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 Number)
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Large
Accelerated Filer o
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Accelerated
Filer þ
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Non-Accelerated
Filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company þ
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Page
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PART
I
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FINANCIAL
INFORMATION
|
||
Item
1
|
Financial
Statements
|
||
1)
|
3
|
||
2)
|
4
|
||
3)
|
5
|
||
4)
|
6
|
||
Item
2
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23
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||
Item
3
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30
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||
Item
4
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30
|
||
PART
II
|
OTHER
INFORMATION
|
||
Item
1
|
31
|
||
Item
1A
|
31
|
||
Item
2
|
31
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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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Item
5
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31
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Item
6
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32
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33
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PART
I
|
Financial
Information
|
Item
1
|
Financial
Statements
|
September
30,
2009
|
December
31,
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 4,141,358 | $ | 369,130 | ||||
Marketable
securities
|
- | 2,999,750 | ||||||
Prepaid
expenses and other current assets (note 3)
|
220,283 | 366,765 | ||||||
Total
Current Assets
|
4,361,641 | 3,735,645 | ||||||
Restricted Cash Equivalents
(note 13)
|
2,100,533 | - | ||||||
Equipment, Net (note
4)
|
179,737 | 92,212 | ||||||
Intangible Asset, Net
(note 5)
|
272,774 | 286,132 | ||||||
Total
Assets
|
$ | 6,914,685 | $ | 4,113,989 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses (note 6)
|
$ | 474,289 | $ | 358,894 | ||||
Deferred Revenue (note
7)
|
993,750 | 1,050,000 | ||||||
Other liabilities (note
8)
|
121,171 | - | ||||||
Total
Liabilities
|
1,589,210 | 1,408,894 | ||||||
Commitments and Contingencies
(note 13)
|
||||||||
Stockholders' Equity
(note 10):
|
||||||||
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, 63,848,175 (2008
– 56,039,854) issued
|
6,384 | 5,604 | ||||||
Additional
paid-in capital
|
39,759,025 | 33,184,860 | ||||||
Accumulated
deficit during the development stage
|
(34,411,524 | ) | (29,906,479 | ) | ||||
Treasury
stock, 14,205 shares, at cost
|
(28,410 | ) | (28,410 | ) | ||||
Accumulated
other comprehensive (loss)
|
- | (550,480 | ) | |||||
Total
Stockholders' Equity
|
5,325,475 | 2,705,095 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 6,914,685 | $ | 4,113,989 |
Three
Months
Ended
September 30,
|
Nine
Months
Ended
September 30,
|
Cumulative
from March 19, 2001 (Inception) to
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
September
30, 2009
|
||||||||||||||||
Revenues:
|
||||||||||||||||||||
Research
|
$ | 18,750 | $ | 18,750 | $ | 56,250 | $ | 56,250 | $ | 506,250 | ||||||||||
Expenses:
|
||||||||||||||||||||
General
and administrative
|
724,067 | 645,368 | 2,285,804 | 1,893,819 | 17,150,243 | |||||||||||||||
Research
and development
|
424,609 | 567,905 | 2,018,766 | 1,419,077 | 15,250,610 | |||||||||||||||
Patent
fees
|
107,618 | 57,574 | 258,421 | 163,778 | 1,180,254 | |||||||||||||||
Depreciation
and amortization
|
17,292 | 13,875 | 41,638 | 41,574 | 544,842 | |||||||||||||||
Total
Expenses
|
1,273,586 | 1,284,722 | 4,604,629 | 3,518,248 | 34,125,949 | |||||||||||||||
Loss
from Operations
|
(1,254,836 | ) | (1,265,972 | ) | (4,548,379 | ) | (3,461,998 | ) | (33,619,699 | ) | ||||||||||
Other
(Income) Expense:
|
||||||||||||||||||||
Realized
loss (gain) on marketable securities
|
- | - | (11,025 | ) | 22,365 | 9,341 | ||||||||||||||
Interest
(income)
|
(17,407 | ) | (52,122 | ) | (32,309 | ) | (220,239 | ) | (1,143,663 | ) | ||||||||||
Interest
expense
|
- | - | - | - | 301,147 | |||||||||||||||
Beneficial
conversion feature
|
- | - | - | - | 1,625,000 | |||||||||||||||
Total
Other (Income) Expense
|
(17,407 | ) | (52,122 | ) | (43,334 | ) | (197,874 | ) | 791,825 | |||||||||||
Net
Loss Before Provision for Income Taxes
|
(1,237,429 | ) | (1,213,850 | ) | (4,505,045 | ) | (3,264,124 | ) | (34,411,524 | ) | ||||||||||
Provision
for Income Taxes
|
- | - | - | - | - | |||||||||||||||
Net
Loss
|
$ | (1,237,429 | ) | $ | (1,213,850 | ) | $ | (4,505,045 | ) | $ | (3,264,124 | ) | $ | (34,411,524 | ) | |||||
Loss
per share, basic and diluted
|
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.06 | ) | ||||||||
Weighted
average number of shares outstanding, basic and diluted
|
61,027,293 | 56,025,649 | 58,440,503 | 55,800,977 |
Nine
Months
Ended
September 30,
|
Cumulative
From
March 19,2001 (Inception) to
|
|||||||||||
2009
|
2008
|
September
30, 2009
|
||||||||||
Cash
Flows from Operating Activities:
|
||||||||||||
Net
loss
|
$ | (4,505,045 | ) | $ | (3,264,124 | ) | $ | (34,411,524 | ) | |||
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
|
41,638 | 41,574 | 544,842 | |||||||||
Stock
option compensation expense
|
489,094 | 397,002 | 4,345,928 | |||||||||
Amortization
of deferred revenue
|
(56,250 | ) | (56,250 | ) | (506,250 | ) | ||||||
Realized
(gains) losses on marketable securities
|
(11,025 | ) | 22,365 | 9,341 | ||||||||
Amortization
of deferred lease incentive
|
(5,000 | ) | - | (5,000 | ) | |||||||
Deferred
lease expenses
|
26,171 | - | 26,171 | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
Prepaid
expenses and other
|
146,482 | (19,555 | ) | (220,283 | ) | |||||||
Accounts
payable and accrued expenses
|
115,395 | (241,982 | ) | 474,289 | ||||||||
Net
Cash (Used in) Operating Activities
|
(3,758,540 | ) | (3,120,970 | ) | (28,095,609 | ) | ||||||
Cash
Flows from Investing Activities:
|
||||||||||||
Restricted
cash equivalents
|
(2,100,533 | ) | - | (2,100,533 | ) | |||||||
Purchase
of equipment
|
(15,805 | ) | (25,697 | ) | (541,137 | ) | ||||||
Purchase
of marketable securities
|
(1,196,824 | ) | (5,848,176 | ) | (10,595,000 | ) | ||||||
Proceeds
from sales of marketable securities
|
4,758,079 | 4,475,581 | 10,585,659 | |||||||||
Payment
of licensing fees
|
- | - | (356,216 | ) | ||||||||
Net
Cash Provided by (Used in) Investing Activities
|
1,444,917 | (1,398,292 | ) | (3,007,227 | ) | |||||||
Cash
Flows from Financing Activities:
|
||||||||||||
Issuance
of common stock and units, net of issuance costs
|
6,085,851 | 931,201 | 28,622,604 | |||||||||
Proceeds
from long-term debt
|
- | - | 5,150,000 | |||||||||
Proceeds
from research contribution
|
- | - | 1,500,000 | |||||||||
Principal
payments on long-term debt
|
- | - | (28,410 | ) | ||||||||
Net
Cash Provided by Financing Activities
|
6,085,851 | 931,201 | 35,244,194 | |||||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
3,772,228 | (3,588,061 | ) | 4,141,358 | ||||||||
Cash
and Cash Equivalents - beginning of period
|
369,130 | 3,809,571 | - | |||||||||
Cash
and Cash Equivalents - end of period
|
$ | 4,141,358 | $ | 221,510 | $ | 4,141,358 | ||||||
Supplemental
Cash Flow Information:
|
||||||||||||
Interest
paid
|
$ | - | $ | - | $ | 301,147 | ||||||
Non-cash
financing and investing activities:
|
||||||||||||
Warrants
issued
|
$ | 1,348,308 | $ | - | $ | 2,762,596 | ||||||
Leasehold
improvement incentive
|
$ | 100,000 | $ | - | $ | 100,000 |
1.
|
Operations
and Organization
|
2.
|
Recent
Accounting Pronouncements Affecting the
Company
|
3.
|
Prepaid
Expenses and Other Current Assets
|
September
30,
2009
|
December
31,
2008
|
|||||||
Deposits
on contracts
|
$ | 162,862 | $ | 294,337 | ||||
Other
assets
|
57,421 | 72,428 | ||||||
$ | 220,283 | $ | 366,765 |
4.
|
Equipment
|
September
30,
2009
|
December
31,
2008
|
|||||||
Furniture
and fixtures
|
$ | 31,713 | $ | 31,713 | ||||
Office
equipment
|
70,276 | 70,276 | ||||||
Lab
and computer equipment
|
428,436 | 421,343 | ||||||
Leasehold
improvements
|
110,712 | 2,000 | ||||||
641,137 | 525,332 | |||||||
Less
accumulated depreciation and amortization
|
(461,400 | ) | (433,120 | ) | ||||
Net
carrying amount
|
$ | 179,737 | $ | 92,212 |
5.
|
Intangible
Asset, Net
|
September
30,
2009
|
December
31,
2008
|
|||||||
Revaax
license, original cost
|
$ | 356,216 | $ | 356,216 | ||||
Less
accumulated amortization
|
(83,442 | ) | (70,084 | ) | ||||
Balance
|
$ | 272,774 | $ | 286,132 |
2009
|
$ | 4,452 | ||
2010
|
17,811 | |||
2011
|
17,811 | |||
2012
|
17,811 | |||
2013
|
17,811 | |||
Thereafter
|
197,078 | |||
$ | 272,774 |
6.
|
Accounts
Payable and Accrued Expenses
|
September
30,
2009
|
December
31,
2008
|
|||||||
Trade
payables
|
$ | 171,555 | $ | 136,906 | ||||
Accrued
expenses
|
210,232 | 98,486 | ||||||
Payroll
liabilities
|
92,502 | 123,502 | ||||||
$ | 474,289 | $ | 358,894 |
7.
|
Deferred
Revenue
|
8.
|
Other
Liabilities
|
September
30,
2009
|
December
31,
2008
|
|||||||
Deferred
lease incentive
|
$ | 100,000 | $ | - | ||||
Less
accumulated amortization
|
(5,000 | ) | - | |||||
Balance
|
$ | 95,000 | $ | - |
9.
|
Net
Loss per Common Share
|
10.
|
Stockholders’
Equity
|
|
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. 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 of $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 $220,005 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.
|
|
ab)
|
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.
|
|
ac)
|
On
May 19, 2009 the Company entered into a purchase agreement to issue
2,857,143 shares of common stock at a price of $1.05 per share to an
institutional investor for total proceeds of $2,710,910, net of $289,090
stock issuance costs. The investor was also
issued:
|
|
1)
|
Series
I warrants to purchase 2,222,222 shares of common stock at a purchase
price of $1.05 per share at any time before September 3,
2009;
|
|
2)
|
Series
II warrants to purchase 1,866,666 shares of common stock at a purchase
price of $1.25 per share at any time from December 3, 2009 to June 5,
2012; and
|
|
3)
|
Series
III warrants to purchase 1,555,555 shares of common stock at a purchase
price of $1.50 per share at any time from December 3, 2009 to June 5,
2014.
|
|
ad)
|
On
June 9, 2009, the Company issued 1,833,341 shares of common stock and
862,246 warrants to purchase common stock at a purchase price of $1.05 per
share to existing stockholders pursuant to the anti-dilution protection
provisions of the private placements transacted on December 24, 2007 and
March 20, 2008. The warrants were valued at $169,985 and
recorded as a reduction in issuance proceeds of the May 19, 2009
transaction as described above.
|
|
ae)
|
On
September 4, 2009, an option holder exercised options to purchase shares
of the Company's common stock for cash of $3,600 and the Company issued an
aggregate of 15,000 shares.
|
|
af)
|
On
September 21, 2009, the Company issued 3,102,837 shares of common stock at
a purchase price of $1.13 per share to an institutional investor for total
proceeds of $3,371,341, net of $128,659 stock issuance
costs.
|
|
ag)
|
During
the nine month period ended September 30, 2009, the Company sold all of
its marketable securities for which it previously recorded an unrealized
loss of ($550,480) to accumulated other comprehensive (loss) at December
31, 2008. The sale of the Company’s investments in marketable
securities resulted in a realized gain of $11,025 during the nine month
period ended September 30, 2009.
|
11.
|
Stock-Based
Compensation
|
September
30,
|
September
30,
|
Inception
(March 19, 2001) to
September
30, 2009
|
||||||||||
2009
|
2008
|
|||||||||||
Income
statement line item:
|
||||||||||||
General
and administrative
|
||||||||||||
Payroll
|
$ | 339,960 | $ | 27,600 | $ | 1,497,038 | ||||||
Consulting
and other professional fees
|
15,278 | 134,448 | 749,298 | |||||||||
Research
and development:
|
||||||||||||
Payroll
|
133,831 | 146,523 | 811,049 | |||||||||
Consulting
and other professional fees
|
25 | 88,431 | 1,288,543 | |||||||||
Total
|
$ | 489,094 | $ | 397,002 | $ | 4,345,928 |
Nine
Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
Black-Scholes
weighted average assumptions:
|
||||||||
Expected
dividend yield
|
- | - | ||||||
Expected
volatility
|
106%-108 | % | 100% - 114 | % | ||||
Risk
free interest rate
|
0.56%-2.55 | % | 1.60%-4.99 | % | ||||
Expected
term (in years)
|
0.71
- 5 years
|
0.52
- 5 years
|
2009
|
2008
|
|||||||||||||||
Shares
Subject
to
Options
|
Weighted
Avg.
Option
Prices
|
Shares
Subject
to
Options
|
Weighted
Avg.
Option
Prices
|
|||||||||||||
Outstanding
at January 1st
|
7,760,795 | $ | 1.01 | 6,045,795 | $ | 0.97 | ||||||||||
Granted
|
130,000 | 1.23 | 750,000 | 1.71 | ||||||||||||
Exercised
|
(15,000 | ) | 0.24 | (90,000 | ) | 0.35 | ||||||||||
Cancelled
|
(55,000 | ) | 1.29 | (50,000 | ) | 1.34 | ||||||||||
Outstanding
at September 30th
|
7,820,795 | $ | 1.00 | 6,655,795 | $ | 1.05 |
Shares
Subject
to Options
|
Weighted
Avg. Option
Prices
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at September 30, 2009
|
7,820,795 | $ | 1.00 |
6.3
years
|
$ | 921,509 | |||||||
Exercisable
at September 30, 2009
|
5,882,795 | $ | 0.99 |
5.7
years
|
$ | 796,509 |
Shares
Subject
to Options
|
Weighted
Avg.
Option
Prices
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at September 30, 2008
|
6,655,795 | $ | 1.05 |
7.0
years
|
$ | 2,655,485 | |||||||
Exercisable
at September 30, 2008
|
4,996,795 | $ | 1.11 |
6.5
years
|
$ | 2,486,567 |
12.
|
Income
Taxes
|
September
30,
2009
|
December
31,
2008
|
|||||||
Net
operating loss carry-forwards
|
$ | 13,076,379 | $ | 11,364,336 | ||||
Valuation
allowance
|
(13,076,379 | ) | (11,364,336 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
13.
|
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 term of the
agreement, ranging from 6 months to 24 months. The costs to be incurred
are estimated and are subject to revision. As of September 30, 2009, the
total contract value of these agreements was approximately $5,469,993 and
the Company had made payments totaling $3,527,100 under the terms of the
agreements as of September 30, 2009. All of these agreements
may be terminated by either party upon appropriate notice as stipulated in
the respective agreements.
|
|
b)
|
The
Company and three of its key executives entered into employment
agreements. Each of these agreements was renewed on August 10, 2009 and
expire on August 10, 2012. The agreements result in annual
commitments of $200,000, $350,000 and
$250,000.
|
|
c)
|
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 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. The Company
believes that it is in compliance in all material respects with currently
applicable rules and regulations.
|
|
d)
|
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 a
monthly fixed retainer amount of $7,000 commencing on 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 30 days prior written
notice to the other party.
|
|
e)
|
On
April 6, 2009, the Company entered into an agreement with Rodman &
Renshaw, LLC (“Rodman”) for Rodman to serve as placement agent for the
Company. Under this agreement, the Company agreed to pay a cash
fee to Rodman immediately upon the closing of the placement equal to 6% of
the aggregate gross proceeds raised in the placement plus a cash fee
payable immediately on each exercise of the warrants issued to the
purchasers in the placement that are solicited by Rodman equal to 6% of
the aggregate proceeds received by the Company in connection with such
exercise; and such number of warrants (the “Rodman Warrants”) issuable to
Rodman or its designees at the closing to purchase shares of common stock
equal to 5% of the aggregate number of shares sold in the
placement. In accordance with the agreement, the contract ended
on July 31, 2009. The Company paid $180,000 and issued the
placement agent warrants to purchase up to an aggregate of 142,857 shares
of our common stock at an exercise price of $1.3125 per
share.
|
|
f)
|
On
April 20, 2009, Amarex, LLC filed suit against us in the Circuit Court of
Montgomery County, Maryland, seeking damages for an alleged breach of a
contract between the Company and Amarex, LLC entered into on January 6,
2006. Amarex, LLC claims damages of $93,156 plus
interest. On May 22, 2009, the Company filed an answer and an
affirmative defense to the complaint denying the claims of damages made by
Amarex, LLC. On June 16, 2009, the Company filed a counterclaim
against Amarex, LLC for breach of the same contract in the amount of
$354,824 plus interest.
|
|
g)
|
On
April 27, 2009, we added a Change Order to the original Single Service
Agreement, dated March 15, 2006 with Aptuit, Inc. for packaging and
labeling of Archexin™ for our Phase II pancreatic cancer
study. The total cost of the Change Order is $16,800, none of
which was paid as of September 30,
2009.
|
|
h)
|
On
May 4, 2009, the NYSE Amex (the “Exchange”) accepted the Company’s
proposed compliance plan which addresses how the Company intends to regain
compliance with the continued listing standards within a maximum of 18
months. On
July 7, 2009, the Company received a notice from the Exchange indicating
that it had regained compliance with the requirements of the NYSE Amex
Company Guide for the continued listing of its common stock on the
Exchange, and that its common stock therefore was no longer subject to
delisting.
|
|
i)
|
On
May 21, 2009, the Company entered into a 1 year agreement to use lab space
commencing on July 1, 2009. The Company agreed to pay monthly
payments of $4,594 from October 1, 2009 to June 30, 2010. The
agreement shall terminate on June 30, 2010 and may be renewed for two
additional terms of one year upon 60 days prior to the expiration of the
agreement.
|
|
j)
|
On
May 22, 2009, we were notified by the Financial Industry Regulatory
Authority (“FINRA”) that FINRA, on behalf of the NYSE Amex, is conducting
a review of trading in our common stock surrounding the May 12, 2009
announcement of the results of an animal study that further demonstrates
that our drug candidate Zoraxel is a potential new-class of therapeutic
for the effective treatment of sexual dysfunction. On October 9, 2009,
FINRA notified the Company that it has closed the review of the trading
activity without further action.
|
|
k)
|
On
June 10, 2009, we entered into a Research Services Agreement with
University of Maryland, Baltimore to evaluate melanoma
research. The total cost of these services is $27,951, of which
$20,964 was paid as of September 30,
2009.
|
|
l)
|
On
June 16, 2009, we contracted with Baptist Cancer Institute as a clinical
site for our Phase IIa clinical study for Archexin(TM) for pancreatic
cancer. The estimated cost for the study is $83,250, none of
which was paid as of September 30,
2009.
|
|
m)
|
On
June 22, 2009, we entered into a License Agreement with KRICT to acquire
the rights to all intellectual properties related to
Quinoxaline-Piperazine derivatives that were synthesized under a Joint
Research Agreement. The initial license fee was $100,000, all
of which was paid as of September 30, 2009. The agreement with
KRICT calls for a one-time milestone payment of $1,000,000 within 30 days
after the first achievement of marketing approval of the first commercial
product arising out of or in connection with the use of KRICT’s
intellectual properties.
|
|
n)
|
On
June 26, 2009, the Company entered into a securities purchase agreement
with Teva Pharmaceutical Industries Limited
(“Teva”). Contemporaneous with the execution and delivery of
this agreement, the parties executed a research and exclusive license
option agreement (“RELO”) pursuant to which the Company shall use
$2,000,000 of the gross proceeds of the issuance and sale of shares to
Teva to fund a research and development program for the pre-clinical
development of RX-3117 and has included this amount in restricted cash
equivalents. The Company will be eligible to receive royalties
on net sales of RX-3117 worldwide. As at September 30, 2009, no
work has been started on the RX-3117 research and development
program.
|
|
o)
|
On
June 29, 2009, the Company signed a five year lease for 5,466 square feet
of office space in Rockville, Maryland commencing on June 29,
2009. The lease requires annual base rents of $76,524 with
increases over the next five years. Under the leasing agreement, the
Company pays its allocable portion of real estate taxes and common area
operating charges. Rent paid under the Company’s former lease
during the nine months period ended September 30, 2009 was $112,973 (2008
- $132,104).
|
2009
|
$ | 52,044 | ||
2010
|
135,982 | |||
2011
|
148,593 | |||
2012
|
158,835 | |||
2013
|
162,806 | |||
Thereafter
|
82,408 | |||
$ | 740,668 |
14.
|
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 September 30, 2009
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Restricted
cash equivalents
|
$ | 2,100,533 | $ | 2,000,533 | $ | 100,000 | - | |||||||||
Total
Assets
|
$ | 2,100,533 | $ | 2,000,533 | $ | 100,000 | $ | - |
|
a)
|
monies
held in money market in accordance with the RELO agreement, as discussed
in noted 13, and classified within level 1 of the fair value hierarchy;
and
|
|
b)
|
a
certificate of deposit and valued based upon the underlying terms of a
letter of credit, as discussed in note 13, and classified within level 2
of the fair value hierarchy
|
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 | $ | - |
15.
|
Subsequent
Events
|
Item 2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
—
|
our
lack of profitability and the need for additional capital to operate our
business;
|
|
—
|
our
ability to obtain the necessary U.S. and worldwide regulatory approvals
for our drug candidates;
|
|
—
|
successful
and timely completion of clinical trials for our drug
candidates;
|
|
—
|
demand
for and market acceptance of our drug
candidates;
|
|
—
|
the
availability of qualified third-party researchers and manufacturers for
our drug development programs;
|
|
—
|
our
ability to develop and obtain protection of our intellectual property;
and
|
|
—
|
other
risks and uncertainties, including those detailed from time to time in our
filings with the Securities and Exchange Commission (the
“SEC”).
|
|
—
|
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.
|
Item 3
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Item 4
|
Controls
and Procedures
|
|
Ÿ
|
information
required to be disclosed by the Company in this Quarterly Report on Form
10-Q and other reports that the Company files or submits under the
Exchange Act would be accumulated and communicated to the Company’s
management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding
required disclosure;
|
|
Ÿ
|
information
required to be disclosed by the Company in this Quarterly Report on Form
10-Q and other reports that the Company files or submits under the
Exchange Act would be recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms;
and
|
|
Ÿ
|
the
Company’s disclosure controls and procedures are effective as of the end
of the period covered by this Quarterly Report on Form 10-Q to ensure that
material information relating to the Company is made known to them,
particularly during the period in which the periodic reports of the
Company, including this Quarterly Report on Form 10-Q, are being
prepared.
|
Item 1
|
Legal
Proceedings
|
Item 1A
|
Risk
Factors
|
Item 2
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Item 3
|
Defaults
Upon Senior Securities
|
Item 4
|
Submission
of Matters to a Vote of Security
Holders
|
Item 5
|
Other
Information
|
Item 6
|
Exhibits
|
Exhibit No
|
Description
|
Location
|
||
10.1
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Chang Ho Ahn.
|
Filed
as Exhibit 10.1 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.2
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Rakesh Soni.
|
Filed
as Exhibit 10.2 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.3
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Tae Heum Jeong.
|
Filed
as Exhibit 10.3 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.4*
|
Research
and Exclusive License Option Agreement, dated as of June 26, 2009, by and
between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical Industries
Limited.
|
Filed
as Exhibit 10.1 to the Current Report on Form 8-K filed on September 21,
2009
|
||
10.5
|
Securities
Purchase Agreement, dated as of June 26, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Teva Pharmaceutical Industries
Limited.
|
Filed
as Exhibit 10.2 to the Current Report on Form 8-K filed on September 21,
2009
|
||
10.6
|
Amendment
No. 1 to Securities Purchase Agreement, dated as of September 16, 2009, by
and between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical
Industries Limited.
|
Filed
as Exhibit 10.3 to the Current Report on Form 8-K filed on September 21,
2009
|
||
31.1
|
Rule 13a-14(a)/15d-14(a)
Certification (Principal Executive Officer)
|
Filed
herewith
|
||
31.2
|
Rule 13a-14(a)/15d-14(a)
Certification (Principal Financial Officer)
|
Filed
herewith
|
||
32.1**
|
Section
1350 Certificate (Principal Executive Officer)
|
Filed
herewith
|
||
32.2**
|
Section
1350 Certificate (Principal Financial Officer)
|
Filed
herewith
|
*
|
Rexahn
Pharmaceuticals, Inc. has applied for confidential treatment of certain
provisions of this exhibit with the SEC. The confidential portions of this
exhibit are marked by an asterisk and have been omitted and filed
separately with the SEC pursuant to Company’s request for confidential
treatment.
|
**
|
This
exhibit is furnished rather than filed, and shall not be incorporated by
reference into any filing of the registrant in accordance with Item 601 of
Registration S-K
|
REXAHN PHARMACEUTICALS,
INC.
|
||
(Registrant)
|
||
By:
|
/s/
Chang H. Ahn
|
|
Date:
November 16, 2009
|
Chang
H. Ahn
|
|
Chairman
and Chief Executive Officer
|
||
By:
|
/s/
Tae Heum Jeong
|
|
Date:
November 16, 2009
|
Tae
Heum Jeong
|
|
Chief
Financial Officer and Secretary
|
Exhibit No
|
Description
|
Location
|
||
10.1
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Chang Ho Ahn.
|
Filed
as Exhibit 10.1 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.2
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Rakesh Soni.
|
Filed
as Exhibit 10.2 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.3
|
Employment
Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Tae Heum Jeong.
|
Filed
as Exhibit 10.3 to the Current Report on Form 8-K filed on August 10,
2009
|
||
10.4*
|
Research
and Exclusive License Option Agreement, dated as of June 26, 2009, by and
between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical Industries
Limited.
|
Filed
as Exhibit 10.1 to the Current Report on Form 8-K filed on September 21,
2009
|
||
10.5
|
Securities
Purchase Agreement, dated as of June 26, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Teva Pharmaceutical Industries
Limited.
|
Filed
as Exhibit 10.2 to the Current Report on Form 8-K filed on September 21,
2009
|
||
10.6
|
Amendment
No. 1 to Securities Purchase Agreement, dated as of September 16, 2009, by
and between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical
Industries Limited.
|
Filed
as Exhibit 10.3 to the Current Report on Form 8-K filed on September 21,
2009
|
||
Rule 13a-14(a)/15d-14(a)
Certification (Principal Executive Officer)
|
Filed
herewith
|
|||
Rule 13a-14(a)/15d-14(a)
Certification (Principal Financial Officer)
|
Filed
herewith
|
|||
32.1**
|
Section
1350 Certificate (Principal Executive Officer)
|
Filed
herewith
|
||
32.2**
|
Section
1350 Certificate (Principal Financial Officer)
|
Filed
herewith
|
*
|
Rexahn
Pharmaceuticals, Inc. has applied for confidential treatment of certain
provisions of this exhibit with the SEC. The confidential portions of this
exhibit are marked by an asterisk and have been omitted and filed
separately with the SEC pursuant to Company’s request for confidential
treatment.
|
**
|
This
exhibit is furnished rather than filed, and shall not be incorporated by
reference into any filing of the registrant in accordance with Item 601 of
Registration S-K
|