Rexahn Pharmaceuticals, Inc. Annual Report 2009

FY2009 Annual Report · Rexahn Pharmaceuticals, Inc.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

(cid:2)

(cid:3)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 001-34079
Rexahn Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

15245 Shady Grove Road, Suite 455
Rockville, Maryland
(Address of principal executive offices)

11-3516358
(I.R.S. Employer
Identification No.)

20850

(Zip Code)

(240) 268-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class
Common Stock, $.0001 par value per share

Name of Each Exchange on Which Registered

NYSE AMEX

Securities registered pursuant to Section 12(g) of the Exchange Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes (cid:3) No (cid:2)(cid:4)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of

the Exchange Act. Yes (cid:3) No (cid:2)(cid:4)(cid:4)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)

of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)(cid:4)(cid:4)

(cid:4)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web

site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes (cid:3) No (cid:3)(cid:4)(cid:4)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not

contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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

Large accelerated filer (cid:3)

Accelerated filer (cid:3)

Non-accelerated filer (cid:3) Smaller reporting company (cid:2)

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes (cid:3) No (cid:2)(cid:4)(cid:4)

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed

by reference to the price at which the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: As of
June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the
registrant was $38,515,679 based on the closing price reported on NYSE Amex.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of

the latest practicable date:

Class

Outstanding at March 31, 2010

Common Stock, $.0001 par value per share

73,469,497 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document

Parts Into Which Incorporated

Portions of the registrant’s Proxy Statement for the
Annual Meeting of Stockholders to be held on June
14, 2010

Part III

Cautionary Statement Regarding Forward-Looking Statements. This Annual Report on
Form 10-K contains statements (including certain projections and business trends) accompanied by such
phrases as "believe", "estimate", "expect", "anticipate", "will", "intend" and other similar expressions, that
are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected as a result of certain risks and uncertainties,
including but not limited to the following:

(cid:2)

our lack of profitability and the need for additional capital to operate our business;

our ability to obtain the necessary U.S. and worldwide regulatory approvals for our drug
candidates;

successful and timely completion of clinical trials for our drug candidates;

demand for and market acceptance of our drug candidates;

the availability of qualified third-party researchers and manufacturers for our drug development
programs;

our ability to develop and obtain protection of our intellectual property; and

other risks and uncertainties, including those set forth herein under the caption "Risk Factors" and
those detailed from time to time in our filings with the Securities and Exchange Commission.

These forward-looking statements are made only as of the date hereof, and we undertake no
obligation to update or revise the forward-looking statements, whether as a result of new information,
future events or otherwise. The safe harbors for forward-looking statements provided by the Private
Securities Litigation Reform Act are unavailable to issuers of "penny stock." Our shares may be
considered a penny stock and, as a result, the safe harbors may not be available to us.

iii

REXAHN PHARMACEUTICALS, INC.

INDEX

PAGE

PART I .............................................................................................................................................5
Item 1. Description of Business ................................................................................................5
Item 1A. Risk Factors .............................................................................................................20
Item 1B. Unresolved Staff Comments ...................................................................................30
Item 2. Description of Property .............................................................................................30
Item 3. Legal Proceedings ......................................................................................................31
Item 4. [Removed and Reserved] ...........................................................................................31

PART II ..........................................................................................................................................32

Item 5. Market for Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities ....................................................................32
Item 6. Selected Financial Data .............................................................................................33
Item 7. Management's Discussion and Analysis of Financial Condition and

Results of Operation ................................................................................................33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ...........................44
Item 8. Financial Statements and Supplementary Data ......................................................44
Item 9. Changes In and Disagreements With Accountants on Accounting

and Financial Disclosure .........................................................................................44
Item 9A(T). Controls and Procedures ...................................................................................44
Item 9B. Other Information ...................................................................................................46

PART III ........................................................................................................................................47
Item 10. Directors, Executive Officers and Corporate Governance ..................................47
Item 11. Executive Compensation .........................................................................................47
Item 12. Security Ownership of Certain Beneficial Owners and

Management and Related Stockholder Matters ...................................................47

Item 13. Certain Relationships and Related Transactions; and Director

Independence ............................................................................................................47
Item 14. Principal Accounting Fees and Services ................................................................47
Item 15. Exhibits, Financial Statement Schedules ...............................................................48

SIGNATURES ...............................................................................................................................52

Item 1. Description of Business

PART I

Any references to "we", "us", "our," the "Company" or "Rexahn" shall mean Rexahn

Pharmaceuticals, Inc.

We are a clinical stage biopharmaceutical company developing and seeking to deliver novel cures
for cancer and disorders of the central nervous system (CNS) to patients worldwide. Our mission is to
discover and develop new medicines for diseases that plague patients with no effective cures, in particular
high mortality cancers and CNS disorders. Our pipeline features three drug candidates in Phase II clinical
trials this year and seven or more other drug candidates in pre-clinical development. Our strategy is to
continue building a significant product pipeline of innovative medicines that we will commercialize alone
or with pharmaceutical partners. For a description of our pipeline drug candidates, see "Our Pipeline
Drug Candidates" in this Item 1.

Our principal corporate offices are located at 15245 Shady Grove Road, Suite 455, Rockville,

Maryland 20850 in Maryland's I-270 technology corridor. Our telephone number is (240) 268-5300.

Rexahn currently has three clinical stage drug candidates: Archexin®, Serdaxin®, and ZoraxelTM.
Our lead anticancer drug candidate, Archexin, is a first-in-class inhibitor of the protein kinase Akt. Akt
plays critical roles in cancer cell proliferation, survival, angiogenesis, metastasis, and drug resistance.
Archexin received "orphan drug" designation from the U.S. Food and Drug Administration (FDA) for
five cancer indications (renal cell carcinoma (RCC), glioblastoma, ovarian cancer, stomach cancer and
pancreatic cancer). The FDA orphan drug program enables expedited FDA review or approval process,
seven years of marketing exclusivity after approval and tax incentives for clinical research.

Archexin is currently in Phase II clinical trials for the treatment of pancreatic cancer with patient
enrollment underway. Archexin’s Phase II clinical trial protocol for the treatment of renal cell carcinoma
(RCC) was accepted by the FDA, but issues with enrollment have delayed the trial. Such enrollment
issues were primarily due to the fact that there is a small number of patients that have been diagnosed
with RCC and such patients are often treated with surgery instead of drug therapies. After further
consideration of the trial design and the limited number of patients, there was a reallocation of resources
and Rexahn reprioritized Archexin to pursue studies in pancreatic cancer and ovarian cancer.

We are currently developing Serdaxin for the treatment of depression and neurodegenerative
disorders. Rexahn has recently concluded a Phase IIa clinical trial for major depressive disorder (MDD)
with Serdaxin, and is planning the Phase II clinical trial for Parkinson’s disease (PD). Unlike the current
standard treatment that treats symptomatic conditions, Serdaxin is a disease modifying drug that protects
neurons from damage that can lead to dysfunction and eventual neuronal death. Considering that over
60% of patients with Parkinson’s, Alzheimer’s, and Multiple Sclerosis also suffer from depression,
Serdaxin’s effectiveness in treating depression and as a neuroprotective agent may make it a potential
market leader for the treatment of neurological diseases. Serdaxin's Phase IIa clinical trial for depression
is complete with positive results. A Phase IIb trial is under development.

We are developing Zoraxel for treatment of erectile dysfunction (ED). Zoraxel is a
developmental stage drug for sexual dysfunction that directly modulates the sexual activity control center
in the brain. Zoraxel enhances the action of serotonin and dopamine, brain signaling molecules that play
a key role in three phases of male sexual activity: arousal, erection and release. Zoraxel is the first ED

therapeutic to affect all three of these phases. Preclinical studies demonstrated that Zoraxel improves
sexual performance via enhanced motivation and arousal. Due to its centrally acting mechanism of
action, Zoraxel may also have potential use in the treatment of female sexual dysfunction. The Phase IIa
clinical trial of Zoraxel is now complete with positive results and the Phase IIb trial will continue through
2010-2011.

We leverage a powerful, multi-faceted discovery engine consisting of small signaling molecule
discovery, computational modeling and nanotechnology-based drug targeting and delivery to develop and
commercialize targeted cancer drugs with greater clinical benefits for patients. Rexahn leverages its
proprietary nanomedicine research and platforms of The Inhibitors of Multi-Expression Signals (TIMES)
and 3-D Gateway Of Ligand Discovery (3D-GOLD) technology, to strengthen and expand its innovative
pipelines, which offer greater therapeutic benefits and quality of life for patients.

Company Background

Our company resulted from a merger of Corporate Road Show.Com Inc., originally a New York
corporation (CPRD) which was formed in November 1999, and Rexahn, Corp, a Maryland corporation
immediately after giving effect to a 1-for-100 reverse stock split and the reincorporation of CPRD as a
Delaware corporation under the name "Rexahn Pharmaceuticals, Inc." (Rexahn Pharmaceuticals), with
Rexahn, Corp surviving as a wholly owned operating subsidiary of ours (the Merger). The Merger was
effective as of May 13, 2005. On September 29, 2005, Rexahn, Corp, was merged with and into us, and
Rexahn, Corp's separate existence was terminated.

Rexahn, Corp was founded in March 2001 and began as a biopharmaceutical company focusing
on oncology drugs. Dr. Chang Ahn, our Chairman, a former U.S. Food and Drug Administration (FDA)
reviewer, and National Cancer Institute (NCI) research scientist, helped guide initial research and
commercialization efforts in targeted cancer drugs and the company’s expansion into disorders of the
central nervous system (CNS). Our mission is to find new cures that improve the health and wellness of
patients with life-threatening or life-altering diseases.

Industry and Disease Markets

Overview

Our research and development focuses on several therapeutic areas that affect the lives of many
people—cancer, CNS disorders such as Parkinson’s disease, depression and related mood disorders, and
sexual dysfunction. These disorders can have a debilitating effect on the quality of life for patients who
suffer from them. Our strategy is to develop innovative drugs that alter the signaling pathways implicated
in these diseases, and thereby help patients regain an improved quality of life.

According to the Center for Disease Control and Prevention, cancer claims the lives of more than
half a million Americans each year and is the second leading cause of death among Americans. In 2008,
the National Institute of Cancer estimated that $228 billion was spent in medical costs in the United
States. Worldwide, it is predicted that the number of new cancer cases diagnosed will rise to 16 million
annually in 2020, with cancer-related deaths reaching 10 million in 2020.1 Global sales of cancer drugs
are predicted to grow to $70 billion by 2018 in the seven major markets, driven mainly by
commercialization of molecular targeted therapies.2

1 Cancer, 2007 (Datamonitor).
2 Cancer Market and Definition Overview, 2009 (Datamonitor).

Currently, there are 45 million estimated cases of depression in the US and its drug cost alone
exceeded $19 billion in 2007. Several classes of drugs are available on the market for depression,
including selective serotonin uptake inhibitors (SSRI), serotonin-norepinephrine reuptake inhibitors
(SNRI), and tricyclic antidepressants (TCA). However, these drugs are prone to side-effects, such as
insomnia, weight gain and sexual dysfunction, and they can take up to 6 weeks to relieve depression
symptoms. Efficacy of the currently available drugs is also in doubt as 35 to 55% of patients experience
remission and the non-compliance rate ranges between 40 to 65%.

Parkinson’s disease is the most common motor disorder. In the United States, 50,000-60,000
new cases of PD are diagnosed each year, adding to the one million people who currently have PD. In
fact, it is estimated that four to six million people around the world suffer from the condition. Age is the
most important risk factor for PD, and the aging world population is expected to push the number of the
afflicted to over 10 million by 2030. In addition, its chronic and debilitating nature has a high socio-
economic impact. In the US alone, the financial cost of the disease is estimated to exceed $6 billion
annually. PD is characterized by the progressive loss of dopaminergic neurons in the brain. The resulting
dopamine depletion leads to its cardinal motor symptoms, such as rigidity (muscle stiffness), bradykinesia
(slowing of movement), postural instability and resting tremor. These impairments are accompanied by
non-motor disabilities, including dementia, depression, and sleep disturbance. The current standard
treatment options target the dopaminergic pathway, either by supplementing the molecule or stimulating
dopamine receptors (binding partners of dopamine). While these strategies ameliorate symptoms in early
stages, they become less effective over the course of the disease. In addition, dopamine therapies fail to
tackle the underlying causes of the disease, and therefore, do not slow the progression of PD or extend the
life expectancy of patients.

Erectile dysfunction causes the consistent inability to attain and maintain an erection sufficient
for satisfactory sexual intercourse. Erectile problems may be due to psychogenic causes (e.g., depression
or stress), organic causes, or both. The launch of the first orally available phosphodiesterase (PDE)-5
inhibitor, Viagra®, in 1998 established a new standard of care for ED and pioneered a new market.
Cialis® and Levitra® were subsequently launched in 2003 as second-generation PDE-5 inhibitor drugs.
However, 30% of patients are refractory or unresponsive to the leading PDE-5 inhibitor drugs. In
addition, PDE-5 inhibitors also increase the risk of a variety of cardiovascular diseases, including heart
attack. As evidenced by clinical data from the Phase IIa trial, Zoraxel has superior safety compared to
PDE-5 inhibitors by demonstrating no serious adverse effects. Contrary to peripherally acting PDE-5
inhibitors, Zoraxel centrally acts in the brain affecting all three functions of sexual activity.

Current Cancer Treatments

The life-threatening nature of cancer, and the various ways of trying to cure cancer to save lives,
has led to treatment(s) with surgery, radiation therapy, and chemotherapy. Surgery is widely used to treat,
and in many cases cure cancer; however, there may be related or significant complications and surgery
may be ineffective if metastasis has occurred. Radiation therapy, or radiotherapy, can be highly effective.
Ionizing radiation deposits energy that injures or destroys cells in the area being treated by damaging their
genetic material, making it impossible for these cells to continue to grow. Although radiation damages
both cancer cells and normal cells, the normal cells are generally able to repair themselves and function
properly. Cytotoxic cancer drugs destroy cancer cells by interfering with various stages of the cell
division process. However, many current cytotoxic chemotherapy drugs have limited efficacy and
debilitating adverse side effects and may result in the development of multi-drug resistance.

Unmet Needs in Cancer

Despite significant advances in cancer research and treatments, high unmet needs still remain

including:

(cid:2) Long-term management of cancers: Surgery, chemotherapy or radiation therapy may not
result in long-term remission, though surgery and radiation therapies are considered cure
methods. Therefore, there is a need for more effective drugs and adjuvant therapies to treat
relapsed and refractory cancers.

(cid:2) Multi-drug resistance: Multi-drug resistance is a major obstacle in successful clinical

outcomes.

(cid:2) Debilitating toxicity by chemotherapy: Chemotherapy as a mainstay of cancer treatment

induces severe adverse reactions and toxicities, affecting quality of life or life itself.

Archexin: First-in-class Anticancer Akt Inhibitor

Archexin is a first-in-class, potent inhibitor of the Akt-1 protein kinase (Akt) in cancer cells.
Archexin has FDA orphan drug designations for five cancers (RCC, glioblastoma, and cancers of the
ovary, stomach and pancreas). Multiple indications for other solid tumors can also be pursued. Archexin
is differentiated by its ability to inhibit both activated and inactivated forms of Akt, and to potentially
reverse the drug resistance observed with the protein kinase inhibitors. Other targeted drugs may only
inhibit inactivated Akt and be vulnerable to development of drug resistance. Akt activation plays a key
role in cancer cell proliferation, survival, angiogenesis and drug resistance. Akt is over-activated in many
human cancers (e.g., breast, colorectal, gastric, pancreatic, prostate, and melanoma cancers). A method to
control the Akt activity involves inhibition of signaling molecules upstream of Akt in cancer cells (e.g.,
EGFR or VEGFR inhibitors). In this case, only the activity of native Akt is indirectly affected. However,
signal transmission for cancer progression and resistance occurs when Akt is activated, thus inhibition of
the activated Akt becomes more important. Archexin inhibits both activated and native Akt.

Archexin is an antisense oligonucleotide (ASO) compound that is complementary to Akt mRNA,
and highly selective for inhibiting mRNA expression and production of Akt protein. Archexin has
demonstrated excellent safety, tolerability and minimal side effects in a Phase I study in patients with
advanced cancers, where Grade 3 (G3) fatigue was the only dose-limiting toxicity and no significant
hematological abnormalities were observed. The main objectives of the Phase I study were to determine
maximum tolerated dose (MTD), dose limiting toxicity, and pharmacokinetic (pk) parameters for
Archexin monotherapy. The Archexin Phase I study design was an open label, single arm ascending
dose, safety and tolerability study. Archexin’s Phase II clinical trial protocol for the treatment of RCC
was accepted by the FDA, but issues with enrollment have delayed the trial. Such enrollment issues are
primarily due to the fact that there is a small number of patients that have been diagnosed with RCC and
such patients are often treated with surgery instead of drug therapies. After further consideration of the
trial design and the limited number of patients, there was a reallocation of resources and Rexahn
reprioritized Archexin to pursue studies in pancreatic cancer and ovarian cancer. Archexin is currently in
Phase II clinical trials for the treatment of pancreatic cancer with patient enrollment underway and the
Phase II protocol for the treatment of ovarian cancer is being developed.

The Company has been issued a U.S. patent for Archexin that covers composition of matter and
broad claims for the nucleotide sequences of the antisense compounds that target and inhibit the

expression of Akt in human tissues or cells, and the method of using the compounds to induce
cytotoxicity in cancer cells.

Current CNS Treatments

The U.S. National Institute of Mental Health (NIMH) estimates that 26 percent of adults, or more
than 55 million Americans, suffer from a diagnosable mental disorder in a given year. The depression
market is one of the more mature and established markets in CNS therapeutics. Current treatments for
depression focus on serotonin-based drugs (e.g., selective serotonin reuptake inhibitors) as a first-line
treatment. Many depression patients are refractory to the various classes of antidepressants and suffer
from severe side effects.

Unmet Needs in CNS Disorders: Major Depressive Disorder

Unmet needs for treating MDD include3 the following:

(cid:2) Faster onset of action. Current antidepressants take four to six weeks to relieve depression
symptoms. The delay in onset of antidepressant activity is associated with the most common
antidepressant drug classes including: selective serotonin reuptake inhibitors (SSRIs),
serotonin-norepinephrine reuptake
inhibitors
(MAOIs), and tricyclic antidepressants (TCAs).

inhibitors (SNRIs), monoamine oxidase

(cid:2) Fewer side effects. The most widely used antidepressants, SSRIs, are linked with side effects
of insomnia, weight gain and sexual dysfunction. The safety of SSRIs has also been called
into question over concerns about inducing suicidal ideations. Use of benzodiazepines is
linked with side effects of cognitive deficit and motor impairment.

(cid:2)

Improved compliance. High rate of serious side effects among patients taking anti-
depressant drugs leads many to stop taking the prescribed medicines, resulting in high non-
compliance rates of 40% to 65%.

(cid:2) Need for greater efficacy. Remission is one key objective of depression treatment. The
proportion of patients achieving remission after antidepressant treatment ranges from 35% to
55% depending on the severity of depression.4 New drugs with much higher efficacy as well
as wider coverage of the depression patients are needed.

(cid:2) Reduced MDD relapse. High relapse rate of about 35% and lingering symptoms are serious

problems in antidepressant treatment.

3 Depression, June 2007; Stakeholder Insight: Major Depressive Disorder (MDD), March 2006 (Datamonitor).

4 Remission rates tend to vary based on factors such as: treatment algorithm and drugs prescribed, patient geographic population
or country, prescribing doctor (primary care, psychiatrist), and time at which remission rates are measured (3, 6, 8, or 10 weeks
of treatment). Depression, June 2007; MDD, March 2006 (Datamonitor).

Serdaxin: CNS Drug to Treat Neurodegenerative Disorders, Depression, and Mood Disorders

Serdaxin is a potential market leading CNS neuroprotective agent and antidepressant. Based on
its novel actions as a dual serotonin and dopamine enhancer, it is a potential treatment for multiple CNS
disorders where these neurotransmitters are depleted or implicated in CNS-based illnesses such as
Parkinson’s disease and depression. It has shown neuroprotective effects in the substantia nigra,
hippocampus, and nucleus accumbens- areas of the brain involved in neurodegenerative diseases.
Serdaxin's Phase IIa clinical trial for depression is complete with positive results and a Phase IIb trial is
under development. The Phase IIa trial was a randomized, double blind, placebo controlled and dose
ranging study of 77 patients and was conducted at multiple sites in the United States to assess the
Serdaxin’s safety and preliminary efficacy. The study showed that patients ages 18-65 with MDD
exhibited clinically meaningful improvement over baseline in symptoms of depression as measured by the
Montgomery-Asberg Depression Rating Scale total score. A marked clinical response was observed
within two weeks in patients taking Serdaxin. Additionally, a significantly lower drop-out rate among
patients taking Serdaxin compared with those patients taking a placebo was observed (<20% treatment
groups vs. >50% placebo group). Multiple indications are also being considered, including possible use
in general anxiety and other mood disorders.

Serdaxin has well-established and extensive safety in humans, and appears to have excellent
tolerability and few side effects. Its greatest potential may be as a neuroprotective agent that further
addresses the morbidity of depression and mood disorders that are linked to CNS illnesses of the
neurodegenerative category, such as PD and Alzheimer’s disease. In regards to PD, Serdaxin has shown
in animal models that it has the potential to address both non-motor and motor events of PD in humans,
by treating depleted dopamine levels that lead to loss of control of movements; and further, enhancing
serotonin and dopamine levels that are involved in depression and mood disorders. Serdaxin may achieve
greater and broader therapeutic coverage, and appears to have no cognition deficit and side effects such as
nausea, vomiting, insomnia, weight gain, and sexual dysfunction that are linked to existing drugs.
Clinical programs are also being developed for PD. Serdaxin is a new class of CNS disorder therapeutics
that has prevented neuronal deaths in PD models. In contrast to other PD drugs, Serdaxin directly targets
the disease mechanism by slowing or halting the progression of the disease, fulfilling unmet needs in
Parkinson’s disease treatment. Currently, Phase II clinical trials for the use of Serdaxin in PD is
under development.

Current Sexual Dysfunction Treatment

The launch of the first orally available PDE-5 inhibitor, Viagra, in 1998 established a new
standard care for ED and pioneered a new market. Cialis and Levitra were subsequently launched in 2003
as second-generation PDE-5 inhibitor drugs. However, 30% of patients are refractory to the leading
PDE-5 inhibitor drugs. In addition, PDE-5 inhibitors also increase the risk of a variety of cardiovascular
diseases, including heart attack. The majority of ED drugs in the R&D pipeline work by a ‘me-too’ PDE-
5 inhibitor mechanism of action.5 Dopamine agonists are also in clinical trials for ED.6

5 Erectile Dysfunction, 2006 (Datamonitor).
6 Gresser U and Gleiter CH. Erectile Dysfunction: Comparison of efficacy and side effects of the PDE-5 inhibitors sildenafil,

vardenafil and tadalafil (Review of Literature). Eur J Med Res (2002) 7:435-46.

Unmet Needs in Sexual Dysfunction

There are potential severe side effects associated with PDE-5 drugs, such as priapism, severe
hypotension, myocardial infarction, sudden death, increased intraocular pressure and sudden hearing loss.
PDE-5 inhibitors only target end organ erectile function, and work in peripheral blood vessels. Beyond
the PDE-5 inhibitors, there is currently no single class of ED drugs that dominates the market.

(cid:2) Need for Greater Efficacy- An estimated 30% of US men are refractory to the leading PDE-
5 inhibitor drugs (Viagra, Cialis, and Levitra), which work peripherally and mechanically.
Certain segments of the ED patient population that respond less to PDE-5 inhibitors include
diabetics, obese or post-surgical prostatectomy or coronary risk patients.

(cid:2) Reduced Side Effects- PDE-5 inhibitors have significant drawbacks of cardiovascular risks
and other side effects (e.g., priapism, severe hypotension, myocardial infarction, ventricular
arrhythmias, sudden death and increased intraocular pressure).

Zoraxel: Drug Candidate to Treat Erectile Dysfunction Sexual Dysfunction

Zoraxel is centrally acting in the CNS and may be a more effective ED treatment for patients who
are responsive or unresponsive to PDE-5 inhibitors. Zoraxel is being developed as an orally
administered, on-demand tablet to treat sexual dysfunction, and has extensive and well-established safety
in humans. Zoraxel is a dual enhancer of neurotransmitters in the brain that play a key role in sexual
activity phases of motivation and arousal, erection and release, and may be the first ED drug to affect all
three of these phases of sexual activity. In preclinical animal studies, Zoraxel significantly improved
sexual performance and suggested positive behavioral effects. The Phase IIa clinical trial of Zoraxel is
now complete with positive results. The double blind, randomized, placebo-controlled, dose ranging
study found that human subjects treated with Zoraxel demonstrated improved erectile function as
measured by changes over the International Index of Erectile Function (IIEF) baseline score within the 8-
week treatment period. The study, which was designed to assess Zoraxel’s safety and preliminary
efficacy in male subjects ages 18 to 65 with ED, demonstrated a dose dependent treatment effect achieved
by Zoraxel as assessed by the IIEF survey. Zoraxel was found to be safe and well tolerated, with no
serious adverse events reported. Furthermore, subjects treated with Zoraxel demonstrated improved
erectile function and significant improvement in the quality of life measures. The Phase IIb trial, which
will include the Sexual Encounter Profile (SEP) survey, IIEF and quality of life study endpoints will
continue through 2010-11.

Market Opportunity

There are several factors favorable for commercializing new cancer, CNS and sexual dysfunction

drugs that may be first-in-class or market leaders, including:

(cid:2) Expedited Regulatory or Commercialization Pathways. Drugs for life-threatening diseases
such as cancer are often treated by the FDA as candidates for fast track, priority and
accelerated reviews. Expedited regulatory review may lead to clinical studies that require
fewer patients, or expedited clinical trials. Our lead products, Serdaxin and Zoraxel, are also
expected to have expedited or shortened clinical development timelines because their active
pharmaceutical ingredient has extensive and well established safety in humans.

(cid:2) Favorable Environment for Formulary Access and Reimbursement. Cancer drugs with
proven efficacy or survival benefit, and cost-effective clinical outcomes would be expected to

gain rapid market uptake, formulary listing and payer reimbursement. In addition, drugs that
have orphan designations are generally reimbursed by insurance companies given that there
are few, if any, alternatives. Because mental disorders affect more than 55 million estimated
Americans, the burden of illness is significant for insurance companies as well as for
employers. Given the significant cost of treating behavioral health problems, there is a
favorable environment for formulary access and reimbursement for effective products that
treat multiple disorders.

(cid:2) Focus on Specialty Markets. The marketing of new drugs to specialty physicians can be
accomplished with a specialty sales force that requires fewer personnel and lower related
costs than a typical sales force that markets to primary care physicians and general
practitioners.

Our Strategy

Our strategy has several key components:

Develop innovative therapeutics with the potential to be first-in-class or market leaders

We plan to expand our R&D pipeline and introduce more new drugs into clinical trials over the
next five years, and develop an industry-leading oncology therapeutics franchise. Our pipeline spans the
major classes of cancer drugs – molecular targeted therapies, signal transduction and multi-kinase
inhibitors, nano-medicines, and small molecule cytotoxics (microtubule inhibitors, quinazoline and
nucleoside analogues). Differentiated target product profiles and proprietary discovery and research
technology platforms further support these strategic efforts. Further, we plan to commercialize neurology
and psychiatry drugs for growing CNS markets. Rexahn has exclusive patent and development rights to a
portfolio of CNS compounds that are repurposed and adaptable for clinical development in multiple
indications, including PD, depression, and neurodegenerative disorders.

Target Signal Transduction Molecules with Multiple Drug Candidates

We plan to expand our oncology drug candidate pipeline and introduce several new signal
inhibitor drugs into clinical trials over the next five years. By identifying and characterizing the genes
and proteins that control the signaling pathways and gene expression of cancer cells, we seek to develop
DNA/RNA-based and small-molecule drugs to treat a broad range of diseases caused by abnormal
expression or functions of those genes and proteins.

Establish Partnerships with Large Pharmaceutical Companies

In September 2009, Rexahn closed on licensing and stock purchase agreements with Teva
Pharmaceutical Industries (Teva) for the development of our novel anti-cancer compound, RX-3117. The
companies reached an agreement with respect to the commercialization and development of RX-3117.
We seek to establish strategic alliances and partnerships with large pharmaceutical companies for the
development of other drug candidates.

Clinically Develop Drug Candidates as Orphan Drugs to Reduce Time-to-Market

Under the Orphan Drug Act, the FDA may expedite approval of new drugs that treat diseases
affecting less than 200,000 patients each year. This category of diseases is called an "orphan indication".

Incentives in the Orphan Drug Act include a faster time-to-market of the drug (with FDA approval
possible after Phase II trials instead of Phase III trials) and seven years of drug marketing exclusivity for
the sponsor. We plan to develop drug candidates initially for orphan category cancers in order to reduce
the time-to-market.

In-License Unique Technology

We continually review opportunities to in-license and advance compounds in oncology and other
strategic therapeutic areas that have value creating potential and will strengthen our R&D pipeline. For
example, in February 2005, we licensed the intellectual property of Revaax Pharmaceuticals LLC
("Revaax") to develop new drugs for treatment of CNS and mood disorders. As a result of this licensing
agreement, we have now advanced Serdaxin and Zoraxel into Phase II clinical trials for depression and
sexual dysfunction patients.

Capitalize on Our Management Team’s Expertise
Commercialization

for Drug Development and Product

Our management team possesses clinical development experience in oncology and several other
therapeutic areas, that facilitates strategic approaches to, and competitive advantages in, the design, risk
assessment, and implementation of drug development programs. We also have prior experience in
pharmaceutical alliances, product launches and marketing.

Our Pipeline Drug Candidates

We have three clinical stage drug candidates, and several more pre-clinical drugs, including the

following:

Clinical Stage Pipeline:

(1) Archexin: First-in-class anticancer Akt inhibitor

(2) Serdaxin: CNS Disorders drug for depression and neurodegenerative diseases

(3) Zoraxel: ED and sexual dysfunction drug

Pre-clinical Pipeline:

(1) RX-1792: Small molecule targeted anticancer drug candidate

(2) RX-5902: Small molecule microtubule inhibitor anticancer drug candidate

(3) RX-3117: Small molecule anti-metabolite nucleoside anticancer drug candidate

(4) RX-8243: Small molecule aurora kinase inhibitor anticancer drug candidate

(5) RX-0201-Nano: Nanoliposomal anticancer Akt-1 inhibitor

(6) RX-0047-Nano: Nanoliposomal anticancer HIF-1 alpha inhibitor

(7) RX-21101 & RX-21202: Nano-polymer Anticancer

We have discussed our clinical stage pipeline in detail above.

Pre-clinical Pipeline

Our pre-clinical pipeline includes:

(1) RX-1792: Small molecule targeted anticancer drug candidate

RX-1792 is a quinazoline analogue that suppresses protein kinase Akt and c-Fos, critical
components of tumor growth and metastasis. Preclinical studies have shown RX-1792 to inhibit tumor
growth in xenograft models.

(2) RX-5902: Small molecule microtubule inhibitor anticancer drug candidate

RX-5902 is a novel piperazine-based small molecule that interferes with microtubule structure
and G2/M cell cycle in cancer cells. Studies demonstrated drug-resistant tumors recede in xenografted
model by oral administration of RX-5902.

(3) RX-3117: Small molecule anti-metabolite nucleoside anticancer drug candidate

RX-3117 is being co-developed with Teva for the treatment of cancer cells and tumors, in
particular gemcitabine-resistant lung cancer. RX-3117 has shown potent anti-tumor effects in xenograft
human tumor models. Preclinical studies revealed the high bioavailability and superior toxicity profile
compared to gemcitabine, the current first-line therapy for pancreatic and other cancers.

(4) RX-8243: Small molecule aurora kinase inhibitor anticancer drug candidate

RX-8243 is a novel isoquinolinamine analogue that inhibits Ark1 (Aurora A) kinase and other
Ser/Thr kinase in caner cells. RX-8243 is a multikinase inhibitor that downregulates signal molecules of
RAS as well as PI3K pathways such as activated forms of ERK, p38 and Akt. Preclinical studies showed
RX-8243 blocks tumor growth in xenograft models at low nanomolar concentrations.

(5) RX-0201-Nano: Nanoliposomal anticancer Akt-1 inhibitor

RX-0201, the active ingredient of Archexin, is a first-in-class, potent inhibitor of the Akt-1
protein kinase. RX-0201-Nano is a nanoliposomal product of RX-0201 with high incorporation
efficiency and good stability. Nanoliposomal delivery of RX-0201 may provide significant clinical
benefits including targeted higher cellular uptake, extended circulation time, reduced drug-related toxicity,
and improved efficacy.

(6) RX-0047-Nano: Nanoliposomal anticancer HIF-1(cid:2) inhibitor

RX-0047 is a potent inhibitor of HIF-1(cid:2), a key transcription factor involved in cancer cell
survival, metastasis, and angiogenesis. HIF-1(cid:2) is over-expressed in a broad range of human cancers, and
associated with increased cancer mortality and resistance. RX-0047 inhibits proliferation of cancer cells
of human origin at low nanomolar concentrations by lowering mRNA level of HIF-1(cid:2). It is also effective
in radiation-resistant cancer cells. Studies in xenografted model have shown RX-0047 to inhibit tumor
growth in lung and prostate and blocks metastasis.

(7) RX-21101 & RX-21202: Nano-polymer Anticancer Drugs

Among the prominent nano-polymer drugs in Rexahn, RX-21101(HPMA-docetaxel) and RX-

21202 (HPMA-gemcitabine) are anticancer drugs that can overcome the downside of cytotoxic
compounds, such as poor solubility, stability, and severe adverse reactions. Conjugating water-soluble
and non-toxic HPMA to conventional anticancer compounds bolster efficacy while lowering toxicity by
specific tumor targeting and increased stability in body.

Competition

We are developing new drugs to address unmet medical needs in oncology, CNS disorders, and
sexual dysfunction markets. Our drug candidates will be competing with products and therapies that
either currently exist or are expected to be developed. Competition among these products will be based
on factors such as product efficacy, safety, price, launch timing and execution. Our competitive position
will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or
otherwise develop proprietary products or processes, and to secure sufficient capital resources for the
often substantial period between technological conception and commercial sales.

There are a number of pharmaceutical and biotechnology companies that are conducting research
and development on technologies and products for treatment of cancers, CNS diseases and sexual
dysfunction. Our competitors may succeed in developing products based on novel technologies that are
more effective than ours, which could render our technology and products noncompetitive prior to
recovery by us of expenses incurred with respect to those products.

Our competitors may include major pharmaceutical, specialized biotechnology firms, and
academic and other research institutions. Many of our competitors have substantially greater financial,
technical and human resources than we do. In addition, many of our competitors have significantly
greater experience than we do in undertaking pre-clinical testing and human clinical trials of new
pharmaceutical products and obtaining FDA and other regulatory approvals of products for use in health
care.

As we expand our drug development programs to include diseases other than cancer, CNS and
sexual dysfunction, we will also face competition from pharmaceutical and biotechnology companies
conducting research and development on products for treatment of those other diseases, increasing our
competition. For many of the same reasons described above, we cannot assure you that we will compete
successfully.

Government Regulation

Regulation by governmental authorities in the United States and in other countries constitutes a
significant consideration in our product development, manufacturing and marketing strategies. We
expect that all of our drug candidates will require regulatory approval by appropriate governmental
agencies prior to commercialization and will be subjected to rigorous pre-clinical, clinical, and post-
approval testing, as well as to other approval processes by the FDA and by similar health authorities in
foreign countries. U.S. federal regulations control the ongoing safety, manufacture, storage, labeling,
record keeping, and marketing of all biopharmaceutical products intended for therapeutic purposes. We
believe that we are in compliance in all material respects with currently applicable rules and regulations.

Obtaining governmental approvals and maintaining ongoing compliance with federal regulations
are expected to require the expenditure of significant financial and human resources not currently at our
disposal. We plan to fulfill our short-term needs through consulting agreements and joint ventures with

academic or corporate partners while building our own internal infrastructure for long-term corporate
growth.

The process by which biopharmaceutical compounds for therapeutic use are approved for
commercialization in the United States is lengthy. Many other countries have instituted equally difficult
approval processes. In the United States, regulations published by the FDA require that the person or
entity sponsoring and/or conducting a clinical study for the purpose of investigating a potential biological
drug product's safety and effectiveness submit an Investigational New Drug (IND) application to the
FDA. These investigative studies are required for any drug product for which the product manufacturer
intends to pursue licensing for marketing the product in interstate commerce. If the FDA does not object
to the IND application, clinical testing of the compound may begin in humans after a 30-day review
period. Clinical evaluations typically are performed in three phases.

In Phase I, the drug is administered to a small number of healthy human subjects or patients to
confirm its safety and to develop detailed profiles of its pharmacological and pharmacokinetic actions
(i.e., absorption, metabolism, excretion, duration of therapeutic concentration and effects, if any).

In Phase II, the drug is administered to groups of patients (up to a total of 500) to determine its
preliminary efficacy against the targeted disease and the requisite dose and dose intervals. In a typical
development program, additional animal toxicology studies precede this phase. In some cases, the trial
can be split into Phase IIa and IIb studies in order to test smaller subject pools. Some Phase I clinical
studies may also proceed in parallel with some Phase II studies.

In Phase III, the drug is administered to a larger group of patients (usually 1,000 to 3,000 or
more) by physicians (study site investigators) in a network of participating clinics and hospitals. The
extensive clinical testing is intended to confirm Phase II results and to document the nature and incidence
of adverse reactions. Studies also are performed in patients with concomitant diseases and medications.
Larger patient populations are evaluated in Phase III at multiple study sites and many clinical trial
programs or registration studies are conducted concurrently for the sake of time and efficiency.

After completing the IND clinical studies, the product developer submits the safety and
effectiveness data generated by the studies to the FDA in the form of a New Drug Application (NDA) to
market the product. It is the responsibility of the FDA to review the proposed product labeling, the pre-
clinical (animal and laboratory) data, the clinical data, the facilities utilized and the methodologies
employed in the manufacture of the product to determine whether the product is safe and effective for its
intended use.

Even after initial FDA approval has been obtained, further studies may be required to provide
additional data on safety or to gain approval for expanded labeling or treatment indications. Also, the
FDA may require post-marketing testing and surveillance programs to monitor the drug's effects. Side
effects resulting from the use of drug products may prevent or limit the further marketing of the products.

For marketing outside the United States, we will be subject to foreign regulatory requirements
governing human clinical trials and marketing approval for drugs. The requirements relating to the
conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to
country.

Certain drugs are eligible in the United States for designation by the FDA as "orphan" drugs if
their use is intended to treat a disease that affects fewer than 200,000 persons in the U.S. or the disease
affects more than 200,000 persons in the United States but there is no reasonable expectation that the cost
of developing and marketing a drug will be recovered from the U.S. sales of such drug. In order for a

sponsor to obtain orphan designation for a drug product, an application must be submitted for approval to
the FDA's Office of Orphan Products Development. The approval of an application for orphan
designation is based upon the information submitted by the sponsor. A drug that has obtained orphan
designation is said to have "orphan status". The approval of an orphan designation request does not alter
the standard regulatory requirements and process for obtaining marketing approval. Safety and efficacy
of a compound must be established through adequate and well-controlled studies.

Orphan drugs may obtain FDA approval after successful Phase II trials, rather than after
completion of Phase III trials, resulting in faster time-to-market for those drugs. If a sponsor obtains
orphan drug designation for a particular compound and is the first to obtain FDA regulatory approval of
that compound, then that sponsor is granted marketing exclusivity for a period of seven years.

Sales and Marketing

Rexahn plans to commercialize unique and differentiated drugs that are first-in-class or potential
market leaders. We may develop cancer drugs for orphan indications initially, and then expand into more
highly prevalent cancers. Currently, Archexin has Orphan drug designation for five cancer indications.
For drugs that require larger pivotal trials and/or large sales force, Rexahn seeks alliances and corporate
partnerships with larger pharmaceutical firms. We also seek acquisition or in-licensing candidates to
strengthen our product pipeline.

Research Technologies

Our research technologies are focused on our proprietary multi-target aimed ligands platform and
nano-based drug delivery. For a discussion of collaboration arrangements pursuant to which we obtain
research and development services from universities, research institutions and other organizations, see
"Collaboration and License Agreements" in this item.

The Inhibitors of Multi-Expression Signals (TIMES)

Rexahn has developed a unique ligand discovery platform targeting multi-expression signals.
Since cancer is a complex disease caused by multiple factors as well as genetic modifications, cancer
treatment involves a combination of drugs with different mechanisms of action, which compound degree
and extent of toxicities. Rexahn's approach is to control multiple targets important for cancer
proliferation with a single agent. In doing so, Rexahn utilizes a proprietary, genomics-based integrated,
gene expression system to identify potentially important targets that control multiple genes or signaling
events in cancer cells.

3-D Gateway of Ligand Discovery (3-D GOLD)

3D-GOLD is a drug discovery platform that integrates 3-D natures of molecular modeling,
databases of chemicals and proteins, and ligand filtering and generation. The chemical database contains
3D structures of about 5 million compounds. Rexahn’s proprietary quantitative structure-activity
relationship tool for innovative discovery and docking tools are parts of the platform. The filtering
module is a powerful component to determine similarity in pharmacophore and 3D fingerprinting, while
ligand generation helps optimize the leads.

Nano-medicine Drug Delivery

Rexahn has developed unique proprietary drug delivery nano-systems that may increase the
availability of a drug at the disease site, minimize adverse reactions, and/or provide longer duration of

action. Rexahn is currently testing multiple nanoliposomal- and nanopolymer-based anticancer drugs.
Rexahn was awarded grants from Maryland Industrial Partnerships and is collaborating with the Center
for Nanomedicine of University of Maryland to accelerate the development of its proprietary nano
technologies and nano products.

Manufacturing and Distribution

We do not currently have the resources required for commercial manufacturing of our drug
candidates. We currently outsource the manufacturing of drug substances and drug products for our drug
candidates. We believe that there are a limited number of manufacturers that could manufacture our drug
candidates. We have no current plans to build internal manufacturing capacity for any product.
Manufacturing will be accomplished
large
pharmaceutical companies. We do not have any specific distribution plans at this time.

through partnerships with

through outsourcing or

Intellectual Property

Proprietary patent and intellectual property (IP) protection for our drug candidates, processes and
know-how is important to our business. We aggressively prosecute and defend our patents and
proprietary technology. Rexahn has several U.S. and international patents issued for broad IP coverage of
our drug candidates in cancer, CNS, behavioral and mood disorders, neuroprotection and sexual
dysfunction, effective until 2020 to 2025. Additional U.S., Europe, and foreign patents are pending. We
also rely upon trade secrets, know-how, continuing technological innovation and licensing opportunities
to develop and maintain our competitive position.

In March 2005, we licensed-in CNS-related intellectual property from Revaax Pharmaceuticals,
LLC. The intellectual property rights acquired cover use of certain compounds for anxiety, depression,
aggression, cognition, Attention Deficit Hyperactivity Disorder, neuroprotection and sexual dysfunction.
See "Collaboration and License Arrangements" in this Item for additional information.

Collaboration and License Arrangements

We have numerous collaborative research and development relationships with universities,

research institutions and other organizations. A description of these material relationships is below

Teva Pharmaceutical Industries. On September 21, 2009, Rexahn
closed on licensing and stock purchase agreements with Teva for the
development our novel anti-cancer compound, RX-3117. RX-3117 is
a small molecule, new chemical entity (NCE), nucleoside compound
that has an anti-metabolite mechanism of action, and has therapeutic
potential in a broad range of cancers including colon, lung and
pancreatic cancer. The companies reached an agreement with respect
to the commercialization and development of RX-3117, under which
Teva purchased 3,102,837 shares of Rexahn’s common stock for $3.5
million. Rexahn will be eligible to receive additional development,
regulatory and sales milestone payments. In addition, Rexahn will be
eligible to receive royalties on net sales worldwide. Under the terms
of the deal, Teva may also make an additional equity investment in
Rexahn within 12 months of the closing.

TheraTarget, Inc. (TheraTarget). On December 14, 2009, Rexahn
and TheraTarget, a developer of innovative polymer therapeutics for

the treatment of cancer, formed a joint research collaboration
agreement. Under the terms of the agreement, TheraTarget will
synthesize and supply Rexahn with polymer-drug conjugate products,
which are part of Rexahn’s polymer-based nanomedicine portfolio.

Korea Research Institute of Chemical Technology (KRICT). On
July 13, 2009 Rexahn entered a licensing partnership with the Korea
Research Institute of Chemical Technology (KRICT) to develop a
synthetic process for Quinoxalines compounds. These compounds
provide selective toxicity towards hypoxic cells – cells found in solid
tumors and that are resistant to anticancer drugs and radiation therapy,
making them a potential treatment for solid tumors.

The University of Maryland Baltimore (UMB). On February 1,
2007, we entered into a Maryland Industrial Partnership agreement
with the UMB to collaborate with and sponsor the joint development
of polymer-drug conjugates for cancer therapy, for the targeted
delivery of cancer drugs. Intellectual property made or developed
under this agreement is jointly owned by us and UMB. This project is
currently on-going.

Revaax Pharmaceuticals LLC (Revaax). On February 10, 2005, we
licensed on an exclusive basis, with the right to sublicense, all of the
intellectual property of Revaax, which includes four patents and
multiple patent applications, with respect
to certain chemical
structures that have demonstrated in pre-clinical research the potential
to treat certain behavioral disorders, such as anxiety, depression and
cognitive disorders. This agreement expires upon the expiration of the
royalty term for all licensed products in all countries, which is no
earlier than August 2020 and could extend to August 2024. This
agreement provides for an initial license fee and milestone payments
based on the initiation of pivotal trials for disease treatment indication
for licensed products. Furthermore, we will pay Revaax a specified
fee for each licensed product under the agreement upon receipt of
marketing approval for the licensed product. Notwithstanding the
milestone payment arrangement described above, we are not obligated
to make any milestone payment with respect to milestone events for
which we receive sublicense revenues and are obligated to pay Revaax
a percentage of such sublicense revenues, as well as royalties for sales
of licensed products based on net sales of the licensed products.

Employees

We currently have 15 full-time and 2 part-time employees, all of whom are based at our
Rockville, Maryland office. Our employees are not covered by any collective bargaining agreement and
we have never experienced a work stoppage. We believe our relationships with our employees are
satisfactory.

Item 1A. Risk Factors.

You should carefully consider the risks described below together with the other information included in
this Annual Report on Form 10-K. Our business, financial condition or results of operations could be
adversely affected by any of these risks. If any of these risks occur, the value of our common stock could
decline.

We currently have no product revenues, have incurred negative cash flows from operations since
inception, and will need to raise additional capital to operate our business.

To date, we have generated no product revenues and have incurred negative cash flow from
operations. Until we receive approval from the FDA and other regulatory authorities for our drug
candidates, we cannot sell our drugs and will not have product revenues. Therefore, for the foreseeable
future, we will have to fund all of our operations and capital expenditures from the net proceeds of equity
or debt offerings we may make, cash on hand, licensing fees and grants. Through the end of 2010, we
expect to spend approximately $2.5 million on clinical development for Phase II clinical trials of
Archexin, Serdaxin and Zoraxel™, and the development of preclinical compounds, $4 million on general
corporate expenses and approximately $108,418 on facilities rent. We will need to raise additional
money through debt and/or equity offerings in order to continue to develop our drug candidates. If we are
not able to raise sufficient additional money, we will have to reduce our research and development
activities. We will first reduce research and development activities associated with our preclinical
compounds. To the extent necessary, we will then reduce our research and development activities related
to some or all of our clinical drugs.

Additionally, changes may occur that would consume our existing capital at a faster rate than
projected, including but not limited to, the progress of our research and development efforts, the cost and
timing of regulatory approvals and the costs of protecting our intellectual property rights. We may seek
additional financing to implement and fund other drug candidate development, clinical trial and research
and development efforts, including Phase I clinical trials for other new drug candidates, as well as other
research and development projects.

We will need additional financing to continue to develop our drug candidates, which may not be
available on favorable terms, if at all. If we are unable to secure additional financing in the future on
acceptable terms, or at all, we may be unable to complete our planned pre-clinical and clinical trials or
obtain approval of our drug candidates from the FDA and other regulatory authorities. In addition, we
may be forced to reduce or discontinue product development or product licensing, reduce or forego sales
and marketing efforts and forego attractive business opportunities in order to improve our liquidity to
enable us to continue operations. Any additional sources of financing will likely involve the sale of our
equity securities or securities convertible into our equity securities, which may have a dilutive effect on
our stockholders.

We are not currently profitable and may never become profitable.

We have generated no revenues to date from product sales. Our accumulated deficit as of
December 31, 2009 and 2008 was $36,293,907 and $29,906,479, respectively. For the years ended
December 31, 2009 and 2008, we had net losses of $6,387,428 and $4,912,148, respectively, primarily as
a result of expenses incurred through a combination of research and development activities related to the
various technologies under our control and expenses supporting those activities. Even if we succeed in
developing and commercializing one or more of our drug candidates, we expect to incur substantial losses
for the foreseeable future and may never become profitable. We also expect to continue to incur
significant operating and capital expenditures and anticipate that our expenses will increase substantially
in the foreseeable future, based on the following considerations:

(cid:2)

continued pre-clinical development and clinical trials for our current and new drug
candidates;

efforts to seek regulatory approvals for our drug candidates;

implementing additional internal systems and infrastructure;

licensing in additional technologies to develop; and

hiring additional personnel.

We also expect to continue to experience negative cash flow for the foreseeable future as we fund
our operating losses and capital expenditures. Until we have the capacity to generate revenues, we are
relying upon outside funding resources to fund our cash flow requirements.

We have a limited operating history.

We are a development-stage company with a limited number of drug candidates. To date, we
have not demonstrated an ability to perform the functions necessary for the successful commercialization
of any of our drug candidates. The successful commercialization of our drug candidates will require us to
perform a variety of functions, including, but not limited to:

(cid:2)

conducting pre-clinical and clinical trials;

participating in regulatory approval processes;

formulating and manufacturing products; and

conducting sales and marketing activities.

To date, our operations have been limited to organizing and staffing our company, acquiring,
developing and securing our proprietary technology, drug candidate research and development and
undertaking, through third parties, pre-clinical trials and clinical trials of our principal drug candidates.
These operations provide a limited basis for assessment of our ability to commercialize drug candidates.

We may not obtain the necessary U.S. or worldwide regulatory approvals to commercialize our drug
candidates.

We will need FDA approval to commercialize our drug candidates in the U.S. and approvals from
the FDA-equivalent regulatory authorities in foreign jurisdictions to commercialize our drug candidates in
those jurisdictions. In order to obtain FDA approval of our drug candidates, we must submit to the FDA
an NDA demonstrating that the drug candidate is safe for humans and effective for its intended use. This
demonstration requires significant research and animal tests, which are referred to as pre-clinical studies,
as well as human tests, which are referred to as clinical trials. Satisfaction of the FDA's regulatory
requirements typically takes many years, and depends upon the type, complexity and novelty of the drug
candidate and requires substantial resources for research, development and testing. We cannot predict
whether our research and clinical approaches will result in drugs that the FDA considers safe for humans
and effective for indicated uses. Two of our drug candidates, Archexin and RX-0047, are antisense
oligonucleotide (ASO) compounds. To date, although applications have been made, the FDA has not
approved any NDAs for any ASO compounds for cancer treatment. In addition, each of Archexin, RX-
0201-nano and RX-0047-nano is of a drug class (Akt inhibitor, in the case of Archexin and RX-0201-
nano, and HIF inhibitor, in the case of RX-0047) that has not been approved by the FDA to date, nor have
we submitted such NDA. After the clinical trials are completed, the FDA has substantial discretion in the
drug approval process and may require us to conduct additional pre-clinical and clinical testing or to
perform post-marketing studies.

In foreign jurisdictions, we must receive approval from the appropriate regulatory authorities
before we can commercialize our drugs. Foreign regulatory approval processes generally include all of
the risks associated with the FDA approval procedures described above. We cannot assure you that we
will receive the approvals necessary to commercialize our drug candidates for sale outside the United
States.

Our drug candidates are in early stages of clinical trials.

Our drug candidates are in an early stage of development and require extensive clinical testing,
which are very expensive, time-consuming and difficult to design. In 2007, Archexin, an oncology drug
candidate, entered Phase II clinical trials. In 2008, we initiated Phase II clinical trials of Zoraxel, a sexual
dysfunction drug candidate. In 2009, we initiated Phase II clinical trial of Serdaxin, drug candidate for
depression and other CNS disorders.

Clinical trials are very expensive, time-consuming and difficult to design and implement.

Human clinical trials are very expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. The clinical trial process is also time-consuming.
We estimate that clinical trials of our current drug candidates will take up to three years to complete.
Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to
abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by
several factors, including, but not limited to:

(cid:2)

unforeseen safety issues;

determination of dosing issues;

lack of effectiveness during clinical trials;

reliance on third party suppliers for the supply of drug candidate samples;

(cid:2)

slower than expected rates of patient recruitment;

inability to monitor patients adequately during or after treatment;

inability or unwillingness of medical investigators and institutional review boards to follow
our clinical protocols; and

lack of sufficient funding to finance the clinical trials.

We or the FDA may suspend clinical trials at any time if it appears that we are exposing
participants to unacceptable health risks or if the FDA finds deficiencies in our IND submissions or the
conduct of these trials.

Additionally, we may have difficulty enrolling patients in our clinical trials. If we experience
such difficulties, we may not be able to complete the clinical trial or we may experience significant delays
in completing the clinical trial.

If the results of our clinical trials fail to support our drug candidate claims, the completion of
development of such drug candidate may be significantly delayed or we may be forced to abandon
development altogether, which will significantly impair our ability to generate product revenues.

Even if our clinical trials are completed as planned, we cannot be certain that our results will
support our drug candidate claims. Success in pre-clinical testing and early clinical trials does not ensure
that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will
replicate the results of prior clinical trials and pre-clinical testing. The clinical trial process may fail to
demonstrate that our drug candidates are safe for humans and effective for indicated uses. This failure
would cause us to abandon a drug candidate and may delay development of other drug candidates. Any
delay in, or termination of, our clinical trials will delay the filing of our NDAs with the FDA and,
ultimately, delay our ability to commercialize our drug candidates and generate product revenues. In
addition, our trial designs may involve a small patient population. Because of the small sample size, the
results of early clinical trials may not be indicative of future results.

If physicians and patients do not accept and use our drugs, our ability to generate revenue from sales
of our products will be materially impaired.

Even if the FDA approves our drug candidates, physicians and patients may not accept and use

them. Future acceptance and use of our products will depend upon a number of factors including:

(cid:2)

awareness of the drug's availability and benefits;

perceptions by members of the health care community, including physicians, about the safety
and effectiveness of our drugs;

pharmacological benefit and cost-effectiveness of our product relative to competing products;

availability of reimbursement for our products from government or other healthcare payers;

(cid:2)

effectiveness of marketing and distribution efforts by us and our licensees and distributors, if
any; and

the price at which we sell our products.

Because we expect sales of our current drug candidates, if approved, to generate substantially all
of our product revenues for the foreseeable future, the failure of any of these drugs to find market
acceptance would harm our business and could require us to seek additional financing.

Much of our drug development program depends upon third-party researchers, and the results of our
clinical trials and such research activities are, to a limited extent, beyond our control.

We depend upon independent investigators and collaborators, such as universities and medical
institutions, to conduct our pre-clinical and clinical trials and toxicology studies. This business practice is
typical for the pharmaceutical industry and companies like us. For example, the Phase I clinical trials of
Archexin were conducted at the Lombardi Comprehensive Cancer Center of Georgetown Medical Center
and the University of Alabama at Birmingham, with the assistance of Amarex, LLC, a pharmaceutical
clinical research service provider who is responsible for creating the reports that will be submitted to the
FDA. We also relied on TherImmune Research Corporation (now named Bridge Global Pharmaceutical
Services, Inc.), a discovery and pre-clinical service provider, to summarize Archexin 's pre-clinical data.
While we make every effort internally to oversee their work, these collaborators are not our employees
and we cannot control the amount or timing of resources that they devote to our programs. These
investigators may not assign priority to our programs or pursue them as diligently as we would if we were
undertaking such programs ourselves. For example, we have a billing dispute on the work performance
and expenses with Amarex, LLC for clinical trials. The dispute might cause a delay of the program or
increase our costs associated with the program. If outside collaborators fail to devote sufficient time and
resources to our drug-development programs, or if their performance is substandard, the approval of our
FDA applications, if any, and our introduction of new drugs, if any, may be delayed. The risk of
completion or delay of these studies is not within our direct control and a program delay may occur due to
circumstances outside our control. A delay in any of these programs may not necessarily have a direct
impact on our daily operations. However, to the extent that a delay results in additional cost to us, a
higher than expected expense may result. These collaborators may also have relationships with other
commercial entities, some of which may compete with us. If our collaborators assist our competitors at
our expense, our competitive position would be harmed.

We rely exclusively on third parties to formulate and manufacture our drug candidates, which expose
us to a number of risks that may delay development, regulatory approval and commercialization of our
products or result in higher product costs.

We have no experience in drug formulation or manufacturing. Internally, we lack the resources
and expertise to formulate or manufacture our own drug candidates. Therefore, we rely on third party
expertise to support us in this area. For example, we have entered into contracts with third-party
manufacturers such as Raylo Chemicals Inc., Formatech, Inc., Avecia Biotechnology Inc. and UPM
Pharmaceuticals, Inc. to manufacture, supply, store and distribute supplies of our drug candidates for our
clinical trials. If any of our drug candidates receive FDA approval, we will rely on these or other
third-party contractors to manufacture our drugs. Our reliance on third-party manufacturers exposes us to
the following potential risks:

(cid:2) We may be unable to identify manufacturers on acceptable terms or at all because the number
of potential manufacturers is limited and the FDA must approve any replacement contractor.
This approval would require new testing and compliance inspections. In addition, a new

manufacturer would have to be educated in, or develop substantially equivalent processes for,
the production of our products after receipt of FDA approval, if any.

(cid:2) Our third-party manufacturers might be unable to formulate and manufacture our drugs in the

volume and of the quality required to meet our clinical needs and commercial needs.

(cid:2) Our contract manufacturers may not perform as agreed or may not remain in the contract
manufacturing business for the time required to supply our clinical trials or to successfully
produce, store and distribute our products.

(cid:2) Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the
Drug Enforcement Agency (DEA), and corresponding state agencies to ensure strict
compliance with good manufacturing practice and other government regulations and
corresponding foreign standards. We do not have control over third-party manufacturers'
compliance with these regulations and standards, but we may be ultimately responsible for
any of their failures.

(cid:2)

If any third-party manufacturer makes improvements in the manufacturing process for our
products, we may not own, or may have to share, the intellectual property rights to the
innovation.

Each of these risks could delay our clinical trials, drug approval and commercialization and

potentially result in higher costs and/or reduced revenues.

We have no experience selling, marketing or distributing products and currently no internal capability
to do so.

We currently have no sales, marketing or distribution capabilities. While we intend to have a role
in the commercialization of our products, we do not anticipate having the resources in the foreseeable
future to develop global sales and marketing capabilities for all of our proposed products. Our future
success depends, in part, on our ability to enter into and maintain collaborative relationships with other
companies having sales, marketing and distribution capabilities, the collaborator's strategic interest in the
products under development and such collaborator's ability to successfully market and sell any such
products. To the extent that we decide not to, or are unable to, enter into collaborative arrangements with
respect to the sales and marketing of our proposed products, significant capital expenditures, management
resources and time will be required to establish and develop an in-house marketing and sales force with
technical expertise. We cannot assure you that we will be able to establish or maintain relationships with
third party collaborators or develop in-house sales and distribution capabilities. To the extent that we
depend on third parties for marketing and distribution, any revenues we receive will depend upon the
efforts of such third parties, as well as the terms of our agreements with such third parties, which cannot
be predicted at this early stage of our development. We cannot assure you that such efforts will be
successful. In addition, we cannot assure you that we will be able to market and sell our products in the
United States or overseas.

Developments by competitors may render our products or technologies obsolete or non-competitive.

We will compete against fully integrated pharmaceutical companies and smaller companies that
are collaborating with larger pharmaceutical companies, such as Keryx Biopharmaceuticals, Genta
Incorporated and Imclone Systems Incorporated, as well as academic institutions, government agencies
and other public and private research organizations. In addition, many of these competitors, either alone

or together with their collaborative partners, operate larger research and development programs or have
substantially greater financial resources than we do, as well as more experience in:

(cid:2)

developing drugs;

undertaking pre-clinical testing and human clinical trials;

obtaining FDA and other regulatory approvals of drugs;

formulating and manufacturing drugs; and

launching, marketing and selling drugs.

Large pharmaceutical companies such as Bristol-Myers Squibb, Eli-Lilly, Novartis, Pfizer and
Glaxo-SmithKline currently sell both generic and proprietary compounds for the treatment of cancer,
depression and erectile dysfunction. In addition, companies pursuing different but related fields represent
substantial competition. Many of these organizations have substantially greater capital resources, larger
research and development staff and facilities, longer drug development history in obtaining regulatory
approvals and greater manufacturing and marketing capabilities than we do. These organizations also
compete with us to attract qualified personnel, parties for acquisitions, joint ventures or other
collaborations.

If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of
others, the value of our intellectual property rights would diminish and our business and competitive
position would suffer.

Our success, competitive position and future revenues will depend in part on our ability and the
abilities of our licensors to obtain and maintain patent protection for our products, methods, processes and
other technologies, to preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights of third parties. We have filed
U.S. and worldwide patent applications for anti-Akt compounds, including Archexin and anti-HIF
compounds, including RX-0047. In November 2006, we were granted a U.S. patent for our anti-Akt
compounds, including Archexin. The patent covers the nucleotide sequences of the antisense compounds
that target and inhibit the expression of Akt in human tissues or cells. The patent also covers the method
of using the compounds to induce cytotoxicity in cancer cells. We have also filed three U.S. provisional
patent applications for new anticancer quinazoline compounds, new anticancer nucleoside products and a
drug target, cenexin, a polo-box binding protein. In December 2004, we also filed two Korean patent
applications for new anticancer piperazine compounds. Through our licensing agreement with Revaax,
we hold exclusive rights to five patents and multiple patent applications, with respect to certain chemical
structures related to antibiotics, but without antibiotic efficacy. However, we cannot predict:

(cid:2)

the degree and range of protection any patents will afford us against competitors, including
whether third parties will find ways to invalidate or otherwise circumvent our licensed
patents;

if and when patents will issue;

(cid:2) whether or not others will obtain patents claiming aspects similar to those covered by our

licensed patents and patent applications;

(cid:2) whether we will need to initiate litigation or administrative proceedings which may be costly

whether we win or lose;

(cid:2) whether our patents will be challenged by competitors alleging that a patent is invalid or
unenforceable and, if litigated, the outcome of any court action as to patent validity,
enforceability or scope;

(cid:2) whether a competitor will develop a similar compound that is outside the scope of protection
afforded by a patent or whether the patent scope is inherent in the claims or modified due to
interpretation of claim scope by a court;

(cid:2) whether there were activities previously undertaken by a licensor that could limit the scope,

validity or enforceability of licensed patents and intellectual property;

(cid:2) whether there will be challenges or litigation brought by a licensor alleging breach of a
license agreement and its effect on our ability to practice particular technologies and the
outcome of any such challenge or litigation; or

(cid:2) whether a competitor will assert infringement of its patents or intellectual property, whether
or not meritorious, and what the outcome of any related litigation or challenge may be.

Our success also depends upon the skills, knowledge and experience of our scientific and
technical personnel, our consultants and advisors as well as our licensors and contractors. To help protect
our proprietary know-how and our inventions for which patents may be unobtainable or difficult to
obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all
employees to enter into agreements that prohibit the disclosure of confidential information and, where
applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions
important to our business. These agreements may not provide adequate protection for our trade secrets,
know-how or other proprietary information in the event of any unauthorized use or disclosure or the
lawful development by others of such information. If any of our trade secrets, know-how or other
proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights
would be significantly impaired and our business and competitive position would suffer.

If we infringe the rights of third parties we could be prevented from selling products and be forced to
pay damages and defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other

parties, we could incur substantial costs and may have to:

(cid:2)

obtain licenses, which may not be available on commercially reasonable terms, if at all;

redesign our products or processes to avoid infringement;

stop using the subject matter claimed in the patents held by others, which could cause us to
lose the use of one or more of our drug candidates;

pay damages; or

defend litigation or administrative proceedings which may be costly whether we win or lose,
and which could result in a substantial diversion of our management resources.

Although to date, we have not received any claims of infringement by any third parties, as our
drug candidates move into clinical trials and commercialization, our public profile and that of our drug
candidates may be raised and generate such claims.

Our license agreement with Revaax may be terminated in the event we commit a material breach, the
result of which would significantly harm our business prospects.

Our license agreement with Revaax is subject to termination by Revaax if we materially breach
our obligations under the agreement, including breaches with respect to certain installment payments and
royalty payments, if such breaches are not cured within a 60-day period. The agreement also provides
that it may be terminated if we become involved in a bankruptcy, insolvency or similar proceeding. If
this license agreement is terminated, we will lose all of our rights to develop and commercialize the
licensed compounds, including Serdaxin and Zoraxel, which would significantly harm our business and
future prospects.

If we are unable to successfully manage our growth, our business may be harmed.

In addition to our own internally developed drug candidates, we proactively seek opportunities to
license-in the compounds in oncology and other therapeutic areas that are strategic and have value
creating potential to take advantage of our development know-how. We are actively pursuing additional
drug candidates to acquire for development. Such additional drug candidates could significantly increase
our capital requirements and place further strain on the time of our existing personnel, which may delay
or otherwise adversely affect the development of our existing drug candidates. Alternatively, we may be
required to hire more employees, further increasing the size of our organization and related expenses. If
we are unable to manage our growth effectively, we may not efficiently use our resources, which may
delay the development of our drug candidates and negatively impact our business, results of operations
and financial condition.

We may not be able to attract and retain qualified personnel necessary for the development and
commercialization of our drug candidates. Our success may be negatively impacted if key personnel
leave.

Attracting and retaining qualified personnel will be critical to our future success. We compete for
qualified individuals with numerous biopharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we cannot assure you that we will be
successful.

The loss of the technical knowledge and management and industry expertise of any of our key
personnel, especially Dr. Chang H. Ahn, our Chairman and Chief Executive Officer and regulatory
expert, could result in delays in product development and diversion of management resources, which
could adversely affect our operating results. We do not have "key person" life insurance policies for any
of our officers.

We may incur substantial liabilities and may be required to limit commercialization of our products in
response to product liability lawsuits.

The testing and marketing of medical products entail an inherent risk of product liability. If we
cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities
or be required to limit commercialization of our products. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against potential product liability claims could prevent

or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators.
Although we currently carry clinical trial insurance and product liability insurance we, or any
collaborators, may not be able to maintain such insurance at a reasonable cost. Even if our agreements
with any future collaborators entitles us to indemnification against losses, such indemnification may not
be available or adequate should any claim arise.

An investment in shares of our common stock is very speculative and involves a very high degree of
risk.

To date, we have generated no revenues from product sales and only minimal revenues from a
research agreement with a minority shareholder, and interest on bank account balances and short-term
investments. Our accumulated deficit as of December 31, 2009 and 2008 was $36,293,907 and
$29,906,479, respectively. For the years ended December 31, 2009 and 2008, we had net losses of
$6,387,428 and $4,912,148, respectively, primarily as a result of expenses incurred through a
combination of research and development activities related to the various technologies under our control
and expenses supporting those activities. Until we receive approval from the FDA and other regulatory
authorities for our drug candidates, we cannot sell our drugs and will not have product revenues.

The market price of our common stock may fluctuate significantly.

The market price of our common stock may fluctuate significantly in response to factors, some of

which are beyond our control, such as:

(cid:2)

the announcement of new products or product enhancements by us or our competitors;

developments concerning intellectual property rights and regulatory approvals;

variations in our and our competitors' results of operations;

changes in earnings estimates or recommendations by securities analysts; and

developments in the biotechnology industry.

Further, the stock market, in general, and the market for biotechnology companies, in particular,
have experienced extreme price and volume fluctuations. Continued market fluctuations could result in
extreme volatility in the price of our common stock, which could cause a decline in the value of our
common stock. You should also be aware that price volatility might be worse if the trading volume of
our common stock is low. We have not paid, and do not expect to pay, any cash dividends because we
anticipate that any earnings generated from future operations will be used to finance our operations and as
a result, you will not realize any income from an investment in our common stock until and unless you
sell your shares at a profit.

Some or all of the "restricted" shares of our common stock issued in the merger of CPRD and
Rexahn, Corp or held by other stockholders may be offered from time to time in the open market pursuant
to Rule 144, and these sales may have a depressive effect on the market for our common stock. In
general, an affiliated person who has held restricted shares for a period of six months may, upon filing
with the SEC a notification on Form 144, sell into the market common stock in an amount equal to
1 percent of the outstanding shares (approximately 700,000 shares) during a three-month period. Non-
affiliates may sell restricted securities after six months without any limits on volume.

Our common stock is currently listed on the NYSE AMEX. However, because our common stock may
be a "penny stock," it may be more difficult for you to sell shares of our common stock, and the market
price of our common stock may be adversely affected.

Our common stock may be a "penny stock" if, among other things, the stock price is below
$5.00 per share, we are not listed on a national securities exchange or approved for quotation on the
Nasdaq Stock Market, or we have not met certain net tangible asset or average revenue requirements.
Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized
risk-disclosure document prepared by the SEC. This document provides information about penny stocks
and the nature and level of risks involved in investing in the penny-stock market. A broker must also give
a purchaser, orally or in writing, bid and offer quotations and information regarding broker and
salesperson compensation, make a written determination that transactions in penny stock are suitable for
the purchaser, and obtain the purchaser's written agreement to the purchase. Broker-dealers must also
provide customers that hold penny stock in their accounts with such broker-dealer a periodic statement
containing price and market information relating to the penny stock. If a penny stock is sold in violation
of the penny stock rules, purchasers may be able to cancel their purchase and get their money back. If
applicable, the penny stock rules may make it difficult for investors to sell their shares of our stock.
Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and
the market price of our common stock may be adversely affected. Also, many brokers choose not to
participate in penny stock transactions. Accordingly, purchasers may not always be able to resell shares
of our common stock publicly at times and prices that they feel are appropriate.

Our business could be adversely impacted if we have deficiencies in our disclosure controls and
procedures or internal control over financial reporting.

Effective internal control over financial reporting and disclosure controls and procedures are
necessary in order for us to provide reliable financial and other reports and effectively prevent fraud.
These types of controls are designed to provide reasonable assurance regarding the reliability of financial
reporting and the proper preparation of our financial statements, as well as regarding the timely reporting
of material information. If we cannot maintain effective internal control or disclosure controls and
procedures, or provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in
our reported financial information, our common stock could be subject to delisting on the stock exchange
where it is traded, our operating results and the trading price of our common stock could suffer, and we
might become subject to litigation.

While our management will continue to review the effectiveness of our internal control over
financial reporting and disclosure controls and procedures, there is no assurance that our disclosure
controls and procedures or our internal control over financial reporting will be effective in accomplishing
all control objectives, including the prevention and detection of fraud, all of the time.

Item 1B. Unresolved Staff Comments.

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Description of Property.

We lease approximately 5,466 square feet of office space at 15245 Shady Grove Road, Rockville,
Maryland 20850. We also lease approximately 1,100 square feet of laboratory space at 20271 Goldenrod

Lane #2086, #2088, Germantown, MD 20876. The facility is equipped with the requisite laboratory
services required to conduct our business and we believe that our existing facilities are adequate to meet
our needs for the foreseeable future. The office lease, which commenced on June 29, 2009, is for a five
year term. The laboratory lease, which commenced on July 1, 2009, is for one year term. We do not own
any real property.

Item 3. Legal Proceedings.

As previously reported in Item 1 of our Quarterly Report on Form 10-Q for the period ending
September 30, 2009, on April 20, 2009, Amarex, LLC filed suit against the Company in the Circuit Court
of Montgomery County, Maryland, seeking damages for an alleged breach of a contract between the
Company and Amarex, LLC entered into on January 6, 2006. Amarex, LLC claims damages of $93,156
plus interest. On May 22, 2009, the Company filed an answer and an affirmative defense to the complaint
denying the claims of damages made by Amarex, LLC. On June 16, 2009, the Company filed a
counterclaim against Amarex, LLC for breach of the same contract in the amount of $354,824 plus
interest. The court ordered that the Company and Amarex, LLC proceed with a non-binding mediation.
The mediation has taken place, but the parties were not able to reach a settlement as of December 31,
2009 and will proceed with litigation. The trial is scheduled to commence on June 14, 2010.

Item 4. [Removed and Reserved].

None.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.

As of March 31, 2010, we are authorized to issue two classes of capital stock, which are common
stock and preferred stock. Our total authorized shares of common stock and preferred stock are
500,000,000 shares, par value $0.0001 per share, and 100,000,000 shares, par value $0.0001,
respectively. As of March 31, 2010, we have 72,755,830 shares of common stock outstanding and
approximately 2000 stockholders of record of common stock. As of March 31, 2010, no shares of
preferred stock are outstanding.

Our common stock is traded on the NYSE AMEX, formerly known as the American Stock
Exchange, under the ticker symbol “RNN”. From May 16, 2005 to May 23, 2008 our common stock was
traded on the Over the Counter Bulletin Board (the OTC-BB) under the ticker symbol "RXHN." From
November 2004 until May 13, 2005, our common stock was traded on the OTC-BB under the ticker
symbol "CPRD."

The following table sets forth the high and low sales prices of our common shares as reported

during the periods indicated.

Period

2008

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2009

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Dividends

High

2.50
9.99
3.50
1.35

1.06
2.00
1.14
1.06

Low

1.35
1.85
0.51
0.66

0.45
0.58
0.40
0.61

We have not paid any cash dividends on common stock and do not expect to do so in the
foreseeable future. We anticipate that any earnings generated from future operations will be used to
finance our operations. No restrictions exist upon our ability to pay dividends.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

There were no repurchases of equity securities in 2009.

Sale of Unregistered Equity Securities

On September 21, 2009, the Company completed a sale of 3,102,837 shares of our
common stock, par value $0.0001 per share, to Teva, for an aggregate purchase price of $3,500,000. The
securities were issued pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. The purchaser is an accredited investor and represented that it was acquiring the
securities for investment only and not with a view for the sale or distribution of the securities.

Equity Compensation Plan Information

The following table provides information, as of December 31, 2009, about shares of our common
stock that may be issued upon the exercise of options, warrants and rights granted to employees,
consultants or directors under all of our existing equity compensation plans.

Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

Weighted average
exercise price of
outstanding
options, warrants
and rights

Number of
securities remaining
available for future
issuance under
equity compensation
plans

7,715,795

$0.98

8,942,500

–
7,715,795

–
$0.98

–
8,942,500

Equity compensation plans
approved by stockholders

Equity compensation plans
not approved by
stockholders

Total

Item 6. Selected Financial Data.

A smaller reporting company is not required to provide the information required by this Item.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.

You should read the following discussion and analysis of our results of operations, financial condition
and liquidity in conjunction with our financial statements and the related notes, which are included in this
Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set
forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and
strategies for our business, statements regarding the industry outlook, our expectations regarding the
future performance of our business, and the other non-historical statements contained herein are
forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements". You
should also review the "Risk Factors" section under this Item 1A of this Annual Report for a discussion of
important factors that could cause actual results to differ materially from the results described herein or
implied by such forward-looking statements.

Overview

Our company resulted from the merger of Corporate Road Show.Com Inc., a New York
corporation incorporated in November 1999, and Rexahn, Corp, a Maryland corporation, immediately
after giving effect to our reincorporation as a Delaware corporation under the name "Rexahn
Pharmaceuticals, Inc." In connection with that transaction, a wholly owned subsidiary of ours merged
with and into Rexahn, Corp, with Rexahn, Corp remaining as the surviving corporation and a wholly
owned subsidiary of ours. In exchange for their shares of capital stock in Rexahn, Corp, the former
stockholders of Rexahn, Corp received shares of common stock representing approximately 91.8% of the
Company's outstanding equity after giving effect to the transaction. Further, upon the effective time of
the Merger, our historic business was abandoned and the business plan of Rexahn, Corp was adopted.
The transaction was therefore accounted for as a reverse acquisition with Rexahn, Corp as the accounting
acquiring party and CPRD as the acquired party. In September 2005, Rexahn, Corp was merged with and
into the Company.

Our efforts and resources have been focused primarily on acquiring and developing our
pharmaceutical technologies, raising capital and recruiting personnel. We are a development stage
company and have no product sales to date and we will not receive any product sales until we receive
approval from the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical
candidates. Our major sources of working capital have been proceeds from various private financings,
primarily private sales of common stock and debt securities, and collaboration agreements with our
strategic investors.

Critical Accounting Policies

A "critical accounting policy" is one which is both important to the portrayal of our financial
condition and results and requires our management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our accounting policies are in accordance with United States generally accepted accounting principles, or
GAAP, and their basis of application is consistent with that of the previous year. Our significant
estimates include assumptions made in estimating the fair values of stock-based compensation and our
assessment relating to the impairment of intangible assets and deferred revenues.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses
consist primarily of third party service costs under research and development agreements, salaries and
related personnel costs, as well as stock compensation related to these costs, costs to acquire
pharmaceutical products and product rights for development and amounts paid to contract research
organizations, hospitals and laboratories for the provision of services and materials for drug development
and clinical trials.

Costs incurred in obtaining the license rights to technology in the research and development
stage, that have no alternative future uses and are for unapproved product compounds are expensed as
incurred.

Fair Value of Financial Instruments

The carrying amounts reported in the accompanying financial statements for cash and cash
equivalents, prepaid expenses and other current assets and accounts payable and accrued expenses
approximate fair value because of the short-term maturity of these financial instruments.

Income Taxes

The Company accounts for income taxes in accordance with Statement ASC 740, "Income
Taxes". Deferred tax assets and liabilities are recorded for differences between the financial statement
and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates. ASC 740 requires that a valuation allowance be established when it
is more likely than not that all portions of a deferred tax asset will not be realized. A review of all
positive and negative evidence needs to be considered, including a company's current and past
performance, the market environment in which the company operates, length of carryback and
carryforward periods and existing contracts that will result in future profits. Income tax expense is
recorded for the amount of income tax payable or refundable for the period, increased or decreased by the
change in deferred tax assets and liabilities during the period.

As a result of the Company's significant cumulative losses, we determined that it was appropriate

to establish a valuation allowance for the full amount of our deferred tax assets.

The calculation of our tax liabilities involves the inherent uncertainty associated with the
application of complex tax laws. We are subject to examination by various taxing authorities. We
believe that as a result of our losses sustained to date, any examination would result in a reduction of our
net operating losses rather than a tax liability. As such, we have not provided for additional taxes
estimated under ASC 740.

Stock-Based Compensation

In accordance with ASC 718 “Stock Compensation” compensation costs related to share-based
payment transactions, including employee stock options, are to be recognized in the financial statements.
In addition, the Company adheres to the guidance set forth within Securities and Exchange Commission
(SEC) Staff Accounting Bulletin No. 107 (SAB 107), which provides the Staff's views regarding the
interaction between ASC 718 and certain SEC rules and regulations, and provides interpretations with
respect to the valuation of share-based payments for public companies.

Impairment of Long-Lived Assets

In accordance with ASC 360, "Property, Plant and Equipment", long-lived assets to be held and
used are analyzed for impairment whenever events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether
events and circumstances have occurred that indicate possible impairment. If there are indications of
impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over
the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not
expected to be sufficient to recover the recorded asset values, the assets are written down to their
estimated fair value. Management determined that an impairment of intangible assets occurred in 2009
and wrote-off the assets remaining carrying value of $286,132.

Concentration of Credit Risk

SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet
Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant
off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance
sheet risk or credit concentration. The Company maintains cash and short-term investments with major
financial institutions. From time to time the Company has funds on deposit with commercial banks that
exceed federally insured limits. The balances are insured by the Federal Deposit Insurance Corporation
up to $250,000. At December 31, 2009, the Company uninsured cash balances or $8,788,659.

Management does not consider this to be a significant credit risk as these banks and financial institutions
are well-known.

Recent Accounting Pronouncements Affecting the Company

In May 2009, the FASB issued guidance that is intended to establish general standards of

accounting for and disclosure of events that occur after the balance sheet date but before the financial
statements are issued or are available to be issued. This guidance is contained in ASC Topic 855
"Subsequent Events." It requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. This guidance is effective for interim and annual periods
ending after June 15, 2009. The Company adopted the provisions of this guidance as of June 30, 2009.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value

Measurements” (ASU 2010-6). The standard amends ASC Topic 820, “Fair Value Measurements and
Disclosures” to require additional disclosures related to transfers between levels in the hierarchy of fair
value measurements. ASU 2010-6 is effective for interim and annual fiscal years beginning after
December 15, 2009. The standard does not change how fair values are measured, accordingly the standard
will not have a financial impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number

of ASUs to date that amend the original text of ASC. Except for the ASUs listed above, those issued to
date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the
Company or (iv) are not expected to have a significant impact on the Company.

Results of Operations

Total Revenues

During 2003, we entered into a collaborative research agreement with Rexgene Biotech Co., Ltd.
(Rexgene), a minority shareholder. Rexgene is engaged in the development of pharmaceutical products
in Asia and has agreed to assist us with the research, development and clinical trials necessary for
registration of our Archexin drug candidate in Asia. This agreement provides Rexgene with exclusive
rights to license, sublicense, make, have made, use, sell and import Archexin in Asia. A one-time
contribution to the joint development and research of Archexin of $1,500,000 was paid to us in 2003 in
accordance with the agreement. The amount of revenue from this contribution is being recognized as
income over the term of this agreement which terminates at the later of 20 years or the term of the patent
on the licensed product. We use 20 years as the basis for revenue recognition and accordingly $75,000
was included in revenues in each fiscal year beginning with 2003 and the remaining $975,000 is reflected
as deferred revenue on the balance sheet as of December 31, 2009. We adopted SAB No. 104, "Revenue
Recognition - Nonrefundable Upfront Fees" with respect to the accounting for this transaction. These
fees are to be used in the cooperative funding of the costs of development of Archexin.

Comparison of the Year Ended December 31, 2009 and the Year Ended December 31, 2008

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, recruitment expenses, professional fees and other
corporate expenses, including business development and general legal activities.

General and administrative expenses increased $418,398, or 16.6%, from $2,525,705 in fiscal
2008 to $2,944,103 in fiscal 2009. The increase was due primarily to professional investment bank fees
for financing activities, accounting fees, and stock options compensation expense.

Research and Development Expenses

Research and development expenses consist primarily of salaries and related personnel costs, fees
paid to consultants and outside service providers for laboratory development and other expenses relating
to the design, development, testing, and enhancement of our drug candidates. We expense our research
and development costs as they are incurred.

Research and development expenses increased $822,464 or 33.9%, from $2,429,507 in fiscal
2008 to $3,251,971 in fiscal 2009. The increase was due primarily to expenses incurred in relation to
Phase II clinical trials of Archexin, Serdaxin and Zoraxel.

Patent Fees

Our patent fees increased $86,860, or 40.1%, from $216,360 in fiscal 2008 to $303,220 in fiscal
2009. This was primarily due to increased activity and legal costs incurred to respond to existing patent
applications in 2009 as compared to 2008.

Depreciation and Amortization

Depreciation expense decreased $14,139, or 25.4%, from $55,743 in fiscal 2008 to $41,604, in
fiscal 2009. The decrease was due primarily to lab equipment being depreciated based on a declining
balance.

Interest Expense

Our interest expense was $0 for fiscal 2008 and 2009.

Interest Income

In fiscal 2009, we recorded $67,445 of interest income from the investment of our cash and cash
equivalents and other short-term investments, compared to $260,533 recorded in fiscal 2008. The
decrease of $193,088, or 74.1%, was primarily due to a lower average cash and cash equivalents balance.

Research and Development Projects

Research and development expenses are expensed as incurred. Research and development
expenses consist primarily of salaries and related personnel costs, costs to acquire pharmaceutical
products and product rights for development and amounts paid to contract research organizations,
hospitals and laboratories for the provision of services and materials for drug development and clinical
trials. Costs incurred in obtaining the license rights to technology in the research and development stage
and that have no alternative future uses are expensed as incurred. Our research and development
programs are related to our three clinical stage lead drug candidates, Archexin, Serdaxin and Zoraxel and
pre-clinical stage nano drug candidates, RX-0201-Nano, RX-0047-Nano and Nano-polymer Anticancer
Drugs. Each of our lead drug candidates is in various stages of completion as described below. As we
expand our clinical studies, we will enter into additional development agreements. Significant additional
expenditures will be required if we complete our clinical trials, start new trials, apply for regulatory

approvals, continue development of our technologies, expand our operations and bring our products to
market. The eventual total cost of each clinical trial is dependent on a number of uncertainties such as
trial design, the length of the trial, the number of clinical sites and the number of patients. The process of
obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and
uncertain. Because the successful development of our most advanced drug candidates, Archexin,
Serdaxin and Zoraxel, is uncertain, and because RX-0201-Nano, RX-0047-Nano and Nano-polymer
Anticancer Drugs are in early-stage development, we are unable to estimate the costs of completing our
research and development programs, the timing of bringing such programs to market and, therefore, when
material cash inflows could commence from the sale of these drug candidates. If these projects are not
completed as planned, our results of operations and financial condition could be negatively affected and if
we are unable to obtain additional financing to fund these projects, we may not be able to continue as a
going concern.

Archexin

In October 2006, we announced the conclusion of the Phase I clinical trial of Archexin, our
leading drug candidate. The costs incurred for the Phase I clinical trial was approximately $1,500,000.
As of December 31, 2009, we have spent an additional $1,500,000 for Phase II clinical trials of Archexin
and we estimate that the Phase IIa trials for pancreatic cancer patients will be completed by the end of
2010 and will require approximately $500,000.

Serdaxin

Through December 31, 2009, the costs incurred for development of these compounds to date have
been approximately $1,000,000. We currently estimate that these studies will require $6 million through
the end of 2011. Also, Phase II clinical trials for the use of Serdaxin in PD is under development. We
currently estimate that these studies will require $8 million through the end of 2012.

Zoraxel

Pre-clinical Pipeline

On June 26, 2009, the Company entered into a securities purchase agreement with Teva.
Contemporaneous with the execution and delivery of this agreement, the parties executed a research and
exclusive license option agreement (RELO) pursuant to which the Company is required to use $2,000,000
of the gross proceeds of the issuance and sale of shares to Teva to fund a research and development
program for the pre-clinical development of RX-3117 and has included this amount in restricted cash
equivalents. The Company will be eligible to receive royalties on net sales of RX-3117 worldwide.
During the fourth quarter of 2009, research and development work began on the RX-3117 research and
development program. These compounds may be entered into Phase I clinical trials in 2010.

RX-0201-Nano, RX-0047-Nano and Nano-polymer Anticancer Drugs are in a pre-clinical stage
of development and the next scheduled program for each compound is a pre-clinical toxicology study
required prior to submission of an IND application to the FDA. Through December 31, 2009, the costs
incurred for development of these compounds to date have been approximately $1,250,000. The
estimated cost to complete pre-clinical toxicology and Phase I clinical trials is estimated to be
approximately $1,500,000 per each compound for a total of $4,500,000.

The conduct of the clinical trial and toxicology studies described above are being accomplished in
conjunction with third-party clinical research organizations at external locations. This business practice is
typical for the pharmaceutical industry and companies like us. As a result, the risk of completion or delay
of these studies is not within our direct control and a program delay may occur due to circumstances
outside our control. A delay in any of these programs may not necessarily have a direct impact on our
daily operations. However, to the extent that a delay results in additional cost to us, a higher than
expected expense may result.

We will need to raise additional money through debt and/or equity offerings in order to continue
to develop our drug candidates. If we are not able to raise sufficient additional money, we will have to
reduce our research and development activities. We will first reduce research and development activities
associated with our preclinical compounds. To the extent necessary, we will then reduce our research and
development activities related to some or all of our clinical drugs.

Liquidity and Capital Resources

Comparison of 2009 and 2008

Cash used in operating activities was $5,146,845 in fiscal 2009 as compared to $4,323,853 in
fiscal 2008. Fiscal 2009 operating cash flows reflect our net loss from operations of $6,387,428, offset by
net non-cash charges of $767,743 and an increase in working capital of $472,840. Non-cash charges
consist of depreciation and amortization of $41,604, stock option compensation of $497,531, amortization
of deferred revenue of $75,000, realized gains on securities of $11,025, amortization of deferred lease
incentives of $10,000, deferred lease expenses of $38,501 and a loss on disposal of intangible assets of
$286,132. The increase in working capital consists of prepaid expenses and other current assets of
$45,830 and an increase in accounts payable and accrued expenses of $427,010. Fiscal 2008 operating
cash flows reflect our loss from continuing operations of $4,912,148, offset by net non-cash charges of
$485,793 and a net increase in cash components of working capital of $102,502. Non-cash charges
consist of depreciation and amortization of $55,743, stock option compensation expense of $484,684,
amortization of deferred revenue of $75,000 and realized losses on securities available for sale of
$20,366. The increase in working capital primarily consists of prepaid expenses and other of $350,440
offset by reduction in accounts payable and accrued expenses of $247,938.

Cash provided by investing activities was $1,341,825 in fiscal 2009, which consisted of
$2,026,060 for restricted cash equivalents, $18,370 for the purchase of equipment, $1,371,824 for the
purchase of securities and $4,758,079 of proceeds from the sales of securities. Cash used in investing
activities was $47,789 in fiscal 2008, which consisted of $27,193 for the purchase of equipment,
$5,848,176 for the purchase of available-for-sale securities and $5,827,580 of proceeds from sales of
securities.

Cash provided by financing activities of $10,733,922 in fiscal 2009 consists of $10,730,320 from
the issuance of common stock and units and $3,602 of proceeds from the exercise of stock options. Cash
provided by financing activities of $931,201 in fiscal 2008 consists of proceeds from the issuance of
common stock for cash.

For the years ended December 31, 2009 and 2008, we experienced net losses of $6,387,428 and
$4,912,148, respectively. Our accumulated deficit as of December 31, 2009 and 2008 was $36,293,907
and $29,906,479, respectively.

Financings

We have financed our operations since inception primarily through equity and convertible debt
financings and interest income from investments of cash and cash equivalents. During fiscal year 2009,
we had a net increase in cash and cash equivalents of $ 6,928,902. The increase resulted primarily from
cash provided by investing activities of $1,341,825 and cash provided by financing activities of
$10,733,922, off set by cash used in operating activities of $5,146,845.

On March 20, 2008, we received approximately $900,001 in proceeds upon closing of the sales of
our securities. Such sales consisted of the following: (1) sale to Jungwoo Family Co., Ltd. of 285,715
shares of our common stock and a warrant to acquire up to 57,143 shares of our common stock for
aggregate cash consideration of $400,000; (2) sale to Super Bio Co. Ltd. of 357,143 shares of our
common stock and a warrant to acquire up to 71,429 shares of our common stock for aggregate cash
consideration of $500,000.

On May 19, 2009 the Company entered into a purchase agreement to issue 2,857,143 shares of
common stock at a price of $1.05 per share to an institutional investor for gross proceeds of $2,710,910
and incurred $289,090 of stock issuance costs. The investor was also issued:

1) Series I warrants to purchase 2,222,222 shares of common stock at a purchase price of $1.05 per

share at any time before September 3, 2009;

2) Series II warrants to purchase 1,866,666 shares of common stock at a purchase price of $1.25 per

share at any time from December 3, 2009 to June 5, 2012; and

3) Series III warrants to purchase 1,555,555 shares of common stock at a purchase price of $1.50 per

share at any time from December 3, 2009 to June 5, 2014.

On September 21, 2009, the Company issued 3,102,837 shares of common stock at a purchase price
of $1.13 per share to Teva for total net proceeds of $3,371,340, which include $128,659 of stock issuance
costs.

On October 19, 2009, the Company entered into a purchase agreement to issue 6,072,383 shares of
common stock at a price of $0.82 per share to five institutional investors for net proceeds of $4,648,070,
which include $351,928 of stock issuance costs. The investors were also issued warrants to purchase
2,125,334 shares of common stock at a purchase price of $1.00 per share, exercisable on or after the date
of delivery until the five-year anniversary. These warrants have been valued at $909,399 and recorded in
additional paid-in-capital. The closing costs included 245,932 warrants valued at $104,722 and were
recorded as a reduction of the total gross proceeds.

For the foreseeable future, we will have to fund all of our operations and capital expenditures
from the net proceeds of equity and debt offerings we may make, cash on hand, licensing fees and grants.
Although we expect to have to pursue additional financing, there can be no assurance that we will be able
to secure financing when needed or obtain such financing on terms satisfactory to us, if at all, or that any
additional funding we do obtain will be sufficient to meet our needs in the long term. If we are not able to
raise sufficient additional money, we will have to reduce our research and development activities. We
will first reduce research and development activities associated with our preclinical compounds. To the

extent necessary, we will then reduce our research and development activities related to some or all of our
clinical drugs.

Contractual Obligations

The Company has contracted with various vendors to provide research and development services.
The terms of these agreements usually require an initiation fee and monthly or periodic payments over the
term of the agreement, ranging from 2 months to 36 months. The costs to be incurred are estimated and
are subject to revision. As of December 31, 2009, the total contract value of these agreements was
approximately $8,433,195 and the Company had made payments totaling $3,323,201 under the terms of
the agreements as of December 31, 2009. All of these agreements may be terminated by either party upon
appropriate notice as stipulated in the respective agreements.

The Company and three of its key executives entered into employment agreements. Each of these
agreements was renewed on August 10, 2009 and expires on August 10, 2012. The agreements result in
annual commitments of $200,000, $350,000 and $250,000.

On April 6, 2009, the Company entered into an agreement with Rodman & Renshaw, LLC
(Rodman) for Rodman to serve as placement agent for the Company. Under this agreement, the
Company agreed to pay a cash fee to Rodman immediately upon the closing of the placement equal to 6%
of the aggregate gross proceeds raised in the placement plus a cash fee payable immediately on each
exercise of the warrants issued to the purchasers in the placement that are solicited by Rodman equal to
6% of the aggregate proceeds received by the Company in connection with such exercise; and such
number of warrants (the Rodman Warrants) issuable to Rodman or its designees at the closing to purchase
shares of common stock equal to 5% of the aggregate number of shares sold in the placement. In
accordance with the agreement, the contract ended on July 31, 2009. The Company paid $180,000 and
issued the placement agent warrants to purchase up to an aggregate of 142,857 shares of our common
stock at an exercise price of $1.3125 per share.

On April 20, 2009, Amarex, LLC filed suit against the Company in the Circuit Court of
Montgomery County, Maryland, seeking damages for an alleged breach of a contract between the
Company and Amarex, LLC entered into on January 6, 2006. Amarex, LLC claims damages of $93,156
plus interest. On May 22, 2009, the Company filed an answer and an affirmative defense to the complaint
denying the claims of damages made by Amarex, LLC. On June 16, 2009, the Company filed a
counterclaim against Amarex, LLC for breach of the same contract in the amount of $354,824 plus
interest. The court ordered the Company and Amarex, LLC to proceed with a non-binding mediation.
The mediation has place but the parties were not able to reach an amicable resolution as at December 31,
2009. The trial is scheduled to commence on June 14, 2010. On October 21, 2009, the Company entered
in to an agreement with Ethridge Quinn McAuliffe Rowan & Hartinger to provide legal services for the
Company.

On May 21, 2009, the Company entered into a 1 year agreement to use lab space commencing on
July 1, 2009. The Company agreed to pay monthly payments of $4,594 from October 1, 2009 to June 30,
2010. The agreement shall terminate on June 30, 2010 and may be renewed for two additional terms of
one year upon 60 days prior to the expiration of the agreement.

On June 22, 2009, the Company entered into a License Agreement with Korea Research Institute
of Chemical Technology (KRICT) to acquire the rights to all intellectual properties related to
Quinoxaline-Piperazine derivatives that were synthesized under a Joint Research Agreement. The initial

license fee was $100,000, all of which was paid as of December 31, 2009. The agreement with KRICT
calls for a one-time milestone payment of $1,000,000 within 30 days after the first achievement of
marketing approval of the first commercial product arising out of or in connection with the use of
KRICT’s intellectual properties.

On June 26, 2009, the Company entered into a securities purchase agreement with Teva.
Contemporaneous with the execution and delivery of this agreement, the parties executed a research and
exclusive license option agreement (RELO) pursuant to which the Company shall use $2,000,000 of the
gross proceeds of the issuance and sale of shares to Teva to fund a research and development program for
the pre-clinical development of RX-3117 and has included this amount in restricted cash equivalents.
The Company will be eligible to receive royalties on net sales of RX-3117 worldwide. During the fourth
quarter of 2009, research and development work began on the RX-3117 research and development
program.

On June 29, 2009, the Company signed a five year lease for 5,466 square feet of office space in
Rockville, Maryland commencing on June 29, 2009. The lease requires annual base rents of $76,524 with
increases over the next five years. Under the leasing agreement, the Company pays its allocable portion of
real estate taxes and common area operating charges. Rent paid under the Company’s former lease
during the year ended December 31, 2009 was $112,973 (2008 - $132,104).

Future rental payments over the next five years and thereafter are as follows:

2010
2011
2012
2013
2014

$108,418
148,593
158,835
162,806
82,408
$661,060

In connection with the lease agreement, the Company issued a letter of credit of $100,000 in
favor of the lessor. The Company has restricted cash equivalents of the same amount for the letter of
credit.

On November 4, 2009, the Company entered into a Synthesis and Supply Agreement with
TheraTarget, Inc. to provide synthesis and supply of Rexahn’s products. The total cost of these services
is $100,000, of which $30,000 was paid as of December 31, 2009.

The Company has a 401(k) plan established for its employees. The Company elected to match
100% of the first 3% of the employee's compensation plus 50% of the employee's deferral that exceeds
3% of the employee's compensation (limited to 5% total employee compensation). Expense related to this
matching contribution aggregated $49,519 and nil for the years ended December 31, 2009 and 2008,
respectively.

Current and Future Financing Needs

We have incurred negative cash flow from operations since we started our business. We have
spent, and expect to continue to spend, substantial amounts in connection with implementing our business
strategy, including our planned product development efforts, our clinical trials, and our research and
development efforts. Based on our current plans and our capital resources, we believe that our cash and
cash equivalents will be sufficient to enable us to meet our minimum planned operating needs through the
end of 2010, which would entail focusing our resources on Phase II clinical trials of Archexin, Serdaxin
and Zoraxel. Through the end of 2010, we expect to spend a minimum of approximately $2.5 million on
clinical development for Phase II clinical trials of Archexin, Serdaxin and Zoraxel (including our
commitments described under "Contractual Commitments" of this Item 6), $4 million on general
corporate expenses, and approximately $108,418 on facilities rent. Additionally, as required by the
exclusive license option agreement executed on June 26, 2009, we plan to spend $2 million on the
preclinical development of RX-3117. We will need to seek additional financing to implement and fund
other drug candidate development, clinical trial and research and development efforts to the maximum
extent of our operating plan, including in-vivo animal and pre-clinical studies, Phase II clinical trials for
new product candidates, as well as other research and development projects. If we are not able to secure
additional financing, we will not be able to implement and fund the research and development.

However, the actual amount of funds we will need to operate is subject to many factors, some of

which are beyond our control. These factors include the following:

(cid:2)

the progress of our product development activities;

the number and scope of our product development programs;

the progress of our pre-clinical and clinical trial activities;

the progress of the development efforts of parties with whom we have entered into
collaboration agreements;

our ability to maintain current collaboration programs and to establish new collaboration
arrangements;

the costs involved in prosecuting and enforcing patent claims and other intellectual property
rights; and

the costs and timing of regulatory approvals.

Impact of Inflation

To date inflationary factors have not had a significant effect on our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this Item.

Item 8. Financial Statements and Supplementary Data.

Our financial statements and financial statement schedule and the Report of Independent
Registered Public Accounting Firm thereon are filed pursuant to this Item 8 and are included in this
Annual Report on Form 10-K beginning on page F-1.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.

None.

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of
the period covered by this report were effective such that the information required to be disclosed by us in
reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within a company have
been detected.

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended
December 31, 2009, there has been no change in our internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:

(cid:2)

Pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and the dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorization of management and the board of
directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to
risk that controls may become inadequate because of changes in conditions or because of declines in the
degree of compliance with the policies or procedures.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2009. In making this assessment, the Company’s management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.

Based on this evaluation, our management, with the participation of the Chief Executive Officer
and Chief Financial Officer, concluded that, as of December 31, 2009, our internal control over financial
reporting was effective.

This annual report does not include an attestation report of the Company's registered public
accounting firm regarding internal controls over financial reporting. Management’s report was not subject
to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC
that permit the Company to provide only management’s report in this annual report.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information to be provided under the caption “Election of Directors,” to be contained in the
Definitive Proxy Statement and required to be disclosed in this Item 10, is hereby incorporated by
reference in this Item 10; and the information to be provided under the caption “Section 16(a) Beneficial
Ownership Reporting Compliance,” to be contained in the Definitive Proxy Statement and required to be
disclosed pursuant to Section 16(a) of the Exchange Act, is also hereby incorporated by reference in this
Item 9.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions.
Rexahn’s Code of Ethics is posted on its website, which is located at www.rexahn.com.

We intend to satisfy any disclosure requirement regarding an amendment to, or waiver from, a
provision of this code of ethics by posting such information on our website, at the address specified
above.

Item 11. Executive Compensation.

The information to be provided under the caption “Executive Compensation and Other Matters”,
to be contained in the Definitive Proxy Statement and required to be disclosed in this Item 11, is hereby
incorporated by reference in this Item 11.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.

The information to be provided under the captions “Equity Compensation Plan Information” and
“Security Ownership of Management and Certain Security Holders”, each to be contained in the
Definitive Proxy Statement and required to be disclosed in this Item 12, is hereby incorporated by
reference in this Item 12.

Item 13. Certain Relationships and Related Transactions; and Director Independence.

Related Transactions

The information to be provided under the caption “Certain Relationships and Related
Transactions,” to be contained in the Definitive Proxy Statement and required to be disclosed in this Item
13, is hereby incorporated by reference in this Item 13.

Item 14. Principal Accounting Fees and Services.

The information to be provided under the caption "Proposal 2 Ratification of the Appointment of
the Independent Registered Public Accounting Firm, Fees," to be contained in the Definitive Proxy
Statement and required to be disclosed in this Item 14, is hereby incorporated by reference in this Item 14.

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as a part of this Annual Report on Form 10-K:
(b)

(1) Financial Statements:

Report of ParenteBeard LLC

Balance Sheets at December 31, 2009 and December 31, 2008

Statement of Operations for the years ended December 31, 2009 and December 31, 2008
and cumulative from March 19, 2001 (Inception) to December 31, 2009

Statement of Stockholders’ Equity and Comprehensive Loss from March 19, 2001
(Inception) to December 31, 2009

Statement of Cash Flows for the years ended December 31, 2009 and December 31, 2008
and cumulative from March 19, 2001 (Inception) to December 31, 2009

Notes to Financial Statements

(2)

Page

F-1

F-2

F-3

F-4

F-6

F-7

All schedules for which provision is made in the applicable accounting regulations of the SEC are
omitted because the required information is either presented in the financial statements or notes
thereto, or is not applicable, required or material.

(3) Exhibits:

The documents listed below are filed with this Annual Report on Form 10-K as exhibits or
incorporated into this Annual Report on Form 10-K by reference as noted:

Exhibit
Number
3.1.

3.2.

4.1.

4.2

4.3

*10.1.1.

*10.1.2.

Exhibit Description

*10.1.3.

*10.2.

*10.3.

10.4.

10.5.

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

Company's Registration Statement on Form S-8 (File No. 333-129294) dated October 28,
2005, is incorporated herein by reference.
Form of Stock Option Grant Agreement for Non-Employee Directors and Consultants, filed as
Exhibit 4.5.2 to the Company's Registration Statement on Form S-8 (File No. 333-129294)
dated October 28, 2005, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and C. H. Ahn, filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and T. H. Jeong, filed as Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Research Collaboration Agreement dated February 6, 2003 by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd., filed as Exhibit 10.5 to the Company’s
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, is incorporated
herein by reference.
Revaax License Agreement, dated February 8, 2005, by and between Rexahn
Pharmaceuticals, Inc. and Revaax Pharmaceuticals LLC, filed as Exhibit 10.6 to the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, is
incorporated herein by reference.
Lease Agreement, dated June 5, 2009, by and between Rexahn Pharmaceuticals, Inc. and The
Realty Associates Fund V, L.P., filed as Exhibit 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by reference.
Securities Purchase Agreement, dated as of November 19, 2007, by and between Rexahn
Pharmaceuticals, Inc. and KT&G Corporation, filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on November 21, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of November 20, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd, filed as Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on November 21, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd, filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Kumho Investment Bank, filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and the several parties thereto, filed as Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.
Warrant, dated December 24, 2007, issued to KT&G Corporation, filed as Exhibit 10.6 to the
Company’s Current Report on Form 8-K filed on December 26, 2007, is incorporated herein
by reference.
Warrant, dated December 24, 2007, issued to Rexgene Biotech Co., Ltd., filed as Exhibit 10.7
to the Company’s Current Report on Form 8-K filed on December 26 ,2007, is incorporated
herein by reference.
Form of Warrant, dated December 24, 2007, issued to the purchasers pursuant to the Jungwoo
Securities Purchase Agreement, the Kumho Securities Purchase Agreement, the Individual
Investor Securities Purchase Agreement and to a consultant, filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed on December 18, 2007, is incorporated herein
by reference.

10.15

10.16

10.17

10.18

*10.19

*10.20

10.21

10.22

10.23

10.24

10.25

10.26

Registration Rights Agreement, dated as of December 24, 2007, by and among Rexahn
Pharmaceuticals, Inc. and the purchasers pursuant to the KT&G Securities Purchase
Agreement, the Rexgene Securities Purchase Agreement, the Jungwoo Securities Purchase
Agreement, the Kumho Securities Purchase Agreement, the Individual Investor Securities
Purchase Agreement and a consulting Services Agreement, filed as Exhibit 10.9 to the
Company Current Report on Form 8-K filed on December 26, 2007, is incorporated herein by
reference.
Securities Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd. (the "Jungwoo Securities Purchase
Agreement”), filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on
March 26, 2008, is incorporated herein by reference.
Securities Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Super Bio Co. Ltd., (the "Super Bio Securities Purchase
Agreement"), filed as Exhibit 10.2 to the Company's current report on Form 8-K filed on
March 26, 2008, is incorporated herein by reference.
Form of Warrant for issuance pursuant to the Jungwoo Securities Purchase Agreement and the
Super Bio Securities Purchase Agreement, filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K filed on March 26, 2008, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Rakesh Soni, filed as Exhibit 10.2 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Consulting Agreement, dated August 12, 2008, by and between Rexahn Pharmaceuticals, Inc.
and Y. Michelle Kang, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on August 27, 2008, is incorporated herein by reference.
Securities Purchase Agreement, dated as of May 19, 2009 by and between Rexhan
Pharmaceuticals, Inc. and the purchaser signatory thereto, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on May 20, 2009, is incorporated herein by
reference.
Form of Warrant for the Company’s Series I, II, and III Common Stock Purchase Warrants,
filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 20, 2009, is
incorporated herein by reference.
Research and Exclusive License Option Agreement, dated as of June 26, 2009, by and
between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical Industries Limited, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 21, 2009, is
incorporated herein by reference.
Securities Purchase Agreement, dated as of June 26, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Teva Pharmaceutical Industries Limited (the “Teva Securities
Purchase Agreement”), filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on September 21, 2009, and Amendment No. 1 to the Teva Securities Purchase
Agreement, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
September 21, 2009, are incorporated herein by reference.
Securities Purchase Agreement, dated as of October 19, 2009, by and between Rexahn
Pharmaceuticals, Inc. and the purchasers signatory thereto, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on October 20, 2009, is incorporated herein by
reference.
Form of Warrant for the Company’s Common Stock Purchase Warrants, filed as Exhibit 4.1
to the Company’s Current Report on Form 8-K filed on October 20, 2009, is incorporated
herein by reference.
Code of Ethics and Business Conduct, filed as Exhibit 14 to the Company’s Annual Report on
10-K for the fiscal year ended December 31, 2008, filed on March 16, 2009, is incorporated
herein by reference.

23
24.
31.1.

31.2.

32.1

32.2

Letter of Lazar Levine & Felix LLP dated February 27, 2009, filed as Exhibit 16.1 to the
Company’s Amended Current Report on Form 8-K filed on March 2, 2009, is incorporated
herein by reference.
Consent of ParenteBeard LLC, independent registered public accounting firm.
Power of Attorney.
Certification of Chief Executive Officer of Periodic Report Pursuant to Pursuant to Rule 13a-
15(e) or Rule 15d-15(e).
Certification of Chief Financial Officer of Periodic Report Pursuant to Pursuant to Rule 13a-
15(e) or Rule 15d-15(e).
Certification of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
Certification of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.

_______________________
* Management contract or compensation plan or arrangement.

SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
on this 31st day of March, 2010.

REXAHN PHARMACEUTICALS, INC.

By: /s/ Chang H. Ahn
Chang H. Ahn
Chairman and Chief Executive Officer

In accordance with the requirement of the Securities Exchange Act of 1934, this report has been
signed on the 31st day of March, 2010 by the following persons on behalf of the issuer and in the
capacities indicated:

Name

/s/ Chang H. Ahn*
Chang H. Ahn
/s/ Tae Heum Jeong*
Tae Heum Jeong
/s/ Freddie Ann Hoffman*
Freddie Ann Hoffman
/s/ David McIntosh*
David McIntosh
/s/ Charles Beever*
Charles Beever
/s/ Kwang Soo Cheong*
Kwang Soo Cheong
/s/ Y. Michele Kang*
Y. Michele Kang

Title
Chairman and Chief Executive Officer

Chief Financial Officer, Secretary and
Director
Director

Director

* By: /s/ Tae Heum Jeong, Attorney-in Fact

Tae Heum Jeong, Attorney-in-Fact**

** By authority of the power of attorney filed as Exhibit 24 hereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Rexahn Pharmaceuticals, Inc.
Rockville, Maryland

We have audited the accompanying balance sheets of Rexahn Pharmaceuticals, Inc. (the “Company”) (a
development stage company) as of December 31, 2009 and 2008, and the related statements of operations,
stockholders’ equity and comprehensive loss, and cash flows for each of the two years in the period ended
December 31, 2009 and the amounts in the cumulative from March 19, 2001 (inception) to December 31,
2009 column in the statements of operations and cash flows. The Company’s management is responsible for
these financial statements. Our responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Rexahn Pharmaceuticals, Inc. as of December 31, 2009 and 2008, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2009 and the cumulative
period from March 19, 2001 (inception) to December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.

PARENTEBEARD LLC

/s/ PARENTEBEARD LLC

New York, New York
March 31, 2010

F-1

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets

ASSETS

Current Assets:

Cash and cash equivalents
Marketable securities
Prepaid expenses and other current assets (note 3)

Total Current Assets

Restricted Cash Equivalents (note 13)

Equipment, Net (note 4)

Intangible Assets, Net

Total Assets

Current Liabilities:

December 31,

2009

December 31,
2008

$ 7,298,032
175,000
320,935

7,793,967

2,026,060

168,978

369,130
2,999,750
366,765

3,735,645

92,212

286,132

$ 9,989,005

$ 4,113,989

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses (note 5)

$ 785,904

$ 358,894

Deferred Revenue (note 6)

975,000

1,050,000

Other Liabilities (note 7)

Total Liabilities

Commitment and Contingencies (note 13)

Stockholders' Equity (note 9):

128,501

1,889,405

1,408,894

Preferred stock, par value $0.0001, 100,000,000 authorized
shares, none issued and outstanding
Common stock, par value $0.0001, 500,000,000 authorized
shares, 71,938,701 (2008 – 56,039,854) issued and
71,924,496 (2008 – 56,025,649) outstanding
Additional paid-in capital
Accumulated deficit during the development stage
Treasury stock, 14,205 shares, at cost
Accumulated other comprehensive (loss)

-
7,194

-
5,604

44,414,723
(36,293,907)
(28,410)
-

33,184,860
(29,906,479)
(28,410)
(550,480)

Total Stockholders' Equity

8,099,600

2,705,095

Total Liabilities and Stockholders' Equity

9,989,005

$ 4,113,989

(See accompanying notes to financial statements.)

F-2

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Statement of Operations

Revenue:

Research

Expenses:

General and administrative
Research and development
Patent fees
Depreciation and amortization

Total Expenses

Loss from Operations

Other (Income) Expense

Realized (gain) loss on securities available-

for-sale
Interest income
Interest expense
Beneficial conversion feature

Years Ended
December 31,

2009

2008

Cumulative from
March 19, 2001
(Inception) to
December 31,
2009

$ 75,000

$ 525,000

2,944,103
3,251,971
303,220
41,604

2,525,705
2,429,507
216,360
55,743

17,808,542
16,483,815
1,225,053
544,808

6,540,898

5,227,315

36,062,218

(6,465,898)

(5,152,315)

(35,537,218)

(11,025)

(67,445)
-
-

20,366

9,341

(260,533)
-
-

(1,178,799)
301,147
1,625,000

(78,470)

(240,167)

756,689

Loss Before Provision for Income Taxes
Provision for Income Taxes

(6,387,428)
-

(4,912,148)
-

(36,293,907)
-

Net Loss

$(6,387,428)

$(4,912,148)

$ (36,293,907)

Net Loss per share , basic and diluted

$ (0.10)

$ (0.09)

Weighted average number of shares,

basic and diluted

61,411,442

55,856,991

(See accompanying notes to financial statements.)

F-3

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Stockholders' Equity and Comprehensive Loss
Period from March 19, 2001 (Inception) to December 31, 2009

Common Stock

NNuummbbeerr ooff
sshhaarreess

AAmmoouunntt

Additional
PPaaiidd iinn
Capital

Accumulated
Deficit
During the
DDeevveellooppmmeenntt
SSttaaggee

Treasury Stock

NNuummbbeerr ooff
sshhaarreess

AAmmoouunntt

Accumulated
OOtthheerr
CCoommpprreehheennssiivvee
LLoossss

TToottaall
SSttoocckkhhoollddeerrss''
EEqquuiittyy
(Deficit)

-
-
(625,109)

-
-
-

--
7,126,666
-

7,126,666
-

7,126,666
500,000

-
-

-
71,266
-

71,266
-

71,266
5,000

-
-

7,626,666
1,500

76,266
15

-
-

-
4,448,702
-

4,448,702
-

4,448,702
1,995,000

538,074
-

6,981,776
1,785

230,770
-

(625,109)
(1,181,157)

(1,806,266)
-

-
(2,775,075)

(4,581,341)
-

-
(3,273,442)

7,628,166
30,512,664

76,281
(72,467)

7,214,331
72,467

(7,854,783)
-

3,397,802

4,175,000

340

417

(340)

8,349,565

650,000

1,299,935

40,000

7,000

-
-

9,596

21,876

1,625,000

61,705

14,802

3,850,000

385

3,849,615

436,748
-

-
(6,349,540)

46,410,632

4,641

19,029,178

(14,204,323)

OOppeenniinngg bbaallaannccee,, MMaarrcchh

1199,, 22000011

Common shares issued`
Net loss
Balances at, December

31, 2001

Net loss
Balances at, December

31, 2002

Common shares issued
Stock option

compensation

Net loss
Balances at, December

31, 2003

Common shares issued
Stock option

compensation

Net loss
Balances at, December

31, 2004

Stock split (5 for 1)
Common shares issued
in connection with
merger

Common stock issued

for cash

Common shares issued
on conversion of
convertible debt
Exercise of stock

options

Common shares issued

in exchange for
services

Beneficial conversion

feature
Stock option

compensation

Net loss
Balances at, December

31, 2005

Exercise of stock

options

Common shares issued
on conversion of
convertible debt
Purchase of treasury

stock

Stock option

compensation

Net loss
Balances at, December

31, 2006

-
-

-
-
-

-
-

-
-
-

-
-

4,519,968
(625,109

3,894,859
(1,181,157

2,713,702
2,000,000

538,074
(2,775,075

2,476,701
1,800

230,770
(3,273,442

(564,171

8,349,982

1,300,000

9,600

21,877

1,625,000

436,748
(6,349,540

4,829,496

14,808

3,850,000

(28,410

1,033,956
(6,486,003

-
-

14,205

(28,410)

1,033,956
-

-
(6,486,003)

-
-

50,322,337

5,032

$ 23,927,551

$ (20,690,326)

14,205

$ (28,410)

3,213,847

(See accompanying notes to financial statements.)

F-4

-
-
-

6,800,024

60,000
1,121,646
(139,674)

(4,304,005)

6,751,838

900,001

31,200

484,684

(4,912,148)

(550,480)

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Stockholders' Equity and Comprehensive Loss (Continued)
Period from March 19, 2001 (Inception) to December 31, 2009

Common Stock

Additional

During the

Treasury Stock

Accumulated

Deficit

NNuummbbeerr ooff

sshhaarreess

AAmmoouunntt

PPaaiidd iinn

CCaappiittaall

DDeevveellooppmmeenntt

NNuummbbeerr ooff

Stage

AAmmoouunntt

LLoossss

Accumulated
OOtthheerr

CCoommpprreehheennssiivvee

Total
SSttoocckkhhoollddeerrss’’

EEqquuiittyy

((DDeeffiicciitt)

Balances at, December 31,

2006

Common stock issued for

cash

Exercise of stock options
Stock option compensation
Share issuance costs

Net loss

Balances at, December 31,

50,322,337

$ 5,032

$ 23,927,551

$ (20,690,326)

14,205

(28,410)

3,213,847

4,857,159

127,500
-
-

486

12
-
-

6,799,538

59,988
1,121,646
(139,674)

-
-
-

(4,304,005)

-
-
-

2007

55,306,996

5,530

31,769,049

(24,994,331)

14,205

(28,410)

Common stock issued

Exercise of stock options

642,858

90,000

Stock option compensation

Share issuance costs

Net (loss)
Unrealized loss on

securities available for
sale

Balances at, December 31,

899,936

31,191

484,684

(4,912,148)

2008

56,039,854

5,604

33,184,860

(29,906,479)

14,205

(28,410)

(550,480)

2,705,095

Issuance of common stock
and units, net of issuance
costs

15,883,847

1,588

10,728,732

Stock options exercised

15,000

3,600

497,531

(6,387,428)

10,730,320

3,602

497,531

(6,387,428)

550,480

Stock option compensation

Net (loss)
Unrealized gain on

securities available for
sale

BBaallaanncceess aatt,, DDeecceemmbbeerr 3311,,
22000099

71,938,701

$ 7,194

$ 44,414,723

$ (36,293,907)

14,205

$ (28,410)

$ 8,099,600

(See accompanying notes to financial statements.)

F-5

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Statement of Cash Flows

Cash Flows from Operating Activities:

Net loss

Adjustments to reconcile net (loss) to net cash

used in operating activities:
Beneficial conversion feature
Compensatory stock
Depreciation and amortization
Stock option compensation
Amortization of deferred revenue
Realized (gains) losses on marketable
securities

Amortization of deferred lease incentive
Deferred lease expenses
Loss on impairment of intangible assets

Changes in assets and liabilities:

Prepaid expenses and other current assets
Accounts payable and accrued expenses

Net Cash Used in Operating Activities

Cash Flows from Investing Activities:`

Restricted cash equivalents
Purchase of equipment
Purchase of marketable securities
Proceeds from sales of marketable securities
Payment of licensing fees

Net Cash Provided (Used in) by Investing
Activities

Cash Flows from Financing Activities:

Issuance of common stock and units, net of

issuance costs

Proceeds from exercise of stock options
Proceeds from long-term debt
Proceeds from research contribution
Principal payments on long-term debt

Net Cash Provided by Financing Activities

Net Increase (Decrease) in Cash and Cash

Equivalents

Cash and Cash Equivalents - beginning of

period

Years Ended
December 31,

2009

2008

Cumulative
From March 19,
2001
(Inception) to
December 31,
2009

$ (6,387,428)

$ (4,912,148)

(36,293,907)

-
-
41,604
497,531
(75,000)
(11,025)

(10,000)
38,501
286,132

45,830
427,010

-
-
55,743
484,684
(75,000)
20,366

-
-
-

350,440
(247,938)

1,625,000
21,877
544,808
4,354,365
(525,000)
9,341

(10,000)
38,501
286,132

(320,935)
785,904

(5,146,845)

(4,323,853)

(29,483,914)

(2,026,060)
(18,370)
(1,371,824)
4,758,079
-

-
(27,193)
(5,848,176)
5,827,580
-

(2,026,060)
(543,702)
(10,770,000)
10,585,659
(356,216)

1,341,825

(47,789)

(3,110,319)

10,730,320

931,201

33,267,073

3,602
-
-
-

-
-
-

3,602
5,150,000
1,500,000
(28,410)

10,733,922

931,201

39,892,265

6,928,902

(3,440,441)

7,298,032

369,130

3,809,571

Cash and Cash Equivalents - end of period

7,298,032

369,130

7,298,032

Supplemental Cash Flow Information

Interest paid

$ -

301,147

Non-cash financing and investing activities:

Warrants issued

$ 2,270,908

$ 220,004

3,877,752

Leasehold improvement incentive

$ 100,000

(See accompanying notes to financial statements.)

F-6

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

1. Operations and Organization

Operations and Organization

Rexahn Pharmaceuticals, Inc. (the "Company" or "Rexahn Pharmaceuticals"), a Delaware corporation, is a
development stage biopharmaceutical company dedicated
the discovery, development and
commercialization of innovative treatments for cancer, central nervous system (“CNS”) disorders, sexual
dysfunction and other medical needs. The Company has not yet generated commercial sales revenue and has
been able to fund it operating losses to date through the sale of its common stock, issuance of long-term
debt, and proceeds from reimbursed research and development costs. The Company believes that its existing
cash and cash equivalents and marketable securities will be sufficient to cover its cash flow requirements for
2010. Management has the capability of managing the Company’s operations within existing cash and
marketable securities available by reducing its research and development activities. This may result in
slowing down clinical studies, but will conserve the Company’s cash to allow it to operate for the next
twelve months.

Reverse Merger Acquisition

Pursuant to an Agreement and Plan of Merger by and among Rexahn, Corp ("Rexahn"), Corporate Road
Show.Com Inc. ("CRS"), a New York corporation and predecessor corporation of the Company, CRS
Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CRS ("Merger Sub"), CRS
Delaware, Inc., a Delaware corporation and wholly owned subsidiary of CRS, immediately after giving
effect to a 1-for-100 reverse stock split and the reincorporation of CRS as a Delaware corporation under the
name Rexahn Pharmaceuticals, Inc. ("Rexahn Pharmaceuticals"), on May 13, 2005, Merger Sub merged
with and into Rexahn, with Rexahn surviving as a wholly owned subsidiary of Rexahn Pharmaceuticals (the
"Acquisition Merger"). In the Acquisition Merger, (i) each share of the issued and outstanding common
stock of Rexahn (other than dissenting shares) was converted into the right to receive five shares of Rexahn
Pharmaceuticals common stock; and (ii) each issued, outstanding and unexercised option to purchase a share
of Rexahn common stock was converted into an option to purchase five shares of Rexahn Pharmaceuticals
common stock.

Shares of Rexahn Pharmaceuticals common stock issued in the Acquisition Merger were exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
Regulation D under the Securities Act and/or Regulation S under the Securities Act. These shares of Rexahn
Pharmaceuticals common stock are deemed "restricted securities" and bear an appropriate restrictive legend
indicating that the resale of such shares may be made only pursuant to registration under the Securities Act
or pursuant to an available exemption from such registration.

For accounting purposes, the Acquisition Merger was accounted for as a reverse acquisition of CRS (legal
acquirer) by Rexahn (accounting acquirer). As a result, following the Acquisition Merger, the historical
financial statements of Rexahn became the historical financial statements of the Company.

Merger of Subsidiary

On September 29, 2005, the Company's wholly owned subsidiary, Rexahn, was merged with and into the
Company and Rexahn's separate existence was terminated.

F-7

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term investments purchased with remaining
maturities of three months or less at acquisition.

b) Marketable Securities

Marketable securities are considered “available-for-sale” in accordance with Financial Statement
Accounting Board Accounting Standard Codification 320 (“ASC 320”), “Debt and Equity Securities”,
and thus are reported at fair value in our accompanying Balance Sheets, with unrealized gains and
(losses) excluded from earnings and reported as a separate component of stockholders’ equity.
Realized gains and (losses) are accounted on the basis of specific identification and are included in
other income (expense) in our income statements. We classify such investments as current on our
balance sheets as the investments are readily marketable and available for use in our current operations.
Accumulated other comprehensive loss for the years ended December 31, 2009 and 2008 was $0 and
$550,480, respectively.

Equipment

Equipment is stated at cost less accumulated depreciation. Depreciation, based on the lesser of the term
of the lease or the estimated useful life of the assets, is provided as follows:

Furniture and fixtures
Office equipment
Lab equipment
Computer equipment
Leasehold improvements

Life Depreciation Method

7 years
5 years
5-7 years
5 years
3-5 years

double declining balance
double declining balance
double declining balance
straight line
straight line

d) Research and Development

Costs incurred in obtaining the license rights to technology in the research and development stage, that
have no alternative future uses and are for unapproved product compounds are expensed as incurred.

F-8

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

2. Summary of Significant Accounting Policies (cont’d)

e) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
These estimates are based on management's best knowledge of current events and actions the Company
may undertake in the future. Actual results may ultimately differ from those estimates. These
estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings
in the period in which they become available.

Fair Value of Financial Instruments

The carrying amounts reported in the accompanying financial statements for cash and cash equivalents,
prepaid expenses and other current assets and accounts payable and accrued expenses approximate fair
value because of the short-term maturity of these financial instruments.

Income Taxes

The Company accounts for income taxes in accordance with Statement ASC 740, "Income Taxes".
Deferred tax assets and liabilities are recorded for differences between the financial statement and tax
basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates. ASC 740 requires that a valuation allowance be established when it is more
likely than not that all portions of a deferred tax asset will not be realized. A review of all positive and
negative evidence needs to be considered, including a company's current and past performance, the
market environment in which the company operates, length of carryback and carryforward periods and
existing contracts that will result in future profits. Income tax expense is recorded for the amount of
income tax payable or refundable for the period, increased or decreased by the change in deferred tax
assets and liabilities during the period.

As a result of the Company's significant cumulative losses, we determined that it was appropriate to
establish a valuation allowance for the full amount of our deferred tax assets.

The calculation of our tax liabilities involves the inherent uncertainty associated with the application of
complex tax laws. We are subject to examination by various taxing authorities. We believe that as a
result of our losses sustained to date, any examination would result in a reduction of our net operating
losses rather than a tax liability. As such, we have not provided for additional taxes estimated under
ASC 740.

h) Loss Per Share

The Company accounts for loss per share pursuant to ASC 260, "Earnings per Share", which requires
disclosure on the financial statements of "basic" and "diluted" loss per share. Basic loss per share is
computed by dividing net loss by the weighted average number of common shares outstanding for the
year. Diluted loss per share is computed by dividing net loss by the weighted average number of
common shares outstanding plus potentially dilutive securities outstanding for each year. Potentially
dilutive securities include stock options and warrants.

F-9

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

Diluted loss per share for the years ended December 31, 2009 and 2008 is the same as basic loss per
share due to the fact that the Company incurred losses for all periods presented and the inclusion of
common share equivalents would be antidilutive. The following securities, presented on a common
share equivalent basis, have been excluded from the per share computations:

Stock Options
Warrants

Stock-Based Compensation

For the years ended

December 31, December 31

2009

2008

7,715,795
8,575,243

7,790,798
1,207,151

In accordance with ASC 718 “Stock Compensation” compensation costs related to share-based
payment transactions, including employee stock options, are to be recognized in the financial
statements. In addition, the Company adheres to the guidance set forth within Securities and Exchange
Commission ("SEC") Staff Accounting Bulletin No. 107 ("SAB 107"), which provides the Staff's
views regarding the interaction between ASC 718 and certain SEC rules and regulations, and provides
interpretations with respect to the valuation of share-based payments for public companies.

Impairment of Long-Lived Assets

In accordance with ASC 360, "Property, Plant and Equipment", long-lived assets to be held and used
are analyzed for impairment whenever events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether
events and circumstances have occurred that indicate possible impairment. If there are indications of
impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping
over the remaining life in measuring whether the assets are recoverable. In the event such cash flows
are not expected to be sufficient to recover the recorded asset values, the assets are written down to
their estimated fair value. Management determined that an impairment of intangible assets occurred in
2009 and wrote-off the assets remaining carrying value of $286,132.

F-10

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

2. Summary of Significant Accounting Policies (cont’d)

k) Concentration of Credit Risk

SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk
and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant
off-balance sheet risk and credit risk concentration. The Company does not have significant
off-balance sheet risk or credit concentration. The Company maintains cash and short-term
investments with major financial institutions. From time to time the Company has funds on deposit
with commercial banks that exceed federally insured limits. The balances are insured by the Federal
Deposit Insurance Corporation up to $250,000. At December 31, 2009, the Company uninsured cash
balances of $8,788,659. Management does not consider this to be a significant credit risk as these
banks and financial institutions are well-known.

l) Recent Accounting Pronouncements Affecting the Company

In May 2009, the FASB issued guidance that is intended to establish general standards of accounting
for and disclosure of events that occur after the balance sheet date but before the financial statements
are issued or are available to be issued. This guidance is contained in ASC Topic 855 "Subsequent
Events." It requires the disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date. This guidance is effective for interim and annual periods ending after June
15, 2009. The Company adopted the provisions of this guidance as of June 30, 2009.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value
Measurements” (“ASU 2010-6”). The standard amends ASC Topic 820, “Fair Value Measurements
and Disclosures” to require additional disclosures related to transfers between levels in the hierarchy
of fair value measurements. ASU 2010-6 is effective for interim and annual fiscal years beginning
after December 15, 2009. The standard does not change how fair values are measured, accordingly the
standard will not have a financial impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of
ASUs to date that amend the original text of ASC. Except for the ASUs listed above, those issued to
date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to
the Company or (iv) are not expected to have a significant impact on the Company.

F-11

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

3. Prepaid Expenses and Other Current Assets

Deposits on contracts
Other assets

4. Equipment, Net

Furniture and fixtures
Office equipment
Lab and computer equipment
Leasehold improvements

Less Accumulated depreciation

December 31,
2009

December 31,
2008

245,476
75,459

294,337
72,428

320,935

366,765

December 31,

2009

December 31,
2008

$ 32,169

$
72,385
428,816
110,713

31,713
70,276
421,724
2,000

644,083
(475,105)

525,713
(433,501)

Net carrying amount

168,978

92,212

Depreciation expense was $41,604 and $37,932 for the years ended December 31, 2009 and 2008,
respectively.

F-12

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

5. Accounts Payable and Accrued Expenses

Trade payables
Accrued expenses
Payroll liabilities

6. Deferred Revenue

December 31,
2009

December 31,
2008

132,212
512,659
141,033

136,906
98,486
123,502

785,904

358,894

In 2003, the Company entered into a collaborative research agreement with Rexgene Biotech Co., Ltd.
("Rexgene"), a shareholder. Rexgene is engaged in the development of pharmaceutical products in Asia and
has agreed to assist the Company with the research, development and clinical trials necessary for registration
of the Company's drug candidate, RX-0201, in Asia. This agreement provides Rexgene with exclusive
rights to license, sublicense, make, have made, use, sell and import RX-0201 in Asia. A one-time
contribution to the joint development and research of RX-0201 of $1,500,000 was paid to the Company in
2003 in accordance with the agreement. The amount of revenue from this contribution is being recognized
as income over the term of the agreement which terminates at the later of 20 years or the term of the patent
on the licensed product.

The Company is using 20 years as its basis for recognition and accordingly $75,000 was included in
revenues for the years ended December 31, 2009 and 2008. The remaining $975,000 at December 31, 2009
(2008 - $1,050,000) is reflected as deferred revenue on the balance sheet. The contribution is being used in
the cooperative funding of the costs of development of RX-0201. Royalties of 3% of net sales of licensed
products will become payable to the Company on a quarterly basis once commercial sales of RX-0201
begin. The product is still under development and commercial sales are not expected to begin until at least
2012.

F-13

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

7. Other Liabilities

Deferred Lease Incentive

On June 29, 2009, the Company entered into a five year office lease agreement as discussed in note 13. The
lessor agreed to grant a leasehold improvement allowance of $100,000 to the Company to be used for
construction cost of the improvements, architectural and engineering fees, government agency plan check,
permit and other fees, sales and use taxes, testing and inspection costs, construction fees and telephone and
data cabling and wiring in the premises. As at December 31, 2009, the full amount of leasehold
improvement allowance has been used up by the Company. The Company accounts for the benefit of the
leasehold improvement allowance as a reduction of rental expense over the term of the lease which is 5
years.

The following table sets forth the deferred lease incentive:

Deferred lease incentive
Less accumulated amortization

Balance

Deferred Office Lease Expense

December 31,
2009

$ 100,000
(10,000)

$ 90,000

The office lease agreement, discussed above, requires an initial annual base rent of $76,524 with annual
increases over the next five years. The Company recognizes rental expense on a straight-line basis over the
term of the lease, which resulted in a deferred rent liability of $31,670 as of December 31, 2009.

Deferred Lab Lease Expense

On May 21, 2009, the Company entered into a 1 year agreement to use lab space commencing on July 1,
2009. The lessor granted free rent to the Company for the period from July 1, 2009 to September 30, 2009.
The Company recognizes rental expense on a straight-line basis over the term of the lease, which results in a
deferred rent liability of $6,831 as of December 31, 2009.

8. Net Loss per Common Share

We compute basic loss per share by dividing net loss by the weighted average number of common shares
outstanding and excluding any potential dilution. Net loss per common share assuming dilution was
computed by reflecting potential dilution from the exercise of stock options and warrants. As of December
31, 2009 and 2008, there were stock options and warrants to acquire 16,291,035 and 8,967,943 shares of our
common stock, respectively. These shares were excluded from the computations of diluted loss per share
because their effect would be anti-dilutive.

F-14

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

9. Common Stock

The following transactions occurred from March 19, 2001 (inception) to December 31, 2009:

a) On May 10, 2001 the Company issued 3,600,000 shares of common stock to the Company's founders

for $1.

b) On August 10, 2001 the Company issued:

1,208,332 shares of common stock to the directors of the Company for cash of $1,450,000.

ii)

958,334 shares of common stock to Rexgene for cash of $550,000.

iii) 360,000 shares of common stock in a private placement to individual investors for cash of

$1,080,000.

These share purchases were negotiated by the parties at various dates prior to the August 10, 2001
share issuance date.

c) On October 10, 2001 the Company issued 400,000 shares of common stock to Chong Kun Dang
Pharmaceutical Corp. ("CKD") for cash of $479,991 and 400,000 shares of common stock to an
individual investor for cash of $479,991.

d) On October 10, 2001 the Company issued 200,000 shares of common stock to CKD for cash of

$479,985.

Since inception, the Company's founders have transferred 800,000 shares of the common stock
described in a) to officers and directors of the Company.

In July 2003, the shareholders described in b)(iii) and e) transferred an aggregate of 1,268,332 shares of
common stock to a voting trust. The trust allows for the unified voting of the stock by the trustees.
The appointed trustees are senior management of the Company who, together with their existing shares,
control a majority of the voting power of the Company.

g) On August 20, 2003 the Company issued 500,000 shares of common stock to KT&G Corporation for

cash of $2,000,000.

h) On October 29, 2004, an option holder exercised options to purchase shares of the Company’s common

stock for cash of $1,800 and the Company issued an aggregate of 1,500 shares.

F-15

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

9. Common Stock (cont’d)

Pursuant to the agreement and plan of merger which occurred on May 13, 2005, (i) each share of the
issued and outstanding common stock of Rexahn, Corp (“Rexahn”) (other than dissenting shares) was
converted into the right to receive five shares of Rexahn Pharmaceuticals common stock; (ii) each
issued, outstanding and unexercised option to purchase a share of Rexahn common stock was
converted into an option to purchase five shares of Rexahn Pharmaceuticals common stock and (iii) the
par value of Rexahn's common stock was adjusted to reflect the par value of Corporate Road Show
Com Inc. (“CRS”) common stock. In the acquisition merger, 289,780,000 CRS pre-reverse stock split
shares were converted into 2,897,802 post-reverse stock split Rexahn Pharmaceuticals shares, and an
additional 500,000 post-reverse stock split Rexahn Pharmaceuticals shares were issued to a former
executive of CRS. All shares and earnings per share information have been retroactively restated in
these financial statements.

j) On August 8, 2005, the Company issued, in a transaction exempt from registration under the Securities

Act, 4,175,000 shares of common stock at a purchase price of $2.00 per share.

k) On October 3, 2005, the Company issued 7,000 shares of common stock for $21,877 and $7,500 cash

in exchange for services.

l) On December 2, 2005, the holders of a convertible note, representing $1,300,000 aggregate principal
amount, exercised their option to convert the entire principal amount of the note into the Company's
common stock. Based on a $2.00 per share conversion price, the holders received an aggregate of
650,000 shares.

m) On December 27, 2005, option holders exercised options to purchase shares of the Company's common

stock for cash of $9,600 and the Company issued an aggregate of 40,000 shares.

n) On February 22, 2006, an option holder exercised options to purchase shares of the Company's

common stock for cash of $1,200 and the Company issued an aggregate of 5,000 shares.

o) On April 12, 2006, an option holder exercised options to purchase shares of the Company’s common
stock for cash of $3,409 and the Company issued an aggregate of 14,205 shares. On the same date, the
Company agreed to repurchase common stock from the option holder based on the then market price
for treasury in exchange for the aggregate purchase price of $28,410 in cash.

p) On May 13, 2006, holders of the $3,850,000 convertible notes issued on February 28, 2005, exercised
their rights to convert the entire principal amount of the notes into shares of the Company’s common
stock. Based on a $1.00 per share conversion price, the Company issued 3,850,000 shares of common
stock in connection with the conversion.

q) On October 9, 2006, an option holder exercised options to purchase shares of the Company’s common

stock for cash of $2,400 and the Company issued an aggregate of 10,000 shares.

r) On November 19, 2006, an option holder exercised options to purchase shares of the Company's

common stock for cash of $1,800 and the Company issued an aggregate of 7,500 shares.

F-16

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

9. Common Stock (cont’d)

s) On December 19, 2006, an option holder exercised options to purchase shares of the Company's

common stock for cash of $6,000 and the Company issued an aggregate of 25,000 shares.

t) On April 18, 2007, an option holder exercised options to purchase shares of the Company's common

stock for cash of $14,400 and the Company issued an aggregate of 18,000 shares.

u) On July 23, 2007, an option holder exercised options to purchase shares of the Company's common

stock for cash of $12,000 and the Company issued an aggregate of 15,000 shares.

v) On September 27, 2007, an option holder exercised options to purchase shares of the Company's

common stock for cash of $15,600 and the Company issued an aggregate of 19,500 shares.

w) On December 18, 2007, the Company issued 4,857,159 units at a price $1.40 per share for total gross
proceeds of $6,800,023. Investors also were issued one warrant for every five shares purchased. One
warrant will entitle the holder to purchase an additional share of common stock at a purchase price of
$1.80 at any time over a period of three years from the date of the closing of the private placement
valued at $1,103,164 on closing and were charged to additional paid in capital. Private placement
closing costs of $139,674, including 107,144 warrants issued, valued at $91,119, were recorded as a
reduction of the issuance proceeds. The anti-dilutive protection provision is indexed to the Company's
own stock and has other equity characteristics. The provision is structured in a way that is designed to
protect a holder's position from being diluted and contains a price protection based on a mathematical
calculation.

x) On December 27, 2007, an option holder exercised options to purchase shares of the Company's

common stock for cash of $18,000 and the Company issued an aggregate of 75,000 shares.

y) On March 20, 2008, the Company issued 642,858 units consisting of one share of the Company’s
common stock and one warrant for every five common shares purchased in a private placement at a
price of $1.40 per unit for total gross proceeds of $900,001. One warrant will entitle the holder to
purchase an additional share of common stock at a price of $1.80 at any time over a period of three
years from the date of the private placement. The warrants were valued at $220,005 and were charged
to additional paid-in-capital. The anti-dilutive protection provision is indexed to the Company's own
stock and has other equity characteristics. The provision is structured in a way that is designed to
protect a holder's position from being diluted and contains a price protection based on a mathematical
calculation.

z) On May 30, 2008, an option holder exercised options to purchase shares of the Company's common

stock for cash of $7,200 and the Company issued an aggregate of 30,000 shares.

aa) On June 2, 2008, an option holder exercised options to purchase shares of the Company's common

stock for cash of $12,000 and the Company issued an aggregate of 50,000 shares.

ab) On June 30, 2008, an option holder exercised options to purchase shares of the Company's common

stock for cash of $12,000 and the Company issued an aggregate of 10,000 shares.

F-17

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

9. Common Stock (cont’d)

ac) On May 19, 2009 the Company entered into a purchase agreement to issue 2,857,143 shares of
common stock at a price of $1.05 per share to an institutional investor for total gross proceeds of
$2,710,910 and incurred $289,090 of stock issuance costs. The investor was also issued:

1) Series I warrants to purchase 2,222,222 shares of common stock at a purchase price of $1.05

per share at any time before September 3, 2009;

2) Series II warrants to purchase 1,866,666 shares of common stock at a purchase price of $1.25

per share at any time from December 3, 2009 to June 5, 2012; and

3) Series III warrants to purchase 1,555,555 shares of common stock at a purchase price of

$1.50 per share at any time from December 3, 2009 to June 5, 2014.

These warrants have been valued at $1,142,925 and recorded in additional paid-in-capital. The closing
costs included 142,857 warrants valued at $35,398 and were recorded as a reduction of the gross
proceeds. Series I warrants to purchase 2,222,222 shares of common stock, valued at $213,013, at a
purchase price of $1.05 per share have been expired. The anti-dilutive protection provision is indexed
to the Company’s own stock and has other equity characteristics. The provision is structured in a way
that is designed to protect a holder's position from being diluted based on a mathematical calculation.

ad) On June 9, 2009, the Company issued 1,833,341 shares of common stock and 862,246 warrants to
purchase common stock at a purchase price of $1.05 per share to existing stockholders pursuant to the
anti-dilution protection provisions of the private placements transacted on December 24, 2007 and
March 20, 2008.

ae) On September 4, 2009, an option holder exercised options to purchase shares of the Company's

common stock for cash of $3,600 and the Company issued an aggregate of 15,000 shares.

af) On September 21, 2009, the Company issued 3,102,837 shares of common stock at a purchase price of
$1.13 per share to an institutional investor for net proceeds of $3,371,340, which includes $128,659 of
stock issuance costs.

ag) On October 19, 2009, the Company entered into a purchase agreement to issue 6,072,383 shares of
common stock at a price of $0.82 per share to five institutional investors for net proceeds of
$4,648,070, which includes $351,928 of stock issuance costs. The investors were also issued warrants
to purchase 2,125,334 shares of common stock at a purchase price of $1.00 per share, exercisable on or
after the date of delivery until the five-year anniversary. These warrants have been valued at $909,399
and recorded in additional paid-in-capital. The closing costs included 245,932 warrants valued at
$104,722 and were recorded as a reduction of the total gross proceeds. The anti-dilutive protection
provision is indexed to the Company’s own stock and has other equity characteristics. The provision is
structured in a way that is designed to protect a holder's position from being diluted based on a
mathematical calculation.

ah) On October 19, 2009, the Company issued 2,018,143 shares of common stock and 569,502 warrants to
purchase common stock at a purchase price of $0.82 per share to existing stockholders pursuant to anti-
dilution protection provisions of the private placements transacted on December 24, 2007 and March
20, 2008. The warrants were valued at $121,491 and are recorded as a reduction in issuance proceeds

F-18

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

of the October 19, 2009 transaction as described above.

10. Stock-Based Compensation

On August 5, 2003, the Company established a stock option plan (the “Plan”). Under the Plan, the Company
grants stock options to key employees, directors and consultants of the Company. For all grants prior to
September 12, 2005 and grants to employees of the Company after September 12, 2005, the vesting period is
30% on the first anniversary of the grant date, an additional 30% on the second anniversary and the
remaining 40% on the third anniversary. Options expire between five and ten years from the date of grant.

For grants to non-employee consultants of the Company after September 12, 2005, the vesting period is
between one to three years, subject to the fulfillment of certain conditions in the individual stock option grant
agreements, or 100% upon the occurrence of certain events specified in the individual stock option grant
agreements. Options authorized for issuance under the Plan total 17,000,000 after giving effect to an
amendment to the Plan approved at the Annual Meeting of the Stockholders of the Company on June 2,
2006. At December 31, 2009, 8,942,500 shares of common stock were available for issuance.

Prior to adoption of the plan, the Company made restricted stock grants. During 2003 all existing restricted
stock grants were converted to stock options. The converted options maintained the same full vesting period
as the original restricted stock grants.

Accounting for Employee Awards

The Company's results of operations for the year ended December 31, 2009 and 2008 include share-based
employee compensation expense totaling $565,150 and $253,197, respectively. Such amounts have been
included in the Statements of Operations in general and administrative and research and development
expenses. No income tax benefit has been recognized in the Statements of Operations for share-based
compensation arrangements as the Company has provided for a 100% valuation allowance on its deferred tax
assets.

Employee stock option compensation expense is the estimated fair value of options granted amortized on a
straight-line basis over the requisite vesting service period for the entire portion of the award.

F-19

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

10. Stock-Based Compensation (cont’d)

Accounting for Non-Employee Awards

Stock compensation expenses related to non-employee options were $(67,619) and $231,487 for the year
ended December 31, 2009 and 2008, respectively. Such amounts have been included in the Statements of
Operations in general and administrative and research and development expenses.

Summary of Stock Compensation Expense Recognized

Total stock-based compensation recognized by the Company in the years ended December 31, 2009 and
2008, and the period from inception (March 19, 2001) to December 31, 2009, all of which relates to stock
options and warrants, is as follows:

Years ended

December 31,
2009

December 31,
2008

Inception
(March 19,2001) to
December 31, 2009

Income statement line item:
General and administrative

Payroll
Consulting and other professional fees

443,013
(67,644)

60,350

1,600,091

Research and development:

Payroll
Consulting and other professional fees

136,918

666,376

122,137
25

192,848
94,568

799,355
1,288,543

Total

497,531

484,684

4,354,365

F-20

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

10. Stock-Based Compensation (cont’d)

Summary of Stock Option Transactions

There were 50,000 stock options granted at an exercise price of $0.73 with a fair value of $28,364, 30,000
stock options granted at an exercise price of $1.05 with a fair value of $5,887 and 100,000 stock options
granted at an exercise price of $1.28 with a fair value of $100,666 during the year ended December 31, 2009.
A total of 2,005,000 stock options were granted with exercise prices ranging from $0.78 - $3.24 during the
year ended December 31, 2008. The fair value of options at the date of grant was estimated using the Black-
Scholes option pricing model. The expected volatility is based upon historical volatility of the Company's
stock. The expected term is based upon the simplified method.

During the year ended December 31, 2009 and 2008, a total of 180,000 and 2,005,000 stock options were
granted with an aggregate fair value of $134,917 and $1,485,885 respectively. The fair value of options at
the date of grant was estimated using the Black-Scholes option pricing model. The Company took into
consideration guidance under ASC 718 and SAB 107 when reviewing and updating assumptions. The
expected volatility is based upon historical volatility of the Company's stock. The expected term is based
upon the simplified method as allowed under SAB 107.

The assumptions made in calculating the fair values of options are as follows:

Black-Scholes weighted average assumptions

Expected dividend yield
Expected volatility
Risk free interest rate
Expected term (in years)

Year Ended December 31,

2009

2008

$ 0
100 - 108%
0.51 – 2.55%

$ 0
104 - 114%
1.55 - 2.98%
1 – 5 years 0.25 - 5 years

The following table summarizes the employee and non-employee share-based transactions:

2009

2008

Shares
Weighted
Avg.
Exercise
Prices

Weighted
Ave. Fair
Value on
Date of
Grant

Shares
Weighted
Avg.
Exercise
Prices

Weighted
Avg. Fair
Value on
Date of Grant

Subject to
Options

7,760,795
180,000
(15,000)
(210,000)

$ 1.01
$ 1.09
$ 0.24
$ 1.71

$ 0.79
$ 0.58
$ 1.29

6,045,795
2,005,000
(90,000)
(200,000)

$ 0.97
$ 1.13
$ 0.35
$ 1.33

$ 0.79
$ 0.62
$ 1.03

Outstanding at
January 1
Granted
Exercised
Cancelled

Outstanding at December 31

7,715,795

$ 0.98

7,760,795

$ 1.01

F-21

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

10. Stock-Based Compensation (cont’d)

The following table summarizes information about stock options outstanding as of December 31, 2009 and
2008.

Weighted

Average

Shares
Remaining
Subject Avg. Exercise Contractual

Weighted

Aggregate
Intrinsic

to Options Prices

Term Value

Outstanding at December 31, 2009 7,715,795

$0.98

6.1 years

$ 352,350

Exercisable at December 31, 2009

6,289,295

$0.99

5.3 years

$ 352,350

Weighted

Average

Shares
Remaining
Subject Avg. Exercise Contractual

Weighted

Aggregate
Intrinsic

to Options Prices Term Value

Outstanding at December 31, 2008

7,760,795

$1.01

6.9 years

$ 987,817

Exercisable at December 31, 2008

5,366,795

$0.92

6.7 years

$ 849,767

As of December 31, 2009 and 2008, there was $2,038,569 and $2,411,468 of total unrecognized
compensation cost, respectively, related to all unvested stock options, which is expected to be recognized
over a weighted average vesting period of 1.7 years and 1.2 years, respectively. As of December 31, 2009
and 2008, the weighted fair value of the unvested stock options on the date of grant was $0.71 and $0.82,
respectively.

F-22

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

11. Warrants

As at December 31, 2009, warrants to purchase 8,575,240 shares were outstanding, having exercise prices
ranging from $0.82 to $1.80 and expiration dates ranging from October 19, 2010 to October 14, 2014.

Balance, January 1
Issued during the period
Exercised during the period
Expired during the period

2009

Number of
warrants

1,207,151
9,590,314

-
(2,222,222)

Weighted average
exercise price
$ 1.80
$ 1.48
-
$

$ 1.05

Number of
warrants
1,078,576
128,572
-
-

2008
Weighted average
exercise price
$ 1.80
$ 1.80
-
$
-
$

Balance, December 31, 2009

8,575,243

$ 1.40

1,207,148

$ 1.80

As at December 31, 2009 the range of exercise prices of the outstanding warrants and options were as
follows:

Range of exercise prices

$0.82 - 1.50

Number of
warrants
8,575,243

Average remaining
contractual life
2.7 years

Weighted
average exercise
price

$ 1.40

Warrants were valued using the Black-Scholes option pricing model. The risk-free interest rate used in the
Black-Scholes option pricing model is based on the implied yield currently available on U.S. Treasury
Securities with an equivalent term. Expected volatility is based on the weighted average historical volatility
of the Company’s common stock for the most recent five year period. The expected term of warrants
represents the contractual term of the warrant.

The assumptions made in calculating the fair values of warrants are as follows:

Black-Scholes weighted average assumptions

Expected dividend yield
Expected volatility
Risk free interest rate
Expected term (in years)

Year Ended December 31,

2009

2008

$ 0
105.9 - 108%
0.20 – 2.85%
0.25 – 5 years

$ 0
100%
1.80%
3 years

F-23

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

12. Income Taxes

No provision for Federal and State income taxes was required for the years ended December 31, 2009 and
2008, due to the Company’s operating losses and increased deferred tax asset valuation allowance. At
December 31, 2009 and 2008, the Company has unused net operating loss carry-forwards of approximately
$34,073,000and $27,690,000 which expire at various dates through 2029. Some of this amount may be
subject to annual limitations under certain provisions of the Internal Revenue Code related to “changes in
ownership”.

As of December 31, 2009 and 2008, the deferred tax assets related to the aforementioned carry-forwards
have been fully offset by valuation allowances, since significant utilization of such amounts is not presently
expected in the foreseeable future.

Deferred tax assets and valuation allowances consist of:

Net operating loss carry-forwards
Valuation allowance

2009

2008

$ 12,947,700
(12,947,700)

$ 10,522,325
(10,522,325)

Net deferred tax assets

The Company files income tax returns in the U.S. federal and New York state jurisdictions. Tax years for
fiscal 2006 through 2008 are open and potentially subject to examination by the federal and New York state
taxing authorities.

13. Commitments and Contingencies

a) The Company has contracted with various vendors to provide research and development services. The
terms of these agreements usually require an initiation fee and monthly or periodic payments over the
term of the agreement, ranging from 2 months to 36 months. The costs to be incurred are estimated and
are subject to revision. As of December 31, 2009, the total estimated cost to be incurred under these
agreements was approximately $8,433,195 and the Company had made payments totaling $3,323,201
under the terms of the agreements as of December 31, 2009. All of these agreements may be
terminated by either party upon appropriate notice as stipulated in the respective agreements.

b) The Company and three of its key executives entered into employment agreements. Each of these
agreements was renewed on August 10, 2009 and expires on August 10, 2012. The agreements result in
annual commitments of $200,000, $350,000 and $250,000.

F-24

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

c) On April 6, 2009, the Company entered into an agreement with Rodman & Renshaw, LLC (“Rodman”)
for Rodman to serve as placement agent for the Company. Under this agreement, the Company agreed
to pay a cash fee to Rodman immediately upon the closing of the placement equal to 6% of the
aggregate gross proceeds raised in the placement plus a cash fee payable immediately on each exercise
of the warrants issued to the purchasers in the placement that are solicited by Rodman equal to 6% of
the aggregate proceeds received by the Company in connection with such exercise; and such number of
warrants (the “Rodman Warrants”) issuable to Rodman or its designees at the closing to purchase shares
of common stock equal to 5% of the aggregate number of shares sold in the placement. In accordance
with the agreement, the contract ended on July 31, 2009. The Company paid $180,000 and issued the
placement agent warrants to purchase up to an aggregate of 142,857 shares of our common stock at an
exercise price of $1.3125 per share.

d) On April 20, 2009, Amarex, LLC filed suit against the Company in the Circuit Court of Montgomery
County, Maryland, seeking damages for an alleged breach of a contract between the Company and
Amarex, LLC entered into on January 6, 2006. Amarex, LLC claims damages of $93,156 plus interest.
On May 22, 2009, the Company filed an answer and an affirmative defense to the complaint denying the
claims of damages made by Amarex, LLC. On June 16, 2009, the Company filed a counterclaim
against Amarex, LLC for breach of the same contract in the amount of $354,824 plus interest. The court
ordered the Company and Amarex, LLC to proceed with a non-binding mediation. The mediation has
taken place, but the parties were not able to reach an amicable resolution as of December 31, 2009. The
trial is scheduled to commence on June 14, 2010.

e) On May 21, 2009, the Company entered into a 1 year agreement to use lab space commencing on July 1,
2009. The Company agreed to pay monthly payments of $4,594 from October 1, 2009 to June 30, 2010.
The agreement shall terminate on June 30, 2010 and may be renewed for two additional terms of one
year upon 60 days prior to the expiration of the agreement.

f) On June 22, 2009, the Company entered into a License Agreement with Korea Research Institute of
Chemical Technology ("KRICT") to acquire the rights to all intellectual properties related to
Quinoxaline-Piperazine derivatives that were synthesized under a Joint Research Agreement. The initial
license fee was $100,000, all of which was paid as of December 31, 2009. The agreement with KRICT
calls for a one-time milestone payment of $1,000,000 within 30 days after the first achievement of
marketing approval of the first commercial product arising out of or in connection with the use of
KRICT’s intellectual properties.

g) On June 26, 2009, the Company entered into a securities purchase agreement with Teva Pharmaceutical
Industries Limited (“Teva”). Contemporaneous with the execution and delivery of this agreement, the
parties executed a research and exclusive license option agreement (“RELO”) pursuant to which the
Company shall use $2,000,000 from the gross proceeds of the issuance and sale of shares to Teva to
fund a research and development program for the pre-clinical development of RX-3117 and has
included this amount in restricted cash equivalents. The Company will be eligible to receive royalties
on net sales of RX-3117 worldwide. During the fourth quarter of 2009, research and development work
began on the RX-3117 research and development program.

h) On June 29, 2009, the Company signed a five year lease for 5,466 square feet of office space in
Rockville, Maryland commencing on June 29, 2009. The lease requires annual base rents of $76,524
with increases over the next five years. Under the leasing agreement, the Company pays its allocable
portion of real estate taxes and common area operating charges. Rent paid under the Company’s former
lease during the year ended December 31, 2009 was $112,973 (2008 - $132,104).
Future rental payments over the next five years and thereafter are as follows:

F-25

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

2010
2011
2012
2013
2014

$108,418
148,593
158,835
162,806
82,408
$661,060

In connection with the lease agreement, the Company issued a letter of credit of $100,000 in favor of
the lessor. The Company has restricted cash equivalents of the same amount for the letter of credit.

i) On November 4, 2009, the Company entered into a Synthesis and Supply Agreement with
TheraTarget, Inc. to provide synthesis and supply of Rexahn’s products. The total cost of these
services is $100,000, of which $30,000 was paid as of December 31, 2009.

j) The Company has a 401(k) plan established for its employees. The Company elected to match 100%
of the first 3% of the employee's compensation plus 50% of the employee's deferral that exceeds 3% of
the employee's compensation (limited to 5% total employee compensation). Expense related to this
matching contribution aggregated $49,519 and nil for the years ended December 31, 2009 and 2008,
respectively.

14. Fair Value Measurements

The Company adopted ASC 820, “Fair Value Measurements and Disclosure” as of January 1, 2008. ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, not adjusted for transaction costs.
ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels giving the highest priority to quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels are described below:

Level 1 Inputs

—

Unadjusted quoted prices in active markets for identical assets or liabilities
that is accessible by the Company;

Level 2 Inputs

—

Quoted prices in markets that are not active or financial instruments for which
all significant inputs are observable, either directly or indirectly;

Level 3 Inputs

—

Unobservable inputs for the asset or liability including significant assumptions
of the Company and other market participants.

F-26

REXAHN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2009 and 2008

14.

Fair Value Measurements (cont’d)

The Company determines fair values for its financial assets as follows:

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and
are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the
reliability of the inputs used to determine fair value.

Assets:
Restricted cash equivalents $ 2,026,060
175,000
Marketable securities

Total

$ 1,925,012
$ 175,000

$ 101,048
-

Fair Value Measurements as of December 31, 2009
Level 2

Level 3

Level 1

Total Assets

$ 2,201,060

$ 2,100,012

101,048

-
-

As of December 31, 2009, the Company’s restricted cash equivalents is comprised of the following:

a) Money market funds valued at the net asset value of shares held be the Company and is classified

within level 1 of the fair value hierarchy;

b) Certificate of deposit valued based upon the underlying terms of a letter of credit, as discussed in

note 13, and classified within level 2 of the fair value hierarchy

Marketable securities consist of state authority and municipal security fund bonds which are valued at fair
value and classified within level 1 of the fair value hierarchy.

Assets:
State Authority Auction
Rate Bonds

Total

$ 2,999,750

Total Assets

$ 2,999,750

Fair Value Measurements as of December 31, 2008
Level 2

Level 1

Level 3

$ 2,999,750

As of December 31, 2008, the investments, at fair value, consists of state authority auction rate bonds which
are valued is based upon closing prices reported on the secondary market in which the security is traded and
is classified within level 2 of the fair value hierarchy.

F-27

3.1.

3.2.

4.1.

4.2

4.3

*10.1.1.

*10.1.2.

*10.1.3.

*10.2.

*10.3.

10.4.

10.5.

10.6

10.7

10.8

10.9

EXHIBIT INDEX

Amended and Restated Certificate of Incorporation, filed as Appendix G to the Company's
Definitive Proxy Statement on Schedule 14A (File No. 000-50590) dated April 29, 2005, is
incorporated herein by reference.
Amended and Restated Bylaws, filed as Exhibit 3.1 to the Company's Current Report on Form
8-K filed on March 26, 2010, is incorporated herein by reference.
Specimen Certificate for the Company's Common Stock, par value $.0001 per share, filed as
Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 333-129294)
dated October 28, 2005, is incorporated herein by reference.
Form of Senior Debt Securities Indenture, filed as Exhibit 4.2 to the Company’s Registration
Statement on Form S-3 dated July 30, 2008, is incorporated herein by reference.
Form of Subordinated Debt Securities Indenture, filed as Exhibit 4.3 to the Company’s
Registration Statement on Form S-3 dated July 30, 2008 is incorporated herein by reference.
Rexahn Pharmaceuticals, Inc. Stock Option Plan, as amended, filed as Exhibit 4.4 to the
Company's Registration Statement on Form S-8 (File No. 333-129294) dated October 28,
2005, is incorporated herein by reference.
Form of Stock Option Grant Agreement for Employees, filed as Exhibit 4.5.1 to the
Company's Registration Statement on Form S-8 (File No. 333-129294) dated October 28,
2005, is incorporated herein by reference.
Form of Stock Option Grant Agreement for Non-Employee Directors and Consultants, filed as
Exhibit 4.5.2 to the Company's Registration Statement on Form S-8 (File No. 333-129294)
dated October 28, 2005, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and C. H. Ahn, filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and T. H. Jeong, filed as Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Research Collaboration Agreement dated February 6, 2003 by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd., filed as Exhibit 10.5 to the Company’s
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, is incorporated
herein by reference.
Revaax License Agreement, dated February 8, 2005, by and between Rexahn
Pharmaceuticals, Inc. and Revaax Pharmaceuticals LLC, filed as Exhibit 10.6 to the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, is
incorporated herein by reference.
Lease Agreement, dated June 5, 2009, by and between Rexahn Pharmaceuticals, Inc. and The
Realty Associates Fund V, L.P., filed as Exhibit 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by reference.
Securities Purchase Agreement, dated as of November 19, 2007, by and between Rexahn
Pharmaceuticals, Inc. and KT&G Corporation, filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on November 21, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of November 20, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Rexgene Biotech Co., Ltd, filed as Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on November 21, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd, filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

*10.19

*10.20

10.21

10.22

Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and Kumho Investment Bank, filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.
Securities Purchase Agreement, dated as of December 17, 2007, by and between Rexahn
Pharmaceuticals, Inc. and the several parties thereto, filed as Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on December 18, 2007, is incorporated herein by reference.
Warrant, dated December 24, 2007, issued to KT&G Corporation, filed as Exhibit 10.6 to the
Company’s Current Report on Form 8-K filed on December 26, 2007, is incorporated herein
by reference.
Warrant, dated December 24, 2007, issued to Rexgene Biotech Co., Ltd., filed as Exhibit 10.7
to the Company’s Current Report on Form 8-K filed on December 26 ,2007, is incorporated
herein by reference.
Form of Warrant, dated December 24, 2007, issued to the purchasers pursuant to the Jungwoo
Securities Purchase Agreement, the Kumho Securities Purchase Agreement, the Individual
Investor Securities Purchase Agreement and to a consultant, filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed on December 18, 2007, is incorporated herein
by reference.
Registration Rights Agreement, dated as of December 24, 2007, by and among Rexahn
Pharmaceuticals, Inc. and the purchasers pursuant to the KT&G Securities Purchase
Agreement, the Rexgene Securities Purchase Agreement, the Jungwoo Securities Purchase
Agreement, the Kumho Securities Purchase Agreement, the Individual Investor Securities
Purchase Agreement and a consulting Services Agreement, filed as Exhibit 10.9 to the
Company Current Report on Form 8-K filed on December 26, 2007, is incorporated herein by
reference.
Securities Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Jungwoo Family Co., Ltd. (the "Jungwoo Securities Purchase
Agreement”), filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on
March 26, 2008, is incorporated herein by reference.
Securities Purchase Agreement, dated as of March 20, 2008, by and between Rexahn
Pharmaceuticals, Inc. and Super Bio Co. Ltd., (the "Super Bio Securities Purchase
Agreement"), filed as Exhibit 10.2 to the Company's current report on Form 8-K filed on
March 26, 2008, is incorporated herein by reference.
Form of Warrant for issuance pursuant to the Jungwoo Securities Purchase Agreement and the
Super Bio Securities Purchase Agreement, filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K filed on March 26, 2008, is incorporated herein by reference.
Employment Agreement, dated as of August 10, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Rakesh Soni, filed as Exhibit 10.2 to the Company's Current Report
on Form 8-K filed on August 10, 2009, is incorporated herein by reference.
Consulting Agreement, dated August 12, 2008, by and between Rexahn Pharmaceuticals, Inc.
and Y. Michelle Kang, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on August 27, 2008, is incorporated herein by reference.
Securities Purchase Agreement, dated as of May 19, 2009 by and between Rexhan
Pharmaceuticals, Inc. and the purchaser signatory thereto, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on May 20, 2009, is incorporated herein by
reference.
Form of Warrant for the Company’s Series I, II, and III Common Stock Purchase Warrants,
filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 20, 2009, is
incorporated herein by reference.

10.23

10.24

10.25

10.26

23
24.
31.1.

31.2.

32.1

32.2

Research and Exclusive License Option Agreement, dated as of June 26, 2009, by and
between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical Industries Limited, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 21, 2009, is
incorporated herein by reference.
Securities Purchase Agreement, dated as of June 26, 2009, by and between Rexahn
Pharmaceuticals, Inc. and Teva Pharmaceutical Industries Limited (the “Teva Securities
Purchase Agreement”), filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on September 21, 2009, and Amendment No. 1 to the Teva Securities Purchase
Agreement, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
September 21, 2009, are incorporated herein by reference.
Securities Purchase Agreement, dated as of October 19, 2009, by and between Rexahn
Pharmaceuticals, Inc. and the purchasers signatory thereto, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on October 20, 2009, is incorporated herein by
reference.
Form of Warrant for the Company’s Common Stock Purchase Warrants, filed as Exhibit 4.1
to the Company’s Current Report on Form 8-K filed on October 20, 2009, is incorporated
herein by reference.
Code of Ethics and Business Conduct, filed as Exhibit 14 to the Company’s Annual Report on
10-K for the fiscal year ended December 31, 2008, filed on March 16, 2009, is incorporated
herein by reference.
Letter of Lazar Levine & Felix LLP dated February 27, 2009, filed as Exhibit 16.1 to the
Company’s Amended Current Report on Form 8-K filed on March 2, 2009, is incorporated
herein by reference.
Consent of ParenteBeard LLC, independent registered public accounting firm.
Power of Attorney.
Certification of Chief Executive Officer of Periodic Report Pursuant to Pursuant to Rule 13a-
15(e) or Rule 15d-15(e).
Certification of Chief Financial Officer of Periodic Report Pursuant to Pursuant to Rule 13a-
15(e) or Rule 15d-15(e).
Certification of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.
Certification of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.

_______________________
* Management contract or compensation plan or arrangement.

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement of Rexahn
Pharmaceuticals, Inc. on Form S-8 (Registration Statement No. 333-129294) and the Registration
Statement of Rexahn Pharmaceuticals, Inc. on Form S-3 (Registration Statement No. 333-152640) of our
report dated March 31, 2010 (which report expresses an unqualified opinion), relating to the financial
statements of Rexahn Pharmaceuticals, Inc. included in this Annual Report on Form 10-K of Rexahn
Pharmaceuticals, Inc. for the year ended December 31, 2009.

/s/ ParenteBeard LLC
New York, New York
March 31, 2010

Exhibit 24

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Tae Heum Jeong, a true and lawful attorney-in-fact and agent, with full
power to him (including the full power of substitution and resubstitution), to sign for him or her and in his
or her name, place and stead, in the capacity or capacities set forth below, (1) the Annual Report on Form
10-K for the fiscal year ended December 31, 2009 to be filed by Rexahn Pharmaceuticals, Inc. (the
"Company") with the Securities and Exchange Commission (the "Commission") pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended, and (2) any amendments to the foregoing Annual
Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with
the Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Signature

Title

Date

/s/ Chang H. Ahn
Chang H. Ahn
/s/ Tae Heum Jeong
Tae Heum Jeong
/s/ Freddie Ann Hoffman
Freddie Ann Hoffman
/s/David McIntosh
David McIntosh
/s/ Charles Beever
Charles Beever
/s/ Kwang Soo Cheong
Kwang Soo Cheong
/s/ Y. Michele Kang
Y. Michele Kang

Chairman and Chief Executive Officer

March 31, 2010

Chief Financial Officer, Secretary and
Director
Director

Director

March 31, 2010

CERTIFICATION

Exhibit 31.1

I, Chang H. Ahn, Chief Executive Officer of Rexahn Pharmaceuticals, Inc. certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009 of

Rexahn Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining

disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and

procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over

financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Dated: March 31, 2010

/s/ Chang H. Ahn
Chang H. Ahn
Chief Executive Officer

CERTIFICATION

Exhibit 31.2

I, Tae Heum Jeong, Chief Financial Officer of Rexahn Pharmaceuticals, Inc. certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009 of

Rexahn Pharmaceuticals, Inc.;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining

a. Designed such disclosure controls and procedures, or caused such disclosure controls and

b. Designed such internal control over financial reporting, or caused such internal control over

b. Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Dated: March 31, 2010

/s/ Tae Heum Jeong
Tae Heum Jeong
Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350

SECTION 1350 CERTIFICATION*

In connection with the Annual Report of Rexahn Pharmaceuticals, Inc. (the “Company”) on Form 10-K
for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Chang H. Ahn, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange

Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial

condition and result of operations of the Company.

Dated: March 31, 2010

By: /s/ Chang H. Ahn

Chang H. Ahn,
Chief Executive Officer

* This Certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act
of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code,
and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to
the liability of that section. This Certification shall not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such
filing.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350

SECTION 1350 CERTIFICATION*

In connection with the Annual Report of Rexahn Pharmaceuticals, Inc. (the “Company”) on Form 10-K
for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Tae Heum Jeong, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange

Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial

condition and result of operations of the Company.

Dated: March 31, 2010

By: /s/ Tae Heum Jeong

Tae Heum Jeong,
Chief Financial Officer