Ovid Therapeutics Inc. 10-Q

Item 1. Financial Statements. OVID THERAPEUTICS INC. Condensed Consolidated Balance Sheets June 30, 2022 December 31, 2021 Assets (unaudited) Current assets: Cash and cash equivalents $ 72,811,755 $ 187,797,532 Marketable securities 79,554,040 — Prepaid expenses and other current assets 2,715,134 2,681,597 Note receivable 1,000,000 — Total current assets 156,080,929 190,479,129 Long-term equity investments 2,228,547 1,631,992 Restricted cash 1,930,753 1,930,753 Security deposit 80,114 96,034 Property and equipment, net 1,243,128 242,757 Right-of-use asset, net 15,437,584 — Other assets 328,797 164,092 Total assets $ 177,329,852 $ 194,544,757 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 4,616,543 $ 7,127,046 Accrued expenses 4,598,843 7,671,275 Long-term liabilities: Lease liability 15,966,970 — Total liabilities 25,182,356 14,798,321 Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; Series A convertible preferred stock, 10,000 shares designated, 1,250 shares issued and outstanding at June 30, 2022 and December 31, 2021 1 1 Common stock, $ 0.001 par value; 125,000,000 shares authorized; 70,419,388 and 70,364,912 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 70,414 70,359 Additional paid-in-capital 354,221,191 351,033,589 Accumulated other comprehensive loss ( 90,127 ) — Accumulated deficit ( 202,053,983 ) ( 171,357,513 ) Total stockholders' equity 152,147,496 179,746,436 Total liabilities and stockholders' equity $ 177,329,852 $ 194,544,757 See accompanying notes to these unaudited condensed consolidated financial statements 3 Table of Contents OVID THERAPEUTICS INC. Condensed Consolidated Statements of Operations (unaudited) For The Three Months Ended June 30, 2022 For The Three Months Ended June 30, 2021 For The Six Months Ended June 30, 2022 For The Six Months Ended June 30, 2021 Revenue: License and other revenue $ — $ — $ 1,445,366 $ 12,382,779 License revenue - related party — — — 196,000,000 Total revenue — — 1,445,366 208,382,779 Operating expenses: Research and development 6,046,670 7,683,668 13,878,939 23,932,581 General and administrative 8,257,617 6,629,158 18,137,820 22,205,707 Total operating expenses 14,304,287 14,312,826 32,016,759 46,138,288 (Loss) income from operations ( 14,304,287 ) ( 14,312,826 ) ( 30,571,393 ) 162,244,491 Other (expense) income, net ( 284,127 ) ( 2,517 ) ( 125,076 ) ( 52,250 ) (Loss) income before provision for income taxes ( 14,588,414 ) ( 14,315,343 ) ( 30,696,470 ) 162,192,241 Provision for income taxes — 1,473,084 — 1,973,361 Net (loss) income $ ( 14,588,414 ) $ ( 15,788,427 ) $ ( 30,696,470 ) $ 160,218,880 Net (loss) income per share, basic $ ( 0.21 ) $ ( 0.23 ) $ ( 0.44 ) $ 2.32 Net (loss) income per share, diluted $ ( 0.21 ) $ ( 0.23 ) $ ( 0.44 ) $ 2.30 Weighted-average common shares outstanding, basic 70,391,458 67,818,366 70,391,236 66,953,431 Weighted-average common shares outstanding, diluted 70,391,458 67,818,366 70,391,236 67,565,761 See accompanying notes to these unaudited condensed consolidated financial statements 4 Table of Contents OVID THERAPEUTICS INC. Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) For The Three Months Ended June 30, 2022 For The Three Months Ended June 30, 2021 For The Six Months Ended June 30, 2022 For The Six Months Ended June 30, 2021 Net (loss) income $ ( 14,588,414 ) $ ( 15,788,427 ) $ ( 30,696,470 ) $ 160,218,880 Other comprehensive loss: Unrealized loss on marketable securities ( 90,127 ) — ( 90,127 ) — Comprehensive (loss) income $ ( 14,678,541 ) $ ( 15,788,427 ) $ ( 30,786,597 ) $ 160,218,880 See accompanying notes to these unaudited condensed consolidated financial statements 5 Table of Contents OVID THERAPEUTICS INC. Condensed Consolidated Statements of Stockholders’ Equity (unaudited) Series A Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Balance, December 31, 2021 1,250 $ 1 70,364,912 $ 70,359 $ 351,033,589 $ — $ ( 171,357,513 ) $ 179,746,436 Stock-based compensation expense — — — — 1,324,812 — — 1,324,812 Issuance of common stock from exercise of stock options — — 52,333 14 33,065 — — 33,079 Net loss — — — — — — ( 16,108,056 ) ( 16,108,056 ) Balance, March 31, 2022 1,250 1 70,417,245 70,373 352,391,466 — ( 187,465,569 ) 164,996,271 Stock-based compensation expense — — — — 1,720,217 — — 1,720,217 Issuance of common stock from exercise of stock options — — 2,143 41 109,507 — — 109,548 Other comprehensive loss — — — — — ( 90,127 ) — ( 90,127 ) Net loss — — — — — — ( 14,588,414 ) ( 14,588,414 ) Balance, June 30, 2022 1,250 $ 1 70,419,388 $ 70,414 $ 354,221,191 $ ( 90,127 ) $ ( 202,053,983 ) $ 152,147,496 Series A Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Balance, December 31, 2020 3,250 $ 3 65,743,170 $ 65,743 $ 337,758,007 $ — $ ( 294,192,097 ) $ 43,631,656 Stock-based compensation expense — — — — 1,320,002 — — 1,320,002 Issuance of common stock from employee stock purchase plan — — 34,256 34 130,139 — — 130,173 Issuance of common stock from exercise of stock options — — 10,400 11 20,791 — — 20,802 Conversion of series A convertible preferred stock to common stock ( 2,000 ) ( 2 ) 2,000,000 2,000 ( 1,998 ) — — — Net income — — — — — — 176,007,307 176,007,307 Balance, March 31, 2021 1,250 1 67,787,826 67,788 339,226,941 — ( 118,184,790 ) 221,109,940 Stock-based compensation expense — — — — 1,257,344 — — 1,257,344 Issuance of common stock from exercise of stock options — — 46,121 46 130,610 — — 130,656 Net loss — — — — — — ( 15,788,427 ) ( 15,788,427 ) Balance, June 30, 2021 1,250 $ 1 67,833,947 $ 67,834 $ 340,614,895 $ — $ ( 133,973,217 ) $ 206,709,513 See accompanying notes to these unaudited condensed consolidated financial statements 6 Table of Contents OVID THERAPEUTICS INC. Condensed Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Cash flows from operating activities: Net (loss) income $ ( 30,696,470 ) $ 160,218,880 Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Non-cash consideration received in licensing agreement transaction ( 945,366 ) — Unrealized loss on equity investment 348,812 — Change in accrued interest and accretion of discount on marketable securities ( 223,649 ) — Stock-based compensation expense 3,045,029 2,577,346 Depreciation and amortization expense 172,105 127,950 Amortization of right-of-use asset 354,185 — Accretion of lease liability 368,226 — Change in operating assets and liabilities: Prepaid expenses and other current assets ( 230,877 ) ( 1,023,996 ) Security deposit 15,920 ( 27,100 ) Related party receivable — 141,763 Long-term prepaid expenses — 477,171 Accounts payable ( 2,510,503 ) ( 4,518,374 ) Accrued expenses ( 3,072,434 ) ( 1,676,476 ) Deferred revenue — ( 12,382,779 ) Related party payable — ( 2,432,192 ) Net cash (used in) provided by operating activities ( 33,375,022 ) 141,482,193 Cash flows from investing activities: Purchase of marketable securities, net of interest earned ( 79,416,203 ) — Issuance of convertible short-term note ( 1,000,000 ) — Purchase of long-term equity investment — ( 1,583,893 ) Purchase of property and equipment ( 1,085,840 ) — Software development and other costs ( 251,340 ) ( 11,515 ) Net cash used in investing activities ( 81,753,383 ) ( 1,595,408 ) Cash flows from financing activities: ATM and other offering costs — ( 21,314 ) Proceeds from employee stock purchase plan — 115,705 Proceeds from exercise of options 142,628 151,458 Net cash provided by financing activities 142,628 245,849 Net (decrease) increase in cash and cash equivalents ( 114,985,777 ) 140,132,634 Cash, cash equivalents and restricted cash at beginning of period 189,728,285 72,033,930 Cash, cash equivalents and restricted cash at end of period 74,742,508 212,166,564 Non-cash investing and financing activities: Right-of-use asset obtained in exchange for lease liability $ 15,791,769 $ — Transaction costs related to purchase of long-term equity investment in accrued expenses $ — $ 24,054 Stock option exercise receivables in prepaid expenses and other current assets $ — $ 14,468 Purchase of property and equipment in accounts payable $ — $ 3,005 See accompanying notes to these unaudited condensed consolidated financial statements 7 Table of Contents OVID THERAPEUTICS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 – NATURE OF OPERATIONS Ovid Therapeutics Inc. (the “Company”) was incorporated under the laws of the state of Delaware on April 1, 2014 and maintains its principal office in New York, New York. The Company commenced operations on April 1, 2014 (date of inception). The Company is a biopharmaceutical company focused exclusively on developing impactful medicines for patients and families living with rare neurological disorders. Since its inception, the Company has devoted substantially all of its efforts to business development, research and development, recruiting management and technical staff, and raising capital. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund operations. Historically, the Company’s major sources of cash have been composed of proceeds from various public and private offerings of its capital stock, revenue from collaboration agreements, option exercises and interest income. As of June 30, 2022, the Company had approximately $ 152.4 million in cash, cash equivalents and marketable securities. Since inception, the Company has generated $ 222.4 million in revenue, primarily pursuant to the Company’s royalty, license and termination agreement (the “Takeda License and Termination Agreement”) with Takeda Pharmaceutical Company Limited (“Takeda”). Historically, the Company has incurred recurring losses, has experienced negative operating cash flows and requires significant cash resources to execute its business plans. The Company has an accumulated deficit of $ 202.1 million as of June 30, 2022, working capital of $ 146.9 million and had cash used in operating activities of $ 33.4 million for the six months ended June 30, 2022. The Company recorded net losses of $ 14.6 million and $ 30.7 million during the three and six months ended June 30, 2022, respectively, and expects to incur losses in subsequent periods for at least the next several years and is highly dependent on its ability to find additional sources of funding through either equity offerings, debt financings, collaborations, strategic alliances, licensing agreements or a combination of any such transactions. Management believes that the Company’s existing cash, cash equivalents and marketable securities as of June 30, 2022 will be sufficient to fund its current operating plans through at least the next 12 months from the date of filing of the Company’s Quarterly Report on Form 10-Q. Adequate additional funding may not be available to the Company on acceptable terms or at all. The failure to raise capital as and when needed could have a negative impact on the Company’s financial condition and ability to pursue its business strategy. The Company may be required to delay, reduce the scope of or eliminate research and development programs, or obtain funds through arrangements with collaborators or others that may require the Company to relinquish rights to certain drug candidates that the Company might otherwise seek to develop or commercialize independently. The Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business. The extent to which the ongoing COVID-19 pandemic impacts the Company's business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for the Company's common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, the extent of sustained or new travel restrictions, social distancing and business closure requirements in the United States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease, including vaccination efforts. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company's business, financial condition, results of operations and growth prospects. In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of the Company's product candidates; delays or problems in the supply of the Company's product candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company's business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2022. (A) Unaudited Interim Condensed Consolidated Financial Statements The interim condensed consolidated balance sheet at June 30, 2022, the condensed consolidated statements of operations, comprehensive (loss) income, cash flows, and stockholders’ equity for the three and six months ended June 30, 2022 and 2021 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 8 Table of Contents generally accepted accounting principles (“GAAP”) and following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP are condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of its financial information. The results of operations for the three and six month periods ended June 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K. (B) Basis of Presentation and Consolidation The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP and include the accounts of Ovid Therapeutics Inc. and its wholly owned subsidiary, Ovid Therapeutics Hong Kong Limited. All intercompany transactions and balances have been eliminated in consolidation. (C) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ materially from those estimates. (D) Marketable Securities Marketable securities consists of investments in U.S. treasury instruments which are considered available-for-sale securities. The Company classifies its marketable securities with maturities of less than one year from the balance sheet date as current assets on its consolidated balance sheets. Unrealized gains and losses on these securities that are determined to be temporary are reported as a separate component of accumulated other comprehensive loss in stockholder's equity. (E) Restricted Cash The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions. Amounts are reported as non-current unless restrictions are expected to be released in the next 12 months. (F) Long-Term Equity Investments Long-term equity investments consist of an equity investment in a private company through preferred shares, which are not considered in-substance common stock, that is accounted for at cost, with adjustments for observable changes in prices or impairments, and is classified within long-term equity investments on our consolidated balance sheets with adjustments recognized in other (expense) income, net on our consolidated statements of operations. The Company has determined that the equity investment does not have a readily determinable fair value and elected the measurement alternative. Therefore, the equity investment’s carrying amount will be adjusted to fair value at the time of the next observable price change for the identical or similar investment of the same issuer or when an impairment is recognized. Each reporting period, the Company performs a qualitative assessment to evaluate whether the investment is impaired. The assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. If the investment is impaired, the Company writes it down to its estimated fair value. As of June 30, 2022 and December 31, 2021, the equity investment had a carrying value of $ 1.6 million. Long-term equity investments also consist of an equity investment in the common shares of Marinus Pharmaceuticals, Inc. ("Marinus") that were received as non-cash consideration via the terms of a licensing agreement executed between the two companies effective March 2022. The equity shares are marked-to-market at each reporting date with changes in the fair value being reflected in the carrying value of the investment on the Company's consolidated balance sheets and other income (expense) on the Company's consolidated statements of operations. As of June 30, 2022, the equity investment in Marinus had a carrying value of approximately $ 0.6 million. (G) Note Receivable On March 17, 2022, the Company issued a convertible promissory note to a related party, in which the Company has a long-term equity investment, with a principal amount of $ 1.0 million. The note has certain features that may allow the Company to acquire additional equity or to settle in cash. Either option would result in the Company receiving an amount at least equal to the outstanding principal balance plus accrued and unpaid interest. The Company will receive interest on the convertible promissory note at the rate of 1.5 % per annum payable upon conversion or maturity of the note on March 17, 2023. The Company has elected to measure the note using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivatives due to changes in the fair value will be reflected in other income (expense), net, in the Company's consolidated statements of operations. (H) Fair Value of Financial Instruments Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent 9 Table of Contents sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: • Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. The Company’s Level 1 assets consisted of investments in a U.S. treasury money market fund and equity securities totaling approximately $ 55.6 million as of June 30, 2022. The Company's Level 1 assets consisted of money market funds and short-term investments of $ 187.6 million as of December 31, 2021. • Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation methodologies. The Company's Level 2 assets consisted of U.S. treasury bills totaling approximately $ 94.5 million as of June 30, 2022. The Company had no Level 2 assets or liabilities as of December 31, 2021. • Level 3—Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company's Level 3 assets consists of the convertible note receivable totaling $ 1.0 million as of June 30, 2022. There were no Level 3 assets or liabilities as of December 31, 2021. The carrying amounts reported in the balance sheets for cash and cash equivalents, other current assets, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. (I) Leases The Company determines if an arrangement is a lease at inception and recognizes the lease in accordance with ASC 842. Operating leases are included in right-of-use ("ROU") assets, current liabilities, and long-term lease liability in the Company's consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The Company determines the portion of the lease liability that is current as the difference between the calculated lease liability at the end of the current period and the lease liability that is projected 12 months from the current period. The Company determined that there was no current lease liability for the period ended June 30, 2022, which is due primarily to the free rental period for the Company's Hudson Commons lease. (J) Revenue Recognition Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In applying ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) it satisfies the performance obligations. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services the Company transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Prior to recognizing revenue, the Company makes estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. The standalone selling price is generally determined using expected cost and comparable transactions. Revenue for performance obligations recognized over time is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure. Non-refundable upfront fees allocated to licenses that are not contingent on any future performance and require no consequential continuing involvement by the Company, are recognized as revenue when the license term commences and the licensed data, technology or product is delivered. The Company defers recognition of upfront license fees if the performance obligations are not satisfied. 10 Table of Contents (K) Net (Loss) Income Per Share Net (loss) income, basic per share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding. The Company applies the two-class method to allocate earnings between common stock and participating securities. Net income, diluted per share attributable to common stockholders adjusts the basic earnings per share attributable to common stockholders and the weighted-average number of shares of common stock outstanding for the potential dilutive impact of stock options using the treasury-stock method and preferred stock using the if-converted method. Net loss, diluted per share is equivalent to the basic net loss per share due to the exclusion of outstanding stock options and convertible preferred stock because the inclusion of these securities would result in an anti-dilutive effect on per share amounts. (L) Recent Accounting Pronouncements The Company has reviewed recently issued accounting standards and plans to adopt those that are applicable. The Company does not expect the adoption of those standards to have a material impact on its financial position, results of operations, or cash flows. The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. NOTE 3 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The following tables summarize the fair value of cash, cash equivalents and marketable securities as well as gross unrealized holding gains and losses as of June 30, 2022 and December 31, 2021: June 30, 2022 Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Cash $ 2,860,631 $ — $ — $ 2,860,631 Money market funds 69,951,125 — — 69,951,125 Marketable securities 79,644,167 — ( 90,127 ) 79,554,040 Total cash, cash equivalents and marketable securities $ 152,455,922 $ — $ ( 90,127 ) $ 152,365,795 December 31, 2021 Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Cash $ 205,555 $ — $ — $ 205,555 Money market funds 187,591,977 — — 187,591,977 Marketable securities — — — — Total cash, cash equivalents and marketable securities $ 187,797,532 $ — $ — $ 187,797,532 The Company did not hold any securities that were in an unrealized loss position for more than 12 months as of June 30, 2022 and December 31, 2021. NOTE 4 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS Property and equipment is summarized as follows: June 30, 2022 December 31, 2021 Furniture and equipment $ 1,303,094 $ 504,965 Leasehold improvements 287,712 — Less accumulated depreciation ( 347,678 ) ( 262,208 ) Total property and equipment, net $ 1,243,128 $ 242,757 Depreciation expense was $ 54,631 and $ 17,834 for the three months ended June 30, 2022 and 2021, respectively. Depreciation expense was $ 85,470 and $ 36,478 for the six months ended June 30, 2022 and 2021, respectively. 11 Table of Contents Intangible assets, net of accumulated amortization was $ 328,797 and $ 164,092 as of June 30, 2022 and December 31, 2021, respectively, and are included in other assets. Amortization expense was $ 32,153 and $ 35,381 for the three months ended June 30, 2022 and 2021, respectively. Amortization expense was $ 86,636 and $ 91,473 for the six months ended June 30, 2022 and 2021, respectively. NOTE 5 – LEASES During September 2021, the Company entered into a 10-year lease agreement for its corporate headquarters with a term commencing March 10, 2022, for approximately 19,143 square feet of office space at Hudson Commons in New York, NY. The lease provides for monthly rental payments over the lease term. The base rent under the lease is currently $ 2.3 million per year. Rent payments commence 10 months following the commencement date of the lease, or January 10, 2023, and continue for 10 years following the rent commencement date. Rent also includes two months of free rent in the 6th and 7th months following the rent commencement date. The Company issued a letter of credit in the amount of $ 1.9 million in association with the execution of the lease agreement; the letter of credit is characterized as restricted cash on the balance sheet. The Hudson Commons lease has a remaining lease term of 10 years and includes a single renewal option for an additional 5 years. The Company did not include the renewal option in the lease term when calculating the lease liability as the Company is not reasonably certain that it will exercise the renewal option. The present value of the lease payments is calculated using an incremental borrowing rate of 7.02 %. Lease expense is included in general and administrative and research and development expenses in the condensed consolidated statements of operations. ROU asset and lease liabilities related to the Company's operating lease are as follows: June 30, 2022 Right-of-use asset $ 15,437,584 Current lease liability — Long-term lease liability $ 15,966,970 The components of operating lease cost for the six months ended June 30, 2022 were as follows: June 30, 2022 Operating lease cost $ 722,411 Variable lease cost — Short-term lease cost — Future minimum commitments under the non-cancelable operating lease are as follows: 2023 $ 1,672,886 2024 2,316,303 2025 2,316,303 2026 2,316,303 2027 2,316,303 Thereafter 12,347,235 $ 23,285,333 NOTE 6 – ACCRUED EXPENSES Accrued expenses consist of the following: June 30, 2022 December 31, 2021 Payroll and bonus accrual $ 2,925,196 $ 3,764,666 Research and development accrual 771,066 1,795,190 Professional fees accrual 396,563 1,564,955 Accrued taxes 222,536 — Other 283,482 546,464 Total $ 4,598,843 $ 7,671,275 12 Table of Contents NOTE 7 – STOCKHOLDERS’ EQUITY AND PREFERRED STOCK The Company’s capital structure consists of common stock and convertible preferred stock ("Preferred Stock"). Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is authorized to issue up to 125,000,000 shares of common stock and 10,000,000 shares of Preferred Stock. The Company has designated 1,250 of the 10,000,000 authorized shares of Preferred Stock as non-voting Series A Convertible Preferred Stock (“Series A Preferred Stock”). The holders of common stock are entitled to one vote for each share held. The holders of common stock have no preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares. Subject to preferences that may apply to any outstanding series of Preferred Stock, holders of the common stock are entitled to receive ratably any dividends declared on a non-cumulative basis. The common stock is subordinate to all series of Preferred Stock with respect to rights upon liquidation, winding up and dissolution of the Company. The holders of common stock are entitled to liquidation proceeds after all liquidation preferences for the Preferred Stock are satisfied. In November 2020, the Company entered into a sales agreement (the “2020 ATM agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may offer and sell in “at the market offerings,” from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $ 75.0 million through Cowen acting as sales agent. As of June 30, 2022, the Company has not sold any shares of its common stock under the 2020 ATM agreement. There were 1,250 shares of Series A Preferred Stock outstanding as of June 30, 2022 and December 31, 2021. Each share of Series A Preferred Stock is convertible into 1,000 shares of common stock at any time at the holder’s option. However, the holder will be prohibited, subject to certain exceptions, from converting shares of Series A Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than, at the written election of the holder, either 9.99 % or 14.99 % of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holder’s election to any other number less than or equal to 19.99 % upon 61 days’ notice to the Company; provided, however, that effective 61 days after delivery of such notice, such beneficial ownership limitations shall not be applicable to any holder that beneficially owns either 10.0 % or 15.0 %, as applicable based on the holder’s initial written election noted above, of the total number of shares of common stock issued and outstanding immediately prior to delivery of such notice. In the event of a liquidation, dissolution, or winding up of the Company, holders of Series A Preferred Stock will receive a payment equal to $ 0.001 per share of Series A Preferred Stock before any proceeds are distributed to the holders of common stock. In March 2021, certain of the Company’s stockholders elected to convert an aggregate of 2,000 shares of Series A Preferred Stock owned by such holders into an aggregate of 2,000,000 shares of the Company’s common stock. Dividends Holders of Series A preferred stock are entitled to receive dividends at a rate equal to (on an as-if-converted-to-common stock basis), and in the same form and manner as, dividends (other than dividends in the form of the issuance of common stock) actually paid on shares of common stock. No dividends on the common stock shall be declared and paid unless dividends on the Preferred Stock have been declared and paid. Through June 30, 2022, the Company has not declared any dividends. NOTE 8 – STOCK-BASED COMPENSATION The Company's Board of Directors adopted and the Company's stockholders approved the 2017 Equity Incentive Plan (“2017 Plan”), which became effective immediately on May 4, 2017. The initial reserve of shares of common stock under the 2017 Plan was 3,052,059 shares. The 2017 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of stock-based awards. Additionally, the 2017 Plan provides for the grant of performance cash awards. The Company's employees, officers, directors and consultants and advisors are eligible to receive awards under the 2017 Plan. Following the adoption of the 2017 Plan, no further awards will be granted under the Company’s prior plan. Pursuant to the terms of the 2017 Plan, on each January 1st, the plan limit shall be increased by the lesser of (x) 5 % of the number of shares of common stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. On January 1, 2022 and January 1, 2021, respectively, an additional 1,000,000 and 3,287,158 shares were reserved for issuance under the 2017 Plan. As of June 30, 2022, there were 2,706,415 shares of the Company’s common stock reserved and available for issuance under the 2017 Plan. The Company's Board of Directors adopted, and the Company's stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which became effective immediately prior to the execution of the underwriting agreement related to the Company’s initial public offering on May 4, 2017. The 2017 ESPP allows employees to purchase common stock of the Company at a 15 % discount to the market price on designated semi-annual purchase dates. During the three months ended June 30, 2022 and 2021, no shares were purchased under the 2017 ESPP, and the Company recorded expense of $ 20,176 and $ 37,849 , respectively. During the six months ended June 30, 2022 and 2021, 38,583 and 34,256 shares, respectively, were purchased under the 2017 ESPP and the Company recorded expense of $ 41,195 and $ 56,636 , respectively. The initial reserve of shares of common stock that may be issued under the 2017 ESPP was 279,069 shares. The number of shares of common stock reserved for issuance under the 2017 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by the lesser of (i) 1 % of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (ii) 550,000 shares or (iii) such lesser number of shares determined by our Board. The Board acted prior to each of January 1, 2021 and January 1, 2022 to provide that there be no increase in the number of shares reserved for issuance under the 2017 ESPP on either such date. As of June 30, 2022, there were 454,479 shares of the Company’s common stock reserved for issuance under the 2017 ESPP. 13 Table of Contents Unless specified otherwise in an individual option agreement, stock options granted under the prior plan and the 2017 Plan generally have a ten-year term and a four-year graded vesting period. The vesting requirement is generally conditioned upon the grantee’s continued service with the Company during the vesting period. Once vested, all awards are exercisable from the date of grant until they expire. The option grants are non-transferable. Vested options generally remain exercisable for 90 days subsequent to the termination of the option holder’s service with the Company. In the event of option holder’s death or disability while employed by or providing service to the Company, the exercisable period extends to 12 months. Performance-based option awards generally have similar terms, with vesting commencing on the date the performance condition is achieved and expire in accordance with the specific terms of the agreement. At June 30, 2022, there were 150,000 performance-based options outstanding and unvested that include options to be granted upon the achievement of certain research and development milestones. The fair value of options granted during the three and six months ended June 30, 2022 and 2021 was estimated using the Black-Scholes option valuation model. The inputs for the Black-Scholes option valuation model require significant assumptions that are detailed in the table below. The risk-free interest rates were based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin No. Topic 14D. The expected volatility was estimated based on historical volatility information of peer companies that are publicly available. All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options underlying the agreements would also be canceled. The Company did no t grant any stock options to nonemployee consultants for services rendered during the three months ended June 30, 2022 and 2021. The Company granted no stock options to nonemployee consultants for services rendered during the six months ended June 30, 2022, and 170,000 during the six months ended June 30, 2021. There were 130,834 and 191,875 unvested nonemployee options outstanding as of June 30, 2022 and 2021, respectively. Total expense recognized related to nonemployee stock options for the three months ended June 30, 2022 and 2021, was $ 160,337 and $ 55,310 , respectively. Total expense recognized related to nonemployee stock options for the six months ended June 30, 2022 and 2021 was $ 355,107 and $ 91,000 , respectively. Total unrecognized compensation expenses related to the nonemployee stock options was $ 1.1 million as of June 30, 2022. The Company did not recognize any expense for nonemployee performance-based option awards during the three months or six months ended June 30, 2022 or 2021. The Company granted 2,426,750 and 363,000 stock options to employees during the three months ended June 30, 2022 and 2021, respectively. The Company granted 4,296,355 and 1,006,600 stock options to employees during the six months ended June 30, 2022 and 2021 respectively. There were 7,354,964 and 4,749,550 unvested employee options outstanding as of June 30, 2022, and 2021, respectively. Total expense recognized related to the employee stock options for the three months ended June 30, 2022 and 2021 was $ 1.5 million and $ 1.2 million, respectively. Total expense recognized related to the employee stock options for the six months ended June 30, 2022 and 2021 was $ 2.6 million and $ 2.4 million, respectively. Total unrecognized compensation expense related to employee stock options was $ 14.3 million as of June 30, 2022. During the three and six months ended June 30, 2022 and 2021, the Company did not recognize any expense for employee performance-based option awards. The Company’s stock-based compensation expense was recognized in operating expense as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Research and development $ 387,384 $ 430,638 $ 782,876 $ 888,673 General and administrative 1,332,833 826,707 2,262,153 1,688,673 Total $ 1,720,217 $ 1,257,345 $ 3,045,029 $ 2,577,346 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Stock options $ 1,700,041 $ 1,219,496 $ 3,003,834 $ 2,520,710 Employee Stock Purchase Plan 20,176 37,849 41,195 56,636 Total $ 1,720,217 $ 1,257,345 $ 3,045,029 $ 2,577,346 14 Table of Contents The fair value of employee options granted during the three and six months ended June 30, 2022 and 2021 was estimated by utilizing the following assumptions: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Weighted Average Weighted Average Weighted Average Weighted Average Volatility 87.20 % 86.13 % 87.20 % 81.72 % Expected term in years 6.08 5.91 6.08 6.04 Dividend rate 0.00 % 0.00 % 0.00 % 0.00 % Risk-free interest rate 2.78 % 0.99 % 2.16 % 0.73 % Fair value of option on grant date $ 2.38 $ 3.09 $ 2.17 $ 2.39 The fair value of nonemployee options granted during the three and six months ended June 30, 2022 and 2021 was estimated by utilizing the following assumptions: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Weighted Average Weighted Average Weighted Average Weighted Average Volatility 0.00 % 80.43 % 0.00 % 80.43 % Expected term in years 0.00 6.23 0.00 6.23 Dividend rate 0.00 % 0.00 % 0.00 % 0.00 % Risk-free interest rate 0.00 % 1.03 % 0.00 % 1.03 % Fair value of option on grant date $ 0.00 $ 2.49 $ 0.00 $ 2.49 The following table summarizes the number of options outstanding and the weighted average exercise price: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Options outstanding December 31, 2021 10,776,758 $ 4.97 6.07 $ 2,389,890 Granted 4,296,355 2.94 9.68 Exercised ( 15,893 ) 1.91 Forfeited or expired ( 1,605,703 ) 5.93 Options outstanding June 30, 2022 13,451,517 $ 4.21 7.53 $ 329,651 Vested and exercisable at June 30, 2022 5,965,719 $ 5.44 5.69 $ 297,953 At June 30, 2022 there was approximately $ 15.4 million of unamortized share–based compensation expense related to employee and nonemployee grants, which is expected to be recognized over a remaining average vesting period of 2.53 years. NOTE 9 – INCOME TAXES The Company’s interim income tax provision consists of U.S. federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of June 30, 2022, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year. For the three and six months ended June 30, 2022, the Company did no t record a tax provision. In assessing the realizability of deferred tax assets, management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. Management assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Based on these factors, including cumulative losses in recent years, the Company continues to maintain a full valuation allowance against its net deferred tax assets as of June 30, 2022. 15 Table of Contents NOTE 10 – COMMITMENTS AND CONTINGENCIES License Agreements H. Lundbeck A/S License Agreement On March 26, 2015, the Company entered into an exclusive agreement with H. Lundbeck A/S (“Lundbeck”) for a worldwide perpetual licensing right related to the research, development and commercialization of OV101 (gaboxadol). On May 10, 2019, the parties amended the license agreement. Pursuant to the Lundbeck license agreement, as of the first amendment, the Company agreed to make milestone payments totaling up to $ 189.0 million upon the achievement of certain developmental, regulatory and sales milestones. The first payment of $ 1.0 million is due upon the successful completion of the first Phase 3 trial for a product in which OV101 is an active ingredient. In addition, the agreement calls for the Company to pay royalties for an initial term based on a low double-digit percentage of sales and provides for the reduction of royalties in certain limited circumstances. Thereafter, the Company closed its OV101 program in Angelman syndrome in early 2021. On February 1, 2022, the Company entered into Amendment No. 3 to the Lundbeck agreement, or Amendment No. 3, to permit its performance under the Healx License and Option Agreement. Under the terms of Amendment No. 3, if Healx exercises its option, the Company will owe Lundbeck a share of all milestone and royalty payments received from Healx if the Company chooses not to exercise the Ovid Opt-In Right. If the Company chooses to exercise the Ovid Opt-In Right and to co-develop and co-commercialize the program with Healx, the Company will owe a share of the net profit share to Lundbeck (see further discussion below in Note 11, Healx License and Option Agreement). Northwestern University License Agreement In December 2016, the Company entered into a license agreement with Northwestern University, or Northwestern, pursuant to which Northwestern granted the Company an exclusive, worldwide license to patent rights of certain inventions, or the Northwestern Patent Rights, which relate to a specific compound and related methods of use for such compound, along with certain Know-How related to the practice of the inventions claimed in the Northwestern Patents. The Company is developing OV329 under this agreement. Under the Northwestern agreement, the Company was granted exclusive rights to research, develop, manufacture and commercialize products utilizing the Northwestern Patent Rights for all uses. The Company has agreed that it will not use the Northwestern Patent Rights to develop any products for the treatment of cancer, but Northwestern may not grant rights in the technology to others for use in cancer. The Company also has an option, exercisable during the term of the agreement to an exclusive license under certain intellectual property rights covering novel compounds with the same or similar mechanism of action as the primary compound that is the subject of the license agreement. Northwestern has retained the right, on behalf of itself and other non-profit institutions, to use the Northwestern Patent Rights and practice the inventions claimed therein for educational and research purposes and to publish information about the inventions covered by the Northwestern Patent Rights. Upon entry into the Northwestern agreement, the Company paid an upfront non-creditable one-time license issuance fee of $ 75,000 , and is required to pay an annual license maintenance fee of $ 20,000 , which will be creditable against any royalties payable to Northwestern following first commercial sale of licensed products under the agreement. The Company is responsible for all ongoing costs of filing, prosecuting and maintaining the Northwestern Patents, but also has the right to control such activities using its own patent counsel. In consideration for the rights granted to the Company under the Northwestern agreement, the Company is required to pay to Northwestern up to an aggregate of $ 5.3 million upon the achievement of certain development and regulatory milestones for the first product covered by the Northwestern Patents, and upon commercialization of any such products, will be required to pay to Northwestern a tiered royalty on net sales of such products by the Company, its affiliates or sublicensees, at percentages in the low to mid single-digits, subject to standard reductions and offsets. The Company’s royalty obligations continue on a product-by-product and country-by-country basis until the later of the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country and 10 years following the first commercial sale of such product in such country. If the Company sublicenses a Northwestern Patent Right, it will be obligated to pay to Northwestern a specified percentage of sublicense revenue received by the Company, ranging from the high single digits to the low-teens. The Northwestern agreement requires that the Company use commercially reasonable efforts to develop and commercialize at least one product that is covered by the Northwestern Patent Rights. Unless earlier terminated, the Northwestern agreement will remain in force until the expiration of the Company’s payment obligations thereunder. The Company has the right to terminate the agreement for any reason upon prior written notice or for an uncured material breach by Northwestern. Northwestern may terminate the agreement for the Company’s uncured material breach or insolvency. AstraZeneca AB License Agreement On December 30, 2021, the Company entered into an exclusive license agreement with AstraZeneca AB, for a library of early-stage small molecules targeting the KCC2 transporter, including lead candidate OV350. Upon execution of the agreement, the Company was obligated to pay an upfront cash payment of $ 5.0 million and issued shares of the Company's common stock in an amount that equaled $ 7.3 million based on the volume-weighted average price of shares of the Company's common stock for the 30 business days immediately preceding the execution date of the transaction. Since the intangibles acquired in the AstraZeneca license agreement do not have an alternative future use, all costs incurred were treated as research and development expense. The Company recorded a total of $ 12.3 million as research and development expense related to this agreement during December 2021. 16 Table of Contents Pursuant to the AstraZeneca license agreement, the Company agreed to potential milestone payments of up to $ 203.0 million upon the achievement of certain developmental, regulatory and sales milestones. The first payment of $ 3.0 million is due upon the successful completion of the first Phase 2 clinical study of a licensed product following a positive biomarker readout in a Phase 1 clinical study. As of June 30, 2022, none of these contingent payments were considered probable. Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company is not currently involved in any legal matters arising in the normal course of business. Under the terms of their respective employment agreements, certain of our executive officers are eligible to receive severance payments and benefits upon a termination without “cause” or due to “permanent disability,” or upon “resignation for good reason,” contingent upon the executive officer’s delivery to the Company of a satisfactory release of claims, and subject to the executive officer’s compliance with non-competition and non-solicitation restrictive covenants. NOTE 11 – COLLABORATION AND LICENSE AGREEMENTS Angelini Collaboration On July 9, 2020, the Company entered into the Angelini License Agreement, pursuant to which the Company granted to Angelini exclusive rights to develop and commercialize OV101, a selective agonist of the GABAA receptor, for the treatment of Angelman syndrome in the European Economic Area as well as Switzerland, the United Kingdom, Russia and Turkey (the “European Territory”). On March 29, 2021, the Company received a notice of termination of the Angelini License Agreement. Subsequently, Angelini and the Company mutually agreed to waive the six month termination notice provisions and the Angelini License Agreement terminated effective March 31, 2021. The Company has been released from its performance obligations and will not be entitled to any future milestone payments under the Angelini License Agreement. The Company evaluated the Angelini License Agreement to determine whether it was a collaborative arrangement for purposes of ASC 808. The Company concluded that because Angelini was not the ultimate decision maker or the legal owner of the license, Angelini was not considered an active participant and therefore the Angelini License Agreement was outside of the scope of ASC 808. The Company concluded that Angelini was a customer with regard to the combined license and research and development activities and as such the Angelini License Agreement should be evaluated under ASC 606. The Company identified the following material promises under the Angelini License Agreement: (1) licensing of intellectual property with respect to OV101; (2) completion of certain ongoing trials; (3) transfer of a specified amount of compound and related information; (4) potential for funding 35 % of the cost for Angelini future trials limited to $ 7.0 million; and (5) completion of the manufacturing process technology transfer. The Company determined that the $ 7.0 million represented a potential payment to a customer and was deferred. The transfer of compound and related information was considered a contingent milestone payment that will be recognized upon acceptance by Angelini of the milestone. The Company further determined that the license and the completion of ongoing trials were distinct from each other, as each had value without the other. As such, for the purposes of ASC 606, the Company determined that these two material promises, represented distinct performance obligations. Pursuant to the Angelini License Agreement and during the year ended December 31, 2020, Angelini made an upfront payment to the Company of $ 20.0 million. Upon the transfer of the specified amount of compound and related information and acceptance by Angelini, Angelini paid the Company an additional $ 5.0 million. This payment was determined to be variable consideration which was constrained and not considered part of the upfront transaction price allocation. The Company determined the transaction price was equal to the upfront fee of $ 20.0 million. The transaction price was allocated based on the standalone selling price of the license and the ongoing trials. During the six months ended June 30, 2022, no revenue was recognized pursuant to the Angelini License Agreement. During the six months ended June 30, 2021 and effective upon termination of the Angelini License Agreement, the Company recognized $ 12.4 million of revenue consisting of $ 5.4 million of license revenue related to ongoing trials and the $ 7.0 million related to the potential 35 % funding of the cost for Angelini future trials. Takeda Collaboration On January 6, 2017, the Company entered into a license and collaboration agreement with Takeda under which the Company licensed from Takeda certain exclusive rights to develop and commercialize soticlestat in certain territories. In March 2021, the Company entered into the Takeda License and Termination Agreement, pursuant to which Takeda secured rights to the Company’s 50 % global share in soticlestat, and the Company granted to Takeda an exclusive worldwide license under the Company’s relevant intellectual property rights to develop and commercialize the investigational medicine soticlestat for the treatment of developmental and epileptic encephalopathies, including Dravet syndrome and Lennox-Gastaut syndrome. 17 Table of Contents Under the Takeda License and Termination Agreement, all rights in soticlestat were owned by Takeda or exclusively licensed to Takeda by the Company. Takeda assumed all responsibility for, and costs of, both development and commercialization of soticlestat, and the Company will no longer have any financial obligation to Takeda under the original collaboration agreement, including milestone payments or any future development and commercialization costs. On March 29, 2021 upon the closing of the Takeda License and Termination Agreement, the Company received an upfront payment of $ 196.0 million and, if soticlestat is successfully developed, will be eligible to receive up to an additional $ 660.0 million upon Takeda achieving developmental, regulatory and sales milestones. In addition, the Company will be entitled to receive tiered royalties beginning in the low double-digits, and up to 20 % on sales of soticlestat if regulatory approval is achieved. Royalties will be payable on a country-by-country and product-by-product basis for any indications that soticlestat is approved for and sold during the period beginning on the date of the first commercial sale of such product in such country and ending on the later to occur of the expiration of patent rights covering the product in such country and a specified anniversary of such first commercial sale. The Company identified the following material promises under the Takeda License and Termination Agreement: (1) no later than the second business day prior to the closing of the Takeda License and Termination Agreement (the “Closing Date”), the Company and Takeda were required to agree on an estimate of the development expenses that accrued, or would accrue, under the original collaboration agreement as of March 31, 2021; (2) on the Closing Date, the Company was required to (i) provide and transfer to Takeda the materials, information and data relating to the soticlestat program, including clinical trial data and results, as further set forth in the Takeda License and Termination Agreement, (ii) assign to Takeda certain agreements applicable to the soticlestat program, and (iii) assign to Takeda all of its right, title and interest in, to and under all intellectual property rights developed or created pursuant to the original collaboration agreement and owned jointly by the Company and Takeda as of the Closing Date; (3) within 45 days after March 31, 2021, the Company and Takeda were required to provide a written report to the finance officer designated by the other party setting forth a final total of the development expenses that accrued as of March 31, 2021 and, within 10 business days after receipt of such report, the finance officers shall agree on whether a net settlement payment is due from Takeda to the Company or from the Company to Takeda; and (4) within 75 days after the Closing Date, to the extent not provided on the Closing Date, Ovid shall provide to Takeda (i) any materials, information and data relating to the soticlestat program, including clinical trial data and results, as further set forth in the Takeda License and Termination Agreement, (ii) other documents (including all expired agreements and related data developed thereunder) to the extent relating to the soticlestat program that are necessary for the exploitation, development, commercialization and manufacture of soticlestat, as further set forth in the Takeda License and Termination Agreement and (iii) any tangible embodiments of the intellectual property rights controlled by Ovid that are reasonably necessary for, used in or held for use in Takeda’s exploitation of the soticlestat program. The Company determined the transaction price is equal to the upfront fee of $ 196.0 million and is associated with all four performance obligations identified above. It is noted that the incremental effort associated with performance obligations three and four is negligible and not material in the context of the Takeda License and Termination Agreement since all of the information is related to the collaboration period for which the Company already has the information readily available. Therefore, since they are not material in the context of the Takeda License and Termination Agreement, the full upfront fee was allocated to the two performance obligations satisfied at closing. During the six months ended June 30, 2022, no expense was recognized pursuant to the Takeda License and Termination Agreement. During the six months ended June 30, 2021, the Company recognized a credit in research and development expenses of $ 2.6 million and recognized $ 0.1 million in general and administrative expenses representing costs which were reimbursed to the Company from Takeda. Healx License and Option Agreement On February 1, 2022, the Company entered into the Healx License and Option Agreement. Under the terms of the Healx License and Option Agreement, Healx has secured a one-year option to investigate gaboxadol (OV101) as part of a potential combination therapy for Fragile X syndrome in a Phase 2A clinical trial, as well as a treatment for other indications, for an upfront payment of $ 0.5 million, and fees to support prosecution and maintenance of our relevant intellectual property rights. At the end of the one-year option period, Healx has the option to secure rights to an exclusive license under our relevant intellectual property rights, in exchange for an additional payment of $ 2.0 million, development and commercial milestone payments, and low to mid-tier double digit royalties. Royalties are payable on a country-by-country and product-by-product basis during the period beginning on the date of the first commercial sale of such product in such country and ending on the later to occur of the expiration of patent rights covering the product in such country and a specified anniversary of such first commercial sale. Healx will assume all responsibility for, and costs of, both development and commercialization of gaboxadol following the exercise of the option. The Company will retain the option to co-develop and co-commercialize the program with Healx, or the Ovid Opt-In Right, at the end of a positive readout of clinical phase 2B and would share net profits and losses in lieu of the milestones and royalty payments. If the Ovid-Opt-In Right were exercised, the Company would be required to pay Healx 50 % of development costs. The Company does not plan to conduct further trials of gaboxadol. The term of the Healx License and Option Agreement will continue until the later of (a) the expiration of all relevant royalty terms, or in the event that Healx does not exercise its option during the option period defined in the Healx License and Option Agreement, or the Option Period, the expiration of such period, or (b) in the event that Healx does exercise its option during the Option Period, and the Company does not exercise the Ovid Opt-In Right during the period of time we have to opt-in, or the Opt-In Period, or the opt-in terms are otherwise terminated, upon the expiration of all payment obligations, or (c) in the event that Healx does exercise the Option during the Option Period, and the Company does exercise the Ovid Opt-In Right during the Opt-In Period, such time as neither Healx nor Ovid is continuing to exploit the gaboxadol. As part of the revised contractual obligations with Lundbeck, Ovid will owe Lundbeck a share of all milestone and royalty payments received from Healx, if we do not 18 Table of Contents exercise the Ovid Opt-In Right. If we do exercise the Ovid Opt-In Right to co-develop and co-commercialize the program with Healx, we will owe a share of the net profit share to Lundbeck. No revenue was recognized relating to this agreement during the three months ended June 30, 2022. During the six months ended June 30, 2022, the Company recorded revenue of $ 0.5 million associated with the Healx License and Option Agreement. Marinus Pharmaceuticals Out-License Agreement On March 1, 2022, the Company entered into an exclusive patent license agreement with Marinus, or the Marinus License Agreement. Under the Marinus License Agreement, the Company granted Marinus an exclusive, non-transferable (except as expressly provided therein), royalty-bearing right and license under certain Ovid patents relating to ganaxolone to develop, make, have made, commercialize, promote, distribute, sell, offer for sale and import licensed products in the territory (which consist of the United States, the European Economic Area, United Kingdom and Switzerland) for the treatment of CDKL5 deficiency disorders. Following the date of regulatory approval by the FDA of the first licensed product in the territory which was received on March 18, 2022, Marinus issued, at the Company's option, 123,255 shares of Marinus common stock, par value $ 0.001 per share, as payment. The Marinus License Agreement also provides for payment of royalties from Marinus to the Company in single digits on net sales of each such licensed product sold. The Company recorded revenue and an associated investment in equity securities of approximately $ 0.9 million related to the patent license agreement on March 18, 2022, based on the price of Marinus common stock on March 1, 2022. The Company had an unrealized loss on the Marinus common stock of $ 0.6 million and $ 0.3 million for the three and six months ended June 30, 2022, which was recorded as an unrealized loss on equity securities and is reflected in other (expense) income, net in the condensed consolidated statements of operation s. NOTE 12 – RELATED PARTY TRANSACTIONS In March 2021, the Company entered into the Takeda License and Termination Agreement with Takeda. For a description of the Takeda License and Termination Agreement, see Note 11. NOTE 13 – NET (LOSS) INCOME PER SHARE Basic net (loss) income per share is calculated based upon the weighted-average number of common shares outstanding during the period, excluding outstanding stock options that have not yet vested. Diluted net income per share is calculated based upon the weighted-average number of common shares outstanding during the period plus the dilutive impact of weighted-average common equivalent shares outstanding during the period resulting from the assumed exercise of outstanding stock options determined under the treasury stock method and the assumed conversion of preferred stock into common shares determined using the if-converted method. Diluted net loss per share is equivalent to the basic net loss per share due to the exclusion of outstanding stock options and convertible preferred stock because the inclusion of these securities would result in an anti-dilutive effect on per share amounts. The basic and diluted net (loss) income per common share is presented in conformity with the two-class method required for participating securities and multiple classes of shares. The Company considers its preferred stock to be participating securities. For any period in which the Company records net income, undistributed earnings allocated to the participating securities are subtracted from net income in determining net income attributable to common stockholders. The undistributed earnings have been allocated based on the participation rights of preferred stock and common shares as if the earnings for the year have been distributed. For periods in which the Company recognizes a net loss, undistributed losses are allocated only to common shares as the participating securities do not contractually participate in the Company’s losses. Basic net (loss) income per share is computed by dividing the net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Participating securities are excluded from basic weighted-average common shares outstanding. 19 Table of Contents The following table summarizes the calculation of basic and diluted net (loss) income per share: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net (loss) income $ ( 14,588,414 ) $ ( 15,788,427 ) $ ( 30,696,470 ) $ 160,218,880 Net income attributable to participating securities — — — ( 4,824,587 ) Net (loss) income attributable to common stockholders $ ( 14,588,414 ) $ ( 15,788,427 ) $ ( 30,696,470 ) $ 155,394,293 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net (loss) income attributable to common stockholders $ ( 14,588,414 ) $ ( 15,788,427 ) $ ( 30,696,470 ) $ 155,394,293 Weighted average common shares outstanding used in computing net income (loss) per share - basic 70,391,458 67,818,366 70,391,236 66,953,431 Weighted average common shares outstanding used in computing net income (loss) per share - diluted 70,391,458 67,818,366 70,391,236 67,565,761 Net (loss) income per share, basic $ ( 0.21 ) $ ( 0.23 ) $ ( 0.44 ) $ 2.32 Net (loss) income per share, diluted $ ( 0.21 ) $ ( 0.23 ) $ ( 0.44 ) $ 2.30 The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as they would be anti-dilutive: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Stock options to purchase common stock 13,451,517 10,352,559 13,103,587 10,435,478 Common stock issuable upon conversion of Series A convertible preferred stock 1,250,000 1,250,000 1,250,000 — 20 Table of Contents