Opus Genetics, Inc 10-Q for FY2022 Q3
Opus Genetics, Inc. (IRD)
10-Q
2022-11-04
For: 2022-09-30
View Original
Added on
April 09, 2026
About this 10-Q
Opus Genetics, Inc filed this 10-Q on November 4, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $489K a year earlier
- Net loss
- $4.53M
- compared with a net loss of $4.23M a year earlier
- Diluted EPS
- -$0.22
- compared with -$0.25 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
For the Quarterly Period Ended September 30, 2022
OR
For the transition period from to ________
Commission File Number: 001-34079
(Exact name of Registrant as specified in its charter)
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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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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s Telephone Number, Including Area Code: (248 ) 681-9815
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:
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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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:
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Large accelerated filer
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Accelerated filer
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Smaller reporting company
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Emerging growth company
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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 2, 2022 was 20,807,015 .
OCUPHIRE PHARMA, INC.
FORM 10-Q
INDEX
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Page
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Item 1.
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2
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2 |
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3 |
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4 |
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5 |
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6 |
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Item 2.
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18 |
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Item 3.
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29 |
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Item 4.
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29 |
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29 |
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Item 1.
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29 |
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Item 1A.
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29 |
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Item 2.
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29 |
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Item 3.
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29 |
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Item 4.
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29 |
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Item 5.
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29 |
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Item 6.
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30 |
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| Item 1. |
Financial Statements
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Ocuphire Pharma, Inc.
(in thousands, except share amounts and par value)
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As of
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September 30,
2022
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December 31,
2021
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(unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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$
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Prepaids and other current assets
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Short-term investments
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Total current assets
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Property and equipment, net
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Total assets
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$
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$
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Liabilities and stockholders’ equity
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses
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Short-term loan
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Total current liabilities
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Warrant liabilities
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Total liabilities
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Commitments and contingencies (Note 4, Note 9 and Note 10)
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Stockholders’ equity:
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Preferred stock, par value $
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Common stock, par value $
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Additional paid-in-capital
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Accumulated deficit
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(
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)
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(
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)
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Total stockholders’ equity
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Total liabilities and stockholders’ equity
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$
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$
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Ocuphire Pharma, Inc.
(in thousands, except share and per share amounts)
(unaudited)
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For the Three Months Ended
September 30,
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For the Nine Months Ended
September 30,
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2022
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2021
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2022 | 2021 | |||||||||||||
| Collaborations revenue |
$ | $ | $ | $ | ||||||||||||
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Operating expenses:
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General and administrative
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Research and development
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Total operating expenses
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Loss from operations
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(
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)
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(
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( |
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Interest expense
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( |
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Fair value change of warrant liabilities
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( |
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Other income (expense), net
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( |
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Loss before income taxes
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(
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)
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(
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( |
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Benefit (provision) for income taxes
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Net loss
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(
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)
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(
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( |
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Other comprehensive loss, net of tax
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Comprehensive loss
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$
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(
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)
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$
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(
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)
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$ | ( |
) | $ | ( |
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Net loss per share:
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Basic and diluted (Note 11)
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$
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(
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)
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$
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(
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)
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$ | ( |
) | $ | ( |
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Number of shares used in per share calculations:
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Basic and diluted
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See accompanying notes.
Ocuphire Pharma, Inc.
(in thousands, except share amounts)
(Unaudited)
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Common Stock
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Additional
Paid–In
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Accumulated
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Total
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Shares
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Amount
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Capital
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Deficit
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Equity (Deficit)
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Balance at December 31, 2020
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$
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$
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$
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(
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$
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(
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| Reclassification of Series A warrant liability to equity | — | |||||||||||||||||||
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Stock–based compensation
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| Exercise of stock options | ||||||||||||||||||||
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Net and comprehensive loss
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—
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(
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(
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Balance at March 31, 2021
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(
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| Issuance of common stock and warrants in connection with registered direct offering | ||||||||||||||||||||
| Issuance of common stock in connection with the at-the-market program | ||||||||||||||||||||
| Issuance of common stock in connection with settlement with investors | ||||||||||||||||||||
| Issuance costs | — | ( |
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) | |||||||||||||||
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Stock–based compensation
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| Exercise of Series B warrants | ||||||||||||||||||||
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Net and comprehensive loss
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—
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(
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(
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Balance at June 30, 2021
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(
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| Issuance of common stock in connection with the at-the-market program | ||||||||||||||||||||
| Issuance costs |
— | ( |
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| Share–based compensation | ||||||||||||||||||||
| Exercise of options |
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| Net and comprehensive loss |
— | ( |
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| Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Balance at December 31, 2021
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$
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$
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$
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(
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)
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$
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| Issuance of common stock in connection with the at-the-market program | ||||||||||||||||||||
| Issuance costs | — | ( |
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) | |||||||||||||||
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Stock–based compensation
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Exercise of stock options
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Net and comprehensive loss
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—
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(
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(
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Balance at March 31, 2022
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(
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Issuance of common stock in connection with the at-the-market program
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Issuance costs
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— |
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(
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(
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Stock–based compensation
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Net and comprehensive loss
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—
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(
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(
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Balance at June 30, 2022
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(
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)
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$
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|||||||||||||
| Issuance of common stock in connection with the at-the-market program |
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| Issuance costs |
— | ( |
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) | |||||||||||||||
| Stock–based compensation |
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| Exercise of Series B warrants |
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| Net and comprehensive loss |
— | ( |
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) | |||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
See accompanying notes.
Ocuphire Pharma, Inc.
(in thousands)
(Unaudited)
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Nine Months Ended
September 30,
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2022
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2021
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Operating activities
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Net loss
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$
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(
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)
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$
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(
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Stock-based compensation
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Depreciation
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Fair value change in warrant liabilities
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Non-cash share settlement with investors
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Receipts of investments related to
license agreement
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( |
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Unrealized loss (gain) from short-term investments
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( |
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Change in assets and liabilities:
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Prepaid expenses and other assets
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Accounts payable
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(
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)
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Accrued and other liabilities
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(
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)
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(
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)
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Net cash used in operating activities
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(
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)
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(
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Investing activities
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Net cash used in investing activities
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Financing activities
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| Proceeds from issuance of common stock – registered direct offering | ||||||||
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Proceeds from issuance of common stock – at-the-market program
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| Issuance costs | ( |
) | ( |
) | ||||
| Payments in connection with short-term loan | ( |
) | ||||||
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Exercise of stock options and Series B warrants
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Net cash provided by financing activities
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Net (decrease) increase in cash and cash equivalents
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(
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)
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Cash and cash equivalents at beginning of period
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Cash and cash equivalents at end of period
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$
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$
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Supplemental disclosure of cash flow information:
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Cash paid for income taxes
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$
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$
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Cash paid for interest
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$
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$
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Supplemental non-cash financing transactions:
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Non-cash reclassification of Series A warrant liability to equity
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$
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$
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Unpaid issuance and deferred offering costs
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$
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$
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See accompanying notes.
| 1. |
Company Description and Summary of Significant Accounting Policies
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Nature of Business
Ocuphire Pharma, Inc. (the “Company” or “Ocuphire”) is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of
refractive and retinal eye disorders. Ocuphire’s pipeline currently includes two small molecule product candidates targeting
several of such indications. The Company’s lead product candidate, Nyxol® Eye Drops (“Nyxol”), is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. The Company’s second
product candidate, APX3330, is a twice-a-day oral tablet designed to target multiple pathways relevant to retinal and choroidal (the vascular layer of the eye) diseases such as diabetic retinopathy (“DR”) and diabetic macular edema
(“DME”) which, if left untreated, can result in permanent visual acuity loss and eventual blindness. The Company has also in-licensed APX2009 and APX2014, which are second-generation product candidates and analogs of APX3330.
The Company has sustained operating losses since inception and expects
such losses to continue indefinitely until a sustained revenue source is realized. Management plans to continue financing the Company’s operations primarily through additional issuances of the Company’s equity and debt securities or through collaborations or partnerships with other companies. If adequate funds are not
available, the Company may be required to delay, reduce the scope of, or eliminate part or all of its research and development programs.
The Company’s headquarters is located in Farmington Hills, Michigan.
Global Economic Conditions
Generally,
worldwide economic conditions remain uncertain, particularly due to the effects of the COVID‑19 pandemic and increased inflation. 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.
The COVID-19 pandemic that began in late 2019 introduced significant volatility to the
global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. As a result of the COVID-19 pandemic, the Company has experienced, and may continue to experience, delays and disruptions in our
clinical trials, as well as interruptions in our manufacturing, supply chain, shipping and research and development operations. Testing and clinical trials, manufacturing, component supply, shipping and research and development
operations may be further impacted by the continuing effects of COVID-19.
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, the conflict in Ukraine, 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 consolidated 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, 2021 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, 2021.
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 close 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 consolidated financial statements prior to the December 31, 2021 merger with OcuSub Inc.
Going Concern
The Company’s ability to continue operating as a going concern is contingent upon, among other things, its ability to secure additional financing and to
achieve and maintain profitable operations. The Company plans to issue additional equity and/or debt instruments to finance operating and working capital requirements, including additional issuances under the 2021 at-the-market program
discussed further below. While the Company expects to obtain the additional financing that is needed, there is no assurance that the Company will be successful in obtaining the necessary funding for future operations. These factors raise
substantial doubt as to the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the condensed consolidated 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. 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 and commercialization 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. The Company’s cash is held by two long-standing financial institutions in the United States. Amounts on deposit may at times exceed
federally insured limits. Management believes that the financial institutions are financially sound, and accordingly, minimal credit risk exists with respect to the financial institutions. As of September 30, 2022, the Company had
deposits that exceeded federally insured amounts by $13.4 million.
Short-term Investments
The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and
are recorded 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 consolidated statements of comprehensive loss. The Company classifies investments available to fund current operations as
current assets on its balance sheets. The Company did no t recognize any impairments on its investments to date through
September 30, 2022.
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 10 – Collaboration License 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.
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 services, and services associated with regulatory submission and approval processes. 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 estimated relative standalone
selling prices of the promised goods or service underlying each performance obligation.
Licenses of intellectual property: 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 promises, 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. 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). When the Company’s assessment of probability of achievement changes and variable consideration becomes probable, any additional estimated consideration
is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation and recorded in collaborations revenue based upon when the
customer obtains control of each element.
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).
General and Administrative Expenses
General and administrative expenses (“G&A”) 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 Expenses
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 preclinical 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.
Other Income
(Expense), net
Other income (expense), net includes payments made by the Company in connection with the Contingent Value Rights Agreement discussed
further below with former stockholders of Rexahn Pharmaceuticals, Inc. (“Rexahn”). In addition, other income (expense), net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from
equity investments and from foreign currency exchange transactions, and when they occur, reimbursements in connection with grants and other sources.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provisions of the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“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.
Warrant Liabilities
The Company issued Series A Warrants in connection with the Pre-Merger Financing (see Note 3 – Pre-Merger Financing) and assumed
Rexahn warrants issued prior to the Merger. The Company accounts for these warrants as a liability while outstanding at fair value during periods when certain provisions preclude equity accounting treatment for these instruments.
Additionally, issuance costs associated with the warrants classified as liabilities are expensed as incurred and reflected as interest expense in the accompanying consolidated statements of comprehensive loss. The change in fair value of
the warrant liabilities while outstanding was recognized as a component of the fair value change in warrant liabilities line item in the condensed consolidated statements of comprehensive loss.
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, 2022 and December 31, 2021, the
fair values of cash and cash equivalents, prepaid and other assets, accounts payable, accrued expenses and short-term loan, while outstanding, 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 warrant liabilities, while
outstanding, were based on cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and were based on Level 3
inputs. There were no
The fair value of financial instruments measured on a
recurring basis is as follows (in thousands):
|
As of September 30, 2022
|
||||||||||||||||
|
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Assets:
|
||||||||||||||||
| Short-term investments |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Total assets at fair value
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
As of December 31, 2021
|
||||||||||||||||
|
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Assets:
|
||||||||||||||||
|
Short-term investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Total assets at fair value
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The following table provides a roll-forward of short-term investments measured at fair value on a recurring basis using observable level
1 inputs for the nine months ended September 30, 2022 and 2021 (in thousands):
|
2022
|
2021
|
|||||||
|
Short-term investments
|
||||||||
|
Balance as of beginning of period
|
$
|
|
$
|
|
||||
| Receipt of investments related to license agreement | ||||||||
|
Unrealized (loss) gain
|
(
|
)
|
|
|||||
|
Balance as of end of period
|
$
|
|
$
|
|
||||
The following table provides a roll-forward of the
warrant liabilities measured at fair value on a recurring basis using unobservable level 3 inputs for the nine months ended September 30, 2022 and 2021 (in thousands):
|
2022
|
2021
|
|||||||
|
Warrant liabilities
|
||||||||
|
Balance as of beginning of period
|
$
|
|
$
|
|
||||
|
Change in fair value of warrant liabilities
|
|
|
||||||
|
Reclassification of Series A warrants from liability to equity
|
|
(
|
)
|
|||||
|
Balance as of end of period
|
$
|
|
$
|
|
||||
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 does not expect that the adoption of this ASU on January 1, 2023 will have a significant impact on its condensed consolidated 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 EPS computation. The amendments in this ASU are effective for public business entities that meet the definition of a Securities and Exchange Commission (“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 is currently evaluating the impact of ASU 2020-06 on its condensed consolidated 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 our financial statements.
| 2. |
Merger and Contingent Value Rights Agreement
|
On November 5, 2020, the Company
completed its merger transaction (the “Merger”) 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”).
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:
| ● |
|
| ● |
|
| ● |
|
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,
2022, no milestones had been accrued as there were no
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, 2022, 63,734 of the
Rexahn warrants remained outstanding with exercise prices ranging from $38.40 to $146.88 per share with an average remaining contractual life of 1.2
years.
|
3.
|
Pre-Merger Financing
|
Securities Purchase Agreement
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.
Waiver Agreements
Effective February 3, 2021, each investor that invested in the Pre-Merger Financing entered into a Waiver Agreement with
the Company (collectively, the “Waiver Agreements”). Pursuant to the Waiver Agreements, the investors and the Company agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate
certain financing restrictions, extend the term of certain leak-out agreements, and, in the case of certain investors, grant certain registration rights for the shares underlying the warrants.
The Waiver Agreements provide for the elimination of the full ratchet anti-dilution provisions contained in the Series A Warrants (as certain of the anti-dilution
provisions had previously caused liability accounting treatment for the Series A Warrants). Upon the effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity.
Pursuant to the Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed in the aggregate with respect to all investors, eliminating
any future resets.
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, 2022. Prior to the execution of the Waiver Agreements, the Series A Warrants were accounted for
and classified as liabilities on the accompanying condensed balance sheets given certain price reset provisions not used for a fair valuation under a fixed for fixed settlement scenario as required for equity balance sheet classification. Upon the
February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity. A final fair valuation of the Series A Warrants was performed utilizing a Black Scholes model to estimate the aggregate fair value of the
Series A Warrants prior to being re-classified as equity. Input assumptions used were as follows: risk-free interest rate 0.4 %; expected
volatility of 86.6 %; expected life of 4.8
years; and expected dividend yield zero percent. The underlying stock price used was the market price as quoted on Nasdaq as of
February 3, 2021, the effective date of the Waiver Agreement. The fair value change of the Series A Warrants was $33.8 million and was
recorded to the fair value change in warrant liabilities line item on the accompanying condensed consolidated statements of comprehensive loss for the nine months ended September 30, 2021. As a result of the reclassification to equity, the Series A
Warrants are no longer subject to remeasurement.
Series B Warrants
The Series B Warrants have an exercise price of $0.0001 , were exercisable upon issuance and will expire on the day following the later to occur of (i) the Reservation Date (as defined therein), and (ii) the date on which the investor’s
Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares
remain issuable thereunder. The Series B Warrants outstanding as of September 30, 2022 were exercisable for 77,678 shares of common
stock. The Series B Warrants were accounted for and classified as equity on the accompanying condensed balance sheets.
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 9 — Apexian Sublicense Agreement). As of September 30, 2022, there was sufficient uncertainty with regard to any future cash milestone payments under the sublicense agreement, and as such, no liabilities were recorded
related to the sublicense agreement.
Facility Leases
In May 2019, the Company entered into a short-term
non-cancellable facility lease (the “HQ Lease”) for its operations and headquarters for a seven-month term beginning in June
2019. The HQ Lease, as amended, has extended the term to December 31, 2022. Additionally, Ocuphire leased office space in Rockville, Maryland through June 30, 2021 previously occupied by Rexahn (the “Rexahn Lease”). The HQ Lease and the Rexahn 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 monthly base rent for the Rexahn
Lease was $13,000 . The rent expense associated with the HQ Lease and Rexahn Lease amounted to $9,000 30,000 107,000 45,000 through its new December 31, 2023 expiration date as amended in October 2022. (See Note 14 — Subsequent Events).
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.
| 5. |
Supplemental Balance Sheet Information
|
Prepaid and Other Assets
Prepaid and other assets consist of the following (in
thousands):
|
September 30,
2022
|
December 31,
2021
|
|||||||
|
Prepaids
|
$
|
|
$
|
|
||||
|
Other
|
|
|
||||||
|
Total prepaids and other assets
|
$
|
|
$
|
|
||||
Property and Equipment, net
Property and equipment held for use by category are presented in the
following table (in thousands):
|
September 30,
2022
|
December 31,
2021
|
|||||||
|
Equipment
|
$
|
|
$
|
|
||||
|
Furniture
|
|
|
||||||
|
Total property and equipment
|
|
|
|
|
||||
|
Less accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Property and equipment, net
|
$
|
|
$
|
|
||||
Depreciation
expense was $1 3
Accrued Expenses
Accrued expenses consist of the following (in thousands):
|
September 30,
|
December 31,
|
|||||||
|
2022
|
2021
|
|||||||
|
R&D services and supplies
|
$
|
|
$
|
|
||||
|
Payroll
|
|
|
||||||
|
Professional services
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
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. The final payment on the Loan was made in
May 2022.
| 6. |
Related Party Transactions
|
Pre-Merger
Financing and Waiver Agreements
On April 8, 2022, Ocuphire entered into a consulting agreement with a director of the Company. The consulting
agreement provides 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, the director received a stock option grant for 50,000 options, 25 % of which will vest 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 Company incurred related consulting expenses of $30,000 and $60,000 during the three and nine months ended September 30, 2022, respectively. There were no 10,000 of the related consulting expenses were
unpaid.
| 7. |
Stockholders’ Equity
|
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, 2022, 634,509 and 1,848,980 shares of common stock were sold under the 2021 ATM 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. During the three and nine months ended September 30, 2021, 332,600 and 1,233,543 shares were sold
under the 2021 ATM for gross proceeds in the amount of approximately $1.7 million and $5.8 million, before deducting issuance expenses in the amount of approximately $0.1 and $0.3 million, respectively.
Registered Direct Offering
On June 4, 2021, the Company entered into a placement agency agreement for a registered direct offering (“RDO”) 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”) at an offering price of $4.875 per one share and 0.50 RDO Warrants, for gross
proceeds of approximately $15,000,000 , before AGP’s fees and related offering expenses in the amount of approximately $1.1 million.
The RDO Warrants have an exercise price of $
| 8. |
Stock-based Compensation
|
Stock-based
compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed consolidated statements of comprehensive loss for the three and nine month periods indicated below
(in thousands):
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
General and administrative
|
$
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Research and development
|
|
|
|
|
||||||||||||
|
Total stock-based compensation
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Ocuphire Stock Options
Inducement
Plan
On February 22, 2021, the Company adopted the
Ocuphire Pharma, Inc. Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 325,258 shares of its
common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the
meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.
2020 Equity Incentive Plan
The stockholders of the Company approved the 2020
Equity Incentive Plan (the “2020 Plan”) for stock-based awards. The 2020 Plan became effective on November 5, 2020. Under the 2020 Plan, (i) 1,000,000
new shares of common stock were reserved for issuance and (ii) up to 70,325 additional shares of common stock may be issued,
consisting of (A) shares that remain available for the issuance of awards under prior equity plans and (B) shares of common stock subject to outstanding stock options or other awards covered by prior equity plans that have been cancelled
or expire on or after the date that the 2020 Plan became effective. The 2020 Plan permits the grant of incentive and nonstatutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock and net loss
awards, and other stock-based awards.
2018 Equity Incentive Plan
Prior to the 2020 Plan, the Company had adopted a 2018
Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,175,000 shares of the Company’s common stock were reserved
for issuance to employees, directors and consultants. Upon the effective date of the 2020 Plan, no additional shares were
available for issuance under the 2018 Plan.
2020 Plan
Evergreen Provision
Under the 2020 Plan, the shares reserved automatically
increase on January 1 of each year, for a period of not more than ten years from the date the 2020 Plan is approved by the
stockholders of the Company, commencing on January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to 5 %
of the shares of common stock outstanding as of December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board of Directors may act prior to January 1 of a given year to provide that there will be no January 1
increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. On January 1, 2022, 942,291 shares were added to the 2020 Plan as a result of the evergreen provision.
General
During the three and nine months ended September 30, 2022, 167,000 and 893,305 stock options were granted to
directors, officers, employees and consultants, respectively, generally vesting over a ten (10 ) to forty-eight (48 ) month period. During the three and nine months ended September 30, 2021, 128,000 and 387,800 stock options were granted to newly-hired
consultants and employees, respectively, generally vesting over a six (6 ) to forty-eight (48 ) month period. The Company recognized $394 ,000 and
$452 ,000 in stock-based compensation expense related to stock options during the three months ended September 30, 2022 and 2021, respectively,
and $1,229 ,000 and $1,331 ,000
during the nine months ended September
30, 2022 and 2021, respectively. During the nine months ended September
30, 2022, 24,309 stock options were exercised with an intrinsic value of $59,000 . During the three and nine months ended September 30, 2021, 66,056 and
73,442 stock options were exercised, respectively, with an intrinsic value of $271,000 and $345,000 , respectively.
The weighted average fair value per share of options granted during the
three and nine months ended September 30, 2022 was $1.65 and $2.06 , respectively.
The weighted average fair value per share of options granted during the three and nine months ended September 30, 2021 was $3.69 and
$4.47 , respectively. The Company measures the fair value of stock options with service-based and performance-based vesting
criteria to employees, directors, consultants and directors on the date of grant using the Black-Scholes option pricing model. The Company does not have history to support a calculation of volatility and expected term. As such, the
Company has used a weighted-average volatility considering the volatilities of several guideline companies.
For purposes of identifying similar entities, the
Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average
expected life of the options was based on the contractual term for agreements that allow for exercise of vested options through the end of the contractual term upon termination of continuous service, and for all other agreements, was
based on the midpoint between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110. The risk-free interest rate is determined by reference to implied
yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. The Company records forfeitures when they occur.
The weighted-average assumptions used
in the Black-Scholes option pricing model are as follows during the three and nine months ended September 30, 2022 and 2021:
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended September 30, |
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
Expected stock price volatility
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
|
Expected life of options (years)
|
|
|
|
|
||||||||||||
|
Expected dividend yield
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
|
Risk free interest rate
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
During the three and nine months ended September 30, 2022,
During the three and nine months ended September
30, 2022, 13,500 and 27,788 options were forfeited, respectively. During the nine months ended September 30, 2021, 25,558 options were forfeited. As of September 30, 2022, 892,920 No shares were available for future
issuance under the 2018 Plan.
Unrecognized
stock-based compensation cost was $3.0 million as of September 30, 2022. The unrecognized stock-based expense is expected to be recognized over a weighted average
period of 1.3 years.
Ocuphire Restricted Stock Awards
The Company did no zero
and 40,000 RSAs vested, respectively, and no zero and $22,000 , respectively.
Common Stock Issued for Services
The Company granted stock for services in the amount of 52,225 common shares during the three months ended September 30, 2022 to four board members who elected to receive their board retainers in the form of stock for services performed as compared to 5,047 shares of common stock granted for services to two
board members during the three months ended September 30, 2021. During the nine months ended September 30, 2022 and 2021, 74,396
and 14,444 common shares were issued to board members for services, respectively. The stock-based compensation related to
these services amounted to $99 ,000 and $26 ,000 during the three months ended September 30, 2022 and 2021, respectively, and $154 ,000
and $82 ,000 during the nine months ended September 30, 2022 and 2021, respectively.
Former
Rexahn Options
| 9. |
Apexian Sublicense Agreement
|
On
January 21, 2020, the Company entered into a sublicense agreement (as amended on June 4, 2020, the “Apexian Sublicense Agreement”) with Apexian, pursuant to which it obtained exclusive worldwide patent and other intellectual property
rights that constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions. The lead compound in the Ref-1 Inhibitor program is APX3330, which the
Company intends to develop as an oral pill therapeutic to treat diabetic retinopathy and diabetic macular edema initially, and potentially later to treat wet age-related macular degeneration. In connection with the Apexian Sublicense
Agreement, the Company issued a total of 891,422 shares of its common stock to Apexian and to certain affiliates of Apexian
in calendar year 2020. As a result of the common stock issued pursuant to the Apexian Sublicense Agreement, Apexian is considered by Ocuphire to be a related party.
The Company
also agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication for the development and regulatory milestones, and once for each
of several sales milestones. These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and the first Phase 3 pivotal trial in the United States, and
filing and achieving regulatory approval from the FDA for the first New Drug Application for a compound) totaling up to $11
million in the aggregate and (ii) payments for specified sales milestones of up to $20 million in the aggregate, which net sales
milestone payments are payable once, upon the first achievement of such milestone. Lastly, the Company also agreed to make a royalty payment equal to a single-digit percentage of its net sales of products associated with the covered patents
under the Apexian Sublicense Agreement. If it is not terminated pursuant to its terms, the Apexian Sublicense Agreement shall remain in effect until expiration of the last to expire of the covered patents.
None of the criteria to recognize
milestone or royalty obligations were met during the three and nine month periods ended September
30, 2022 and
2021.
|
10.
|
Collaboration and License Agreements
|
BioSense License and Assignment Agreement
On March 10, 2020,
pre-Merger, Rexahn entered into an amendment to its collaboration and license agreement, (as amended, the “BioSense License and Assignment Agreement”) with BioSense to advance the development and commercialization of RX-3117 for all human
uses in the Republic of Singapore, China, Hong Kong, Macau, and Taiwan (the “BioSense Territory”). Under the terms of the BioSense License and Assignment Agreement, the Company (i) granted BioSense an exclusive license to develop and
commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the BioSense Territory and (ii) assigned and transferred all of the former Rexahn patents and patent applications related to RX-3117 in the
BioSense Territory. The upfront payment consisted of an aggregate of $1,650,000 , of which $1,550,000 was paid to Rexahn prior to the Merger. During the nine month period ended September 30,
2021, the Company satisfied a performance obligation for the $100,000 payment that was remaining and recorded this amount as
collaboration revenue.
Under the BioSense License and Assignment Agreement, the Company is
eligible to receive additional milestone payments in an aggregate of up to
$84,500,000 upon the achievement of development, regulatory and commercial goals and will also be eligible to receive tiered royalties at low double-digit rates on annual net
sales in the BioSense Territory. The Company determined that none of the milestone payments under the BioSense License and Assignment Agreement were probable of payment as of September 30, 2022, and as a result, no revenue related to the milestones was recognized as the achievement of events entitling the Company to any milestone payments were highly
susceptible to factors outside of the Company’s control. Future sales-based royalties related to the exclusive license to develop RX-3117 will be recognized in the period the underlying sales transaction occurs.
Payments received under the BioSense License and Assignment Agreement are subject to the
CVR Agreement described in Note 2 – Merger and Contingent Value Rights Agreement.
Processa License Agreement
On June 16, 2021, the
Company entered into a license agreement (the “Processa License Agreement”) with Processa Pharmaceuticals, Inc. (“Processa”), pursuant to which the Company has agreed to grant Processa an exclusive license to develop, manufacture and commercialize RX-3117 globally, excluding the BioSense Territory.
As consideration for the Processa License Agreement, the Company received an upfront payment in July 2021 consisting of 44,689 shares of Processa common stock with a fair value of $289,000 (at the contract date) and a $200,000 cash payment.
The Company was restricted from selling the Processa common stock for a period of one year ending June 16, 2022. As additional
consideration, Processa will make payments to the Company upon the achievement of certain development and regulatory milestones, which primarily consist of dosing a patient in pivotal trials or having a drug indication approved by a regulatory
authority in the United States or another country. In addition, Processa will pay the Company mid-single-digit royalties based on annual sales under the license and will make one -time sales milestone payments based on the achievement during a calendar year of certain thresholds for annual sales. Processa is also required to give the Company 32 % of any milestone payments received based on any sub-license agreement Processa may enter into with respect to the Processa License Agreement.
The Company determined that none of the milestone payments under the Processa License Agreement were probable of payment as of September 30, 2022, and as a result, no revenue related to the milestones was recognized, as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the
Company’s control.
Processa is required to use commercially reasonable efforts, at its sole cost and expense, to conduct development
activities in one or more countries, including meeting specific diligence milestones that consist
of: (i) first patient administered drug in a clinical trial of a licensed product prior to the three (3 ) year anniversary of the
effective date; and (ii) first patient administered drug in a pivotal clinical trial of a licensed product or first patient administered drug in a clinical trial for a second indication of a licensed product prior to the five (5 ) year anniversary of the effective date. Either party may terminate the agreement in the event of a material breach of the agreement that has not
been cured following written notice and a 120 -day opportunity to cure such breach, and Processa may terminate the agreement for any
reason upon 120 days prior written notice to Ocuphire.
During the three and nine month period ended September 30, 2021, the Company had fulfilled its performance obligations with
respect to the upfront payment under the Processa License Agreement and revenue was recognized in connection with the payment.
Payments received under the Processa License Agreement will be subject to the CVR Agreement described in Note 2– Merger and
Contingent Value Rights Agreement.
| 11. |
Net loss per share
|
Basic loss per
share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or
loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, unissued common stock for services and
stock options while outstanding are considered common stock equivalents for this purpose. Diluted earnings are computed utilizing the treasury method for the warrants, unissued common stock for services and stock options. No incremental
common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.
The following
potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three and nine month periods ended presented below:
|
September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Series A, Series B, and RDO warrants
|
|
|
||||||
|
Stock options
|
|
|
||||||
|
Unissued common stock for services
|
|
|
||||||
|
Former Rexahn warrants
|
|
|
||||||
|
Former Rexahn options
|
|
|
||||||
|
12.
|
Income Taxes
|
The effective
tax rate for the three and nine months ended September 30, 2022 and 2021 was zero no
The Company’s corporate returns are subject to examination for tax years beginning in 2018 for federal income tax purposes and subject to examination in various state jurisdictions. The Company does not have any reserves for
income taxes that represent the Company’s potential liability for uncertain tax positions.
|
13.
|
Deferred Compensation Plan
|
Effective October 1, 2021, the Company began offering a 401(k) plan (“401K Plan”) to its employees. All employees are eligible to participate in the 401K Plan. The Company makes matching contributions equal to 100 % on the first 3 % of compensation that is deferred as an
elective deferral and an additional 50 % on the next 2 % of compensation. The Company’s matching contributions are made on a payroll-by-payroll basis. During the three and nine months ended September 30, 2022, the Company contributed $17,000 and
$62,000 to the 401K Plan, respectively.
| 14. |
Subsequent Events
|
Headquarters Lease
On October 17, 2022, the term of the HQ Lease was extended by one year to December 31, 2023. The rent under the HQ Lease will continue to be $3,000 per month.
Ocuphire Pharma, Inc.
Form 10-Q
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes
included in Part I “Financial Information”, Item I “Financial Statements” of this Quarterly Report on Form 10-Q (the “Report”) and the audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year
ended December 31, 2021.
Forward-Looking Statements
Certain statements contained in this Report are not statements of historical fact and are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give current expectations or forecasts of future events or our future financial or
operating performance. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and
similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements.
These forward-looking statements reflect our management’s beliefs and views with respect to future events, are based on estimates and assumptions as of the date of this
Report and are subject to risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in these forward-looking statements. We discuss many of these risks in greater detail
under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent reports filed with or furnished to the Securities and Exchange Commission (the “SEC”), including this Report. Moreover,
we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these
forward-looking statements.
Any forward-looking statement made by us in this Report speaks only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a
result of new information, future developments or otherwise, except as may be required by applicable laws or regulations.
Overview
Ocuphire is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of refractive and retinal eye
disorders. Ocuphire’s pipeline currently includes two small-molecule product candidates targeting several of such indications.
Its lead product candidate, Nyxol® Eye Drops (“Nyxol”), is a once-daily eye drop
formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. As a result, Nyxol can potentially be used for the treatment of multiple indications such as reversal of pharmacologically-induced mydriasis
(“RM”) (dilation of the pupil), presbyopia (age-related blurry near vision) and dim light or night vision disturbances (“NVD”) (halos and glares). Ocuphire’s management believes these multiple indications potentially represent a significant
market opportunity. Nyxol has been studied in a total of 12 clinical trials (3 Phase 1, 5 Phase 2, 4 Phase 3) in a total of approximately 1,100 patients (with over 650 Nyxol-treated) and has demonstrated promising clinical data for use in the
multiple ophthalmic indications mentioned above. Ocuphire reported positive top-line data from the 1st Phase 3 trial (MIRA-2) for RM in March 2021, reported
positive top-line data from a 2nd Phase 3 RM trial (MIRA-3) in March 2022, reported positive data from a pediatric safety study (MIRA-4) for RM in April 2022, and
Ocuphire reported positive top-line data from a Phase 3 trial of Nyxol for treatment of NVD in May 2022. Ocuphire also reported positive top-line data from a Phase 2 trial of Nyxol for treatment of presbyopia, both Nyxol alone and with low-dose
pilocarpine (pilocarpine hydrochloride 0.4% ophthalmic solution, “LDP”) as adjunctive therapy in June 2021 and January 2022. Ocuphire anticipates submitting a new drug application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) in the
fourth quarter of 2022 under the 505(b)(2) pathway for its drug-led combination product. Ocuphire has started pre-commercialization planning and activities in anticipation of approval of its RM application.
Ocuphire’s second product candidate, APX3330, is a twice-a-day oral tablet designed to target multiple pathways relevant to retinal and choroidal (the vascular layer of the
eye) diseases such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”) which, if left untreated, can result in permanent visual acuity loss and eventual blindness. DR is a disease resulting from diabetes in which chronically
elevated blood sugar levels cause progressive damage to blood vessels in the retina. DME is a severe form of DR which involves leakage of protein and fluid into the macula, the central portion of the retina, causing swelling and vascular
damage. Prior to Ocuphire’s in-licensing of the product candidate, APX3330 had been studied by other sponsors in a total of 11 clinical trials (6 Phase 1 and 5 Phase 2) in a total of over 420 healthy volunteers or patients (with over 340
APX3330-treated) for inflammatory and oncology indications, and had demonstrated evidence of tolerability, pharmacokinetics, durability, and target engagement. Ocuphire has also in-licensed APX2009 and APX2014, which are second-generation
product candidates and analogs of APX3330. Ocuphire initiated a Phase 2 trial for APX3330 in April 2021 for the treatment of patients with DR, including moderately severe non-proliferative DR (“NPDR”) and mild proliferative DR (“PDR”), as well
as patients with DME without loss of central vision. Ocuphire reported enrollment completion of 103 patients in the ZETA-1 trial in March 2022 and expects to report top-line results from the ZETA-1 DR/DME Phase 2b study in early 2023. During
Ocuphire’s KOL event in October 2022, Ocuphire reported masked safety data from the ongoing Phase 2 trial in DR/DME for the 103 patients enrolled, of which 91 patients completed 24 weeks of dosing. These masked safety data are consistent with
the favorable safety profile from the prior 11 clinical trials, which included total exposure experience of over 10,000 subject-days with 600 mg daily dose of APX3330.
Ocuphire Pharma, Inc.
Form 10-Q
Strategic Outlook
As part of its strategy, Ocuphire will continue to explore opportunities to acquire additional ophthalmic assets and to seek strategic partners for late-stage development, regulatory preparation
and commercialization in key global markets. To date, Ocuphire’s primary activities have been conducting research and development activities, planning clinical trials, performing business and financial planning, recruiting personnel and raising
capital. Ocuphire does not have any products approved for sale and has not generated any significant amounts of revenue. Ocuphire does not expect to generate significant revenues until, and unless, the FDA or other regulatory authorities approve
Nyxol or APX3330 and Ocuphire successfully commercializes its product candidates, or if Ocuphire enters into any significant license and/or collaboration agreements. Until such time, if ever, as Ocuphire can generate substantial product revenue,
Ocuphire expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Through September 30, 2022, Ocuphire has funded its operations primarily
through equity financings that totaled $54.1 million in gross proceeds, of which $21.15 million was received in connection with the merger (“Merger”) with Rexahn Pharmaceuticals, Inc. (“Rexahn”), net cash at Rexahn, a minor amount of license fee
payments earned under license agreements related to Rexahn’s RX-3117 drug compound, and through the issuance of convertible notes in private placements that totaled $8.5 million in gross proceeds. Ocuphire’s net losses were $16.1 million and
$50.4 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, Ocuphire had an accumulated deficit of $105.4 million. Ocuphire anticipates that its expenses will increase substantially as it:
| • |
continues clinical trials for Nyxol, APX3330 and for any other product candidate in its future pipeline;
|
| • |
continues preclinical studies for Nyxol, APX3330 and for any other product candidate in its future pipeline;
|
| • |
develops additional product candidates that it identifies, in-licenses or acquires;
|
| • |
seeks regulatory approvals for any product candidates that successfully complete clinical trials;
|
| • |
contracts to manufacture its product candidates;
|
| • |
maintains, expands and protects its intellectual property portfolio;
|
| • |
hires additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan;
|
| • |
adds operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts;
|
| • |
continues to operate as a public company; and
|
| • |
establishes on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which Ocuphire may obtain regulatory approval;
|
Ocuphire’s net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of its preclinical studies, clinical trials and its expenditures on other
research and development activities as well as level of license fee payments received under license agreements in connection with the former Rexahn drug compounds.
Recent Developments
Clinical Milestones
In September 2022, Ocuphire announced last patient last visit completion in ZETA-1, a Phase 2b trial evaluating the safety and efficacy of APX3330 in diabetic retinopathy patients. Top-line data
from this trial is expected in early 2023.
In July 2022, Ocuphire submitted a Phase 3 protocol to the FDA for the VEGA-2 trial. This is the first of two Phase 3 registration trials intended
to support a presbyopia indication for Nyxol alone and Nyxol with LDP and is anticipated to initiate in the fourth quarter of 2022. In addition, the VEGA-3 trial (the second Phase 3) and LYRA-1 trial (1-year safety) are planned to begin in
2023. If successful, the Company plans to file a supplemental NDA for Nyxol as a single-agent for presbyopia and a new NDA for the combination thereafter.
Non-clinical Update
In support of conducting clinical trials using Nyxol for chronic indications such as presbyopia and NVD, Ocuphire has successfully completed a 6-month rabbit ocular toxicology study. The findings from the 6-month
study provide support for the conduct of the planned 1-year Phase 3 safety trial LYRA-1. The submission of the final report is planned in the fourth quarter of 2022 to the FDA.
In support of the combination of Nyxol and LDP treatment in presbyopia, a 90-day nonclinical ocular toxicology study with Nyxol and LDP in Dutch-belted rabbits has been conducted. The in-life phase has successfully
been completed and the report is being finalized with a subsequent submission to the FDA.
Ocuphire Pharma, Inc.
Form 10-Q
Regulatory Update
In August 2022, the FDA granted a small business waiver of the Prescription Drug User Fee Act (PDUFA) fee of $3.1 million for the 505(b)(2) NDA for Nyxol.
Presentations, Publications and Conferences
Ocuphire’s management team and medical advisors have participated by invitation at over 25 medical, scientific, industry and investment conferences from January through
October 2022, at which over 40 papers, posters and panel talks were presented. The Company has been engaging with many key opinion leaders to expand awareness of the Nyxol and APX3330 development programs.
In early November 2022, Ocuphire announced a manuscript titled “A randomized phase 2 clinical trial of phentolamine mesylate eye drops in patients with severe night vision
disturbances,” was published in peer-reviewed journal BMC Ophthalmology.
Medical Advisory Board
Ocuphire announced expansion of the Medical Advisory Board with seven new medical advisors totaling 22 across refractive, retina and medical optometry.
Global Economic Conditions
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID‑19 pandemic and increased inflation. 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.
The COVID-19 pandemic that began in late 2019 introduced significant volatility to the global economy, disrupted supply chains and had a widespread adverse
effect on the financial markets. As a result of the COVID-19 pandemic, the Company has experienced, and may continue to experience, delays and disruptions in our clinical trials, as well as interruptions in our manufacturing, supply
chain, shipping and research and development operations. Testing and clinical trials, manufacturing, component supply, shipping and research and development operations may be further impacted by the continuing effects of COVID-19.
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, the conflict in Ukraine, 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.
Financial Operations Overview
Collaborations Revenue
To date, Ocuphire had limited collaborations revenue during the second and third quarters of 2021 related to fees earned from license agreements with BioSense Global LLC
(“BioSense”) and Processa Pharmaceuticals, Inc. (“Processa”) in connection with the Rexahn RX-3117 drug compound. We anticipate that we may earn additional revenues stemming from additional milestone and royalty payments from these or other
license agreements related to Rexahn’s legacy drug compounds; however, the attainment of milestones or level of sales required to earn royalty payments is highly uncertain.
Ocuphire does not expect to generate significant revenue unless or until it obtains regulatory approval of and commercializes Nyxol or APX3330, or until it enters into a
significant license agreement for either Nyxol or APX3330. If Ocuphire fails to complete the development of Nyxol, APX3330, or any other product candidate it may pursue in the future, in a timely manner, or fails to obtain regulatory approval,
Ocuphire’s ability to generate significant revenue would be compromised.
Operating Expenses
Ocuphire’s operating expenses are classified into two categories: general and administrative and research and development.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation costs, for personnel in functions not directly
associated with research and administrative activities. Other significant costs include insurance coverage for directors and officers and other property and liability exposures, legal fees relating to intellectual property and corporate matters,
professional fees for accounting and tax services, and other services provided by business consultants. Ocuphire anticipates that its general and administrative expenses will significantly increase in the future to support its continued research
and development activities and costs associated with operating as a public company. These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional services as well as other public
company-related costs.
Ocuphire Pharma, Inc.
Form 10-Q
Research and Development
To date, Ocuphire’s research and development expenses have been related primarily to the clinical-stage development of Nyxol and APX3330. Research and development expenses
consist of costs incurred in performing research and development activities, including compensation and benefits for research and development employees and costs for consultants, costs associated with preclinical studies and clinical trials,
regulatory activities, manufacturing activities to support clinical activities, license fees, non-legal patent costs, fees paid to external service providers that conduct certain research and development, and an allocation of overhead expenses.
Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed. Ocuphire accrues for costs incurred as the services are being provided by monitoring the status of the
study or project, and the invoices received from its external service providers. Ocuphire adjusts its accrual as actual costs become known. Research and development activities are central to Ocuphire’s business model.
Ocuphire expects that Nyxol and APX3330 will have higher development costs during their later stages of clinical development, as compared to costs incurred during their
earlier stages of development, primarily due to the increased size and duration of the later-stage clinical trials. Ocuphire expects its research and development expenses to significantly increase over the next several years. However, it is
difficult for Ocuphire to determine with certainty the duration, costs and timing to complete its current or future preclinical programs and clinical trials of Nyxol, APX3330, and other product candidates. The duration, costs and timing of
clinical trials and development of Nyxol, APX3330 and other product candidates will depend on a variety of factors that include, but are not limited to, the following:
| • |
per patient trial costs;
|
| • |
the number of patients that participate in the trials;
|
| • |
the number of sites included in the trials;
|
| • |
the countries in which the trials are conducted;
|
| • |
the length of time required to enroll eligible patients;
|
| • |
the number of doses that patients receive;
|
| • |
the drop-out or discontinuation rates of patients;
|
| • |
potential additional safety monitoring or other studies requested by regulatory agencies;
|
| • |
the duration of patient follow-up;
|
| • |
the phase of development of the product candidate;
|
| • |
arrangements with contract research organizations and other service providers; and
|
| • |
the efficacy and safety profile of the product candidates.
|
Interest Expense
Interest expense consists of interest costs relates to interest on principal associated with a short-term loan (related to financing an insurance policy)
during the period it is outstanding. The short-term loan had an annual interest rate of 5.5%.
Fair Value Change in Warrant Liabilities
The fair value change in warrant liabilities comprises the change in the fair value of the warrant liabilities during the period the warrant liabilities are outstanding.
Other Income (Expense), net
Other income (expense), net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and foreign
currency exchange transactions, and reimbursements in connection with grants and other sources when they occur. In addition, payments made by us in connection with the Contingent Value Rights Agreement (the “CVR Agreement”) with former Rexahn
shareholders when they occur are also included in this line item.
Provision for Income Taxes
Provision for income taxes consists of federal and state income taxes in the United States, as well as deferred income taxes and changes in related valuation allowance reflecting the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Currently, there is no provision for income taxes, as Ocuphire has incurred
operating losses to date, and a full valuation allowance has been provided on the net deferred tax assets as of September 30, 2022 and December 31, 2021.
Ocuphire Pharma, Inc.
Form 10-Q
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021
The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):
|
For the Three Months Ended
|
||||||||||||
|
September 30,
|
||||||||||||
|
2022
|
2021
|
Change | ||||||||||
|
Collaborations revenue
|
$
|
—
|
$
|
489
|
$
|
(489
|
)
|
|||||
|
Operating expenses:
|
||||||||||||
|
General and administrative
|
1,703
|
1,595
|
108
|
|||||||||
|
Research and development
|
2,835
|
3,126
|
(291
|
)
|
||||||||
|
Total operating expenses
|
4,538
|
4,721
|
(183
|
)
|
||||||||
|
Loss from operations
|
(4,538
|
)
|
(4,232
|
)
|
(306
|
)
|
||||||
|
Other income, net
|
7
|
2
|
5
|
|||||||||
|
Loss before income taxes
|
(4,531
|
)
|
(4,230
|
)
|
(301
|
)
|
||||||
|
Provision for income taxes
|
—
|
—
|
—
|
|||||||||
|
Net loss
|
$
|
(4,531
|
)
|
$
|
(4,230
|
)
|
$
|
(301
|
)
|
|||
Collaborations Revenue
Collaborations revenue was $0.5 million for the three months ended September 30, 2021. Revenue during the period was derived from the license agreement with Processa related to certain technology transfers. There was
no collaborations revenue recognized during the current year period.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2022 were $1.7 million compared to $1.6 million for the three months ended September 30, 2021. The $0.1 million
increase was largely attributed to an increase in legal costs on a net basis. General and administrative expenses included $0.3 million in stock-based compensation expense during each of the three-month periods ended September 30, 2022 and 2021.
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2022 were $2.8 million compared to $3.1 million for the three months ended September 30, 2021. The $0.3 million decrease
was primarily attributable to the completion of clinical trials and the timing of manufacturing activities for Nyxol and APX3330. Research and development expenses also included $ 0.2 million in stock-based compensation expense during each of the
three-month periods ended September 30, 2022 and 2021.
Other Income, net
During the three months ended September 30, 2022, Ocuphire had other income, net of $7,000 which consisted of interest income related to cash and cash equivalents of
$34,000, offset in part by unrealized losses from our short-term investments of $25,000 and from realized foreign currency exchange losses of $2,000.
Other income, net during the three months ended September 30, 2021 consisted primarily of unrealized gains from our short-term investments and to a lesser extent interest
income from our cash and cash equivalent investments in the aggregate of $94,000, offset largely by payments due in connection with the CVR Agreement in the amount of $92,000.
Ocuphire Pharma, Inc.
Form 10-Q
Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):
|
For the Nine Months Ended
|
||||||||||||
|
September 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
Collaborations revenue
|
$
|
—
|
$
|
589
|
$
|
(589
|
)
|
|||||
|
Operating expenses:
|
||||||||||||
|
General and administrative
|
5,215
|
6,707
|
(1,492
|
)
|
||||||||
|
Research and development
|
10,769
|
10,437
|
332
|
|||||||||
|
Total operating expenses
|
15,984
|
17,144
|
(1,160
|
)
|
||||||||
|
Loss from operations
|
(15,984
|
)
|
(16,555
|
)
|
571
|
|||||||
|
Interest expense
|
(9
|
)
|
—
|
(9
|
)
|
|||||||
|
Fair value change in warrant liabilities
|
—
|
(33,829
|
)
|
33,829
|
||||||||
|
Other (expense) income, net
|
(60
|
)
|
4
|
(64
|
)
|
|||||||
|
Loss before income taxes
|
(16,053
|
)
|
(50,380
|
)
|
34,327
|
|||||||
|
Provision for income taxes
|
—
|
—
|
—
|
|||||||||
|
Net loss
|
$
|
(16,053
|
)
|
$
|
(50,380
|
)
|
$
|
34,327
|
||||
Collaborations Revenue
Collaborations revenue was $0.6 million for the nine months ended September 30, 2021. Revenue during the period was derived from the license agreements with Processa and BioSense related to
certain technology transfers. There was no collaborations revenue recognized during nine months ended September 30, 2022.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2022 were $5.2 million compared to $6.7 million for the nine months ended September 30, 2021. The $1.5 million decrease
was largely attributable to the $1.6 million non-cash settlement with certain investors in the comparable prior year period, offset by a slight increase in general and administrative expenses attributed to higher payroll and other operating costs
of $0.1 million, on a net basis, in the current year period when compared to the comparable prior year period. General and administrative expenses included $0.9 million and $0.8 million in stock-based compensation expense during the nine months
ended September 30, 2022 and 2021, respectively.
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2022 were $10.8 million compared to $10.4 million for the nine months ended September 30, 2021. The $0.3 million increase
was primarily attributable to the timing of clinical trials and manufacturing activities for Nyxol and APX3330 as well as regulatory, preclinical and other development activities. Research and development expenses also included $0.5 million and
$0.6 million in stock-based compensation expense during the nine months ended September 30, 2022 and 2021, respectively.
Fair Value Change in Warrant Liabilities
The fair value change in warrant liabilities was an expense of $33.8 million for the nine months ended September 30, 2021 and was due to the issuance of the Series A Warrants in connection with
the Pre-Merger Financing in November 2020. The fair value of the Series A Warrants was impacted by the fluctuations in Ocuphire’s common stock fair value and by the number of potential shares of common stock issuable upon conversion of the
underlying Ocuphire warrant liabilities. Upon the February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity and are no longer subject to remeasurement.
There was a negligible change to the fair value of the warrant liability associated with the Rexahn warrants during the nine months ended September 30, 2022.
Other (Expense) Income, net
During the nine months ended September 30, 2022, Ocuphire had other expense, net of $60,000 stemming from net unrealized losses from our short-term investments of $118,000 and realized
currency losses of approximately $1,000, offset in part by interest income of $59,000 related to cash and cash equivalents.
Other income, net during the nine months ended September 30, 2021 consisted primarily of unrealized gains from our short-term investments and to a lesser extent interest
income from our cash and cash equivalent investments in the aggregate of $96,000, offset largely by payments due in connection with the CVR Agreement in the amount of $92,000.
Ocuphire Pharma, Inc.
Form 10-Q
Liquidity and Capital Resources
Capital Resources
As of September 30, 2022, Ocuphire’s principal sources of liquidity consisted of cash and cash equivalents of $13.9 million. Ocuphire believes that its cash on hand will be
sufficient to fund its operations into the fourth quarter of 2023. The Company’s cash and cash equivalents are invested primarily in cash deposits at large, long-standing financial institutions.
Ocuphire has not generated any significant revenue to date and anticipates that it will continue to incur losses for the foreseeable future in the
absence of successful product commercialization or execution of significant license agreements with third parties. Future capital requirements depend on many factors, including the need for the following:
| • |
continued clinical trials and preclinical studies for Nyxol, APX3330 and for any other product candidate in its future pipeline;
|
| • |
developing additional product candidates that it identifies, in-licenses or acquires;
|
| • |
seeking regulatory approvals for any product candidates that successfully complete clinical trials;
|
| • |
contracts to manufacture its product candidates;
|
| • |
Establishing, on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which it may obtain regulatory approval;
|
| • |
maintaining, expanding and protecting its intellectual property portfolio;
|
| • |
hiring additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan;
|
| • |
adding operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts; and
|
| • |
operating as a public company.
|
Historical Capital Resources
Ocuphire’s primary source of cash to fund its operations has been various equity offerings in the amount of $54.1 million and the issuance of convertible notes in the amount of $8.5 million,
inclusive of the promissory notes exchanged for Ocuphire convertible notes.
At-The-Market Program
On February 4, 2021, Ocuphire filed a Form S-3 shelf registration under the Securities Act 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”). A total of 4,627,870 shares of common stock were sold under the 2021 ATM for gross proceeds through September 30, 2022 in the amount of $17.9 million before
deducting issuance expenses in the amount of $0.6 million.
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”) at an offering price of $4.875 per share and 0.50
RDO Warrants, for gross proceeds of $15.0 million, before deducting AGP’s fees and related offering expenses in the amount of $1.1 million. The purchase agreement contains customary representations, warranties and agreements by the Company,
customary conditions to closing, indemnification obligations of the Company, other obligations of the parties and termination provisions.
The RDO Warrants have an exercise price of $6.09 per share, are exercisable upon the initial issuance date of June 8, 2021, and will expire five years
following the initial exercise date. Subject to limited exceptions, a holder of a RDO Warrant will not have the right to exercise any portion of its RDO Warrants if the holder, together with its
affiliates, would beneficially own in excess of 4.99% (or, at the election of a holder prior to the date of issuance, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided,
however, that upon prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided further that in no event shall the beneficial ownership limitation exceed 9.99%. As of September 30,
2022, 1,538,461 RDO Warrants were still outstanding.
Ocuphire Pharma, Inc.
Form 10-Q
The offering of the securities was made pursuant to the Company’s effective shelf registration statement on Form S-3.
Pre-Merger Financing
Securities Purchase Agreement
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 directors of Ocuphire Pharma, Inc. prior to the Merger, and one
director of Rexahn, upon closing of the Merger (the “Pre-Merger Financing”). Pursuant to the Pre-Merger Financing, (i) Ocuphire issued and sold to the investors shares of common stock of Ocuphire Pharma, Inc. prior to the Merger (the “Initial
Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of 1,249,996 shares (the “Converted Initial Shares”) of common stock, (ii) Ocuphire deposited into escrow, for the benefit of the Investors, additional shares
of common stock of Ocuphire Pharma, Inc. prior to the Merger (the “Additional Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of 3,749,992 shares of common stock (the “Converted Additional Shares”), which
Converted Additional Shares were delivered (or became deliverable) to the investors on November 19, 2020, and (iii) the Company agreed to issue to each investor on the tenth trading day following the consummation of the Merger (x) Series A
Warrants representing the right to acquire shares of common stock equal to the sum of (A) the Converted Initial Shares purchased by the investor, (B) the Converted Additional Shares delivered or deliverable to the investor, without giving effect
to any limitation on delivery contained in the Securities Purchase Agreement and (C) the initial number of shares of common stock, if any, underlying the Series B Warrants issued to the Investor and (y) additional warrants to purchase shares of
common stock.
Waiver Agreements
Effective February 3, 2021, each investor that invested in the Pre-Merger Financing (each, a “Holder”) entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”).
Pursuant to the Waiver Agreements, the Holders and the Company agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate certain financing restrictions, extend the term of certain
leak-out agreements, and, in the case of certain Holders, grant certain registration rights for the shares underlying the warrants.
The Waiver Agreements provide for the permanent waiver of the full ratchet anti-dilution provisions, contained in the Series A Warrants (as certain of the anti-dilution provisions had
previously caused liability accounting treatment for the Series A Warrants). Upon the effective date of the Waiver Agreement, the Series A Warrants were reclassified to equity.
Pursuant to the Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed to 1,708,335 in the aggregate with respect to all Holders.
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). As of September 30, 2022, 5,665,838 Series A Warrants were still
outstanding.
At issuance, the Series A Warrants contained certain provisions that could have resulted in a downward adjustment of the initial exercise price and an upward adjustment in the number of shares
underlying the warrants if Ocuphire were to have issued or sold, or made an agreement to issue or sell, any shares of common stock for a price lower than the exercise price then in effect. Pursuant to the terms of the Waiver Agreements, these
provisions are no longer in effect.
Series B Warrants
The Series B Warrants have an exercise price of $0.0001, were exercisable upon issuance and will expire on the day following the later to occur of (i) the Reservation Date (as defined therein),
and (ii) the date on which the investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder. The Series B Warrants were initially
exercisable for 665,836 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and ultimately became exercisable for 1,708,335 shares of common stock upon execution of the Waiver
Agreements. As of September 30, 2022, 77,678 Series B Warrants were still outstanding.
At issuance, the Series B Warrants contained certain provisions that could have resulted in the issuance of additional Series B Warrants depending on the dollar volume-weighted average prices of a share of Common
Stock during a 45-trading day Reset Period. Pursuant to the terms of the Waiver Agreements, those provisions are no longer in effect.
Ocuphire Convertible Notes
Ocuphire Pharma, Inc.
Form 10-Q
From May 2018 through March 2020, Ocuphire issued convertible notes (the “Ocuphire convertible notes”) for aggregate gross proceeds of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes. The final
closing of the Ocuphire convertible notes occurred on March 10, 2020. The Ocuphire convertible notes had an interest rate of 8% per annum. On November 4, 2020, all of Ocuphire’s outstanding notes were
converted into 977,128 shares of Ocuphire common stock in connection with the completion of the Merger.
Cash Flows
The following table summarizes Ocuphire’s cash flows for the periods indicated (in thousands):
|
For the Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Net cash used in operating activities
|
$
|
(14,477
|
)
|
$
|
(13,724
|
)
|
||
|
Net cash provided by (used in) investing activities
|
—
|
—
|
||||||
|
Net cash provided by financing activities
|
3,798
|
19,575
|
||||||
|
Net (decrease) increase in cash and cash equivalents
|
$
|
(10,679
|
)
|
$
|
5,851
|
|||
Cash Flow from Operating Activities
For the nine months ended September 30, 2022, cash used in operating activities of $14.5 million was attributable to a net loss of $16.1 million, partially offset by $1.5 million in non-cash
operating expenses, and attributable to a net cash increase of approximately $0.1 million stemming from the change in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of stock-based compensation of $1.4
million and unrealized loss on short-term investments of $0.1 million. The change in operating assets and liabilities was primarily attributable to a net cash source of $0.7 million attributed to a decrease in prepaid expenses, offset largely by
a decrease in accounts payable and accrued expense associated with the fluctuations of Ocuphire’s operating expenses.
For the nine months ended September 30, 2021, cash used in operating activities of $13.7 million was attributable to a net loss of $50.4 million, partially offset by $36.5 million in non-cash
operating expenses and a net change of $0.2 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of the fair value change in the warrant liabilities of $33.8 million, a share settlement with
certain investors in the amount of $1.6 million, stock-based compensation of $1.4 million and non-cash impact from the receipt of common stock stemming from the fulfillment of revenue milestones ($0.4) million. The change in operating assets and
liabilities was primarily attributable to a decrease in Ocuphire’s prepaid expenses offset in part by a net decrease in accrued liabilities in connection with operating as a public company post-Merger.
Cash Flow from Investing Activities
There were no sources or uses from investing activities during the periods presented.
Cash Flow from Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2022 was $3.8 million that consisted principally of proceeds received from the 2021 ATM net of issuance costs
in the amount of $4.3 million, offset in part by payments made on the short-term loan of $0.5 million.
Net cash provided by financing activities during the nine months ended September 30, 2021 was $19.6 million in connection with proceeds received from both the Registered Direct Offering and 2021
ATM, net of issuance costs, and to a much lesser extent proceeds in connection with the exercise of stock options.
Liquidity and Capital Resource Requirements
Ocuphire has no current source of revenue to sustain its present activities, and Ocuphire does not expect to generate significant revenue until, and unless, the FDA or other regulatory authorities approve
Nyxol or APX3330 and it successfully commercializes its product candidates or if Ocuphire enters into any significant license agreements with third parties. Until such time, if ever, as Ocuphire can generate substantial product revenue, it
expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Ocuphire does not have any committed external source of funds. To the extent that
Ocuphire raises additional capital through the sale of equity or convertible debt securities, the ownership interest of Ocuphire’s stockholders will be diluted, and the terms of these securities may include liquidation, warrants, or other
preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting Ocuphire’s ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. If Ocuphire raises additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, Ocuphire may have to relinquish valuable rights to
its technologies, future revenue streams or grant licenses on terms that may not be favorable to Ocuphire. If Ocuphire is unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or
licensing arrangements when needed, Ocuphire may be required to delay, limit, reduce or terminate its product development, future commercialization efforts, or grant rights to develop and market its product candidates that Ocuphire would
otherwise prefer to develop and market itself.
Ocuphire Pharma, Inc.
Form 10-Q
Future Capital Requirements
Ocuphire’s independent registered public accounting firm included an explanatory paragraph in its report on Ocuphire’s financial statements as of and for the years ended December 31,
2021 and 2020, noting the existence of substantial doubt about its ability to continue as a going concern. This uncertainty arose from management’s review of Ocuphire’s results of operations and financial condition and its conclusion that, based
on Ocuphire’s operating plans, Ocuphire did not have sufficient existing working capital to sustain operations substantially beyond twelve months following the date of the report filing. To continue to fund operations, Ocuphire will need to raise
capital. Ocuphire may obtain additional financing in the future through the issuance of common stock, through other equity or debt financings or through collaborations or partnerships with other companies. Ocuphire may not be able to raise
additional capital on terms acceptable to it, or at all, and any failure to raise capital as and when needed could compromise Ocuphire’s ability to execute on its business plan.
The development of Nyxol and APX3330 is subject to numerous uncertainties, and Ocuphire has based these estimates on assumptions that may prove to be substantially different than what Ocuphire currently
anticipates and could result in cash resources being used sooner than what Ocuphire currently expects. Additionally, the process of advancing early-stage product candidates and testing product candidates in clinical trials is costly, and the
timing of progress in these clinical trials is uncertain. Ocuphire’s ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support its cost structure. Ocuphire cannot give any
assurance that it will ever be profitable or generate positive cash flow from operating activities.
Contractual Obligations and Commitments
Facility Lease
Ocuphire leases a facility under a non-cancellable operating lease that commenced on June 8, 2019 and expires on December 31, 2022, as amended, for a
base rent in the amount of $3,000 per month.
Apexian Sublicense Agreement
On January 21, 2020, Ocuphire entered into the Apexian Sublicense Agreement, pursuant to which it obtained exclusive worldwide patent and other intellectual property rights that
constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions. The lead compound in the Ref-1 Inhibitor program is APX3330, which Ocuphire intends to develop as
an oral tablet therapeutic to treat DR and DME, and potentially wAMD.
In connection with the Apexian Sublicense Agreement, Ocuphire issued 843,751 shares of Ocuphire common stock to Apexian and certain of Apexian’s affiliates.
Ocuphire agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus
indication. These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and the first Phase 3 pivotal trial in the United States, and filing and achieving
regulatory approval from the FDA for the first New Drug Application for a compound) totaling up to $11 million in the aggregate and (ii) payments for specified sales milestones of up to $20 million in the aggregate, each of which net sales
milestone payments is payable once, upon the first achievement of such milestone.
Lastly, Ocuphire also agreed to make royalty payments equal to a single-digit percentage of its net sales of products covered by the patents under the Apexian Sublicense Agreement. None
of the milestone or royalty payments were triggered as of the date of this Report.
Other Commitments
In the course of normal operations, Ocuphire entered into cancellable purchase commitments with its suppliers for various key research, clinical and manufacturing services. The purchase
commitments covered by these arrangements are subject to change based on Ocuphire’s research and development efforts.
Other Funding Requirements
As noted above, certain of our cash requirements relate to the funding of our ongoing research and development of Nyxol and APX3330, inclusive of any potential
milestone and royalty obligations under our intellectual property licenses. See “Part I, Item 1— Business—Nyxol and APX3330 Clinical Experience Summaries —Ocuphire Clinical Development Plan —Future Planned Nyxol Trials—Potential Clinical Plans
for APX3330—Future In-Licensing and Acquisition Opportunities—Manufacturing—Apexian Sublicense Agreement— Review and Approval of Drugs in the United States” in our Annual Report on Form 10-K for
the year ended December 31, 2021 for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are
able to estimate such costs.
Our other cash requirements within the next twelve months include accounts payable, accrued expenses, purchase commitments and other current liabilities. Our
other cash requirements greater than twelve months from various contractual obligations and commitments may include operating leases and contractual agreements with third-party service providers for clinical research, product development,
manufacturing, commercialization, supplies, payroll, equipment maintenance, and audits for periods into calendar year 2023. Refer to Note 4 – Commitments and Contingencies included in Part 1, Item 1 – Financial Statements” of this Report for further detail of our lease obligation and license agreements with regard to the timing of expected future payments.
Ocuphire Pharma, Inc.
Form 10-Q
We expect to satisfy our short-term and long-term obligations through cash on hand and from future equity and debt financings until we generate an adequate level of revenue from commercial sales to cover expenses, if ever.
Critical Accounting Policies and Estimates
Ocuphire’s financial statements are prepared in accordance with U.S. GAAP. These accounting principles require Ocuphire to make estimates and judgments
that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. Ocuphire believes that the estimates and judgments
upon which it relies are reasonably based upon information available to Ocuphire at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, Ocuphire’s
financial results will be affected. The accounting policies that reflect Ocuphire’s more significant estimates and judgments and which it believes are the most critical to aid in fully understanding and evaluating its reported financial results
are described below.
Our significant accounting policies are discussed in Note 1 — Company Description and Summary of Significant Accounting Policies, included in “Part I,
Item 1 – Financial Statements” of this Report. We believe that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates require our most
difficult, subjective, or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with the Audit Committee of our Board of
Directors. We have not made any material changes to date, nor do we believe there is a reasonable likelihood of a material future change to the accounting methodologies for the areas described below.
Collaborations Revenue
For discussion about the determination of collaborations revenue, see Note 10 — Collaborations and License Agreements included in “Part 1, Item 1 – Financial Statements” of this Report. To date,
we have not had, nor expect to have in the future, significant variable consideration adjustments related to product revenue, such as chargebacks, sales allowances and sales returns.
Warrant Liabilities
Following the Merger, Ocuphire issued the Series A Warrants in connection with the Pre-Merger Financing and assumed Rexahn warrants issued prior to
the Merger. Ocuphire accounts for these warrants as a liability at fair value as long as certain provisions precluding equity accounting treatment are present. Upon the execution of the Waiver Agreements described in Note 3 — Pre-Merger
Financing included in “Part 1, Item 1 – Financial Statements” of this Report, the Series A Warrants were no longer subject to cash settlement or indexation provisions, precluding equity classification, and as a result, not subject to fair
value remeasurement. Ocuphire will continue to adjust the Rexahn warrant liability for changes in fair value until the earlier of the exercise, expiration, or until such time that cash settlement or indexation provisions are no longer in
effect for the Rexahn warrants. We do not expect that the fluctuations in fair value attributed to the Rexahn warrant liability will be significant.
Stock-based Compensation
Ocuphire accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation. Accordingly, compensation
costs related to equity instruments granted are recognized at the grant date fair value which is not subject to remeasurement. We record equity instrument forfeitures when they occur. For discussions about the application of grant date fair
value associated with our stock-based compensation, see Note 8 — Stock-based Compensation included in “Part 1, Item 1 – Financial Statements” of this Report.
Income Tax Assets and Liabilities
Currently, there is no provision for income taxes, as we have incurred operating losses to date, and a full valuation allowance has been provided on our net
deferred tax assets. For additional information, see Note 12 — Income Taxes included in “Part 1, Item 1 – Financial Statements” of this Report.
Contingencies
We are subject to numerous contingencies arising in the ordinary course of business, including obligations related to certain license agreements. For
additional information, see Note 4 — Commitments and Contingencies included in “Part 1, Item 1 – Financial Statements” of this Report.
Recent Accounting Pronouncements
Refer to Note 1 — “Company Description and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in “Part 1, Item 1 – Financial Statements” in
this Report for a discussion of recently issued accounting pronouncements.
Ocuphire Pharma, Inc.
Form 10-Q
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
Not applicable for smaller reporting companies.
| Item 4. |
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.
We designed and evaluated our disclosure controls and procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance and not absolute assurance of achieving the desired control objectives. Also, the design of a control system must reflect the fact that there are resource constraints and that the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any,
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon
certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our
disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15(d)- 15(e) promulgated under the Exchange Act as of September 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective as of September 30, 2022.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2022, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 1. |
Legal Proceedings
|
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal
proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management
resources and other factors.
| Item 1A. |
Risk Factors
|
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price
of our securities. During the three months ended September 30, 2022, our risk factors have not changed materially from those risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. You
should carefully consider the risks and uncertainties discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
None.
| Item 3. |
Defaults Upon Senior Securities
|
None.
Not applicable to our Company.
| Item 5. |
Other Information
|
None.
Ocuphire Pharma, Inc.
Form 10-Q
| Item 6. |
Exhibits
|
|
NUMBER
|
DESCRIPTION OF DOCUMENT
|
||
|
Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Appendix G to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 29, 2005).
|
|||
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 5,
2017).
|
|||
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on August 30,
2018).
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Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 12,
2019).
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Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
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Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
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|||
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Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
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First Amendment to Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 10, 2022).
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Second Amendment to Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 17, 2022).
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Fourth Lease Amendment, dated as of October 17, 2022.
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Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|||
|
101.INS
|
Inline XBRL Instance Document.
|
||
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
||
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
||
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
||
|
*
|
Documents are furnished not filed
|
Ocuphire Pharma, Inc.
Form 10-Q
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: November 4, 2022 | ||
| Ocuphire Pharma, Inc. | ||
|
By:
|
/s/ Mina Sooch
|
|
|
Mina Sooch
|
||
|
Chief Executive Officer
|
||
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(Principal Executive Officer)
|
||
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By:
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/s/ Amy Rabourn
|
|
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Amy Rabourn
|
||
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Vice President of Finance
|
||
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(Principal Financial Officer)
|
31
Exhibit 10.1
FOURTH LEASE AMENDMENT
This Lease Amendment made this 17th day of October, 2022 by and between DUKE & DUKE, a Limited Partnership, of 37000 Grand River Avenue, Suite 360, Farmington Hills, MI 48335, as “Landlord” and Ocuphire Pharma,
Inc. of 37000 Grand River Avenue, Suite 120, Farmington Hills, MI 48335, as “Tenant”.
WITNESSETH
WHEREAS, on or about the 31st day of August, 2021, Landlord and Tenant entered into a Lease Agreement with a First Amendment on
October 29, 2019, a Second Amendment on November 17, 2020, and a Third Amendment on September 9, 2022. The Lease together with any and all Amendments and/or riders is herein collectively referred to as, “Lease”. The certain demised premises
consists of 1,623 rentable square feet and being commonly known as Suite 120 at 37000 Grand River Avenue, Farmington Hills, MI 48335; and
WHEREAS, the parties wish to amend this Lease in respect to the demised premises in that Tenant will extend the term of the Lease; and
NOW THEREFORE, in consideration of monies to be paid and covenants and conditions to be performed, IT IS HEREBY AGREED AS FOLLOWS:
1. That the rent for the Suite known as Suite 120 will be as follows;
01/01/2023 — 12/31/2023 $22.00 per rentable square foot
2. That the expiration date of Tenant’s Lease shall be December 31, 2023.
3. Tenant Share: 2.13%
4. Base Tax: $1.39
5. Miscellaneous: The Lease remains in full force and effect and has not been modified or extended except as specifically set in this Fourth Amendment. To the extent of any conflict between this Amendment and
the Lease, the provisions of this Amendment shall control.
|
TENANT:
|
LANDLORD:
|
||
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Ocuphire Pharma, Inc.
|
DUKE & DUKE,
|
||
|
a Limited Partnership
|
|||
|
/s/ Mina Sooch
|
/s/ Thomas Duke
|
||
|
Name:
|
Mina Sooch
|
Name:
|
Thomas Duke
|
|
Its:
|
CEO
|
Its:
|
Thomas Duke Gen Ptnr
|
|
Date:
|
10/18/2022
|
Date:
|
10/18/2022
|
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR 15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Mina Sooch, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2022 of Ocuphire Pharma, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability
to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 4, 2022
|
/s/ Mina Sooch |
|
Name:
|
Mina Sooch
|
|
|
Title:
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR 15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Amy Rabourn, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2022 of Ocuphire Pharma, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 4, 2022
|
/s/ Amy Rabourn |
|
Name:
|
Amy Rabourn
|
|
|
Title:
|
Vice President of Finance
|
|
|
(Principal Financial Officer)
|
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the “Report”) of Ocuphire Pharma, Inc., a Delaware corporation (the “Company”) as
filed with the Securities and Exchange Commission, Mina Sooch, as Chief Executive Officer of the Company, and Amy Rabourn, as Vice President of Finance of the Company, each hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that to the best of her knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Mina Sooch | |
|
Mina Sooch
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
| /s/ Amy Rabourn | |
|
Amy Rabourn
|
|
|
Vice President of Finance
|
|
|
(Principal Accounting Officer)
|
|
|
Dated: November 4, 2022
|