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| Delaware                                                            | 11-3516358                                   |
|---------------------------------------------------------------------|----------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification Number) |

| Large      Accelerated Filer o                                                                         | Accelerated      Filer þ         |
|--------------------------------------------------------------------------------------------------------|---------------------------------------|
| Non-Accelerated      Filer o    (Do      not check if a smaller reporting company) | Smaller      reporting company þ |

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RE

|         | Page                                                                                             |
|--------------|--------------------------------------------------------------------------------------------------|
|         |                                                                                             |
| PART      I  | FINANCIAL      INFORMATION                                                                       |   |
|         |                                                                                             |   |
| Item      1  | Financial      Statements                                                                        |   |
|         |                                                                                             |   |
|         | 1)                                                                                               | Condensed Balance Sheets at September 30, 2009 (unaudited) and      December 31, 2008 | 3 |
|         |                                                                                             |   |   |
|         | 2)                                                                                               | Condensed Statements of Operations for the three months and      nine months ended September 30, 2009 and 2008 (unaudited) and cumulative      from March 19, 2001 (inception) to September 30, 2009      (unaudited) | 4 |
|         |                                                                                             |   |   |
|         | 3)                                                                                               | Condensed Statements of Cash Flows for the nine months ended      September 30, 2009 and 2008 (unaudited) and cumulative from March 19, 2001      (inception) to September 30, 2009 (unaudited) | 5 |
|         |                                                                                             |   |   |
|         | 4)                                                                                               | Notes to Condensed Financial Statements      (unaudited) | 6 |
|         |                                                                                             |   |   |
| Item      2  | Management’s Discussion and Analysis of Financial Condition      and Results of Operations | 23 |
|         |                                                                                             |   |
| Item      3  | Quantitative and Qualitative Disclosures About Market      Risk                                  | 30 |
|         |                                                                                             |   |
| Item      4  | Controls and Procedures                                                                          | 30 |
|         |                                                                                             |   |
| PART      II | OTHER      INFORMATION                                                                           |   |
|         |                                                                                             |   |
| Item      1  | Legal Proceedings                                                                                | 31 |
|         |                                                                                             |   |
| Item      1A | Risk Factors                                                                                     | 31 |
|         |                                                                                             |   |
| Item      2  | Unregistered Sales of Equity Securities and Use of      Proceeds                                 | 31 |
|         |                                                                                             |   |
| Item      3  | Defaults Upon Senior Securities                                                                  | 31 |
|         |                                                                                             |   |
| Item      4  | Submission of Matters to a Vote of Security      Holders                                         | 31 |
|         |                                                                                             |   |
| Item      5  | Other Information                                                                                | 31 |
|         |                                                                                             |   |
| Item      6  | Exhibits                                                                                         | 32 |
|         |                                                                                             |   |
|         |                                                                                             |
| SIGNATURES   | 33                                                                                               |

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Table of Contents

| PART      I | Financial      Information |
|-------------|----------------------------|

| Item      1 | Financial      Statements |
|-------------|---------------------------|

RE

|                                                                                                                  |   | September      30,2009 |        |   | December      31,2008 |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|--------|-----------------------|--------|
|                                                                                                                  |   | (Unaudited)            |        |   |                  |   |
| ASSETS                                                                                                                |   |
| Current      Assets:                                                                                                  |   |                   |        |   |                  |   |
| Cash      and cash equivalents                                                                                        |   | $                      | 4,141,358   |   |                  | $      | 369,130 |   |
| Marketable      securities                                                                                            |   |                   | -           |   |                  |   | 2,999,750 |   |
| Prepaid      expenses and other current assets (note 3)                                                               |   |                   | 220,283     |   |                  |   | 366,765 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Total      Current Assets                                                                                             |   |                   | 4,361,641   |   |                  |   | 3,735,645 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Restricted Cash Equivalents      (note 13)                                                                            |   |                   | 2,100,533   |   |                  |   | - |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Equipment, Net (note      4)                                                                                          |   |                   | 179,737     |   |                  |   | 92,212 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Intangible Asset, Net      (note 5)                                                                                   |   |                   | 272,774     |   |                  |   | 286,132 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Total      Assets                                                                                                     |   | $                      | 6,914,685   |   |                  | $      | 4,113,989 |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                             |   |
| Current      Liabilities:                                                                                             |   |                   |        |   |                  |   |   |   |
| Accounts      payable and accrued expenses (note 6)                                                                   |   | $                      | 474,289     |   |                  | $      | 358,894 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Deferred Revenue (note      7)                                                                                        |   |                   | 993,750     |   |                  |   | 1,050,000 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Other liabilities (note      8)                                                                                       |   |                   | 121,171     |   |                  |   | - |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Total      Liabilities                                                                                                |   |                   | 1,589,210   |   |                  |   | 1,408,894 |   |
| Commitments and Contingencies      (note 13)                                                                          |   |                   |        |   |                  |   |   |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Stockholders' Equity      (note 10):                                                                                  |   |                   |        |   |                  |   |   |   |
| Preferred      stock, par value $0.0001, 100,000 authorized shares, none issued and      outstanding                  |   |                   | -           |   |                  |   | - |   |
| Common      stock, par value $0.0001, 500,000,000 authorized shares, 63,848,175 (2008      – 56,039,854) issued |   |                   | 6,384       |   |                  |   | 5,604 |   |
| Additional      paid-in capital                                                                                       |   |                   | 39,759,025  |   |                  |   | 33,184,860 |   |
| Accumulated      deficit during the development stage                                                                 |   |                   | (34,411,524 | )      |                  |   | (29,906,479 | ) |
| Treasury      stock, 14,205 shares, at cost                                                                           |   |                   | (28,410     | )      |                  |   | (28,410 | ) |
| Accumulated      other comprehensive (loss)                                                                           |   |                   | -           |   |                  |   | (550,480 | ) |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Total      Stockholders' Equity                                                                                       |   |                   | 5,325,475   |   |                  |   | 2,705,095 |   |
|                                                                                                                  |   |                   |        |   |                  |   |   |   |
| Total      Liabilities and Stockholders' Equity                                                                       |   | $                      | 6,914,685   |   |                  | $      | 4,113,989 |   |

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|                                                                  |   | Three      MonthsEnded      September 30, |       |   | Nine      MonthsEnded      September 30, |   |       | Cumulative      from March 19, 2001 (Inception) to |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------|------------|--------|------------------------------------------|--------|------------|----------------------------------------------------|--------|
|                                                                  |   | 2009                                      |       |   | 2008                                     |   |       | 2009                                               |   |   | 2008 |   |   | September      30, 2009 |   |
| Revenues:                                                             |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |
| Research                                                              |   | $                                         | 18,750     |   |                                     | $      | 18,750     |                                               |   | $ | 56,250 |   |   | $ | 56,250 |   |   | $ | 506,250 |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                             |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| General      and administrative                                       |   |                                      | 724,067    |   |                                     |   | 645,368    |                                               |   |   | 2,285,804 |   |   |   | 1,893,819 |   |   |   | 17,150,243 |   |
| Research      and development                                         |   |                                      | 424,609    |   |                                     |   | 567,905    |                                               |   |   | 2,018,766 |   |   |   | 1,419,077 |   |   |   | 15,250,610 |   |
| Patent      fees                                                      |   |                                      | 107,618    |   |                                     |   | 57,574     |                                               |   |   | 258,421 |   |   |   | 163,778 |   |   |   | 1,180,254 |   |
| Depreciation      and amortization                                    |   |                                      | 17,292     |   |                                     |   | 13,875     |                                               |   |   | 41,638 |   |   |   | 41,574 |   |   |   | 544,842 |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Expenses                                                   |   |                                      | 1,273,586  |   |                                     |   | 1,284,722  |                                               |   |   | 4,604,629 |   |   |   | 3,518,248 |   |   |   | 34,125,949 |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from Operations                                             |   |                                      | (1,254,836 | )      |                                     |   | (1,265,972 | )                                                  |   |   | (4,548,379 | ) |   |   | (3,461,998 | ) |   |   | (33,619,699 | ) |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      (Income) Expense:                                          |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Realized      loss (gain) on marketable securities                    |   |                                      | -          |   |                                     |   | -          |                                               |   |   | (11,025 | ) |   |   | 22,365 |   |   |   | 9,341 |   |
| Interest      (income)                                                |   |                                      | (17,407    | )      |                                     |   | (52,122    | )                                                  |   |   | (32,309 | ) |   |   | (220,239 | ) |   |   | (1,143,663 | ) |
| Interest      expense                                                 |   |                                      | -          |   |                                     |   | -          |                                               |   |   | - |   |   |   | - |   |   |   | 301,147 |   |
| Beneficial      conversion feature                                    |   |                                      | -          |   |                                     |   | -          |                                               |   |   | - |   |   |   | - |   |   |   | 1,625,000 |   |
| Total      Other (Income) Expense                                     |   |                                      | (17,407    | )      |                                     |   | (52,122    | )                                                  |   |   | (43,334 | ) |   |   | (197,874 | ) |   |   | 791,825 |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss Before Provision for Income Taxes                       |   |                                      | (1,237,429 | )      |                                     |   | (1,213,850 | )                                                  |   |   | (4,505,045 | ) |   |   | (3,264,124 | ) |   |   | (34,411,524 | ) |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for Income Taxes                                       |   |                                      | -          |   |                                     |   | -          |                                               |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss                                                         |   | $                                         | (1,237,429 | )      |                                     | $      | (1,213,850 | )                                                  |   | $ | (4,505,045 | ) |   | $ | (3,264,124 | ) |   | $ | (34,411,524 | ) |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      per share, basic and diluted                                |   | $                                         | (0.02      | )      |                                     | $      | (0.02      | )                                                  |   | $ | (0.08 | ) |   | $ | (0.06 | ) |   |   |   |   |
|                                                                  |   |                                      |       |   |                                     |   |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares outstanding, basic and diluted |   |                                      | 61,027,293 |   |                                     |   | 56,025,649 |                                               |   |   | 58,440,503 |   |   |   | 55,800,977 |   |   |   |   |   |

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|                                                                                  |   | Nine      MonthsEnded      September 30, |       |   | CumulativeFrom      March 19,2001 (Inception) to |   |
|---------------------------------------------------------------------------------------|--------|------------------------------------------|------------|--------|--------------------------------------------------|--------|
|                                                                                  |   | 2009                                     |       |   | 2008                                             |   |   | September      30, 2009 |   |
| Cash      Flows from Operating Activities:                                            |   |                                     |       |   |                                             |   |   |   |   |
| Net      loss                                                                         |   | $                                        | (4,505,045 | )      |                                             | $      | (3,264,124 | ) |   | $ | (34,411,524 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities: |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Beneficial      conversion feature                                                    |   |                                     | -          |   |                                             |   | - |   |   |   | 1,625,000 |   |
| Compensatory      stock                                                               |   |                                     | -          |   |                                             |   | - |   |   |   | 21,877 |   |
| Depreciation      and amortization                                                    |   |                                     | 41,638     |   |                                             |   | 41,574 |   |   |   | 544,842 |   |
| Stock      option compensation expense                                                |   |                                     | 489,094    |   |                                             |   | 397,002 |   |   |   | 4,345,928 |   |
| Amortization      of deferred revenue                                                 |   |                                     | (56,250    | )      |                                             |   | (56,250 | ) |   |   | (506,250 | ) |
| Realized      (gains) losses on marketable securities                                 |   |                                     | (11,025    | )      |                                             |   | 22,365 |   |   |   | 9,341 |   |
| Amortization      of deferred lease incentive                                         |   |                                     | (5,000     | )      |                                             |   | - |   |   |   | (5,000 | ) |
| Deferred      lease expenses                                                          |   |                                     | 26,171     |   |                                             |   | - |   |   |   | 26,171 |   |
| Changes      in assets and liabilities:                                               |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Prepaid      expenses and other                                                       |   |                                     | 146,482    |   |                                             |   | (19,555 | ) |   |   | (220,283 | ) |
| Accounts      payable and accrued expenses                                            |   |                                     | 115,395    |   |                                             |   | (241,982 | ) |   |   | 474,289 |   |
| Net      Cash (Used in) Operating Activities                                          |   |                                     | (3,758,540 | )      |                                             |   | (3,120,970 | ) |   |   | (28,095,609 | ) |
|                                                                                  |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Cash      Flows from Investing Activities:                                            |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Restricted      cash equivalents                                                      |   |                                     | (2,100,533 | )      |                                             |   | - |   |   |   | (2,100,533 | ) |
| Purchase      of equipment                                                            |   |                                     | (15,805    | )      |                                             |   | (25,697 | ) |   |   | (541,137 | ) |
| Purchase      of marketable securities                                                |   |                                     | (1,196,824 | )      |                                             |   | (5,848,176 | ) |   |   | (10,595,000 | ) |
| Proceeds      from sales of marketable securities                                     |   |                                     | 4,758,079  |   |                                             |   | 4,475,581 |   |   |   | 10,585,659 |   |
| Payment      of licensing fees                                                        |   |                                     | -          |   |                                             |   | - |   |   |   | (356,216 | ) |
| Net      Cash Provided by (Used in) Investing Activities                              |   |                                     | 1,444,917  |   |                                             |   | (1,398,292 | ) |   |   | (3,007,227 | ) |
| Cash      Flows from Financing Activities:                                            |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Issuance      of common stock and units, net of issuance costs                        |   |                                     | 6,085,851  |   |                                             |   | 931,201 |   |   |   | 28,622,604 |   |
| Proceeds      from long-term debt                                                     |   |                                     | -          |   |                                             |   | - |   |   |   | 5,150,000 |   |
| Proceeds      from research contribution                                              |   |                                     | -          |   |                                             |   | - |   |   |   | 1,500,000 |   |
| Principal      payments on long-term debt                                             |   |                                     | -          |   |                                             |   | - |   |   |   | (28,410 | ) |
| Net      Cash Provided by Financing Activities                                        |   |                                     | 6,085,851  |   |                                             |   | 931,201 |   |   |   | 35,244,194 |   |
|                                                                                  |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                             |   |                                     | 3,772,228  |   |                                             |   | (3,588,061 | ) |   |   | 4,141,358 |   |
| Cash      and Cash Equivalents - beginning of period                                  |   |                                     | 369,130    |   |                                             |   | 3,809,571 |   |   |   | - |   |
|                                                                                  |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents - end of period                                        |   | $                                        | 4,141,358  |   |                                             | $      | 221,510 |   |   | $ | 4,141,358 |   |
| Supplemental      Cash Flow Information:                                              |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Interest      paid                                                                    |   | $                                        | -          |   |                                             | $      | - |   |   | $ | 301,147 |   |
| Non-cash      financing and investing activities:                                     |   |                                     |       |   |                                             |   |   |   |   |   |   |   |
| Warrants      issued                                                                  |   | $                                        | 1,348,308  |   |                                             | $      | - |   |   | $ | 2,762,596 |   |
| Leasehold      improvement incentive                                                  |   | $                                        | 100,000    |   |                                             | $      | - |   |   | $ | 100,000 |   |

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| 1. | Operations      and Organization |
|----|----------------------------------|

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Table of Contents

| 2. | Recent      Accounting Pronouncements Affecting theCompany |
|----|------------------------------------------------------------|

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| 3. | Prepaid      Expenses and Other Current Assets |
|----|------------------------------------------------|

|                       |   | September      30,2009 |    |   | December      31,2008 |   |
|----------------------------|--------|------------------------|---------|--------|-----------------------|--------|
|                       |   |                   |    |   |                  |   |
| Deposits      on contracts |   | $                      | 162,862 |   |                  | $      | 294,337 |   |
| Other      assets          |   |                   | 57,421  |   |                  |   | 72,428 |   |
|                       |   |                   |    |   |                  |   |   |   |
|                       |   | $                      | 220,283 |   |                  | $      | 366,765 |   |

| 4. | Equipment |
|----|-----------|

|                                                |   | September      30,2009 |     |   | December      31,2008 |   |
|-----------------------------------------------------|--------|------------------------|----------|--------|-----------------------|--------|
|                                                |   |                   |     |   |                  |   |
| Furniture      and fixtures                         |   | $                      | 31,713   |   |                  | $      | 31,713 |   |
| Office      equipment                               |   |                   | 70,276   |   |                  |   | 70,276 |   |
| Lab      and computer equipment                     |   |                   | 428,436  |   |                  |   | 421,343 |   |
| Leasehold      improvements                         |   |                   | 110,712  |   |                  |   | 2,000 |   |
|                                                |   |                   |     |   |                  |   |   |   |
|                                                |   |                   | 641,137  |   |                  |   | 525,332 |   |
| Less      accumulated depreciation and amortization |   |                   | (461,400 | )      |                  |   | (433,120 | ) |
|                                                |   |                   |     |   |                  |   |   |   |
| Net      carrying amount                            |   | $                      | 179,737  |   |                  | $      | 92,212 |   |

| 5. | Intangible      Asset, Net |
|----|----------------------------|

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Table of Contents

|                               |   | September      30,2009 |    |   | December      31,2008 |   |
|------------------------------------|--------|------------------------|---------|--------|-----------------------|--------|
|                               |   |                   |    |   |                  |   |
| Revaax      license, original cost |   | $                      | 356,216 |   |                  | $      | 356,216 |   |
| Less      accumulated amortization |   |                   | (83,442 | )      |                  |   | (70,084 | ) |
|                               |   |                   |    |   |                  |   |   |   |
| Balance                            |   | $                      | 272,774 |   |                  | $      | 286,132 |   |

| 2009       |   | $      | 4,452   |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 17,811  |   |
| 2011       |   |   | 17,811  |   |
| 2012       |   |   | 17,811  |   |
| 2013       |   |   | 17,811  |   |
| Thereafter |   |   | 197,078 |   |
|       |   | $      | 272,774 |   |

| 6. | Accounts      Payable and Accrued Expenses |
|----|--------------------------------------------|

|                     |   | September      30,2009 |    |   | December      31,2008 |   |
|--------------------------|--------|------------------------|---------|--------|-----------------------|--------|
|                     |   |                   |    |   |                  |   |
| Trade      payables      |   | $                      | 171,555 |   |                  | $      | 136,906 |   |
| Accrued      expenses    |   |                   | 210,232 |   |                  |   | 98,486 |   |
| Payroll      liabilities |   |                   | 92,502  |   |                  |   | 123,502 |   |
|                     |   |                   |    |   |                  |   |   |   |
|                     |   | $                      | 474,289 |   |                  | $      | 358,894 |   |

| 7. | Deferred      Revenue |
|----|-----------------------|

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| 8. | Other      Liabilities |
|----|------------------------|

|                               |   | September      30,2009 |    |   | December      31,2008 |   |
|------------------------------------|--------|------------------------|---------|--------|-----------------------|--------|
|                               |   |                   |    |   |                  |   |
| Deferred      lease incentive      |   | $                      | 100,000 |   |                  | $      | - |   |
| Less      accumulated amortization |   |                   | (5,000  | )      |                  |   | - |   |
|                               |   |                   |    |   |                  |   |   |   |
| Balance                            |   | $                      | 95,000  |   |                  | $      | - |   |

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| 9. | Net      Loss per Common Share |
|----|--------------------------------|

| 10. | Stockholders’      Equity |
|-----|---------------------------------|

|   | 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 Companyissued: |
|--------|----|---------------------------------------------|

|   | i) | 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. |
|--------|------|-----------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|---------------------------------------------------------------------------------------------------------------|

|   | e) | 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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f) | 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. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | i) | 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 has 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 pershare. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 650,000shares. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 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 of $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. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 proceeds of $2,710,910, net of $289,090      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 |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 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. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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.  The warrants were valued at $169,985 and      recorded as a reduction in issuance proceeds of the May 19, 2009      transaction as described above. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 total      proceeds of $3,371,341, net of $128,659 stock issuance    costs. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ag) | During      the nine month period ended September 30, 2009, the Company sold all of      its marketable securities for which it previously recorded an unrealized      loss of ($550,480) to accumulated other comprehensive (loss) at December      31, 2008.  The sale of the Company’s investments in marketable      securities resulted in a realized gain of $11,025 during the nine month      period ended September 30, 2009. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11. | Stock-Based      Compensation |
|-----|-------------------------------|

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|                                        |   | September      30, |    |   | September      30, |   |    | Inception      (March 19, 2001) toSeptember      30, 2009 |   |
|---------------------------------------------|--------|--------------------|---------|--------|--------------------|--------|---------|-----------------------------------------------------------|--------|
|                                        |   | 2009               |    |   | 2008               |   |    |                                                      |   |
| Income      statement line item:            |   |               |    |   |               |   |    |                                                      |   |
| General      and administrative             |   |               |    |   |               |   |    |                                                      |   |
| Payroll                                     |   | $                  | 339,960 |   |               | $      | 27,600  |                                                      |   | $ | 1,497,038 |   |
| Consulting      and other professional fees |   |               | 15,278  |   |               |   | 134,448 |                                                      |   |   | 749,298 |   |
| Research      and development:              |   |               |    |   |               |   |    |                                                      |   |   |   |   |
| Payroll                                     |   |               | 133,831 |   |               |   | 146,523 |                                                      |   |   | 811,049 |   |
| Consulting      and other professional fees |   |               | 25      |   |               |   | 88,431  |                                                      |   |   | 1,288,543 |   |
| Total                                       |   | $                  | 489,094 |   |               | $      | 397,002 |                                                      |   | $ | 4,345,928 |   |

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|                                             |   | Nine      Months EndedSeptember      30, |       |
|--------------------------------------------------|--------|------------------------------------------|------------|
|                                             |   | 2009                                |       |   | 2008  |   |
|                                             |   |                                     |       |   |   |   |
| Black-Scholes      weighted average assumptions: |   |                                     |       |   |   |   |
| Expected      dividend yield                     |   |                                     | -          |   |   |   | - |   |
| Expected      volatility                         |   |                                     | 106%-108   | % |   |   | 100%      - 114 | % |
| Risk      free interest rate                     |   |                                     | 0.56%-2.55 | % |   |   | 1.60%-4.99 | % |
| Expected      term (in years)                    |   | 0.71      - 5 years                      |       |   | 0.52      - 5 years |   |

|                               |   | 2009                    |      |   | 2008                      |   |
|------------------------------------|--------|------------------------------|-----------|--------|--------------------------------|--------|
|                               |   | SharesSubjectto      Options |      |   | Weighted      Avg.OptionPrices |   |   | SharesSubjectto      Options |   |   | Weighted      Avg.OptionPrices |   |
|                               |   |                         |      |   |                           |   |   |   |   |   |   |   |
| Outstanding      at January 1st    |   |                         | 7,760,795 |   |                           | $      | 1.01 |   |   |   | 6,045,795 |   |   | $ | 0.97 |   |
| Granted                            |   |                         | 130,000   |   |                           |   | 1.23 |   |   |   | 750,000 |   |   |   | 1.71 |   |
| Exercised                          |   |                         | (15,000   | )      |                           |   | 0.24 |   |   |   | (90,000 | ) |   |   | 0.35 |   |
| Cancelled                          |   |                         | (55,000   | )      |                           |   | 1.29 |   |   |   | (50,000 | ) |   |   | 1.34 |   |
| Outstanding      at September 30th |   |                         | 7,820,795 |   |                           | $      | 1.00 |   |   |   | 6,655,795 |   |   | $ | 1.05 |   |

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|                                   |   | SharesSubjectto Options |      |   | Weighted      Avg. OptionPrices |   | WeightedAverageRemainingContractualTerm |   | AggregateIntrinsicValue |   |
|----------------------------------------|--------|-------------------------|-----------|--------|---------------------------------|--------|-----------------------------------------|--------|-------------------------|--------|
| Outstanding      at September 30, 2009 |   |                    | 7,820,795 |   |                            | $      | 1.00                                    |   | 6.3      years          |   | $ | 921,509 |   |
|                                   |   |                    |      |   |                            |   |                                    |   |                    |   |   |   |   |
| Exercisable      at September 30, 2009 |   |                    | 5,882,795 |   |                            | $      | 0.99                                    |   | 5.7      years          |   | $ | 796,509 |   |

|                                   |   | Shares      Subjectto Options |      |   | WeightedAvg.      OptionPrices |   | WeightedAverageRemainingContractualTerm |   | AggregateIntrinsicValue |   |
|----------------------------------------|--------|-------------------------------|-----------|--------|--------------------------------|--------|-----------------------------------------|--------|-------------------------|--------|
|                                   |   |                          |      |   |                           |   |                                    |   |                    |   |
| Outstanding      at September 30, 2008 |   |                          | 6,655,795 |   |                           | $      | 1.05                                    |   | 7.0      years          |   | $ | 2,655,485 |   |
|                                   |   |                          |      |   |                           |   |                                    |   |                    |   |   |   |   |
| Exercisable      at September 30, 2008 |   |                          | 4,996,795 |   |                           | $      | 1.11                                    |   | 6.5      years          |   | $ | 2,486,567 |   |

| 12. | Income      Taxes |
|-----|-------------------|

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|                                   |   | September      30,2009 |        |   | December      31,2008 |   |
|----------------------------------------|--------|------------------------|-------------|--------|-----------------------|--------|
| Net      operating loss carry-forwards |   | $                      | 13,076,379  |   |                  | $      | 11,364,336 |   |
| Valuation      allowance               |   |                   | (13,076,379 | )      |                  |   | (11,364,336 | ) |
|                                   |   |                   |        |   |                  |   |   |   |
| Net      deferred tax assets           |   | $                      | -           |   |                  | $      | - |   |

| 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 6 months to 24 months. The costs to be incurred      are estimated and are subject to revision. As of September 30, 2009, the      total contract value of these agreements was approximately $5,469,993 and      the Company had made payments totaling $3,527,100 under the terms of the      agreements as of September 30, 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      expire on August 10, 2012.  The agreements result in annual      commitments of $200,000, $350,000 and$250,000. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | Regulation      by governmental authorities in the United States and in other countries      constitutes a significant consideration in our product development,      manufacturing and marketing strategies. The Company expects that all 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. United States federal regulations control the ongoing safety,      manufacture, storage, labeling, record keeping, and marketing of all      biopharmaceutical products intended for therapeutic purposes. The Company      believes that it is in compliance in all material respects with currently      applicable rules and regulations. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | On      August 19, 2008, the Company entered into an agreement with KCSA Strategic      Communications (“KCSA”) for KCSA to provide investor relations services to      the Company.  Under this agreement, the Company agreed to a      monthly fixed retainer amount of $7,000 commencing on August 19,      2008.  In December 2008, the monthly retainer was reduced to      $4,000 per month.  In accordance with the agreement, the      contract may be terminated by either party upon 30 days prior written      notice to the other party. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | e) | 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. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f) | On      April 20, 2009, Amarex, LLC filed suit against us 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. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | g) | On      April 27, 2009, we added a Change Order to the original Single Service      Agreement, dated March 15, 2006 with Aptuit, Inc. for packaging and      labeling of ArchexinTM for our Phase II pancreatic cancer      study.  The total cost of the Change Order is $16,800, none of      which was paid as of September 30,2009. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | h) | On      May 4, 2009, the NYSE Amex (the “Exchange”) accepted the Company’s      proposed compliance plan which addresses how the Company intends to regain      compliance with the continued listing standards within a maximum of 18      months.  On      July 7, 2009, the Company received a notice from the Exchange indicating      that it had regained compliance with the requirements of the NYSE Amex      Company Guide for the continued listing of its common stock on the      Exchange, and that its common stock therefore was no longer subject to      delisting. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | i) | 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. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | j) | On      May 22, 2009, we were notified by the Financial Industry Regulatory      Authority (“FINRA”) that FINRA, on behalf of the NYSE Amex, is conducting      a review of trading in our common stock surrounding the May 12, 2009      announcement of the results of an animal study that further demonstrates      that our drug candidate Zoraxel is a potential new-class of therapeutic      for the effective treatment of sexual dysfunction. On October 9, 2009,      FINRA notified the Company that it has closed the review of the trading      activity without further action. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | k) | On      June 10, 2009, we entered into a Research Services Agreement with      University of Maryland, Baltimore to evaluate melanoma      research.  The total cost of these services is $27,951, of which      $20,964 was paid as of September 30,2009. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | l) | On      June 16, 2009, we contracted with Baptist Cancer Institute as a clinical      site for our Phase IIa clinical study for Archexin(TM) for pancreatic      cancer.  The estimated cost for the study is $83,250, none of      which was paid as of September 30,2009. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | m) | On      June 22, 2009, we entered into a License Agreement with 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 September 30, 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. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | n) | 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 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.  As at September 30, 2009, no      work has been started on the RX-3117 research and development      program. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o) | 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 nine months period ended September 30, 2009 was $112,973 (2008      - $132,104). |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2009       |   | $      | 52,044  |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 135,982 |   |
| 2011       |   |   | 148,593 |   |
| 2012       |   |   | 158,835 |   |
| 2013       |   |   | 162,806 |   |
| Thereafter |   |   | 82,408  |   |
|       |   | $      | 740,668 |   |

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| 14. | Fair      Value Measurements |
|-----|------------------------------|

|   | 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 marketparticipants. |
|--------|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

|                             |   |   |      |   | Fair      Value Measurements as of September 30, 2009 |   |
|----------------------------------|--------|--------|-----------|--------|-------------------------------------------------------|--------|
|                             |   | Total  |      |   | Level 1                                               |   |   | Level 2 |   |   | Level 3 |   |
| Assets:                          |   |   |      |   |                                                  |   |   |   |   |   |   |   |
| Restricted      cash equivalents |   | $      | 2,100,533 |   |                                                  | $      | 2,000,533 |   |   | $ | 100,000 |   |   |   | - |   |
|                             |   |   |      |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                |   | $      | 2,100,533 |   |                                                  | $      | 2,000,533 |   |   | $ | 100,000 |   |   | $ | - |   |

|   | a) | monies      held in money market in accordance with the RELO agreement, as discussed      in noted 13, and classified within level 1 of the fair value hierarchy;      and |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | a      certificate of deposit and 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 |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                    |   |   |      |   | Fair      Value Measurements as of December 31, 2008 |   |
|-----------------------------------------|--------|--------|-----------|--------|------------------------------------------------------|--------|
|                                    |   | Total  |      |   | Level 1                                              |   |   | Level 2 |   |   | Level 3 |   |
| Assets:                                 |   |   |      |   |                                                 |   |   |   |   |   |   |   |
| State      Authority Auction Rate Bonds |   | $      | 2,999,750 |   |                                                 |   | - |   |   | $ | 2,999,750 |   |   |   | - |   |
|                                    |   |   |      |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                       |   | $      | 2,999,750 |   |                                                 | $      | - |   |   | $ | 2,999,750 |   |   | $ | - |   |

| 15. | Subsequent      Events |
|-----|------------------------|

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| Item 2 | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations |
|--------|-------------------------------------------------------------------------------------------------------|

|   | — | 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 detailed from time to time in our      filings with the Securities and Exchange Commission (the      “SEC”). |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | — | the      progress of our product developmentactivities; |
|--------|---------|---------------------------------------------------------|

|   | — | 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 regulatoryapprovals. |
|--------|---------|---------------------------------------------------|

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| Item 3 | Quantitative      and Qualitative Disclosures About MarketRisk |
|--------|----------------------------------------------------------------|

| Item 4 | Controls      and Procedures |
|--------|------------------------------|

|   | Ÿ | information      required to be disclosed by the Company in this Quarterly Report on Form      10-Q and other reports that the Company files or submits under the      Exchange Act would be accumulated and communicated to the Company’s      management, including its principal executive officer and principal      financial officer, as appropriate to allow timely decisions regarding      required disclosure; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ÿ | information      required to be disclosed by the Company in this Quarterly Report on Form      10-Q and other reports that the Company files or submits under the      Exchange Act would be recorded, processed, summarized and reported within      the time periods specified in the SEC’s rules and forms;    and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ÿ | the      Company’s disclosure controls and procedures are effective as of the end      of the period covered by this Quarterly Report on Form 10-Q to ensure that      material information relating to the Company is made known to them,      particularly during the period in which the periodic reports of the      Company, including this Quarterly Report on Form 10-Q, are being      prepared. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| Item 1 | Legal      Proceedings |
|--------|------------------------|

| Item 1A | Risk      Factors |
|---------|-------------------|

| Item 2 | Unregistered      Sales of Equity Securities and Use ofProceeds |
|--------|-----------------------------------------------------------------|

| Item 3 | Defaults      Upon Senior Securities |
|--------|--------------------------------------|

| Item 4 | Submission      of Matters to a Vote of SecurityHolders |
|--------|---------------------------------------------------------|

| Item 5 | Other      Information |
|--------|------------------------|

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Table of Contents

| Item 6 | Exhibits |
|--------|----------|

| Exhibit No |   | Description                                                                                                                                                                              |   | Location                                                                                      |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
| 10.1       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Chang Ho Ahn.                                                               |   | Filed      as Exhibit 10.1 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.2       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Rakesh Soni.                                                                |   | Filed      as Exhibit 10.2 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.3       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Tae Heum Jeong.                                                             |   | Filed      as Exhibit 10.3 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.4*      |   | 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 Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.5       |   | Securities      Purchase Agreement, dated as of June 26, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Teva Pharmaceutical Industries      Limited.                         |   | Filed      as Exhibit 10.2 to the Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.6       |   | Amendment      No. 1 to Securities Purchase Agreement, dated as of September 16, 2009, by      and between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical      Industries Limited. |   | Filed      as Exhibit 10.3 to the Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 31.1       |   | Rule 13a-14(a)/15d-14(a)      Certification (Principal Executive Officer)                                                                                                           |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 31.2       |   | Rule 13a-14(a)/15d-14(a)      Certification (Principal Financial Officer)                                                                                                           |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 32.1**     |   | Section      1350 Certificate (Principal Executive Officer)                                                                                                                              |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 32.2**     |   | Section      1350 Certificate (Principal Financial Officer)                                                                                                                              |   | Filed      herewith                                                                           |

| * | Rexahn      Pharmaceuticals, Inc. has applied for confidential treatment of certain      provisions of this exhibit with the SEC. The confidential portions of this      exhibit are marked by an asterisk and have been omitted and filed      separately with the SEC pursuant to Company’s request for confidential      treatment. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ** | This      exhibit is furnished rather than filed, and shall not be incorporated by      reference into any filing of the registrant in accordance with Item 601 of      Registration S-K |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

SIG

|                         |   | REXAHN PHARMACEUTICALS,  INC.                                                                                                                                      |
|------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                               (Registrant) |
|                         |   |                                                                                                                                                               |
|                         | By:    | /s/      Chang H. Ahn                                                                                                                                              |
| Date:      November 16, 2009 |   | Chang      H. Ahn                                                                                                                                                  |
|                         |   | Chairman      and Chief Executive Officer                                                                                                                          |
|                         |   |                                                                                                                                                               |
|                         | By:    | /s/      Tae Heum Jeong                                                                                                                                            |
| Date:      November 16, 2009 |   | Tae      Heum Jeong                                                                                                                                                |
|                         |   | Chief      Financial Officer and Secretary                                                                                                                         |

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Table of Contents

| Exhibit No |   | Description                                                                                                                                                                              |   | Location                                                                                      |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
| 10.1       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Chang Ho Ahn.                                                               |   | Filed      as Exhibit 10.1 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.2       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Rakesh Soni.                                                                |   | Filed      as Exhibit 10.2 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.3       |   | Employment      Agreement, dated as of August 10, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Tae Heum Jeong.                                                             |   | Filed      as Exhibit 10.3 to the Current Report on Form 8-K filed on August 10,      2009    |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.4*      |   | 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 Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.5       |   | Securities      Purchase Agreement, dated as of June 26, 2009, by and between Rexahn      Pharmaceuticals, Inc. and Teva Pharmaceutical Industries      Limited.                         |   | Filed      as Exhibit 10.2 to the Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 10.6       |   | Amendment      No. 1 to Securities Purchase Agreement, dated as of September 16, 2009, by      and between Rexahn Pharmaceuticals, Inc. and Teva Pharmaceutical      Industries Limited. |   | Filed      as Exhibit 10.3 to the Current Report on Form 8-K filed on September 21,      2009 |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 31.1       |   | Rule 13a-14(a)/15d-14(a)      Certification (Principal Executive Officer)                                                                                                           |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 31.2       |   | Rule 13a-14(a)/15d-14(a)      Certification (Principal Financial Officer)                                                                                                           |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 32.1**     |   | Section      1350 Certificate (Principal Executive Officer)                                                                                                                              |   | Filed      herewith                                                                           |
|       |   |                                                                                                                                                                                     |   |                                                                                          |
| 32.2**     |   | Section      1350 Certificate (Principal Financial Officer)                                                                                                                              |   | Filed      herewith                                                                           |

| * | Rexahn      Pharmaceuticals, Inc. has applied for confidential treatment of certain      provisions of this exhibit with the SEC. The confidential portions of this      exhibit are marked by an asterisk and have been omitted and filed      separately with the SEC pursuant to Company’s request for confidential      treatment. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ** | This      exhibit is furnished rather than filed, and shall not be incorporated by      reference into any filing of the registrant in accordance with Item 601 of      Registration S-K |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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