What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-08 compared with 2023-03-13 · 197 added, 222 removed, 621 unchanged (40% of the section changed)

10 unchanged sentences

Attestation Report of the Registered Public Accounting Firm

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of internal control over financial reporting as of December 31, 2022, appears in the “Report of Independent Registered Public Accounting Firm” beginning on page F-2 and is incorporated herein by reference.

This Annual Report on Form 10-K does not include an attestation report on our internal control over financial reporting from our registered public accounting firm due to an exemption as a smaller reporting company and as a non-accelerated filer for the year ended December 31, 2023.

Changes in Internal Control over Financial Reporting

1 unchanged sentence

Other Information

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

30 unchanged sentences

333-217245), filed with the Commission on April 25, 2017).

4.2 Second Amended and Restated Investors’ Rights Agreement, by and among the Company and certain of its stockholders, dated January 6, 2017 (incorporated herein by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No.

333-217245), filed with the Commission on April 10, 2017).

4.2 Description of the Securities of Ovid Therapeutics Inc.

(incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K (File No.

001-38085), filed with the Commission on March 12, 2020).

4.3 Form of Series A Preferred Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No.

24 unchanged sentences

001-38085), filed with the Commission on May 22, 2017).

10.13+ Non-Employee Director Compensation P o l icy (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

001-38085), filed with the Commission on November 10, 2021).

10.14+ Non-Employee Director Compensation P olicy (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

001-38085 ), filed with the Commission on May 10, 2022).

Amended Non-Employee Director Compensation Policy, effective May 5, 2022.

Executive Employment Agreement between the Registrant and Jeremy M.

15 unchanged sentences

001-38085), filed with the Commission on January 3, 2022).

P urchase and Sale Agreement , dated as of October 1 7 , 2023, by and between the Company and Ligand P harma ceuticals Incorporated.

23.1 Consent of Independent Registered Public Accounting Firm

2 unchanged sentences

31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 C ertification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.

32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 I ncentive Compensation Reco upment Policy

101.INS Inline XBRL Instance Document

51 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss ) Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

4 unchanged sentences

Ovid Therapeutics Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Ovid Therapeutics Inc.

and subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

and subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report On Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

1 unchanged sentence

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We believe that our audits provide a reasonable basis for our opinion .

Critical Audit Matters

29 unchanged sentences

Lease liability 14,755,606 16,001,725

Royalty monetization liability 30,000,000 —

Total liabilities 56,229,896 22,993,250

8 unchanged sentences

Additional paid-in-capital 365,590,993 357,770,825

Accumulated other comprehensive loss ( 42,187 ) —

Accumulated other comprehensive income (loss)

702 ( 42,187 )

Accumulated deficit ( 277,865,501 ) ( 225,526,542 )

7 unchanged sentences

License and other revenue $ 391,695 $ 1,502,748

License revenue - related party — 196,000,000

Total revenue 391,695 1,502,748

3 unchanged sentences

Total operating expenses 59,673,158 57,050,909

(Loss) income from operations ( 55,548,161 ) 124,209,092

Loss from operations ( 59,281,464 ) ( 55,548,161 )

Other income (expense), net 6,942,505 1,379,132

(Loss) income before provision for income taxes $ ( 54,169,029 ) $ 124,163,402

Loss before provision for income taxes $ ( 52,338,959 ) $ ( 54,169,029 )

Provision for income taxes — —

Net (loss) income $ ( 54,169,029 ) $ 122,834,584

Net (loss) income per share, basic $ ( 0.77 ) $ 1.78

Net (loss) income per share, diluted $ ( 0.77 ) $ 1.76

Net loss $ ( 52,338,959 ) $ ( 54,169,029 )

Net loss per share, basic $ ( 0.74 ) $ ( 0.77 )

Net loss per share, diluted $ ( 0.74 ) $ ( 0.77 )

Weighted-average common shares outstanding, basic

70,580,604 70,424,819

Weighted-average common shares outstanding, diluted

70,580,604 70,424,819

See accompanying notes to these consolidated financial statements

OVID THERAPEUTICS INC.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

For the Year Ended December 31,

Net (loss) income $ ( 54,169,029 ) $ 122,834,584

Other comprehensive loss:

Unrealized loss on marketable securities ( 42,187 ) —

Comprehensive (loss) income $ ( 54,211,216 ) $ 122,834,584

Net loss $ ( 52,338,959 ) $ ( 54,169,029 )

Other comprehensive gain (loss):

Unrealized gain (loss) on available-for-sale securities 702 ( 42,187 )

Comprehensive loss $ ( 52,338,257 ) $ ( 54,211,216 )

See accompanying notes to these consolidated financial statements

4 unchanged sentences

Comprehensive

Loss Accumulated

Income (Loss)

Deficit Total

3 unchanged sentences

Stock-based compensation expense — — — — 7,285,192 — — 7,285,192

Other comprehensive loss — — — — — ( 42,187 ) — ( 42,187 )

Balance, Net loss — — — — — — ( 54,169,029 ) ( 54,169,029 )

Other comprehensive income — — — — — 42,889 — 42,889

Net loss — — — — — — ( 52,338,959 ) ( 52,338,959 )

Balance, December 31, 2023 1,250 $ 1 70,691,992 $ 70,692 $ 365,590,993 $ 702 $ ( 277,865,501 ) $ 87,796,887

2 unchanged sentences

Comprehensive

Loss Accumulated

Income (Loss)

Deficit Total

1 unchanged sentence

Balance, December 31, 2021 1,250 $ 1 70,364,912 $ 70,359 $ 351,033,589 $ — $ ( 171,357,513 ) $ 179,746,436

Issuance of common stock in asset acquisition — — 2,272,727 2,273 7,297,727 — — 7,300,000

Issuance of common stock from exercise of stock options and employee stock purchase plan — — 101,973 108 180,550 — — 180,658

Conversion of series A convertible preferred stock to common stock ( 2,000 ) ( 2 ) 2,000,000 2,000 ( 1,998 ) — — —

Stock-based compensation expense — — — — 6,556,686 — — 6,556,686

Net income — — — — — — 122,834,584 122,834,584

Other comprehensive loss — — — — — ( 42,187 ) — ( 42,187 )

Net loss — — — — — — ( 54,169,029 ) ( 54,169,029 )

Balance, December 31, 2022 1,250 $ 1 70,466,885 $ 70,467 $ 357,770,825 $ ( 42,187 ) $ ( 225,526,542 ) $ 132,272,564

5 unchanged sentences

Cash flows from operating activities:

Net (loss) income $ ( 54,169,029 ) $ 122,834,584

Adjustments to reconcile net (loss) income to cash used in operating activities:

Non-cash research and development expense — 7,300,000

Net loss $ ( 52,338,959 ) $ ( 54,169,029 )

Adjustments to reconcile net loss to cash used in operating activities:

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

Unrealized loss on equity investment 454,811 —

Interest income and accretion of discount on marketable securities ( 1,211,311 ) —

Unrealized (gain) loss on equity investments

( 2,003,073 ) 454,811

Change in accrued interest income and accretion of discount on marketable securities

( 2,172,254 ) ( 1,211,311 )

Stock-based compensation expense 7,285,192 6,556,686

1 unchanged sentence

Amortization of right-of-use asset 1,028,293 869,100

Accretion of lease liability 936,927 —

Change in lease liability ( 533,946 ) 936,927

Change in operating assets and liabilities:

2 unchanged sentences

Accrued expenses 2,020,566 ( 3,166,606 )

Deferred revenue — ( 12,382,779 )

Related party payable — ( 2,432,192 )

Related party receivable — 141,763

Long-term prepaid expenses — 477,171

Net cash (used in) provided by operating activities ( 55,227,127 ) 118,611,673

Net cash used in operating activities ( 45,780,925 ) ( 55,227,127 )

Cash flows from investing activities:

2 unchanged sentences

Purchase of long-term equity investments

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

Purchase of property and equipment ( 1,224,379 ) ( 184,008 )

Software development and other assets ( 194,397 ) ( 5,400 )

( 10,000,000 ) ( 2,500,000 )

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

Purchases of property and equipment ( 40,308 ) ( 1,224,379 )

Software development and other costs ( 97,147 ) ( 194,397 )

Net cash used in investing activities ( 2,580,605 ) ( 87,883,217 )

Cash flows from financing activities:

ATM and other offering costs — ( 21,314 )

Proceeds from exercise of options and employee stock purchase plan 535,201 180,658

Proceeds from royalty monetization agreement 30,000,000 —

Net cash provided by financing activities 30,535,201 180,658

Net (decrease) increase in cash, cash equivalents and restricted cash ( 142,929,686 ) 117,694,355

Net decrease in cash, cash equivalents and restricted cash ( 17,826,329 ) ( 142,929,686 )

Cash, cash equivalents and restricted cash, at beginning of period 46,798,599 189,728,285

8 unchanged sentences

Ovid Therapeutics Inc.

(the “Company”) was incorporated under the laws of the state of Delaware and commenced operations on April 1, 2014 (date of inception) and maintains its principal executive office in New York, New York.

The Company is a biopharmaceutical company currently focused on developing impactful medicines for patients and families living with epilepsies and seizure-related 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, and has financed its operations through the issuance of convertible preferred stock (“Preferred Stock”), common stock and other equity instruments.

(the “Company”) was incorporated under the laws of the state of Delaware, commenced operations on April 1, 2014, and maintains its principal executive office in New York, New York.

The Company is a biopharmaceutical company that is dedicated to meaningfully improving the lives of people affected by certain epilepsies and brain conditions with seizure symptoms.

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 sale and/or licensing of certain assets and the licensing of certain intellectual property.

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.

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

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 December 31, 2023, the Company had approximately $ 105.8 million in cash, cash equivalents and marketable securities.

Since inception, the Company has generated $ 222.5 million in revenue which is primarily comprised of $ 25.0 million received pursuant to the Company’s license and collaboration agreement (the “Angelini License Agreement”) with Angelini Pharma Rare Diseases AG (“Angelini”) and a one-time, upfront payment of $ 196.0 million received pursuant to 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 recurring negative operating cash flows and required significant cash resources to execute its business plans.

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 recurring 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 $ 277.9 million as of December 31, 2023, working capital of $ 98.1 million and had cash used in operating activities of $ 45.8 million for the year ended December 31, 2023.

The Company recorded a net loss of $ 54.2 million during the fiscal year ended December 31, 2022, 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.

The Company recorded a net loss of $ 52.3 million during the year ended December 31, 2023 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 December 31, 2023 will be sufficient to fund its current operating plans through at least 12 months from the date of filing of the Company’s Annual Report on Form 10-K.

2 unchanged sentences

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 is subject to other challenges and risks specific to the Company's 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:

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:

delays or problems in the supply of the Company's product candidates, loss of single source suppliers or failure to comply with manufacturing regulations;

1 unchanged sentence

pharmaceutical product development and the inherent uncertainty of clinical success;

and the challenges of protecting and enhancing the Company's intellectual property rights;

the challenges of protecting and enhancing intellectual property rights;

complying with applicable regulatory requirements;

8 unchanged sentences

Actual results could differ materially from those estimates.

Comprehensive (loss) income includes net (loss) income as well as unrealized gains and losses on available-for-sale securities.

(D) Marketable Securities

Marketable securities consist of investments in U.S.

1 unchanged sentence

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 stockholders' equity.

(E) Restricted Cash

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 income (loss) in stockholders' equity.

(D) Restricted Cash

The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash for which 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 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 income (expense), 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 December 31, 2022 and 2021, the equity investment had a carrying value of $ 5.1 million and $ 1.6 million, respectively.

(E) Long-term Equity Investments

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

As of December 31, 2023, the equity investment in Graviton had a carrying value of $ 11.2 million, which reflects a $ 1.2 million unrealized gain recognized during the year and recorded in other income (expense), net, in the consolidated statements of operations due to an observable change in price.

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

As of December 31, 2022, the equity investment in Marinus had a carrying value of approximately $ 0.5 million.

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

No impairments were recognized in the years ending December 31, 2023 and 2022.

(G) Note Receivable

(F) Note Receivable

On March 17, 2022, the Company issued a convertible promissory note with a principal amount of $ 1.0 million to Gensaic.

2 unchanged sentences

The Company received interest on the convertible promissory note at the rate of 1.5 % per annum through the date of conversion.

(H) Fair Value of Financial Instruments

(G) Fair Value of Financial Instruments

Financial Accounting Standards Board 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 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).

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 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 approximately $ 42.5 million as of December 31, 2022.

The Company’s Level 1 assets consisted of money market funds and short-term investments totaling $ 181.4 million as of December 31, 2021.

treasury money market fund and equity securities totaling approximately $ 25.7 million and $ 42.5 million, respectively, as of December 31, 2023 and 2022.

• 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).

1 unchanged sentence

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

treasury bills totaling approximately $ 84.1 million as of December 31, 2022.

The Company had no Level 2 assets or liabilities as of December 31, 2021.

treasury bills totaling approximately $ 78.8 million and $ 84.1 million, respectively, as of December 31, 2023 and 2022.

• Level 3—Unobservable inputs for the asset or liability.

Financial instruments are considered Level 3 when the 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 had no Level 3 assets or liabilities as of December 31, 2022 or 2021.

The Company's Level 3 liabilities consist of a royalty monetization liability totaling $ 30.0 million at December 31, 2023.

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

The carrying amounts reported in the consolidated balance sheets for cash, cash equivalents and marketable securities, other current assets, accounts payable, and accrued expenses approximate their fair values based on the short-term maturity of these instruments.

4 unchanged sentences

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.

(J) Property and Equipment

(I) Property and Equipment

Property and equipment are stated at cost and depreciated over their estimated useful lives of three years using the straight-line method.

1 unchanged sentence

The Company reviews the recoverability of all long-lived assets, including the related useful life, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.

(K) Research and Development Expenses

(J) Research and Development Expenses

The Company expenses the cost of research and development as incurred.

Research and development expenses are comprised of costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and preclinical materials as well as contracted services, license fees, and other external costs.

Research and development expenses also include the cost of licensing agreements acquired from third-parties, such as the acquisition of OV350 from AstraZeneca AB.

Research and development expenses also include the cost of licensing agreements acquired from third-parties.

Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received in accordance with ASC 730, Research and Development.

(L) Stock-based Compensation

(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

9 unchanged sentences

The fair value is measured at the value of the Company’s common stock award at the earlier of the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

(L) Royalty Monetization Liability

The Company accounted for its sale to Ligand Pharmaceuticals Incorporated (“Ligand”) of a 13 % share of royalties and milestones owed to the Company related to the potential approval and commercialization of soticlestat in accordance with ASC 470, Debt, which addresses situations in which an entity receives cash from an investor in return for an agreement to pay the investor a specified percentage of the revenue from a contractual right.

The Company classified the proceeds received from the sale to Ligand as debt as the Company determined that it had significant continuing involvement in the generation of the cash flows to Ligand.

The Company further elected to account for the debt at fair value in accordance with ASC 825, Financial Instruments, which permits a company to elect the fair value option on an instrument specific basis for a recognized financial liability that is not specifically excluded.

If commercialized, the Company will recognize 100 % of the royalties and milestones received for sales of soticlestat as revenue and the 13 % share of royalties payable to Ligand Pharmaceuticals as a cash outflow from financing activities in the consolidated statements of cash flows.

Changes in the fair value of the debt will be classified as a component of other income / expense in the consolidated statements of operations.

The change in fair value of the debt was immaterial for the year-ended December 31, 2023.

(M) Income Taxes

1 unchanged sentence

Valuation allowances are provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The impact of a change in the tax laws is recorded in the period in which the law is enacted.

(N) Net (Loss) Income per Share

Net (loss) income per common share is determined by dividing net (loss) income attributable to common stockholders by the basic and diluted weighted-average common shares outstanding during the period.

The impact of a change in tax laws is recorded in the period in which the law is enacted.

(N) Net Loss per Share

Net loss per common share is determined by dividing net loss attributable to common stockholders by the basic and diluted weighted-average common shares outstanding during the period.

The Company applies the two-class method to allocate earnings between common stock and participating securities.

Net (loss) income per diluted 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 the potential impact of preferred stock using the if-converted method.

Net loss per diluted 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 the potential impact of preferred stock using the if-converted method.

(O) Retirement Plan

5 unchanged sentences

(P) Revenue Recognition

Under ASC 606, Revenue Recognition, 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.

Under ASC 606, Revenue from Contracts with Customers, 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:

8 unchanged sentences

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.

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.

6 unchanged sentences

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 GAAP 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.

(R) Reclassifications

Certain prior period amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no effect on the reported results of operations.

The Company adopts new pronouncements relating to GAAP applicable to the Company as they are issued, and based upon the effective dates included in the pronouncements.

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 consolidated financial statements.

N OTE 3 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

4 unchanged sentences

Money market funds

24,340,121 — — 24,340,121

Marketable securities 78,791,156 702 — 78,791,858

26 unchanged sentences

the letter of credit is characterized as restricted cash on the Company's consolidated balance sheets.

The Hudson Commons lease has a remaining lease term of 10 years and includes a single renewal option for an additional five years .

The Hudson Commons lease has a remaining lease term of approximately nine years and includes a single renewal option for an additional five 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.

2 unchanged sentences

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

Right-of-use asset $ 14,922,669

2023 December 31,

$ 13,894,376 $ 14,922,669

Current lease liability $ 1,246,119 $ 533,946

Long-term lease liability $ 14,755,606 $ 16,001,725

The components of operating lease cost for the year ended December 31, 2022 were as follows:

The components of operating lease cost for the year ended December 31, 2023 and 2022 were as follows:

2023 December 31,

Operating lease cost $ 2,167,233 $ 1,806,028

16 unchanged sentences

Total $ 6,525,235 $ 4,504,669

NOTE 7 – STOCKHOLDERS’ EQUITY AND PREFERRED STOCK

NOTE 7 – STOCKHOLDERS’ EQUITY

The Company’s capital structure consists of common stock and preferred stock.

4 unchanged sentences

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.

Shares of Series A Preferred Stock will be 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 actually paid on shares of common stock.

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 December 31, 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 December 31, 2023 and 2022.

2 unchanged sentences

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.

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

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.

Through December 31, 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.

NOTE 8 – STOCK-BASED COMPENSATION

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

The types of stock-based awards, including share purchase rights amount, terms, and provisions for exercising grants were determined by the Company’s Board of Directors.

The Company's Board of Directors adopted, and the Company's stockholders approved, the 2017 equity incentive plan (“2017 Plan”), which became effective on May 4, 2017.

The Company’s Board of Directors (the “Board”) adopted and 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, nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units.

The types of stock-based awards, including share purchase rights amount, terms, and provisions for exercising grants were determined by the Board.

The Board adopted, and the Company's stockholders approved, the 2017 equity incentive plan (“2017 Plan”), which became effective 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.

Additionally, the 2017 Plan provides for the grant of performance awards.

The Company's employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan.

Upon the adoption of the 2017 Plan, no further awards will be granted under the 2014 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.

Upon the adoption of the 2017 Plan, no further awards were granted under the 2014 Plan.

On January 1, 2022, an additional 1,000,000 shares were reserved for issuance under the 2017 Plan.

As of December 31, 2021, there were 4,397,067 shares of the Company’s common stock reserved for issuance under the 2017 Plan.

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

1 unchanged sentence

On January 1, 2024, an additional 3,534,600 shares were reserved 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 on May 4, 2017.

The Board adopted, and the Company's stockholders approved the 2017 employee stock purchase plan (“ESPP”), which became effective on May 4, 2017.

The initial reserve of shares of common stock that may be issued under the ESPP was 279,069 shares.

1 unchanged sentence

During the years ended December 31, 2023 and 2022, 63,761 and 76,455 shares were purchased under the ESPP and the Company recorded expense of $ 57,148 and $ 85,319 , respectively.

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 capital 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 number of shares of common stock reserved for issuance under the 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 capital 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 January 1, 2024 to provide that there be no increase in the number of shares reserved for issuance under the ESPP.

As of December 31, 2023 and 2022, there were 352,846 and 416,607 shares of the Company’s common stock reserved for issuance under the ESPP.

Unless specified otherwise in an individual option agreement, stock options granted under the 2014 Plan and 2017 Plan generally have a ten-year term and a four-year graded vesting period.

Unless specified otherwise in an individual option agreement, stock options granted under the 2014 Plan and 2017 Plan 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.

1 unchanged sentence

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 the option holder’s death or disability while employed by or providing service to the Company, the exercisable period extends to 12 months.

Vested options remain exercisable for 90 days under the 2017 Plan and 30 days under the 2014 Plan subsequent to the termination of the option holder’s service with the Company.

In the event of the option holder’s death or disability while employed by or providing service to the Company, the exercisable period extends to 18 months or 12 months, respectively under the 2017 Plan and 6 months under the 2014 Plan..

Performance-based option awards generally have similar vesting terms, with vesting occurring on the date the performance condition is achieved and expire in accordance with the specific terms of the agreement.

At December 31, 2022 and 2021, there were 100,000 and 150,000 performance-based options outstanding and unvested, respectively, that include options to vest upon the achievement of certain research and development milestones.

At December 31, 2023 and 2022, there were zero and 100,000 performance-based options outstanding and unvested, respectively, that include options to vest upon the achievement of certain research and development milestones.

The fair value of options granted during the years ended December 31, 2023 and 2022 was estimated using the Black-Scholes option valuation model.

1 unchanged sentence

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.

Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant

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

The expected volatility was estimated based on historical volatility information of peer companies that is publicly available.

The expected volatility was estimated based on the Company's published historical stock prices.

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 cancelled.

The Company granted zero and 170,000 stock options to nonemployee consultants for services rendered during the years ended December 31, 2022 and 2021, respectively.

The Company granted 45,000 and zero stock options to nonemployee consultants for services rendered during the years ended December 31, 2023 and 2022, respectively.

There were 98,542 and 127,459 unvested nonemployee options outstanding as of December 31, 2023 and 2022, respectively.

6 unchanged sentences

Total unrecognized compensation expense related to employee stock options was $ 9.3 million and $ 11.5 million as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2022 and 2021, the Company recognized $ 118,075 and zero in expenses for employee performance-based option awards.

During the years ended December 31, 2023 and 2022, the Company recognized zero and $ 0.1 million, respectively, in expenses for employee performance-based option awards.

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

6 unchanged sentences

Employee stock purchase plan

57,148 85,319

Total $ 7,285,192 $ 6,556,686

19 unchanged sentences

Life in Years Aggregate

Options outstanding December 31, 2020 10,403,420 $ 5.26 7.59 $ 652,438

Options outstanding at December 31, 2021 10,776,758 $ 4.97 6.07 $ 2,389,890

Vested and exercisable at December 31, 2021 6,188,200 $ 5.98 4.63 $ 1,531,907

2 unchanged sentences

Forfeited or expired

( 2,365,643 ) 5.56

Options outstanding December 31, 2022 12,961,238 $ 4.13 7.42 $ 62,158

3 unchanged sentences

Forfeited or expired

( 728,346 ) 3.44

Options outstanding December 31, 2023 15,124,546 $ 3.87 6.90 $ 5,212,586

Vested and exercisable at December 31, 2023 9,649,094 $ 4.47 5.97 $ 2,464,620

At December 31, 2022, there was $ 12.1 million of unamortized share–based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.26 years.

At December 31, 2021, there was $ 10.4 million of unamortized share–based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.61 years.

At December 31, 2023, there was $ 9.4 million of unamortized stock-based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.23 years.

At December 31, 2022, there was $ 12.1 million of unamortized stock-based compensation expense, which is expected to be recognized over a remaining average vesting period of 2.26 years.

NOTE 9 – INCOME TAXES

4 unchanged sentences

On each of August 10, 2015 and February 22, 2019 the Company experienced an ownership change.

The Company anticipates a significant portion of its pre-change NOLs to be limited, but has not yet completed a formal Section 382 analysis.

The Company anticipates a significant portion of its pre-change NOLs to be limited, however has not yet completed a formal Section 382 analysis subsequent to the last ownership change.

The Company maintains a full valuation allowance against its net deferred tax assets.

The valuation allowance increased by $ 10.4 million and decreased by $ 26.5 million during the years 2022 and 2021, respectively.

The increase in valuation allowance in 2022 is primarily due to increases in NOL carryforwards and capitalized research and experimentation costs.

The valuation allowance increased by $ 18.9 million and $ 10.4 million during the years 2023 and 2022, respectively.

The increase in valuation allowance in 2023 is primarily due to increases in NOL carryforwards and capitalized research and experimental costs.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows:

Deferred tax assets/liabilities:

Net operating loss carryforwards $ 55,472,573 $ 49,086,998

Net operating loss carryovers $ 55,653,286 $ 55,472,573

Intangible assets 7,522,067 6,332,176

Capitalized research and development costs 4,246,071 —

Capitalized research and experimental costs 10,909,248 4,246,071

Stock-based compensation 7,248,199 4,384,751

Royalty monetization liability 8,427,970 —

Lease liability 4,495,402 3,544,624

17 unchanged sentences

Effective income tax expense rate

0.00 % 0.00 %

The Company’s reserves related to taxes are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies related to the tax benefit.

7 unchanged sentences

Northwestern University License Agreement

In December 2016, the Company entered into a license agreement with Northwestern University ("Northwestern"), pursuant to which Northwestern granted the Company an exclusive, worldwide license to patent rights of certain invention ("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 Patent Rights.

In December 2016, the Company entered into a license agreement (“Northwestern Agreement”) ///8with Northwestern University (“Northwestern”), pursuant to which Northwestern granted the Company an exclusive, worldwide license to patent rights of certain inventions (“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 Patent Rights.

The Company is developing OV329 under this agreement.

13 unchanged sentences

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.

In December 2021, the Company entered into an exclusive license agreement with AstraZeneca AB (“AstraZeneca”), 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.

4 unchanged sentences

Gensaic Collaboration and Option Agreement

In August 2022, the Company entered into a collaboration and option agreement (the "Collaboration Agreement") with Gensaic.

The Collaboration Agreement involves the research and development of phage-derived particle ("PDP") products on Gensaic's proprietary platform for certain central nervous system rare disorder targets.

Under the Collaboration Agreement, Gensaic grants the Company an exclusive option to obtain an exclusive license with respect to certain identified lead PDP products, which are exercisable at any time prior to the expiration of the option period.

In August 2022, the Company entered into a collaboration and option agreement with Gensaic (“Gensaic Collaboration Agreement”).

The Gensaic Collaboration Agreement involves the research and development of phage-derived particle (“PDP”) products on Gensaic's proprietary platform for certain rare central nervous system (“CNS”) disorder targets.

Under the Collaboration Agreement, Gensaic grants the Company an option to obtain an exclusive license with respect to certain identified lead PDP products, which are exercisable at any time prior to the expiration of the option period.

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 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 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.

10 unchanged sentences

NOTE 11 – COLLABORATION 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, Collaborative Arrangements.

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 the related information was considered a contingent milestone payment that would be recognized upon acceptance of the milestone by Angelini.

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 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 performance obligation 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 year ended December 31, 2022, no revenue was recognized pursuant to the Angelini License Agreement.

During the year ended December 31, 2021, and effective upon the 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 January 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 RLT Agreement with Takeda, 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.

1 unchanged sentence

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 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 March 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 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 was equal to the upfront fee of $ 196.0 million and was 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 was related to the collaboration period for which the Company already had the information readily available.

Therefore, since they were 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 year ended December 31, 2022, no expense was recognized pursuant to the RLT Agreement.

During the year ended December 31, 2021, the Company recognized a credit in research and development expenses of $ 2.5 million and recognized $ 0.1 million in general and administrative expenses representing costs which were reimbursed to the Company from Takeda.

In 2023, the Company sold a 13 % stake in the royalty, regulatory and commercial milestone payments that the Company is eligible to receive under the RLT Agreement to Ligand for $ 30.0 million.

During the years ended December 31, 2023 and 2022, no income or expense was recognized pursuant to the RLT Agreement.

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, Ltd.

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 the Company's relevant intellectual property rights.

In February 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 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 the Company's relevant intellectual property rights.

At the end of the one-year option period, Healx had 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.

This option period was extended for an additional three months as of February 1, 2023.

If applicable, 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.

In February 2023, the Company granted an extension of the option period for up to four months for Healx to continue to investigate gaboxadol.

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.

2 unchanged sentences

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 ("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 ("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.

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 (“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 it has to opt-in (“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 the Company is continuing to exploit gaboxadol.

Further, if the Company exercises the Ovid Opt-In Right to co-develop and co-commercialize the program, it will owe an equal share of any net profits to a third party with which it previously established a licensing agreement.

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

In June 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 year ended December 31, 2023.

During the year ended December 31, 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 ("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.

In March 2022 the Company entered into an exclusive patent license agreement with Marinus (“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 consists 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 unrealized losses on the Marinus common stock of $ 0.5 million for the year ended December 31, 2022, which were recorded as an unrealized loss on equity securities and reflected in other income (expenses), net in the consolidated statements of operations.

The Company recorded revenue and an associated investment in equity securities of approximately $ 0.9 million related to the Marinus License Agreement in March 2022, based on the price of Marinus common stock at that time.

The Company had unrealized gains on the Marinus common stock of $ 0.8 million for the year ended December 31, 2023, and unrealized loss of $ 0.5 million for the year ended December 31, 2022, which were recorded as unrealized gains (losses) on equity securities and reflected in other income (expenses), net in the consolidated statements of operations.

Graviton License Agreement and Equity Purchase

In April 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 (OV888) in rare 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 consolidated balance sheets.

In December 2023, the Company recognized an unrealized gain on the investment due to an observable change in price, and recorded the gain in other income (expense), net, in the consolidated statements of operations.

NOTE 12 – RELATED PARTY TRANSACTIONS

1 unchanged sentence

For a description of the RLT 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.

NOTE 13 – NET LOSS PER SHARE

Basic net loss 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.

For any period in which the Company records net income, 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 basic and diluted net loss 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.

2 unchanged sentences

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.

The following tables summarizes the calculation of basic and diluted net (loss) income per share:

Basic net loss per share is computed by dividing the net loss 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.

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

For the Year Ended December 31,

Net (loss) income $ ( 54,169,029 ) $ 122,834,584

Net loss $ ( 52,338,959 ) $ ( 54,169,029 )

Net income attributable to participating securities — —

Net (loss) income attributable to common stockholders $ ( 54,169,029 ) $ 119,837,240

Net loss attributable to common stockholders $ ( 52,338,959 ) $ ( 54,169,029 )

For the Year Ended December 31,

Net (loss) income attributable to common stockholders $ ( 54,169,029 ) $ 119,837,240

Weighted average common shares outstanding used in computing net (loss) income per share - basic

Net loss attributable to common stockholders $ ( 52,338,959 ) $ ( 54,169,029 )

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

70,580,604 70,424,819

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

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

70,580,604 70,424,819

Net (loss) income per share, basic $ ( 0.77 ) $ 1.78

Net (loss) income per share, diluted $ ( 0.77 ) $ 1.76

Net loss per share, basic $ ( 0.74 ) $ ( 0.77 )

Net loss per share, diluted $ ( 0.74 ) $ ( 0.77 )

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 Year Ended For the Year Ended December 31,

For the Year Ended December 31,

Stock options to purchase common stock 15,124,546 12,961,238

1 unchanged sentence

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-K

Item 9A. Controls and Procedures