Condensed Balance Sheets
|
3
|
Condensed Statements of Comprehensive Loss
|
4
|
Condensed Statements of Changes in Stockholders’ Deficit
|
5
|
Condensed Statements of Cash Flows
|
6
|
Notes to Condensed Financial Statements
|
7
|
September 30, 2020
(Unaudited) |
December 31, 2019
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
722,160
|
$
|
1,536,917
|
||||
Proceeds receivable from convertible notes
|
450,000
|
75,000
|
||||||
Proceeds receivable from convertible notes - related parties
|
—
|
50,000
|
||||||
Prepaids and other assets
|
22,708
|
24,022
|
||||||
Deferred costs
|
1,467,649
|
76,165
|
||||||
Total current assets
|
2,662,517
|
1,762,104
|
||||||
Property and equipment, net
|
14,795
|
22,175
|
||||||
Total assets
|
$
|
2,677,312
|
$
|
1,784,279
|
||||
Liabilities and stockholders’ deficit
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
720,779
|
$
|
341,634
|
||||
Accrued liabilities
|
1,765,793
|
621,671
|
||||||
Convertible notes
|
8,445,811
|
4,977,074
|
||||||
Convertible notes from related parties
|
854,065
|
689,756
|
||||||
Premium conversion derivatives
|
300,378
|
2,713,668
|
||||||
Total current liabilities
|
12,086,826
|
9,343,803
|
||||||
Total liabilities
|
12,086,826
|
9,343,803
|
||||||
Commitments and contingencies (Note 2)
|
||||||||
Stockholders’ deficit
|
||||||||
Preferred stock, par value $0.0001; 625,000 shares authorized as of September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019.
|
—
|
—
|
||||||
Common stock, par value $0.0001; 5,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 3,543,751 and 2,700,000 shares issued and outstanding at September 30, 2020
and December 31, 2019, respectively.
|
354
|
270
|
||||||
Additional paid-in-capital
|
4,584,852
|
494,909
|
||||||
Accumulated deficit
|
(13,994,720
|
)
|
(8,054,703
|
)
|
||||
Total stockholders’ deficit
|
(9,409,514
|
)
|
(7,559,524
|
)
|
||||
Total liabilities and stockholders’ deficit
|
$
|
2,677,312
|
$
|
1,784,279
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2020
|
2019
|
2020 | 2019 | |||||||||||||
Operating expenses:
|
||||||||||||||||
General and administrative
|
$
|
565,310
|
$
|
388,309
|
|
$
|
1,507,781
|
$
|
1,165,498
|
|||||||
Research and development
|
1,382,614
|
731,765
|
2,311,175
|
1,560,215
|
||||||||||||
Acquired in‑process research and development
|
—
|
—
|
2,126,253
|
—
|
||||||||||||
Total operating expenses
|
1,947,924
|
1,120,074
|
5,945,209
|
2,725,713
|
||||||||||||
Loss from operations
|
(1,947,924
|
)
|
(1,120,074
|
)
|
(5,945,209
|
)
|
(2,725,713
|
)
|
||||||||
Interest expense
|
(179,048
|
)
|
(618,692
|
)
|
(1,421,672
|
)
|
(938,561
|
)
|
||||||||
Fair value change of premium conversion derivatives
|
879,386
|
(29,592
|
)
|
157,942
|
(161,675
|
)
|
||||||||||
Gain on note extinguishment (Note 4)
|
—
|
—
|
1,260,350
|
—
|
||||||||||||
Other income, net
|
67
|
—
|
8,572
|
—
|
||||||||||||
Loss before income taxes
|
(1,247,519
|
)
|
(1,768,358
|
)
|
(5,940,017
|
)
|
(3,825,949
|
)
|
||||||||
Benefit (provision) for income taxes
|
—
|
—
|
—
|
—
|
||||||||||||
Net loss
|
(1,247,519
|
)
|
(1,768,358
|
)
|
(5,940,017
|
)
|
(3,825,949
|
)
|
||||||||
Other comprehensive loss, net of tax
|
—
|
—
|
—
|
—
|
||||||||||||
Comprehensive loss
|
$
|
(1,247,519
|
)
|
$
|
(1,768,358
|
)
|
|
$
|
(5,940,017
|
)
|
$
|
(3,825,949
|
)
|
|||
Net loss per share:
|
||||||||||||||||
Basic and diluted (Note 9)
|
$
|
($0.35
|
)
|
$
|
($0.66
|
)
|
|
$
|
(1.71
|
)
|
$
|
(1.42
|
)
|
|||
Number of shares used in per share calculations:
|
||||||||||||||||
Basic and diluted
|
3,543,751
|
2,690,364
|
3,482,163
|
2,700,000
|
Common Stock
|
Additional
Paid–In
|
Accumulated
|
Total
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||
Balance at December 31, 2018
|
2,700,000
|
$
|
270
|
$
|
186,799
|
$
|
(1,885,743
|
)
|
$
|
( 1,698,674
|
)
|
|||||||||
Share–based compensation – employee
|
—
|
—
|
65,343
|
—
|
65,343
|
|||||||||||||||
Share–based compensation – non-employee
|
—
|
—
|
20,519
|
—
|
20,519
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(944,064
|
)
|
(944,064
|
)
|
|||||||||||||
Balance at March 31, 2019
|
2,700,000
|
270
|
272,661
|
(2,829,807
|
)
|
(2,556,876
|
)
|
|||||||||||||
Share–based compensation – employee
|
—
|
—
|
52,594
|
—
|
52,594
|
|||||||||||||||
Share–based compensation – non-employee
|
—
|
—
|
18,030
|
—
|
18,030
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(1,113,527
|
)
|
(1,113,527
|
)
|
|||||||||||||
Balance at June 30, 2019
|
2,700,000
|
270
|
343,285
|
(3,943,334
|
)
|
(3,599,779
|
)
|
|||||||||||||
Share–based compensation – employee
|
—
|
—
|
52,593
|
—
|
52,593
|
|||||||||||||||
Share–based compensation – non-employee
|
—
|
—
|
20,712
|
—
|
20,712
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(1,768,358
|
)
|
(1,768,358
|
)
|
|||||||||||||
Balance at September 30, 2019
|
2,700,000
|
$
|
270
|
$
|
416,590
|
$
|
(5,711,692
|
)
|
$
|
(5,294,832
|
)
|
|||||||||
Balance at December 31, 2019
|
2,700,000
|
$
|
270
|
$
|
494,909
|
$
|
(8,054,703
|
)
|
$
|
( 7,559,524
|
)
|
|||||||||
Issuance of common stock in exchange for in-process research and development
|
843,751
|
84
|
2,126,169
|
—
|
2,126,253
|
|||||||||||||||
Share–based compensation
|
—
|
—
|
61,324
|
—
|
61,324
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(3,088,316
|
)
|
(3,088,316
|
)
|
|||||||||||||
Balance at March 31, 2020
|
3,543,751
|
354
|
2,682,402
|
(11,143,019
|
)
|
(8,460,263
|
)
|
|||||||||||||
Gain on note extinguishment (Note 4)
|
—
|
—
|
970,628
|
—
|
970,628
|
|||||||||||||||
Share–based compensation
|
—
|
—
|
316,464
|
—
|
316,464
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(1,604,182
|
)
|
(1,604,182
|
)
|
|||||||||||||
Balance at June 30, 2020
|
3,543,751
|
354
|
3,969,494
|
(12,747,201
|
)
|
(8,777,353
|
)
|
|||||||||||||
Share–based compensation
|
—
|
—
|
615,358
|
—
|
615,358
|
|||||||||||||||
Net and comprehensive loss
|
—
|
—
|
—
|
(1,247,519
|
)
|
(1,247,519
|
)
|
|||||||||||||
Balance at September 30, 2020
|
3,543,751
|
$
|
354
|
$
|
4,584,852
|
$
|
(13,994,720
|
)
|
$
|
(9,409,514
|
)
|
Nine Months Ended
September 30,
|
||||||||
2020
|
2019
|
|||||||
Operating activities
|
||||||||
Net loss
|
$
|
(5,940,017
|
)
|
$
|
(3,825,949
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Share-based compensation
|
993,146
|
229,791
|
||||||
Depreciation
|
7,380
|
1,515
|
||||||
Non-cash acquired in-process research and development
|
2,126,253
|
—
|
||||||
Non-cash interest on convertible notes
|
432,561
|
160,187
|
||||||
Non-cash interest on convertible notes – related party
|
44,866
|
29,603
|
||||||
Non-cash discount amortization on convertible notes
|
873,518
|
684,015
|
||||||
Non-cash discount amortization on convertible notes – related party
|
70,727
|
64,756
|
||||||
Fair value change in premium conversion derivatives
|
(157,942
|
)
|
161,675
|
|||||
Gain on note extinguishment
|
(1,260,350
|
)
|
—
|
|||||
Change in assets and liabilities:
|
||||||||
Prepaid expenses and other assets
|
126,314
|
(11,956
|
)
|
|||||
Accounts payable
|
213,810
|
(87,257
|
)
|
|||||
Accrued and other liabilities
|
30,917
|
137,355
|
||||||
Net cash used in operating activities
|
(2,438,817
|
)
|
(2,456,265
|
)
|
||||
Investing activities
|
||||||||
Purchases of property and equipment
|
—
|
(24,937
|
)
|
|||||
Net cash used in investing activities
|
—
|
(24,937
|
)
|
|||||
Financing activities
|
||||||||
Proceeds from issuance of convertible notes
|
1,747,500
|
3,532,500
|
||||||
Proceeds from issuance of convertible notes – related party
|
—
|
223,040
|
||||||
Deferred offering costs
|
(123,201
|
)
|
—
|
|||||
Issuance costs attributed to convertible notes
|
(239
|
)
|
(1,698
|
)
|
||||
Net cash provided by financing activities
|
1,624,060
|
3,753,842
|
||||||
Net (decrease) increase in cash and cash equivalents
|
(814,757
|
)
|
1,272,640
|
|||||
Cash and cash equivalents at beginning of period
|
1,536,917
|
451,342
|
||||||
Cash and cash equivalents at end of period
|
$
|
722,160
|
$
|
1,723,982
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
—
|
$
|
—
|
||||
Cash paid for interest
|
$
|
—
|
$
|
—
|
||||
Supplemental non-cash financing transactions:
|
||||||||
Bifurcation and modification of premium conversion derivatives related to convertible notes
|
$
|
831,172
|
$
|
1,099,609
|
||||
Non-cash change in deferred offering costs
|
$
|
1,268,283
|
$
|
—
|
||||
Unpaid issuance costs attributed to convertible notes
|
$
|
10,256
|
$
|
—
|
||||
Proceeds receivable from convertible note issuance
|
$
|
450,000
|
$
|
—
|
• |
Level 1 inputs: Unadjusted quoted prices for identical assets or liabilities in active markets;
|
• |
Level 2 inputs: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, whether directly or indirectly, for substantially the full term of the
asset or liability; and
|
• |
Level 3 inputs: Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or
liability at the measurement date.
|
As of September 30, 2020
|
||||||||||||||||
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Liabilities:
|
||||||||||||||||
Premium conversion derivatives
|
$
|
300,378
|
$
|
—
|
$
|
—
|
$
|
300,378
|
||||||||
Total liabilities at fair value
|
$
|
300,378
|
$
|
—
|
$
|
—
|
$
|
300,378
|
As of December 31, 2019
|
||||||||||||||||
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Liabilities:
|
||||||||||||||||
Premium conversion derivatives
|
$
|
2,713,668
|
$
|
—
|
$
|
—
|
$
|
2,713,668
|
||||||||
Total liabilities at fair value
|
$
|
2,713,668
|
$
|
—
|
$
|
—
|
$
|
2,713,668
|
2020
|
2019
|
|||||||
Premium conversion derivatives
|
||||||||
Balance as of beginning of period
|
$
|
2,713,668
|
$
|
304,712
|
||||
Value assigned to the underlying derivatives in connection with convertible notes
|
831,172
|
1,099,609
|
||||||
Revaluation due to convertible note extinguishment
|
(3,086,520
|
)
|
—
|
|||||
Change in fair value of premium conversion derivatives
|
(157,942
|
)
|
161,675
|
|||||
Balance as of end of period
|
$
|
300,378
|
$
|
1,565,996
|
September 30,
2020
|
December 31,
2019
|
|||||||
Equipment
|
$
|
20,175
|
$
|
20,175
|
||||
Furniture
|
4,762
|
4,762
|
||||||
Total property and equipment
|
24,937
|
24,937
|
||||||
Less accumulated depreciation
|
(10,142
|
)
|
(2,762
|
)
|
||||
Property and equipment, net
|
$
|
14,795
|
$
|
22,175
|
September 30,
2020
|
December 31,
2019
|
|||||||
Deferred offering and issuance costs
|
$
|
1,170,020
|
$
|
—
|
||||
Payroll
|
401,342
|
350,082
|
||||||
Professional services
|
194,350
|
262,397
|
||||||
Other
|
81
|
9,192
|
||||||
Total
|
$
|
1,765,793
|
$
|
621,671
|
• |
IPO: The Convertible Notes would have automatically converted into the number of fully paid and non-assessable shares of the
Company’s common stock equal to One Hundred and Seventy-Five Percent (175%) times Note Value divided by the per share price such shares were issued to purchasers of the Company’s equity securities in the IPO rounded to the nearest whole
share.
|
• |
CIC: The Convertible Notes would have automatically converted prior to the effectiveness of such CIC into that number of
fully paid and non-assessable shares of the Company’s common stock equal to Two Hundred Percent (200%) of the Note Value divided by the per share price of the Company’s common stock at which the Company’s common stock was valued in such
CIC (after giving effect to such conversion). The Convertible Note holder would have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as the other stockholders of the Company
in such CIC.
|
• |
Qualified Financing: The Convertible Notes would have automatically converted into that number of fully paid and
non-assessable shares of the Company that were issued by the Company in the Qualified Financing, determined by dividing an amount equal to One Hundred and Seventy-Five Percent (175%) times the Note Value by the per share price such shares
of the Company were issued to purchasers of the Company’s equity securities in the Qualified Financing, rounded to the nearest whole share. The Convertible Note holder would have been entitled to the same contractual rights and would
have been bound by the same restrictions and obligations as the other purchasers of shares in the Qualified Financing. A Qualified Financing was defined as a sale and issuance of capital stock of the Company (or its successor) in a single
transaction or series of related transactions resulting in gross proceeds to the Company of not less than $5,000,000 (including new equity investment of at least $1,000,000 plus the sum of the outstanding principal amount of the
Convertible Notes being so converted under this provision).
|
• |
Reverse Merger (excluding close of Merger with Rexahn): The Convertible Notes would have automatically converted into that
number of fully paid and non-assessable shares of the Combined Company whose shares were publicly traded in the United States or other jurisdiction following the completion of the Reverse Merger (the Reverse Merger Parent), determined by
dividing an amount equal to One Hundred and Seventy-Five Percent (175%) times the Note Value divided by the per share price at which such shares were issued by the Reverse Merger Parent in such Reverse Merger, rounded to the nearest whole
share. The Convertible Note holder would have been entitled to the same contractual rights and would have been bound by the same restrictions and obligations as the other stockholders of the Company in the Reverse Merger.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
General and administrative
|
$
|
224,120
|
$
|
42,735
|
$
|
425,581
|
$
|
132,960
|
||||||||
Research and development
|
391,238
|
30,570
|
567,565
|
96,831
|
||||||||||||
Total share-based compensation
|
$
|
615,358
|
$
|
73,305
|
$
|
993,146
|
$
|
229,791
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Expected stock price volatility
|
87.6
|
%
|
87.2
|
%
|
94.8
|
%
|
86.0
|
%
|
||||||||
Expected life of options (years)
|
10.0
|
5.3
|
10.0
|
5.3
|
||||||||||||
Expected dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
||||||||
Risk free interest rate
|
0.7
|
%
|
1.6
|
%
|
0.7
|
%
|
1.9
|
%
|
2020
|
2019
|
|||||||
Stock options
|
1,175,000
|
510,219
|
• |
90% of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of BioSense Global LLC (BioSense) pursuant to that certain License and Assignment Agreement, dated
as of February 25, 2019, by and between BioSense and Rexahn, as amended by Amendment No. 1, dated August 24, 2019, and as further amended by Amendment No. 2, dated March 10, 2020, minus certain permitted deductions;
|
• |
90% of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of Zhejiang HaiChang Biotechnology Co., Ltd. (HaiChang) pursuant to that certain Exclusive License
Agreement, dated as of February 8, 2020, by and between HaiChang and Rexahn, minus certain permitted deductions; and
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75% of the sum of (i) all cash consideration paid by a third party to Rexahn or its affiliates during the applicable CVR Payment Period in connection with the grant, sale or transfer of rights to Rexahn’s
pre-Closing intellectual property (other than a grant, sale or transfer of rights involving a sale or disposition of the post-Merger combined company) that is entered into during the 10-year period after the Closing (Parent IP Deal), plus
(ii) with respect to any non-cash consideration received by Rexahn or its affiliates from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn and its affiliates for
such non-cash consideration at the time such non-cash consideration is monetized by Rexahn or its affiliates, minus (iii) certain permitted deductions.
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