) issued and 56,025,649 (2007 – 55,292,791)
outstanding
|
5,604 | 5,530 | ||||||
Additional
paid-in capital
|
33,184,860 | 31,769,049 | ||||||
Accumulated
deficit during the development stage
|
(29,906,479 | ) | (24,994,331 | ) | ||||
Treasury
stock, 14,205 (2007 – 14,205) shares, at cost
|
(28,410 | ) | (28,410 | ) | ||||
Accumulated
other comprehensive (loss)
|
(550,480 | ) | - | |||||
Total
Stockholders' Equity
|
2,705,095 | 6,751,838 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 4,113,989 | $ | 8,483,670 |
Years Ended
December 31,
|
Cumulative from
March 19, 2001
(Inception) to
December 31, 2008
|
|||||||||||
2008
|
2007
|
|||||||||||
Revenue:
|
||||||||||||
Research
|
$ | 75,000 | $ | 75,000 | $ | 450,000 | ||||||
Expenses:
|
||||||||||||
General
and administrative
|
2,525,705 | 2,728,152 | 14,864,439 | |||||||||
Research
and development
|
2,429,507 | 1,527,294 | 13,231,844 | |||||||||
Patent
fees
|
216,360 | 186,613 | 921,833 | |||||||||
Depreciation
and amortization
|
55,743 | 65,070 | 503,204 | |||||||||
Total
Expenses
|
5,227,315 | 4,507,129 | 29,521,320 | |||||||||
Loss
from Operations
|
(5,152,315 | ) | (4,432,129 | ) | (29,071,320 | ) | ||||||
Other
(Income) Expense
|
||||||||||||
Realized
loss on marketable securities
|
20,366 | - | 20,366 | |||||||||
Interest income
|
(260,533 | ) | (128,124 | ) | (1,111,354 | ) | ||||||
Interest
expense
|
- | - | 301,147 | |||||||||
Beneficial
conversion feature
|
- | - | 1,625,000 | |||||||||
(240,167 | ) | (128,124 | ) | 835,159 | ||||||||
Loss
Before Provision for Income Taxes
|
(4,912,148 | ) | (4,304,005 | ) | (29,906,479 | ) | ||||||
Provision
for Income Taxes
|
- | - | - | |||||||||
Net
Loss
|
$ | (4,912,148 | ) | $ | (4,304,005 | ) | $ | (29,906,479 | ) | |||
Net
Loss per share outstanding, basic and diluted
|
$ | (0.09 | ) | $ | (0.09 | ) | ||||||
Weighted
average number of shares outstanding, basic and
diluted
|
55,856,991 | 50,332,642 |
Accumulated
|
||||||||||||||||||||||||||||||||
Accumulated
|
Deficit
|
|||||||||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Additional
|
Other
|
During
the
|
Total
|
|||||||||||||||||||||||||||
Number
of
|
Number
of
|
Paid
-
|
Comprehensive
|
Development
|
Stockholders’
|
|||||||||||||||||||||||||||
shares
|
Amount
|
shares
|
Amount
|
Capital
|
Loss
|
Stage
|
Equity (Deficit)
|
|||||||||||||||||||||||||
Opening
balance, March 19, 2001
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Common
shares issued`
|
7,126,666 | 71,266 | - | - | 4,448,702 | - | - | 4,519,968 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (625,109 | ) | (625,109 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2001
|
7,126,666 | 71,266 | - | - | 4,448,702 | - | (625,109 | ) | 3,894,859 | |||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (1,181,157 | ) | (1,181,157 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2002
|
7,126,666 | 71,266 | - | - | 4,448,702 | - | (1,806,266 | ) | 2,713,702 | |||||||||||||||||||||||
Common
shares issued
|
500,000 | 5,000 | - | - | 1,995,000 | - | - | 2,000,000 | ||||||||||||||||||||||||
Stock
option compensation
|
- | - | - | - | 538,074 | - | - | 538,074 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (2,775,075 | ) | (2,775,075 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2003
|
7,626,666 | 76,266 | - | - | 6,981,776 | - | (4,581,341 | ) | 2,476,701 | |||||||||||||||||||||||
Common
shares issued
|
1,500 | 15 | - | - | 1,785 | - | - | 1,800 | ||||||||||||||||||||||||
Stock
option compensation
|
- | - | - | - | 230,770 | - | - | 230,770 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (3,273,442 | ) | (3,273,442 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2004
|
7,628,166 | 76,281 | - | - | 7,214,331 | - | (7,854,783 | ) | (564,171 | ) | ||||||||||||||||||||||
Stock
split (5 for 1)
|
30,512,664 | (72,467 | ) | - | - | 72,467 | - | - | - | |||||||||||||||||||||||
Common
shares issued in connection with merger
|
3,397,802 | 340 | - | - | (340 | ) | - | - | - | |||||||||||||||||||||||
Common
shares issued for cash
|
4,175,000 | 17 | - | - | 8,349,565 | - | - | 8,349,982 | ||||||||||||||||||||||||
Common
shares issued on conversion of convertible debt
|
650,000 | 65 | - | - | 1,299,935 | - | - | 1,300,000 | ||||||||||||||||||||||||
Exercise
of stock options
|
40,000 | 4 | - | - | 9,596 | - | - | 9,600 | ||||||||||||||||||||||||
Common
shares issued in exchange for services
|
7,000 | 1 | - | - | 21,876 | - | - | 21,877 | ||||||||||||||||||||||||
Beneficial
conversion feature
|
- | - | - | - | 1,625,000 | - | - | 1,625,000 | ||||||||||||||||||||||||
Stock
option compensation
|
- | - | - | - | 436,748 | - | - | 436,748 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (6,349,540 | ) | (6,349,540 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2005
|
46,410,632 | 4,641 | - | - | 19,029,178 | - | (14,204,323 | ) | 4,829,496 | |||||||||||||||||||||||
Exercise
of stock options
|
61,705 | 6 | - | - | 14,802 | - | - | 14,808 | ||||||||||||||||||||||||
Common
shares issued on conversion of convertible debt
|
3,850,000 | 385 | - | - | 3,849,615 | - | - | 3,850,000 | ||||||||||||||||||||||||
Purchase
of treasury stock
|
- | - | 14,205 | (28,410 | ) | - | - | - | (28,410 | ) | ||||||||||||||||||||||
Stock
option compensation
|
- | - | - | - | 1,033,956 | - | - | 1,033,956 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (6,486,003 | ) | (6,486,003 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2006
|
50,322,337 | $ | 5,032 | 14,205 | $ | (28,410 | ) | $ | 23,927,551 | $ | - | $ | (20,690,326 | ) | $ | 3,213,847 |
Accumulated
|
||||||||||||||||||||||||||||||||
Accumulated
|
Deficit
|
Total
|
||||||||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Additional
|
Other
|
During
the
|
Stockholders’
|
|||||||||||||||||||||||||||
Number
of
|
Number
of
|
Paid
-
|
Comprehensive
|
Development
|
Equity
|
|||||||||||||||||||||||||||
shares
|
Amount
|
shares
|
Amount
|
Capital
|
Loss
|
Stage
|
(Deficit)
|
|||||||||||||||||||||||||
Balances
at, December 31, 2006
|
50,322,337 | $ | 5,032 | 14,205 | $ | (28,410 | ) | $ | 23,927,551 | $ | - | $ | (20,690,326 | ) | $ | 3,213,847 | ||||||||||||||||
Common
shares issued for cash
|
4,857,159 | 486 | - | - | 6,799,538 | - | - | 6,800,024 | ||||||||||||||||||||||||
Exercise
of stock options
|
127,500 | 12 | - | - | 59,988 | - | - | 60,000 | ||||||||||||||||||||||||
Stock
option compensation
|
- | - | - | - | 1,121,646 | - | - | 1,121,646 | ||||||||||||||||||||||||
Share
issuance costs
|
- | - | - | - | (139,674 | ) | - | - | (139,674 | ) | ||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (4,304,005 | ) | (4,304,005 | ) | ||||||||||||||||||||||
Balances
at, December 31, 2007
|
55,306,996 | 5,530 | 14,205 | (28,410 | ) | 31,769,049 | - | (24,994,331 | ) | 6,751,838 | ||||||||||||||||||||||
Common
shares issued
|
628,858 | 65 | - | - | 899,936 | - | - | 900,001 | ||||||||||||||||||||||||
Exercise
of stock options
|
90,000 | 9 | - | - | 31,191 | - | - | 31,200 | ||||||||||||||||||||||||
Stock
option compensation expense
|
- | - | - | - | 484,684 | - | - | 484,684 | ||||||||||||||||||||||||
Net
(loss)
|
- | - | - | - | - | - | (4,912,148 | ) | (4,912,148 | ) | ||||||||||||||||||||||
Unrealized
loss on securities available for sale
|
(550,480 | ) | - | (550,480 | ) | |||||||||||||||||||||||||||
Balances
at, December 31, 2008
|
56,039,854 | $ | 5,604 | 14,205 | $ | (28,410 | ) | $ | 33,184,860 | $ | (550,480 | ) | $ | (29,906,479 | ) | $ | 2,705,095 |
Years Ended
December 31,
|
Cumulative
From
March 19,
2001
(Inception)
to
December 31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Cash
Flows from Operating Activities:
|
||||||||||||
Net
loss
|
$ | (4,912,148 | ) | $ | (4,304,005 | ) | $ | (29,906,479 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Beneficial
conversion feature
|
- | - | 1,625,000 | |||||||||
Compensatory
stock
|
- | - | 21,877 | |||||||||
Depreciation
and amortization
|
55,743 | 65,070 | 503,585 | |||||||||
Stock
option compensation expense
|
484,684 | 1,121,646 | 3,856,834 | |||||||||
Amortization
of deferred revenue
|
(75,000 | ) | (75,000 | ) | (450,000 | ) | ||||||
Realized
losses on marketable securities available-for-sale
|
20,366 | - | 20,366 | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
Prepaid
expenses and other
|
350,440 | (234,019 | ) | (366,765 | ) | |||||||
Accounts
payable and accrued expenses
|
(247,938 | ) | 31,469 | 358,894 | ||||||||
Net
Cash Used in Operating Activities
|
(4,323,853 | ) | (3,394,839 | ) | (24,336,688 | ) | ||||||
Cash
Flows from Investing Activities:`
|
||||||||||||
Purchase
of equipment
|
(27,193 | ) | - | (525,713 | ) | |||||||
Purchase
of marketable securities
|
(5,848,176 | ) | (3,550,000 | ) | (9,398,176 | ) | ||||||
Proceeds
from sales of marketable securities
|
5,827,580 | 5,827,580 | ||||||||||
Net
Cash Used in Investing Activities
|
(47,789 | ) | (3,550,000 | ) | (4,096,309 | ) | ||||||
Cash
Flows from Financing Activities:
|
||||||||||||
Issuance
of common stock
|
931,201 | 6,720,350 | 22,536,753 | |||||||||
Proceeds
from long-term debt
|
- | - | 5,150,000 | |||||||||
Proceeds
from research contribution
|
- | - | 1,500,000 | |||||||||
Payment
of licensing fees
|
- | - | (356,216 | ) | ||||||||
Principal
payments on long-term debt
|
- | - | (28,410 | ) | ||||||||
Net
Cash Provided by Financing Activities
|
931,201 | 6,720,350 | 28,802,127 | |||||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(3,440,441 | ) | (224,489 | ) | 369,130 | |||||||
Cash
and Cash Equivalents - beginning of period
|
3,809,571 | 4,034,060 | - | |||||||||
Cash
and Cash Equivalents - end of period
|
$ | 369,130 | $ | 3,809,571 | $ | $369,130 | ||||||
Supplemental
Cash Flow Information:
|
||||||||||||
Interest
paid
|
$ | - | $ | 8,235 | $ | $301,147 | ||||||
Non-cash
financing and investing activities:
|
||||||||||||
Warrants
|
$ | 220,004 | $ | 1,194,283 | $ | $1,414,287 |
1.
|
Operations
and Organization
|
2.
|
Summary
of Significant Accounting Policies
|
a)
|
Cash
and Cash Equivalents
|
b)
|
Marketable
securities
|
c)
|
Equipment
|
Life
|
Depreciation Method
|
||
Furniture
and fixtures
|
7
years
|
|
double
declining balance
|
Office
equipment
|
5
years
|
double
declining balance
|
|
Lab
and computer equipment
|
5-7
years
|
double
declining
balance
|
d)
|
Research
and Development
|
e)
|
Use
of Estimates
|
f)
|
Fair
Value of Financial
Instruments
|
g)
|
Income
Taxes
|
h)
|
Earnings
or Loss Per Share:
|
For the years ended
|
||||||||
December 31,
2008
|
December 31,
2007
|
|||||||
Stock
Options
|
7,760,795 | 6,045,795 | ||||||
Warrants
|
1,207,148 | 1,078,576 | ||||||
8,967,943 | 7,124,371 |
i)
|
Stock-Based
Compensation
|
j)
|
Impairment
of Long-Lived Assets and Intangible
Assets
|
k)
|
Concentration
of Credit Risk
|
l)
|
Comprehensive
Loss
|
m)
|
Recent
Accounting Standards Affecting the
Company
|
3.
|
Marketable
Securities
|
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
|||||||||||||
December
31, 2008
|
||||||||||||||||
State
authority auction rate bonds
|
$ | 3,550,000 | $ | 0 | $ | 550,250 | $ | 2,999,750 | ||||||||
$ | 3,550,000 | $ | 0 | $ | 550,250 | $ | 2,999,750 | |||||||||
December
31, 2007
|
||||||||||||||||
State
authority auction rate bonds
|
$ | 3,550,000 | $ | 0 | $ | 0 | $ | 3,550,000 | ||||||||
$ | 3,550,000 | $ | 0 | $ | 0 | $ | 3,550,000 |
Cost
|
Estimated Fair Value
|
|||||||
Due
in one year or less
|
$ | 0 | $ | 0 | ||||
Due
in two to ten years
|
0 | 0 | ||||||
Due
in ten to twenty years
|
0 | 0 | ||||||
Due
in twenty to forty years
|
3,550,000 | 2,999,750 | ||||||
$
|
3,550,000 |
$
|
2,999,750 |
4.
|
Prepaid
Expenses and Other
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Deposits
on contracts
|
$ | 294,337 | $ | 679,769 | ||||
Other
assets
|
72,428 | 37,436 | ||||||
$ | 366,765 | $ | 717,205 |
5.
|
Equipment,
Net
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Furniture
and fixtures
|
$ | 31,713 | $ | 31,713 | ||||
Office
equipment
|
70,276 | 43,648 | ||||||
Lab
and computer equipment
|
423,724 | 423,159 | ||||||
525,713 | 498,520 | |||||||
Less:
Accumulated depreciation
|
(433,501 | ) | (395,569 | ) | ||||
Net
carrying amount
|
$ | 92,212 | $ | 102,951 |
6.
|
Intangible
Assets, Net
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Revaax
license, original cost
|
$ | 356,216 | $ | 356,216 | ||||
Less:
Accumulated amortization
|
(70,084 | ) | (52,273 | ) | ||||
Balance
|
$ | 286,132 | $ | 303,943 |
2009
|
$ | 17,811 | ||
2010
|
17,811 | |||
2011
|
17,811 | |||
2012
|
17,811 | |||
2013
|
17,811 | |||
Thereafter
|
197,077 | |||
$ | 286,132 |
7.
|
Accounts
Payable and Accrued Expenses
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Trade
payables
|
$ | 136,906 | $ | 246,786 | ||||
Accrued
expenses
|
98,486 | 259,871 | ||||||
Payroll
liabilities
|
123,502 | 100,175 | ||||||
$ | 358,894 | $ | 606,832 |
8.
|
Deferred
Revenue
|
9.
|
Common
Stock
|
a)
|
On
May 10, 2001 the Company issued 3,600,000 shares of common stock to the
Company's founders for $1.
|
b)
|
On
August 10, 2001 the Company
issued:
|
i)
|
1,208,332
shares of common stock to the directors of the Company for cash of
$1,450,000.
|
ii)
|
958,334
shares of common stock to Rexgene for cash of
$550,000.
|
iii)
|
360,000
shares of common stock in a private placement to individual investors for
cash of $1,080,000.
|
c)
|
On
October 10, 2001 the Company issued 400,000 shares of common stock to
Chong Kun Dang Pharmaceutical Corp. ("CKD") for cash of $479,991 and
400,000 shares of common stock to an individual investor for cash of
$479,991.
|
d)
|
On
October 10, 2001 the Company issued 200,000 shares of common stock to CKD
for cash of $479,985.
|
e)
|
Since
inception, the Company's founders have transferred 800,000 shares of the
common stock described in a) to officers and directors of the
Company.
|
f)
|
In
July 2003, the shareholders described in b)(iii) and e) transferred an
aggregate of 1,268,332 shares of common stock to a voting
trust. The trust allows for the unified voting of the stock by
the trustees. The appointed trustees are senior management of
the Company who, together with their existing shares, control a majority
of the voting power of the
Company.
|
g)
|
On
August 20, 2003 the Company issued 500,000 shares of common stock to
KT&G Corporation for cash of
$2,000,000.
|
h)
|
On
October 29, 2004, an option holder exercised options to purchase shares of
the Company’s common stock for cash of $1,800 and the Company issued an
aggregate of 1,500 shares.
|
i)
|
Pursuant
to the agreement and plan of merger which occurred on May 13, 2005, (i)
each share of the issued and outstanding common stock of Rexahn, Corp
(“Rexahn”) (other than dissenting shares) was converted into the right to
receive five shares of Rexahn Pharmaceuticals common stock; (ii) each
issued, outstanding and unexercised option to purchase a share of Rexahn
common stock was converted into an option to purchase five shares of
Rexahn Pharmaceuticals common stock and (iii) the par value of Rexahn's
common stock was adjusted to reflect the par value of Corporate Road Show.
Com Inc. (“CRS”) common stock. In the acquisition merger,
289,780,000 CRS pre-reverse stock split shares were converted into
2,897,802 post-reverse stock split Rexahn Pharmaceuticals shares, and an
additional 500,000 post-reverse stock split Rexahn Pharmaceuticals shares
were issued to a former executive of CRS. For purposes of the Statement of
Stockholders' Equity, the five-for-one stock split is reflected as a
one-line adjustment. All shares and earnings per share
information has been retroactively restated in these financial
statements.
|
j)
|
On
August 8, 2005, the Company issued, in a transaction exempt from
registration under the Securities Act, 4,175,000 shares of common stock at
a purchase price of $2.00 per
share.
|
k)
|
On
October 3, 2005, the Company issued 7,000 shares of common stock for
$21,877 and $7,500 cash in exchange for
services.
|
l)
|
On
December 2, 2005, the holders of a convertible note, representing
$1,300,000 aggregate principal amount, exercised their option to convert
the entire principal amount of the note into the Company's common
stock. Based on a $2.00 per share conversion price, the holders
received an aggregate of 650,000
shares.
|
m)
|
On
December 27, 2005, option holders exercised options to purchase shares of
the Company's common stock for cash of $9,600 and the Company issued an
aggregate of 40,000 shares.
|
n)
|
On
February 22, 2006, an option holder exercised options to purchase shares
of the Company's common stock for cash of $1,200 and the Company issued an
aggregate of 5,000 shares.
|
o)
|
On
April 12, 2006, an option holder exercised options to purchase shares of
the Company’s common stock for cash of $3,409 and the Company issued an
aggregate of 14,205 shares. On the same date, the Company
agreed to repurchase common stock from the option holder based on the then
market price for treasury in exchange for the aggregate purchase price of
$28,410 in cash.
|
p)
|
On
May 13, 2006, holders of the $3,850,000 convertible notes issued on
February 28, 2005, exercised their rights to convert the entire principal
amount of the notes into shares of the Company’s common
stock. Based on a $1.00 per share conversion price, the
Company issued 3,850,000 shares of common stock in connection with the
conversion.
|
q)
|
On
October 9, 2006, an option holder exercised options to purchase shares of
the Company’s common stock for cash of $2,400 and the Company issued an
aggregate of 10,000 shares.
|
r)
|
On
November 19, 2006, an option holder exercised options to purchase shares
of the Company's common stock for cash of $1,800 and the Company issued an
aggregate of 7,500 shares.
|
s)
|
On
December 19, 2006, an option holder exercised options to purchase shares
of the Company's common stock for cash of $6,000 and the Company issued an
aggregate of 25,000 shares.
|
t)
|
On
April 18, 2007, an option holder exercised options to purchase shares of
the Company's common stock for cash of $14,400 and the Company issued an
aggregate of 18,000 shares.
|
u)
|
On
July 23, 2007, an option holder exercised options to purchase shares of
the Company's common stock for cash of $12,000 and the Company issued an
aggregate of 15,000 shares.
|
v)
|
On
September 27, 2007, an option holder exercised options to purchase shares
of the Company's common stock for cash of $15,600 and the Company issued
an aggregate of 19,500
shares.
|
w)
|
On
December 18, 2007, the Company issued 4,857,159 units at a price $1.40 per
share for total gross proceeds of $6,800,023. Investors also were
issued one warrant for every five shares purchased. One warrant
will entitle the holder to purchase an additional share of common stock at
a purchase price of $1.80 at any time over a period of three years from
the date of the closing of the private placement valued at $1,103,164 on
closing and were charged to additional paid in capital. Private placement
closing costs of $139,674, including 107,144 warrants issued, valued at
$91,119, were recorded as a reduction of the issuance
proceeds.
|
x)
|
On
December 27, 2007, an option holder exercised options to purchase shares
of the Company's common stock for cash of $18,000 and the Company issued
an aggregate of 75,000
shares.
|
y)
|
On
March 20, 2008, the Company issued 642,858 units consisting of one share
of the Company’s common stock and one warrant for every five common shares
purchased in a private placement at a price of $1.40 per unit for total
gross proceeds of $900,001. One warrant will entitle the holder to
purchase an additional share of common stock at a price of $1.80 at any
time over a period of three years from the date of the private placement.
The warrants were valued at $220,004 and were charged to additional
paid-in-capital.
|
z)
|
On
May 30, 2008, an option holder exercised options to purchase shares of the
Company's common stock for cash of $7,200 and the Company issued an
aggregate of 30,000 shares.
|
aa)
|
On
June 2, 2008, an option holder exercised options to purchase shares of the
Company's common stock for cash of $12,000 and the Company issued an
aggregate of 50,000 shares.
|
bb)
|
On
June 30, 2008, an option holder exercised options to purchase shares of
the Company's common stock for cash of $12,000 and the Company issued an
aggregate of 10,000 shares.
|
10.
|
Stock-Based
Compensation
|
Years ended
|
Inception
(March 19, 2001)
to December 31,
2008
|
|||||||||||
December 31,
2008
|
December 31,
2007
|
|||||||||||
Statement
of Operations line item: General and
administrative
|
||||||||||||
Payroll
|
$ | 60,350 | $ | 408,731 | $ | 1,157,078 | ||||||
Consulting
and other professional fees
|
136,918 | 178,167 | 734,020 | |||||||||
Research
and development:
|
||||||||||||
Payroll
|
192,848 | 187,366 | 677,218 | |||||||||
Consulting
and other professional fees
|
94,568 | 347,382 | 1,288,518 | |||||||||
Total
|
$ | 484,684 | $ | 1,121,646 | $ | 3,856,834 |
Year Ended
December 31,
|
||||||||
2008
|
2007
|
|||||||
Black-Scholes
weighted average assumptions
|
||||||||
Expected
dividend yield
|
0 | % | 0 | % | ||||
Expected
volatility
|
104 - 114 | % | 100 | % | ||||
Risk
free interest rate
|
1.55 - 2.98 | % | 2.76 - 4.99 | % | ||||
Expected
term (in years)
|
0.25
- 5 years
|
0.05
- 5 years
|
2008
|
2007
|
|||||||||||||||
Shares
subject to
Options
|
Weighted
Avg.
Option Prices
|
Shares
Subject to
Options
|
Weighted
Avg.
Option Prices
|
|||||||||||||
Outstanding
at January 1
|
6,045,795 | $ | 0.97 | 6,123,295 | $ | 0.94 | ||||||||||
Granted
|
2,005,000 | 1.13 | 525,000 | 1.48 | ||||||||||||
Exercised
|
(90,000 | ) | 0.35 | (127,500 | ) | 0.47 | ||||||||||
Cancelled
|
(200,000 | ) | 1.33 | (475,000 | ) | 1.29 | ||||||||||
Outstanding
at December 31
|
7,760,795 | $ | 1.01 | 6,045,795 | $ | 0.97 | ||||||||||
Exercisable
at December 31
|
5,366,795 | $ | 0.92 | 3,877,795 | $ | 0.87 | ||||||||||
Weighted
Average Remaining Contractual Terms (Years)
|
||||||||||||||||
Outstanding
|
6.9 | 6.9 | ||||||||||||||
Exercisable
|
6.7 | 6.7 |
2008
|
2007
|
|||||||||||||||
Number of
warrants
|
Weighted average
exercise price
|
Number of
warrants
|
Weighted average
exercise price
|
|||||||||||||
Balance,
January 1
|
1,078,576 | $ | 1.80 | - | $ | - | ||||||||||
Issued
during the period
|
128,572 | $ | 1.80 | 1,078,576 | $ | 1.80 | ||||||||||
Exercised
during the period
|
- | $ | - | - | $ | - | ||||||||||
Balance,
December 31,
|
1,207,148 | $ | 1.80 | 1,078,576 | $ | 1.80 |
Range
of exercise prices
|
Number
of warrants
|
Average
remaining contractual life
|
Weighted
average exercise price
|
||||||||
$ | 1.80 | 1,207,148 |
2
years
|
$ | 1.80 |
11.
|
Income
Taxes
|
2008
|
2007
|
|||||||
Net
operating loss carry-forwards
|
$ | 11,364,336 | $ | 9,554,013 | ||||
Valuation
allowance
|
(11,364,336 | ) | (9,554,013 | ) | ||||
Net
deferred tax assets
|
$ | $ | - |
12.
|
Commitments
and Contingencies
|
a)
|
The
Company has contracted with various vendors to provide research and
development services. The terms of these agreements usually require an
initiation fee and monthly or periodic payments over the terms of the
agreement, ranging from 6 months to 24 months. The costs to be incurred
are estimated and are subject to
revision.
|
b)
|
The
Company and three of its key executives entered into employment
agreements. One of the two agreements was renewed on September 12, 2007
and results in an annual commitment of $160,000 through September 12,
2009. The second agreement expires on September 12, 2010 and results in an
annual commitment of $350,000. The third agreement expires on
July 13, 2009 and results in an annual commitment of
$200,000.
|
c)
|
In
April 2004, the Company signed a 5 year lease for 8,030 square feet of
office space in Rockville, Maryland from July 2004 to June 2009. The lease
requires annual base rents of $200,750 subject to annual increases of 3%
of the preceding year’s adjusted base rent. Under the leasing agreement,
the Company also pays its allocable portion of real estate taxes and
common area operating charges. Rent expense was $222,656 and
$216,170, as of December 31, 2008 and 2007,
respectively.
|
d)
|
Regulation
by governmental authorities in the United States and in other countries
constitutes a significant consideration in our product development,
manufacturing and marketing strategies. The Company expects that all of
drug candidates will require regulatory approval by appropriate
governmental agencies prior to commercialization and will be subjected to
rigorous pre-clinical, clinical, and post-approval testing, as well as to
other approval processes by the FDA and by similar health authorities in
foreign countries. United States federal regulations control the ongoing
safety, manufacture, storage, labeling, record keeping, and marketing of
all biopharmaceutical products intended for therapeutic
purposes.
|
e)
|
On
August 19, 2008, the Company entered into an agreement with KCSA Strategic
Communications (“KCSA”) for KCSA to provide investor relations services to
the Company. Under this agreement, the Company agreed to pay KCSA a
monthly fixed retainer amount of $7,000 commencing August 19,
2008. In December 2008, the monthly retainer was reduced to
$4,000 per month. In accordance with the agreement, the
contract may be terminated by either party upon thirty (30) days prior
written notice to the other
party.
|
13.
|
Fair
Value Measurements
|
Level
1 Inputs
|
—
|
Unadjusted
quoted prices in active markets for identical assets or liabilities that
is accessible by the Company;
|
Level
2 Inputs
|
—
|
Quoted
prices in markets that are not active or financial instruments for which
all significant inputs are observable, either directly or
indirectly;
|
Level
3 Inputs
|
—
|
Unobservable
inputs for the asset or liability including significant assumptions of the
Company and other market
participants.
|
Fair Value Measurements as of December 31, 2008
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
State
Authority Auction Rate Bonds
|
$ | 2,999,750 | - | $ | 2,999,750 | - | ||||||||||
Total
Assets
|
$ | 2,999,750 | $ | - | $ | 2,999,750 | $ | - |
14.
|
Comparative
Information
|
Exhibit
Number
|
Exhibit Description
|
|
3.1.
|
Amended
and Restated Certificate of Incorporation, filed as Appendix G to the
Company's Definitive Proxy Statement on Schedule 14A (File No.
000-50590) dated April 29, 2005, is incorporated herein by
reference.
|
|
3.2.
|
Amended
and Restated Bylaws, filed as Appendix H to the Company's Definitive
Proxy Statement on Schedule 14A (File No. 000-50590) dated
April 29, 2005, is incorporated herein by
reference.
|
|
4.1.
|
Specimen
Certificate for the Company's Common Stock, par value $.0001 per
share, filed as Exhibit 4.3 to the Company's Registration Statement
on Form S-8 (File No. 333-129294) dated October 28, 2005, is
incorporated herein by reference.
|
|
*10.1.1.
|
Rexahn
Pharmaceuticals, Inc. Stock Option Plan, as amended, filed as
Exhibit 4.4 to the Company's Registration Statement on Form S-8
(File No. 333-129294) dated October 28, 2005, is incorporated herein
by reference.
|
|
*10.1.2.
|
Form
of Stock Option Grant Agreement for Employees, filed as Exhibit 4.5.1
to the Company's Registration Statement on Form S-8 (File No.
333-129294) dated October 28, 2005, is incorporated herein by
reference.
|
|
*10.1.3.
|
Form
of Stock Option Grant Agreement for Non-Employee Directors and
Consultants, filed as Exhibit 4.5.2 to the Company's Registration
Statement on Form S-8 (File No. 333-129294) dated October 28,
2005, is incorporated herein by reference.
|
|
*10.2.
|
Employment
Agreement, dated September 12, 2005, by and between Rexahn
Pharmaceuticals, Inc. and C. H. Ahn, filed as Exhibit 10.1
to the Company's Current Report on Form 8-KSB filed on
September 12, 2005, is incorporated herein by
reference.
|
|
*10.3.
|
Employment
Agreement, effective September 12, 2007, by and between Rexahn
Pharmaceuticals, Inc. and T. H. Jeong, filed as Exhibit 10
to the Company's Current Report on Form 8-KSB filed on October 9,
2007 is incorporated herein by reference.
|
|
10.4.
|
Research
Collaboration Agreement dated February 6, 2003 by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd., filed as Exhibit 10.5
to the Company’s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2005, is incorporated herein by reference.
|
|
10.5.
|
Revaax
License Agreement, dated February 8, 2005, by and between Rexahn
Pharmaceuticals, Inc. and Revaax Pharmaceuticals LLC, filed as Exhibit
10.6 to the Company’s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005, is incorporated herein by
reference.
|
|
10.6
|
Lease
Agreement, dated April 26, 2004, by and between Red Gate III LLC and
Rexahn Corporation, filed as Exhibit 10.3 to the Company’s Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2007, is
incorporated herein by reference..
|
|
10.7
|
Securities
Purchase Agreement, dated as of November 19, 2007, by and between Rexahn
Pharmaceuticals, Inc. and KT&G Corporation, filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed on November 21, 2007, is
incorporated herein by reference.
|
|
10.8
|
Securities
Purchase Agreement, dated as of November 20, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd, filed as Exhibit 10.4
to the Company’s Current Report on Form 8-K filed on November 21, 2007, is
incorporated herein by reference.
|
|
10.9
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd, filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K filed on December 18, 2007, is
incorporated herein by reference.
|
|
10.10
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Kumho Investment Bank, filed as Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed on December 18, 2007, is
incorporated herein by
reference.
|
Exhibit
Number
|
Exhibit Description
|
|
10.11
|
Securities
Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and the several parties thereto, filed as Exhibit
10.3 to the Company’s Current Report on Form 8-K filed on December 18,
2007, is incorporated herein by reference.
|
|
10.12
|
Warrant,
dated December 24, 2007, issued to KT&G Corporation, filed as Exhibit
10.6 to the Company’s Current Report on Form 8-K filed on December 26,
2007, is incorporated herein by reference.
|
|
10.13
|
Warrant,
dated December 24, 2007, issued to Rexgene Biotech Co., Ltd., filed as
Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on December
26, 2007, is incorporated herein by reference.
|
|
10.14
|
Form
of Warrant, dated December 24, 2007, issued to the purchasers pursuant to
the Jungwoo Securities Purchase Agreement, the Kumho Securities Purchase
Agreement, the Individual Investor Securities Purchase Agreement and to a
consultant, filed as Exhibit 10.4 to the Company’s Current Report on Form
8-K filed on December 18, 2007, is incorporated herein by
reference.
|
|
10.15
|
Registration
Rights Agreement, dated as of December 24, 2007, by and among Rexahn
Pharmaceuticals, Inc. and the purchasers pursuant to the KT&G
Securities Purchase Agreement, the Rexgene Securities Purchase Agreement,
the Jungwoo Securities Purchase Agreement, the Kumho Securities Purchase
Agreement, the Individual Investor Securities Purchase Agreement and a
consulting Services Agreement, filed as Exhibit 10.9 to the Company
Current Report on Form 8-K filed on December 26, 2007, is incorporated
herein by reference.
|
|
10.16
|
Securities
Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd. (the "Jungwoo
Securities Purchase Agreement”), filed as Exhibit 10.1 to the Company's
current report on Form 8-K filed on March 26, 2008, is incorporated herein
by reference.
|
|
10.17
|
Securities
Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Super Bio Co. Ltd., (the "Super Bio Securities
Purchase Agreement"), filed as Exhibit 10.2 to the Company's current
report on Form 8-K filed on March 26, 2008, is incorporated herein by
reference.
|
|
10.18
|
Form
of Warrant for issuance pursuant to the Jungwoo Securities Purchase
Agreement and the Super Bio Securities Purchase Agreement, filed as
Exhibit 10.3 to the Company's current report on Form 8-K filed on March
26, 2008, is incorporated herein by reference.
|
|
*10.19
|
Employment
Agreement, dated July 14, 2008, by and between Rexahn Pharmaceuticals,
Inc. and Rakesh Soni, filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on July 16, 2008, is incorporated
herein by reference.
|
|
*10.20
|
Consulting
Agreement, dated August 12, 2008, by and between Rexahn Pharmaceuticals,
Inc. and Y. Michelle Kang, filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on August 27, 2008, is
incorporated herein by reference.
|
|
Code
of Ethics and Business Conduct.
|
||
Consent
of Parente Randolph, LLC, independent registered public accounting
firm.
|
||
Consent
of Lazar Levine & Felix LLP, independent registered public accounting
firm.
|
||
Power
of Attorney.
|
||
Certification
of Chief Executive Officer of Periodic Report Pursuant to Pursuant to
Rule 13a-15(e) or Rule 15d-15(e).
|
||
Certification
of Chief Financial Officer of Periodic Report Pursuant to Pursuant to
Rule 13a-15(e) or Rule 15d-15(e).
|
||
Certification
of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|
||
Certification
of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
|