What changed in this filing

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Item 1. Financial Statements

2024-05-14 compared with 2023-11-03 · 160 added, 200 removed, 421 unchanged (46% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(in thousands, except share and per share data) March 31,

2024 December 31,

9 unchanged sentences

Property and equipment, net 686 769

Other assets 248,651 261,191

Other noncurrent assets 174 210

Total assets $ 131,613 $ 144,027

7 unchanged sentences

Lease liability 14,430 14,756

Royalty monetization liability 30,000 30,000

Total liabilities 53,333 56,230

2 unchanged sentences

10,000,000 shares authorized;

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

Series A convertible preferred stock, 10,000 shares designated, 1,250 shares issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.001 par value;

125,000,000 shares authorized;

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

70,681 70,467

70,783,961 and 70,691,992 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in-capital 367,787 365,591

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

Accumulated other comprehensive (loss) income ( 19 ) 1

Accumulated deficit ( 289,560 ) ( 277,866 )

4 unchanged sentences

Condensed Consolidated Statements of Operations

For The Three Months Ended

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

(in thousands, except share and per share data) For The Three Months Ended

March 31, 2024 For The Three Months Ended

March 31, 2023

License and other revenue $ 148 $ 66

16 unchanged sentences

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

For The Three Months Ended

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

March 31, 2024 For The Three Months Ended

March 31, 2023

Net loss $ ( 11,694 ) $ ( 13,356 )

5 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(in thousands, except shares) Series A

Preferred Stock Common Stock Additional

4 unchanged sentences

Stock-based compensation expense — — — — 1,968 — — 1,968

Other comprehensive income — — — — — 47,817 — 47,817

Net loss — — — — — — ( 13,356,209 ) ( 13,356,209 )

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

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

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

Other comprehensive loss — — — — — ( 20 ) — ( 20 )

Net loss — — — — — — ( 11,694 ) ( 11,694 )

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

Balance, March 31, 2024 1,250 $ — 70,783,961 $ 71 $ 367,787 ( 19 ) $ ( 289,560 ) $ 78,279

(in thousands, except shares) Series A

Preferred Stock Common Stock Additional

Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total

Paid-In Capital Accumulated

Comprehensive

(Loss) Income Accumulated Deficit Total

Shares Amount Shares Amount

2 unchanged sentences

Stock-based compensation expense — — — — 1,917 — — 1,917

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

Balance, March 31, 2022 1,250 1 70,417,245 70,373 352,391,466 — ( 187,465,569 ) 164,996,271

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

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

Other comprehensive loss — — — — — ( 90,127 ) — ( 90,127 )

Net loss — — — — — — ( 14,588,414 ) ( 14,588,414 )

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

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 — — — — — 48 — 48

Net loss — — — — — — ( 13,356 ) ( 13,356 )

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

Balance, March 31, 2023 1,250 $ — 70,491,510 $ 70 $ 359,754 $ 6 $ ( 238,883 ) $ 120,948

See accompanying notes to these unaudited condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For The Nine Months Ended

September 30, 2023 For The Nine Months Ended

September 30, 2022

(in thousands) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Cash flows from operating activities:

1 unchanged sentence

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

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

Unrealized (gain) loss on equity investment ( 501,648 ) 125,721

Unrealized gain on equity investment ( 4,397 ) ( 360 )

Change in accrued interest and accretion of discount on marketable securities ( 921 ) ( 729 )

1 unchanged sentence

Depreciation and amortization expense 136 145

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

Non-cash operating lease expense 266 253

Change in lease liability ( 303 ) 289

8 unchanged sentences

Sales/maturities of marketable securities 30,000 40,000

Purchase of long-term equity investment ( 10,000,000 ) ( 2,500,000 )

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

Purchases of property and equipment ( 19 ) ( 14 )

Software development and other costs ( 109,637 ) ( 251,340 )

Net cash provided by (used in) investing activities 45,935,572 ( 83,713,708 )

Net cash provided by investing activities 20,188 30,229

Cash flows from financing activities:

1 unchanged sentence

Net cash provided by financing activities 228 67

Net increase (decrease) in cash, cash equivalents and restricted cash 12,568,766 ( 129,540,846 )

Net increase in cash, cash equivalents and restricted cash 3,731 18,184

Cash, cash equivalents and restricted cash, at beginning of period 28,972 46,799

Cash, cash equivalents and restricted cash, at end of period $ 32,703 $ 64,982

Non-cash investing and financing activities:

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

4 unchanged sentences

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

The Company is a biopharmaceutical company committed to developing medicines that transform the lives of people with epilepsies and seizure-related disorders.

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, other equity instruments, the sale and/or licensing of certain assets and the licensing of certain intellectual property.

1 unchanged sentence

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

As of March 31, 2024, the Company had approximately $ 90.3 million in cash, cash equivalents and marketable securities.

Since inception, the Company has generated $ 223.0 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 $ 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 has an accumulated deficit of $ 289.6 million as of March 31, 2024, working capital of $ 84.3 million and had cash used in operating activities of $ 16.7 million for the three months ended March 31, 2024.

The Company recorded a net loss of $ 11.7 million during the three months ended March 31, 2024, 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 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.

Management believes that the Company’s existing cash, cash equivalents and marketable securities as of March 31, 2024 will be sufficient to fund its current operating plans through at least the next 12 months from the date of filing of the Company’s Quarterly Report on Form 10-Q.

Adequate additional funding may not be available to the Company on acceptable terms or at all.

12 unchanged sentences

(A) Unaudited Interim Condensed Consolidated Financial Statements

The interim condensed consolidated balance sheet at 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.

The interim condensed consolidated balance sheet at March 31, 2024 and the condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three months ended March 31, 2024 and 2023 are unaudited.

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

generally accepted accounting principles (“GAAP”) and following the requirements of the SEC for

interim reporting.

As permitted under those rules, certain notes or other financial information that are normally required by GAAP are condensed or omitted.

These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of its financial information.

The results of operations for the three 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 results of operations for the three month periods ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period.

The balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date.

2 unchanged sentences

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP and include the accounts of Ovid Therapeutics Inc.

and its wholly owned subsidiary, Ovid Therapeutics Hong Kong Limited.

and its wholly owned subsidiaries, Ovid Therapeutics Hong Kong Limited and Ovid Therapeutics Australia Pty Ltd.

All intercompany transactions and balances have been eliminated in consolidation.

6 unchanged sentences

The Company classifies its marketable securities with maturities of less than one year from the balance sheet date as current assets on its condensed consolidated balance sheets.

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 stockholder's equity.

The Company classifies its marketable securities with original maturities of less than three months as cash equivalents on its condensed 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) income in stockholder's equity.

(E) Restricted Cash

4 unchanged sentences

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

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

The 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 condensed consolidated balance sheets with adjustments recognized in other income (expense), net on the condensed consolidated statements of operations.

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

3 unchanged sentences

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

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.

As of March 31, 2024 and December 31, 2023, the equity investment in Gensaic had a carrying value of $ 5.1 million.

As of March 31, 2024 and December 31, 2023, the equity investment in Graviton had a carrying value of $ 15.8 million and $ 11.2 million, respectively.

The initial investment in Graviton was $10.0 million, and cumulative measurement adjustments total $5.8 million, including $4.5 million during the three months ended March 31, 2024.

The Company's equity investments are assessed quarterly and increases have been based upon change in observable price.

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), 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.

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 condensed consolidated balance sheets and other income (expense), net on the Company's condensed consolidated statements of

As of March 31, 2024 and December 31, 2023, the equity investment in Marinus had a carrying value of $ 1.1 million and $ 1.3 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 $ 37.7 million as of September 30, 2023.

treasury money market fund and equity securities totaling $ 20.6 million as of March 31, 2024.

The Company's Level 1 assets totaled $ 25.7 million as of December 31, 2023.

2 unchanged sentences

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

treasury bills, totaling $ 49.5 million as of September 30, 2023 and $ 84.1 million as of December 31, 2022.

treasury bills, totaling $ 69.5 million as of March 31, 2024 and $ 78.8 million as of December 31, 2023.

• 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 September 30, 2023 or December 31, 2022.

There were no Level 3 assets or liabilities as of March 31, 2024 or December 31, 2023.

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.

The Company determines if an arrangement is a lease at inception and recognizes the lease in accordance with ASC 842.

Operating leases are included in right-of-use (“ROU”) assets, current liabilities, and long-term lease liability in the Company's consolidated balance sheets.

Operating leases are included in right-of-use (“ROU”) assets, current liabilities, and long-term lease liability in the Company's condensed consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

11 unchanged sentences

(K) Stock-based Compensation

companies to expense the estimated fair value of these awards over the requisite service period.

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.

7 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) Income Taxes

(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 as a cash outflow from financing activities in the condensed consolidated statements of cash flows.

Changes in the fair value of the debt will be classified as a component of other income (expense), net in the condensed consolidated statements of operations.

The change in fair value of the debt was immaterial for the period ended March 31, 2024.

(M) Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts and respective tax bases of existing assets and liabilities, as well as for net operating loss carryforwards and research and development credits.

1 unchanged sentence

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

(M) Net Loss per Share

(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.

1 unchanged sentence

When applicable, net 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.

(N) Revenue Recognition

(O) Revenue Recognition

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.

6 unchanged sentences

The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services the Company transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations and assesses whether each promised good or service is distinct.

obligations and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

6 unchanged sentences

The Company defers recognition of upfront license fees if the performance obligations are not satisfied.

(O) Recent Accounting Pronouncements

(P) Recent Accounting Pronouncements

The Company has reviewed recently issued accounting standards and plans to adopt those that are applicable.

3 unchanged sentences

NOTE 3 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

The following tables summarize the fair value of cash, cash equivalents and marketable securities as well as gross unrealized holding gains and losses as of September 30, 2023 and December 31, 2022:

September 30, 2023

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

The following tables summarize the fair value of cash, cash equivalents and marketable securities as well as gross unrealized holding gains and losses as of March 31, 2024 and December 31, 2023:

March 31, 2024

(in thousands) Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value

Cash $ 1,320 $ — $ — $ 1,320

Cash equivalents 29,452 — — 29,452

56,626,797 — — 56,626,797

Marketable securities 59,506 — ( 19 ) 59,487

Total cash, cash equivalents and marketable securities $ 90,278 $ — $ ( 19 ) $ 90,259

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

December 31, 2023

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

(in thousands) Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value

Cash $ 2,701 $ — $ — $ 2,701

Money market funds 42,014,804 — — 42,014,804

Cash equivalents 24,340 — — 24,340

Marketable securities 78,791 1 — 78,792

Total cash, cash equivalents and marketable securities $ 105,833 $ 1 $ — $ 105,833

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.

The Company did not hold any securities that were in an unrealized loss position for more than 12 months as of March 31, 2024 and December 31, 2023.

There were no material realized gains or losses on available-for-sale securities during the three months ended March 31, 2024 and 2023.

NOTE 4 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is summarized as follows:

September 30,

(in thousands) March 31,

2024 December 31,

3 unchanged sentences

Total property and equipment, net $ 686 $ 769

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 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.

Depreciation expense was $ 101,000 and $ 108,000 for the three months ended March 31, 2024 and 2023, respectively.

Intangible assets, net of accumulated amortization, were $ 148,000 and $ 186,000 as of March 31, 2024 and December 31, 2023, respectively, and are included in other assets.

Amortization expense was $ 35,000 and $ 36,000 for the three months ended March 31, 2024 and 2023, respectively.

NOTE 5 – LEASES

10 unchanged sentences

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

September 30,

(in thousands) March 31,

Right-of-use asset, net $ 13,628

1 unchanged sentence

Long-term lease liability $ 14,430

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

September 30,

The components of operating lease cost for the three months ended March 31, 2024 were as follows:

(in thousands) March 31,

Operating lease cost $ 542

2 unchanged sentences

Future minimum commitments under the non-cancelable operating lease are as follows:

2024 2,316,303

2025 2,316,303

2026 2,316,303

2027 2,316,303

(in thousands)

Thereafter 9,878

Total lease payments $ 21,033

NOTE 6 – ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,

(in thousands) March 31,

2024 December 31,

5 unchanged sentences

NOTE 7 – STOCKHOLDERS’ EQUITY

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

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

Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is authorized to issue up to 125,000,000 shares of common stock and 10,000,000 shares of preferred stock.

5 unchanged sentences

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

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

There were 1,250 shares of Series A Preferred Stock outstanding as of March 31, 2024 and December 31, 2023.

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

2 unchanged sentences

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 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 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.

Through March 31, 2024, 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.

6 unchanged sentences

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, 2024 and January 1, 2023 an additional 3,534,599 and 3,523,344 shares, respectively, were reserved 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.

As of March 31, 2024, there were 5,277,844 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 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.

During the three months ended March 31, 2024 and 2023, 31,561 and 29,830 shares, respectively, were purchased under the 2017 ESPP, and the Company recorded expense of $ 15,000 for both periods.

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, 2024 and January 1, 2023 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 September 30, 2023, there were 352,846 shares of the Company’s common stock reserved and available for issuance under the 2017 ESPP.

As of March 31, 2024, there were 321,285 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.

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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 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.

As of March 31, 2024, options to purchase 1,356,621 shares of common stock were outstanding under the 2014 Plan.

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

The vesting requirement is generally conditioned upon the grantee’s continued service with the Company during the vesting period.

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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.

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 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.

Vested options generally 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 six months under the 2014 Plan.

The fair value of options granted during the three months ended March 31, 2024 and 2023 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.

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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 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 granted 2,422,150 and 2,660,500 stock options to employees during the three months ended March 31, 2024 and 2023, respectively.

There were 6,437,733 and 7,372,384 unvested employee options outstanding as of March 31, 2024, and 2023, respectively.

Total expense recognized related to the employee stock options for the three months ended March 31, 2024 and 2023 was $ 1.9 million and $ 1.8 million, respectively.

Total unrecognized compensation expense related to employee stock options was $ 15.6 million as of March 31, 2024.

The Company did not recognize any expense for employee performance-based option awards during the three months ended March 31, 2024 and 2023.

The Company granted 250,000 and 0 stock options to nonemployee consultants for services rendered during the three months ended March 31, 2024 and 2023, respectively.

There were 322,709 and 125,303 unvested nonemployee options outstanding as of March 31, 2024 and 2023.

Total expense recognized related to nonemployee stock options for the three months ended March 31, 2024 and 2023 was $ 59,000 and $ 109,000 , respectively.

Total unrecognized compensation expenses related to the nonemployee stock options was $ 0.8 million as of March 31, 2024.

The Company did not recognize any expense for nonemployee performance-based option awards during the three months ended March 31, 2024 or 2023.

The Company granted 348,575 restricted stock units to employees during the three months ended March 31, 2024.

No restricted stock units were granted by the Company in prior periods.

The restricted stock units granted will vest in equal installments over three years , beginning January 1, 2025 and otherwise have similar terms to the Company's stock option grants.

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

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) March 31, 2024 March 31, 2023

Research and development $ 529 $ 510

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Total $ 1,968 $ 1,916

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) March 31, 2024 March 31, 2023

Stock options $ 1,953 $ 1,901

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Total $ 1,968 $ 1,916

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

The fair value of employee options granted during the three months ended March 31, 2024 and 2023 was estimated utilizing the following assumptions:

Three Months Ended

March 31, 2024 March 31, 2023

Average Weighted

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Fair value of option on grant date $ 2.63 $ 1.84

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

The fair value of nonemployee options granted during the three months ended March 31, 2024 and 2023 was estimated utilizing the following assumptions:

Three Months Ended

March 31, 2024 March 31, 2023

Average Weighted

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Forfeited or expired ( 363,211 ) 7.55

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.

Options outstanding March 31, 2024 17,356,577 $ 3.77 7.03 $ 3,850,510

Vested and exercisable at March 31, 2024 10,596,135 $ 4.15 5.82 $ 2,370,416

At March 31, 2024 there was approximately $ 16.4 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 2.63 years.

NOTE 9 – INCOME TAXES

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

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.

As of March 31, 2024, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year.

For the three months ended March 31, 2024, 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.

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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 September 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 March 31, 2024.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

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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 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 Patents.

In December 2016, the Company entered into a license agreement (“Northwestern Agreement”) with 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.

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Upon entry into the Northwestern Agreement, the Company paid an upfront non-creditable one-time license issuance fee of $ 75,000 , and is required to pay an annual license maintenance fee of $ 20,000 , which will be creditable against any royalties payable to Northwestern following first commercial sale of licensed products under the agreement.

The Company is responsible for all ongoing costs of filing, prosecuting and maintaining the Northwestern Patents, but also has the right to control such activities using its own patent counsel.

In consideration for the rights granted to the Company under the Northwestern agreement, the Company is required to pay to Northwestern up to an aggregate of $ 5.3 million upon the achievement of certain development and regulatory milestones for the first product covered by the Northwestern Patents, and upon commercialization of any such products, will be required to pay to Northwestern a tiered royalty on net sales of such products by the Company, its affiliates or sublicensees, at percentages in the low to mid-single-digits, subject to standard reductions and offsets.

The Company is responsible for all ongoing costs of filing, prosecuting and maintaining the Northwestern Patent Rights, but also has the right to control such activities using its own patent counsel.

In consideration for the rights granted to the Company under the Northwestern Agreement, the Company is required to pay to Northwestern up to an aggregate of $ 5.3 million upon the achievement of certain development and regulatory milestones for the first product covered by the Northwestern Patent Rights, and upon commercialization of any such products, will be required to pay to Northwestern a tiered royalty on net sales of such products by the Company, its affiliates or sublicensees, at percentages in the low to mid-single-digits, subject to standard reductions and offsets.

The Company’s royalty obligations continue on a product-by-product and country-by-country basis until the later of the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country and 10 years following the first commercial sale of such product in such country.

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AstraZeneca AB License Agreement

On December 30, 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.

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.

Since the intangibles acquired in the AstraZeneca license agreement do not have an alternative future use, all costs incurred were treated as research and development expense.

The Company recorded a total of $ 12.3 million as research and development expense related to this agreement during December 2021.

Pursuant to the AstraZeneca license agreement, the Company agreed to potential milestone payments of up to $ 203.0 million upon the achievement of certain developmental, regulatory and sales milestones.

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Gensaic Collaboration and Option Agreement

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

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 Gensaic 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.

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.

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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.

The amount was 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 September 30, 2023, none of these contingent payments were considered probable.

As of March 31, 2024, none of these contingent payments were considered probable.

Contingencies

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Legal costs incurred in connection with loss contingencies are expensed as incurred.

The Company is not currently involved in any legal matters arising in the normal course of business.

The Company is not currently involved in any legal matters arising in the normal course of business that are material to the Company.

The Company is currently defending a post grant review (“PGR”) action initiated by Marinus, challenging one of the Company's patents related to the use of ganaxolone for the treatment of status epilepticus, patent no.

11,395,817 filed in 2016.

Subsequent to the PGR challenge by Marinus, the Company initiated an inter partes review (“IPR”) to challenge Marinus's later filed patent, patent no.

11,100,100 filed in 2019, related to the use of ganaxolone for the treatment of status epilepticus.

Both the PGR and the IPR are not material to the Company.

Under the terms of their respective employment agreements, certain of our executive officers are eligible to receive severance payments and benefits upon a termination without “cause” or due to “permanent disability,” or upon “resignation for good reason,” contingent upon the executive officer’s delivery to the Company of a satisfactory release of claims, and subject to the executive officer’s compliance with non-competition and non-solicitation restrictive covenants.

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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, 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.

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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 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.

During the nine months ended September 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.

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.

The Company retained 87 % of its interest in soticlestat’s potential royalties and milestones.

In the event that soticlestat is not approved and commercialized, the Company has no continuing debt or other obligations to Ligand.

During the three months ended March 31, 2024, no income or expense was recognized pursuant to the RLT Agreement.

Healx License and Option Agreement

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

Under the terms of the Healx License and Option Agreement, Healx has secured a one-year option to investigate gaboxadol (“OV101”) as part of a potential combination therapy for Fragile X syndrome in a Phase 1B/2A clinical trial, as well as a treatment for other indications, for an upfront payment of $ 0.5 million, and fees to support prosecution and maintenance of our relevant intellectual property rights.

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 our relevant intellectual property rights.

At the end of the one-year option period, Healx has the option to secure rights to an exclusive license under the Company's relevant intellectual property rights, in exchange for an additional payment of $ 2.0 million, development and commercial milestone payments, and low to mid-tier double-digit royalties.

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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 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.

Healx will assume all responsibility for, and costs of, both development and commercialization of gaboxadol following the exercise of the option.

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The term of the Healx License and Option Agreement will continue until the later of (a) the expiration of all relevant royalty terms, or in the event that Healx does not exercise its option during the option period defined in the Healx License and Option Agreement, or the Option Period, the expiration of such period, or (b) in the event that Healx does exercise its option during the Option Period, and the Company does not exercise the Ovid Opt-In Right during the period of time it has to opt-in, or the Opt-In Period, or the opt-in terms are otherwise terminated, upon the expiration of all payment obligations, or (c) in the event that Healx does exercise the Option during the Option Period, and the Company does exercise the Ovid Opt-In Right during the Opt-In Period, such time as neither Healx nor 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 a share of the net profit share to a third party with which it previously established a licensing agreement.

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 the net profit share 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 a share of all milestone and royalty payments.

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

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.

No revenue was recognized relating to this agreement during the three months ended March 31, 2024 and 2023.

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.

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.

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 in March 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 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.

The Company had unrealized losses on the Marinus common stock of $ 0.2 million and unrealized gains of $ 0.4 million for the three months ended March 31, 2024 and 2023, respectively, which were recorded as unrealized gains (losses) on equity securities and are reflected in other income (expense), net in the condensed consolidated statements of operations.

Graviton License Agreement and Equity Purchase

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

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 OV888 (GV101) 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.

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

In December 2023 and March 2024, the Company recognized unrealized gains on the investment due to observable changes in price, and recorded the gains in other income (expense), net, in the condensed consolidated statements of operations.

NOTE 12 – RELATED PARTY TRANSACTIONS

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

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

2023 2022 2023 2022

For the Three Months Ended March 31,

(in thousands) 2024 2023

Net loss $ ( 11,694 ) $ ( 13,356 )

1 unchanged sentence

Net loss attributable to common stockholders $ ( 11,694 ) $ ( 13,356 )

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

2023 2022 2023 2022

For the Three Months Ended March 31,

(in thousands, except share and per share data) 2024 2023

Net loss attributable to common stockholders $ ( 11,694 ) $ ( 13,356 )

1 unchanged sentence

70,716,929 70,490,704

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

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

70,716,929 70,490,704

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

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

2023 2022 2023 2022

For the Three Months Ended March 31,

Stock options to purchase common stock 17,356,577 15,418,577

Common stock issuable upon conversion of Series A convertible preferred stock 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