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As filed with the Securities and Exchange Commission on September 30, 2020
Registration No. 333-239702
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REXAHN PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2834
(Primary Standard Industrial
Classification Code Number)
11-3516358
(I.R.S. Employer
Identification Number)
15245 Shady Grove Road, Suite 455
Rockville, MD 20850
(240) 268-5300
(Address including zip code, and telephone number, including
area code, of Registrant’s principal executive offices)
Douglas J. Swirsky
President and Chief Executive Officer
Rexahn Pharmaceuticals, Inc.
15245 Shady Grove Road, Suite 455
Rockville, MD 20850
(240) 268-5300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Asher M. Rubin
William I. Intner
Hogan Lovells US LLP
100 International Drive, Suite 2000
Baltimore, MD 21202
(410) 659-2700
Mina Sooch
President & Chief Executive Officer
Ocuphire Pharma, Inc.
37000 Grand River Ave, Suite 120
Farmington Hills, MI 48335
(248) 681-9815
Phillip D. Torrence
Jeffrey H. Kuras
Emily J. Johns
Honigman LLP
650 Trade Centre Way, Suite 200
Kalamazoo, MI 49002-0402
(269) 337-7700
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
 
Accelerated filer
Non-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 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13(e)-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Security to be Registered
Amount to be
Registered(1)
Proposed Maximum
Offering Price
Per Share
Proposed Maximum
Aggregate
Offering Price(2)
Amount of
Registration Fee(3)
Common stock, $0.0001 par value per share
75,043,772
N/A
$336.95
$1.00
(1)
Represents the maximum number of shares of common stock, $0.0001 par value per share (“Rexahn common stock”), of Rexahn Pharmaceuticals, Inc., a Delaware corporation (“Rexahn”), issuable to holders of common stock, $0.0001 par value per share (“Ocuphire common stock”), and options of Ocuphire Pharma, Inc., a Delaware corporation (“Ocuphire”), in the proposed merger of Razor Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Rexahn (“Merger Sub”), with and into Ocuphire (the “merger”). The amount of Rexahn common stock to be registered is based on the estimated maximum number of shares of Rexahn common stock that are expected to be issued pursuant to the merger, after taking into account the expected issuance by Ocuphire immediately prior to the merger of an estimated 4,462,544 shares of Ocuphire common stock (3,346,908 of which will be held in escrow for the benefit of certain accredited investors) pursuant to an amended and restated securities purchase agreement, dated June 29, 2020, by and among Ocuphire, Rexahn and certain accredited investors, and assuming an exchange ratio calculated by assuming a minimum “Parent Valuation” of $12.0 million and “Parent Outstanding Shares” of 5,019,141 (which amount includes shares of Rexahn common stock that may be issued by Rexahn in exchange for warrants of Rexahn that are currently outstanding), conversion of Ocuphire convertible notes on November 14, 2020, and without giving effect to a reverse stock split of Rexahn common stock expected to be completed immediately prior to the merger.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Ocuphire is a private company, no market exists for its securities, and Ocuphire has an accumulated capital deficit. Therefore, the proposed maximum aggregate offering price is one-third of the aggregate par value of the Ocuphire securities expected to be exchanged in the proposed merger.
(3)
This fee has been calculated pursuant to Section 6(b) of the Securities Act and has been rounded up to $1.00. Rexahn previously paid this amount.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this proxy statement/prospectus/information statement is not complete and may be changed. Rexahn may not sell its securities pursuant to the proposed transactions until the Registration Statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus/information statement is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated September 30, 2020

PROPOSED MERGER
YOUR VOTE IS VERY IMPORTANT

To the stockholders of Rexahn Pharmaceuticals, Inc. and Ocuphire Pharma, Inc.:
Rexahn Pharmaceuticals, Inc. (“Rexahn”) and Ocuphire Pharma, Inc. (“Ocuphire”) have entered into an Agreement and Plan of Merger and Reorganization, dated June 17, 2020 and amended on June 29, 2020 (as amended, the “Merger Agreement”), pursuant to which a wholly owned subsidiary of Rexahn will merge with and into Ocuphire, with Ocuphire surviving as a wholly owned subsidiary of Rexahn (the “merger”).
At the effective time of the merger (the “Effective Time”), each share of common stock of Ocuphire, $0.0001 par value per share (“Ocuphire common stock”), will be converted into the right to receive approximately 4.3812 shares of Rexahn common stock, $0.0001 par value per share (“Rexahn common stock”), assuming Rexahn delivers $1.9 million of net cash, subject to adjustment. This exchange ratio is an estimate only as of the date hereof and the final exchange ratio will be determined pursuant to a formula described in the Merger Agreement (the “Exchange Ratio”) and on page 151 of this proxy statement/prospectus/information statement. The Exchange Ratio is adjusted based primarily on Rexahn’s actual net cash as calculated in accordance with the Merger Agreement (the “Parent Cash Amount”). Rexahn anticipates delivering a Parent Cash Amount between $1.9 million and $2.4 million assuming the merger closes by November 14, 2020. If the Parent Cash Amount is $1.9 million, then immediately following the Effective Time, Rexahn stockholders would own approximately 13.1% of Rexahn common stock, and the former Ocuphire securityholders would own approximately 86.9% of Rexahn common stock on a fully-diluted basis. Because the final Parent Cash Amount will not be calculated until shortly prior to closing of the Merger and may vary significantly depending on a number of factors, Rexahn’s stockholders may own significantly less of the combined company depending on the final Parent Cash Amount and Rexahn may not be able to satisfy the minimum Parent Cash Amount requirement of $0 as set forth in the Merger Agreement. If the Parent Cash Amount is less than $0, the merger would not close unless Ocuphire waives the minimum Parent Cash Amount closing condition.
On June 17, 2020, Ocuphire and Rexahn entered into a securities purchase agreement, which was amended and restated on June 29, 2020, with certain investors (the “Investors”) pursuant to which, among other things, Ocuphire agreed to issue to the Investors shares of Ocuphire common stock immediately prior to the merger and Rexahn agreed to issue to the Investors warrants to purchase shares of Rexahn common stock (the “Investor Warrants”) after closing of the merger in a private placement transaction for an aggregate purchase price of $21.15 million (the “Pre-Merger Financing”). The illustrative ownership percentages set forth above give effect to the shares of Ocuphire common stock that will be issued to Investors in the Pre-Merger Financing prior to the Effective Time, but do not account for any additional shares of Rexahn common stock that may be issued to Investors following the Effective Time or shares of Rexahn common stock issuable to the Investors pursuant to the Investor Warrants after the Effective Time. Rexahn stockholders prior to the merger may therefore own significantly less of the securities of the combined company following closing of the Pre-Merger Financing and will not know the percentage of securities they will hold in the combined company at the time of the Rexahn Special Meeting of Stockholders. For example, assuming an Exchange Ratio of 4.3812 and Parent Cash Amount of $1.9 million, the ownership percentage of Rexahn stockholders could be between approximately 2.3% and 13.1% of the fully-diluted combined company equity securities. See the section entitled “Agreements Related to the Merger—Pre-Merger Financing” on page 188 of this proxy statement/prospectus/information statement.
Rexahn common stock is currently listed on the Nasdaq Capital Market under the symbol “REXN.” Rexahn has filed an initial listing application for the combined company with the Nasdaq Capital Market. After completion of the merger, Rexahn expects to be renamed “Ocuphire Pharma, Inc.” and to trade under the symbol “OCUP.” On September 29, 2020, the last trading day before the date of this proxy statement/prospectus/information statement, the closing sale price of Rexahn common stock was $2.11 per share.
Rexahn is holding the Rexahn special meeting in order to obtain the stockholder approvals necessary to complete the merger and related matters. The Rexahn special meeting will be held at 8:00 a.m., Eastern Time, on Monday, November 2, 2020 at Rexahn’s offices located at 15245 Shady Grove Road, Suite 455, Rockville, MD 20850, unless postponed or adjourned to a later date, for the purpose of considering and voting upon the matters set forth in the Notice of Special Meeting of Stockholders and accompanying proxy statement/prospectus/information statement.
After careful consideration, each of the boards of directors of Rexahn and Ocuphire has (i) determined that the merger and all related transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of the applicable company’s stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated therein and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the respective stockholders approve the proposals necessary to accomplish the transactions contemplated by the Merger Agreement.
More information about Rexahn, Ocuphire and the proposed transactions is contained in this proxy statement/prospectus/information statement. Rexahn and Ocuphire urge you to read this proxy statement/prospectus/information statement carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 35.
Rexahn and Ocuphire are excited about the opportunities the merger brings to both Rexahn’s and Ocuphire’s stockholders.
Douglas J. Swirsky
Mina Sooch
President and CEO, Rexahn Pharmaceuticals, Inc.
President and CEO, Ocuphire Pharma, Inc.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus/information statement. Any representation to the contrary is a criminal offense.
The accompanying proxy statement/prospectus/information statement is dated     , 2020, and is first being mailed to Rexahn’s and Ocuphire’s stockholders on or about     , 2020.

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REXAHN PHARMACEUTICALS, INC.
15245 Shady Grove Road, Suite 455
Rockville, MD 20850
(240) 268-5300
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 2, 2020
Dear Stockholders of Rexahn:
On behalf of the board of directors (the “Rexahn Board”) of Rexahn Pharmaceuticals, Inc., a Delaware corporation (“Rexahn”), we are pleased to deliver this proxy statement/prospectus/information statement for a special meeting of stockholders of Rexahn (the “Rexahn special meeting”) and for the proposed transactions between Rexahn and Ocuphire Pharma, Inc., a Delaware corporation (“Ocuphire”), pursuant to which Razor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Rexahn (“Merger Sub”), will merge with and into Ocuphire, with Ocuphire surviving as a wholly owned subsidiary of Rexahn (the “merger”). The Rexahn special meeting will be held on Monday, November 2, 2020 at 8:00 a.m., Eastern Time, at Rexahn’s offices located at 15245 Shady Grove Road, Suite 455, Rockville, MD 20850, for the following purposes:
1.
to consider and vote upon a proposal to approve the issuance of shares of Rexahn common stock, $0.0001 par value per share (“Rexahn common stock”), to stockholders of Ocuphire pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 17, 2020, by and among Rexahn, Merger Sub and Ocuphire, as amended by the First Amendment to Agreement and Plan of Merger and Reorganization dated June 29, 2020, a copy of which is attached as Annex A to this proxy statement/prospectus/information statement (as amended, the “Merger Agreement”), and the change of control of Rexahn resulting from the merger under The Nasdaq Stock Market LLC rules;
2.
to consider and vote upon an amendment to the amended and restated certificate of incorporation of Rexahn, as amended (the “Rexahn Certificate of Incorporation”), to effect a reverse stock split of Rexahn common stock, at a ratio within the range of 1-for-3 to 1-for-5, with such specific ratio to be approved by the Rexahn Board, in the form attached as Annex B to this proxy statement/prospectus/information statement;
3.
to consider and vote upon an amendment to the Rexahn Certificate of Incorporation to change the corporate name of Rexahn from “Rexahn Pharmaceuticals, Inc.” to “Ocuphire Pharma, Inc.”, in the form attached as Annex C to this proxy statement/prospectus/information statement;
4.
to consider and vote upon a proposal to approve the adoption of the Ocuphire Pharma, Inc. 2020 Equity Incentive Plan in the form attached as Annex D to this proxy statement/prospectus/information statement (the “Ocuphire 2020 Plan”);
5.
to consider and vote upon a proposal to approve the issuance of: (i) shares of Rexahn common stock upon the exercise of the Investor Warrants to be issued in the Pre-Merger Financing, and (ii) additional shares of Rexahn common stock that may be issued following the closing of the Pre-Merger Financing, in each case pursuant to the Amended and Restated Securities Purchase Agreement, dated as of June 29, 2020, by and among Rexahn, Ocuphire and the investors party thereto, and as required by and in accordance with Nasdaq Listing Rule 5635;
6.
to consider and vote upon an adjournment of the Rexahn special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1, 2, 3, 4 or 5; and
7.
to transact such other business as may properly come before the Rexahn special meeting or any adjournment or postponement thereof.
The Rexahn Board has fixed September 25, 2020 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Rexahn special meeting and any adjournment or postponement thereof

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(the “Record Date”). Only holders of record of shares of Rexahn common stock at the close of business on the Record Date are entitled to notice of, and to vote at, the Rexahn special meeting. At the close of business on the Record Date, Rexahn had 4,483,198 shares of common stock outstanding and entitled to vote.
Your vote is important. The affirmative vote of a majority in interest of the holders of Rexahn common stock present in person or by proxy at the Rexahn special meeting and entitled to vote on the matter is required for approval of Proposal Nos. 1, 4, 5 and 6. The affirmative vote of the holders of a majority of the shares of Rexahn common stock outstanding on the Record Date for the Rexahn special meeting and entitled to vote on the matter is required for approval of Proposal Nos. 2 and 3.
Proposal No. 1 is conditioned upon the approval of Proposal No. 2, and the merger cannot be consummated without the approval of Proposal Nos. 1 and 2. Proposal Nos. 3 and 4 are conditioned upon the consummation of the merger. If the merger is not completed or the stockholders do not approve Proposal No. 3, Rexahn will not change its name to “Ocuphire Pharma, Inc.” If the merger is not completed or the stockholders do not approve Proposal No. 4, the Ocuphire 2020 Plan will not become effective. Proposal No. 5 is conditioned upon Proposal Nos. 1 and 2. Proposal Nos. 1 and 5 are not conditioned on Proposal No. 3 or Proposal No. 4 being approved, and Proposal No. 2 is not conditioned on the approval of any other proposal.
Even if you plan to attend the Rexahn special meeting in person, Rexahn requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Rexahn special meeting if you are unable to attend.
THE REXAHN BOARD HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, REXAHN AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE REXAHN BOARD RECOMMENDS THAT REXAHN STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.
 
By Order of the Rexahn Board,
 
 
 
Douglas J. Swirsky
President and Chief Executive Officer
Rockville, Maryland
    , 2020
Rexahn is closely monitoring developments related to COVID-19. It could become necessary or desirable for Rexahn to change the date, time, location and/or means of holding the Rexahn special meeting (including by means of remote communication). If such a change is made, Rexahn will announce the change in advance, and details on how to participate will be issued by press release, posted on Rexahn’s website and filed as additional proxy materials.

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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus/information statement incorporates important business and financial information about Rexahn that is not included in or delivered with this document. You may obtain this information without charge through the website of the Securities and Exchange Commission (the “SEC”) (http://www.sec.gov) or upon your written or oral request by contacting the Secretary of Rexahn Pharmaceuticals, Inc., 15245 Shady Grove Road, Suite 455, Rockville, MD 20850 or by calling (240) 268-5300.
To ensure timely delivery of these documents, any request should be made no later than October 19, 2020 to receive them before the Rexahn special meeting.
For additional details about where you can find information about Rexahn, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.

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ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
This proxy statement/prospectus/information statement, which forms part of a registration statement on Form S-4 filed with the SEC by Rexahn (File No. 333-239702), constitutes a prospectus of Rexahn under Section 5 of the Securities Act of 1933, as amended, (the “Securities Act”), with respect to the shares of Rexahn common stock to be issued pursuant to the Merger Agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the Rexahn special meeting, at which Rexahn stockholders will be asked to consider and vote on, among other matters, a proposal to approve the issuance of shares of Rexahn common stock pursuant to the Merger Agreement.
No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus/information statement. This proxy statement/prospectus/information statement is dated    , 2020. The information contained in this proxy statement/prospectus/information statement is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies.
This proxy statement/prospectus/information statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
The information concerning Rexahn contained in this proxy statement/prospectus/information statement or incorporated by reference has been provided by Rexahn, and the information concerning Ocuphire contained in this proxy statement/prospectus/information statement has been provided by Ocuphire.

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References to “Rexahn” and “Ocuphire” in this proxy statement/prospectus/information statement refer to Rexahn Pharmaceuticals, Inc. and Ocuphire Pharma, Inc., respectively. References to the “combined company” refer to Rexahn and its wholly owned subsidiary, Ocuphire, after the merger. Except as otherwise noted, references to “we,” “us” or “our” refer to both Rexahn and Ocuphire. References to “Merger Sub” refer to Razor Merger Sub, Inc., a newly formed, wholly owned subsidiary of Rexahn.
References to the “Merger Agreement” refer to that certain agreement and plan of merger and reorganization dated as of June 17, 2020, among Rexahn, Merger Sub and Ocuphire, as amended from time to time, including by the First Amendment to Agreement and Plan of Merger and Reorganization dated June 29, 2020. References to the “merger” refer to the merger of Merger Sub with and into Ocuphire, with Ocuphire surviving as the surviving entity and as a wholly owned subsidiary of Rexahn as contemplated under the Merger Agreement.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus/information statement gives effect to Rexahn’s 1-for-10 reverse stock split of its outstanding shares of common stock, which was effective on May 5, 2017, and Rexahn’s 1-for-12 reverse stock split of its outstanding shares of common stock, which was effective on April 12, 2019, but does not give effect to the proposed reverse stock split described in the section entitled “Matters Being Submitted to a Vote of Rexahn Stockholders—Proposal No. 2: Approval of an Amendment to the Rexahn Certificate of Incorporation Effecting the Rexahn Reverse Stock Split” in this proxy statement/prospectus/information statement (the “Rexahn Reverse Stock Split”).
The following section provides answers to frequently asked questions about the merger. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.
Q:
What is the merger?
A:
Rexahn, Merger Sub and Ocuphire entered into the Agreement and Plan of Merger and Reorganization on June 17, 2020 (the “Original Merger Agreement”). On June 29, 2020, the parties entered into the First Amendment to Agreement and Plan of Merger and Reorganization (the “Merger Agreement Amendment,” and together with the Original Merger Agreement, the “Merger Agreement”). The Merger Agreement contains the terms and conditions of the proposed business combination of Rexahn and Ocuphire. Under the Merger Agreement, Merger Sub will merge with and into Ocuphire, with Ocuphire surviving as a wholly owned subsidiary of Rexahn (the “merger”).
At the effective time of the merger (the “Effective Time”), each share of Ocuphire common stock, $0.0001 par value per share (“Ocuphire common stock”), outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement and shares held by holders of Ocuphire common stock who have exercised and perfected appraisal rights or dissenters’ rights as more fully described in the section entitled “The Merger—Appraisal Rights and Dissenters’ Rights” in this proxy statement/prospectus/information statement) will be converted into the right to receive shares of Rexahn common stock, $0.0001 par value per share (“Rexahn common stock”), at a ratio, subject to adjustment as discussed in this proxy statement/prospectus/information statement (the “Exchange Ratio”), estimated to be 4.3812 shares of Rexahn common stock for each share of Ocuphire common stock (assuming, among other things, Rexahn’s and Ocuphire’s capitalization as of September 10, 2020, the Ocuphire convertible notes converted on September 10, 2020 and Rexahn delivers $1.9 million of net cash on the anticipated Closing date agreed upon by Rexahn and Ocuphire at least five business days prior to the Rexahn special meeting (the “Anticipated Closing Date”)). The Exchange Ratio formula in the Merger Agreement is subject to adjustment for every $100,000 that Rexahn’s net cash (the “Parent Cash Amount”) on the Anticipated Closing Date is less than $3.2 million or more than $6.0 million, with incremental upward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is less than $3.2 million and incremental downward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is more than $6.0 million. This Exchange Ratio is described in more detail in the Merger Agreement and in the section entitled “The Merger—Merger Consideration and Exchange Ratio” of this proxy statement/prospectus/information statement.
Under the Merger Agreement, the Parent Cash Amount is calculated as follows: (i) the sum of Rexahn’s cash and cash equivalents, short-term investments, accrued investment interest receivable, and any prepaid refundable deposits of Rexahn, less (ii) the sum of Rexahn’s accounts payable and accrued expenses, less (iii) all liabilities of Rexahn to any current or former officer, director, employee, consultant or independent contractor, including change of control payments, retention payments, severance and other related termination costs, or other payments pursuant to any of Rexahn’s benefit plans, less (iv) any bona fide current liabilities of Rexahn payable in cash, less (v) Rexahn’s transaction expenses in connection with the merger as calculated in accordance with the terms of the Merger Agreement, less (vi) certain estimated liabilities associated with Rexahn’s outstanding warrants to be calculated approximately ten days prior to the consummation of the merger (the “Determination Date”) in accordance with the terms of the Merger Agreement, and plus (vii) $200,000. The estimated liabilities associated with Rexahn’s outstanding warrants will be impacted by, among other things, the trading price of a share of Rexahn common stock on the Determination Date, with such estimated warrant liabilities increasing as the trading price increases and
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decreasing as the trading price decreases. In addition, under the terms of the Merger Agreement, the Parent Cash Amount will be increased by $1.00 for each share of Rexahn common stock underlying any outstanding Rexahn warrant that is exchanged and terminated in exchange for a newly issued share of Rexahn common stock between the date of execution of the Merger Agreement and the Effective Time.
Q:
What is the Pre-Merger Financing?
A:
Concurrently with signing the Original Merger Agreement, Ocuphire and Rexahn entered into a securities purchase agreement with certain institutional healthcare investors, accredited investors and certain directors and officers of Ocuphire (the “Investors”). On June 29, 2020, concurrently with the execution of the Merger Agreement Amendment, Ocuphire and Rexahn entered into an amended and restated securities purchase agreement (as may be amended from time to time, the “Securities Purchase Agreement”) with the Investors, pursuant to which, among other things, (i) Ocuphire agreed to issue to the Investors shares of Ocuphire common stock (the “Initial Shares”) and to issue to an escrow account for the benefit of the Investors three times the number of Initial Shares of Ocuphire common stock (the “Additional Shares” and together with the Initial Shares, the “Pre-Merger Financing Shares”), in each case immediately prior to the merger to be exchanged for shares of Rexahn common stock at the closing of the merger, and (ii) Rexahn agreed to issue to the Investors warrants to purchase shares of Rexahn common stock on the tenth trading day following the consummation of the merger (the “warrant closing date”) (the “Investor Warrants”), and subject to certain conditions set forth in the Securities Purchase Agreement, to issue to the Investors all or a portion of the shares of Rexahn common stock from the escrow account, in a private placement transaction for an aggregate purchase price of approximately $21,150,000 (the “Pre-Merger Financing”).
Rexahn and Ocuphire securityholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger and the Pre-Merger Financing. For illustrative purposes, what follows are four potential scenarios of the dilution that stockholders in the combined company may face as a result of the Pre-Merger Financing as of the warrant closing date, assuming different market prices of the Rexahn common stock on the Nasdaq Capital Market.
Assumptions
Based on a sample Exchange Ratio of 4.3812, and Ocuphire and Rexahn capitalization as of September 10, 2020, the number of shares of Rexahn common stock to be issued to the Investors at the Effective Time in exchange for the Initial Shares (the “Converted Initial Shares”) would be 5,145,259, resulting in an effective price per share (based on the aggregate purchase price of $21,150,000) of approximately $4.11. The sample Exchange Ratio of 4.3812 assumes (i) Rexahn’s and Ocuphire’s capitalization as of September 10, 2020, (ii) the Ocuphire convertible notes converted on September 10, 2020, and (iii) Rexahn has a Parent Cash Amount of $1.9 million. Different sample Exchange Ratios used elsewhere in this proxy statement/prospectus/information statement have different underlying assumptions that vary based on when such assumptions were made. For example, the sample Exchange Ratio used in the opinion of Oppenheimer & Co. Inc. (“Oppenheimer”) attached as Annex E hereto assumed (i) Rexahn’s and Ocuphire’s capitalization as of June 17, 2020, (ii) the Ocuphire convertible notes converted on June 17, 2020, and (iii) Rexahn would deliver a Parent Cash Amount of $720,000. The Exchange Ratio formula is described in more detail in the Merger Agreement and in the section entitled “The Merger—Merger Consideration and Exchange Ratio” of this proxy statement/prospectus/information. In addition, 15,435,777 shares of Rexahn common stock would be issued to the escrow agent at such time in exchange for the Additional Shares (the “Converted Additional Shares”). Further, the Floor Price (as defined in the section entitled “Prospectus Summary - Pre-Merger Financing”) would be approximately $0.2535 per share.
If the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing multiplied by 85% is less than $4.11 (the effective price per share of the Initial Shares), then the Investors will be entitled to receive a combination of Converted Additional Shares and Investor Warrants.
Scenario 1
If on the warrant closing date, the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $4.84 (85% of which is $4.11) or more, then no Converted
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Additional Shares would be deliverable to the Investors from escrow, all of the outstanding Converted Additional Shares held by the escrow agent on such date would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 5,145,259 shares with an exercise price of approximately $4.93 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets (as defined in the section entitled “Prospectus Summary − Pre-Merger Financing”) on subsequent Reset Dates (as defined in the section entitled “Prospectus Summary − Pre-Merger Financing”). In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 13.1% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 71.9% of such amount and the Investors would own approximately 15.0% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 11.4%, 62.5% and 26.1%, respectively.
Scenario 2
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $3.00 (85% of which is $2.55), then 3,148,859 Converted Additional Shares would be deliverable to the Investors from escrow, 12,286,918 of the remaining Converted Additional Shares in escrow on such date would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 8,294,118 shares with an exercise price of $3.06 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets on subsequent Reset Dates. In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 12.0% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock would own approximately 65.9% and the Investors would own approximately 22.1% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 9.8%, 53.9% and 36.3% respectively.
Scenario 3
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $1.50 (85% of which is approximately $1.28), then 11,442,977 of the Converted Additional Shares would be deliverable to the Investors from escrow, 3,992,800 Converted Additional Shares would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 16,588,236 shares with an exercise price of approximately $1.53 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets on subsequent Reset Dates. In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 9.8% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 53.9% of such amount and the Investors would own approximately 36.3% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 7.2%, 39.6% and 53.2%, respectively.
Scenario 4
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $0.2982 (85% of which is approximately $0.2535, the estimated Floor Price) or lower, then all 15,435,777 of the Converted Additional Shares would be deliverable to the Investors from escrow, no Converted Additional Shares would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 83,431,953 shares with an exercise price of approximately $0.30 per share and the Series B Warrants would be exercisable for 62,850,917 shares with an exercise price of $0.0001 per share, this being the maximum amount issuable under such warrants, and therefore no increases upon subsequent Resets while the Floor Price still applies. In such case, when including the Series B Warrants but excluding the Series A Warrants, the pre-merger
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holders of Rexahn common stock would own approximately 4.0% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 21.9% of such amount and the Investors would own approximately 74.1% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 2.3%, 12.6% and 85.1%, respectively.
Q:
What will Ocuphire securityholders receive in the merger?
A:
The Exchange Ratio at the closing of the merger (the “Closing”) would be approximately 4.3812, assuming (i) the Ocuphire convertible notes converted on September 10, 2020, (ii) the Parent Cash Amount is $1.9 million on the Anticipated Closing Date, (iii) there are 4,483,198 shares of Rexahn common stock outstanding as of the Closing (on a pre-Rexahn Reverse Stock Split basis) and (iv) there are 6,806,019 shares of Ocuphire common stock and options exercisable for Ocuphire common stock (each, an “Ocuphire Option,” each holder of an Ocuphire Option an “Ocuphire Optionholder” and, collectively with the Ocuphire Stockholders, “Ocuphire Securityholders”) outstanding as of the Closing (giving effect to the Initial Shares issued in the Pre-Merger Financing, and shares issuable upon the conversion of the Ocuphire convertible notes).
Based solely on such estimated Exchange Ratio, and not accounting for shares of Rexahn common stock issuable upon the exercise of Rexahn Warrants, Additional Shares issued in escrow prior to the merger or Converted Additional Shares that may be issuable pursuant to the adjustment provisions in the Investor Warrants sold in the Pre-Merger Financing, at Closing, Ocuphire Securityholders (including the Investors) immediately prior to the merger would own, or hold rights to acquire, in the aggregate approximately 86.9% of the Fully Diluted Closing Rexahn Common Stock (as defined below), and current Rexahn Stockholders would own in the aggregate approximately 13.1% of the Fully Diluted Rexahn Closing Common Stock (as defined below), in each case, immediately following the Effective Time.
“Fully Diluted Closing Rexahn Common Stock” as used herein means (x) Parent Outstanding Shares (defined in the Merger Agreement as the total number of shares of Rexahn common stock outstanding immediately prior to the Effective Time, following the effectiveness of the Rexahn Reverse Stock Split, expressed on a fully-diluted and as converted to Rexahn common stock basis, including any new in-the-money warrants issued between execution of the Merger Agreement and the Effective Time in exchange for existing Rexahn warrants (the “Replacement Warrants”) and excluding (i) any Rexahn Option cancelled at the Effective Time pursuant to the Merger Agreement, (ii) any out-of-the-money Rexahn Options and Warrants as of the date of the Merger Agreement and (iii) one-half of each share of Rexahn common stock underlying any out-of-the-money Replacement Warrants) plus (y) Company Outstanding Shares (defined in the Merger Agreement as the total number of shares of Ocuphire common stock outstanding immediately prior to the Effective Time on a fully-diluted and as converted to Ocuphire common stock basis, taking into account the conversion of the Ocuphire convertible notes into Ocuphire common stock (the “Convertible Note Conversion”) and the Initial Shares issued in the closing of the Pre-Merger Financing, each of which will occur prior to the Effective Time).
Q:
What will Rexahn Securityholders receive in the merger?
A:
At the Effective Time, Rexahn Stockholders will continue to own and hold their existing shares of Rexahn common stock.
Each outstanding and unexercised option to purchase Rexahn common stock (each, a “Rexahn Option” and each holder of a Rexahn Option, a “Rexahn Optionholder”) granted pursuant to the Rexahn Pharmaceuticals, Inc. 2013 Stock Option Plan, as amended and restated (the “Rexahn 2013 Plan”), having an exercise price per share less than the volume-weighted average closing trading price of a share of Rexahn common stock on Nasdaq for the five consecutive trading days ending five trading days immediately prior to the Effective Time (the “Rexahn Closing Price”) will be automatically exercised in full and, in exchange therefor, each former holder of any such automatically exercised Rexahn Option granted under the Rexahn 2013 Plan will be entitled to receive, subject to required tax withholding (if any), a number of shares of Rexahn common stock calculated by dividing (i) the product of (a) the total number of shares of Rexahn common stock previously subject to such Rexahn Option, and (b) the excess of the Rexahn Closing Price over the exercise price per share of the Rexahn common stock previously subject to
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such Rexahn Option by (ii) the Rexahn Closing Price. Each outstanding and unexercised Rexahn Option that has an exercise price equal to or greater than the Rexahn Closing Price will be terminated and cease to exist as of immediately prior to the Effective Time for no consideration. All outstanding and unexercised Rexahn Options granted pursuant to the Rexahn Pharmaceuticals, Inc. Stock Option Plan, as amended (the “Rexahn 2003 Plan”) immediately prior to the Effective Time will remain in effect pursuant to their terms.
All outstanding and unexercised warrants to purchase Rexahn common stock (each, a “Rexahn Warrant,” each holder of a Rexahn Warrant, a “Rexahn Warrantholder”, and collectively with the Rexahn Stockholders and Rexahn Optionholders, “Rexahn Securityholders”), immediately prior to the Effective Time will remain in effect pursuant to their terms, except that Rexahn Warrantholders will have the right to exchange their warrants for cash in an amount equal to the Black-Scholes value of such warrants calculated as set forth therein and in accordance with the terms of the applicable Rexahn Warrant.
In addition, pursuant to the Merger Agreement and a Contingent Value Rights Agreement (the “CVR Agreement”), Rexahn Stockholders as of immediately prior to the Effective Time will receive one contingent value right (“CVR”) for each share of Rexahn common stock held of record as of immediately prior to the Effective Time. Each CVR will represent the right to receive cash payments upon the occurrence of certain triggering events. In particular, for each calendar quarter (each, a “CVR Payment Period”) during the 15-year period after the Closing (the “CVR Term”), CVR holders will be entitled to (i) 90% of all payments received by Rexahn from BioSense Global LLC (“BioSense”) pursuant to that certain License and Assignment Agreement, dated as of February 25, 2019, by and between BioSense and Rexahn, as amended (the “BioSense Agreement”), less certain permitted deductions, (ii) 90% of all payments received by Rexahn from Zhejiang HaiChang Biotechnology Co., Ltd. (“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of February 8, 2020, by and between HaiChang and Rexahn (the “HaiChang Agreement”), less certain permitted deductions, and (iii) 75% of (a) all cash consideration paid by a third party to Rexahn during the applicable CVR Payment Period in connection with the grant, sale or transfer of rights to certain of Rexahn’s pre-Closing intellectual property (“Parent IP”) under an agreement that is entered into during the 10-year period after the Closing (“Parent IP Deal”); plus (b) with respect to any non-cash consideration received by Rexahn from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn at the time such non-cash consideration is monetized, less (c) certain permitted deductions. The CVRs will be issued pursuant to the CVR Agreement and Shareholder Representative Services LLC (“SRS”) will act as representative of holders of the CVRs. See the section entitled “Agreements Related to the Merger—Contingent Value Rights Agreement” on page 183 of this proxy statement/prospectus/information statement.
Q:
What will happen to Rexahn if, for any reason, the merger does not close?
A:
If, for any reason, the merger does not close, the Rexahn Board may elect to, among other things, attempt to complete another strategic transaction like the merger, attempt to sell or otherwise dispose of the various assets of Rexahn, resume its research and development activities and continue to operate the business of Rexahn or dissolve and liquidate its assets. If Rexahn decides to dissolve and liquidate its assets, Rexahn would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims, and there can be no assurances as to the amount or timing of available cash left, if any, to distribute to stockholders after paying the debts and other obligations of Rexahn and setting aside funds for reserves. If Rexahn were to continue its business, it would need to raise a substantial amount of cash to fund ongoing operations and future development activities for its existing product candidates and any new product candidates that it acquires.
Q:
Why are the two companies proposing to merge?
A:
Ocuphire and Rexahn believe that the merger will result in a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of eye disorders. For a discussion of Rexahn’s and Ocuphire’s reasons for the merger, please see the section entitled “The Merger—Rexahn Reasons for the Merger” and “The Merger—Ocuphire Reasons for the Merger” in this proxy statement/prospectus/information statement.
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Q:
Why am I receiving this proxy statement/prospectus/information statement?
A:
You are receiving this proxy statement/prospectus/information statement because you have been identified as a Rexahn Stockholder or an Ocuphire Stockholder as of the applicable record date, and you are entitled, as applicable, to (i) notice of, and to vote at, the Rexahn special meeting or (ii) sign and return to Ocuphire the written consent. This document serves as:
a proxy statement of Rexahn used to solicit proxies for the Rexahn special meeting;
a prospectus of Rexahn used to offer shares of Rexahn common stock in exchange for shares of Ocuphire common stock in the merger and issuable upon exercise of Ocuphire Options; and
an information statement of Ocuphire used to solicit the written consent of Ocuphire Stockholders for the adoption of the Merger Agreement and the approval of the merger and related transactions.
Q:
What is required to consummate the merger?
A:
To consummate the merger, Rexahn Stockholders must approve (i) the issuance of Rexahn common stock to Ocuphire Stockholders pursuant to the Merger Agreement and the change of control of Rexahn resulting from the merger under Nasdaq rules (Proposal No. 1) and (ii) the Rexahn Reverse Stock Split (Proposal No. 2). The merger may also not be consummated if Proposal Nos. 3 or 5 are not approved as approval of such proposals is also a condition to Closing under the Merger Agreement. Ocuphire Stockholders must adopt the Merger Agreement, thereby approving the merger and the related transactions.
Proposal No. 1 is conditioned upon the approval of Proposal No. 2, and the merger cannot be consummated without the approval of Proposal Nos. 1 and 2. Proposal Nos. 3 and 4 are conditioned upon the consummation of the merger. If the merger is not completed or the stockholders do not approve Proposal No. 3, Rexahn will not change its name to “Ocuphire Pharma, Inc.” If the merger is not completed or the stockholders do not approve Proposal No. 4, the Ocuphire 2020 Plan will not become effective. Proposal No. 5 is conditioned upon Proposal Nos. 1 and 2. Proposal Nos. 1 and 5 are not conditioned on Proposal No. 3 or Proposal No. 4 being approved, and Proposal No. 2 is not conditioned on the approval of any other proposal.
The adoption of the Merger Agreement and the approval of the merger and related transactions by the Ocuphire Stockholders requires the affirmative vote (or written consent) of the holders of a majority of the Ocuphire common stock outstanding on the record date and entitled to vote thereon.
As of September 10, 2020, directors, officers, and holders of 5% or more of Ocuphire common stock who in the aggregate own approximately 62.6% of the outstanding shares of Ocuphire common stock are parties to voting agreements with Rexahn and Ocuphire, whereby such stockholders have agreed to vote their shares in favor of the adoption or approval of the Merger Agreement and the transactions contemplated therein, subject to the terms of the voting agreements. In addition, following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the SEC and pursuant to the conditions of the Merger Agreement and the voting agreements, Ocuphire Stockholders who are party to the voting agreements will each execute written consents approving the merger and related transactions. Therefore, holders of a sufficient number of shares of Ocuphire common stock required to adopt the Merger Agreement, thereby approving the merger, have agreed to adopt the Merger Agreement via written consent. Ocuphire Stockholders, including those who are parties to voting agreements, are being requested to execute written consents providing such approvals.
In addition to the requirement of obtaining the stockholder approvals described above and appropriate regulatory approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived. For a more complete description of the closing conditions under the Merger Agreement, please see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.
Q:
What stockholder votes are required to approve the proposals required in connection with the merger at the Rexahn special meeting?
Approval of Proposal Nos. 1, 4, 5 and 6 each requires the affirmative vote of a majority in interest of the Rexahn Stockholders present in person or by proxy at the Rexahn special meeting and entitled to vote
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thereon. Approval of Proposal Nos. 2 and 3 each requires the affirmative vote of holders of a majority of Rexahn common stock issued and outstanding on the record date, September 25, 2020, for the Rexahn special meeting (the “Record Date”) and entitled to vote on the matter.
Votes will be counted by the inspector of election appointed for the Rexahn special meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total and will have the same effect as “AGAINST” votes for each of the proposals. Proposal Nos. 2, 3, and 6 are matters on which Rexahn expects brokers, banks or other nominees to have authority and, therefore, broker non-votes are not expected with respect to these proposals. Broker non-votes will have no effect on the outcome of Proposal Nos. 1, 4, and 5.
Q:
Who will be the directors of Rexahn following the merger?
A:
Following the consummation of the merger, the size of the Rexahn Board is expected to be comprised of seven directors. Pursuant to the terms of the Merger Agreement, the Rexahn Board will be reconstituted such that six of the initial post-Closing directors will be designated by Ocuphire, and one initial post-Closing director will be designated by Rexahn. It is currently anticipated that, following the Closing, the Rexahn Board will be constituted as follows:
Name
Current Principal Affiliation
Mina Sooch
Ocuphire Pharma, Inc., President, Chief Executive Officer and Director
Sean Ainsworth
Ocuphire Pharma, Inc., Director
Alan R. Meyer
Ocuphire Pharma, Inc., Director
James S. Manuso
Ocuphire Pharma, Inc., Director
Cam Gallagher
Ocuphire Pharma, Inc., Director
Richard J. Rodgers
Rexahn Pharmaceuticals, Inc., Director
Susan K. Benton
Thea Pharma, Inc., General Manager and Head of the U.S.
Q:
Who will be the executive officers of Rexahn immediately following the merger?
A:
Immediately following the consummation of the merger, the executive management team of Rexahn is expected to be composed solely of the members of Ocuphire’s executive management team prior to the merger, as follows:
Name
Title
Mina Sooch, MBA
President, Chief Executive Officer & Treasurer
Bernhard Hoffmann, MBA
VP of Corporate Development & Finance, Secretary
Q:
What are the material U.S. federal income tax consequences of the merger?
A:
In the opinion of Honigman LLP (“Honigman”), counsel to Ocuphire, and subject to the Tax Opinion Representations and Assumptions (as defined on page 158), the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Subject to the limitations and qualifications described in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” a U.S. Holder (as defined on page 157) of Ocuphire common stock will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Ocuphire common stock for shares of Rexahn common stock in the merger, except with respect to cash received by such U.S. Holder of Ocuphire common stock in lieu of a fractional share of Rexahn common stock. If any of the Tax Opinion Representations and Assumptions is incorrect, incomplete or inaccurate or is violated, the accuracy of the opinion described above may be affected and the U.S. federal income tax consequences of the merger could differ from those described in this proxy statement/prospectus/information statement.
Please review the information in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more complete description of the material U.S. federal income tax consequences of the merger to U.S. Holders of Ocuphire common stock. The tax consequences to you of the merger will depend on your particular facts and circumstances. You should consult your tax advisors as to the specific tax consequences to you of the merger.
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Q:
What are the material U.S. federal income tax consequences of the receipt of CVRs and the Rexahn Reverse Stock Split to Rexahn U.S. Holders?
A:
In the opinion of Hogan Lovells US LLP, Rexahn’s legal counsel, based on the facts, representations and assumptions set forth herein, the issuance of the CVRs to Rexahn U.S. Holders (as defined on page 185) under the terms expressed in the form of the CVR Agreement included in Annex G to this proxy statement/prospectus/information statement is more likely than not to be treated as a distribution of property with respect to Rexahn common stock. Please review the information in the section entitled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the Receipt of CVRs” for a more complete description of the material U.S. federal income tax consequences of the receipt of CVRs to Rexahn U.S. Holders, including possible alternative treatments.
A Rexahn U.S. Holder should not recognize gain or loss upon the Rexahn Reverse Stock Split, except to the extent a Rexahn U.S. Holder receives cash in lieu of a fractional share of Rexahn common stock. Please review the information in the section entitled “Proposal No. 2: Approval of an Amendment to the Rexahn Certificate of Incorporation Effecting the Rexahn Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Rexahn Reverse Stock Split” for a more complete description of the material U.S. federal income tax consequences of the Rexahn Reverse Stock Split to Rexahn U.S. Holders.
The tax consequences to you of the receipt of CVRs and the Rexahn Reverse Stock Split will depend on your particular facts and circumstances. You should consult your tax advisors as to the specific tax consequences to you.
Q:
As a Rexahn Stockholder, how does the Rexahn Board recommend that I vote?
A:
After careful consideration, the Rexahn Board recommends that Rexahn Stockholders vote “FOR” all of the proposals described in this proxy statement/prospectus/information statement.
Q:
As an Ocuphire Stockholder, how does the Ocuphire Board recommend that I vote?
A:
After careful consideration, the Ocuphire Board recommends that Ocuphire Stockholders execute the written consent to approve a certificate of amendment to Ocuphire’s certificate of incorporation, as amended (the “Ocuphire Certificate of Incorporation”) to increase the authorized shares of Ocuphire common stock, the merger, the Merger Agreement, and the transactions contemplated therein, substantially in accordance with the terms of the Merger Agreement and the other agreements contemplated by the Merger Agreement.
Q:
What risks should I consider in deciding whether to vote in favor of the merger or to execute and return the written consent, as applicable?
A:
You should carefully review the section entitled “Risk Factors” in this proxy statement/prospectus/information statement which sets forth certain risks and uncertainties related to the merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Rexahn and Ocuphire, as independent companies, are subject.
Q:
Who can vote at the Rexahn special meeting?
A:
Only Rexahn Stockholders of record at the close of business on the Record Date will be entitled to vote at the Rexahn special meeting. As of the Record Date, there were 4,483,198 shares of Rexahn common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If, at the close of business on the Record Date, your shares of Rexahn common stock were registered directly in your name with Rexahn’s transfer agent, Olde Monmouth Stock Transfer Co., Inc., then you are a Rexahn Stockholder of record. As a Rexahn Stockholder of record, you may vote in person at the Rexahn special meeting or vote by proxy. Whether or not you plan to attend the Rexahn special meeting, please vote as soon as possible by completing and returning the enclosed proxy card or vote by proxy over the telephone or on the internet as instructed on the proxy card to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If, at the close of business on the Record Date, your shares of Rexahn common stock were not held in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you
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by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Rexahn special meeting. As a beneficial owner, you have the right to direct your broker or other agent how to vote the shares in your account. You are also invited to attend the Rexahn special meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Rexahn special meeting unless you request and obtain a valid legal proxy from your broker or other agent, giving you the right to vote the shares at the Rexahn special meeting.
Q:
How many votes do I have?
A:
On each matter to be voted upon, you have one vote for each share of Rexahn common stock you own as of the Record Date.
Q:
What is the quorum requirement?
A:
A quorum of Rexahn Stockholders is necessary to hold a valid meeting. A quorum will be present if Rexahn Stockholders holding at least 40% of the issued and outstanding shares of Rexahn common stock entitled to vote at the Rexahn special meeting are present in person or represented by proxy at the Rexahn special meeting. As of the Record Date, there were 4,483,198 shares of Rexahn common stock outstanding and entitled to vote. Accordingly, Rexahn expects that the holders of at least 1,793,280 shares of Rexahn common stock must be present at the Rexahn special meeting for a quorum to exist. Your shares of Rexahn common stock will be counted toward the quorum at the Rexahn special meeting only if you attend the Rexahn special meeting in person or are represented at the Rexahn special meeting by proxy.
Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, a majority in interest of Rexahn Stockholders present in person or represented by proxy and entitled to vote at the Rexahn special meeting may adjourn the Rexahn special meeting to another date without notice other than announcement at the Rexahn special meeting, until Rexahn Stockholders holding the requisite amount of stock will be present in person or represented by proxy.
Q:
What are “broker non-votes?”
A:
If you hold shares beneficially in street name and do not provide your broker or other agent with voting instructions, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when banks, brokers and other nominees are not permitted to vote on certain non-discretionary matters without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters. Proposal Nos. 1, 4 and 5 are anticipated to be non-routine matters, and Proposal Nos. 2, 3, and 6 are anticipated to be routine matters. Broker non-votes will have no effect on the outcome of Proposal Nos. 1, 4, and 5.
Q:
When do you expect the merger to be consummated?
A:
Rexahn and Ocuphire anticipate that the merger will occur sometime soon after the Rexahn special meeting to be held on Monday, November 2, 2020, but the companies cannot predict the exact timing. For more information, please see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.
Q:
What do I need to do now?
A:
Rexahn and Ocuphire urge you to read this proxy statement/prospectus/information statement carefully, including its annexes, and to consider how the merger affects you.
If you are a Rexahn Stockholder of record, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. You may also provide your proxy instructions via telephone or via the Internet by following the instructions on your proxy card or voting instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Rexahn special meeting.
If you are an Ocuphire Stockholder, you may execute and return your written consent to Ocuphire in accordance with the instructions provided.
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Q:
What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?
A:
If you are a Rexahn Stockholder of record, the failure to return your proxy card or otherwise provide proxy instructions will have the same effect as voting “AGAINST” Proposal Nos. 2 and 3.
Q:
When and where is the Rexahn special meeting and may I vote in person?
A:
The Rexahn special meeting will be held at Rexahn’s offices located at 15245 Shady Grove Road, Suite 455, Rockville, MD 20850, at 8:00 a.m., Eastern Time, on Monday, November 2, 2020. Subject to space availability, all Rexahn Stockholders as of the Record Date, or their duly appointed proxies, may attend the Rexahn special meeting. Since seating is limited, admission to the Rexahn special meeting will be on a first-come, first-served basis. Registration and seating will begin at 7:30 a.m., Eastern Time. If your shares of Rexahn common stock are registered directly in your name with Rexahn’s transfer agent, you are considered to be the stockholder of record with respect to those shares, and the proxy materials and proxy card are being sent directly to you by Rexahn. If you are a stockholder of record, you may attend the Rexahn special meeting and vote your shares in person. Even if you plan to attend the Rexahn special meeting in person, Rexahn requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Rexahn special meeting if you become unable to attend. If your shares of Rexahn common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Rexahn special meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Rexahn special meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Rexahn special meeting.
Rexahn is closely monitoring developments related to COVID-19. It could become necessary or desirable for Rexahn to change the date, time, location and/or means of holding the Rexahn special meeting (including by means of remote communication). If such a change is made, Rexahn will announce the change in advance, and details on how to participate will be issued by press release, posted on Rexahn’s website and filed as additional proxy materials.
Q:
If my Rexahn shares are held in “street name” by my broker, will my broker vote my shares for me?
A:
Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your shares of Rexahn common stock without instructions from you. Brokers are not expected to have discretionary authority to vote for any of the proposals other than Proposal Nos. 2, 3, and 6. To make sure that your vote is counted, you should instruct your broker to vote your shares, following the procedures provided by your broker.
Q:
May I change my vote after I have submitted a proxy or provided proxy instructions?
A:
Rexahn Stockholders of record may change their vote at any time before their proxy is voted at the Rexahn special meeting in one of three ways. First, a Rexahn Stockholder of record can send a written notice to the Secretary of Rexahn stating that it would like to revoke its proxy. Second, a Rexahn Stockholder of record can submit new proxy instructions either on a new proxy card or via telephone or the Internet. Third, a Rexahn Stockholder of record can attend the Rexahn special meeting and vote in person. Attendance alone will not revoke a proxy. If a Rexahn Stockholder who owns shares of Rexahn common stock in “street name” has instructed a broker to vote its shares of Rexahn common stock, the stockholder must follow directions received from its broker to change those instructions.
Q:
Who is paying for this proxy solicitation?
A:
Rexahn and Ocuphire will share equally the cost of printing and filing this proxy statement/prospectus/information statement and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Rexahn common stock for the forwarding of solicitation materials to the beneficial owners of Rexahn common stock. Rexahn will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.
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Rexahn has engaged Alliance Advisors, LLC to assist in the solicitation of proxies and provide related advice and informational support, in exchange for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $130,000 in total.
Q:
Who can help answer my questions?
A:
If you are a Rexahn Stockholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the merger, including the procedures for voting your shares, you should contact:
Rexahn Pharmaceuticals, Inc.
15245 Shady Grove Road, Suite 455
Rockville, MD 20850
Telephone: (240) 268-5300
Attn: Secretary
If you are an Ocuphire Stockholder, and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the merger, including the procedures for voting your shares, you should contact:
Ocuphire Pharma, Inc.
37000 Grand River Avenue, Suite 120
Farmington Hills, MI 48335
Telephone: (248) 681-9815
Attn: Secretary
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PROSPECTUS SUMMARY
This summary highlights selected information from this proxy statement/prospectus/information statement and may not contain all of the information that is important to you. To better understand the merger, the proposals being considered at the Rexahn special meeting and Ocuphire’s stockholder actions that are the subject of the written consent, you should read this entire proxy statement/prospectus/information statement carefully, including the Merger Agreement attached as Annex A, the opinion of Oppenheimer & Co. Inc. (“Oppenheimer”) attached as Annex E and the other annexes to which you are referred herein. For more information, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.
The Companies
Rexahn Pharmaceuticals, Inc.
15245 Shady Grove Road, Suite 455
Rockville, MD 20850
(240) 268-5300
Rexahn is a clinical stage biopharmaceutical company that has been focused on the development of innovative therapies to improve patient outcomes in cancers that are difficult to treat.
Ocuphire Pharma, Inc.
37000 Grand River Avenue, Suite 120
Farmington Hills, MI 48335
(248) 681-9815
Ocuphire is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of several eye disorders. Ocuphire’s pipeline currently includes two small molecule product candidates targeting front and back of the eye 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 dim light or night vision disturbances (“NVD”), pharmacologically-induced mydriasis (which refers to the use of pharmacological agents to dilate the pupil for office-based eye exams) and presbyopia (a gradual, age-related loss of the eyes’ ability to focus on nearby objects). Ocuphire management believes this multiple indication potential represents a significant market opportunity. Nyxol has been studied across three Phase 1 and four Phase 2 trials totaling over 230 patients and has demonstrated promising clinical data for use in multiple ophthalmic indications. Ocuphire plans to initiate a Phase 3 trial for the treatment of NVD in the fourth quarter of 2020, a Phase 3 trial for reversal of pharmacologically-induced mydriasis (“RM”) in the fourth quarter of 2020, and a Phase 2 trial in combination with low dose pilocarpine for presbyopia, in the first quarter of 2021. Ocuphire expects top-line results to read out as early as the first quarter of 2021 and throughout the remainder of 2021, and, assuming successful and timely completion of further trials, anticipates submitting a new drug application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) in early 2023 under the 505(b)(2) pathway.
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) vascular diseases, such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”) which if left untreated may 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. Prior to Ocuphire’s in-licensing of the product candidate, APX3330 had been studied by third parties in six Phase 1 and five Phase 2 trials totaling over 440 patients, for inflammatory and oncology indications, and had demonstrated promising evidence of tolerability, pharmacokinetics, durability and target engagement. Ocuphire plans to initiate a Phase 2 trial for APX3330 in the first quarter of 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 has also in-licensed additional second generation product candidates, analogs of APX3330, including APX2009 and APX2014.
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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 of drugs in key global markets.
Ocuphire estimates that there are 15-20 million moderate-to-severe NVD patients in the United States, over 80 million eye exams conducted per year with pharmacologically-induced mydriasis, over 100 million presbyopia patients, over 7 million patients with DR, and 750,000 patients with DME. There are no currently approved pharmacological products on the market for NVD, RM, or presbyopia. In the case of presbyopia there are non-pharmacologic and potentially inconvenient treatments such as reading glasses or contact lenses, as well as invasive surgical interventions with associated risks such as creation or worsening of NVD. For DR and DME, intraocular injections targeting vascular endothelial growth factors (“VEGF”) (a family of proteins that promote angiogenesis – the formation of new blood vessels – and vascular permeability) are approved globally, but these chronic therapies require frequent biweekly or monthly office visits and are prone to side effects such as hemorrhage, intraocular infection, and increased risk of blood clots.
Ocuphire is developing Nyxol and APX3330 for multiple indications. Ocuphire believes the two programs present similar potential advantages: (1) promising clinical data to date; (2) small molecules; (3) convenient dosing route and schedule; (4) potential for first-line or adjunct therapy; and (5) significant commercial potential. In the fourth quarter of 2020, Ocuphire expects to initiate Phase 3 clinical trials for Nyxol in NVD and RM, as well as a first quarter of 2021 initiation of Phase 2 proof of concept trial in presbyopia for a kit combination of Nyxol and low-dose pilocarpine, a pupil constrictor with a mechanism different and complementary to Nyxol. In preparation for at least one of the two Phase 3 registration trials for Nyxol, Ocuphire plans to launch a blow-fill-seal manufacturing program for preservative-free single use Nyxol eye drops . Furthermore, Ocuphire plans to initiate a 6-month rabbit toxicology study in the first quarter of 2021, completion of which is necessary prior to commencement of the Phase 3 safety exposure trial for chronic indications. Ocuphire also expects to launch a Phase 2 trial for APX3330 in DR and DME in the first quarter of 2021 with a concurrent Phase 2/3 oral tablet manufacturing program. TABLE 1 below summarizes Ocuphire’s current development pipeline of product candidates and their target indications:
TABLE 1. Ocuphire Pipeline Indications

Razor Merger Sub, Inc.
Merger Sub is a wholly owned subsidiary of Rexahn, formed solely for the purposes of carrying out the merger.
The Merger (see page 112)
If the merger is completed, Merger Sub will merge with and into Ocuphire, with Ocuphire surviving as a wholly owned subsidiary of Rexahn.
The Closing will occur no later than the third business day after the last of the conditions to the merger has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each such condition), or at such other time as Rexahn and Ocuphire agree. Rexahn and Ocuphire anticipate that the consummation of the merger will occur in the second half of the fiscal year. However, because the merger is subject to a number of conditions, neither Rexahn nor Ocuphire can
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predict exactly when the Closing will occur or if it will occur at all. After completion of the merger, assuming that Rexahn receives the required stockholder approval of Proposal No. 3, Rexahn will be renamed “Ocuphire Pharma, Inc.”
Reasons for the Merger (see page 129)
Following the merger, the combined company will be a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of several eye disorders. Rexahn and Ocuphire believe that the combined company will have the following potential advantages:
Lead Product Candidate Nyxol is Phase 3 Ready in Multiple Indications. Nyxol is being developed for the treatment of multiple indications, which Ocuphire management believes together represent a significant market opportunity. Ocuphire plans to begin Phase 3 trials for NVD and RM in the fourth quarter of 2020, and Phase 2 development for presbyopia in the first quarter of 2021.
Secondary Product Candidate APX3330 to Initiate Phase 2 Clinical Development. APX3330 is being developed for DR and DME, which represents a significant, established market opportunity, with plans to begin its first ophthalmic Phase 2 trial in the first quarter of 2021. APX2009, a second generation preclinical product candidate analog of APX3330, is being investigated for use in wet age-related macular degeneration (“wAMD”). Wet age-related macular degeneration is a chronic and progressive disease where abnormal blood vessels grow underneath the retina and leak blood and fluid into the macula.
Multiple Upcoming Late Clinical Stage Milestones. Ocuphire expects top-line results to read out as early as the first quarter of 2021 and throughout the remainder of 2021 for its four planned clinical trials.
Experienced Management Team. It is expected that the combined organization will be led by the experienced senior management team from Ocuphire and a board of directors from Ocuphire with representation from Rexahn.
Cash Resources. Following the Closing and taking into account proceeds received in the Pre-Merger Financing, the combined company is expected to have sufficient cash at the Closing for the combined company to sustain its operations through 2021. The combined company’s Nasdaq listing will provide it with access to the public market to raise additional funds in the future.
Each of the Rexahn Board and Ocuphire Board also considered other reasons for the merger, as described herein. For example, the Rexahn Board considered, among other things:
the Rexahn Board’s belief that a go-it-alone scenario poses significant risk, including the risk of dilution to the Rexahn Stockholders, taking into account Rexahn’s business, operational and financial prospects, including its cash position, the limited value given by the marketplace to Rexahn’s product portfolio, uncertainty regarding the potential results from additional preclinical studies and clinical trials, uncertainty regarding the future costs and timeline to support a clinical program of Rexahn’s product candidates, the chances of success in conducting a clinical development program and obtaining regulatory approval, and the need to raise significant additional financing for future clinical and commercial development of Rexahn’s product candidates;
the Rexahn Board’s belief, given the risks associated with clinical development, and based in part on the judgment, advice and analysis of Rexahn senior management with respect to the potential strategic, financial and operational benefits of the merger (which judgment was informed in part by the business, technical, financial and legal due diligence investigation performed by Rexahn with respect to Ocuphire) that Ocuphire’s Phase 3 ready, lead product candidate, Nyxol, for multiple front-of-the-eye (pupil/cornea) indications, as well as its product candidate, APX3330, for multiple back-of-the-eye (retina) conditions, along with the experience of its management and other personnel, and the granting of CVRs to Rexahn Stockholders to provide a potential financial benefit in the event that any of Rexahn’s existing intellectual property is sold or licensed during a future period or Rexahn receives any payments from BioSense or HaiChang, would create more value for Rexahn Stockholders in the long term than Rexahn could create as an independent stand-alone company;
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the Rexahn Board’s review of the current development plans of Ocuphire to confirm the likelihood that the combined company would possess sufficient resources, or have access to sufficient resources, to allow Ocuphire senior management to focus on its plans for the continued development of Ocuphire’s product pipeline;
the Rexahn Board’s consideration that the combined company should have sufficient cash at the Closing for the combined company to sustain its operations for the next 18 months at the time of the Rexahn Board’s consideration and the combined company’s public company structure will provide it with access to the public market to raise additional funds in the future;
the Rexahn Board’s consideration of the results of its strategic review process, which included Oppenheimer’s outreach to 50 companies and the receipt of five inbound inquiries, resulting in the receipt of indications of interest from 19 companies. Further, the Rexahn Board’s consideration of the valuation and business prospects of all other strategic transaction candidates involved in its strategic review process, and its collective view that Ocuphire was the most attractive candidate for Rexahn due to, among other things, Ocuphire’s Phase 3 ready asset, Nyxol, as well as its APX3330 product candidate, Ocuphire’s strong financial position that includes backing from a syndicate of investors, the strength of Ocuphire’s management team, the potential market opportunity for Nyxol and APX3330, Ocuphire’s understanding of the potential value of Rexahn’s partnerships with BioSense and HaiChang, and that Ocuphire’s potential to achieve key milestones over the next several years could enable the combined company to access the public markets for additional financial resources;
the Rexahn Board’s conclusion that the merger provides existing Rexahn Stockholders a significant opportunity to participate in the potential growth of the combined company following the merger, while potentially receiving certain cash payments from the grant, sale or transfer of rights to Rexahn’s existing intellectual property or pursuant to payments received by BioSense or HaiChang during a certain period following Closing on account of the CVR Agreement to be executed at the Effective Time;
the Rexahn Board’s consideration that the combined company will be led by an experienced senior management team from Ocuphire and a board of directors with representation from each of the current boards of directors of Rexahn and Ocuphire;
the Rexahn Board’s consideration of the financial analysis of Oppenheimer and the opinion of Oppenheimer delivered to the Rexahn Board on June 17, 2020, to the effect that, as of the date of such opinion, and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of the review undertaken by Oppenheimer, as set forth in its written opinion, the Exchange Ratio was fair to Rexahn Stockholders, from a financial point of view, and that Oppenheimer’s opinion was based on an estimated Exchange Ratio of 4.3820, which assumed Rexahn would deliver an estimated Parent Cash Amount of $720,000 on the Anticipated Closing Date, resulting in Rexahn Stockholders owning approximately 11.9% of the combined company immediately following consummation of the merger on a fully diluted basis;
Rexahn’s recent results of operations and financial condition; and
the terms of the Merger Agreement, the CVR Agreement, the Pre-Merger Financing transaction documents and associated transactions.
The Rexahn Board also considered a variety of risks and other countervailing factors related to the merger including:
the fact that the Exchange Ratio will be adjusted downward to the extent the Parent Cash Amount is below $3.2 million on the Anticipated Closing Date, and Rexahn’s belief, based on current estimates, that it is reasonably likely to deliver significantly less than $3.2 million on the Anticipated Closing Date;
the fact that the Parent Cash Amount will be reduced by an estimated warrant liability amount to be calculated approximately ten days prior to the Closing, with such estimated warrant liabilities being impacted by, among other things, the stock price of Rexahn common stock on such calculation date; and
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the fact that all Rexahn Stockholders may be further diluted based on the price reset provisions and Investor Warrants contemplated by the Pre-Merger Financing and the recognition that the fairness opinion from Oppenheimer did not address the potential additional dilution as a result of such price reset provisions and Investor Warrants.
In the course of reaching its decision to approve the terms and authorize the execution of the Merger Agreement for the purpose of the consummating the merger, the Ocuphire Board consulted with Ocuphire’s senior management, legal counsel and other advisors, and reviewed a significant amount of information and considered a number of factors, including, among others:
historical and current information concerning Ocuphire’s business, including its financial performance and condition, operations, management and pre-clinical and clinical data;
the potential value of Nyxol and APX3330 and the ability of the combined company to advance the development of the Nyxol and APX3330 programs;
Ocuphire’s prospects if it were to remain an independent company, including its need to obtain additional financing to continue its operations and the terms on which it would be able to obtain such financing, if at all;
the belief of the Ocuphire Board that no alternatives to the merger were reasonably likely to create greater value for stockholders after reviewing the various strategic options to enhance stockholder value that were considered by the Ocuphire Board;
the potential to provide Ocuphire’s current stockholders with greater liquidity by owning stock in the combined company, a public company;
the expectation that the merger with Rexahn would be a more time- and cost-efficient means to access capital than other options considered by and available to Ocuphire, including private placements, venture debt financings and traditional methods of accessing the public markets through an initial public offering of Ocuphire’s securities;
the anticipated cash resources of the combined company expected to be available at the Closing and the anticipated burn rate of the combined company;
the broader range of investors potentially available to the combined company as a public company to support the development of Ocuphire’s product candidates, as compared with the investors to which Ocuphire could otherwise gain access if it continued to operate as a privately held company;
the ability to improve Ocuphire’s balance sheet through the conversion of the Ocuphire convertible notes and accrued interest into common stock;
the expectation that substantially all of Ocuphire’s employees, particularly its management, will serve in similar roles at the combined company;
the expectation that the merger will be treated as a tax-free reorganization for U.S. federal income tax purposes, with the result that Ocuphire Stockholders will not recognize taxable gain or loss for U.S. federal income tax purposes upon the exchange of Ocuphire common stock for Rexahn common stock pursuant to the merger;
the terms and conditions of the Merger Agreement, including, without limitation, the following:
the expected relative percentage ownership of Rexahn Stockholders and Ocuphire Stockholders in the combined company at the Closing and the implied valuation of Ocuphire and Rexahn;
the parties’ representations, warranties and covenants and the conditions to their respective obligations; and
the limited number and nature of the conditions of the obligation of Rexahn to consummate the merger; and
the likelihood that the merger will be consummated on a timely basis.
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Opinion of the Rexahn Financial Advisor (see page 134)
The Rexahn Board engaged Oppenheimer to provide financial advisory services and to consider and evaluate potential strategic transactions on its behalf. Rexahn ultimately requested that Oppenheimer deliver a fairness opinion with respect to the merger with Ocuphire. At the June 17, 2020 meeting of the Rexahn Board, representatives of Oppenheimer rendered Oppenheimer’s oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion, the Exchange Ratio was fair, from a financial point of view, to the Rexahn Stockholders. Oppenheimer’s opinion was based on an estimated Exchange Ratio of 4.3820, which assumed Rexahn would deliver an estimated Parent Cash Amount of $720,000 on the Anticipated Closing Date, resulting in Rexahn Stockholders owning approximately 11.9% of the combined company immediately following consummation of the merger on a fully diluted basis. The Oppenheimer opinion did not take into account any post-Closing dilutive issuances of Rexahn securities pursuant to the Pre-Merger Financing.
The full text of the written opinion of Oppenheimer, dated June 17, 2020, which sets forth, among other things, the various qualifications, assumptions and limitations on the scope of the review undertaken by Oppenheimer, is attached as Annex E to this proxy statement/prospectus/information statement. Rexahn encourages Rexahn Stockholders to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Oppenheimer. The summary of the written opinion of Oppenheimer set forth herein is qualified by reference to the full text of the opinion. Oppenheimer provided its opinion for the information and assistance of the Rexahn Board (solely in its capacity as such) in connection with, and for purposes of, its consideration of the merger and its opinion only addresses whether the Exchange Ratio was fair, from a financial point of view, to the Rexahn Stockholders, as of the date of the opinion. The Oppenheimer opinion did not address any other term or aspect of the Merger Agreement or the merger or any other transaction, including any post-Closing dilutive issuances of Rexahn securities pursuant to the Pre-Merger Financing. The Oppenheimer opinion does not constitute a recommendation to the Rexahn Board or any Rexahn Stockholder as to how the Rexahn Board, such stockholder or any other person should vote or otherwise act with respect to the merger or any other matter, including whether or not any Rexahn Stockholder should enter into any voting, support, stockholder or other agreements, arrangements or understandings in connection with the merger.
Litigation Related to the Merger (see page 156)
On July 31, 2020, a putative stockholder class action was filed in the Court of Chancery of the State of Delaware styled Stahlman v. Rexahn Pharmaceuticals, Inc., et al., Case No. 2020-0639. Additionally, on August 3, 2020, a putative stockholder class action was filed in the United States District Court for the District of Delaware styled Thompson v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-01036-UNA (D. Del). On August 7, 2020 and August 17, 2020, putative stockholder class actions were filed in the United States District Court for the Southern District of New York styled, respectively, Manes v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-06227 (S.D.N.Y.) and Talsma v. Rexahn Pharmaceuticals, Inc., et al Case No. 1:20-cv-06541 (S.D.N.Y).On August 18, 2020, a putative stockholder class action was filed in the United States District Court for the Eastern District of New York styled Juilfs v. Rexahn Pharmaceuticals, Inc., et al Case No. 1:20-cv-03780 (E.D.N.Y.) (together with the Stahlman, Thompson, Manes and Talsma actions, the “Stockholder Actions”). The Stockholder Actions assert claims against Rexahn and members of the Rexahn Board (the “Individual Defendants”).
The Stahlman and Manes complaints allege that the Individual Defendants breached their fiduciary duties owed to the Rexahn stockholders. The Thompson, Manes, Juilfs and Talsma complaints allege that Rexahn and the Individual Defendants violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by failing to disclose in the initial Registration Statement on Form S-4 that Rexahn filed with the SEC on July 6, 2020 (File No. 333-239702) (the “Initial Registration Statement”) certain information regarding, among other things, financial projections for Rexahn and Ocuphire, the valuation analyses performed by Oppenheimer in support of its fairness opinion and the process leading to the execution of the Merger Agreement. The Thompson, Manes, Juilfs and Talsma complaints also allege that the Individual Defendants violated Section 20(a) of the Exchange Act, as control persons who had the ability to prevent the Initial Registration Statement from being false and misleading. The Stockholder Actions seek, among other things, an injunction preventing consummation of the merger, an award of damages, and an award of costs and expenses, including attorneys’ fees.
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Additionally, on August 6, 2020, another party sent a letter to Rexahn’s counsel demanding that Rexahn and the Individual Defendants amend the Initial Registration Statement to provide additional disclosures that the party alleges were improperly omitted from the Initial Registration Statement in violation of Sections 14(a) and 20(a) of the Exchange Act, including certain information regarding financial data and the background and process leading to the execution of the Merger Agreement (the “Demand Letter”).
On September 8, 2020, plaintiff Thompson made a filing in the United States District Court for the District of Delaware voluntarily dismissing the Thompson complaint.
Rexahn intends to defend against the remaining Stockholder Actions and the Demand Letter, however it is reasonably possible that a loss may be incurred. At this time, Rexahn is unable to estimate the potential loss or range of losses.
Material U.S. Federal Income Tax Consequences of the Merger (see page 157)
In the opinion of Honigman LLP and subject to the Tax Opinion Representations and Assumptions (as defined on page 158), the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Subject to the limitations and qualifications described in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger,” a U.S. Holder (as defined on page 157) of Ocuphire common stock will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of Ocuphire common stock for shares of Rexahn common stock in the merger, except with respect to cash received by such U.S. Holder of Ocuphire common stock in lieu of a fractional share of Rexahn common stock. If any of the Tax Opinion Representations and Assumptions is incorrect, incomplete or inaccurate or is violated, the accuracy of the opinion described above may be affected and the U.S. federal income tax consequences of the merger could differ from those described in this proxy statement/prospectus/information statement.
Please review the information in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more complete description of the material U.S. federal income tax consequences of the merger to U.S. Holders of Ocuphire common stock. The tax consequences to you of the merger will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you of the merger.
Material U.S. Federal Income Tax Consequences of Receipt of CVRs and the Rexahn Reverse Stock Split (see pages 184 and 202)
In the opinion of Hogan Lovells US LLP, Rexahn’s legal counsel, based on the facts, representations and assumptions set forth herein, the issuance of CVRs to Rexahn U.S. Holders (as defined on page 185) under the terms expressed in the form of the CVR Agreement attached as Annex G to this proxy statement/prospectus/information statement is more likely than not to be treated as a distribution of property with respect to Rexahn common stock. Please review the information in the section entitled “Agreements Related to the Merger—CVR Agreement—Material U.S. Federal Income Tax Consequences of the Receipt of CVRs” for a more complete description of the material U.S. federal income tax consequences of the receipt of CVRs to Rexahn U.S. Holders, including possible alternative treatments.
A Rexahn U.S. Holder should not recognize gain or loss upon the Rexahn Reverse Stock Split, except to the extent a Rexahn U.S. Holder receives cash in lieu of a fractional share of Rexahn common stock. Please review the information in the section entitled “Proposal No. 2: Approval of an Amendment to the Rexahn Certificate of Incorporation Effecting the Rexahn Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Rexahn Reverse Stock Split” for a more complete description of the material U.S. federal income tax consequences of the Rexahn Reverse Stock Split to Rexahn U.S. Holders.
The tax consequences to you of the receipt of CVRs and the Rexahn Reverse Stock Split will depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you.
Overview of the Merger Agreement (see page 165)
Merger Consideration (see page 165)
At the Effective Time, each share of Ocuphire common stock outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement, and shares held by holders of Ocuphire common stock who have exercised and perfected appraisal rights or dissenters’ rights as more fully
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described in the section entitled “The Merger—Appraisal Rights and Dissenters’ Rights” in this proxy statement/prospectus information statement) will automatically be converted into the right to receive a number of shares of Rexahn common stock equal to the Exchange Ratio, subject to adjustment to account for the Rexahn Reverse Stock Split and as described below (prior to the Effective Time, the outstanding Ocuphire convertible notes will be converted into Ocuphire common stock and will participate in the merger on the same basis as the other shares of Ocuphire common stock). At the Effective Time, each option to purchase shares of Ocuphire common stock outstanding and unexercised immediately prior to the Effective Time will be assumed by Rexahn and will become an option, subject to vesting, to purchase shares of Rexahn common stock with the number of shares of Rexahn common stock underlying such options and the exercise prices for such options adjusted to reflect the Exchange Ratio and the Rexahn Reverse Stock Split.
The Exchange Ratio formula in the Merger Agreement is subject to adjustment based on the Parent Cash Amount on the Anticipated Closing Date. For example, if the Parent Cash Amount is $0, which is the minimum Parent Cash Amount that Rexahn is required to deliver on the Anticipated Closing Date to consummate the merger, then immediately following the Effective Time, Rexahn Stockholders would own approximately 11.2% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 88.8% of Rexahn common stock, in each case calculated on a fully-diluted basis. The calculation of the Exchange Ratio under the Merger Agreement and post-closing ownership of Rexahn Stockholders are subject to adjustment based on an assumed value of Rexahn at Closing based on Rexahn’s Parent Cash Amount as of the Anticipated Closing Date. To the extent the Parent Cash Amount falls below $3.2 million or exceeds $6.0 million, Rexahn’s assumed value would be reduced or increased by $150,000 for every $100,000 below or above the thresholds referenced. According to the terms of the Merger Agreement, if the Parent Cash Amount on the Anticipated Closing Date is between $3.2 million and $6.0 million, then immediately following the consummation of the merger, Rexahn Stockholders would own approximately 14.3% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 85.7% of Rexahn common stock, in each case, calculated on a fully-diluted basis.
The adjustments in the Exchange Ratio formula in the Merger Agreement provide for incremental adjustments of $150,000 to the assumed value of Rexahn for every $100,000 that the Parent Cash Amount is less than $3.2 million or more than $6.0 million, with incremental upward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is less than $3.2 million and incremental downward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is more than $6.0 million. Based on Rexahn’s current estimates, Rexahn anticipates delivering a Parent Cash Amount between $1.9 million and $2.4 million assuming the Closing occurs by November 14, 2020, which is the end date set forth in the Merger Agreement; however, the final Parent Cash Amount will not be calculated until the Anticipated Closing Date, and may vary significantly depending on, among other things, Rexahn’s ability to control and correctly estimate its operating expenses, expenses relating to Rexahn’s ongoing litigation and the trading price of Rexahn common stock (and its impact on Rexahn’s estimated warrant liabilities, which are deducted from the Parent Cash Amount). If the Parent Cash Amount is $1.9 million on the Anticipated Closing Date, then immediately following the Effective Time, Rexahn Stockholders would own approximately 13.1% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 86.9% of Rexahn common stock, in each case calculated on a fully-diluted basis. Under the terms of the Merger Agreement, Rexahn Stockholders’ ownership percentage in the combined company is subject to a floor of approximately 9.1% regardless of the Parent Cash Amount on the Anticipated Closing Date, assuming Ocuphire waives the minimum Parent Cash Amount condition at or prior to Closing. These ownership percentages give effect to the shares of Ocuphire common stock that will be issued to Investors in the Pre-Merger Financing prior to the Effective Time, but do not account for any additional shares of Rexahn common stock that may be issued to Investors following the Effective Time or shares of Rexahn common stock issuable pursuant to the Investor Warrants issued to Investors after the Effective Time. As a result, Ocuphire Securityholders and Rexahn Stockholders could own less of the combined company than currently contemplated. For example, assuming an Exchange Ratio of 4.3812 and Parent Cash Amount of $1.9 million, depending on the trading prices of Rexahn common stock on Nasdaq following the closing of the Pre-Merger Financing, the ownership percentage of pre-merger holders of Rexahn common stock could be between approximately 2.3% and 13.1% of the fully-diluted combined company equity securities. Rexahn Stockholders will not know the percentage of securities they will hold in the combined company at the time of the Rexahn special meeting. If the Parent Cash Amount on the Anticipated Closing Date is less than $0,
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Rexahn would be unable to satisfy a closing condition for the merger, and the merger would not close unless Ocuphire waives such condition. For more information regarding calculation of the Exchange Ratio, see the section entitled “The Merger–Merger Consideration and Exchange Ratio” beginning on page 151 of this proxy statement/prospectus/information statement.
Under the Merger Agreement, “Parent Cash Amount” is calculated as follows: (i) the sum of Rexahn’s cash and cash equivalents, short-term investments, accrued investment interest receivable, and any prepaid refundable deposits of Rexahn, less (ii) the sum of Rexahn’s accounts payable and accrued expenses, less (iii) all liabilities of Rexahn to any current or former officer, director, employee, consultant or independent contractor, including change of control payments, retention payments, severance and other related termination costs, or other payments pursuant to any of Rexahn’s benefit plans, less (iv) any bona fide current liabilities of Rexahn payable in cash, less (v) Rexahn’s transaction expenses in connection with the merger as calculated in accordance with the terms of the Merger Agreement, less (vi) certain estimated liabilities associated with the Rexahn Warrants (the “Estimated Warrant Amount”) to be calculated approximately 10 days prior to Closing in accordance with the terms of the Merger Agreement, and plus (vii) $200,000; in each case, as of such applicable date and determined in a manner consistent with the manner in which such items were historically determined and in accordance with Rexahn’s audited financial statements and Rexahn’s unaudited interim balance sheet. In addition, the Parent Cash Amount will be increased by $1.00 for each share of Rexahn common stock underlying any outstanding Rexahn Warrant that is exchanged and terminated in exchange for a newly issued share of Rexahn common stock between the date of execution of the Merger Agreement and the Effective Time.
For a more complete description of the Exchange Ratio, please see the section entitled “The Merger–Merger Consideration and Exchange Ratio” in this proxy statement/prospectus/information statement.
Treatment of Rexahn Options and Warrants (see page 168)
Rexahn Options
Prior to the Closing, the Rexahn Board will adopt appropriate resolutions and take all other actions necessary and appropriate to provide that each outstanding, unexercised and unvested Rexahn Option granted under the Rexahn 2013 Plan (“2013 Rexahn Options”) will be accelerated in full effective as of immediately prior to the Effective Time. Effective as of the Effective Time, each outstanding and unexercised 2013 Rexahn Option having an exercise price per share less than the Rexahn Closing Price will be automatically exercised in full and, in exchange therefor, each former holder of any such automatically exercised 2013 Rexahn Options will be entitled to receive, subject to required tax withholding (if any), a number of shares of Rexahn common stock calculated by dividing (a) the product of (i) the total number of shares of Rexahn common stock previously subject to such 2013 Rexahn Option, and (ii) the excess of the Rexahn Closing Price over the exercise price per share of the Rexahn common stock previously subject to such 2013 Rexahn Option by (b) the Rexahn Closing Price. Each outstanding and unexercised 2013 Rexahn Option that has an exercise price equal to or greater than the Rexahn Closing Price will be terminated and cease to exist as of immediately prior to the Effective Time for no consideration.
At the Effective Time, each outstanding, unexercised and unvested Rexahn Option granted under the Rexahn 2003 Plan (“2003 Rexahn Options”) shall survive the Closing and remain outstanding in accordance with its terms.
Rexahn Warrants
Warrants to purchase shares of Rexahn common stock will remain outstanding according to their terms, and will, in connection with the consummation of the merger and the other transactions contemplated by the Merger Agreement, become exchangeable at the option of the holder for cash in an amount equal to the Black-Scholes value of such warrant calculated as set forth therein and in accordance with their respective terms. The number of shares of Rexahn common stock underlying warrants and the exercise prices for such warrants will be appropriately adjusted to reflect the Rexahn Reverse Stock Split. Under the Merger Agreement, Rexahn is permitted to exchange or modify outstanding Rexahn warrants for (i) newly issued shares of Rexahn common stock without obtaining Ocuphire’s prior consent and (ii) Replacement Warrants or in-the-money Rexahn securities with the prior consent of Ocuphire. In addition, the Parent Cash Amount will be increased by $1.00 for each share of Rexahn common stock underlying any outstanding Rexahn warrant that is exchanged and terminated in exchange for a newly issued share of Rexahn common stock between the date of execution of the
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Merger Agreement and the Effective Time. Any newly issued shares of Rexahn common stock and in-the-money Replacement Warrants will be counted toward Rexahn’s fully diluted shares outstanding for purposes of calculating the Exchange Ratio, and one-half of any out-of-the-money Replacement Warrants will be counted toward such amount. A Replacement Warrant will be out-of-the-money if its exercise price is equivalent to or greater than $2.5025, and will be in-the-money if its exercise price is less than such amount.
Treatment of Ocuphire Options (see page 168)
Rexahn will assume outstanding and unexercised options to purchase shares of Ocuphire common stock, and in connection with the merger, they will be converted into options to purchase shares of Rexahn common stock in accordance with the terms of the Merger Agreement.
Conditions to the Completion of the Merger (see page 169)
Under the terms of the Merger Agreement, to consummate the merger, Rexahn Stockholders must approve Proposal Nos. 1, 2, 3 and 5, and Ocuphire Stockholders must (i) adopt and approve of the Merger Agreement and the transactions contemplated thereby, (ii) acknowledge that the approval given is irrevocable and that such stockholder is aware of its rights to demand appraisal for its shares pursuant to Section 262 of the General Corporation Law of the State of Delaware (“DGCL”), and that such stockholder has received and read a copy of Section 262 of the DGCL and (iii) acknowledge that by its approval of the merger it is not entitled to appraisal rights with respect to its shares in connection with the merger and thereby waives any rights to receive payment of the fair value of its capital stock under the DGCL.
In addition to obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the Merger Agreement, as described under the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement must be satisfied or waived.
No Solicitation (see page 173)
Each of Rexahn and Ocuphire agreed that during the period commencing on the date of the Merger Agreement and ending on the earlier of the consummation of the merger or the termination of the Merger Agreement, except as described below, Rexahn and Ocuphire will not, nor will either party authorize any of its directors, officers, employees, agents, attorneys, accountants, investment bankers, advisors or representatives to, directly or indirectly:
solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of, any “acquisition proposal” or “acquisition inquiry” (each as defined below) or take any action that could reasonably be expected to lead to an acquisition proposal or acquisition inquiry;
furnish any non-public information with respect to it to any person in connection with or in response to an acquisition proposal or acquisition inquiry;
engage in discussions or negotiations with any person with respect to any acquisition proposal or acquisition inquiry;
approve, endorse or recommend an acquisition proposal;
execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any “acquisition transaction” as defined below (other than a confidentiality agreement permitted by the Merger Agreement); or
publicly propose to do any of the above.
Termination of the Merger Agreement (see page 179)
Either Rexahn or Ocuphire can terminate the Merger Agreement under certain circumstances, which would prevent the merger from being consummated.
Termination Fee (see page 181)
If the Merger Agreement is terminated under certain circumstances, Rexahn or Ocuphire will be required to pay the other party a termination fee of up to $750,000, and, in some circumstances, Ocuphire will be required to reimburse Rexahn for expenses incurred in connection with the transaction up to a maximum of $750,000.
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CVR Agreement (see page 183)
Pursuant to the Merger Agreement and the CVR Agreement, Rexahn Stockholders as of immediately prior to the Effective Time will receive one CVR for each share of Rexahn common stock held of record as of immediately prior to the Effective Time. Each CVR will represent the right to receive cash payments upon the occurrence of certain triggering events. In particular, for each CVR Payment Period during the CVR Term, CVR holders will be entitled to (i) 90% of all payments received by Rexahn from BioSense pursuant to the BioSense Agreement, less certain permitted deductions, (ii) 90% of all payments received by Rexahn from HaiChang pursuant to the HaiChang Agreement, less certain permitted deductions, and (iii) 75% of (x) all cash consideration paid by a third party to Rexahn during the applicable CVR Payment Period in connection with a Parent IP Deal; plus (y) with respect to any non-cash consideration received by Rexahn from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn at the time such non-cash consideration is monetized; less (z) certain permitted deductions. For more information about the BioSense Agreement and the HaiChang Agreement, see the section entitled “Rexahn Business– Collaboration and License Arrangements.”
The sole right of the holders of the CVRs is to receive cash from Rexahn, if any, through the rights agent in accordance with the CVR Agreement. The CVRs are not transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument and will not be registered with the SEC or listed for trading on any exchange. The CVRs will not have any voting or dividend rights, will not represent any equity or ownership interest in Rexahn or its subsidiaries, and interest will not accrue in any amounts payable on the CVRs. The CVR Agreement will be effective prior to the Closing and will continue in effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder, unless and until earlier terminated upon termination of the Merger Agreement.
Voting Agreements and Written Consents (see page 187)
In order to induce Rexahn to enter into the Merger Agreement, certain directors, officers, and holders of 5% or more of Ocuphire common stock are parties to a voting agreement with Ocuphire pursuant to which among other things, each such stockholder has agreed, solely in his, her or its capacity as a stockholder of Ocuphire, to vote all of his, her or its shares of Ocuphire common stock in favor of (i) the adoption and approval of the Merger Agreement and the transactions contemplated thereby; (ii) adoption and approval of an amendment of the Ocuphire Certificate of Incorporation to increase the authorized shares of Ocuphire common stock; (iii) acknowledgement that the approval given for the Merger Agreement is irrevocable and that the stockholder is aware of such stockholder’s appraisal rights under Section 262 of the DGCL; (iv) acknowledgement that the stockholder is not entitled to appraisal rights by voting in favor of the transaction and waiving appraisal rights under the DGCL; and (iv) a waiver of any notice that may have been or may be required relating to the merger or any other transactions contemplated thereby. Additionally, each stockholder has agreed, solely in its capacity as an Ocuphire Stockholder, to vote against any competing acquisition proposal and any action, proposal or transaction that would reasonably be expected to result in a material breach of the voting agreement, or would prevent or materially delay or adversely affect the consummation of the merger, or change in any manner the voting rights of any class of capital stock of Ocuphire. These Ocuphire Stockholders have also granted an irrevocable proxy to Ocuphire and its designee to vote their respective shares of Ocuphire common stock in accordance with the voting agreements.
Nasdaq Stock Market Listing (see page 160)
Rexahn has filed an initial listing application with Nasdaq pursuant to the Nasdaq Stock Market LLC “business combination” rules. If such application is accepted, Rexahn anticipates that Rexahn common stock will be listed on the Nasdaq Capital Market following the Closing under the trading symbol “OCUP.”
Pre-Merger Financing (see page 188)
On June 29, 2020, Ocuphire, Rexahn and the Investors entered into the Securities Purchase Agreement, which amended and restated in its entirety the prior securities purchase agreement among the same parties dated June 17, 2020 (the “Initial Securities Purchase Agreement”). The Securities Purchase Agreement that was entered into on June 29, 2020 was substantially similar to the Initial Securities Purchase Agreement, except (i) the number of Additional Shares to be deposited into escrow was increased from two times the number of
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Initial Shares of Ocuphire common stock to three times the number of Initial Shares of Ocuphire common stock, (ii) the Registration Rights Agreement, dated June 17, 2020, by and among Rexahn and the Investors (the “Registration Rights Agreement”) was terminated in its entirety, and (iii) certain of Rexahn’s obligations were revised to reflect termination of the Registration Rights Agreement.
Pursuant to the Securities Purchase Agreement, the Investors agreed to invest a total of $21.15 million in cash (the “Purchase Price”) to fund the combined company following the merger. In return, based on an agreed upon pre-money valuation of the combined company of $120 million, Ocuphire will issue the Initial Shares to the Investors, which shares will be exchangeable in the merger for approximately 15% of the Pre-Merger Financing Fully Diluted Shares (as defined in “Agreements Related to the Merger—Pre-Merger Financing”). In addition, (i) Ocuphire will deposit the Additional Shares into escrow with an escrow agent for the benefit of the Investors, to be exchanged for Rexahn common stock in the merger, and to be delivered, in whole or in part, based on the formula set forth below, out of escrow to the Investors if 85% of the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on The Nasdaq Stock Market during the first ten trading days (or earlier, at the election of any Investor) immediately following the closing date of the Pre-Merger Financing (which closing date will be the same date as the Closing) is lower than the effective price per share paid by the Investors for the Converted Initial Shares (as defined below), and (ii) on the tenth trading day following the closing date of the Pre-Merger Financing (the “warrant closing date”), Rexahn will issue to the Investors (x) Series A warrants to purchase shares of Rexahn common stock, as further described below (the “Series A Warrants”) and (y) Series B warrants to purchase shares of Rexahn common stock, as further described below (the “Series B Warrants”, and together with the Series A Warrants and the Pre-Merger Financing Shares, the “Purchased Securities”).
As a result of the merger, at the Effective Time, the Initial Shares will automatically be converted into the right to receive a number of shares of Rexahn common stock equal to the number of Initial Shares multiplied by the Exchange Ratio. Further, at the Effective Time, the Additional Shares placed into escrow with the escrow agent will automatically be converted into the right to receive a number of shares of Rexahn common stock equal to the number of Additional Shares multiplied by the Exchange Ratio (the “Convertible Additional Shares”). The number of Converted Additional Shares deliverable out of escrow to each Investor will be equal to the lesser of (A) the number of Converted Additional Shares issued in exchange for the Additional Shares deposited in the Investor’s escrow account and (B) the number determined on or prior to the warrant closing date by subtracting (i) the number of Converted Initial Shares issued to the Investor from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by the Investor by (b) 85% of the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days (or earlier at the election of any Investor) immediately following the Closing, subject to the Floor Price (as defined below). Any Converted Additional Shares not deliverable to the Investors as of the warrant closing date based on the foregoing formula will be returned to Rexahn as treasury shares and cancelled. No Converted Additional Shares will be deliverable out of escrow if the foregoing formula results in a negative number. The lower of (x) the effective initial purchase price per Converted Initial Share and (y) the number obtained by the formula in clause (b) above, subject to the Floor Price, is called the “Final Purchase Price.” Notwithstanding the foregoing, no Converted Additional Shares will be delivered to Investors from escrow to the extent such delivery would result in such Investor, together with its affiliates and any other person whose beneficial ownership of Rexahn common stock would be aggregated with such Investor for purposes of Section 13(d) of the Exchange Act beneficially owning in excess of 4.99% or 9.99% of the outstanding Rexahn common stock (including the Converted Additional Shares so delivered).
Series A Warrants
The Series A Warrants will be issued on the warrant closing date, will have an initial exercise price per share equal to 120% of per share Final Purchase Price, will be immediately exercisable and will have a term of five years from the date of issuance. The Series A Warrants issued to each Investor will initially be exercisable for an amount of Rexahn common stock equal to the sum of (i) the number of Converted Initial Shares issued to the Investor, (ii) the number of Converted Additional Shares delivered or deliverable to the Investor as of the warrant closing date and (iii) the number of shares, if any, underlying the Series B Warrants held by the Investor as of the warrant closing date.
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The Series A Warrants will provide that, until the second anniversary of the date on which all shares of Rexahn common stock issued and issuable to the Investors (including any shares underlying the Investor Warrants) (the “Underlying Securities”) may be sold without restriction or limitation pursuant to Rule 144 (provided that Ocuphire is current in its SEC filings, and if not, the second anniversary of such later date on which the Public Information Failure (as defined on page 190) is cured and no longer prevents the Investors from selling all of the Underlying Securities), if Rexahn publicly announces, issues or sells, enters into a definitive, binding agreement pursuant to which Rexahn is required to issue or sell or is deemed, pursuant to the provisions of the Series A Warrants, to have issued or sold, any shares of Rexahn common stock for a price per share lower than the exercise price then in effect, subject to certain limited exceptions, then the exercise price of the Series A Warrants shall be reduced to such lower price per share.
Further, every ninth trading day up to and including the 45th trading day (each, a “Reset Date”), the Series A Warrants will be adjusted downward (but not increased) such that the exercise price thereof becomes 120% of the Reset Price (as defined below), and the number of shares underlying the Series A Warrants will be increased (but not decreased) to the quotient of (a) (i) the exercise price in effect prior to such Reset (as defined below) multiplied by (ii) the number of shares underlying the Series A Warrants prior to the Reset divided by (b) the resulting exercise price.
Series B Warrants
The Series B Warrants will be issued to each Investor on the warrant closing date, and each Investor’s Series B Warrants will have an exercise price per share of $0.0001, will be immediately exercisable and will expire on the day following the later to occur of (i) the Reservation Date (as defined on page 191), 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. Each Investor’s Series B Warrants will be initially exercisable for an amount of Rexahn common stock equal to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or deliverable to the Investor as of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by the Investor by (b) 85% of the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days (or earlier at the election of any Investor) immediately following the Closing, subject to the Floor Price.
Additionally, every Reset Date following (i) the earlier date to occur of (x) such time as all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and (y) six months following the issuance date (such earlier date, the “Six Month Reset Date”) and (ii) if a Public Information Failure has occurred at any time following the Six Month Reset Date, the earlier to occur of (x) the date that such Public Information Failure is cured and no longer prevents the holder from selling all of the Underlying Securities pursuant to Rule 144 without restriction or limitation and (y) the earlier to occur of (I) the date all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be incompliance with Rule 144(c)(1) and (II) one year after the issuance date (each such date provided in the foregoing clauses (i), (ii) and (iii), an “End Reset Measuring Date”) (such 45 trading day period, the “Reset Period” and each such 45th trading day after an End Reset Measuring Date, an “End Reset Date”), the number of shares issuable upon exercise of each Investor’s Series B Warrants shall be increased (a “Reset”) to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or deliverable to the Investor as of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by the Investor, by (b) the greater of (x) the arithmetic average of the five lowest dollar volume-weighted average prices of a share of Rexahn common stock on Nasdaq during the applicable Reset Period immediately preceding the applicable Reset Date to date and (y) a floor price per share (the “Floor Price”) calculated based on a pre-money valuation (of the combined company, assuming for this purpose the pre-money issuance of the Converted Initial Shares and Converted Additional Shares) of $10 million (such number resulting in this clause (b), the “Reset Price”). See the section entitled “Agreements Related to the Merger – Pre-Merger Financing.”
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Financing Lock-Up Agreements
In connection with the Pre-Merger Financing, Rexahn and Ocuphire will enter into additional lock-up agreements (the “Financing Lock-Up Agreements”) with each officer, director or other person that will be subject to Section 16 of the Exchange Act, with respect to Rexahn immediately following the Closing (the “Financing Lock-Up Parties”), pursuant to which each of the Financing Lock-Up Parties will agree that until the date that is 90 calendar days after the earlier of (i) such time as all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and (ii) six months after the closing of the Pre-Merger Financing (provided that, if there is a Public Information Failure, such date shall be such later date on which the Public Information Failure is cured and no longer prevents the Investors from selling all of the Underlying Securities), subject to certain customary exceptions, such Financing Lock-Up Party will not and will cause its affiliates not to (A) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or agree to dispose of, directly or indirectly, any shares of Rexahn common stock or common stock equivalents, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to any shares of Rexahn common stock or common stock equivalents owned directly by the Financing Lock-Up Parties (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the SEC (collectively, the “Subject Shares”), or (B) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Subject Shares, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of shares of Rexahn common stock or other securities, in cash or otherwise, (C) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Rexahn common stock or common stock equivalents or (D) publicly disclose the intention to do any of the foregoing.
Leak-Out Agreements
In connection with the Pre-Merger Financing, each Investor will enter into a leak-out agreement with Rexahn (collectively, the “Leak-Out Agreements”) limiting its daily sales to no more than its pro rata portion, based on such Investor’s investment amount, of 30% of the daily traded volume as reported by Bloomberg, LP (“Bloomberg”).
Additional Lock-Up Agreements (see page 195)
As a condition to the Closing, certain stockholders of each of Rexahn and Ocuphire and their affiliates, have entered into lock-up agreements, pursuant to which such parties have agreed not to, except in limited circumstances, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly any shares of Rexahn common stock or any security convertible into or exercisable or exchangeable for Rexahn common stock, including, as applicable, shares received in the merger and issuable upon exercise of certain warrants and options, during the period commencing at the Effective Time and continuing until the date that is 180 days from the Effective Time.
Each of the directors and officers of Rexahn is a party to a lock-up agreement. As of September 10, 2020, Rexahn Stockholders who have executed lock-up agreements beneficially owned in the aggregate approximately 2.2% of the outstanding Rexahn common stock. Ocuphire Stockholders who have executed lock-up agreements, as of September 10, 2020, beneficially owned in the aggregate approximately 63.7% of the outstanding shares of Ocuphire capital stock on an as converted to common stock basis.
Ocuphire and Rexahn may waive the restrictions applicable to certain Ocuphire and Rexahn stockholders in their discretion and as needed to comply with the initial listing requirements of the Nasdaq Stock Market LLC and as described under the section entitled “Agreements Related to the Merger—Additional Lock-Up Agreements” in this proxy statement/prospectus/information statement.
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Management Following the Merger (see page 308)
The following table lists, as of September 10, 2020, the names, ages and positions of the individuals who are expected to serve as executive officers and directors of the combined company following completion of the merger.
Name
Age
Position
Executive Officers
 
 
Mina Sooch
52
President, Chief Executive Officer, Treasurer, Director, Vice Chair
Bernhard Hoffmann
65
VP of Corporate Development and Finance, Secretary
 
 
 
Non-Employee Directors
 
 
Sean Ainsworth
52
Director, Lead Independent Director
James S. Manuso
72
Director
Cam Gallagher
51
Director, Chair of the Board
Alan R. Meyer
67
Director
Richard J. Rodgers
53
Director
Susan K. Benton
56
Director
Interests of Rexahn Directors and Executive Officers in the Merger (see page 145)
In considering the recommendation of the Rexahn Board with respect to issuing shares of Rexahn common stock as contemplated by the Merger Agreement and the other matters to be acted upon by Rexahn Stockholders at the Rexahn special meeting, Rexahn Stockholders should be aware that certain members of the Rexahn Board and certain of Rexahn’s executive officers have interests in the merger that may be different from, or in addition to, the interests of Rexahn Stockholders. As of September 10, 2020, Rexahn’s directors and current executive officers owned, in the aggregate less than 1% of the shares of Rexahn common stock, which for purposes of this subsection excludes any Rexahn common stock issuable upon exercise of stock options held by such individual. As of September 10, 2020, Rexahn’s directors and current executive officers owned, in the aggregate, unvested Rexahn stock options covering 40,506 shares of Rexahn common stock and vested Rexahn stock options covering 91,521 shares of Rexahn common stock. The affirmative vote of a majority in interest of the holders of Rexahn common stock present in person or by proxy at the Rexahn special meeting and entitled to vote on the matter is required for approval of Proposal Nos. 1, 4, 5 and 6. The affirmative vote of the holders of a majority of the shares of Rexahn common stock outstanding on the Record Date for the Rexahn special meeting and entitled to vote on the matter is required for approval of Proposal Nos. 2 and 3. In addition, Rexahn has entered into an employment agreement with its President and Chief Executive Officer that will result in the receipt by such officer of cash severance payments and other benefits upon an eligible termination of employment of such officer’s employment following the Closing.
Further, Mr. Rodgers, a member of the Rexahn Board, is expected to continue as a member of the Rexahn Board following the merger. Mr. Rodgers, along with the rest of the expected members of the Rexahn Board following the merger, has committed to invest in the Pre-Merger Financing. Mr. Rodgers' investment is for $100,000 in the Pre-Merger Financing. The compensation arrangements with Rexahn’s officers and directors are discussed in greater detail in the sections entitled “The Merger—Interests of Rexahn Directors and Executive Officers in the Merger” and “Rexahn Executive Compensation” in this proxy statement/prospectus/information statement.
Interests of Ocuphire Directors and Executive Officers in the Merger (see page 149)
In considering the recommendation of the Ocuphire Board with respect to the Merger Agreement, Ocuphire Stockholders should be aware that certain members of the Ocuphire Board and certain of Ocuphire’s executive officers have interests in the merger that may be different from, or in addition to, interests they have as Ocuphire Stockholders. All of Ocuphire’s executive officers and directors have options, subject to vesting, to purchase shares of Ocuphire common stock that will be converted into and become options to purchase shares of Rexahn common stock. Certain of Ocuphire’s directors and executive officers are expected to become directors and executive officers of the combined company as described in “Management Following the Merger” upon the
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Closing, and all of Ocuphire’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement.
As of September 10, 2020, Ocuphire’s directors and executive officers owned, in the aggregate: (i) approximately 35.6% of the shares of Ocuphire common stock, which excludes (i) Ocuphire common stock issuable in the Pre-Merger Financing, (ii) Ocuphire common stock issuable upon the Convertible Note Conversion, pursuant to the conversion agreement dated June 8, 2020 among Ocuphire and the holders of the Ocuphire convertible notes (the “Note Conversion Agreement”) and (iii) Ocuphire common stock issuable upon exercise or settlement of Ocuphire Options. Affirmative approval from a majority of the outstanding shares of Ocuphire common stock is required to approve the amendment to the Ocuphire Certificate of Incorporation and to adopt and approve the Merger Agreement and the transactions contemplated thereby. The compensation arrangements with Ocuphire’s officers and directors are discussed in greater detail in the sections entitled “Merger Agreement—Interests of Ocuphire Directors and Executive Officers in the Merger” and “Management Following the Merger” in this proxy statement/prospectus/information statement.
Risk Factors (see page 35)
Both Rexahn and Ocuphire are subject to various risks associated with their businesses and their industries. In addition, the merger poses a number of risks to each company and its respective stockholders, including the possibility that the merger may not be completed and the following risks:
Rexahn and Ocuphire securityholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger and the Pre-Merger Financing.
The Exchange Ratio set forth in the Merger Agreement is adjustable based on the Parent Cash Amount, so the relative ownership of the combined company as between current Rexahn Stockholders and current Ocuphire Securityholders may change based on, among other things, Rexahn’s interim cash burn prior to the Closing and the estimated warrant liabilities associated with the Rexahn Warrants.
The market price of Rexahn common stock will impact the estimated warrant liability amount in the calculation of the Parent Cash Amount, and if the market price of Rexahn common stock continues to increase, Rexahn may not be able to satisfy the minimum Parent Cash Amount requirement in the Merger Agreement or, if Ocuphire waives the minimum Parent Cash Amount condition, Rexahn Stockholders may own significantly less of the combined company than currently estimated.
Rexahn has issued and may issue additional shares of Rexahn common stock or other Rexahn securities before Closing in exchange for outstanding Rexahn warrants, which has diluted and would further dilute the ownership interests of current Rexahn Stockholders.
The merger consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed.
Failure to complete the merger may result in either Rexahn or Ocuphire paying a termination fee to the other party and could significantly harm the market price of Rexahn common stock and negatively affect the future business and operations of each company.
The issuance of Rexahn common stock to Ocuphire Stockholders pursuant to the Merger Agreement and the resulting change in control from the merger must be approved by Rexahn Stockholders, and the Merger Agreement and transactions contemplated thereby must be approved by the Ocuphire Stockholders. Failure to obtain these approvals would prevent the Closing.
The merger may be completed even though certain events occur prior to the Closing that materially and adversely affect Rexahn or Ocuphire.
Some Rexahn and Ocuphire officers and directors have interests in the merger that are different from the respective stockholders of Rexahn and Ocuphire and that may influence them to support or approve the merger without regard to the interests of the respective stockholders of Rexahn and Ocuphire.
The market price of Rexahn common stock following the merger may decline as a result of the merger.
Rexahn Stockholders and Ocuphire Securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the Closing as compared to their current ownership and voting interest in the respective companies.
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The combined company will need to raise additional capital by issuing securities or debt or through licensing or other strategic arrangements, which may cause dilution to the combined company's stockholders or restrict the combined company's operations or impact its proprietary rights.
During the pendency of the merger, Rexahn and Ocuphire may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.
Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.
Because the lack of a public market for Ocuphire common stock makes it difficult to evaluate the value of Ocuphire common stock, the Ocuphire Stockholders may receive shares of Rexahn common stock in the merger that have a value that is less than, or greater than, the fair market value of Ocuphire common stock.
If the conditions to the merger are not met or waived, the merger will not occur.
Rexahn and Ocuphire do not anticipate that the combined company will pay any cash dividends in the foreseeable future.
Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.
The Pre-Merger Financing may not be satisfied.
Litigation relating to the merger could require Rexahn or Ocuphire to incur significant costs and suffer management distraction, and could delay or enjoin the merger.
The historical unaudited pro forma condensed combined financial information may not be representative of the combined company’s results after the merger.
Ocuphire’s risk-adjusted projections, which Oppenheimer relied on for its fairness opinion delivered to the Rexahn Board, assume that Ocuphire’s product candidates receive FDA approval. Ocuphire’s failure to obtain such FDA approval would adversely impact the combined company’s potential to generate revenue, its business and its results of operations.
The opinion received by the Rexahn Board from Oppenheimer is subject to a number of assumptions and it has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.
These risks and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement/prospectus/information statement. Rexahn and Ocuphire both encourage you to read and consider all of these risks carefully.
Regulatory Approvals (see page 156)
In the United States, Rexahn must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Rexahn common stock and the filing of this proxy statement/prospectus/information statement with the SEC.
Anticipated Accounting Treatment (see page 161)
Although Rexahn is the legal acquirer and will issue shares of Rexahn common stock to effect the merger with Ocuphire, Ocuphire is considered the accounting acquirer. In accordance with the accounting guidance under Accounting Standards Update (“ASU”) 2017-01, the merger is considered an asset acquisition. Accordingly, the assets and liabilities of Rexahn will be recorded as of the merger Closing date at the purchase price of the accounting acquirer, Ocuphire. Ocuphire will have to allocate the total purchase price among the individual net assets acquired on a fair value basis. Determination of fair value of certain assets acquired is dependent upon certain valuations that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. A final determination of these estimated fair values, which cannot be made prior to the completion of the transaction, will be based on the actual net tangible assets of Rexahn that
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exist as of the date of the completion of the transaction. Therefore, the actual purchase price allocation may differ from the amounts reflected in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed consolidated financial statements include the accounts of Rexahn since the effective date of merger and Ocuphire since inception.
Appraisal Rights and Dissenters’ Rights (see page 161)
Holders of Rexahn common stock are not entitled to appraisal rights in connection with the merger. Holders of Ocuphire common stock are entitled to appraisal rights in connection with the merger under Delaware law. For more information about such rights, please see the provisions of Section 262 of the DGCL attached as Annex F and the section entitled “The Merger—Appraisal Rights and Dissenters’ Rights” in this proxy statement/prospectus/information statement.
Comparison of Stockholder Rights (see page 341)
Both Rexahn and Ocuphire are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. If Proposal Nos. 1 and 2 are approved by Rexahn Stockholders at the Rexahn special meeting, and the merger is completed, Ocuphire Stockholders will become stockholders of Rexahn, and their rights will be governed by the DGCL, Rexahn’s amended and restated bylaws (the “Rexahn Bylaws”) and the Rexahn Certificate of Incorporation. The rights of Rexahn stockholders contained in the Rexahn Certificate of Incorporation and Rexahn Bylaws differ from the rights of Ocuphire Stockholders under the Ocuphire Certificate of Incorporation and bylaws (the “Ocuphire Bylaws”), as more fully described under the section entitled “Comparison of Rights of Holders of Rexahn Stock and Ocuphire Stock” in this proxy statement/prospectus/information statement.
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following tables present summary historical financial data for Rexahn and Ocuphire, summary unaudited pro forma condensed combined financial data for Rexahn and Ocuphire, and comparative historical and unaudited pro forma per share data for Rexahn and Ocuphire.
Selected Historical Financial Data of Rexahn
The following selected statement of operations data for the years ended December 31, 2019 and 2018 and the selected balance sheet data as of December 31, 2019 and 2018 was derived from Rexahn’s audited financial statements included elsewhere in this proxy statement/prospectus/information statement. Rexahn derived the following selected statement of operations data for the years ended December 31, 2017, 2016 and 2015 and the selected balance sheet data as of December 31, 2017, 2016 and 2015 from audited financial statements that are not included in this proxy statement/prospectus/information statement. The following selected financial data as of and for the six months ended June 30, 2020 and 2019 are derived from Rexahn’s unaudited condensed financial statements included in this proxy statement/prospectus/information statement.
Rexahn’s historical results are not necessarily indicative of the results that may be expected in the future. You should read the selected financial data below in conjunction with the section entitled “Rexahn Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Rexahn’s financial statements and related notes appearing elsewhere in this proxy statement/prospectus/information statement.
 
For the Year Ended
December 31,
Six Months Ended
June 30,
 
2019
2018
2017
2016
2015
2020
(unaudited)
2019
(unaudited)
Statement of Operations Data:
 
 
 
 
 
 
 
Revenues
$
$
$
$
$
$1,150,000
$
Operating expenses:
 
 
 
 
 
 
 
General and administrative
5,738,227
7,428,615
6,639,421
6,324,236
6,115,210
3,372,898
3,035,538
Research and development
5,476,776
13,109,058
10,715,296
10,089,149
12,148,226
688,397
3,890,631
Total operating expenses
11,215,003
20,537,673
17,354,717
16,413,385
18,263,436
4,061,295
6,926,169
Loss from operations
(11,215,003)
(20,537,673)
(17,354,717)
(16,413,385)
(18,263,436)
(2,911,295)
(6,926,169)
Other income (expense), net
 
 
 
 
 
 
 
Interest income
313,700
254,344
207,003
118,565
103,269
40,461
178,035
Mediation settlement
1,770,658
Unrealized gain (loss) on fair value of warrants
2,265,869
5,546,049
(7,594,162)
5,529,907
3,986,727
(227,094)
1,940,854
Other, net
368,750
(552,627)
(313,090)
(211,116)
Total other income (expense), net
2,579,569
6,169,143
(7,939,786)
7,106,040
3,878,880
(186,633)
2,118,889
Net loss
$(8,635,434)
$(14,368,530)
$(25,294,503)
$(9,307,345)
$(14,384,556)
$(3,097,928)
$(4,807,280)
Net Loss per share, basic and diluted(1)
$(2.18)
$(5.25)
$(11.10)
$(5.15)
$(9.49)
$(0.77)
$(1.23)
Weighted average shares outstanding, basic and diluted (1)
3,960,163
2,738,506
2,278,105
1,807,628
1,515,465
4,019,141
3,900,208
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As of December 31,
As of June 30,
 
2019
2018
2017
2016
2015
2020
(unaudited)
2019
(unaudited)
Balance Sheet Data:
 
 
 
 
 
 
 
Cash, cash equivalents and marketable securities
$12,216,767
$14,725,821
$26,831,095
$20,315,580
$23,439,526
$9,208,951
$16,260,169
Total assets
$12,968,772
$16,042,926
$28,287,881
$21,043,532
$24,805,029
$10,249,074
$17,677,234
Total liabilities
$3,010,818
$5,480,036
$11,519,285
$3,985,070
$6,029,481
$3,245,761
$4,054,128
Accumulated deficit
$(163,322,676)
$(154,687,242)
$(140,318,712)
$(115,024,209)
$(105,716,864)
$(166,420,604)
$(159,494,522)
Total Stockholders’ Equity
$9,957,954
$10,562,890
$16,768,596
$17,058,462
$18,775,548
$7,003,313
$13,623,106
(1)
Basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding, plus the number of common share equivalents that would be dilutive. On May 5, 2017, Rexahn effected a one-for-ten reverse stock split of the outstanding shares of Rexahn common stock, together with a corresponding proportional reduction in the number of authorized shares of Rexahn capital stock. Each 10 shares of Rexahn common stock, par value $0.0001 per share, issued and outstanding at the effective time of the reverse stock split were reclassified and combined into one share of common stock par value $0.0001 per share. On April 12, 2019, Rexahn effected a 1-for-12 reverse stock split of the outstanding shares of Rexahn common stock. Each 12 shares of Rexahn common stock, par value $0.0001 per share, issued and outstanding at the effective time of the reverse stock split were reclassified and combined into one share of common stock par value $0.0001 per share. All share and per share amounts have been restated for all periods to give retroactive effect to the reverse stock splits.
Selected Historical Financial Data of Ocuphire
The selected statement of operations data for the years ended December 31, 2019 and 2018 and the selected balance sheet data as of December 31, 2019 and December 31, 2018 are derived from Ocuphire’s audited financial statements prepared using accounting principles generally accepted in the United States (“U.S. GAAP”), which are included in this proxy statement/prospectus/information statement. The selected statement of operations data for the six months ended June 30, 2020 and 2019 and the selected balance sheet data as of June 30, 2020 and 2019 are derived from Ocuphire's unaudited condensed financial statements included in this proxy statement/prospectus/information statement. The financial data should be read in conjunction with the section entitled “Ocuphire Management's Discussion and Analysis of Financial Condition and Results of Operations” and Ocuphire’s financial statements and related notes appearing elsewhere in this proxy statement/prospectus/information statement. The historical results are not necessarily indicative of results to be expected in any future period.
 
Year Ended
December 31,
Six Months Ended
June 30,
Statement of Operations Data:
2019
2018
2020
(unaudited)
2019
(unaudited)
Operating expenses:
 
 
 
 
General and administrative
$1,820,477
$743,279
$942,471
$777,189
Research and development
2,372,502
555,951
928,561
828,450
Acquired in-process research and development
2,126,253
Total operating expenses
4,192,979
1,299,230
3,997,285
1,605,639
Loss from operations
(4,192,979)
(1,299,230)
(3,997,285)
(1,605,639)
Interest expense
(1,409,096)
(196,506)
(1,242,624)
(319,869)
Fair value change of premium conversion derivatives
(499,414)
(21,238)
(721,444)
(132,083)
Gain on note extinguishment
1,260,350
Other income, net
(67,471)
(109,897)
8,505
Loss before income taxes
(6,168,960)
(1,626,871)
(4,692,498)
(2,057,591)
Benefit (provision) for income taxes
Net loss
(6,168,960)
(1,626,871)
(4,692,498)
(2,057,591)
Other comprehensive loss, net of tax
Comprehensive loss
$(6,168,960)
$(1,626,871)
$(4,692,498)
$(2,057,591)
Net loss per share:
 
 
 
 
Basic and diluted(1)
$(2.29)
$(0.68)
$(1.36)
$(0.77)
Number of shares used in per share calculations:
 
 
 
 
Basic and diluted(1)
2,692,793
2,388,941
3,451,031
2,685,467
(1)
See Note 9 to Ocuphire’s financial statements appearing elsewhere in this proxy statement/prospectus/information statement for further details on the calculation of net loss per share, basic and diluted, attributable to common stockholders, and the weighted-average number of shares used in computation of the per share amounts.
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As of December 31,
As of June 30,
 
2019
2018
2020
(unaudited)
2019
(unaudited)
Balance Sheet Data:
 
 
 
 
Cash and cash equivalents
$1,536,917
$451,342
$854,331
$1,191,794
Total assets
1,784,279
533,073
3,499,908
2,996,731
Convertible notes (including premium conversion derivatives)
8,380,498
1,643,146
10,300,593
5,848,940
Total liabilities
9,343,803
2,231,747
12,277,261
6,596,510
Accumulated deficit
(8,054,703)
(1,885,743)
(12,747,201)
(3,943,334)
Total shareholders’ deficit
(7,559,524)
(1,698,674)
(8,777,353)
(3,599,779)
Selected Unaudited Pro Forma Condensed Combined Financial Data of Rexahn and Ocuphire
The following selected unaudited pro forma condensed combined financial data gives effect to: (i) the Merger and (ii) the Initial Shares issued to stockholders of Ocuphire upon the closing of the Pre-Merger Financing (collectively, the “Pro Forma Events”). The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting under U.S. generally accepted accounting principles (“GAAP”). For accounting purposes, Ocuphire is considered to be acquiring Rexahn and the merger is expected to be accounted for as an asset acquisition. Ocuphire was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Ocuphire Securityholders (including the Investors) would own approximately 86.9% of Rexahn immediately following the Effective Time assuming Rexahn delivers a Parent Cash Amount of $1.9 million on the Anticipated Closing Date, (ii) Ocuphire will hold 6 of the 7 board seats of the combined company and (iii) Ocuphire’s management will hold all key positions in the management of the combined company.
The Rexahn and Ocuphire unaudited pro forma condensed combined balance sheet data assume that the Pro Forma Events took place on June 30, 2020, and combines the Rexahn and Ocuphire historical balance sheets at June 30, 2020. The Rexahn and Ocuphire unaudited pro forma condensed combined statements of operations data assume that the Pro Forma Events took place as of January 1, 2019, and combines the historical results of Rexahn and Ocuphire for the year ended December 31, 2019 and of Rexahn and Ocuphire for the six months ended June 30, 2020.
The selected unaudited pro forma condensed combined financial data are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The selected unaudited pro forma condensed combined financial data as of and for the six months ended June 30, 2020 and for the year ended December 31, 2019 are derived from the unaudited pro forma condensed combined financial information and should be read in conjunction with that information. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” in this proxy statement/prospectus/information statement.
The unaudited pro forma condensed combined financial information assumes that, at the Effective Time, each share of Ocuphire common stock will be converted into the right to receive shares of Rexahn common stock such that, immediately after the Merger, Rexahn Stockholders are expected to own approximately 13.1% of the fully-diluted common stock of the combined company, and Ocuphire Securityholders (including the Investors) are expected to own approximately 86.9% of the fully-diluted common stock of the combined company, assuming Rexahn delivers a Parent Cash Amount of $1.9 million. Such percentages are subject to adjustment to account for the occurrence of certain events discussed elsewhere in this proxy statement/prospectus/information statement. Based on Rexahn’s current estimates, Rexahn anticipates delivering a Parent Cash Amount between $1.9 million and $2.4 million assuming the Closing occurs by November 14, 2020, which is the end date set forth in the Merger Agreement; however, the final Parent Cash Amount will not be calculated until the Anticipated Closing Date, and may vary significantly depending on, among other things, Rexahn’s ability to control and correctly estimate its operating expenses, expenses relating to Rexahn’s ongoing litigation and the trading price of Rexahn common stock (and its impact on Rexahn’s estimated warrant liabilities, which are deducted from the Parent Cash Amount). If the Parent Cash Amount is $1.9 million on the Anticipated Closing Date, then immediately following the Effective Time, Rexahn Stockholders would own approximately 13.1% of Rexahn common stock, and the Ocuphire Securityholders would own, or hold rights to acquire, approximately 86.9% of Rexahn common stock, in each case calculated on a fully-diluted basis. Under the terms of the Merger Agreement, Rexahn Stockholders’ ownership percentage in the combined company is subject to a floor of approximately 9.1% regardless of the Parent Cash Amount on the Anticipated Closing Date, assuming Ocuphire waives the minimum Parent Cash Amount condition at or prior to Closing.
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Unaudited Pro Forma Condensed Combined Statements of Operations Data
 
For the Six
Months Ended
June 30,
2020
For the
Year Ended
December 31,
2019
Revenue
$1,150,000
$
General and administrative expenses
2,705,055
7,070,635
Research and development expenses
1,616,958
7,849,278
Acquired in-process research and development expenses
2,126,253
Loss from operations
(5,298,266)
(14,919,913)
Net loss attributable to common stockholders
(5,476,394)
(12,407,815)
Net loss per share, basic and diluted
(0.21)
(0.59)
Unaudited Pro Forma Condensed Combined Balance Sheet Data
 
As of June 30,
2020
Cash and cash equivalents
$29,121,282
Working capital, net
22,298,160
Total assets
31,451,968
Accumulated deficit
(29,952,599)
Total stockholders’ equity
22,288,221
Comparative Historical and Unaudited Pro Forma Per Share Data
The information below reflects the historical net loss and book value per share of Rexahn common stock and the historical net loss and book value per share of Ocuphire common stock in comparison with the unaudited pro forma net loss and book value per share after giving effect to the Pro Forma Events on an asset acquisition basis.
You should read the tables below in conjunction with the audited and unaudited consolidated financial statements of Rexahn included in this proxy statement/prospectus/information statement and the audited and unaudited financial statements of Ocuphire included in this proxy statement/prospectus/information statement and the related notes and the unaudited pro forma condensed combined financial information and notes related to such financial statements included elsewhere in this proxy statement/prospectus/information statement.
Rexahn
 
Six Months
Ended
June 30,
2020
Year Ended
December 31,
2019
Historical Per Common Share Data:
 
 
Basic and diluted net loss per share
$(0.77)
$(2.18)
Book value per share
1.74
2.48
Ocuphire
 
Six Months
Ended
June 30,
2020
Year Ended
December 31,
2019
Historical Per Common Share Data:
 
 
Basic and diluted net loss per share
$(1.36)
$(2.29)
Book value per share
(2.48)
(2.80)
Combined company
 
Six Months
Ended
June 30,
2020
Year Ended
December 31,
2019
Pro Forma Per Common Share Data:
 
 
Basic and diluted net loss per share
$(0.21)
$(0.59)
Book value per share
0.85
N/A
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MARKET PRICE AND DIVIDEND INFORMATION
Rexahn common stock is listed on the Nasdaq Capital Market under the symbol “REXN.” Ocuphire is a private company and shares of Ocuphire common stock are not publicly traded. The closing price of Rexahn common stock on June 17, 2020, the last trading day prior to the public announcement of the merger, was $2.90 per share, and the closing price of Rexahn common stock was $2.11 on September 29, 2020, each as reported on the Nasdaq Capital Market. Because the market price of Rexahn common stock is subject to fluctuation, the market value of the shares of Rexahn common stock that Ocuphire Stockholders will be entitled to receive in the merger may increase or decrease.
Assuming stockholder approval and successful application for initial listing on the Nasdaq Capital Market, following the consummation of the merger, the Rexahn common stock will trade on the Nasdaq Capital Market under the new name, “Ocuphire Pharma, Inc.,” and new trading symbol “OCUP.”
As of September 25, 2020, the Record Date for the Rexahn special meeting, there were 22 holders of record of Rexahn common stock. As of September 25, 2020, Ocuphire had 98 holders of record of Ocuphire common stock. This number does not include stockholders for whom shares were held in “nominee” or “street name.” For detailed information regarding the beneficial ownership of certain Rexahn Stockholders upon consummation of the merger, see the section entitled “Principal Stockholders of the Combined Company” in this proxy statement/prospectus/information statement.
Dividends
Rexahn has never declared or paid any cash dividends on the Rexahn common stock and does not anticipate paying cash dividends on the Rexahn common stock for the foreseeable future. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the merger will be at the discretion of the combined company’s then-current board of directors and will depend upon a number of factors, including the combined company’s results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the then-current board of directors deems relevant.
Ocuphire has never paid or declared any cash dividends on the Ocuphire common stock. If the merger does not occur, Ocuphire does not anticipate paying any cash dividends on the Ocuphire common stock in the foreseeable future, and Ocuphire intends to retain all available funds and any future earnings to fund the development and expansion of its business. Any future determination to pay dividends will be at the discretion of the Ocuphire Board and will depend upon a number of factors, including its results of operations, financial condition, future prospects, contractual restrictions, and restrictions imposed by applicable laws and other factors the Ocuphire Board deems relevant.
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RISK FACTORS
The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below and those described in the section of this proxy statement/prospectus/information statement titled “Cautionary Statement Concerning Forward-Looking Statements” before deciding how to vote your shares of stock. You should also read and consider the other information in this proxy statement/prospectus/information statement. Please see the section titled “Where You Can Find More Information” in this proxy statement/prospectus/information statement.
Risks Related to the Merger
The Exchange Ratio set forth in the Merger Agreement is adjustable based on the Parent Cash Amount, which will be impacted by, among other things, the market price of Rexahn common stock, and if the market price of Rexahn common stock continues to increase, Rexahn may not be able to satisfy the minimum Parent Cash Amount requirement in the Merger Agreement or, if Ocuphire waives the minimum Parent Cash Amount condition, the Rexahn Stockholders may own significantly less of the combined company than currently estimated.
The Exchange Ratio formula in the Merger Agreement is subject to adjustment based on the Parent Cash Amount on the Anticipated Closing Date. For example, if the Parent Cash Amount is $0, which is the minimum Parent Cash Amount that Rexahn is required to deliver on the Anticipated Closing Date to consummate the merger, then immediately following the Effective Time, Rexahn Stockholders would own approximately 11.2% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 88.8% of Rexahn common stock, in each case calculated on a fully-diluted basis. The calculation of the Exchange Ratio under the Merger Agreement and post-closing ownership of Rexahn Stockholders are subject to adjustment based on an assumed value of Rexahn at Closing based on Rexahn’s Parent Cash Amount as of the Anticipated Closing Date. To the extent the Parent Cash Amount falls below $3.2 million or exceeds $6.0 million, Rexahn’s assumed value would be reduced or increased by $150,000 for every $100,000 below or above the thresholds referenced. According to the terms of the Merger Agreement, if the Parent Cash Amount on the Anticipated Closing Date is between $3.2 million and $6.0 million, then immediately following the consummation of the merger, Rexahn Stockholders would own approximately 14.3% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 85.7% of Rexahn common stock, in each case, calculated on a fully-diluted basis. The adjustments in the Exchange Ratio formula in the Merger Agreement provide for incremental adjustments of $150,000 to the assumed value of Rexahn for every $100,000 that the Parent Cash Amount is less than $3.2 million or more than $6.0 million, with incremental upward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is less than $3.2 million and incremental downward adjustments to the Exchange Ratio to the extent that the Parent Cash Amount is more than $6.0 million.
Under the Merger Agreement, “Parent Cash Amount” is reduced by, among other things, certain estimated liabilities associated with Rexahn Warrants (the “Estimated Warrant Amount”) to be calculated approximately 10 days prior to Closing in accordance with the terms of the Merger Agreement. The Estimated Warrant Amount will be impacted by, among other things, the trading price of a share of Rexahn common stock on such calculation date, with such Estimated Warrant Amount increasing as the trading price increases and decreasing as the trading price decreases.
Based on Rexahn’s current estimates, Rexahn anticipates delivering a Parent Cash Amount between $1.9 million and $2.4 million assuming the Closing occurs by November 14, 2020, which is the end date set forth in the Merger Agreement; however, the final Parent Cash Amount will not be calculated until the Anticipated Closing Date, and may vary significantly depending on, among other things, Rexahn’s ability to control and correctly estimate its operating expenses, expenses relating to Rexahn’s ongoing litigation and the trading price of Rexahn common stock (and its impact on Rexahn’s estimated warrant liabilities, which are deducted from the Parent Cash Amount). If the Parent Cash Amount is $1.9 million on the Anticipated Closing Date, then immediately following the Effective Time, Rexahn Stockholders would own approximately 13.1% of Rexahn common stock, and Ocuphire Securityholders would own, or hold rights to acquire, approximately 86.9% of Rexahn common stock, in each case calculated on a fully-diluted basis. Under the terms of the Merger Agreement, Rexahn Stockholders’ ownership percentage in the combined company is subject to a floor of
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approximately 9.1% regardless of the Parent Cash Amount on the Anticipated Closing Date, assuming Ocuphire waives the minimum Parent Cash Amount condition at or prior to Closing. If the Rexahn’s estimated warrant liabilities rise due to an increase in the market price of Rexahn common stock, or Rexahn’s cash decreases for any other reason (including, for example, due to the ongoing litigation related to the merger) then Rexahn may be unable to satisfy the minimum Parent Cash Amount requirement of $0. If the Parent Cash Amount on the Anticipated Closing Date is less than $0, Rexahn would be unable to satisfy a closing condition for the merger, and the merger would not close unless Ocuphire waives such condition. Even if Ocuphire waives the minimum Parent Cash Amount requirement, Rexahn Stockholders would own significantly less of the combined company than currently estimated. Further, these ownership percentages give effect to the shares of Ocuphire common stock that will be issued to Investors in the Pre-Merger Financing prior to the Effective Time, but do not account for any additional shares of Rexahn common stock that may be issued to Investors following the Effective Time or shares of Rexahn common stock issuable pursuant to the Investor Warrants issued to Investors after the Effective Time. As a result, Ocuphire Securityholders and Rexahn Stockholders could own less of the combined company than currently contemplated. For example, assuming an Exchange Ratio of 4.3812 and Parent Cash Amount of $1.9 million, if the average of the five lowest volume-weighted average trading prices of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $0.2535 or lower, then the pre-merger holders of Rexahn common stock would own approximately 2.3% of the fully-diluted combined company equity securities. Rexahn Stockholders will not know the percentage of securities they will hold in the combined company at the time of the Rexahn special meeting. Please see the section entitled “The Merger–Merger Consideration and Exchange Ratio” beginning on page 151 of this proxy statement/prospectus/information statement.
Rexahn and Ocuphire Securityholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger and the Pre-Merger Financing.
If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Rexahn Stockholders and Ocuphire Stockholders will have experienced substantial dilution of their ownership interests in their respective companies, including as a result of the Pre-Merger Financing, without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger and the Pre-Merger Financing.
The Investor Warrants will be issued on the tenth trading day following the merger, will be exercisable immediately upon issuance and contain price-based adjustment provisions, pursuant to which the number of shares of the combined company’s common stock that are issuable upon exercise of the Investor Warrants may be adjusted upward based upon the volume weighted average trading price of the combined organization’s common stock after closing and in the event of certain dilutive issuances by the combined company. The circumstances under which the number of shares of the combined company’s common stock issuable upon exercise of the Investor Warrants may be adjusted upward are set forth in the Investor Warrants and described in the sections entitled “Agreements Related to the Merger − Series A Warrants” and “Agreements Related to the Merger − Series B Warrants” in this proxy statement/prospectus/information statement.
If the adjustment provisions in the Investor Warrants are triggered, a substantial number of additional shares of the combined company’s common stock may become issuable upon exercise of the Investor Warrants, potentially increasing the impact of any subsequent exercise of the Investor Warrants and resale of the shares issuable pursuant thereto.
For illustrative purposes, what follows are four potential scenarios of the dilution that stockholders in the combined company may face as a result of the Pre-Merger Financing as of the warrant closing date, assuming different market prices of the Rexahn common stock on the Nasdaq Capital Market. The maximum amount of shares of Rexahn common stock that could be issuable upon the exercise of the Investor Warrants is the same amount whether determined on the warrant closing date or on any Reset Date, due to the application of the Floor Price on all such dates.
Assumptions
Based on a sample Exchange Ratio of 4.3812, and Ocuphire and Rexahn capitalization as of September 10, 2020, the number of shares of Rexahn common stock to be issued to the Investors at the Effective Time in exchange for the Initial Shares (the “Converted Initial Shares”) would be 5,145,259, resulting in an effective
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price per share (based on the aggregate purchase price of $21,150,000) of approximately $4.11. The sample Exchange Ratio of 4.3812 assumes (i) Rexahn’s and Ocuphire’s capitalization as of September 10, 2020, (ii) the Ocuphire convertible notes converted on September 10, 2020, and (iii) Rexahn has a Parent Cash Amount of $1.9 million. Different sample Exchange Ratios used elsewhere in this proxy statement/prospectus/information statement have different underlying assumptions that vary based on when such assumptions were made. For example, the sample Exchange Ratio used in the opinion of Oppenheimer attached as Annex E hereto assumed (i) Rexahn’s and Ocuphire’s capitalization as of June 17, 2020, (ii) the Ocuphire convertible notes converted on June 17, 2020, and (iii) Rexahn would deliver a Parent Cash Amount of $720,000. The Exchange Ratio formula is described in more detail in the Merger Agreement and in the section entitled “The Merger—Merger Consideration and Exchange Ratio” of this proxy statement/prospectus/information. In addition, 15,435,777 shares of Rexahn common stock would be issued to the escrow agent at such time in exchange for the Additional Shares (the “Converted Additional Shares”). Further, the Floor Price (as defined in the section entitled “Prospectus Summary - Pre-Merger Financing”) would be approximately $0.2535 per share.
Under the terms of the Securities Purchase Agreement, if the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing multiplied by 85% is less than $4.11 (the effective price per share of the Initial Shares), then the Investors will be entitled to receive a combination of Converted Additional Shares and Investor Warrants.
Scenario 1
If on the warrant closing date, the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $4.84 (85% of which is $4.11) or more, then no Converted Additional Shares would be deliverable to the Investors from escrow, all of the outstanding Converted Additional Shares held by the escrow agent on such date would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 5,145,259 shares with an exercise price of approximately $4.93 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets (as defined in the section entitled “Prospectus Summary − Pre-Merger Financing”) on subsequent Reset Dates (as defined in the section entitled “Prospectus Summary − Pre-Merger Financing”). In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 13.1% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 71.9% of such amount and the Investors would own approximately 15.0% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 11.4%, 62.5% and 26.1%, respectively.
Scenario 2
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $3.00 (85% of which is $2.55), then 3,148,859 Converted Additional Shares would be deliverable to the Investors from escrow, 12,286,918 of the remaining Converted Additional Shares in escrow on such date would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 8,294,118 shares with an exercise price of $3.06 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets on subsequent Reset Dates. In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 12.0% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock would own approximately 65.9% and the Investors would own approximately 22.1% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 9.8%, 53.9% and 36.3% respectively.
Scenario 3
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $1.50 (85% of which is approximately $1.28), then 11,442,977 of the Converted Additional Shares would be deliverable to the Investors from escrow, 3,992,800 Converted Additional
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Shares would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 16,588,236 shares with an exercise price of approximately $1.53 per share and the Series B Warrants would be exercisable for zero shares, with both warrants subject to Resets on subsequent Reset Dates. In such case, when excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 9.8% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 53.9% of such amount and the Investors would own approximately 36.3% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 7.2%, 39.6% and 53.2%, respectively.
Scenario 4
If on the warrant closing date the average of the five lowest volume-weighted average trading prices of a share of Rexahn common stock on Nasdaq during the first ten trading days immediately following the closing of the Pre-Merger Financing is equal to $0.2982 (85% of which is approximately $0.2535, the estimated Floor Price) or lower, then all 15,435,777 of the Converted Additional Shares would be deliverable to the Investors from escrow, no Converted Additional Shares would be returned to and cancelled by the combined company, the Series A Warrants would be exercisable for 83,431,953 shares with an exercise price of approximately $0.30 per share and the Series B Warrants would be exercisable for 62,850,917 shares with an exercise price of $0.0001 per share, this being the maximum amount issuable under such warrants, and therefore no increases upon subsequent Resets while the Floor Price still applies. In such case, when including the Series B Warrants but excluding the Series A Warrants, the pre-merger holders of Rexahn common stock would own approximately 4.0% of the fully-diluted combined company equity securities, the pre-merger holders of Ocuphire common stock (not including the Investors) would own approximately 21.9% of such amount and the Investors would own approximately 74.1% of such amount. Taking into account the shares of Rexahn common stock underlying the Series A Warrants, such percentages would be approximately 2.3%, 12.6% and 85.1%, respectively.
If Rexahn exchanges outstanding Rexahn Warrants for newly issued shares of Rexahn common stock or other Rexahn securities prior to the Closing, Rexahn Stockholders will suffer additional dilution at the Effective Time.
Under the Merger Agreement, Parent Cash Amount is reduced by, among other things, the Estimated Warrant Amount to be calculated approximately 10 days prior to Closing in accordance with the terms of the Merger Agreement. The Estimated Warrant Amount will be impacted by, among other things, the trading price of a share of Rexahn common stock, with such Estimated Warrant Amount increasing as the trading price increases and decreasing as the trading price decreases. Under the Merger Agreement, Rexahn is permitted to exchange or modify outstanding Rexahn Warrants for (i) newly issued shares of Rexahn common stock without obtaining Ocuphire’s prior consent and (ii) Replacement Warrants or in-the-money Rexahn securities with the prior consent of Ocuphire. In addition, the Parent Cash Amount will be increased by $1.00 for each share of Rexahn common stock underlying any outstanding Rexahn warrant that is exchanged and terminated in exchange for a newly issued share of Rexahn common stock between the date of execution of the Merger Agreement and the Effective Time. Rexahn’s issuance of newly issued shares of Rexahn common stock, Replacement Warrants and/or other Rexahn securities would have a dilutive effect on Rexahn Stockholders at the Effective Time. For example, any newly issued shares of Rexahn common stock and in-the-money Replacement Warrants will be counted toward Rexahn’s fully diluted shares outstanding for purposes of calculating the Exchange Ratio, and one-half of any out-of-the-money Replacement Warrants will be counted toward such amount. A Replacement Warrant will be out-of-the-money if its exercise price is equivalent to or greater than $2.5025, and will be in-the-money if its exercise price is less than such amount. Since the execution of the Merger Agreement, Rexahn has entered into warrant exchange agreements with several holders of Rexahn Warrants, pursuant to which Rexahn has issued to such holders an aggregate of 464,057 shares of Rexahn common stock in exchange for the surrender and cancellation of an aggregate of 995,757 Rexahn Warrants.
The merger consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed.
The Merger Agreement has set the calculation of the Exchange Ratio for the Ocuphire capital stock, and the Exchange Ratio is based on the fully-diluted capitalization of Ocuphire and Rexahn, in each case immediately prior to the Closing as described in the section entitled “The Merger—Merger Consideration and Exchange Ratio.”
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The Merger Agreement does not include a price-based termination right. Therefore, if before the completion of the merger the market price of Rexahn common stock declines from the market price on the date of the Merger Agreement, then Ocuphire Stockholders could receive merger consideration with substantially lower value than the value of such merger consideration on the date of the Merger Agreement. Similarly, if before the completion of the merger the market price of Rexahn common stock increases from the market price of Rexahn common stock on the date of the Merger Agreement, then Ocuphire Stockholders could receive merger consideration with substantially greater value than the value of such merger consideration on the date of the Merger Agreement. Because the Exchange Ratio does not adjust as a direct result of changes in the market price of Rexahn common stock (other than to the extent such changes impact the calculation of the Parent Cash Amount due to changes in liabilities associated with Rexahn Warrants), changes in the market price of Rexahn common stock will change the value of the total merger consideration payable to Ocuphire Stockholders pursuant to the Merger Agreement.
Stock price changes may result from a variety of factors, including, but not limited to, changes in Ocuphire’s or Rexahn’s respective businesses, operations and prospects, reductions or changes in U.S. government spending or budgetary policies, market assessments of the likelihood that the merger will be completed, interest rates, federal, state, and local legislation, governmental regulation, legal developments in the industry segments in which Ocuphire or Rexahn operate, the timing of the merger, and general market, industry and economic conditions, including pandemics and other public health emergencies. The COVID-19 pandemic, in particular, has introduced unusually high levels of volatility into financial and stock markets, and may affect the value of Rexahn common stock.
Failure to complete the merger may result in either Rexahn or Ocuphire paying a termination fee to the other party and could significantly harm the market price of Rexahn common stock and negatively affect the future business and operations of each company.
If the merger is not completed and the Merger Agreement is terminated under certain circumstances, Rexahn or Ocuphire may be required to pay the other party a termination fee of $750,000, and in some circumstances Ocuphire may be required to reimburse Rexahn’s expenses up to a maximum of $750,000. Even if a termination fee or expenses of the other party are not payable in connection with a termination of the Merger Agreement, each of Rexahn and Ocuphire will have incurred significant fees and expenses, which must be paid whether or not the merger is completed. Further, if the merger is not completed, it could significantly harm the market price of Rexahn common stock and raise serious doubts as to its ability to continue as an entity.
In addition, if the Merger Agreement is terminated and the Rexahn Board or Ocuphire Board determines to seek another business combination, there can be no assurance that either Rexahn or Ocuphire will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Merger Agreement. See the section entitled “Risk Factors—If the merger is not completed, Rexahn may not be able to otherwise source adequate liquidity to fund its operations, meet its obligations, and continue as a going concern. The Rexahn Board may decide to pursue a dissolution and liquidation of Rexahn. In such an event, there can be no assurances as to the amount or timing of available cash left, if any, to distribute to its stockholders after paying its debts and other obligations and setting aside funds for reserves” in this proxy statement/prospectus/information statement.
The issuance of Rexahn common stock to Ocuphire Stockholders pursuant to the Merger Agreement and the resulting change in control from the merger must be approved by Rexahn Stockholders, and the Merger Agreement and transactions contemplated thereby must be approved by the Ocuphire Stockholders. Failure to obtain these approvals would prevent the Closing.
Before the merger can be completed, the Rexahn Stockholders must approve, among other things, the issuance of Rexahn common stock to Ocuphire Stockholders pursuant to the Merger Agreement and the resulting change in control from the merger, and Ocuphire Stockholders must approve the Merger Agreement and the transactions contemplated thereby. Failure to obtain the required stockholder approvals may result in a material delay in, or the abandonment of, the merger. Any delay in completing the merger may materially adversely affect the timing and benefits that are expected to be achieved from the merger.
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The merger may be completed even though certain events occur prior to the Closing that materially and adversely affect Rexahn or Ocuphire.
The Merger Agreement provides that either Rexahn or Ocuphire can refuse to complete the merger if there is a material adverse change affecting the other party between June 17, 2020, the date of the Original Merger Agreement, and the Closing. However, certain types of changes do not permit either party to refuse to complete the merger, even if such change could be said to have a material adverse effect on Rexahn or Ocuphire, including:
general business, economic or political conditions affecting the industries in which Ocuphire or Rexahn, as applicable, operates;
any natural disaster or any acts of war, armed hostilities or terrorism;
changes in financial, banking or securities markets;
with respect to Rexahn, any change in its stock price or trading volume excluding any underlying effect that may have caused such change, unless such effect is otherwise exempt from causing a material adverse effect under the Merger Agreement;
any change in, or any compliance with or action taken for the purpose of complying with, applicable laws or U.S. GAAP, or interpretations thereof;
continued losses from operations or decreases in cash balances of Rexahn; and
the taking of any action, or failure to take action, by Rexahn or Ocuphire required to comply with the terms of the Merger Agreement.
If adverse changes occur and Rexahn and Ocuphire still complete the merger, the market price of the combined company’s common stock may suffer. This in turn may reduce the value of the merger to the stockholders of Rexahn, Ocuphire or both.
Some Rexahn and Ocuphire officers and directors have interests in the merger that are different from the respective stockholders of Rexahn and Ocuphire and that may influence them to support or approve the merger without regard to the interests of the respective stockholders of Rexahn and Ocuphire.
Certain officers and directors of Rexahn and Ocuphire participate in arrangements that provide them with interests in the merger that are different from the interests of the respective stockholders of Rexahn and Ocuphire, including, among others, the continued service as an officer or director of the combined company, severance benefits, the acceleration of stock option vesting, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined company in accordance with Rule 144 under the Securities Act. For example, Rexahn has entered into an employment agreement with its President and Chief Executive Officer that will result in the receipt by such officer of cash severance payments and other benefits upon an eligible termination of employment of such officer’s employment following the Closing. In addition, Mr. Rodgers, a member of the Rexahn Board, is expected to continue as a member of the Rexahn Board following the merger. Mr. Rodgers, along with the rest of the expected members of the Rexahn Board following the merger, has committed to invest in the Pre-Merger Financing. Mr. Rodgers’ investment is for $100,000 in the Pre-Merger Financing. The compensation arrangements with Rexahn’s officers and directors are discussed in greater detail in the sections entitled “The Merger—Interests of Rexahn Directors and Executive Officers in the Merger” and “Rexahn Executive Compensation-Director Compensation” in this proxy statement/prospectus/information statement.
These interests, among others, may influence the officers and directors of Rexahn and Ocuphire to support or approve the merger. For more information concerning the interests of Rexahn’s and Ocuphire’s respective officers and directors, see the sections entitled “The Merger—Interests of Rexahn Directors and Executive Officers in the Merger” and “The Merger—Interests of Ocuphire Directors and Executive Officers in the Merger” in this proxy statement/prospectus/information statement.
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The market price of Rexahn common stock following the merger may decline as a result of the merger.
The market price of Rexahn common stock may decline as a result of the merger for a number of reasons, including if:
investors react negatively to the prospects of the combined company’s product candidates, business and financial condition following the merger;
the effect of the merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts.
Rexahn and Ocuphire securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the Closing as compared to their current ownership and voting interest in the respective companies.
If the proposed merger is completed, the current securityholders of Rexahn and Ocuphire will own a smaller percentage of the combined company than their ownership in their respective companies prior to the merger. Accordingly, the issuance of shares of Rexahn common stock to Ocuphire Stockholders in the merger will reduce significantly the relative voting power of each share of Rexahn common stock held by its current stockholders and will reduce the relative voting power of each share of Ocuphire common stock held by its current stockholders. Consequently, Rexahn Stockholders as a group and Ocuphire Stockholders as a group will have less influence over the management and policies of the combined company after the merger than prior to the merger.
In addition, the board of directors for the post-merger combined company is expected to be comprised of seven directors, one of whom is expected to be Richard J. Rodgers, a current member of the Rexahn Board, and the remaining six directors are expected to include existing Ocuphire board members and an additional director designated by Ocuphire. Consequently, securityholders of both Rexahn and Ocuphire will be able to exercise less influence over the management and policies of the combined company following the Closing than they currently exercise over the management and policies of their respective companies.
The combined company will need to raise additional capital by issuing securities or debt or through licensing or other strategic arrangements, which may cause dilution to the combined company’s stockholders or restrict the combined company's operations or impact its proprietary rights.
The combined company may be required to raise additional funds sooner than currently planned. If either or both of Rexahn or Ocuphire hold less cash at the time of the Closing than the parties currently expect, the combined company will need to raise additional capital sooner than expected. Additional financing may not be available to the combined company when it needs it or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution to the combined company’s stockholders’ ownership and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of the combined company’s technologies or product candidates and proprietary rights, or grant licenses on terms that are not favorable to the combined company.
Furthermore, provisions in the Securities Purchase Agreement and related documents may deter or prevent the combined company from raising additional capital to fund the company as and when needed. For example, the Securities Purchase Agreement restricts Rexahn from filing a registration statement or any amendment or supplement thereto, causing any registration statement to be declared effective by the SEC, or granting any registration rights, in each case subject to certain limited exceptions, until the date that is 90 days after the earlier of (i) such time as all of the shares of Rexahn common stock issued or issuable in the Pre-Merger Financing may be sold without restriction or limitation pursuant to Rule 144, and (ii) the date that is six months following the Closing; provided that in the event Rexahn shall fail to satisfy any condition set forth in Rule 144(i)(2) under the
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Securities Act (a “Public Information Failure”), such date shall be such later date on which the Public Information Failure is cured and no longer prevents the investors from selling all shares of Rexahn common stock issued or issuable in the Pre-Merger Financing (the 90th date after such earlier date, the “Trigger Date”).
In addition, pursuant to the Securities Purchase Agreement, until 240 calendar days following the closing of the Pre-Merger Financing, subject to certain exceptions, neither Ocuphire nor Rexahn may (i) offer, sell, grant any option to purchase, or otherwise dispose of any of its or its subsidiaries’ debt, equity or equity equivalent securities (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”), or (ii) be party to any solicitations, negotiations or discussions with regard to the foregoing.
Additionally, for one year following the closing of the Pre-Merger Financing, Ocuphire, Rexahn and each of their subsidiaries will be prohibited from effecting or entering into an agreement to effect any Subsequent Placement involving a transaction in which Ocuphire, Rexahn or any of their subsidiaries (i) issues or sells any stock or securities convertible into or exercisable or exchangeable for Ocuphire common stock or Rexahn common stock (“Convertible Securities”) either (a) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Ocuphire common stock or Rexahn common stock at any time after the initial issuance of such Convertible Securities, or (b) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of Ocuphire or Rexahn or the market for Ocuphire common stock or Rexahn common stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an equity line of credit or an “at-the-market” offering) whereby Ocuphire, Rexahn or any of their subsidiaries may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights); provided, that Rexahn will be permitted to consummate “at the market” offerings at any time after the later of (x) the date that is nine months after the closing date of the Pre-Merger Financing and (y) the Trigger Date.
These restrictive covenants and other provisions in the Pre-Merger Financing documents could deter or prevent the combined company from raising additional capital as and when needed. The combined company’s failure to raise capital as and when needed would have a negative effect on its financial condition and its ability to develop and commercialize its pipeline and otherwise pursue the combined company’s business strategy and the combined company may be unable to continue as a going concern.
During the pendency of the merger, Rexahn and Ocuphire may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.
Covenants in the Merger Agreement impede the ability of Rexahn and Ocuphire to make acquisitions, subject to certain exceptions relating to fiduciary duties, as set forth below, or to complete other transactions that are not in the ordinary course of business pending completion of the merger. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during such period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties. Any such transactions could be favorable to such party’s stockholders.
Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.
The terms of the Merger Agreement prohibit each of Rexahn and Ocuphire from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith that an unsolicited alternative takeover proposal is or is reasonably likely to lead to a superior takeover proposal and that failure to cooperate with the proponent of the proposal would be reasonably likely to be inconsistent with the applicable board’s fiduciary duties. Any such transactions could be favorable to such party’s stockholders. In addition, if Rexahn terminates the Merger Agreement under certain circumstances, including terminating because of a decision of Rexahn to enter into definitive agreement with respect to a superior offer, Rexahn would be required to pay a
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termination fee of $750,000 to Ocuphire. This termination fee described above may discourage third parties from submitting alternative takeover proposals to Rexahn Stockholders.
Because the lack of a public market for Ocuphire common stock makes it difficult to evaluate the value of Ocuphire common stock, the Ocuphire Stockholders may receive shares of Rexahn common stock in the merger that have a value that is less than, or greater than, the fair market value of Ocuphire common stock.
The outstanding common stock of Ocuphire is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Ocuphire. Because the percentage of Rexahn common stock to be issued to Ocuphire Stockholders was determined based on negotiations between the parties, it is possible that the value of Rexahn common stock to be received by Ocuphire Stockholders will be less than the fair market value of Ocuphire, or Rexahn may pay more than the aggregate fair market value for Ocuphire.
If the conditions to the merger are not met, the merger will not occur.
Even if the transactions contemplated by the Merger Agreement are approved by Rexahn Stockholders and Ocuphire Stockholders, certain other specified conditions set forth in the Merger Agreement must be satisfied or waived to complete the merger, including approval from Nasdaq to maintain the listing of the Rexahn common stock on the Nasdaq Capital Market following the merger and to list the shares of Rexahn common stock being issued in the merger. These conditions are set forth in the Merger Agreement and described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement. Rexahn and Ocuphire cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the merger will not occur or will be delayed, and Rexahn and Ocuphire each may lose some or all of the intended benefits of the merger.
Rexahn and Ocuphire do not anticipate that the combined company will pay any cash dividends in the foreseeable future.
The current expectation is that the combined company will retain its future earnings, if any, to fund the development and growth of the combined company’s business. As a result, capital appreciation, if any, of the common stock of the combined company will be your sole source of gain, if any, for the foreseeable future.
Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.
If existing stockholders of Rexahn and Ocuphire sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after the merger, the trading price of the common stock of the combined company could decline. Using Rexahn’s capitalization as of September 10, 2020, taking into account the consummation of the Pre-Merger Financing and an assumed Exchange Ratio of 4.3812, the combined company is expected to have outstanding a total of approximately 44,589,595 shares of common stock (prior to giving effect to the proposed Rexahn Reverse Stock Split, and including the Converted Additional Shares held in escrow). Not all shares of Rexahn common stock will be freely tradable, without restriction, in the public market. For example, approximately 15,435,777 shares will initially be Converted Additional Shares held in escrow, and an aggregate of 10,148,448 shares of the combined company’s common stock will be subject to the lock-up agreements required under the Securities Purchase Agreement or Merger Agreement as of the Closing.
In addition, using the assumptions set forth in the illustrative scenarios in the section entitled “Agreements Related to the Merger—Pre-Merger Financing,” and subject to the terms of the Leak-Out Agreements described in such section, assuming that (i) all of the Converted Additional Shares are delivered to the Investors from escrow pursuant to the Securities Purchase Agreement and (ii) the Series B Warrants are initially exercisable or otherwise Reset to the maximum extent subject to the Floor Price, the Investors would hold (a) an aggregate of 20,581,036 shares of Rexahn common stock and (b) Series B Warrants exercisable for an aggregate of 62,850,917 shares of Rexahn common stock, at an exercise price of $0.0001 per share.
The Pre-Merger Financing may not be satisfied.
One of the conditions to the obligations of Rexahn under the Merger Agreement is that on or immediately prior to the Closing, Ocuphire consummate the Pre-Merger Financing whereby Ocuphire receives gross proceeds of no less than $20,000,000. No assurance can be given that all of the conditions to the consummation of the
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Pre-Merger Financing condition will be satisfied, or that Ocuphire will be able to satisfy the Pre-Merger Financing condition. If the Pre-Merger Financing is not consummated, and if Rexahn is not otherwise willing to waive the Pre-Merger Financing condition, the parties will not be able to consummate the merger.
Lawsuits have been filed, and other lawsuits may be filed, against Rexahn and members of the Rexahn Board challenging the merger, and an adverse ruling in any such lawsuit may delay or prevent the completion of the merger or result in an award of damages against us.
On July 31, 2020, a putative stockholder class action was filed in the Court of Chancery of the State of Delaware styled Stahlman v. Rexahn Pharmaceuticals, Inc., et al., Case No. 2020-0639. Additionally, on August 3, 2020, a putative stockholder class action was filed in the United States District Court for the District of Delaware styled Thompson v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-01036-UNA (D. Del). On August 7, 2020 and August 17, 2020, putative stockholder class actions were filed in the United States District Court for the Southern District of New York styled, respectively, Manes v. Rexahn Pharmaceuticals, Inc., et al., Case No. 1:20-cv-06227 (S.D.N.Y.) and Talsma v. Rexahn Pharmaceuticals, Inc., et al Case No. 1:20-cv-06541 (S.D.N.Y). On August 18, 2020, a putative stockholder class action was filed in the United States District Court for the Eastern District of New York styled Juilfs v. Rexahn Pharmaceuticals, Inc., et al Case No. 1:20-cv-03780 (E.D.N.Y.) (together with the Stahlman, Thompson, Manes and Talsma actions, the “Stockholder Actions”). The Stockholder Actions assert claims against Rexahn and the Individual Defendants.
The Stahlman and Manes complaints allege that the Individual Defendants breached their fiduciary duties owed to the Rexahn stockholders. The Thompson, Manes, Juilfs and Talsma complaints allege that Rexahn and the Individual Defendants violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by failing to disclose in the Initial Registration Statement certain information regarding, among other things, financial projections for Rexahn and Ocuphire, the valuation analyses performed by Rexahn’s financial advisor, Oppenheimer, in support of its fairness opinion and the process leading to the execution of the Merger Agreement. The Thompson, Manes, Juilfs and Talsma complaints also allege that the Individual Defendants violated Section 20(a) of the Exchange Act, as control persons who had the ability to prevent the Initial Registration Statement from being false and misleading. The Stockholder Actions seek, among other things, an injunction preventing consummation of the merger, an award of damages, and an award of costs and expenses, including attorneys’ fees.
Additionally, on August 6, 2020, another party sent a letter to Rexahn’s counsel demanding that Rexahn and the Individual Defendants amend the Initial Registration Statement to provide additional disclosures that the party alleges were improperly omitted from the Initial Registration Statement in violation of Sections 14(a) and 20(a) of the Exchange Act, including certain information regarding financial data and the background and process leading to the execution of the Merger Agreement (the “Demand Letter”).
On September 8, 2020, plaintiff Thompson made a filing in the United States District Court for the District of Delaware voluntarily dismissing the Thompson complaint.
Rexahn and the Individual Defendants intend to vigorously defend against the remaining Stockholder Actions and the Demand Letter. Additional lawsuits arising out of or relating to the Merger Agreement or the Merger may be filed in the future against Rexahn and Ocuphire. The results of complex legal proceedings are difficult to predict and could delay or prevent the completion of the merger. The existence of litigation relating to the merger could impact the likelihood of obtaining stockholder approval of the merger. Moreover, the pending litigation is, and any future additional litigation could be, time consuming and expensive and could divert management’s attention away from its regular business.
The historical unaudited pro forma condensed combined financial information may not be representative of the combined company’s results after the merger.
The historical unaudited pro forma condensed combined financial information included elsewhere in this proxy statement/prospectus/information statement has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the merger been completed as of the date indicated, nor is it indicative of future operating results or financial position.
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Ocuphire’s risk-adjusted projections, which Oppenheimer relied on for its fairness opinion delivered to the Rexahn Board, assume that Ocuphire’s product candidates receive FDA approval. Ocuphire’s failure to obtain such FDA approval would adversely impact the combined company’s potential to generate revenue, its business and its results of operations.
In performing its analysis in support of its fairness opinion, Oppenheimer relied, without assuming liability or responsibility for independent verification, on financial projections prepared by Ocuphire management that extended into 2040 (the “Ocuphire Projections”). The Ocuphire Projections are described in more detail in the section entitled “The Merger—Ocuphire Projections” in this proxy statement/prospectus/information statement. The assumptions underlying the Ocuphire Projections reflected the best available estimates and good faith judgments of Ocuphire management as to the future financial performance of Ocuphire and assumed, among other things, that Nyxol would receive FDA approval in 2023 for NVD and RM and 2024 for presbyopia, and that APX3330 would receive FDA approval in 2024, with commercial launch beginning one year later for each. The Ocuphire Projections, which assume FDA approval for each of its drug candidates, included probability of success risk adjustments to account for the risk that a particular product candidate at a specific stage of development would not continue to be developed and that a product candidate would not ultimately receive FDA approval. Oppenheimer considered the various risk-weighted probabilities of success attributed to each individual product candidate assigned by Ocuphire management, which accounted for the possibility that product candidates may not receive FDA approval. Oppenheimer conducted a risk-adjusted analysis and therefore did not conduct any separate analyses assuming the separate outcomes that Ocuphire’s product candidates either definitively do or do not receive FDA approval. The Ocuphire Projections were not prepared by Ocuphire management with a view toward public disclosure or toward complying with U.S. GAAP, the published guidelines of the SEC regarding projections and the use of non-GAAP measures or the guidelines established by American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Rexahn’s nor Ocuphire’s independent public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Ocuphire Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Ocuphire Projections.
The failure or delay in obtaining FDA approval of any of the combined company’s product candidates would prevent or delay commercialization of the combined company’s product candidates and adversely impact its potential to generate revenue, its business and its results of operations. The process of obtaining FDA and other required regulatory approvals, including foreign regulatory approvals and clearances, requires a substantial amount of time and significant capital expenditure. Despite the time and expense expended, regulatory approval is never guaranteed. See “Risk Factors—Risks Related to Ocuphire—Risks Related to Development of Ocuphire’s Product Candidates.”
The opinion received by the Rexahn Board from Oppenheimer is subject to a number of assumptions and it has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.
Oppenheimer delivered its opinion to the Rexahn Board that, as of June 17, 2020, and based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion, the Ex