What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 128 added, 113 removed, 493 unchanged (33% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

2023 December 31,

23 unchanged sentences

10,000,000 shares authorized;

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

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

Common stock, $ 0.001 par value;

125,000,000 shares authorized;

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

70,680,551 and 70,466,885 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

70,681 70,467

Additional paid-in-capital 363,768,613 357,770,825

Accumulated other comprehensive income (loss) 5,208 ( 42,187 )

Accumulated other comprehensive loss ( 3,877 ) ( 42,187 )

Accumulated deficit ( 262,543,467 ) ( 225,526,542 )

5 unchanged sentences

For The Three Months Ended

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

September 30, 2023 For The Three Months Ended

September 30, 2022 For The Nine Months Ended

September 30, 2023 For The Nine Months Ended

September 30, 2022

License and other revenue $ 108,972 $ 11,102 $ 250,132 $ 1,456,468

17 unchanged sentences

For The Three Months Ended

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

September 30, 2023 For The Three Months Ended

September 30, 2022 For The Nine Months Ended

September 30, 2023 For The Nine Months Ended

September 30, 2022

Net loss $ ( 11,252,386 ) $ ( 11,967,771 ) $ ( 37,016,925 ) $ ( 42,664,240 )

19 unchanged sentences

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

Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 76,758 78 223,642 — — 223,720

Stock-based compensation expense — — — — 1,631,027 — — 1,631,027

Other comprehensive loss — — — — — ( 9,085 ) — ( 9,085 )

Net loss — — — — — — ( 11,252,386 ) ( 11,252,386 )

Balance, September 30, 2023 1,250 $ 1 70,680,551 $ 70,681 $ 363,768,613 ( 3,877 ) $ ( 262,543,467 ) $ 101,291,951

Preferred Stock Common Stock Additional

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Balance, June 30, 2022 1,250 1 70,419,388 70,414 354,221,191 ( 90,127 ) ( 202,053,983 ) 152,147,496

Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 47,497 53 81,576 — — 81,629

Stock-based compensation expense — — — — 1,782,043 — — 1,782,043

Other comprehensive income — — — — — 7,335 — 7,335

Net loss — — — — — — ( 11,967,771 ) ( 11,967,771 )

Balance, September 30, 2022 1,250 $ 1 70,466,885 $ 70,467 $ 356,084,810 $ ( 82,792 ) $ ( 214,021,753 ) $ 142,050,733

See accompanying notes to these unaudited condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For The Six Months Ended

June 30, 2023 For The Six Months Ended

June 30, 2022

For The Nine Months Ended

September 30, 2023 For The Nine Months Ended

September 30, 2022

Cash flows from operating activities:

7 unchanged sentences

Amortization of right-of-use asset 767,423 614,130

Accretion of lease liability 573,015 368,226

Change in lease liability ( 237,884 ) 650,089

Change in operating assets and liabilities:

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Right-of-use asset in exchange for lease liability $ — $ 15,791,769

Conversion of short-term note receivable to long-term equity investment $ — $ 1,000,000

See accompanying notes to these unaudited condensed consolidated financial statements

5 unchanged sentences

The Company is a biopharmaceutical company committed to developing medicines that transform the lives of people with epilepsies and seizure-related 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, and has financed its operations through the issuance of convertible preferred stock, common stock and other equity instruments.

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 the ability to secure additional capital to fund operations.

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

As of September 30, 2023, the Company had approximately $ 87.1 million in cash, cash equivalents and marketable securities.

Since inception, the Company has generated $ 222.8 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 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 has an accumulated deficit of $ 262.5 million as of September 30, 2023, working capital of $ 83.0 million and had cash used in operating activities of $ 33.9 million for the nine months ended September 30, 2023.

The Company recorded net losses of $ 11.3 million and $ 37.0 million during the three and nine months ended September 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 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.

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

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(A) Unaudited Interim Condensed Consolidated Financial Statements

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.

The interim condensed consolidated balance sheet at September 30, 2023 and the condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three and nine months ended September 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.

1 unchanged sentence

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, 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 results of operations for the three and nine month periods ended September 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.

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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.

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

As of September 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.

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

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), net on the Company's consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the equity investment in Marinus had a carrying value of approximately $ 1.0 million and $ 0.5 million, respectively.

(G) Fair Value of Financial Instruments

6 unchanged sentences

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

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

treasury money market fund and equity securities totaling $ 37.7 million as of September 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 $ 54.8 million as of June 30, 2023 and $ 84.1 million as of December 31, 2022.

treasury bills, totaling $ 49.5 million as of September 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 June 30, 2023 or December 31, 2022.

There were no Level 3 assets or liabilities as of September 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.

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(K) Stock-based Compensation

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.

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.

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.

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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, 2023 and December 31, 2022:

June 30, 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 September 30, 2023 and December 31, 2022:

September 30, 2023

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

4 unchanged sentences

Total cash, cash equivalents and marketable securities $ 87,075,565 $ — $ ( 3,878 ) $ 87,071,687

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

(1) Cash equivalents as of September 30, 2023 include money market funds of $ 36.7 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 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.

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

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

NOTE 4 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is summarized as follows:

September 30,

2023 December 31,

3 unchanged sentences

Total property and equipment, net $ 856,491 $ 1,147,963

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.

Depreciation expense was $ 104,323 and $ 102,071 for the three months ended September 30, 2023 and 2022, respectively.

Depreciation expense was $ 318,074 and $ 187,541 for the nine months ended September 30, 2023 and 2022, respectively.

Intangible assets, net of accumulated amortization, were $ 222,051 and $ 222,100 as of September 30, 2023 and December 31, 2022, respectively, and are included in other assets.

Amortization expense was $ 41,316 and $ 53,348 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.

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

Amortization expense was $ 109,686 and $ 139,984 for the nine months ended September 30, 2023 and 2022, respectively.

NOTE 5 – LEASES

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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 %.

The present value of the lease payments was 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:

September 30,

Right-of-use asset, net $ 14,155,246

1 unchanged sentence

Long-term lease liability $ 15,073,284

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

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

September 30,

Operating lease cost $ 1,625,425

9 unchanged sentences

Accrued expenses consist of the following:

September 30,

2023 December 31,

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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 June 30, 2023 and December 31, 2022.

There were 1,250 shares of Series A Preferred Stock outstanding as of September 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 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.

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

Through September 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.

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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 at its discretion.

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 at its discretion.

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 June 30, 2023, there were 4,131,738 shares of the Company’s common stock reserved and available for issuance under the 2017 Plan.

As of September 30, 2023, there were 4,371,869 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 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.

During the three months ended September 30, 2023 and 2022, 33,931 and 37,872 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expense of $ 13,783 and $ 20,687 , respectively.

During the nine months ended September 30, 2023 and 2022, 63,761 and 76,455 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expenses of $ 42,383 and $ 61,882 , 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 June 30, 2023, there were 386,777 shares of the Company’s common stock reserved and available for issuance under the 2017 ESPP.

As of September 30, 2023, there were 352,846 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.

1 unchanged sentence

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

As of September 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.

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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, 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.

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

The fair value of options granted during the three and nine months ended September 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.

The risk-free interest rates were based on the rate for U.S.

The risk-free interest rates are 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.

Beginning in January 1, 2023, the expected volatility was estimated based on historical volatility information of the Company since the Company's initial public offering.

The expected life is based on the simplified method in accordance with the SEC Staff Accounting Bulletin No.

Beginning January 1, 2023, the expected volatility is estimated based on the historical volatility of the Company since the Company's initial public offering.

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 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 granted zero and 70,000 stock options to nonemployee consultants for services rendered during the three and nine months ended September 30, 2023, respectively, and no stock options during the three and nine months ended September 30, 2022.

There were 99,792 and 130,834 unvested nonemployee options outstanding as of September 30, 2023 and 2022.

Total expense recognized related to nonemployee stock options for the three months ended September 30, 2023 and 2022 was $ 106,032 and $ 106,806 , respectively.

Total expense recognized related to nonemployee stock options for the nine months ended September 30, 2023 and 2022, was $ 377,816 and $ 461,913 , respectively.

Total unrecognized compensation expenses related to the nonemployee stock options was $ 365,301 as of September 30, 2023.

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

The Company granted 4,000 and 266,800 stock options to employees during the three months ended September 30, 2023 and 2022, respectively.

The Company granted 2,934,500 and 4,555,641 stock options to employees during the nine months ended September 30, 2023 and 2022, respectively.

There were 5,985,002 and 7,010,800 unvested employee options outstanding as of September 30, 2023, and 2022, respectively.

Total expense recognized related to the employee stock options for the three months ended September 30, 2023 and 2022 was $ 1.5 million and $ 1.6 million, respectively.

Total expense recognized related to the employee stock options for the nine months ended September 30, 2023 and 2022 was $ 5.1 million and $ 4.3 million, respectively.

Total unrecognized compensation expense related to employee stock options was $ 10.8 million as of September 30, 2023.

No expense for employee performance-based options was recognized during the three and nine months ended September 30, 2023.

The Company recognized total expense of $ 94,000 for employee performance-based options during the three and nine months ended September 30, 2022.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Research and development $ 345,292 $ 487,368 $ 4,060,725 $ 1,270,244

1 unchanged sentence

Total $ 1,631,028 $ 1,782,043 $ 5,496,194 $ 4,827,072

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Stock options $ 1,617,244 $ 1,761,356 $ 5,453,810 $ 4,765,190

1 unchanged sentence

Total $ 1,631,028 $ 1,782,043 $ 5,496,194 $ 4,827,072

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

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Average Weighted

6 unchanged sentences

Fair value of option on grant date $ 2.61 $ 1.61 $ 1.92 $ 2.13

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

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

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Average Weighted

14 unchanged sentences

Forfeited or expired ( 665,956 ) 3.52

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.

Options outstanding September 30, 2023 15,164,877 $ 3.86 7.14 $ 11,557,144

Vested and exercisable at September 30, 2023 9,080,083 $ 4.54 6.11 $ 5,268,442

At September 30, 2023 there was approximately $ 11.2 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 2.32 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 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.

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

For the nine months ended September 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 June 30, 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 September 30, 2023.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

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Once a product is identified by the Company that demonstrates sufficient efficacy, the Company may exercise its option with respect to the specific research program for that PDP product.

The Company shall reimburse Gensaic for Gensaic's research costs related to the specific research plan for PDP products identified, the research plan and budget shall be mutually agreed upon by the parties and shall not exceed $ 3.0 million in any research year.

The Company shall reimburse Gensaic for Gensaic’s research costs related to the specific research plan for PDP products identified;

the research plan and budget shall be mutually agreed upon by the parties and shall not exceed $ 3.0 million in any research year.

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.

The amount is expensed as the research and development occurs with the remaining amount 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 June 30, 2023, none of these contingent payments were considered probable.

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

Contingencies

7 unchanged sentences

In March 2021, the Company entered into the RLT 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.

Under the RLT 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.

Under the RLT Agreement, all rights in soticlestat are 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 no longer has 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 RLT 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 RLT Agreement:

(1) no later than the second business day prior to the closing of the RLT 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 RLT 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 RLT 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 RLT Agreement and (iii) any tangible embodiment 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 RLT 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 RLT Agreement, the full upfront fee was allocated to the two performance obligations satisfied at closing.

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

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.

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

Healx License and Option Agreement

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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.

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

During the nine months ended September 30, 2022, the Company recorded revenue of $ 0.5 million associated with the Healx License and Option Agreement.

Marinus Pharmaceuticals Out-License Agreement

4 unchanged sentences

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 $ 0.8 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.

The Company had unrealized gains on the Marinus common stock of $ 0.1 million and unrealized losses of $ 0.1 million for the nine months ended September 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

20 unchanged sentences

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

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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Net loss attributable to common stockholders $ ( 11,252,386 ) $ ( 11,967,771 ) $ ( 37,016,925 ) $ ( 42,664,240 )

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

7 unchanged sentences

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 June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

1 unchanged sentence

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

On October 17, 2023, the Company entered into a purchase and sale agreement (the “Ligand Agreement”) with Ligand Pharmaceuticals Incorporated (“Ligand”) for the sale to Ligand of a 13 % interest in the potential royalties and milestone payments owed to the Company under the RLT Agreement related to the potential approval and commercialization of soticlestat.

Under the Ligand Agreement, Ligand paid the Company $ 30 million, less $ 100,000 of reimbursable expenses.

The Company retains an 87 % interest in such potential royalty and milestone payments.

The Company expects to account for the transaction in accordance with ASC 470.

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