vtgn20231231

vtgn20231231_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-37761

VISTAGEN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-5093315

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

343 Allerton Avenue

South San Francisco, CA 94080

(Address of principal executive offices including zip code)

(650) 577-3600

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VTGN	Nasdaq Capital Market

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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 February 12, 2024, 27,025,209 shares of the registrant’s common stock, $0.001 par value, were outstanding.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023	1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended December 31, 2023 and 2022	2
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended December 31, 2023 and 2022	3
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2023 and 2022	5
Notes to the Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
Item 4. Controls and Procedures	18

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3. Defaults Upon Senior Securities	51
Item 4. Mine Safety Disclosures	51
Item 5. Other Information	51
Item 6. Exhibits	51

SIGNATURES	52

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2023			2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	126,559,200		$	16,637,600
Prepaid expenses and other current assets		1,480,300			802,700
Deferred contract acquisition costs - current portion		74,500			67,100
Total current assets		128,114,000			17,507,400
Property and equipment, net		445,100			507,300
Right-of-use asset - operating lease		1,933,600			2,260,300
Deferred offering costs		325,700			495,700
Deferred contract acquisition costs - non-current portion		148,700			217,600
Security deposits		100,900			100,900
Total assets	$	131,068,000		$	21,089,200

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,737,000		$	2,473,100
Accrued expenses		129,300			787,400
Note payable		-			105,300
Deferred revenue - current portion		1,762,800			714,300
Operating lease obligation - current portion		533,500			485,600
Financing lease obligation - current portion		1,900			1,700
Total current liabilities		4,164,500			4,567,400
Deferred revenue - non-current portion		1,899,400			2,314,600
Operating lease obligation - non-current portion		1,713,300			2,119,800
Financing lease obligation - non-current portion		6,000			7,400
Total liabilities		7,783,200			9,009,200
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2023 and March 31, 2023; no shares outstanding at December 31, 2023 and March 31, 2023		-			-
Common stock, $0.001 par value; 325,000,000 shares authorized at December 31, 2023 and March 31, 2023; 27,029,731 and 7,315,583 shares issued at December 31, 2023 and March 31, 2023, respectively		27,000			7,300
Additional paid-in capital		473,918,200			342,892,500
Treasury stock, at cost, 4,522 shares of common stock held at December 31, 2023 and March 31, 2023		(3,968,100	)		(3,968,100	)
Accumulated deficit		(346,692,300	)		(326,851,700	)
Total stockholders’ equity		123,284,800			12,080,000
Total liabilities and stockholders’ equity	$	131,068,000		$	21,089,200

See accompanying notes to unaudited condensed consolidated financial statements.

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2023			2022			2023			2022
Revenues:
Sublicense and other revenue	$	411,400		$	179,600		$	866,700		$	(402,900	)
Total revenues		411,400			179,600			866,700			(402,900	)
Operating expenses:
Research and development		4,537,600			6,854,000			12,585,400			35,039,800
General and administrative		3,757,800			3,092,100			9,943,300			11,586,200
Total operating expenses		8,295,400			9,946,100			22,528,700			46,626,000
Loss from operations		(7,884,000	)		(9,766,500	)		(21,662,000	)		(47,028,900	)
Other income, net:
Interest income, net		1,534,200			5,300			1,823,900			13,700
Loss before income taxes		(6,349,800	)		(9,761,200	)		(19,838,100	)		(47,015,200	)
Income taxes		-			-			(2,500	)		(5,500	)
Net loss and comprehensive loss	$	(6,349,800	)	$	(9,761,200	)	$	(19,840,600	)	$	(47,020,700	)
Basic and diluted net loss per common share	$	(0.22	)	$	(1.42	)	$	(1.27	)	$	(6.82	)
Weighted average common shares outstanding, basic and diluted		29,388,085			6,894,603			15,632,451			6,891,641

See accompanying notes to unaudited condensed consolidated financial statements.

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

					Additional								Total
	Common Stock				Paid-in		Treasury			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Deficit			Equity
Balance at March 31, 2022		6,889,400	$	6,900	$	336,280,500	$	(3,968,100	)	$	(267,604,000	)	$	64,715,300
Stock-based compensation expense		-		-		956,900		-			-			956,900
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,500		-		56,100		-			-			56,100
Issuance of common stock upon exercise of options for cash		3,333		-		100,000		-			-			100,000
Net loss		-		-		-		-			(19,776,300	)		(19,776,300	)
Balance at June 30, 2022		6,895,233		6,900		337,393,500		(3,968,100	)		(287,380,300	)		46,052,000
Stock-based compensation expense		-		-		1,031,800		-			-			1,031,800
Issuance of common stock upon exercise of options for cash		367		-		4,400		-			-			4,400
Issuance of common stock upon exercise of options (cashless)		3,646		-		-		-			-			-
Net loss		-		-		-		-			(17,483,200	)		(17,483,200	)
Balance at September 30, 2022		6,899,246		6,900		338,429,700		(3,968,100	)		(304,863,500	)		29,605,000
Stock-based compensation expense		-		-		746,300		-			-			746,300
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,667		-		7,000		-			-			7,000
Increase in fair value attributed to warrant modifications		-		-		77,400		-			-			77,400
Net loss		-		-		-		-			(9,761,200	)		(9,761,200	)
Balance at December 31, 2022		6,901,913	$	6,900	$	339,260,400	$	(3,968,100	)	$	(314,624,700	)	$	20,674,500

See accompanying notes to unaudited condensed consolidated financial statements.

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

					Additional								Total
	Common Stock				Paid-in		Treasury			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Deficit			Equity
Balance at March 31, 2023		7,315,583	$	7,300	$	342,892,500	$	(3,968,100	)	$	(326,851,700	)	$	12,080,000
Stock-based compensation expense		-		-		569,100		-			-			569,100
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,672		-		4,200		-			-			4,200
Issuance of common stock under Open Market Sale Agreement, net of issuance costs		561,418		600		1,098,200		-			-			1,098,800
Net loss		-		-		-		-			(6,903,100	)		(6,903,100	)
Balance at June 30, 2023		7,879,673		7,900		344,564,000		(3,968,100	)		(333,754,800	)		6,849,000
Stock-based compensation expense		-		-		583,700		-			-			583,700
Issuance of common stock under Open Market Sale Agreement, net of issuance costs		4,137,077		4,100		34,796,100		-			-			34,800,200
Net loss		-		-		-		-			(6,587,700	)		(6,587,700	)
Balance at September 30, 2023		12,016,750		12,000		379,943,800		(3,968,100	)		(340,342,500	)		35,645,200
Stock-based compensation expense		-		-		506,700		-			-			506,700
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,171		-		3,700		-			-			3,700
Issuance of common stock and pre-funded warrants through public offering, net of issuance costs		15,010,810		15,000		93,464,000		-			-			93,479,000
Net loss		-		-		-		-			(6,349,800	)		(6,349,800	)
Balance at December 31, 2023		27,029,731	$	27,000	$	473,918,200	$	(3,968,100	)	$	(346,692,300	)	$	123,284,800

See accompanying notes to unaudited condensed consolidated financial statements.

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended December 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(19,840,600	)	$	(47,020,700	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		94,500			96,200
Stock-based compensation		1,659,500			2,734,900
Warrant modification expense		-			77,400
Amortization of operating lease right-of-use asset		327,000			297,900
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		201,900			3,037,900
Operating lease liability		(359,000	)		(321,500	)
Deferred sublicense and other revenue, net of deferred contract acquisition costs		695,000			365,000
Accounts payable and accrued expenses		(1,394,200	)		(1,509,500	)
Net cash used in operating activities		(18,615,900	)		(42,242,400	)

Cash flows from investing activities:
Purchases of laboratory and other equipment		(32,300	)		(212,000	)
Net cash used in investing activities		(32,300	)		(212,000	)

Cash flows from financing activities:
Net proceeds from issuance of common stock, including option exercises		-			104,400
Proceeds from issuance of common stock and warrants, net of issuance costs		93,517,200			-
Net proceeds (expenses) from sale of common stock under Open Market Sale Agreement, net of deferred offering costs		36,030,700			(89,600	)
Net proceeds from sale of common stock under Employee Stock Purchase Plan		7,900			63,100
Principal payments on financing lease obligations		(1,200	)		(1,000	)
Repayment of note payable		(984,800	)		(720,500	)
Net cash provided by (used in) financing activities		128,569,800			(643,600	)
Net increase (decrease) in cash and cash equivalents		109,921,600			(43,098,000	)
Cash and cash equivalents at beginning of period		16,637,600			68,135,300
Cash and cash equivalents at end of period	$	126,559,200		$	25,037,300
Supplemental disclosure of noncash activities:
Non-cash investing and financing activities:
Insurance premiums settled by issuing note payable	$	879,500		$	1,139,700
Purchases of equipment included in accounts payable	$	17,900		$	-
Acquisition of office lease subject to financing lease	$	-		$	10,600

See accompanying notes to unaudited condensed consolidated financial statements.

VISTAGEN THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Vistagen Therapeutics, Inc., a Nevada corporation (Vistagen, the Company, we, our, or us), is a clinical-stage biopharmaceutical company pioneering neuroscience to deliver first-in-class therapies for psychiatric and neurological disorders. Five of our six clinical-stage product candidates – fasedienol (PH94B), itruvone (PH10), PH15, PH80 and PH284 – belong to a new class of drugs known as pherines, which have the potential to rapidly deliver meaningful efficacy with a differentiated safety profile. Pherines are investigational neuroactive nasal sprays with innovative proposed mechanisms of action that activate chemosensory neurons in the nasal passages to impact fundamental neural circuits in the brain without the need for systemic absorption or binding to receptors in the brain. Our sixth clinical-stage product candidate, AV-101, is an investigational oral drug candidate with the potential to inhibit, but not block, NMDA receptor activity. Vistagen is passionate about transforming what is possible in the treatment of anxiety, depression, and other neuroscience disorders.

2. Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) applicable to interim financial information and pursuant to the instructions of the Securities and Exchange Commission (SEC) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Further, the results of our operations for any interim periods are not necessarily indicative of the results that may be expected for any other interim period or the full fiscal year. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included. The condensed consolidated balance sheet at March 31, 2023, has been derived from our audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The report of our independent auditors included an explanatory paragraph in their opinion on our consolidated financial statements as of and for the fiscal year ended March 31, 2023, that states that our ongoing losses raised substantial doubt about our ability to continue as a going concern. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 (our Annual Report).

The accompanying unaudited condensed consolidated financial statements include the accounts of Vistagen and its subsidiaries. All intercompany accounts and transactions have been eliminated.

On June 6, 2023, we implemented a stockholder-approved one-for-thirty (1-for-30) reverse split of our common stock (the Reverse Stock Split). All share and per share data for all periods presented in the accompanying condensed consolidated financial statements and related disclosures in this Report have been adjusted retrospectively to reflect the Reverse Stock Split. Refer to Note 5, Capital Stock, for additional information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Significant estimates include those relating to revenue recognition, share-based compensation, right-of-use assets and lease liabilities and assumptions that have been used historically to value warrants and warrant modifications. Actual results could differ from those estimates. Changes in estimates are reflected in the reported results in the period in which they become known.

Liquidity

We have incurred significant losses and negative cash flows from operations since inception. As of December 31, 2023, we had an accumulated deficit of $346.7 million. We expect that operating losses and negative cash flows will continue for the foreseeable future as we continue to develop our product candidates. We currently expect that our cash and cash equivalents of $126.6 million as of December 31, 2023 will be sufficient to fund operating expenses and capital requirements for more than 12 months from the date the unaudited condensed consolidated financial statements are issued.

Recently Issued Accounting Pronouncements

There were no significant updates not already disclosed in the Company’s audited consolidated financial statements for the years ended March 31, 2023, and 2022, to the recently issued accounting standards for the nine months ended December 31, 2023.

3. Fair Value Measurements

We have certain financial assets that are measured at fair value on a recurring basis, which consist of cash held in money market funds. These assets, which are classified within Level 1 of the fair value hierarchy and are reflected as a component of cash and cash equivalents on the condensed consolidated balance sheets, totaled $120.8 million and $5.0 million at December 31, 2023 and March 31, 2023, respectively. We had no financial liabilities measured at fair value on a recurring basis at December 31, 2023 or March 31, 2023.

4. Note Payable

In May 2023, we executed a 7.43% promissory note in the principal amount of $0.9 million in connection with certain insurance policy renewal premiums. The note was payable in monthly installments of $0.1 million, including principal and interest, through February 2024. We paid this note in full in August 2023.

In May 2022, we executed a 3.88% promissory note in the principal amount of $1.1 million in connection with certain insurance policy premiums. The note was payable in monthly installments of $0.1 million, including principal and interest, and we paid this note in full in April 2023.

5. Capital Stock

Common Stock

Reverse Split of Common Stock

On June 6, 2023, we implemented the stockholder-approved one-for-thirty (1-for-30) Reverse Stock Split. The number of shares and exercise prices of outstanding options to purchase common stock granted under our stockholder-approved equity compensation plans and common stock purchase warrants issued prior to June 6, 2023, have been adjusted proportionately to reflect the Reverse Stock Split. Following the Reverse Stock Split, authorized shares of our common stock remain unchanged at 325,000,000 and authorized shares of our preferred stock remain unchanged at 10,000,000. The par value of our common stock and preferred stock remains at $0.001 per share. All issued and outstanding shares of common stock, options exercisable for common stock and common stock purchase warrants issued prior to June 6, 2023, and per share amounts for all periods presented in the accompanying condensed consolidated financial statements have been adjusted retrospectively to reflect the Reverse Stock Split.

Open Market Sale Agreement

In May 2021, we entered into an Open Market Sale Agreement ^SM (the Sales Agreement) with Jefferies LLC (Jefferies) pursuant to which we may, in our sole discretion, offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $75.0 million. During the nine months ended December 31, 2023, we sold an aggregate of 4,698,495 shares of our common stock under the Sales Agreement and received net cash proceeds of $36.2 million. We did not sell any shares under the Sales Agreement during the three months ended December 31, 2023.

October 2023 Public Offering

On October 2, 2023, we completed an underwritten public offering (the October 2023 Public Offering), whereby we offered and sold, for gross proceeds of approximately $100,000,000, a total of 15,010,810 shares of our common stock and, to certain investors, 3,577,240 pre-funded warrants to purchase up to 3,577,240 shares of common stock in lieu of shares of common stock (the Pre-Funded Warrants). Each share of common stock and/or Pre-Funded Warrant was issued together with a ratably allocated portion of both warrants to purchase up to 9,294,022 shares of common stock (or pre-funded warrants to purchase up to 9,294,022 shares of common stock in lieu thereof) with an exercise price of $5.38 per share (the T1 Warrants) and warrants to purchase 11,265,086 shares of common stock (or pre-funded warrants to purchase up to 11,265,086 shares of common stock in lieu thereof) with an exercise price of $8.877 per share (the T2 Warrants). The combined offering price for each share of common stock, accompanying T1 Warrant and accompanying T2 Warrant was $5.38. The combined offering price per Pre-Funded Warrant, accompanying T1 Warrant and accompanying T2 Warrant was $5.379. The securities were issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-254299) and a related prospectus supplement filed with the Securities and Exchange Commission on October 3, 2023. The October 2023 Public Offering closed on October 4, 2023. The net proceeds to us from the October 2023 Public Offering were approximately $93.5 million, after deducting expenses related to the offering, including commissions, legal expenses and other offering costs.

The Pre-Funded Warrants, T1 Warrants and T2 Warrants are exercisable, only at the option of the holder, at any time after October 4, 2023. Holders of Pre-Funded Warrants, T1 Warrants, and T2 Warrants are entitled to receive dividends, if declared, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the common stock. We may not effect the exercise of any Pre-Funded, T1 Warrant, or T2 Warrant, and a holder will not be entitled to exercise any portion of any Pre-Funded, T1 or T2 Warrant, which, upon giving effect to such exercise, would cause the aggregate number of shares of common stock beneficially owned by the holder of such warrant (together with its affiliates) to exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. However, any holder may increase or decrease such percentage to any other percentage (not to exceed 19.99% if exceeding such percentage would result in a change of control under Nasdaq Listing Rule 5636(b) or any successor rule) upon at least 61 days’ prior notice from the holder to us subject to the terms of the respective warrant agreement.

We evaluated the terms of the warrants issued and determined that they should be classified as equity instruments within additional paid-in capital.

Common Stock Warrants

At December 31, 2023, the following common stock warrants were outstanding:

Number of Common Shares Underlying Warrants	Exercise Price Per Share		Expiration Date
33,334	$	15.000	12/9/2024
12,352	$	21.900	7/25/2025
3,577,240	$	0.001	N/A
9,294,022	$	5.380	(a)
11,265,086	$	8.877	10/4/2028

(a)

The warrants will expire 60 days after the later of (i) the date on which the Company first publicly discloses, whether by press release or Form 8-K filing, the top-line data for its PALISADE-3 Phase 3 clinical trial of fasedienol for the acute treatment of anxiety in adults with SAD and (ii) the date on which the Company first publicly discloses, whether by press release or Form 8-K filing, the top-line data for its PALISADE-4 Phase 3 clinical trial of fasedienol for the acute treatment of anxiety in adults with SAD.

The weighted average exercise price of all outstanding warrants at December 31, 2023 is $6.24 per share.

On May 1, 2020, we filed a Registration Statement on Form S-3 covering the resale of the shares underlying all of the currently outstanding warrants at that time (the Warrant Registration Statement). The SEC declared the Warrant Registration Statement effective on May 13, 2020. No outstanding warrant, including the warrants issued in connection with the October 2023 Public Offering, is subject to any down-round anti-dilution protection feature.

6. Stock-Based Compensation

The following table summarizes stock-based compensation expense included in operating expense:

Three Months Ended December 31,

Nine Months Ended December 31,

2023

SEC Form 10-Q filed by VistaGen Therapeutics Inc.