What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 153 added, 107 removed, 453 unchanged (36% of the section changed)

27 unchanged sentences

10,000,000 shares authorized;

Series A convertible preferred stock, 10,000 shares designated, 1,250 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series A convertible preferred stock, 10,000 shares designated, 1,250 shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.001 par value;

125,000,000 shares authorized;

70,491,510 and 70,466,885 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

70,602,793 and 70,466,885 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

70,603 70,467

8 unchanged sentences

For The Three Months Ended

March 31, 2023 For The Three Months Ended

March 31, 2022

June 30, 2023 For The Three Months Ended

June 30, 2022 For The Six Months Ended

June 30, 2023 For The Six Months Ended

June 30, 2022

License and other revenue $ 75,000 $ — $ 141,160 $ 1,445,366

17 unchanged sentences

For The Three Months Ended

March 31, 2023 For The Three Months Ended

March 31, 2022

June 30, 2023 For The Three Months Ended

June 30, 2022 For The Six Months Ended

June 30, 2023 For The Six Months Ended

June 30, 2022

Net loss $ ( 12,408,330 ) $ ( 14,588,414 ) $ ( 25,764,539 ) $ ( 30,696,470 )

Other comprehensive income:

Unrealized gain on marketable securities 47,817 —

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities ( 422 ) ( 90,127 ) 47,395 ( 90,127 )

Comprehensive loss $ ( 12,408,752 ) $ ( 14,678,541 ) $ ( 25,717,144 ) $ ( 30,786,597 )

3 unchanged sentences

Preferred Stock Common Stock Additional

Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total

Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total

Shares Amount Shares Amount

5 unchanged sentences

Balance, March 31, 2023 1,250 1 70,491,510 70,492 359,754,310 5,630 ( 238,882,751 ) 120,947,682

Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 112,283 111 210,986 — — 211,097

Stock-based compensation expense — — — — 1,948,648 — — 1,948,648

Other comprehensive loss — — — — — ( 422 ) — ( 422 )

Net loss — — — — — — ( 12,408,330 ) ( 12,408,330 )

Balance, June 30, 2023 1,250 $ 1 70,603,793 $ 70,603 $ 361,913,944 5,208 $ ( 251,291,081 ) $ 110,698,675

Preferred Stock Common Stock Additional

4 unchanged sentences

Stock-based compensation expense — — — — 1,324,812 — — 1,324,812

Net income — — — — — — ( 16,108,056 ) ( 16,108,056 )

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

Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 2,143 41 109,507 — — 109,548

Stock-based compensation expense — — — — 1,720,217 — — 1,720,217

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

See accompanying notes to these unaudited condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For The Three Months Ended

March 31, 2023 For The Three Months Ended

March 31, 2022

For The Six Months Ended

June 30, 2023 For The Six Months Ended

June 30, 2022

Cash flows from operating activities:

2 unchanged sentences

Non-cash consideration received in licensing agreement transaction — ( 945,366 )

Unrealized gain on equity investment ( 359,905 ) ( 207,068 )

Interest income and accretion of discount on marketable securities ( 729,119 ) —

Unrealized (gain) loss on equity investment ( 847,995 ) 348,812

Change in accrued interest and accretion of discount on marketable securities ( 1,139,113 ) ( 223,649 )

Stock-based compensation expense 3,865,166 3,045,029

11 unchanged sentences

Sales/maturities of marketable securities 85,000,000 —

Issuance of short-term note receivable — ( 1,000,000 )

Purchase of long-term equity investment ( 10,000,000 ) —

Issuance of convertible short-term note receivable — ( 1,000,000 )

Purchases of property and equipment ( 21,357 ) ( 1,085,840 )

19 unchanged sentences

The Company’s major sources of cash have been licensing revenue, proceeds from various public and private offerings of its capital stock, option exercises and interest income.

As of March 31, 2023, the Company had approximately $ 117.7 million in cash, cash equivalents and marketable securities.

As of June 30, 2023, the Company had approximately $ 96.5 million in cash, cash equivalents and marketable securities.

Since inception, the Company has generated $ 222.6 million in revenue, primarily from the Company’s royalty, license and termination agreement (“RLT 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 $ 238.9 million as of March 31, 2023, working capital of $ 112.8 million and had cash used in operating activities of $ 12.1 million for the three months ended March 31, 2023.

The Company recorded a net loss of $ 13.4 million during the three months ended March 31, 2023, and expects to incur losses in subsequent periods for at least the next several years.

Historically, the Company has incurred recurring losses, has experienced negative operating cash flows and has required significant cash resources to execute its business plans, which the Company expects will continue for the foreseeable future.

The Company has an accumulated deficit of $ 251.3 million as of June 30, 2023, working capital of $ 92.0 million and had cash used in operating activities of $ 23.8 million for the six months ended June 30, 2023.

The Company recorded net losses of $ 12.4 million and $ 25.8 million during the three and six months ended June 30, 2023, respectively, and expects to incur losses in subsequent periods for at least the next several years.

The Company 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 March 31, 2023 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.

Management believes that the Company’s existing cash, cash equivalents and marketable securities as of June 30, 2023 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.

12 unchanged sentences

(A) Unaudited Interim Condensed Consolidated Financial Statements

The interim condensed consolidated balance sheet at March 31, 2023 and the condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three months ended March 31, 2023 and 2022 are unaudited.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

The interim condensed consolidated balance sheet at June 30, 2023 and the condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022 are unaudited.

The accompanying unaudited condensed consolidated financial statements have been prepared in

accordance with U.S.

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.

As permitted under those rules, certain notes 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 month periods ended March 31, 2023 and 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period.

The results of operations for the three and six month periods ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period.

The balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date.

12 unchanged sentences

The Company classifies its marketable securities with original maturities of less than three months as cash equivalents 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.

Unrealized gains and losses on these securities that are determined to be temporary are reported as a separate component of accumulated other comprehensive income (loss) in stockholder's equity.

(E) Restricted Cash

2 unchanged sentences

(F) Long-Term Equity Investments

Long-term equity investments consist of an equity investment in the preferred shares of Gensaic, Inc., formerly M13 Therapeutics, Inc.

(“Gensaic”), a privately held corporation.

The preferred shares are not considered in-substance common stock, and the investment 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's securities, and other publicly available data.

If the investment is impaired, the Company writes it down to its estimated fair value.

As of March 31, 2023 and December 31, 2022, the equity investment in Gensaic had a carrying value of $ 5.1 million.

Long-term equity investments consist of equity investments in the preferred shares of Gensaic, Inc., formerly M13 Therapeutics, Inc.

(“Gensaic”), and Graviton Bioscience Corporation (“Graviton”), both privately held corporations.

The preferred shares are not considered in-substance common stock, and the investments are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified within long-term equity investments on the consolidated balance sheets with adjustments recognized in other income (expense), net on the condensed consolidated statements of operations.

The Company has determined that these equity investments do not have a readily determinable fair value and elected the measurement alternative.

Therefore, the carrying amount of the equity investments 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 investments are impaired.

The assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investees' securities, and other publicly available data.

If an investment is determined to be impaired, the Company will then write it down to its estimated fair value.

As of June 30, 2023 and December 31, 2022, the equity investment in Gensaic had a carrying value of $ 5.1 million.

As of June 30, 2023, the equity investment in Graviton had a carrying value of $ 10.0 million.

Long-term equity investments also consist of an equity investment in the common shares of Marinus Pharmaceuticals, Inc.

1 unchanged sentence

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 March 31, 2023 and December 31, 2022, the equity investment in Marinus had a carrying value of approximately $ 0.9 million and $ 0.5 million, respectively.

As of June 30, 2023 and December 31, 2022, the equity investment in Marinus had a carrying value of approximately $ 1.3 million and $ 0.5 million, respectively.

(G) Fair Value of Financial Instruments

1 unchanged sentence

Observable inputs reflect market data obtained from independent 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 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:

2 unchanged sentences

The Company’s Level 1 assets consisted of investments in a U.S.

treasury money market fund and equity securities totaling $ 61.6 million as of March 31, 2023.

treasury money market fund and equity securities totaling $ 42.2 million as of June 30, 2023.

The Company's Level 1 assets totaled $ 42.5 million as of December 31, 2022.

2 unchanged sentences

The Company's Level 2 assets consisted of U.S.

treasury bills, totaling $ 54.7 million as of March 31, 2023 and $ 84.1 million as of December 31, 2022.

treasury bills, totaling $ 54.8 million as of June 30, 2023 and $ 84.1 million as of December 31, 2022.

• 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.

There were no Level 3 assets or liabilities as of March 31, 2023 or December 31, 2022.

There were no Level 3 assets or liabilities as of June 30, 2023 or December 31, 2022.

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.

15 unchanged sentences

The Company accounts for its stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation, which establishes accounting for stock-based awards granted to employees for services and requires companies to expense the estimated fair value of these awards over the requisite service period.

The Company estimates the fair value of all awards granted using the Black-Scholes valuation model.

The Company estimates

the fair value of all awards granted using the Black-Scholes valuation model.

Key inputs and assumptions include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, stock price and exercise price.

1 unchanged sentence

The Company elected an accounting policy to record forfeitures as they occur.

recognizes employee stock-based compensation expense based on the fair value of the award on the date of the grant.

The Company recognizes employee stock-based compensation expense based on the fair value of the award on the date of the grant.

The compensation expense is recognized over the vesting period under the straight-line method.

34 unchanged sentences

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 March 31, 2023 and December 31, 2022:

March 31, 2023

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, 2023 and December 31, 2022:

June 30, 2023

Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value

Cash $ 868,598 $ — $ — $ 868,598

Money market funds 60,705,569 — — 60,705,569

Cash equivalents (1)

70,754,658 5,208 — 70,759,866

Marketable securities 24,888,936 — — 24,888,936

Total cash, cash equivalents and marketable securities $ 96,512,192 $ 5,208 $ — $ 96,517,400

(1) Cash equivalents as of June 30, 2023 include money market funds of $ 40.9 million.

December 31, 2022

4 unchanged sentences

Total cash, cash equivalents and marketable securities $ 129,043,598 $ — $ ( 42,187 ) $ 129,001,411

The Company did not hold any securities that were in an unrealized loss position for more than 12 months as of March 31, 2023 and December 31, 2022.

There were no material realized gains or losses on available-for-sale securities during the three months ended March 31, 2023 and 2022.

The Company did not hold any securities that were in an unrealized loss position for more than 12 months as of June 30, 2023 and December 31, 2022.

There were no material realized gains or losses on available-for-sale securities during the three and six months ended June 30, 2023 and 2022.

NOTE 4 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

5 unchanged sentences

Total property and equipment, net $ 955,569 $ 1,147,963

Depreciation expense was $ 108,460 and $ 30,839 for the three months ended March 31, 2023 and 2022, respectively.

Intangible assets, net of accumulated amortization, were $ 185,910 and $ 222,100 as of March 31, 2023 and December 31, 2022, respectively, and are included in other assets.

Amortization expense was $ 36,190 and $ 32,000 for the three months ended March 31, 2023 and 2022, respectively .

Depreciation expense was $ 105,292 and $ 54,631 for the three months ended June 30, 2023 and 2022, respectively.

Depreciation expense was $ 213,751 and $ 85,470 for the six months ended June 30, 2023 and 2022, respectively.

Intangible assets, net of accumulated amortization, were $ 263,367 and $ 222,100 as of June 30, 2023 and December 31, 2022, respectively, and are included in other assets.

Amortization expense was $ 32,180 and $ 32,153 for the

three months ended June 30, 2023 and 2022, respectively.

Amortization expense was $ 68,370 and $ 86,636 for the six months ended June 30, 2023 and 2022, respectively.

NOTE 5 – LEASES

1 unchanged sentence

The lease provides for monthly rental payments over the lease term.

The base rent under the lease is

currently $ 2.3 million per year.

The base rent under the lease is currently $ 2.3 million per year.

Rent payments commenced 10 months following the commencement date of the lease, or January 10, 2023, and continue for 10 years following the rent commencement date.

6 unchanged sentences

ROU asset and lease liabilities related to the Company's operating lease are as follows:

Right-of-use asset $ 14,669,362

Right-of-use asset, net $ 14,412,068

Current lease liability 944,943

Long-term lease liability $ 15,389,567

The components of operating lease cost for the three months ended March 31, 2023 were as follows:

The components of operating lease cost for the six months ended June 30, 2023 were as follows:

Operating lease cost $ 1,083,617

6 unchanged sentences

2027 2,316,303

Thereafter 12,347,235

16 unchanged sentences

The holders of common stock are entitled to liquidation proceeds after all liquidation preferences for the preferred stock are satisfied.

There were 1,250 shares of Series A Preferred Stock outstanding as of March 31, 2023 and December 31, 2022.

There were 1,250 shares of Series A Preferred Stock outstanding as of June 30, 2023 and December 31, 2022.

Each share of Series A Preferred Stock is convertible into 1,000 shares of common stock at any time at the holder’s option.

3 unchanged sentences

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 March 31, 2023, the Company has not sold any shares of its common stock under the 2020 ATM agreement.

Through March 31, 2023, the Company has not declared any dividends.

As of June 30, 2023, the Company has not sold any shares of its common stock under the 2020 ATM agreement.

Through June 30, 2023, the Company has not declared any dividends.

No dividends on the common stock shall be declared and paid unless dividends on the preferred stock have been declared and paid.

8 unchanged sentences

On January 1, 2023 and January 1, 2022 an additional 3,523,344 and 1,000,000 shares, respectively, were reserved for issuance under the 2017 Plan.

As of March 31, 2023, there were 4,243,849 shares of the Company’s common stock reserved and available for issuance under the 2017 Plan.

As of June 30, 2023, there were 4,131,738 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 (“2017 ESPP”), which became effective on May 4, 2017.

1 unchanged sentence

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 March 31, 2023 and 2022, 29,830 and 38,583 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expense of $ 15,154 and $ 21,019 , respectively.

The number of shares of common stock reserved for issuance under the 2017 ESPP automatically increases 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 the Board.

During the three months ended June 30, 2023 and 2022, there were no shares purchased under the 2017 ESPP, and the Company recorded expense of $ 13,446 and $ 20,176 , respectively.

During the six months ended June 30, 2023 and 2022, 29,830 and 38,583 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expenses of $ 28,600 and $ 41,195 , respectively.

The number of shares of common stock reserved for issuance under the 2017 ESPP automatically increases

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 the Board.

The Board acted prior to each of January 1, 2023 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 March 31, 2023, there were 386,777 shares of the Company’s common stock reserved and available for issuance under the 2017 ESPP.

The Company’s Board of Directors adopted and the Company’s stockholder’s approved the 2014 Equity Incentive Plan (“2014 Plan”), which authorized the Company to grant shares of common stock in the form of incentive stock options,

non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units.

As of June 30, 2023, there were 386,777 shares of the Company’s common stock reserved and available for issuance under the 2017 ESPP.

The 2014 Plan was terminated as to future awards in May 2017, although it continues to govern the terms of options that remain outstanding under the 2014 Plan.

No additional stock awards will be granted under the 2014 Plan, and all outstanding stock awards granted under the 2014 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2017 Plan in accordance with its terms.

As of March 31, 2023, options to purchase 1,663,597 shares of common stock were outstanding under the 2014 Plan.

As of June 30, 2023, options to purchase 1,663,597 shares of common stock were outstanding under the 2014 Plan.

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.

5 unchanged sentences

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 March 31, 2023, there were 100,000 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 months ended March 31, 2023 and 2022 was estimated using the Black-Scholes option valuation model.

At June 30, 2023, there were no performance-based options outstanding.

The fair value of options granted during the three and six months ended June 30, 2023 and 2022 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.

5 unchanged sentences

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 March 31, 2023 and 2022.

There were 125,303 and 175,938 unvested nonemployee options outstanding as of March 31, 2023 and 2022, respectively.

Total expense recognized related to nonemployee stock options for the three months ended March 31, 2023 and 2022, was $ 108,585 and $ 195,000 , respectively.

Total unrecognized compensation expenses related to the nonemployee stock options was $ 518,392 as of March 31, 2023.

The Company did not recognize any expense for nonemployee performance-based option awards during the three months ended March 31, 2023 or 2022.

The Company granted 2,660,500 and 2,426,750 stock options to employees during the three months ended March 31, 2023 and 2022, respectively.

There were 7,372,384 and 5,954,029 unvested employee options outstanding as of March 31, 2023, and 2022, respectively.

Total expense recognized related to the employee stock options for the three months ended March 31, 2023 and 2022 was $ 1.8 million and $ 1.1 million, respectively.

Total unrecognized compensation expense related to employee stock options was $ 14.2 million as of March 31, 2023.

No expense for employee performance-based options was recognized during the three months ended in March 31, 2023 and 2022.

The Company granted 50,000 stock options to nonemployee consultants for services rendered during the three and six months ended June 30, 2023 and no stock options during the three and six months ended June 30, 2022.

There were 130,834 unvested nonemployee options outstanding as of June 30, 2023 and 2022.

Total expense recognized related to nonemployee stock options for the three months ended June 30, 2023 and 2022 was $ 163,199 and $ 160,337 , respectively.

Total expense recognized related to nonemployee stock options for the six months ended June 30, 2023 and 2022, was $ 271,784 and $ 355,107 , respectively.

Total unrecognized compensation expenses related to the nonemployee stock options was $ 994,411 as of June 30, 2023.

The Company did not recognize any expense for nonemployee performance-based option awards during the six months ended June 30, 2023 or 2022.

The Company granted 270,000 and 2,426,750 stock options to employees during the three months ended June 30, 2023 and 2022, respectively.

The Company granted 2,950,500 and 4,296,355 stock options to employees during the six months ended June 30, 2023 and 2022, respectively.

There were 6,710,485 and 7,354,964 unvested employee options outstanding as of June 30, 2023, and 2022, respectively.

Total expense recognized related to the employee stock options for the three months ended June 30, 2023 and 2022 was $ 1.8 million and $ 1.5 million, respectively.

Total expense recognized related to the employee stock options for the six months ended June 30, 2023 and 2022 was $ 3.6 million and $ 2.6 million, respectively.

Total unrecognized compensation expense related to employee stock options was $ 12.8 million as of June 30, 2023.

No expense for employee performance-based options was recognized during the six months ended in June 30, 2023 and 2022.

The Company’s stock-based compensation expense was recognized in operating expenses as follows:

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Research and development $ 579,917 $ 387,384 $ 1,090,177 $ 782,876

1 unchanged sentence

Total $ 1,948,648 $ 1,720,217 $ 3,865,165 $ 3,045,029

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Stock options $ 1,935,202 $ 1,700,041 $ 3,836,565 $ 3,003,834

1 unchanged sentence

Total $ 1,948,648 $ 1,720,217 $ 3,865,165 $ 3,045,029

The fair value of employee options granted during the three months ended March 31, 2023 and 2022 was estimated utilizing the following assumptions:

Three Months Ended March 31,

The fair value of employee options granted during the three and six months ended June 30, 2023 and 2022 was estimated utilizing the following assumptions:

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Average Weighted

Volatility 84.11 % 87.20 % 84.56 % 87.20 %

3 unchanged sentences

Fair value of option on grant date $ 2.66 $ 2.38 $ 1.92 $ 2.17

The fair value of non-employee options granted during the three and six months ended June 30, 2023 and 2022 was estimated utilizing the following assumptions:

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Average Weighted

Volatility 83.00 % — % 83.00 % — %

Expected term in years 5.25 0.00 5.25 0.00

Dividend rate 0.00 % 0.00 % 0.00 % 0.00 %

Risk-free interest rate 3.89 % — % 3.89 % — %

Fair value of option on grant date $ 2.42 $ — $ 2.42 $ —

The following table summarizes the number of options outstanding and the weighted average exercise price:

6 unchanged sentences

Forfeited or expired ( 421,825 ) 3.25

Options outstanding March 31, 2023 15,418,177 $ 3.86 7.57 $ 1,028,677

Vested and exercisable at March 31, 2023 7,920,490 $ 4.75 6.23 $ 694,303

At March 31, 2023 there was approximately $ 14.7 million of unrecognized stock–based compensation expense related to employee and nonemployee grants, which is expected to be recognized over a remaining average vesting period of 2.57 years.

Options outstanding June 30, 2023 15,448,835 $ 3.87 7.37 $ 5,854,085

Vested and exercisable at June 30, 2023 8,607,516 $ 4.64 6.17 $ 2,406,178

At June 30, 2023 there was approximately $ 13.8 million of unrecognized stock–based compensation expense related to employee and nonemployee grants, which is expected to be recognized over a remaining average vesting period of 2.43 years.

NOTE 9 – INCOME TAXES

2 unchanged sentences

Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

As of March 31, 2023, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year.

For the three months ended March 31, 2023, the Company did no t record any tax benefit or expense.

As of June 30, 2023, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year.

For the six months ended June 30, 2023, the Company did no t record any tax benefit or expense.

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.

3 unchanged sentences

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 March 31, 2023.

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, 2023.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

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The Company will record these reimbursement payments as research and development costs in the period the research costs are incurred.

In May 2023, the Company identified a lead PDP candidate for further research and provided $ 3.5 million to Gensaic to support the approved research plan and budget.

The amount is included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

If a product is ultimately commercialized under this agreement, the Company shall make tiered royalty payments to Gensaic in the mid-single to low double-digit range based on the net sales of all licensed PDP products during the royalty term.

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The Company may terminate this agreement by providing written notice to Gensaic 90 days in advance of the termination date.

As of March 31, 2023, none of these contingent payments were considered probable.

As of June 30, 2023, none of these contingent payments were considered probable.

Contingencies

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Therefore, since they are not material in the context of the RLT Agreement, the full upfront fee was allocated to the two performance obligations satisfied at closing.

During the three months ended March 31, 2023, no expense was recognized pursuant to the RLT Agreement.

During the six months ended June 30, 2023, no expense was recognized pursuant to the RLT Agreement.

Healx License and Option Agreement

On February 1, 2022, the Company entered an exclusive license option agreement (“Healx License and Option Agreement”) with Healx, Ltd.

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.

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 1B/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 the Company's 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.

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If the Company does not exercise the Ovid Opt-In Right, it will owe the third party a share of all milestone and royalty payments.

No revenue was recognized relating to this agreement during the three months ended March 31, 2023.

During the three months ended March 31, 2022, the Company recorded revenue of $ 0.5 million associated with the Healx License and Option Agreement.

On June 9, 2023, the Company entered into an amendment to the Healx License and Option Agreement whereby revisions were made to terms regarding the timing of the option exercise fee payable by Healx to the Company, the clinical and regulatory milestone payment structure, and the royalty payment structure.

Additionally, the parties agreed that following the exercise of the option, Healx would assume direct responsibility for patent maintenance and prosecution and that the Company would transfer to Healx all supply obligations with respect to the active pharmaceutical ingredient and finished gaboxadol products and any related licensed technology and know-how in the Company's possession that is relevant to the manufacture of such licensed products.

No revenue was recognized relating to this agreement during the six months ended June 30, 2023.

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

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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 unrealized gains on the Marinus common stock of $ 0.4 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively, which were recorded as unrealized gains on equity securities and are reflected in other income (expense), net in the condensed consolidated statements of operations.

The Company had unrealized gains on the Marinus common stock of $ 0.8 million and unrealized losses of $ 0.3 million for the six months ended June 30, 2023 and 2022, respectively, which were recorded as unrealized gains (losses) on equity securities and are reflected in other income (expense), net in the condensed consolidated statements of operations.

Graviton License Agreement and Equity Purchase

On April 30, 2023, the Company entered into a collaboration and license agreement with Graviton (“Graviton Agreement”), whereby it secured from Graviton an exclusive license to develop and commercialize Graviton's library of ROCK2 inhibitors including their lead program GV101 in rare central nervous system (“CNS”) disorders (excluding amyotrophic lateral sclerosis) worldwide (excluding China, Hong Kong, Macau and Taiwan).

Under the Graviton Agreement, the Company and Graviton plan to investigate GV101 in cerebral cavernous malformations as well as Graviton's library of ROCK2 inhibitors in other rare CNS disorders.

The Company will be responsible for all development and commercialization costs of the products.

Should the Company receive regulatory approval and commercialize any of Graviton’s ROCK2 inhibitors, it will pay Graviton tiered royalties on net sales ranging from the mid to high teens.

As part of the Graviton Agreement, the Company also purchased shares of Graviton's preferred stock for $ 10.0 million.

The Company recorded the purchase of the preferred stock as a long-term equity investment on its condensed consolidated balance sheets.

NOTE 12 – RELATED PARTY TRANSACTIONS

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The following table summarizes the calculation of basic and diluted net loss per share:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Net loss $ ( 12,408,330 ) $ ( 14,588,414 ) $ ( 25,764,539 ) $ ( 30,696,470 )

1 unchanged sentence

Net loss attributable to common stockholders $ ( 12,408,330 ) $ ( 14,588,414 ) $ ( 25,764,539 ) $ ( 30,696,470 )

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 12,408,330 ) $ ( 14,588,414 ) $ ( 25,764,539 ) $ ( 30,696,470 )

1 unchanged sentence

70,534,181 70,391,458 70,512,479 70,391,236

Weighted average common shares outstanding used in computing net loss per share - diluted

Weighted average common shares outstanding used in computing loss per share - diluted

70,534,181 70,391,458 70,512,479 70,391,236

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The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as they would be anti-dilutive:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Stock options to purchase common stock 15,448,835 13,451,517 15,448,835 13,103,587

Common stock issuable upon conversion of Series A convertible preferred stock 1,250,000 1,250,000 1,250,000 1,250,000

NOTE 14 – SUBSEQUENT EVENT

Graviton License Agreement and Equity Purchase

On April 30, 2023, the Company entered into an agreement with Graviton Bioscience Corporation (“Graviton”), whereby it secured from Graviton an exclusive license to develop and commercialize Graviton's library of ROCK2 inhibitors including their lead program GV101 in rare central nervous system (“CNS”) disorders (excluding amyotrophic lateral sclerosis) worldwide (excluding China, Hong Kong, Macau and Taiwan).

Under the agreement, the Company and Graviton plan to investigate GV101 in cerebral cavernous malformations as well as Graviton's library of ROCK2 inhibitors in other rare CNS disorders.

The Company will be responsible for all development and commercialization costs of the products.

Should the Company receive regulatory approval and commercialize any of Graviton’s ROCK2 inhibitors, it will pay Graviton tiered royalties on net sales ranging from the mid to high teens.

As part of the collaboration the Company also purchased shared of Graviton's Series A Preferred Stock for $ 10 million .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements