UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to ________

Commission File Number: 001-34079
 
Ocuphire Pharma, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
  
11-3516358
(State or Other Jurisdiction of Incorporation or Organization)
  
(I.R.S. Employer Identification Number)

 
37000 Grand River Avenue, Suite 120
Farmington Hills, MI
  
48335
(Address of Principal Executive Offices)
  
(Zip Code)

Registrant’s Telephone Number, Including Area Code: (248) 957-9024
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
  
Trading Symbol(s)
  
Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share
OCUP
  
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer
 ☐
Non-accelerated filer
 ☒
Accelerated filer
 ☐
Smaller reporting company
 ☒
   
Emerging growth company
 ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock as of November 7, 2023 was 22,637,600.

OCUPHIRE PHARMA, INC.
FORM 10-Q
INDEX

 
 
Page
 
 3
Item 1.
 3
 
 3
 
 4
 
 5
 
 6
 
 7
Item 2.
 27
Item 3.
 43
Item 4.
 43
 
 
 
 44
 
 
Item 1.
 44
Item 1A.
 44
Item 2.
 44
Item 3.
 44
Item 4.
 44
Item 5.
 44
Item 6.
 45
 
 
  
46

2
PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

Ocuphire Pharma, Inc.
Condensed Balance Sheets
(in thousands, except share amounts and par value)
 
   
As of
  
   
September 30,
2023
(unaudited)
    
December 31,
2022
  
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
42,350
    
$
42,634
  
Accounts receivable (Note 9)     10,132       1,298  
Contract assets and unbilled receivables (Note 9)
     1,211       3,552  
Prepaids and other current assets
     484       1,453  
Short-term investments
    
11
      
49
  
Total current assets
    
54,188
      
48,986
  
Property and equipment, net
    
3
      
6
  
Total assets
  
$
54,191
    
$
48,992
  
                 
Liabilities and stockholders’ equity
                
Current liabilities:
                
Accounts payable
  
$
1,890
    
$
1,069
  
Accrued expenses
    
1,926
      
1,684
  
Derivative liability     93
       —
  
Total current liabilities
    
3,909
      
2,753
  
Total liabilities
    
3,909
      
2,753
  
                 
Commitments and contingencies (Note 3 and Note 8)
      
       
 
                 
Stockholders’ equity
                
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022.
    
—
      
—
  
Common stock, par value $0.0001; 75,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 22,610,131 and 20,861,315 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively.
    
2
      
2
  
Additional paid-in capital
    
126,951
      
117,717
  
Accumulated deficit
    
(76,671
)
    
(71,480
)
Total stockholders’ equity
    
50,282
      
46,239
  
Total liabilities and stockholders’ equity
  
$
54,191
    
$
48,992
  
 
See accompanying notes.

3
Ocuphire Pharma, Inc.
Condensed Statements of Comprehensive Income (Loss)
(in thousands, except share and per share amounts)
(Unaudited)


  
For the Three Months Ended
September 30,
    
For the Nine Months Ended
September 30,
  
   
2023
    
2022
     2023     2022  
License and collaborations revenue
   $ 11,935     $ —     $ 17,358     $ —  
                                 
Operating expenses:
                                
General and administrative
    
2,055
      
1,703
       8,680       5,215  
Research and development
    
3,494
      
2,835
       13,812       10,769  
Total operating expenses
    
5,549
      
4,538
       22,492       15,984  
Income (loss) from operations    
6,386
      
(4,538
)
     (5,134 )     (15,984 )
Financing costs (Note 6)
     (1,328 )     —       (1,328 )     —  
Interest expense (Note 4)
    
—
      
—
       —       (9 )
Fair value change in derivative liability
     61       —       61       —  
Other income (expense), net
    
456
      
7
       1,224       (60 )
Income (loss) before income taxes
    
5,575
      
(4,531
)
     (5,177 )     (16,053 )
Provision for income taxes
    
(14
)
    
—
       (14 )     —  
Net income (loss)
    
5,561
      
(4,531
)
     (5,191 )     (16,053 )
Other comprehensive income (loss), net of tax    
—
      
—
       —       —  
Comprehensive income (loss)  
$
5,561
    
$
(4,531
)
   $ (5,191 )   $ (16,053 )
Net income (loss) per share (Note 10):                                
Basic
  
$
0.26
    
$
(0.22
)
   $ (0.25 )   $ (0.82 )
Diluted   $ 0.25     $ (0.22 )   $ (0.25 )   $ (0.82 )
Number of shares used in per share calculations:
                                
Basic
    
21,446,648
      
20,498,229
       21,117,211       19,635,651  
Diluted     22,405,995       20,498,229       21,117,211       19,635,651  

See accompanying notes.
 

4
Ocuphire Pharma, Inc.
Condensed Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)

   
Common Stock
    
Additional
Paid–In
    
Accumulated
    
Total
  
   
Shares
    
Amount
    
Capital
    
Deficit
    
Equity
 
                               
Balance at December 31, 2021
    
18,845,828
    
$
2
    
$
111,588
    
$
(89,368
)
  
$
22,222
  
Issuance of common stock in connection with the at-the-market program
     336,544
       —
       1,208
       —
       1,208
  
Issuance costs
     —       —       (35 )     —       (35 )
Stock–based compensation
    
6,970
      
—
      
445
      
—
      
445
  
Exercise of stock options     24,309       —       27       —       27  
Net and comprehensive loss
    
—
      
—
      
—
      
(6,595
)
    
(6,595
)
Balance at March 31, 2022
    
19,213,651
      
2
      
113,233
      
(95,963
)
    
17,272
  
Issuance of common stock in connection with the at-the-market program
     877,927       —       1,858       —       1,858  
Issuance costs     —       —       (53 )     —       (53 )
Stock–based compensation
    
8,024
      
—
      
445
      
—
      
445
  
Net and comprehensive loss
    
—
      
—
      
—
      
(4,927
)
    
(4,927
)
Balance at June 30, 2022
    
20,099,602
    

2
    

115,483
    

(100,890
)
  

14,595
  
Issuance of common stock in connection with the at-the-market program
     634,509       —       1,362       —       1,362  
Issuance costs     —       —       (42 )     —       (42 )
Stock–based compensation     66,372       —       493       —       493  
Exercise of Series B warrants
     1,023       —       —       —       —  
Net and comprehensive loss     —       —       —       (4,531 )     (4,531 )
Balance at September  30, 2022     20,801,506     $ 2     $
117,296     $
(105,421 )   $
11,877  
                                         
Balance at December 31, 2022
    
20,861,315
    
$
2
    
$
117,717
    
$
(71,480
)
  
$
46,239
  
Issuance costs     —       —       (2 )     —       (2 )
Stock-based compensation
    
68,646
      
—
      
804
      
—
      
804
  
Exercise of warrants
    
17,869
      
—
      
—
      
—
      
—
  
Net and comprehensive loss
    
—
      
—
      
—
      
(5,791
)
    
(5,791
)
Balance at March 31, 2023
    
20,947,830
      
2
      
118,519
      
(77,271
)
    
41,250
  
Issuance costs
     —
      
—
      
(7
)
     —      
(7
)
Stock-based compensation
    
37,954
      
—
      
1,422
      
—
      
1,422
  
Net and comprehensive loss
    
—
      
—
      
—
      
(4,961
)
    
(4,961
)
Balance at June 30, 2023
    
20,985,784
    

2
    

119,934
    

(82,232
)
  

37,704
  
Issuance of common stock in connection with the at-the-market program and purchase agreement
     1,624,347       —       6,504       —       6,504  
Issuance costs
     —       —       (60 )     —       (60 )
Stock–based compensation     —       —       573       —       573  
Net and comprehensive income
     —       —       —       5,561     5,561
Balance at September 30, 2023     22,610,131     $
2     $
126,951     $
(76,671 )   $
50,282  

See accompanying notes.

5
Index
 Ocuphire Pharma, Inc.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)

   
For the Nine Months
Ended
September 30,
  
   
2023
    
2022
  
Operating activities
            
Net loss
  
$
(5,191
)
  
$
(16,053
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Stock-based compensation
    
2,799
      
1,383
  
Depreciation
    
3
      
3
  
Unrealized loss from short-term investments
     38       118  
Financing costs
     1,328       —  
Fair value change in derivative liability
     (61 )     —  
Change in assets and liabilities:
                
Accounts receivable
     (8,834 )     —  
Contract assets and unbilled receivables
     2,341       —  
Prepaid and other assets
    
969
      
709
  
Accounts payable
    
709
      
(125
)
Accrued and other liabilities
    
239
      
(512
)
Net cash used in operating activities
    
(5,660
)
    
(14,477
)
Investing activities
                
Net cash used in investing activities
    
—
      
—
  
Financing activities
                
Proceeds from issuance of common stock in connection with the at-the-market program and purchase agreement
     5,482       4,428  
Issuance costs     (106 )     (119 )
Payments made in connection with short-term loan     —       (538 )
Exercise of Series B warrants
     —       —  
Exercise of stock options
    
—
      
27
  
Net cash provided by financing activities
    
5,376
      
3,798
  
Net decrease in cash and cash equivalents
    
(284
)
    
(10,679
)
Cash and cash equivalents at beginning of period
    
42,634
      
24,534
  
Cash and cash equivalents at end of period
  
$
42,350
    
$
13,855
  
Supplemental disclosure of cash flow information:
                
Cash paid for income taxes
  
$
318
    
$
—
  
Cash paid for interest
  
$
—
    
$
9
  
Supplemental non-cash financing transactions:
                
Unpaid issuance costs  
$
115
    
$
11
  
Non-cash issuance of common stock in connection with equity purchase agreement
   $ 1,022     $ —  
Value of derivative established in connection with the equity purchase agreement
   $ 154     $ —  
 
See accompanying notes.

6
Notes to Condensed Financial Statements
1.
Company Description and Summary of Significant Accounting Policies

Nature of Business

Ocuphire Pharma, Inc. (the “Company” or “Ocuphire”) is a clinical-stage ophthalmic biopharmaceutical company focused on developing novel therapies for the treatment of unmet needs of patients with retinal and refractive eye disorders.

The Company’s lead retinal product candidate, APX3330, is a first-in-class small-molecule inhibitor of Ref-1 (reduction oxidation effector factor-1 protein). Ref-1 is a regulator of transcription factors such as HIF-1α and NF-kB. Inhibiting REF-1 reduces levels of vascular endothelial growth factor (“VEGF”) and inflammatory cytokines which are known to play key roles in ocular angiogenesis and inflammation. Through inhibition of Ref-1, APX3330 normalizes the levels of VEGF to physiologic levels, unlike biologics that deplete VEGF below the levels required for normal function. APX3330 is an oral tablet administered twice per day for the treatment of diabetic retinopathy (“DR”). A Phase 2 study in subjects with DR or diabetic macular edema has recently been completed. A successful End-of-Phase 2 (“EOP2”) meeting with the U.S. Food and Drug Administration (the “FDA”) was held in October 2023 at which the Company obtained agreement on the registration endpoint supporting the advancement of APX3330 into Phase 3 clinical trials.

DR affects approximately 10 million people with diabetes and is projected to impact over 14 million Americans by 2050. DR is classified as Non-Proliferative Diabetic Retinopathy (“NPDR”), the early stage of the disease in which symptoms may be mild or nonexistent or Proliferative Diabetic Retinopathy (“PDR”) which is the more advanced stage of diabetic eye disease that can be highly symptomatic with loss of vision. Approximately 80% of DR patients have NPDR that will progress to PDR if left untreated. Despite the risk for visual loss associated with this disease, over 90% of NPDR patients currently receive no course of treatment apart from observation by their eye care specialist until they develop sight-threatening complications. This is due to the treatment burden of the frequent eye injections required with currently approved therapies for this disease. APX3330, as an oral tablet, has the potential to be an early, non-invasive treatment for the 8 million NPDR patients in the US.

The Company has also in-licensed APX2009 and APX2014, which are second-generation analogs of APX3330. The unique mechanism of action of these Ref-1 inhibitors of reducing angiogenesis and inflammation could potentially be beneficial in treating other retinal diseases such as age-related macular degeneration, and geographic atrophy.

In November 2022, the Company entered into a license and collaboration agreement (the “Nyxol License Agreement”) with FamyGen Life Sciences, Inc. (“Famy”) (acquired by Viatris, Inc. (“Viatris”) in January 2023) pursuant to which it granted Viatris an exclusive license to develop, manufacture, import, export and commercialize its refractive product candidate Phentolamine Ophthalmic Solution 0.75%, formerly known as Nyxol (“POS”). POS is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. POS was approved by the FDA for the treatment for pharmacologically-induced mydriasis under the brand name RYZUMVI™ in September 2023. POS is currently in Phase 3 clinical trials for presbyopia (age-related blurry near vision). The VEGA-2 Phase 3 study in presbyopia achieved its primary endpoint. POS is also in Phase 3 for night vision disturbances or dim light vision (“DLD”) (halos, glares and starbursts) and a Special Protocol Assessment (“SPA”) has been submitted in DLD with the FDA.

The Company’s headquarters is located in Farmington Hills, Michigan.

Reverse Merger with Rexahn

On June 17, 2020, Ocuphire, Rexahn Pharmaceuticals, Inc. (“Rexahn”) and Razor Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Rexahn (“Merger Sub”), entered into an Agreement and Plan of Merger and Reorganization, as amended on June 29, 2020 (as amended, the “Merger Agreement”), pursuant to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub would merge with and into Ocuphire, with Ocuphire continuing as a wholly-owned subsidiary of Rexahn and the surviving corporation of the merger (the “Merger”). The Merger closed on November 5, 2020. Upon completion of the Merger, Rexahn changed its name to Ocuphire Pharma, Inc. and changed its ticker symbol on the Nasdaq Capital Market (“Nasdaq”) to “OCUP”.

7
Notes to Condensed Financial Statements
Global Economic Conditions

Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the conflict between Russia and Ukraine and potentially between Israel and Hamas, disruptions in the banking system and financial markets, lingering COVID-19 pandemic, increased inflation and rising interest rates. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected.

 

Additionally, the Company’s operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, conflicts in Ukraine and the Middle East, disruptions in the banking system and financial markets, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.


Basis of Presentation

The accompanying condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
 
The December 31, 2022 condensed balance sheet was derived from audited financial statements and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2022.
 
In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.
 
On December 31, 2021, the Company merged its wholly-owned subsidiary, OcuSub Inc, with and into the Company, with the Company remaining as the surviving entity. The merger of the Company’s wholly-owned subsidiary did not have a financial impact in the periods presented. Upon closing of this merger, the Company did not have any remaining entities that required consolidation for financial statement reporting purposes. All significant intercompany accounts and transactions were eliminated in the preparation of the condensed financial statements prior to the December 31, 2021 merger with OcuSub Inc.
 
Liquidity


The accompanying condensed financial statements have been prepared on the basis that the Company will continue as a going concern. From its inception, the Company has devoted substantially all of its efforts to drug development and conducting clinical trials.



As of September 30, 2023, the Company had $42.4 million in cash and cash equivalents.  The Company believes its current available cash and cash equivalents will be sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following November 13, 2023, which is the date that these condensed financial statements are available to be issued.

8
Notes to Condensed Financial Statements

In the future, the Company may need to raise additional funds until it is able to generate sufficient revenues to fund its development activities. The Company’s future operating activities, coupled with its plans to raise capital or issue debt financing, may provide additional liquidity in the future, however these actions are not solely within the control of the Company and the Company is unable to predict the outcome of these actions to generate the liquidity ultimately required.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.

 
Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer  or such person functioning in such role. The Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is the business of development of products related to vision performance and health. Accordingly, the Company has a single reporting segment.

Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of deposit to be cash equivalents.
 

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. Management follows approved policies established by its Board of Directors to reduce credit risk associated with the Company’s cash deposit and investment accounts. Pursuant to these policies, the Company limits its exposure through the kind, quality and concentration of its investments. The Company’s cash and cash equivalents are held or managed by two financial institutions in the United States. As of September 30, 2023, the Company had cash equivalents of $42.0 million that were not eligible for coverage by Federal Deposit Insurance Corporation (“FDIC”). These balances are invested in funds whose assets consist almost entirely of securities issued by the U.S. Treasury or guaranteed by the U.S. government.



Short-term Investments



The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and records them on a settlement date basis. The Company’s short-term investments are comprised of equity securities, which in accordance with the fair value hierarchy described below are recorded at fair value using Level l inputs on the balance sheets.  Subsequent changes in fair values are recorded in other income (expense), net on the  condensed statements of comprehensive income (loss). The Company classifies investments available to fund current operations as current assets on its balance sheets. The Company did not recognize any impairments on its investments to date through September 30, 2023.

Revenue Recognition
 

The Company follows the provisions of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The guidance provides a five-step model to determine how revenue is recognized. The Company has entered into license agreements which have revenue recognition implications (See Note 9 – License and Collaboration Agreements).

 

In determining the appropriate amount of revenue to be recognized, the Company performs the following steps: (i) identification of the contracts with a customer; (ii) determination of the performance obligations in the contract; (iii) measurement of the transaction price, including potential constraints on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated stand-alone selling prices; and (v) recognition of revenue when (or as) the Company satisfies a performance obligation.
 
9
Notes to Condensed Financial Statements

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. Performance obligations may include license rights, development and other services. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.



As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation based on the relative standalone selling prices of the promised goods or service underlying each performance obligation.



Licenses of intellectual property and research and development services: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that are bundled with other obligations, such as research and development services, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. For research and development services that are distinct from a license transfer obligation, the Company determines whether the services are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from such services. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. 



Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission) is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until such contingency occurs (such as receipt of those approvals).



Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).



Contract Assets and Unbilled Receivables



The Company recognizes contract assets and unbilled receivables when goods or services are transferred to the customer before the customer pays or before reimbursement for payment is billed or due, excluding any amounts presented as an account receivable. The Company recorded contract assets and unbilled receivables in connection with a license and collaboration agreement in the amount of $1.2 million as of September 30, 2023. See Note 9- License and Collaboration Agreements.



Accounts Receivable and Allowances for Doubtful Accounts



 The Company records a provision for doubtful accounts, when appropriate, based on historical experience and a detailed assessment of the collectability of its accounts receivable. In estimating the allowance for doubtful accounts, the Company considers, among other factors, the aging of the accounts receivable, its historical write-offs, the credit worthiness of each customer, and economic conditions that could affect the collectability of the balances in the future. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the Company’s estimated allowance. The Company has not incurred any bad debt expense to date and no allowance for doubtful accounts has been recorded during the periods presented.

10
Notes to Condensed Financial Statements

General and Administrative Expenses



General and administrative expenses consist primarily of personnel-related costs, including salaries and stock-based compensation costs, for personnel in functions not directly associated with research and development activities. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and tax services, settlement costs with third parties and other services provided by business consultants.



Research and Development



Research and development expenses (“R&D”) consist of costs incurred in performing research and development activities, including compensation for research and development employees and consultants, costs associated with nonclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, fees paid to external service providers that conduct certain research and development, and an allocation of R&D related overhead expenses. R&D costs include costs that are reimbursed under the Nyxol License Agreement.



Financing costs



Financing costs consist of issuance costs attributed to an equity line financing facility with Lincoln Park (See Note 6 – Stockholders’ Equity).



Interest Expense



Interest expense is attributed to interest on principal related to a short-term loan during the period it was outstanding. The short-term loan was fully repaid in May 2022.


Other Income (Expense), net



Other income (expense), net reflected in this line item includes payments made by the Company in connection with the Contingent Value Rights Agreement discussed further below with former Rexahn shareholders. In addition, other income (expense), net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and reimbursements in connection with grants and other sources when they occur.
 

Stock-Based Compensation



The Company accounts for stock-based compensation in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) ASC 718, Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value. The Company records forfeitures when they occur. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718.



Derivative Liability



The Company evaluates all features contained in financing agreements to determine if there are any embedded derivatives that require separation from the underlying agreement under ASC 815 – Derivatives and Hedging. An embedded derivative that requires separation is accounted for as a separate liability from the host agreement.  The separated embedded derivative is accounted for separately on a fair market value basis. The Company records the fair value changes of a separated embedded derivative at each reporting period in the condensed statements of comprehensive income (loss) under the fair value change in derivative liability line item. The Company determined that certain features under an equity line financing (See Note 6 — Stockholders’ Equity) collectively qualified as an embedded derivative. The derivative was accounted for separately from the underlying equity line financing agreement.

11
Notes to Condensed Financial Statements
Fair Value Measurements
 
The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements are defined on a three-level hierarchy:
 

●
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, 2023 and December 31, 2022, the fair values of cash and cash equivalents, accounts receivable, contract assets, unbilled receivables, prepaid and other assets, accounts payable, accrued expenses approximated their carrying values because of the short-term nature of these assets or liabilities. The fair value of the short-term investments, while outstanding, were based on observable Level 1 inputs in the form of quoted market prices from a major stock exchange. The fair value of the derivative liability associated with the equity line financing facility (See Note 6 – Stockholders’ Equity) was based on cash flow models discounted at current implied market rates representing expected returns by market participants for similar instruments and are based on Level 3 inputs. The fair value of the warrant liabilities, while outstanding, were based on a Black-Scholes option model using Level 3 inputs. There were no transfers between fair value hierarchy levels during the three and nine months ended September 30, 2023 and 2022.

The fair value of financial instruments measured on a recurring basis is as follows (in thousands):
 
   
As of September 30, 2023
  
Description
  
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets:
                        
Short-term investments
 		 
$
11
    
$
11
    
$
—
    
$
—
  
Total assets at fair value
  
$
11
    
$
11
    
$
—
    
$
—
  
Liabilities:                                
Derivative liability   $
 93     $
 —     $
 —     $
93  
Total liabilities at fair value   $
 93     $
 —     $
 —     $
 93  

   
As of December 31, 2022
  
Description
  
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets:
                        
Short-term investments
 
$
49
    
$
49
    
$
—
    
$
—
  
Total assets at fair value
  
$
49
    
$
49
    
$
—
    
$
—
  

The following table provides a roll-forward of short-term investments and derivative liabilities measured at fair value on a recurring basis using observable Level 1 and Level 3 inputs, as applicable, for the nine months ended September 30, 2023 and 2022 (in thousands):

   
2023
   
2022
 
Short-term investments
            
Balance as of beginning of period
  
$
49
    
$
219
  
Unrealized loss
   
(38
)
    
(118
)
Balance as of end of period
  
$
11
    
$
101
  

12
Notes to Condensed Financial Statements
   
2023
    
2022
  
Derivative liability
            
Balance as of beginning of period
  
$
—
    
$
—
  
Purchase agreement execution
    
154
      
—
  
Unrealized gain
     (61 )    
—
  
Balance as of end of period
   $ 93    
$
—
  


Rexahn Warrants



The fair value of the warrant liabilities associated with the Rexahn warrants was de minimis during the periods presented.  The last of the Rexahn warrants classified as liabilities expired in April 2023 unexercised.  See Note 2 – Merger for additional background.



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


Recent Accounting Pronouncements


In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a current expected credit loss (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The Company adopted this ASU on January 1, 2023 and it did not have a significant impact on its condensed financial statements.



In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ​ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in this ASU are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company adopted this ASU on January 1, 2023 and the adoption did not have a material impact on its condensed financial statements.


In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. The amendments in this ASU are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022 and it did not have a material impact to the condensed financial statements.
 
2.
Merger
  
On November 5, 2020, the Company completed the Merger transaction with Rexahn. In connection with the Merger, the Company, Shareholder Representatives Services LLC, as representative of the Rexahn stockholders prior to the Merger, and Olde Monmouth Stock Transfer Co., Inc., as the rights agent, entered into a Contingent Value Rights Agreement (the “CVR Agreement”).
 
13
Notes to Condensed Financial Statements
Pursuant to the terms of the Merger and the CVR Agreement, Rexahn stockholders of record as of immediately prior to the effective time of the Merger received one contingent value right (“CVR”) for each share of Rexahn common stock held.
 
Each CVR entitles such holders to receive, for each calendar quarter (each, a “CVR Payment Period”) during the 15-year period after the closing (the “CVR Term”), an amount equal to the following:
 

●
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
 

●
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 or 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.
 
The CVRs are not transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading on any exchange. The CVR Agreement will continue in effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder. As of September 30, 2023, no payments subject to the CVR had been received beyond those previously reported in the second and third quarters of calendar year 2021.  In addition, no milestones had been accrued as there were no potential milestones yet considered probable beyond those previously reported.

Former Rexahn Warrants
 
Following the closing of the Merger, 231,433 outstanding, unexercised Rexahn warrants to purchase common stock remained outstanding, the majority of which were subsequently repurchased according to the terms of the original warrant agreements.  As of September 30, 2023, 58,597 of the Rexahn warrants remained outstanding with an exercise price of $38.40 per share with an average remaining contractual life of 0.3 years and were accounted for and classified as equity.

3.
Commitments and Contingencies
 
Apexian Sublicense Agreement
 
On January 21, 2020, the Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc., pursuant to which it obtained exclusive worldwide patent and other intellectual property rights. In exchange for the patent and other intellectual rights, the Company agreed to certain milestone payments and royalty payments on future sales (See Note 8 — Apexian Sublicense Agreement). As of September 30, 2023, there was sufficient uncertainty with regard to any future cash milestone payments under the sublicense agreement that no liabilities were recorded related to the sublicense agreement.

14
Notes to Condensed Financial Statements
Facility Leases

The Company has a short-term, non-cancellable facility lease (the “HQ Lease”) for its headquarters. The HQ Lease qualified for the short-term lease exception under ASC 842, Leases. The monthly base rent, as amended, for the HQ Lease is approximately $3,000. The rent expense associated with the HQ Lease amounted to  $9,000 during each of the three months ended September 30, 2023 and 2022. The rent expense associated with the HQ Lease amounted to $27,000 and $30,000 during the nine months ended September 30, 2023 and 2022, respectively. The total remaining expected rental payments under the HQ Lease amount to $9,000 through its current expiration date of December 31, 2023.

Other

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations, patent infringement and other claims. In addition, the Company from time to time may be potentially committed to reimburse third parties for costs incurred associated with business development related transactions upon the achievement of certain milestones. The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated. To date, no loss contingency for such matters and potential commitments have been recorded. Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material adverse effect on its results of operations or financial position.
 
4.
Supplemental Balance Sheet Information
 
Prepaid and Other Assets
 
Prepaid and other assets consist of the following as of (in thousands):

   
September 30,
2023
    
December 31,
2022
  
Prepaids
  
$
433
    
$
1,373
  
Other
    
51
      
80
  
Total prepaids and other assets
  
$
484
    
$
1,453
  

Property and Equipment, net
 
Property and equipment held for use by category are presented in the following table as of (in thousands):

   
September 30,
2023
    
December 31,
2022
  
Equipment
  
$
20
    
$
20
  
Furniture
    
5
      
5
  
Total property and equipment
  

25
      
25
  
Less accumulated depreciation
    
(22
)
    
(19
)
Property and equipment, net
  
$
3
    
$
6
  

Depreciation expense was $1,000 during each of the three months ended September 30, 2023 and 2022. Depreciation expense was $3,000 during each of the nine months ended September 30, 2023 and 2022.

Accrued Expenses
 

Accrued expenses consist of the following as of (in thousands):
 
   
September 30,
    
December 31,
  
   
2023
    
2022
  
Income taxes
   $
11
    
$
315
  
Payroll
    
470
      
782
  
Professional services
    
262
      
208
  
R&D services and supplies
    634       212  
Severance
    500       —  
Other
    
49
      
167
  
Total
   $
1,926
    
$
1,684
  

15
Notes to Condensed Financial Statements
On April 19, 2023, the Company terminated the employment of Mina Sooch, the President and Chief Executive Officer of the Company.


Short-Term Loan


The Company entered into an unsecured short-term loan (the “Loan”) agreement in the amount of $0.6 million in November 2021 related to financing an insurance policy. The Loan was payable in six monthly installments of $108,000 beginning in December 2021. The Loan had an annual interest rate of 5.5% per annum.  Interest expense in the amount of $9,000 was recognized in connection with the Loan during the nine months ended September 30, 2022. No interest expense under the Loan was recognized during the three and nine months ended September 30, 2023.

5.
Related Party Transactions

On April 8, 2022, Ocuphire entered into a consulting agreement with Jay Pepose, a director of the Company.  The consulting agreement provided for $10,000 a month in cash payments, effective as of April 1, 2022.  Additionally, on April 8, 2022, in connection with the consulting arrangement, Dr. Pepose received a stock option grant for 50,000 options, of which 25% vested on March 31, 2023, with the remainder vesting in equal monthly installments over 36 months. The consulting agreement was amended on September 19, 2022 to provide for vesting acceleration for stock-based awards in the event of a change in control. The consulting agreement was also amended effective December 1, 2022 to increase the cash payment to $25,000 per month.

The Company incurred related consulting expenses of $75,000 and $225,000 during the three and nine months ended September 30, 2023, respectively. The Company incurred related consulting expenses of $30,000 and $60,000 during the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, $25,000 of the related consulting expenses were unpaid.

On April 19, 2023, Ocuphire appointed Richard Rodgers, a director of the Company, as interim President and Chief Executive Officer.  In connection with his appointment, Ocuphire and Mr. Rodgers entered into a letter agreement concerning Mr. Rodgers’s services (the “Letter Agreement”). The Letter Agreement provides that Mr. Rodgers will receive (i) a $40,000 monthly salary, and (ii) is eligible for a potential prorated bonus at the discretion of Ocuphire’s Board of Directors, at the end of his term as interim President and Chief Executive Officer. Mr. Rodgers also received 50,000 restricted stock units under the Company’s 2020 Equity Incentive Plan which will vest 12 months following the grant date. The Company incurred related consulting expenses of $120,000 and $215,000 during the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, $80,000 of the related consulting expenses were unpaid.

6.
Stockholders’ Equity
 
Lincoln Park Purchase Agreement

On August 10, 2023, the Company entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) for an equity line financing (the “Purchase Agreement”).  The Purchase Agreement provides that, subject to the terms and conditions set forth therein, the Company has the sole right, but not the obligation, to direct Lincoln Park to purchase up to $50 million of shares of the Company’s common stock from time to time over the 30-month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”), pursuant to which the Company agreed to register the resale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the Purchase Agreement pursuant to a registration statement. Upon the execution of the Purchase Agreement, the Company issued 246,792 shares of the Company’s common stock to Lincoln Park with a fair value of $1.0 million as consideration for its commitment to purchase shares of the Company’s common stock under the Purchase Agreement which was recorded as a component of financing costs in the accompanying statements of comprehensive income (loss) during the three and nine month periods ended September 30, 2023. Lincoln Park has agreed not to cause or engage in any manner whatsoever in any direct or indirect short selling or hedging of the Company’s common stock.

16
Notes to Condensed Financial Statements
In addition to the commitment shares referenced above, a total of 800,000 shares of the Company’s common stock were sold under the Purchase Agreement for net proceeds through September 30, 2023 in the amount of $3.1 million. Lastly, the Company incurred issuance costs of $0.2 million, consisting of investor expense reimbursement and legal costs, during the three- and nine-months periods ended September 30, 2023 which were recorded as a component of  financing costs in the accompanying statements of comprehensive income (loss) during the three and nine month periods ended September 30, 2023. No shares of the Company’s common stock were sold under the Purchase Agreement prior to the third quarter of 2023.

Under the Purchase Agreement on any business day selected by the Company, the Company may direct Lincoln Park to purchase up to 50,000 shares of its common stock on such business day (or the purchase date) (a “Regular Purchase”), provided that the closing sale price of the Company’s common stock on Nasdaq on the applicable purchase date is not below $0.25 and subject to other adjustments. A Regular Purchase may be increased to up to (i) 60,000  shares if the closing sale price of the Company’s common stock on Nasdaq is not below $5.00 on the applicable purchase date and (ii) 70,000 shares if the closing sale price of the Company’s common stock on Nasdaq is not below $7.50 on the applicable purchase date. The Company may direct Lincoln Park to purchase shares in Regular Purchases as often as every business day. The purchase price per share for each such Regular Purchase will be equal to the lesser of:


•
the lowest sale price for the Company’s common stock on Nasdaq on the purchase date of such shares; and

•
the average of the three (3) lowest closing sale prices for the Company’s common stock on Nasdaq during the ten (10) consecutive business days prior to the purchase date of such shares.

In addition, the Company may also direct Lincoln Park, on any business day on which the Company has submitted a Regular Purchase notice for the maximum amount allowed for such Regular Purchase, to purchase an additional amount of the Company’s common stock (an “Accelerated Purchase”) of up to the lesser of:


•
three (3) times the number of shares purchased pursuant to such Regular Purchase; and

•
30% of the aggregate shares of the Company’s common stock traded on Nasdaq during all or, if certain trading volume or market price thresholds specified in the Purchase Agreement are crossed on the applicable Accelerated Purchase date, the portion of the normal trading hours on the applicable Accelerated Purchase date prior to such time that any one of such thresholds is crossed (the “Accelerated Purchase Measurement Period”).

The purchase price per share for each such Accelerated Purchase will be equal to 96.5% of the lower of:


•
the closing sale price of the Company’s common stock on Nasdaq on the applicable Accelerated Purchase date; and

•
the volume-weighted average price of the Company’s common stock on Nasdaq during the applicable Accelerated Purchase Measurement Period on the applicable Accelerated Purchase date.

The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been delivered to Lincoln Park in accordance with the Purchase Agreement, to purchase an additional amount of the Company’s common stock (an “Additional Accelerated Purchase”) as described in the Purchase Agreement.

The pricing and settlement provisions in the Purchase Agreement result in the recognition of a derivative liability under the Purchase Agreement were accounted for as a derivative liability on a fair value basis under the provisions of ASC 815 - Derivatives and Hedging. A Monte Carlo simulation model was used to estimate future stock pricing and purchase activity to determine the fair value of the derivative liability as of the August 10, 2023 commencement date and again as of  September 30, 2023.  As of August 10, 2023 and September 30, 2023, the inputs used to determine fair value of the derivative liability included the Company’s Nasdaq closing stock price of $4.14 and $3.35 per share, respectively, a stock volatility rate of 82.5% and 87.5%., respectively, an expected term of 2.5 years and 2.4 years, respectively, and a risk-free interest rate of 4.6% and 4.9%, respectively.  Lastly, the fair value of the derivative liability took into account future purchase decisions based on economic considerations and relevant stock issuance rules/limitations.  The fair value change in the derivative liability was recorded in the fair value change in derivative liability line item in the accompanying statements of comprehensive income (loss) during the three- and nine-month periods ended September 30, 2023.

17
Notes to Condensed Financial Statements
At-The-Market Program

On February 4, 2021, Ocuphire filed a Form S-3 shelf registration under the Securities Act of 1933 which was declared effective by the SEC on February 12, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion, securities having an aggregate offering price of up to $125 million. In connection with the 2021 Shelf, on March 11, 2021, Ocuphire entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which the Company may offer and sell, from time to time at its sole discretion, to or through JonesTrading, acting as agent and/or principal, shares of its common stock having an aggregate offering price of up to $40 million (the “2021 ATM”). During the three and nine months ended September 30, 2023, 577,555 shares of common stock were sold under the 2021 ATM for aggregate gross proceeds in the amount of $2.4 million before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of $69,000.

During the three and nine months ended September 30, 2022, 634,509 and 1,848,980 shares of common stock were sold under the 2021 ATM, respectively, for aggregate gross proceeds in the amount of $1.4 million and $4.4 million, respectively, before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of $42,000 and $130,000, respectively.

Registered Direct Offering

On June 4, 2021, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners (“AGP”). Pursuant to the terms of the placement agency agreement, AGP on June 8, 2021 sold an aggregate of 3,076,923 shares of the Company’s common stock and warrants to purchase 1,538,461 shares of the Company’s common stock (the “RDO Warrants”). The RDO Warrants are equity classified, have an exercise price of $6.09 per share, are exercisable from the initial issuance date of June 8, 2021, and will expire five years following the initial issuance date. As of September 30, 2023, 1,538,461 RDO Warrants were outstanding.

Pre-Merger Financing

On June 17, 2020, Ocuphire, Rexahn and certain investors entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the “Securities Purchase Agreement”). Pursuant to the Securities Purchase Agreement, the investors invested a total of $21.15 million in cash, including $300,000 invested by five directors of Ocuphire Pharma, Inc., prior to the Merger and one director of Rexahn upon closing of the Merger (the “Pre-Merger Financing”). The Pre-Merger Financing also included the issuance of Series A Warrants and Series B Warrants discussed further below.

Series A Warrants

The Series A Warrants were issued on November 19, 2020 at an initial exercise price of $4.4795 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance. The Series A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and were outstanding as of September 30, 2023. The Series A Warrants were accounted for and classified as equity on the accompanying condensed balance sheets.

Series B Warrants

The Series B Warrants had an exercise price of $0.0001, were exercisable upon issuance and would have expired on the day following the later to occur of (i) the Reservation Date (as defined therein) or (ii) the date on which the investor’s Series B Warrants would have been exercised in full (without giving effect to any limitation on exercise contained therein). None of the Series B Warrants were outstanding as of September 30, 2023. During the nine months ended September 30, 2023, 17,869 warrants were exercised for  shares of common stock. The Series B Warrants were accounted for and classified as equity on the accompanying condensed balance sheets while outstanding.

18
Notes to Condensed Financial Statements
7.
Stock-based Compensation

Stock-based compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed statements of comprehensive income (loss) for the three and nine-month periods indicated below (in thousands):
 
 
  
Three Months
Ended
September 30,
    
Nine Months
Ended
September 30,
  
 
  
2023
    
2022
    
2023
    
2022