Related Party Transactions	3 Months Ended
Jun. 30, 2015
Related Party Transactions
Related Party Transactions	Note E—Related Party Transactions [1] Services Agreement: During 2015, the Company and ASI, entered into a services agreement with RSI (the ‘‘Services Agreement’’). RSI will provide certain administrative and research and development services to the Company. The Company will pay or reimburse RSI for any expenses it, or third parties acting on its behalf, incurs for the Company. For any research and development activities performed by RSI employees, RSI will charge back the employee compensation expense plus a pre-determined mark-up. Employee compensation expense, inclusive of base salary, fringe benefits and share-based compensation, is determined based upon the relative percentage of time utilized on Company matters. All other costs will be billed back at cost. The condensed consolidated financial statements include third-party expenses that have been paid by RSI and RSL. Under the Service Agreement, the Company incurred expenses of $2,571,000, inclusive of the mark-up, for the three months ended June 30, 2015, which were recorded as research and development expense of $1,334,000 and general and administrative expense of $1,237,000. These amounts include share-based compensation expense of $766,000 and a compensation arrangement expense of $554,000 provided to Vivek Ramaswamy as RSI’s Chief Executive Officer by one of BVC’s investors. The share-based compensation expense of $766,000 for the three months ended June 30, 2015 charged to the Company under the services agreement, relates to the share-based awards issued by BVC Ltd. (‘‘BVC’’) to RSI employees. Such awards are in the form of restricted shares of BVC granted to RSI’s employees. BVC is a non-public entity, which holds a non-controlling ownership interest in RSL, the parent of the Company and RSI. BVC’s ownership interest and board rights in RSL allow it to exercise significant influence over RSL. As such, because the awards are not based on the Company’s or RSL’s shares, they are remeasured at fair value at each reporting period until the awards vest. Significant judgment and estimates were used to estimate the fair value of these awards as the underlying shares in BVC are not publicly traded. RSI’s estimation of fair value of the awards considered recent transactions entered into by RSL, relevant industry and comparable public company data, as well as discounted cash flow analyses. As BVC is a non-public entity, the majority of the inputs used to estimate the fair value of the restricted share awards are considered level 3 due to their unobservable nature. Each award is subject to specified vesting schedules and requirements (a mix of time-based, performance-based and corporate event-based, including post-IPO market capitalization target and financing events). Compensation expense will be charged to the Company under the services agreement by RSI over the required service period to earn the award, which is expected to be four years, subject to the achievement of performance and event-based vesting requirements. At June 30, 2015, the remaining weighted average requisite service period over which the awards could be earned was 2.91 years. The Company incurred additional share-based compensation expense of $18,049,000 for the three months ended June 30, 2015, not charged to the Company under the Services Agreement, related to these restricted share awards and recognized as an additional capital contribution from RSL. [2] Stock Options: During the three months ended June 30, 2015 the Company granted stock options for 40,000 common shares to employees of RSI, with an exercise price of $1.04, as compensation for support services provided to the Company. The fair value of the stock options granted to RSI employees is accounted for by the Company in accordance with the authoritative guidance for non-employee equity awards and is remeasured on each valuation date until performance is complete using the Black-Scholes pricing model. Each award is subject to specified vesting schedules. Compensation expense will be recognized by the Company over the required service period to earn the award, which is expected to be four years. For the three months ended June 30, 2015, the Company incurred compensation expense of $442,000, which the Company recorded as research and development and general and administrative expense in the condensed consolidated statement of operations. The total remaining unrecognized compensation cost related to the non-vested stock options amounted to $6,395,000 as of June 30, 2015, which will be recognized over the weighted-average remaining requisite service period of 3.72 years. Refer to (Note G) for additional disclosures. [3] Information Sharing and Cooperation Agreement: In March 2015, the Company entered into an information sharing and cooperation agreement (the “Cooperation Agreement”) with RSL. The Cooperation Agreement, among other things, grants the Company a right of first review on any potential dementia-related product or investment opportunity that RSL may consider pursuing and obligates the Company to deliver periodic financial statements and other financial information to RSL and comply with other specified financial reporting requirements. On May 1, 2015, the Company received an offer notice, as defined in the Cooperation Agreement, from RSL relating to the opportunity to acquire from Arena Pharmaceuticals GmbH, or Arena, certain rights to develop and market nelotanserin, a novel inverse agonist of the 5-HT2a receptor. On May 8, 2015, (1) the Company entered into a Waiver and Option Agreement with RSL with respect to such opportunity and (2) RSL entered into a development, marketing and supply agreement for nelotanserin with Arena (the ‘‘Arena Development Agreement’’). Pursuant to the terms of the Waiver and Option Agreement, RSL granted the Company an option to receive an assignment and assume all of RSL’s right, title and interest in and to the Arena Development Agreement, together with any amendments and related side letters or other agreements. The Company’s option is exercisable beginning on September 16, 2015 and will expire on December 16, 2015. If the Company elects to exercise the option, the Company will be required to reimburse RSL for 110% of any payments made to Arena, including but not limited to a $4 million up-front payment, and any costs incurred in connection with the development of nelotanserin, in each case pursuant to the Arena Development Agreement. The Services Agreement between the Company and RSI will not apply with regard to any reimbursements made to RSL in the event that the Company elects to exercise the option. [4] Family Relationships: Geetha Ramaswamy, MD, the Vice President, Medical Affairs for ASI, is the mother of Vivek Ramaswamy, the Chief Executive Officer of ASI and the Company’s principal executive officer. Shankar Ramaswamy, MD, the Vice President of Corporate Development of ASI, is the brother of Vivek Ramaswamy. For the three months ended June 30, 2015, the Company incurred $62,500 of salary expense for each of Geetha Ramaswamy and Shankar Ramaswamy. In March 2015, Geetha Ramaswamy was granted a stock option for 262,500 common shares and Shankar Ramaswamy was granted a stock option for 750,000 common shares, in each case, with an exercise price of $0.90 per share.

Note E—Related Party Transactions

[1] Services Agreement:

During 2015, the Company and ASI, entered into a services agreement with RSI (the ‘‘Services Agreement’’). RSI will provide certain administrative and research and development services to the Company. The Company will pay or reimburse RSI for any expenses it, or third parties acting on its behalf, incurs for the Company. For any research and development activities performed by RSI employees, RSI will charge back the employee compensation expense plus a pre-determined mark-up. Employee compensation expense, inclusive of base salary, fringe benefits and share-based compensation, is determined based upon the relative percentage of time utilized on Company matters. All other costs will be billed back at cost. The condensed consolidated financial statements include third-party expenses that have been paid by RSI and RSL.

Under the Service Agreement, the Company incurred expenses of $2,571,000, inclusive of the mark-up, for the three months ended June 30, 2015, which were recorded as research and development expense of $1,334,000 and general and administrative expense of $1,237,000. These amounts include share-based compensation expense of $766,000 and a compensation arrangement expense of $554,000 provided to Vivek Ramaswamy as RSI’s Chief Executive Officer by one of BVC’s investors.

The share-based compensation expense of $766,000 for the three months ended June 30, 2015 charged to the Company under the services agreement, relates to the share-based awards issued by BVC Ltd. (‘‘BVC’’) to RSI employees. Such awards are in the form of restricted shares of BVC granted to RSI’s employees. BVC is a non-public entity, which holds a non-controlling ownership interest in RSL, the parent of the Company and RSI. BVC’s ownership interest and board rights in RSL allow it to exercise significant influence over RSL. As such, because the awards are not based on the Company’s or RSL’s shares, they are remeasured at fair value at each reporting period until the awards vest. Significant judgment and estimates were used to estimate the fair value of these awards as the underlying shares in BVC are not publicly traded. RSI’s estimation of fair value of the awards considered recent transactions entered into by RSL, relevant industry and comparable public company data, as well as discounted cash flow analyses. As BVC is a non-public entity, the majority of the inputs used to estimate the fair value of the restricted share awards are considered level 3 due to their unobservable nature. Each award is subject to specified vesting schedules and requirements (a mix of time-based, performance-based and corporate event-based, including post-IPO market capitalization target and financing events). Compensation expense will be charged to the Company under the services agreement by RSI over the required service period to earn the award, which is expected to be four years, subject to the achievement of performance and event-based vesting requirements. At June 30, 2015, the remaining weighted average requisite service period over which the awards could be earned was 2.91 years. The Company incurred additional share-based compensation expense of $18,049,000 for the three months ended June 30, 2015, not charged to the Company under the Services Agreement, related to these restricted share awards and recognized as an additional capital contribution from RSL.

[2] Stock Options:

During the three months ended June 30, 2015 the Company granted stock options for 40,000 common shares to employees of RSI, with an exercise price of $1.04, as compensation for support services provided to the Company. The fair value of the stock options granted to RSI employees is accounted for by the Company in accordance with the authoritative guidance for non-employee equity awards and is remeasured on each valuation date until performance is complete using the Black-Scholes pricing model.

Each award is subject to specified vesting schedules. Compensation expense will be recognized by the Company over the required service period to earn the award, which is expected to be four years. For the three months ended June 30, 2015, the Company incurred compensation expense of $442,000, which the Company recorded as research and development and general and administrative expense in the condensed consolidated statement of operations. The total remaining unrecognized compensation cost related to the non-vested stock options amounted to $6,395,000 as of June 30, 2015, which will be recognized over the weighted-average remaining requisite service period of 3.72 years. Refer to (Note G) for additional disclosures.

[3] Information Sharing and Cooperation Agreement:

In March 2015, the Company entered into an information sharing and cooperation agreement (the “Cooperation Agreement”) with RSL. The Cooperation Agreement, among other things, grants the Company a right of first review on any potential dementia-related product or investment opportunity that RSL may consider pursuing and obligates the Company to deliver periodic financial statements and other financial information to RSL and comply with other specified financial reporting requirements.

On May 1, 2015, the Company received an offer notice, as defined in the Cooperation Agreement, from RSL relating to the opportunity to acquire from Arena Pharmaceuticals GmbH, or Arena, certain rights to develop and market nelotanserin, a novel inverse agonist of the 5-HT2a receptor. On May 8, 2015, (1) the Company entered into a Waiver and Option Agreement with RSL with respect to such opportunity and (2) RSL entered into a development, marketing and supply agreement for nelotanserin with Arena (the ‘‘Arena Development Agreement’’).

Pursuant to the terms of the Waiver and Option Agreement, RSL granted the Company an option to receive an assignment and assume all of RSL’s right, title and interest in and to the Arena Development Agreement, together with any amendments and related side letters or other agreements. The Company’s option is exercisable beginning on September 16, 2015 and will expire on December 16, 2015. If the Company elects to exercise the option, the Company will be required to reimburse RSL for 110% of any payments made to Arena, including but not limited to a $4 million up-front payment, and any costs incurred in connection with the development of nelotanserin, in each case pursuant to the Arena Development Agreement. The Services Agreement between the Company and RSI will not apply with regard to any reimbursements made to RSL in the event that the Company elects to exercise the option.

[4] Family Relationships:

Geetha Ramaswamy, MD, the Vice President, Medical Affairs for ASI, is the mother of Vivek Ramaswamy, the Chief Executive Officer of ASI and the Company’s principal executive officer. Shankar Ramaswamy, MD, the Vice President of Corporate Development of ASI, is the brother of Vivek Ramaswamy.

For the three months ended June 30, 2015, the Company incurred $62,500 of salary expense for each of Geetha Ramaswamy and Shankar Ramaswamy. In March 2015, Geetha Ramaswamy was granted a stock option for 262,500 common shares and Shankar Ramaswamy was granted a stock option for 750,000 common shares, in each case, with an exercise price of $0.90 per share.