Axsome Therapeutics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Axsome Therapeutics, Inc. Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2020 ​ 2019 ​ ​ ​ ​ (Unaudited) ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 202,360,292 ​ $ 219,966,167 ​ Prepaid and other current assets ​ 911,992 ​ 413,095 ​ Total current assets ​ 203,272,284 ​ 220,379,262 ​ Equipment, net ​ 39,745 ​ 30,623 ​ Other assets ​ 317,375 ​ 139,875 ​ Total assets ​ $ 203,629,404 ​ $ 220,549,760 ​ Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 11,315,126 ​ $ 10,943,325 ​ Accrued expenses and other current liabilities ​ 9,026,412 ​ 10,949,128 ​ Loan payable, current portion ​ ​ — ​ ​ 2,602,292 ​ Total current liabilities ​ 20,341,538 ​ 24,494,745 ​ Loan payable, long-term ​ ​ 48,026,108 ​ ​ 17,332,626 ​ Total liabilities ​ ​ 68,367,646 ​ ​ 41,827,371 ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.0001 par value per share ( 10,000,000 shares authorized, none issued and outstanding at September 30, 2020 and December 31, 2019, respectively) ​ ​ — ​ ​ — ​ Common stock, $ 0.0001 par value per share ( 150,000,000 shares authorized, 37,344,201 and 36,933,217 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively) ​ 3,733 ​ 3,693 ​ Additional paid-in capital ​ 384,889,471 ​ 354,614,189 ​ Accumulated deficit ​ ( 249,631,446 ) ​ ( 175,895,493 ) ​ Total stockholders’ equity ​ 135,261,758 ​ 178,722,389 ​ Total liabilities and stockholders’ equity ​ $ 203,629,404 ​ $ 220,549,760 ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 4 Table of Contents Axsome Therapeutics, Inc. Consolidated Statements of Operations (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 14,795,493 ​ $ 15,835,573 ​ $ 52,859,850 ​ $ 34,441,796 ​ General and administrative ​ 6,331,308 ​ 3,111,662 ​ 18,537,242 ​ 8,375,131 ​ Total operating expenses ​ 21,126,801 ​ 18,947,235 ​ 71,397,092 ​ 42,816,927 ​ Loss from operations ​ ( 21,126,801 ) ​ ( 18,947,235 ) ​ ( 71,397,092 ) ​ ( 42,816,927 ) ​ Interest income (expense) ​ ( 551,002 ) ​ ( 327,825 ) ​ ( 1,091,849 ) ​ ( 860,723 ) ​ Tax credit ​ — ​ 139,448 ​ — ​ 139,448 ​ Loss on extinguishment of debt ​ ( 1,247,012 ) ​ — ​ ( 1,247,012 ) ​ — ​ Net loss ​ $ ( 22,924,815 ) ​ $ ( 19,135,612 ) ​ $ ( 73,735,953 ) ​ $ ( 43,538,202 ) ​ Net loss per common share, basic and diluted ​ $ ( 0.61 ) ​ $ ( 0.56 ) ​ $ ( 1.98 ) ​ $ ( 1.29 ) ​ Weighted average common shares outstanding, basic and diluted ​ 37,311,726 ​ 34,445,489 ​ 37,158,513 ​ 33,771,671 ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 5 Table of Contents ​ Axsome Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional Accumulated Total stockholders’ ​ ​ Shares ​ Amount ​ paid-in capital ​ deficit ​ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2018 30,087,213 ​ 3,009 ​ 108,485,219 ​ ( 107,550,307 ) ​ 937,921 ​ Stock-based compensation ​ — ​ ​ — ​ ​ 1,256,310 ​ ​ — ​ ​ 1,256,310 ​ Issuance of common stock upon exercise of options 52,819 ​ ​ 5 ​ ​ 410,157 ​ ​ — ​ ​ 410,162 ​ Issuance of warrants upon debt financing ​ — ​ ​ — ​ ​ 426,000 ​ ​ — ​ ​ 426,000 ​ Issuance of common stock upon financing ​ 3,164,015 ​ ​ 316 ​ ​ 24,983,366 ​ ​ — ​ ​ 24,983,682 ​ Net loss — ​ ​ — ​ ​ — ​ ​ ( 10,640,376 ) ​ ​ ( 10,640,376 ) ​ Balance at March 31, 2019 ​ 33,304,047 ​ $ 3,330 ​ $ 135,561,052 ​ $ ( 118,190,683 ) ​ $ 17,373,699 ​ Stock-based compensation ​ — ​ ​ — ​ ​ 888,556 ​ ​ — ​ ​ 888,556 ​ Issuance of common stock upon exercise of options 59,720 ​ ​ 6 ​ ​ 205,330 ​ ​ — ​ ​ 205,336 ​ Issuance of common stock upon exercise of warrants ​ 24,389 ​ ​ 2 ​ ​ 144,868 ​ ​ — ​ ​ 144,870 ​ Issuance of warrants upon debt financing ​ — ​ ​ — ​ ​ ( 39,000 ) ​ ​ — ​ ​ ( 39,000 ) ​ Issuance of common stock upon financing ​ 942,285 ​ ​ 95 ​ ​ 19,471,603 ​ ​ — ​ ​ 19,471,698 ​ Net loss — ​ ​ — ​ ​ — ​ ​ ( 13,762,214 ) ​ ​ ( 13,762,214 ) ​ Balance at June 30, 2019 ​ 34,330,441 ​ $ 3,433 ​ $ 156,232,409 ​ $ ( 131,952,897 ) ​ $ 24,282,945 ​ Stock-based compensation ​ — ​ ​ — ​ ​ 1,156,435 ​ ​ — ​ ​ 1,156,435 ​ Issuance of common stock upon exercise of options ​ 129,218 ​ ​ 13 ​ ​ 483,825 ​ ​ — ​ ​ 483,838 ​ Issuance of common stock upon exercise of warrants ​ 37,187 ​ ​ 4 ​ ​ 34,986 ​ ​ — ​ ​ 34,990 ​ Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 19,135,612 ) ​ ​ ( 19,135,612 ) ​ Balance at September 30, 2019 ​ 34,496,846 ​ $ 3,450 ​ $ 157,907,655 ​ $ ( 151,088,509 ) ​ $ 6,822,596 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2019 36,933,217 ​ 3,693 ​ 354,614,189 ​ ( 175,895,493 ) ​ 178,722,389 ​ Stock-based compensation ​ — ​ ​ — ​ ​ 2,133,530 ​ ​ — ​ ​ 2,133,530 ​ Issuance of common stock upon exercise of options 60,186 ​ ​ 6 ​ ​ 629,750 ​ ​ — ​ ​ 629,756 ​ Issuance of common stock related to license agreement ​ 82,019 ​ ​ 8 ​ ​ 7,155,329 ​ ​ — ​ ​ 7,155,337 ​ Net loss — ​ ​ — ​ ​ — ​ ​ ( 32,484,146 ) ​ ​ ( 32,484,146 ) ​ Balance at March 31, 2020 37,075,422 ​ $ 3,707 ​ $ 364,532,798 ​ $ ( 208,379,639 ) ​ $ 156,156,866 ​ Stock-based compensation ​ — ​ ​ — ​ ​ 4,148,025 ​ ​ — ​ ​ 4,148,025 ​ Issuance of common stock upon exercise of options 20,428 ​ ​ 2 ​ ​ 190,407 ​ ​ — ​ ​ 190,409 ​ Issuance of common stock upon exercise of warrants ​ 29,982 ​ ​ 3 ​ ​ - ​ ​ — ​ ​ 3 ​ Issuance of common stock upon financing ​ 141,678 ​ ​ 14 ​ ​ 12,074,985 ​ ​ — ​ ​ 12,074,999 ​ Net loss — ​ ​ — ​ ​ — ​ ​ ( 18,326,992 ) ​ ​ ( 18,326,992 ) ​ Balance at June 30, 2020 37,267,510 ​ $ 3,726 ​ $ 380,946,215 ​ $ ( 226,706,631 ) ​ $ 154,243,310 ​ Stock-based compensation ​ ​ ​ ​ ​ ​ ​ 2,868,818 ​ ​ — ​ ​ 2,868,818 ​ Issuance of common stock upon exercise of options ​ 42,842 ​ ​ 4 ​ ​ 190,222 ​ ​ — ​ ​ 190,226 ​ Issuance of common stock upon exercise of warrants ​ 33,849 ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 3 ​ Issuance of warrants upon debt financing ​ — ​ ​ — ​ ​ 884,216 ​ ​ — ​ ​ 884,216 ​ Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 22,924,815 ) ​ ​ ( 22,924,815 ) ​ Balance at September 30, 2020 ​ 37,344,201 ​ $ 3,733 ​ $ 384,889,471 ​ $ ( 249,631,446 ) ​ $ 135,261,758 ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 6 Table of Contents Axsome Therapeutics, Inc. Consolidated Statements of Cash Flows (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ 2020 2019 ​ ​ ​ ​ ​ ​ ​ Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 73,735,953 ) ​ $ ( 43,538,202 ) ​ Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense ​ 9,150,373 ​ 3,301,301 ​ Non-cash research and development license expense ​ ​ 7,155,337 ​ ​ — ​ Amortization of debt discount ​ 491,009 ​ 471,742 ​ Loss on extinguishment of debt ​ ​ 1,247,012 ​ ​ — ​ Depreciation ​ 16,482 ​ 31,938 ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other current assets ​ ( 498,897 ) ​ 652,015 ​ Other assets ​ ( 177,500 ) ​ ( 56,624 ) ​ Accounts payable ​ 371,801 ​ 5,760,114 ​ Accrued expenses and other current liabilities ​ ( 1,922,716 ) ​ 4,569,808 ​ Net cash used in operating activities ​ ( 57,903,052 ) ​ ( 28,807,908 ) ​ Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ Purchases of equipment ​ ( 25,604 ) ​ ( 14,660 ) ​ Net cash used in investing activities ​ ( 25,604 ) ​ ( 14,660 ) ​ Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ Proceeds from issuance of common stock upon financing, net ​ 12,074,999 ​ 44,455,380 ​ Proceeds from issuance of term loan ​ ​ 50,000,000 ​ ​ 20,000,000 ​ Payment of debt financing costs ​ ​ ( 1,102,609 ) ​ ​ — ​ Repayment of principal on term loan ​ ​ ( 21,660,000 ) ​ ( 7,238,889 ) ​ Proceeds from issuance of common stock upon exercise of options ​ ​ 1,010,391 ​ ​ 1,099,336 ​ Proceeds from issuance of common stock upon exercise of warrants ​ ​ — ​ ​ 179,860 ​ Net cash (used in) provided by financing activities ​ 40,322,781 ​ 58,495,687 ​ Net (decrease) increase in cash ​ ( 17,605,875 ) ​ 29,673,119 ​ Cash at beginning of period ​ 219,966,167 ​ 13,968,742 ​ Cash at end of period ​ $ 202,360,292 ​ $ 43,641,861 ​ Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ ​ Interest paid ​ $ 1,179,337 ​ $ 979,167 ​ Supplemental disclosures of non-cash financing activity: ​ ​ ​ ​ ​ ​ ​ Issuance of warrants in connection with debt financing ​ $ 884,216 ​ $ 387,000 ​ Shares of common stock issued in connection with license agreement with Pfizer, Inc. ​ $ 8,000,000 ​ $ — ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 7 Table of Contents Axsome Therapeutics, Inc. Notes to Consolidated Financial Statements (Unaudited) ​ Note 1. Nature of Business and Basis of Presentation Axsome Therapeutics, Inc. (“Axsome” or the “Company”) is a biopharmaceutical company developing novel therapies for central nervous system (“CNS”) disorders for which there are limited treatment options. By focusing on this therapeutic area, the Company is addressing significant and growing markets where current treatment options are limited or inadequate. The Company’s core CNS portfolio includes five product candidates, AXS-05, AXS-07, AXS-09, AXS-12, and AXS-14, which are being developed for multiple indications. The Company aims to become a fully integrated biopharmaceutical company that develops and commercializes differentiated therapies that expand the treatment options available to caregivers and improve the lives of patients living with CNS disorders. The Company was incorporated on January 12, 2012 in the State of Delaware. The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 12, 2020. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, which are normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Liquidity and Capital Resources The Company has incurred operating losses since its inception, and expects to continue to incur operating losses for the foreseeable future and may never become profitable. As of September 30, 2020, the Company had an accumulated deficit of $ 249.6 million. The Company’s primary sources of cash have been proceeds from the issuance and sale of its common stock in public offerings. The Company has not yet commercialized any of its product candidates and cannot be sure if it will ever be able to do so. The Company’s ability to achieve profitability depends on a number of factors, including its ability to obtain regulatory approval for its product candidates, successfully complete any post-approval regulatory obligations and successfully commercialize its product candidates alone or in partnership. The Company may continue to incur substantial operating losses even if it begins to generate revenues from its product candidates. The Company believes its existing cash will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the date of this filing. The actual amount of cash that the Company will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of clinical trials for its product candidates. The Company may use a combination of public and private equity offerings, debt financings, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements if market conditions are favorable or in light of other strategic considerations to finance its future cash needs. The Company’s common stock is listed on the Nasdaq Global Market and trades under the symbol “AXSM”. 8 Table of Contents Impact of COVID-19 In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency in the United States on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared COVID-19 a pandemic. The full impact of the COVID-19 pandemic is unknown and rapidly evolving. While the potential economic impact brought by and over the duration of the COVID-19 pandemic may be difficult to assess or predict, the COVID-19 pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market volatility resulting from the COVID-19 pandemic could affect the Company’s business. Given the nature and type of the Company’s short-term investments, the Company does not believe the COVID-19 pandemic has had or will have a material impact on the Company’s current investment liquidity. Note 2. Summary of Significant Accounting Policies Significant Risks and Uncertainties The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s product candidates; the Company’s ability to obtain regulatory approval to market its products, if approved; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, the Company’s products, if approved; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, if approved; and the Company’s ability to raise additional financing. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve and maintain profitability. Use of Estimates Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these financial statements, management used significant estimates in the following areas, among others: stock-based compensation expense; the determination of the fair value of the warrants; the accounting for research and development costs; and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Foreign Currency Translation Expenses denominated in foreign currency are translated into U.S. dollars at the exchange rate on the date the expense is incurred. Assets and liabilities of foreign operations are translated at period-end exchange rates. The effect of exchange rate fluctuations on translating foreign currency into U.S. dollars is included in the Statements of Operations and is not material to the Company’s financial statements. 9 Table of Contents Segment and Geographic Information Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment, which is the business of developing novel therapies for the management of CNS disorders. Cash Equivalents The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. The Company’s cash and cash equivalents includes holdings in checking and overnight sweep accounts. The Company’s cash equivalents, which are money market funds held in a sweep account, are measured at fair value on a recurring basis. As of September 30, 2020, the balance of cash and cash equivalents was $ 202.4 million, which approximates fair value and was determined based upon Level 1 inputs. The sweep account is valued using quoted market prices with no valuation adjustments applied. Accordingly, these securities are categorized as Level 1. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company maintains its cash at financial institutions, which at times, exceed federally insured limits. At September 30, 2020, the majority of the Company’s cash was held by one financial institution and the amount on deposit was in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not recognized any losses from credit risks on such accounts since inception. The Company believes it is not exposed to significant credit risk on cash. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1 —Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 —Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly. Level 3 —Inputs that are unobservable for the asset or liability. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments are cash, accounts payable, accrued liabilities, and current and long-term debt. The carrying values for cash, accounts payable and accrued liabilities reported in the accompanying consolidated financial statements approximate their respective fair values due to their short-term maturities. The carrying value of debt on the Company’s balance sheet, the Hercules Term Loan (see Note 4 – Loan and Security Agreement), is estimated to approximate its fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics. 10 Table of Contents Debt Issuance Costs Debt issuance costs consist of costs incurred in obtaining long-term financing. These costs are classified on the consolidated balance sheet as a direct deduction from the carrying amount of the related debt liability. These expenses are deferred and amortized as part of interest expense in the consolidated statement of operations using the effective interest rate method over the term of the debt agreement. Equipment Equipment consists primarily of computer equipment and is recorded at cost. Equipment is depreciated on a straight-line basis over its estimated useful life, which the Company estimates to be three years . When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in operating expenses. Research and Development Costs Research and development expenses primarily consist of costs incurred in performing research and development activities, including preclinical studies, clinical trials, manufacturing costs, regulatory costs, employee salaries and benefits, stock-based compensation expense, contract services, including external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), facilities costs, overhead costs, depreciation, and other related costs. Generally, research and development costs are expensed as incurred. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. The Company makes estimates of costs incurred in relation to clinical site costs. The Company analyzes the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability. Significant judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period. The Company reviews and accrues clinical trial study expenses based on work performed and relies upon estimates of those costs applicable to the stage of completion of a study. With respect to clinical site costs, the financial terms of these agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors such as the achievement of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions. The objective of the Company’s policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical site costs are recognized based on the Company’s estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract. Income Taxes Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company estimates an annual effective tax rate of 0 % for the year ending December 31, 2020 and has not recorded an income tax benefit for the nine months ended September 30, 2020 and 2019 since it determined that a full valuation allowance is required against the Company’s deferred tax assets. 11 Table of Contents The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position as well as consideration of the available facts and circumstances. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. As of September 30, 2020, the Company does not believe any material uncertain tax positions are present. In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of income tax expense. Stock-Based Compensation For stock options issued, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The Black-Scholes model takes into account the expected volatility of the Company’s common stock, expected dividends of the Company’s common stock, the risk-free interest rate, the estimated life of the option, the closing market price of the Company’s common stock and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management’s judgment. In addition, the Company recognizes expense for equity awards forfeitures as they occur. For restricted stock units (“RSUs”) issued, the Company issues them in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. Prior to January 1, 2020, the Company only granted stock options. Beginning in 2020, for grants to employees, the Company granted a mix of stock options and RSUs. For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term. For awards subject to performance-based vesting conditions, the Company recognizes stock-based compensation expense using the accelerated attribution method when it is probable that the performance condition will be achieved. The expense related to the stock-based compensation is recorded within the same financial statement line item as the grantee’s cash compensation. The Company’s policy upon exercise of stock options and RSUs is that shares will be issued as new shares from the Company’s 2015 Omnibus Incentive Compensation Plan available share pool. Basic and Diluted Net Loss per Common Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options, and RSUs, which would result in the issuance of incremental shares of common stock. As the impact of these items is anti-dilutive during periods of net loss, there was no difference between basic and diluted net loss per share of common stock for the three and nine months ended September 30, 2020 and 2019. Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. ​ ​ 12 Table of Contents Note 3. Accrued Expenses and Other Current Liabilities At September 30, 2020 and December 31, 2019 accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 5,472,963 ​ $ 8,209,594 ​ Accrued compensation ​ ​ 2,522,556 ​ ​ 2,056,356 ​ Other ​ 1,030,893 ​ 683,178 ​ Total ​ $ 9,026,412 ​ $ 10,949,128 ​ ​ Note 4. Loan and Security Agreement Silicon Valley Bank In November 2016, the Company entered into an initial term loan agreement with Silicon Valley Bank (“SVB”) for a total of $ 20.0 million (“2016 Original Term Loan”). The three -tranche term loan consisted of an initial $ 10.0 million tranche funded upon closing, and the remaining tranches were not drawn upon as the Company did not achieve the conditional criteria to access the second and third tranches before the specified dates and the $ 10.0 million in additional term loan advances subsequently expired. Therefore, the Company amended the 2016 Original Term Loan to provide an additional $ 4.0 million growth capital loan (“2016 Amended Term Loan”). The Company’s obligations under the 2016 Amended Term Loan, along with the ability to draw down on the additional $ 4.0 million tranche, were considered to be performed and completed in connection with the establishment of the 2019 Term Loan (as defined below). In March 2019, the Company entered into a $ 24.0 million growth capital term facility (the “2019 Term Loan”) with SVB and WestRiver Innovation Lending Fund VIII, L.P. (“WestRiver”). The 2019 Term Loan consisted of an initial $ 20.0 million tranche, which was funded upon closing, and a second tranche of $ 4.0 million, which was available to be drawn subject to completion of a clinical milestone prior to August 15, 2019. A portion of the first tranche was used to satisfy the Company’s existing obligations under and fully extinguish the 2016 Amended Term Loan, which at the commencement of the 2019 Term Loan consisted of $ 5.6 million in outstanding principal balance and $ 0.85 million as a final payment fee. The 2019 Term Loan was subsequently amended in July 2019 (the “First Amendment to the 2019 Term Loan”) to extend the interest-only monthly payment period for 18 months from the date of the 2019 Term Loan and the Company’s ability to draw down on the second tranche of $ 4.0 million was extended until December 31, 2019. The second tranche of $ 4.0 million was not drawn down by the Company. The 2019 Term Loan accrued interest at a fixed rate of 7.5 %. Interest on the 2019 Term Loan and the First Amendment to the 2019 Term Loan was payable monthly beginning April 1, 2019 and principal was due starting on October 1, 2020. In addition, the Company was required to make a final payment of $ 1.26 million on February 1, 2023, the maturity date of the 2019 Term Loan. However, the Company subsequently entered into the 2020 Term Loan (as defined below), the proceeds of which were used in part to fully satisfy and extinguish the 2019 Term Loan, as amended. In connection with the 2019 Term Loan, the Company issued SVB and WestRiver a warrant to purchase shares of common stock. These warrants were fully exercised and no longer outstanding as of September 30, 2020 (see Note 6 – Stockholders’ Equity under “Warrants” section for further discussion). In September 2020, the Company terminated and repaid all amounts outstanding under the 2019 Term Loan and recorded a loss on extinguishment of the loan (see further discussion below). 13 Table of Contents Hercules Capital, Inc. In September 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc., in its capacity as administrative agent and collateral agent and as a lender (in such capacity, the “Agent” or “Hercules”) and the other financial institutions that from time to time become parties to the Loan Agreement as lenders (collectively, the “Lenders”). The Loan Agreement provides for term loans in an aggregate principal amount of up to $ 225.0 million under multiple tranches (the “2020 Term Loan”). The tranches consist of (i) a first tranche consisting of term loans in an aggregate principal amount of $ 60.0 million, of which $ 50.0 million was funded to the Company on the Closing Date (the “First Advance”), and of which the remaining $ 10.0 million is available at the Company’s option at any time through September 15, 2021; (ii) subject to the approval of the Company’s AXS-05 product candidate for the treatment of major depressive disorder (the “First Milestone”), a second tranche consisting of additional term loans in an aggregate principal amount of up to $ 35.0 million, available at the Company’s option beginning on the date that the First Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022; (iii) subject to the approval of the Company’s AXS-07 product candidate for the treatment of migraine (the “Second Milestone”), a third tranche consisting of additional term loans in an aggregate principal amount of up to $ 20.0 million, available at the Company’s option beginning on the date that the Second Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022; (iv) subject to the achievement of either the First Milestone or the Second Milestone and so long as the Company is in compliance with a required ratio of Lender indebtedness to net product revenue, a fourth tranche consisting of additional term loans in an aggregate principal amount of up to $ 60.0 million, available at the Company’s option beginning on January 1, 2022 and continuing through March 31, 2023; and (v) subject to approval by the Lenders’ in their discretion, a fifth tranche of additional term loans in an aggregate principal amount of up to $ 50.0 million, available through December 31, 2023. The Company intends to use the proceeds of the Term Loan Advances for working capital and general corporate purposes. In addition, approximately $ 21.5 million of the proceeds from the First Advance was used to satisfy in full and retire the Company’s indebtedness under the 2019 Term Loan, as amended. The outstanding principal balance of the term loans bears interest at an annual rate equal to the greater of either (i) the prime rate as reported in The Wall Street Journal plus 5.90 % or (ii) 9.15 % , subject to an ability by the Company, during certain periods (each, a “PIK Deferral Period”), to request a reduction of the then-effective cash-pay interest rate by up to 1.00 % per annum (the “Cash Interest Reduction Amount”). Accrued interest is payable monthly following the funding of each term loan. During each PIK Deferral Period, the term loans will bear cash-pay interest, at the reduced amount, and will accrue paid-in-kind interest at a rate equal to the Cash Interest Reduction Amount multiplied by 1.15 , which amount will be capitalized and added to the outstanding principal balance of the term loans on each monthly interest payment date during the PIK Deferral Period. The Company is required to repay the term loans in equal installments of principal and interest commencing on May 1, 2023 through October 1, 2025 (the “Maturity Date”). However, if either the First Milestone or the Second Milestone are achieved prior to May 1, 2023, and no default exists, the amortization commencement date will be automatically extended to November 1, 2023; if both the First Milestone and the Second Milestone are achieved prior to November 1, 2023, and no default exists, the amortization commencement date will be further automatically extended to May 1, 2024 and if any term loans are funded under the fourth tranche noted above prior to May 1, 2024, and no default exists, the amortization commencement date will be further automatically extended to November 1, 2024. On the Maturity Date, all unpaid term loans will be due and payable. As collateral for the obligations, the Company has granted to Hercules a senior security interest in all of Company’s right, title, and interest in, to and under all of Company’s property, inclusive of intellectual property, which includes one of the Company’s existing license agreements (the “License Agreement”) with Antecip Bioventures II LLC (“Antecip”) , an entity owned by Axsome’s Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., subject to limited exceptions . Antecip consented to the collateral assignment of the License Agreement, among other things, under a direct agreement (the “Direct Agreement”) with the Company and Hercules. 14 Table of Contents T he Loan Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens (including a negative pledge on intellectual property and other assets), guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. At the initial closing, there were no applicable financial covenants contained in the Loan Agreement. Only after additional amounts are drawn down by the Company in the future, if the Company decides to do so, under the terms set forth in the Loan Agreement, there will be certain limited financial covenants that will apply, including: ● E ffective upon the date the outstanding principal amount of the advances under the Loan Agreement equals or exceeds $ 55.0 million, which has not yet occurred, the Company at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to $ 15.0 million, plus the amount of the Company’s accounts payable under U.S. GAAP not paid after the 180 th day following the invoice for such account payable (such amount, the “Qualified Cash A/P Amount”). ​ ● E ffective upon the later of (i) the last calendar month of the calendar quarter that is twelve months following the earlier of (x) the date that the First Milestone is achieved and (y) the date that the Second Milestone is achieved, or (ii) the date on which the outstanding principal amount of the term loan advances under the Loan Agreement is equal to or greater than $ 65.0 million, the Company is required to (A) ensure that at all times its market capitalization exceeds $ 2.0 billion, and that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 65 % of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, (B) ensure that at all times that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 100 % of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, or (C) achieve at least 60 % of the net product revenue solely from the sale of AXS-05 and AXS-07 (which may include royalty, profit sharing, or sales-based milestone revenue recognized in accordance with GAAP, but will not include any upfront or non-sales-based milestone payments under business development or licensing transactions), measured on a trailing six-month basis as of the date of the Company’s most recent quarterly financial statement, determined on a quarterly basis. ​ ● R estrictions on the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions. The Company’s obligations under the Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Borrower’s business, operations or financial or other condition. In addition, the Company is required to pay a final payment fee equal to the greater of (A) $ 2,910,000 and (B) 4.85 % of the aggregate amount of all term loan advances minus the aggregate amount of repayments made. The final payment fee is being accreted and amortized into interest expense using the effective interest rate method over the term of the loan. The Company may, at its option prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.0 % of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the Closing Date, (ii) 1.5 % of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the Closing Date, and (iii) 1.0 % of the principal amount prepaid if the prepayment occurs on or after the second anniversary and prior to the third anniversary of the Closing Date. 15 Table of Contents The Company evaluated whether the Hercules Term Loan entered into in September 2020 represented a debt modification or extinguishment in accordance with ASC 470-50, Debt – Modifications and Extinguishments . As a result of the repayment and retirement of the SVB Loan, the loan was accounted for by the Company under the extinguishment accounting model. The Company recorded a loss on extinguishment of debt of approximately $ 1.2 million on the Company’s statement of operations for the nine months ended September 30, 2020, representing a prepayment premium, the unamortized discount of the SVB Loan and the write-off of deferred financing costs. Loan Interest Expense and Amortization The Company incurred interest expense of $ 421,004 and $ 1,179,338 for the three and nine months ended September 30, 2020, respectively, as compared to $ 383,334 and $ 979,167 for the three and nine months ended September 30, 2019, respectively. In addition, amortization of the final payment fee was $ 87,425 and $ 325,453 for the three and nine months ended September 30, 2020, respectively, as compared to $ 120,322 and $ 316,246 for the three and nine months ended September 30, 2019, respectively. The outstanding debt and unamortized debt discount balances are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ Total Outstanding Debt ​ $ 50,000,000 ​ $ 20,000,000 Add: accreted liability of final payment fee ​ ​ 7,690 ​ ​ 404,364 Less: unamortized debt discount, long-term ​ ​ ( 1,981,582 ) ​ ​ ( 405,071 ) Less: current portion of long-term debt ​ ​ — ​ ​ ( 2,666,667 ) Loan payable, long-term ​ $ 48,026,108 ​ $ 17,332,626 ​ ​ ​ ​ ​ ​ ​ Current portion of long-term debt ​ $ — ​ $ 2,666,667 Less: current portion of unamortized debt discount ​ ​ — ​ ​ ( 64,375 ) Loan payable, current portion ​ $ — ​ $ 2,602,292 ​ In connection with the entry into the Hercules Term Loan, the Company issued to Hercules a warrant to purchase a number of shares of the Company’s common stock equal to 2.5 % of the aggregate amount of the Term Loan Advances that are funded. Further information on warrants issued related to this loan and prior debt financings and amendments are disclosed in Note 6 - Stockholders’ Equity under the “Warrants” section. ​ Amortization of the debt discount in relation to warrants issued as described above was $ 46,920 and $ 165,556 for the three and nine months ended September 30, 2020, as compared to $ 56,602 and $ 155,496 for the three and nine months ended September 30, 2019, respectively. ​ Scheduled Principal Payments on Outstanding Debt, as of September 30, 2020, are as follows: ​ ​ ​ ​ ​ ​ 2020 ​ ​ — ​ 2021 ​ ​ — ​ 2022 ​ ​ — ​ 2023 ​ ​ 12,239,903 ​ 2024 ​ ​ 19,812,629 ​ 2025 ​ ​ 17,947,468 ​ Total principal payments outstanding ​ $ 50,000,000 ​ ​ ​ The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the nine months ended September 30, 2020. ​ 16 Table of Contents Note 5. Net Loss per Common Share The following table sets forth the computation of basic and diluted net loss per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, Nine months ended September 30, ​ 2020 2019 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted net loss per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 22,924,815 ) ​ $ ( 19,135,612 ) ​ $ ( 73,735,953 ) ​ $ ( 43,538,202 ) Weighted average common shares outstanding—basic and diluted ​ 37,311,726 ​ 34,445,489 ​ 37,158,513 ​ 33,771,671 Net loss per common share—basic and diluted ​ $ ( 0.61 ) ​ $ ( 0.56 ) ​ $ ( 1.98 ) ​ $ ( 1.29 ) ​ The following potentially dilutive securities outstanding at September 30, 2020 and 2019 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2020 2019 ​ ​ ​ ​ ​ Stock options 3,909,855 3,184,842 ​ Restricted stock units ​ 155,922 ​ — ​ Warrants 15,541 110,603 ​ Total 4,081,318 3,295,445 ​ ​ ​ ​ ​ Note 6. Stockholders’ Equity Capital Structure In May 2019, the Company entered into a Sales Agreement with SVB Leerink (the “May 2019 Sales Agreement”), pursuant to which the Company could sell up to $ 50 million in shares of its common stock from time to time through SVB Leerink, acting as the Company’s sales agent, in one or more at-the-market offerings utilizing the 2016 Shelf Registration Statement (as defined below). SVB Leerink was entitled to receive a commission of 3.0 % of the gross proceeds for any shares sold under the May 2019 Sales Agreement. The shares that were unsold under the May 2019 Sales Agreement at the time of the expiration of the 2016 Shelf Registration Statement were rolled over to the December 2019 Sales Agreement (see below). In December 2019, the Company entered into a new Sales Agreement with SVB Leerink (the “December 2019 Sales Agreement”), pursuant to which the Company may sell up to $ 80 million in shares of the Company’s common stock from time to time through SVB Leerink, acting as the Company’s sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0 % of the gross proceeds for any shares sold under the December 2019 Sales Agreement. The Company received approximately $ 12.4 million in gross proceeds through the sale of 141,678 shares, of which net proceeds were approximately $ 12.1 million during the nine months ended September 30, 2020. In December 2019, the Company completed an underwritten public offering, whereby the Company sold 2,300,000 shares of common stock at a public offering price of $ 87.00 per share. The Company received gross proceeds of approximately $ 200.1 million and net proceeds of approximately $ 187.1 million, after deducting underwriting discounts and offering expenses. The holders of shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings. The holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors. 17 Table of Contents Shelf Registration Statement On December 5, 2019, the Company filed an automatic shelf registration statement (“2019 Shelf Registration Statement”) with the Securities and Exchange Commission (“SEC”) for the issuance of common stock, preferred stock, warrants, rights, debt securities and units. The 2019 Shelf Registration Statement was automatically effective upon filing with the SEC and is currently the Company’s only active shelf registration statement. The 2019 Shelf Registration Statement was filed in part to replace the Company’s previous non-automatic shelf registration statement, which became effective on December 16, 2016, and provided for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of $ 150.0 million (the “2016 Shelf Registration Statement”). The 2016 Shelf Registration Statement expired on December 16, 2019. Through the date of this report, the Company has issued common stock of approximately $ 219.8 million pursuant to the 2019 Shelf Registration Statement. Under SEC rules, the 2019 Shelf Registration Statement allows for the potential future offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of the Company’s common stock, preferred stock, debt securities, and units at indeterminate prices. At the time any of the securities covered by the 2019 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering. ​ Equity Incentive Plans ​ There were 4,134,138 shares available for the issuance of stock options or stock-based awards under the Company’s 2015 Omnibus Incentive Compensation Plan at September 30, 2020. Stock Options The following table sets forth the stock option activity for the nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ average ​ Aggregate ​ ​ Number ​ average ​ contractual ​ intrinsic ​ ​ of shares ​ exercise price ​ term ​ value Outstanding at December 31, 2019 3,458,447 ​ $ 10.19 ​ ​ ​ ​ ​ Granted ​ 642,509 ​ ​ 54.27 ​ ​ ​ ​ ​ ​ Exercised ​ ( 123,456 ) ​ ​ 8.18 ​ ​ ​ ​ ​ ​ Forfeited ​ ( 67,645 ) ​ ​ 41.57 ​ ​ ​ ​ ​ ​ Expired ​ — ​ ​ — ​ ​ ​ ​ ​ ​ Outstanding at September 30, 2020 3,909,855 ​ $ 16.95 7.5 ​ $ 213,789,330 ​ Vested and expected to vest at September 30, 2020 3,903,686 ​ $ 16.98 7.5 ​ $ 213,357,801 ​ Exercisable at September 30, 2020 2,319,685 ​ $ 9.99 6.2 ​ $ 142,292,294 ​ ​ The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The expected term of the Company’s stock options has been determined utilizing the “simplified” method as described in the SEC’s Staff Accounting Bulletin No. 107 relating to stock-based compensation. The simplified method was chosen because the Company has limited historical option exercise experience due to its short operating history. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Expected volatility is based on historical volatilities of similar entities within the Company’s industry which were commensurate with the Company’s expected term assumption. 18 Table of Contents The weighted average grant date fair value of options granted was $ 34.73 per option for the nine months ended September 30, 2020. As of September 30, 2020, there was $ 26.9 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted average period of 3.0 years. These amounts do not include 11,222 options outstanding as of September 30, 2020, which are performance-based and vest upon the achievement of certain corporate milestones. Stock‑based compensation will be measured and recorded if and when it is probable that the milestone will occur. Restricted Stock Units In 2020, the Company began granting RSUs covering an equal number of its shares of common stock to employees. The fair value of RSUs is determined on the date of the grant based on the market price of its shares of common stock as of that date. The fair value of the RSUs is recognized as an expense ratably over the vesting period of four years . As of September 30, 2020, total compensation cost not yet recognized related to unvested RSUs was $ 4.7 million, which is expected to be recognized over a weighted-average period of 3.7 years. The following table sets forth the RSU activity for the nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ average ​ ​ ​ Number ​ grant date ​ ​ ​ of shares ​ fair value ​ Outstanding at December 31, 2019 — ​ $ — Granted ​ 156,378 ​ ​ 34.67 ​ Released ​ — ​ ​ — ​ Forfeited ​ ( 456 ) ​ ​ 45.14 ​ Outstanding at September 30, 2020 155,922 ​ $ 34.64 ​ Stock-based compensation expense recognized for the three and nine months ended September 30, 2020 and 2019 was allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ Nine months ended September 30, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 860,744 ​ $ 286,234 ​ $ 2,532,649 ​ $ 652,666 ​ General and administrative ​ 2,008,074 ​ 870,201 ​ 6,617,724 ​ 2,648,635 ​ Total ​ $ 2,868,818 ​ $ 1,156,435 ​ $ 9,150,373 ​ $ 3,301,301 ​ ​ ​ Warrants The following table summarizes warrant activity for the nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ average ​ ​ Warrants ​ exercise price Outstanding at December 31, 2019 69,656 ​ $ 7.21 Issued ​ 15,541 ​ ​ 80.43 Exercised ​ ( 69,656 ) ​ ​ 7.21 Outstanding at September 30, 2020 15,541 ​ $ 80.43 ​ 19 Table of Contents Outstanding Warrants ​ In connection with the first advance of the 2020 Term Loan, Hercules Capital Inc. received warrants to purchase an aggregate 15,541 shares of the Company’s common stock at an exercise price of $ 80.43 per share, which was the volume weighted average price of the Company’s common stock over the ten -day trading period immediately preceding the initial closing, subject to certain limited adjustments as specified in the warrant. The warrants are exercisable for seven years from the date of issuance. The warrants were classified as a component of stockholders’ equity. T he relative fair value of the warrants of approximately $ 0.9 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The discount on the debt is being amortized to interest expense over the term of the debt utilizing the effective interest rate method. ​ Fully Exercised Warrants ​ In connection with the 2016 Original Term Loan, SVB and Life Science Loans, LLC (“Life Science”) received warrants to purchase an aggregate of 65,228 shares of the Company’s common stock at an exercise price of $ 7.41 per share, which were exercisable for seven years from the date of issuance. The warrants were classified as a component of stockholders’ equity. In September 2019, SVB exercised in full the 32,614 warrants it received in connection with the 2016 Original Term Loan via a cashless exercise. The Company issued SVB 24,328 shares of its common stock in connection with the warrant exercise, and did not receive any cash proceeds. In addition, in May 2020, Life Science exercised in full the 32,614 warrants it received in connection with the 2016 Original Term Loan via a cashless exercise. The Company issued Life Science 29,982 shares of its common stock in connection with the warrant exercise and did not receive any cash proceeds. As of September 30, 2020, none of the warrants issued in connection with the 2016 Original Term Loan were outstanding. ​ Additionally, in connection with the 2016 Amended Term Loan, SVB and WestRiver received warrants to purchase an aggregate 15,750 shares of the Company’s common stock at an exercise price of $ 3.06 per share, which were exercisable for seven years from the date of issuance. Both warrants issued in connection with the 2016 Original Term Loan and the 2016 Amended Term Loan were classified as a component of stockholders’ equity. Prior to entering into the 2019 Term Loan, the fair value of these warrants and the closing costs were recorded as debt discounts and were being amortized using the effective interest rate method over the term of the loan. In August 2019, SVB exercised in full the 7,875 warrants it received in connection with the 2016 Amended Term Loan via a cashless exercise. The Company issued SVB 6,969 shares of its common stock in connection with the warrant exercise, and did not receive any cash proceeds. In August 2020, WestRiver exercised in full the 7,875 warrants it received in connection with the 2016 Amended Term Loan via a cashless exercise. The Company issued SVB 7,579 shares of its common stock in connection with the warrant exercise, and did not receive any cash proceeds. As of September 30, 2020, none of the warrants issued in connection with the 2016 Amended Term Loan were outstanding. ​ Due to the debt modification upon entry of the 2019 Term Loan, the unamortized balance of the deferred debt issuance costs incurred with the 2016 Amended Term Loan continued to be amortized through maturity in February 2023 along with the debt issuance costs of the 2019 Term Loan utilizing the effective interest rate method. ​ In connection with the 2019 Term Loan, SVB and WestRiver received warrants to purchase an aggregate of 70,000 shares of the Company’s common stock at a price per share equal to $ 8.10 (the “March 2019 Warrants”). The warrants would initially be earned based upon the usage of the facility and are exercisable until March 4, 2026. The warrants were classified as a component of stockholder’s equity, of which 58,332 warrants were immediately exercisable and the remaining 11,668 warrants could be earned based on usage of the second tranche of the 2019 Term Loan. The additional warrants were initially immediately exercisable if and when the Term B Loan Advance was funded (however, the March 2019 Warrants were amended in connection with the First Amendment to the 2019 Term Loan, as discussed below). T he relative fair value of the warrants of approximately $ 0.4 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The discount on the debt is being amortized to interest expense over the term of the debt utilizing the effective interest rate method. ​ 20 Table of Contents In connection with the First Amendment to the 2019 Term Loan, the March 2019 Warrants were amended to fix the number of shares that may be issued upon exercise of each such March 2019 Warrant at 29,167 shares of common stock, and SVB and WestRiver were issued new warrants (the “July 2019 Warrants”), which were to become exercisable only upon funding of the Term B Loan Advance, to purchase 5,750 shares of the Company’s common stock at a price per share equal to $ 25.71 . The July 2019 Warrants replaced the portion of the March 2019 Warrants that could originally be earned by SVB and WestRiver upon funding of the Term B Loan Advance. Because the Company did not draw down on the Term B Loan Advance by December 31, 2019, the July 2019 Warrants have been terminated. In December 2019, SVB exercised in full its portion of 29,167 warrants it received in connection with the 2019 Term Loan via a cashless exercise. The Company issued SVB 24,185 shares of its common stock in connection with the warrant exercise and did not receive any cash proceeds. In August 2020, WestRiver exercised in full its portion of 29,167 warrants it received in connection with the 2019 Term Loan via a cashless exercise. The Company issued SVB 26,270 shares of its common stock in connection with the warrant exercise and did not receive any cash proceeds. As of September 30, 2020, none of the warrants issued in connection with the First Amendment to the 2019 Term Loan were outstanding. ​ In relation to the retirement of the 2019 Term Loan, the unamortized portion of the debt issuance costs from the issuance of these warrants were fully extinguished and are included in the $ 1.2 million loss on extinguishment of debt on the statement of operations. ​ ​ Note 7. License Agreements ​ Exclusive License Agreement with Pfizer ​ In January 2020, the Company entered into an exclusive license agreement with Pfizer Inc. (“Pfizer”) for Pfizer’s clinical and nonclinical data, and intellectual property for reboxetine, the active pharmaceutical ingredient in AXS-12 which the Company is developing for the treatment of narcolepsy. The agreement also provides the Company exclusive rights to develop and commercialize esreboxetine, a new late-stage product candidate now referred to as AXS-14, in the U.S. for the treatment of fibromyalgia. ​ Under the terms of the agreement, Pfizer received 82,019 shares of the Company’s common stock having a stated value of $ 8.0 million, based on the average closing price of the Company’s common stock for the ten prior trading days of $ 97.54 , in consideration for the license and rights and also received an upfront cash payment of $ 3.0 million. The Company determined that the fair value of each share of common stock granted to Pfizer on the closing date of January 9, 2020 was $ 87.24 , based on the closing price of the Company’s stock on that date. As a result, the fair value of the stock issued was $ 7.2 million and therefore, the total research and development expense recognized was $ 10.2 million related to the Pfizer license agreement during the nine months ended September 30, 2020. ​ Pfizer can also receive up to $ 323 million in regulatory and sales milestones, and tiered mid-single to low double-digit royalties on future sales. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14. During the nine months ended September 30, 2020, no milestone payments or royalties were paid to Pfizer by the Company. ​ 21 Table of Contents Exclusive License Agreements with Antecip ​ In 2012, the Company entered into three exclusive license agreements with Antecip, in which it was granted exclusive licenses to develop, manufacture, and commercialize Antecip’s patents and applications related to the development of AXS-02, AXS-05, and AXS-04, a product candidate that is currently in early stage development, anywhere in the world for human therapeutic, veterinary, and diagnostic use. Pursuant to the agreements, the Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize AXS-02, AXS-05, and AXS-04. Under the terms of the agreements, the Company is required to pay to Antecip a royalty equal to 4.5 % for AXS-02, 3.0 % for AXS-05, and 1.5 % for AXS-04, of net sales of products containing the licensed technology by the Company, its affiliates, or permitted sublicensees. These royalty payments are subject to reduction by an amount up to 50.0 % of any required payments to third parties. Unless earlier terminated by a party for cause or by the Company for convenience, the agreements shall remain in effect on a product-by-product and country-by-country basis until the later to occur of (i) the applicable product is no longer covered by a valid claim in that country or (ii) 10 years from the first commercial sale of the applicable product in that country. Upon expiration of the agreements with respect to a product in a country, the Company’s license grant for that product in that country will become a fully paid-up, royalty-free, perpetual non-exclusive license. If Antecip terminates any of the agreements for cause, or if the Company exercises its right to terminate any of the agreements for convenience, the rights granted to the Company under such terminated agreement will revert to Antecip. To date, the Company has not been required to make any payments to Antecip under any of the license agreements. ​ In connection with the 2020 Term Loan, the Company entered into a Direct Agreement with Antecip pursuant to which Antecip consented to the collateral assignment of the License Agreement to Hercules, among other things. ​ ​ 22 Table of Contents