12.Commitments and Contingencies
a)The Company has contracted with various vendors for services, with terms that require payments over the terms of the agreements, usually ranging from two to 36 months. The costs to be incurred are estimated and are subject to revision. As of September 30, 2020, the total estimated cost to complete these agreements was approximately $160,000. All of these agreements may be terminated by either party upon appropriate notice as stipulated in the respective agreements.
b)On June 22, 2009, the Company entered into a License Agreement with Korea Research Institute of Chemical Technology (“KRICT”) to acquire the rights to all intellectual property related to quinoxaline-piperazine derivatives that were synthesized under a Joint Research Agreement. 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 property. As of September 30, 2020, the milestone has not occurred.
c)The Company has established a 401(k) plan for its employees. The Company has elected to match 100% of the first 3% of an employee’s compensation plus 50% of an additional 2% of the employee’s deferral. Expense related to this matching contribution aggregated to $7,840 and $16,355 for the three months ended September 30, 2020 and 2019, respectively, and $28,854 and $62,740 for the nine months ended September 30, 2020 and 2019, respectively.
d)On February 5, 2018, the Company and Next BT terminated a research collaboration agreement between the Company and Rexgene Biotech Co., Ltd, a predecessor in interest to Next BT. The Company agreed to pay Next BT a royalty in the low single digits of any net sales of RX-0201 the Company makes in Asia and 50% of the Company’s licensing revenue related to licensing of RX-0201 in Asia, up to an aggregate of $5,000,000. On June 18, 2018, the Company reinstated the exclusive license to RX-0201 in Asia, which had no effect on the potential royalty payments granted to Next BT in February 2018. As of September 30, 2020, the Company has not made any royalty payments to Next BT.
On July 31, 2020, a putative stockholder class action was filed in the Court of Chancery of the State of Delaware (the “Chancery Court”) styled Stahlman v. Rexahn Pharmaceuticals, Inc., et al., Case No. 2020-0639. Additionally, on August 3, 2020, a putative stockholder class action was filed in the United States District Court for the District of Delaware styled Thompson v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-01036-UNA (D. Del). On August 7, 2020 and August 17, 2020, putative stockholder class actions were filed in the United States District Court for the Southern District of New York styled, respectively, Manes v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-06227 (S.D.N.Y.) and Talsma v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1-20-cv-06541 (S.D.N.Y.). Finally, on August 18, 2020, a putative stockholder class action was filed in the United States District Court for the Eastern District of New York styled Juilfs v. Rexahn Pharmaceuticals, Inc., et al., Case No 1:20-cv-03780 (F.D.N.Y.) (together with the Stahlman, Thompson, Manes and Talsma actions, the “Stockholder Actions”). The Stockholder Actions assert claims against the Company and members of its board of directors (the “Individual Defendants”).
The Stahlman and Manes complaints allege that the Individual Defendants breached their fiduciary duties owed to the Company’s stockholders. The Thompson, Manes, Juilfs and Talsma complaints allege that the Company and the Individual Defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by failing to disclose in the initial Registration Statement on Form S-4 that the Company filed with the SEC on July 6, 2020 (File No. 333-239702) (the “Initial Registration Statement”) certain information regarding, among other things, financial projections for the Company and Ocuphire, the valuation analyses performed by the Company’s financial advisor, Oppenheimer & Co., Inc., in support of its fairness opinion and the process leading to the execution of the Merger Agreement. The Thompson, Manes, Juilfs and Talsma complaints also allege that the Individual Defendants violated Section 20(a) of the Exchange Act as control persons who had the ability to prevent the Proxy Statement from being false and misleading. The Stockholder Actions seek, among other things, an injunction preventing consummation of the Merger, an award of damages, and an award of costs and expenses, including attorneys’ fees. On September 8, 2020, plaintiff Thompson made a filing in the United States District Court for the District of Delaware voluntarily dismissing the Thompson complaint. On September 22, 2020, the plaintiff filed a notice of voluntary dismissal of the Juilfs action in the United States District Court for the Eastern District of New York.
On August 6, 2020, another party sent a letter to the Company’s counsel demanding that the Company and the Individual Defendants amend the Initial Registration Statement to provide additional disclosures that the party alleges were improperly omitted from the Initial Registration Statement in violation of Sections 14(a) and 20(a) of the Exchange Act, including certain information regarding financial data and the background and process leading to the execution of the Merger Agreement (the “Demand Letter”).
The Company is unable to estimate the potential loss or range of losses as a result of the Stockholder Actions remaining as of September 30, 2020 and the Demand Letter. See Note 14, Subsequent Events, for information regarding developments in the Stahlman and Manes actions subsequent to September 30, 2020.