UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended SeptemberJune 30, 20182019

OR

For the transition period from ______________________ to ______________________

Commission File Number: 001-38085

Ovid Therapeutics Inc.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (646) 661-7661

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 1, 2018,July 30, 2019, the registrant had 24,654,11438,693,018 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements.statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this report, regarding, among other things:

You should not rely upon forward-looking statements as predictions of future events.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether because of new information, future events or otherwise, after the date of this report.

ii

PART I—FINAI—FINANCIANCILAL INFORMATION

Item 1. Financial Statements.

OVID THERAPEUTICS INC.

Condensed Consolidated Balance Sheets

See accompanying notes to these unaudited condensed consolidated financial statements

OVID THERAPEUTICS INC.

Condensed Consolidated Statements of Operations

(unaudited)

See accompanying notes to these unaudited condensed consolidated financial statements

OVID THERAPEUTICS INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

See accompanying notes to these unaudited condensed consolidated financial statements

OVID THERAPEUTICS INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

See accompanying notes to these unaudited condensed consolidated financial statements

OVID THERAPEUTICS INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

See accompanying notes to these unaudited condensed consolidated financial statements

OVID THERAPEUTICS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – NATURE OF OPERATIONS

Ovid Therapeutics Inc. (the “Company”) was incorporated under the laws of the state of Delaware on April 1, 2014 and maintains its principal executive office in New York, New York. The Company commenced operations on April 1, 2014 (date of inception). The Company is a biopharmaceutical company focused exclusively on developing impactful medicines for patients and families living with rare neurological disorders.

Since its inception, the Company has devoted substantially all of its efforts to business development, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through issuance of convertible preferred stock (“Preferred Stock”), common stock and other equity instruments. The Company has not generated any revenue. 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, development of viable treatments, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund operations.

On May 10, 2017,In February 2019 (“February Offering”), the Company completed its initial public offering (“IPO”) of 5,000,000sold 13,993,778 shares of the Company'sits common stock and 2,500 shares of Series A Convertible Preferred Stock at a public offering price of $15.00$2.00 and $2,000 per share. Theshare, respectively, for gross proceeds from the IPO were $75.0of $33.0 million and the net proceeds were $66.7of $30.5 million after deducting underwriting discounts and commissions commission and other offering expenses.  Atexpenses payable by the time of the IPO, the Series A Preferred Stock, the Series B Preferred Stock, and the Series B-1 Preferred Stock were converted into common stock (see Note 7).Company.

In June 2018, the Company filed a shelf registration statement on Form S-3 (Registration No. 333-225391) that allows it to sell up to an aggregate of $200 million of our common stock, which includes up to $50.0 million designated in the prospectus supplement for an at-the-market offering program. In connection with the at-the-market offering, the Company entered into a Sales Agreement (“ATM Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company may offer and sell, from time to time at its sole discretion through Cowen, as its sales agent, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. The Company will pay Cowen a commission equal to 3.0% of the gross sales proceeds of any common stock sold through Cowen under the ATM Agreement and also have provided Cowen with indemnification and contribution rights. To date, the Company has not sold any common stock under the ATM Agreement.

The Company has not generated any revenue since inception. As a result, the Company has incurred operatingrecurring losses since inception and hadrequires significant cash resources to execute its business plans. The Company has an accumulated deficit of $139.8$179.6 million as of SeptemberJune 30, 2018. The Company expects2019 and had cash outflows from operating activities of $24.7 million for the six months ended June 30, 2019. These losses are expected to continue for an extended period of time.

Historically, the Company’s major sources of cash have comprised proceeds from various public and private offerings of its common stock and preferred stock and interest income. As of June 30, 2019, the Company had approximately $47.4 million in cash and cash equivalents. Management’s plans to incur net losses for at leastmitigate an expected shortfall of capital to support future operations include raising additional funds. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the next several yearsCompany or whether the Company will become profitable and generate positive operating cash flow.  If the Company is highly dependentunable to raise additional capital in sufficient amounts or on itsterms acceptable to the Company or identify commercial partners to support development of the Company’s product candidates, the Company we may have to significantly delay, scale back or discontinue the Company research and development programs or future commercialization efforts. The actual amount of cash that the Company will need to operate is subject to many factors.

The aforementioned factors raise substantial doubt about the Company’s ability to find additional sources of funding in the form of debt or equity financing or expanded partnering arrangements to fund its operations. Management believes that the Company’s existing cash, cash equivalents, and short-term investmentscontinue as of September 30, 2018, will be sufficient to fund its current operating plans through at least the nexta going concern 12 months from the date of filingthis 10-Q filing. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the Company’s Quarterly Report on Form 10-Q. Adequate additional funding maysatisfaction of liabilities in the normal course of business. The financial statements do not be availableinclude any adjustments relating to the Company on acceptable termsrecoverability and classification of asset amounts or at all. The failure to raise capital as and when needed could have a negative impact on the Company’s financial condition and ability to pursue its business strategy. The Company mayclassification of liabilities that might 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 requirenecessary should the Company be unable to relinquish rights to certain drug candidates that the Company might otherwise seek to develop or commercialize independently.continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 29, 2018.7, 2019. There have been no material changes to the significant accounting policies during the period ended SeptemberJune 30, 2018,2019, except for items mentioned below.

(A) Unaudited Interim Condensed Financial Statements

The interim condensed balance sheet at SeptemberJune 30, 2018,2019, the condensed statements of operations, and comprehensive loss and stockholders’ equity for the three and ninesix months ended SeptemberJune 30, 2019 and 2018, and 2017, andthe condensed statements of cash flows for the ninesix months ended SeptemberJune 30, 20182019 and 20172018 are unaudited. The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP are condensed or omitted. These condensed 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 ninesix months ended SeptemberJune 30, 20182019 and 20172018 are not necessarily indicative of the results to be expected for the year ending December 31, 20182019 or for any other future annual or interim period. The balance sheet as of December 31, 20172018 included herein was derived from the audited financial statements as of that date. These interim condensed financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 20172018 included in the Company’s Annual Report on Form 10-K.

(B) Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in conformity with GAAP and include the accounts of Ovid Therapeutics Inc. and its wholly owned subsidiary, Ovid Therapeutics Hong Kong Limited.  All intercompany transactions and balances have been eliminated in consolidation.

(C) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ materially from those estimates.

(C)(D) Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent 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:

The carrying amounts reported in the balance sheets for cash and cash equivalents, related party receivables, other current assets, accounts payable, accrued expenses, and current related party payables approximate their fair value based on the short-term maturity of these instruments.

(D) Short-term Investments

Short-term investments consist of debt securities with maturities greater than three months from the date of purchase.  The Company classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value with unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity until realized. Realized gains and losses, amortization and accretion of premiums and discounts are included within net loss.

(E) Recent Accounting Pronouncements

Recent accounting standards which have been adopted

In May 2017,On June 20, 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09,2018-07, Compensation – Stock Compensation (Topic 718): Scope of ModificationImprovements to Nonemployee Share-Based Payment Accounting. This new standard clarifies whensimplifies the accounting for share-based payments granted to accountnonemployees for a changegoods and services. The standard supersedes Accounting Standards Codification (“ASC”) 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the terms or conditionsacquisition of share-based payment award as a modification. Undergoods and services from both nonemployees and employees. As such, among others, the new guidance, modification accountingmeasurement date for nonemployee awards would generally be the grant date, which is required unless the fair value, the vesting conditions, and the classification of the modified award remain the same as the originalmeasurement date for employee equity awards and for performance-based awards, an entity is now required to recognize any cost on the basis of the probable outcome of the performance conditions using the grant-date fair value of the award. TheASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim

periods within those fiscal years.  The adoption of this standardASU 2018-07 on January 1, 2018,2019 did not have a material impact on the Company’s financial statements.

In JanuaryOn March 30, 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805)2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Clarifying the Definition of a Business.Premium Amortization and Purchased Callable Debt Securities.  This new standard clarifiesrequires premiums on callable debt securities, that have explicit, non-contingent call features that are callable at fixed prices on preset dates, to be amortized to the definition ofearliest call date. The amortization period for callable debt securities purchased at a business and provides a screen to determine when an integrated set of assets and activities isdiscount will not a business. The screen requires that when substantially allbe impacted. Under current GAAP, premiums on callable debt securities are generally amortized over the contractual life of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 is effective

forsecurity. The guidance was applicable to the Company as ofbeginning on January 1, 2018.2019.  The adoption of this standard on January 1, 2018, did not have an impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. The adoption of this standard on January 1, 20182017-08 did not have a material impact on the Company’s statements of cash flows.financial statements.

In JanuaryFebruary 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.2016-02, Leases (Topic 842). This new standard amends certain aspects of accountingwas issued to increase transparency and disclosure requirementscomparability among entities by recognizing for financial instruments, including the requirement that equity investments (other than equity method investees) with readily determinable fair values are to be measured at fair value with any changes in fair value recognized in a company's results of operations. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. The standard also includes certain amendments for the accounting for a financial liability that is measured at fair value in accordance with the fair value option and prescribes that a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The ASU makes targeted changes to the presentation requirements for financial instruments under current GAAP. All entities are required to disclose financialall leases lease assets and financiallease liabilities separately, grouped by measurement categoryon the balance sheet and form of financial asset. ASU No. 2016-01 is effective for the Company as of January 1, 2018. As the Company does not have equity investments, financial liabilities measured at fair value in accordance with the fair value option or deferred tax assets, the recognition and measurement guidance of thisdisclosing key information about lease arrangements. This new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU 2016-02 did not applicable tohave a material impact on the Company. However, since the Company does haveCompany’s financial asset investments, it has adopted the presentation and disclosure requirements of this standard.statements.

New accounting standards which have not yet been adopted

On August 29, 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40) - which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. ASU No. 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract. According to the standard the balance sheet line item for the presentation of capitalized implementation costs should be the same as that for the prepayment of fees related to the hosting arrangement and the manner in which an entity classifies the cash flows related to capitalized implementation costs should be the same as that in which it classifies the cash flows for the fees related to the hosting arrangement. ASU 2018-15 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods therein. Entities are permitted to apply either a retrospective or prospective transition approach to adopt the guidance. When prospective transition is chosen, entities must apply the transition requirements to any eligible costs incurred after adoption. The Company is in the process of assessing the impact of this standard on its financial statements.

On August 28, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.  This standard changes the fair value measurement disclosure requirements of ASC 820. The new standard eliminatedeliminates certain disclosures, addedadds new disclosures with regard to unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, as well as modifiedmodifies certain disclosure. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted. The ASU requires application of the prospective method of transition for the aforementioned new disclosure requirements and for modified disclosure with regard to measurement uncertainty while all other amendments made by the ASU must be applied retrospectively to all periods presented. The Company is in the process of assessing the impact of this standard on its financial statements.

On June 20, 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This new standard simplifies the accounting for share-based payments granted to nonemployees for goods and services. The standard supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. As such, among others, the

measurement date for nonemployee awards would generally be the grant date same as the measurement date for employee equity awards and for performance-based awards, an entity is required to recognize any cost on the basis of the probable outcome of the performance conditions using the grant-date fair value of the award. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Due to the immaterial volume of nonemployee equity-based awards as well as the immaterial fair value of such awards the Company does not expect ASU 2018-07 to have a material impact on its financial statements.

On March 30, 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization and Purchased Callable Debt Securities.  This new standard requires premiums on callable debt securities, that have explicit, non-contingent call features that are callable at fixed prices on preset dates, to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be impacted. Under current GAAP, premiums on callable debt securities are generally amortized over the contractual life of the security. The guidance is applicable to the Company beginning on January 1, 2019. The Company will be impacted if it will have on January 1, 2019 callable debt purchased with a premium. However, based on the Company’s current investment strategy where it purchases debt securities with maturity dates of less than a year, it does not expect to have significant premiums for callable debt.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  This new standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including loans and trade and other receivables. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The standard also amends the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Under the new guidance, an entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. The Company does not expect this standard to have a material impact on its financial statements due to the immaterial level of its unrealized losses on available-for-sale securities and its immaterial level of loans and receivables.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This new standard was issued to increase transparency and comparability among entities by recognizing for all leases lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. This new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company does not expect ASU 2016-02 to have a material impact on its financial statements.

NOTE 3 – PRECLINICAL AND CLINICAL AGREEMENTS

During the ordinary course of business, the Company contracts with clinical research organizations.  In connection with these contracts, the Company provides upfront payments for services to be provided over a period greater than 12 months that are applied against final expenses.  As of September 30, 2018, the Company reflected $4.5 million within long-term prepaid expenses on the balance sheet related to these contracts.

On August 26, 2016, the Company contracted with a clinical research organization for the study entitled “Safety and Efficacy of Gaboxadol in Angelman Syndrome: A Phase 2 Study of OV101 in adolescents and adults.” In connection with the execution of this contract, the Company provided an upfront retainer of $355,435. At September 30, 2018, this retainer is reflected within current assets on the balance sheet. During the nine months ended September 30, 2018 and 2017, the Company has expensed approximately $2,305,127 and $3,169,550 related to this contract, respectively. The expense related to this contract is reflected within research and development on the statement of operations.

NOTE 43 – CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

All short-term investments are classified as available-for-sale. The following tables summarize the fair value of cash, cash equivalents, and short-term investments, as well as gross unrealized holding gains and losses as of SeptemberJune 30, 20182019 and December 31, 2017:2018:

As of SeptemberJune 30, 20182019, and December 31, 2017,2018, the aggregate fair value of securities that were in an unrealized loss position for less than 12 months was $22.0zero and $5.0 million, and zero, respectively. The Company did not hold any securities in an unrealized loss position for more than 12 months as of SeptemberJune 30, 2018.

There were no realized gains or losses on available-for-sale securities during the three and nine months ended September 30, 2018.2019.

NOTE 54 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is summarized as follows:

Depreciation expense was $25,551$19,000 and $19,155$15,000 for the ninesix months ended SeptemberJune 30, 2019 and 2018, and 2017, respectively.  Depreciation expense was $6,746$9,000 and $7,171$9,000 for the three months ended SeptemberJune 30, 2019 and 2018, and 2017, respectively.

Intangible assets, net of accumulated amortization, were $406,078$271,000 and $124,194$392,000 as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively, and are included in other assets. Amortization expense was $60,890$127,000 and $39,436$36,000 for the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, respectively. Amortization expense was $24,615$60,000 and $13,864$19,000 for the three months ended SeptemberJune 30, 20182019 and 2017,2018, respectively.

NOTE 65 – ACCRUED EXPENSES

Accrued expenses consist of the following: