UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2023

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

For the transition period from to ________

Commission File Number: 001-34079

Ocuphire Pharma, Inc.

(Exact name of Registrant as specified in its charter)

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

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

Registrant’s Telephone Number, Including Area Code: (248) 957-9024

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

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

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

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

The number of outstanding shares of the registrant’s common stock as of May 10, 2023 was 20,952,170.

OCUPHIRE PHARMA, INC.

FORM 10-Q

INDEX

		Page
	PART 1 – FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	2
	Condensed Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)	3
	Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	4
	Condensed Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Notes to Condensed Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

	PART II – OTHER INFORMATION	29

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

SIGNATURES		31

Index

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Ocuphire Pharma, Inc.

Condensed Balance Sheets

(in thousands, except share amounts and par value)

	As of
	March 31, 2023 (unaudited)			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	38,988		$	42,634
Accounts receivable (Note 9)		2,834			1,298
Contract asset (Note 9)		2,467			3,552
Prepaids and other current assets		1,088			1,453
Short-term investments		22			49
Total current assets		45,399			48,986
Property and equipment, net		5			6
Total assets	$	45,404		$	48,992

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,221		$	1,069
Accrued expenses		1,933			1,684
Total current liabilities		4,154			2,753
Warrant liabilities		—			—
Total liabilities		4,154			2,753

Commitments and contingencies (Note 3 and Note 8)

Stockholders’ equity
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 and December 31, 2022.		—			—
Common stock, par value $0.0001; 75,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 20,947,830 and 20,861,315 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively.		2			2
Additional paid-in capital		118,519			117,717
Accumulated deficit		(77,271	)		(71,480	)
Total stockholders’ equity		41,250			46,239
Total liabilities and stockholders’ equity	$	45,404		$	48,992

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed Statements of Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2023			2022

License and collaborations revenue	$	1,749		$	—

Operating expenses:
General and administrative		2,285			1,736
Research and development		5,595			4,772
Total operating expenses		7,880			6,508
Loss from operations		(6,131	)		(6,508	)
Interest expense		—			(5	)
Fair value change in warrant liabilities		—			—
Other income (expense), net		340			(82	)
Loss before income taxes		(5,791	)		(6,595	)
Benefit (provision) for income taxes		—			—
Net loss		(5,791	)		(6,595	)
Other comprehensive loss, net of tax		—			—
Comprehensive loss	$	(5,791	)	$	(6,595	)
Net loss per share:
Basic and diluted (Note 10)	$	(0.28	)	$	(0.35	)
Number of shares used in per share calculations:
Basic and diluted		20,939,607			18,888,471

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

	Common Stock				Additional Paid–In			Accumulated			Total
	Shares		Amount		Capital			Deficit			Equity

Balance at December 31, 2021		18,845,828	$	2	$	111,588		$	(89,368	)	$	22,222
Issuance of common stock in connection with the at-the-market program		336,544		—		1,208			—			1,208
Issuance costs		—		—		(35	)		—			(35	)
Stock–based compensation		6,970		—		445			—			445
Exercise of stock options		24,309		—		27			—			27
Net and comprehensive loss		—		—		—			(6,595	)		(6,595	)
Balance at March 31, 2022		19,213,651	$	2	$	113,233		$	(95,963	)	$	17,272

Balance at December 31, 2022		20,861,315	$	2	$	117,717		$	(71,480	)	$	46,239
Issuance costs		—		—		(2	)		—			(2	)
Stock–based compensation		68,646		—		804			—			804
Exercise of warrants		17,869		—		—			—			—
Net and comprehensive loss		—		—		—			(5,791	)		(5,791	)
Balance at March 31, 2023		20,947,830	$	2	$	118,519		$	(77,271	)	$	41,250

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(5,791	)	$	(6,595	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		804			445
Depreciation		1			1
Fair value change in warrant liabilities		—			—
Unrealized loss from short-term investments		27			84
Change in assets and liabilities:
Accounts receivable		(1,536	)		—
Contract asset		1,085			—
Prepaid expenses and other assets		365			219
Accounts payable		1,152			(5	)
Accrued and other liabilities		247			(319	)
Net cash used in operating activities		(3,646	)		(6,170	)
Investing activities
Net cash used in investing activities		—			—
Financing activities
Proceeds from issuance of common stock in connection with the at-the-market program		—			1,208
Issuance costs		—			(30	)
Payments made in connection with short-term loan		—			(323	)
Exercise of Series B warrants		—			—
Exercise of stock options		—			27
Net cash provided by financing activities		—			882
Net decrease in cash and cash equivalents		(3,646	)		(5,288	)
Cash and cash equivalents at beginning of period		42,634			24,534
Cash and cash equivalents at end of period	$	38,988		$	19,246
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—		$	—
Cash paid for interest	$	—		$	5
Supplemental non-cash financing transactions:
Unpaid issuance and deferred offering costs	$	2		$	5

See accompanying notes.

Index

Notes to Condensed Financial Statements

1.	Company Description and Summary of Significant Accounting Policies

Nature of Business

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

The Company’s lead retinal product candidate, APX3330, is a 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.

In November 2022, the Company entered into a license and collaboration agreement (the “Nyxol License Agreement”) with FamyGen Life Sciences, Inc. (acquired by Viatris, Inc. (“Viatris”) in January 2023) pursuant to which it granted Viatris an exclusive license to develop, manufacture, import, export and commercialize its refractive product candidate phentolamine ophthalmic solution 0.75% (Nyxol® Eye Drops or “Nyxol”). Nyxol is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. Nyxol can potentially be used across multiple indications such as treatment of pharmacologically-induced mydriasis (“RM”) (dilation of the pupil), presbyopia (age-related blurry near vision) and dim light or night vision disturbances (“DLD”) (halos, glares and starbursts).

Reverse Merger with Rexahn

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

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 conflict between Russia and Ukraine, disruptions in the banking system and financial markets, lingering 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.

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, disruptions in the banking system and financial markets, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.

Basis of Presentation

The accompanying condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The December 31, 2022 condensed balance sheet was derived from audited financial statements, and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2022.

In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

On December 31, 2021, the Company merged its wholly-owned subsidiary, OcuSub Inc, with and into the Company, with the Company remaining as the surviving entity. The merger of the Company’s wholly-owned subsidiary did not have a financial impact in the periods presented. Upon 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 financial statements prior to the December 31, 2021 merger with OcuSub Inc.

Index

Notes to Condensed Financial Statements

Liquidity

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

As of March 31, 2023, the Company had $39.0 million in cash and cash equivalents. The Company believes its current available cash and cash equivalents will be sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following May 15, 2023, which is the date that these condensed financial statements are being issued.

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

Use of Estimates

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

Segment Information

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

Cash and Cash Equivalents

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

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is held or managed by one financial institution in the United States. Amounts on deposit exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. In addition, the Company limits its exposure through the kind, quality and concentration of its investments. As of March 31, 2023, the Company had deposits that exceeded federally insured amounts by $38.7 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 statements of comprehensive loss. The Company classifies investments available to fund current operations as current assets on its balance sheets. The Company did not recognize any impairments on its investments to date through March 31, 2023.

Revenue Recognition

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

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

Index

Notes to Condensed Financial Statements

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

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

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

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

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

Contract Asset

The Company recognizes a contract asset when goods or services are transferred to the customer before the customer pays or before payment is due, excluding any amounts presented as an accounts receivable. The Company recorded a contract asset in connection with a license and collaboration agreement in the amount of $2.5 million as of March 31, 2023. See Note 9- License and Collaboration Agreements.

Accounts Receivable and Allowances for Doubtful Accounts

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

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

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. R&D costs include costs that are reimbursed under the Nyxol License Agreement.

Index

Notes to Condensed Financial Statements