UNITED STATES SECURITIES AND EXCHANGE COMMISSION Commission File Number: 001-37761 VISTAGEN THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Washington, DC 20549 Form 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition ...

Financial Data and Key Metrics Changes - Research and development expenses increased by $9.8 million from $5.5 million to $15.3 million for the quarter ended June 30, 2022, primarily due to expenses related to the PALISADE Phase 3 program for PH94B [22] - General and administrative expenses rose to approximately $4.8 million for the quarter ended June 30, 2022, compared to approximately $2.6 million for the same quarter in the previous year, mainly due to the addition of senior management and prelaunch commercialization studies [23] - Net loss attributable to common stockholders for the quarter ended June 30, 2022, was approximately $19.8 million, compared to a net loss of approximately $8.1 million for the same quarter in 2021 [24] - As of June 30, 2022, the company had cash and cash equivalents of approximately $52 million, anticipating a considerable reduction in external spending to conserve cash for at least the next 12 months [24] Business Line Data and Key Metrics Changes - The company is focused on developing three central nervous system therapies aimed at treating anxiety and depression, with a particular emphasis on PH94B for social anxiety disorder [8][9] - The ongoing randomized double-blind placebo-controlled exploratory Phase 2a study in adjustment disorder with anxieties involves daily use of PH94B for 28 days [17] Market Data and Key Metrics Changes - The prevalence of anxiety and depression disorders has significantly increased since the beginning of the pandemic, highlighting the need for new treatment options [8] Company Strategy and Development Direction - The company aims to radically change the trajectory of mental health care and improve the lives of millions suffering from mental health challenges [29] - There is a focus on late-stage clinical development of PH94B, with plans to meet with the FDA to discuss a clearly defined development plan for further Phase 3 development [16][29] - The company is also advancing other CNS candidates, including PH10 for major depressive disorder and AV-101 in combination with probenecid [18][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges recent setbacks but remains confident in the potential of PH94B to transform the treatment of social anxiety disorder and other anxiety disorders [9][29] - The company is assessing different study designs for submission to the FDA, emphasizing the importance of LSAS as a primary efficacy endpoint [10][16] Other Important Information - The company has conducted extensive new data analysis since its last meeting with the FDA, reinforcing confidence in PH94B's potential [12] - Preliminary data from nearly 200 subjects in the PALISADE open-label safety study suggest significant functional improvement in social anxiety disorder severity [13][14] Q&A Session Summary Question: Clarification on preliminary results from the open-label extension - Management confirmed that the improvement observed is significant, with a notable percentage of subjects showing a 20-point reduction in LSAS scores after one month of treatment [35] Question: Details on the interim PALISADE-2 analysis - Management stated that it is still too early to draw conclusions from PALISADE-1 and that they are awaiting more data from the interim analysis [40][41] Question: Performance of drug in placebo arms relative to Phase 2 - Management indicated that they are not ready to disclose specific data regarding the performance of the drug versus placebo at this time [47]

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of cash flows, and statements of changes in stockholders' equity, along with detailed notes explaining the company's business, accounting policies, and financial position for the quarter ended June 30, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202022%20and%20March%2031%2C%202022) This statement presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2022 (USD) | March 31, 2022 (USD) | | :-------------------------------- | :------------ | :------------- | | Cash and cash equivalents | $51,986,400 | $68,135,300 | | Total current assets | $54,993,600 | $70,998,000 | | Total assets | $58,725,600 | $74,643,400 | | Total current liabilities | $8,926,200 | $5,765,100 | | Total liabilities | $12,673,600 | $9,928,100 | | Total stockholders' equity | $46,052,000 | $64,715,300 | - Cash and cash equivalents decreased by approximately **$16.1 million** from March 31, 2022, to June 30, 2022[8](index=8&type=chunk) - Total stockholders' equity decreased by approximately **$18.7 million**, primarily due to the net loss incurred during the quarter[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20June%2030%2C%202022%20and%202021) This statement details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations and Comprehensive Loss Highlights | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Sublicense revenue | $310,100 | $354,100 | | Research and development expense | $15,291,400 | $5,457,200 | | General and administrative expense | $4,791,800 | $2,643,100 | | Total operating expenses | $20,083,200 | $8,100,300 | | Net loss and comprehensive loss | $(19,776,300) | $(7,744,500) | | Basic and diluted net loss per common share | $(0.10) | $(0.04) | - Research and development expense significantly increased by **$9.8 million** (**179%**) from **$5.5 million** in Q2 2021 to **$15.3 million** in Q2 2022[10](index=10&type=chunk) - Net loss more than doubled, increasing from **$7.7 million** in Q2 2021 to **$(19.8 million)** in Q2 2022[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20June%2030%2C%202022%20and%202021) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(15,968,300) | $(6,172,900) | | Net cash used in investing activities | $(175,100) | $(149,900) | | Net cash (used in) provided by financing activities | $(5,500) | $991,400 | | Net decrease in cash and cash equivalents | $(16,148,900) | $(5,331,400) | | Cash and cash equivalents at end of period | $51,986,400 | $97,776,900 | - Net cash used in operating activities increased significantly from **$6.2 million** in Q2 2021 to **$16.0 million** in Q2 2022, primarily due to increased R&D expenses[13](index=13&type=chunk) - Cash and cash equivalents decreased by **$16.1 million** during the quarter, ending at **$52.0 million**[13](index=13&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20June%2030%2C%202022%20and%202021) This statement outlines the changes in the components of stockholders' equity over specific reporting periods Condensed Consolidated Statement of Changes in Stockholders' Equity Highlights | Metric | March 31, 2022 (USD) | June 30, 2022 (USD) | | :-------------------------- | :------------- | :------------ | | Common Stock (Amount) | $206,700 | $206,900 | | Additional Paid-in Capital | $336,080,700 | $337,193,500 | | Accumulated Deficit | $(267,604,000) | $(287,380,300)| | Total Stockholders' Equity | $64,715,300 | $46,052,000 | - Accumulated deficit increased by approximately **$19.8 million** during the quarter, reflecting the net loss[17](index=17&type=chunk) - Additional paid-in capital increased by **$1.1 million**, primarily due to stock-based compensation expense and proceeds from stock option exercises and ESPP purchases[17](index=17&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Description of Business](index=7&type=section&id=Note%201.%20Description%20of%20Business) VistaGen Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing innovative, faster-acting therapeutics with fewer side effects for anxiety, depression, and other CNS disorders. The company's lead candidates are pherine nasal sprays PH94B and PH10, and the oral prodrug AV-101. Recent Phase 3 results for PH94B (PALISADE-1) did not meet the primary efficacy endpoint, leading to a pause in PALISADE-2 and a re-evaluation of the development strategy for PH94B - VistaGen is a clinical-stage biopharmaceutical company developing therapeutics for anxiety, depression, and other CNS disorders, aiming for faster-acting treatments with fewer side effects[19](index=19&type=chunk) - Key product candidates include PH94B (nasal spray for anxiety disorders like Social Anxiety Disorder (SAD) and Adjustment Disorder with Anxiety (AjDA)), PH10 (nasal spray for Major Depressive Disorder (MDD)), and AV-101 (oral prodrug for CNS indications involving NMDAR, in combination with probenecid)[23](index=23&type=chunk) - PALISADE-1, a Phase 3 study of PH94B for acute SAD, did not achieve its primary efficacy endpoint[21](index=21&type=chunk) Enrollment in PALISADE-2 is paused for interim data analysis, and recruitment for PALISADE OLS (long-term safety) has ended, though preliminary OLS data suggests potential for cumulative functional improvement with as-needed PH94B use[21](index=21&type=chunk)[22](index=22&type=chunk) [Note 2. Basis of Presentation](index=8&type=section&id=Note%202.%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim information. The company has experienced recurring losses and negative cash flows, resulting in an accumulated deficit of $287.4 million, raising a going concern uncertainty. Operations have been financed primarily through equity and debt issuances, government grants, and strategic collaborations. Current cash and cash equivalents of $52.0 million are believed sufficient for the next 12 months, but future funding will be needed, especially after the PALISADE-1 results - The company has an accumulated deficit of approximately **$287.4 million** as of June 30, 2022, and expects continued losses and negative cash flows[26](index=26&type=chunk) - Operations have been financed through **$208.7 million** from equity/debt, **$22.7 million** from grants/collaborations, and **$38.2 million** in non-cash equity issuances for licenses/settlements[27](index=27&type=chunk) - Cash and cash equivalents were approximately **$52.0 million** at June 30, 2022, deemed sufficient for at least 12 months, but the company is re-evaluating cash resources and future funding needs following the PALISADE-1 results[29](index=29&type=chunk) - Future funding may come from equity/debt sales, warrant exercises, strategic collaborations, and government grants, with no assurance of availability or acceptable terms[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=9&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's significant accounting policies, including the use of estimates, cash and cash equivalents, revenue recognition (primarily from the AffaMed Agreement), contract acquisition costs, research and development expense, stock-based compensation, leases, concentrations of credit risk, comprehensive loss, loss per common share, fair value measurements, and warrants issued in connection with equity financing. It also discusses recent accounting pronouncements, specifically ASU 2020-06, which is not expected to have a material impact - Revenue recognition is primarily from the AffaMed Agreement, with **$310,100** and **$354,100** recognized for the three months ended June 30, 2022 and 2021, respectively[37](index=37&type=chunk)[49](index=49&type=chunk) - Research and development expense is charged as incurred, including internal costs (salaries, stock-based compensation) and external costs (clinical/nonclinical development)[53](index=53&type=chunk) Stock-Based Compensation Expense | Expense Category | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :----------------------------- | :------------------------------- | :------------------------------- | | Research and development | $329,600 | $240,800 | | General and administrative | $627,300 | $349,600 | | Total stock-based compensation | $956,900 | $590,400 | - The company accounts for leases as operating leases, recognizing right-of-use assets and lease liabilities based on the present value of lease payments[59](index=59&type=chunk) - Potentially dilutive securities, totaling **29,004,248** at June 30, 2022, were excluded from diluted net loss per share computation due to their antidilutive effect[65](index=65&type=chunk)[66](index=66&type=chunk) [Note 4. Prepaid Expense and Other Current Assets](index=15&type=section&id=Note%204.%20Prepaid%20Expense%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets increased slightly from $2.7 million at March 31, 2022, to $2.9 million at June 30, 2022, driven by a significant increase in prepaid insurance and a new receivable from a collaboration partner, partially offset by a decrease in clinical and nonclinical materials and contract services Prepaid Expense and Other Current Assets | Component | June 30, 2022 (USD) | March 31, 2022 (USD) | | :------------------------------------------ | :------------ | :------------- | | Clinical and nonclinical materials and contract services | $996,300 | $2,139,600 | | Insurance | $1,125,600 | $196,500 | | Receivable from CRO for cancelled project | $337,900 | $337,900 | | Receivable from collaboration partner | $343,900 | - | | All other | $86,600 | $71,800 | | Total | $2,890,300 | $2,745,800 | - Prepaid insurance increased significantly from **$196,500** to **$1,125,600**[78](index=78&type=chunk) - A new receivable of **$343,900** from a collaboration partner was recorded at June 30, 2022[78](index=78&type=chunk) [Note 5. Property and Equipment](index=15&type=section&id=Note%205.%20Property%20and%20Equipment) Net property and equipment increased from $414,300 at March 31, 2022, to $567,600 at June 30, 2022, primarily due to new laboratory equipment purchases and a new financing lease for office equipment. Depreciation and amortization expense for the quarter was $32,300 Property and Equipment, Net | Component | June 30, 2022 (USD) | March 31, 2022 (USD) | | :-------------------------------- | :------------ | :------------- | | Laboratory equipment | $1,356,400 | $1,181,300 | | Total Property and equipment | $1,854,100 | $1,683,100 | | Accumulated depreciation and amortization | $(1,286,500) | $(1,268,800) | | Property and equipment, net | $567,600 | $414,300 | - Depreciation and amortization expense for the three months ended June 30, 2022, was **$32,300**[79](index=79&type=chunk) - A new financing lease for office equipment was initiated in April 2022, replacing fully-depreciated equipment[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 6. Accrued Expense](index=16&type=section&id=Note%206.%20Accrued%20Expense) Accrued expenses decreased from $1.3 million at March 31, 2022, to $0.7 million at June 30, 2022, mainly due to a reduction in accrued expenses for clinical and nonclinical materials, development, and contract services, partially offset by an increase in accrued compensation Accrued Expense | Component | June 30, 2022 (USD) | March 31, 2022 (USD) | | :------------------------------------------ | :------------ | :------------- | | Accrued expenses for clinical and nonclinical materials, development and contract services | $453,200 | $1,070,800 | | Accrued compensation | $240,700 | $66,200 | | Accrued professional services | $28,000 | $159,500 | | All other | $5,400 | $32,700 | | Total | $727,300 | $1,329,200 | [Note 7. Note Payable](index=16&type=section&id=Note%207.%20Note%20Payable) The company executed a new 3.88% promissory note for $1,139,700 in May 2022 to finance insurance policy premiums, payable in monthly installments through April 2023. This resulted in a current notes payable balance of $1,037,800 at June 30, 2022, up from zero at March 31, 2022 Notes Payable | Note Type | June 30, 2022 (Principal) | March 31, 2022 (Principal) | | :------------------------------------------ | :------------------------ | :------------------------- | | 3.88% Note payable to insurance premium financing company (current) | $1,037,800 | $0 | - A new **$1,139,700** promissory note was executed in May 2022 for insurance premiums, with monthly payments through April 2023[83](index=83&type=chunk) [Note 8. Capital Stock](index=16&type=section&id=Note%208.%20Capital%20Stock) The company has an At-the-Market (ATM) offering program for up to $75.0 million, under which $4.3 million net cash proceeds were received in Fiscal 2022, but no sales have occurred since October 2021. During Q2 2022, $156,100 was received from stock option exercises and ESPP purchases. As of June 30, 2022, 9,275,858 warrants were outstanding with a weighted average exercise price of $1.47 per share - The company has an ATM program for up to **$75.0 million**, with **$4.3 million** net cash proceeds received in Fiscal 2022, but no sales since October 2, 2021[84](index=84&type=chunk)[174](index=174&type=chunk) - During the quarter ended June 30, 2022, **$156,100** was received from stock option exercises and ESPP purchases[86](index=86&type=chunk)[174](index=174&type=chunk) Warrants Outstanding at June 30, 2022 | Exercise Price per Share (USD) | Expiration Date | Warrants Outstanding | | :----------------------- | :-------------- | :------------------- | | $0.50 | 12/9/2022 | 1,000,000 | | $0.73 | 7/25/2025 | 370,544 | | $0.805 | 12/31/2022 | 76,859 | | $1.50 | 12/13/2022 | 6,789,243 | | $1.70 | 10/5/2022 | 12,162 | | $1.82 | 3/7/2023 | 880,050 | | $7.00 | 3/3/2023 | 147,000 | | Total | | 9,275,858 | [Note 9. Related Party Transactions](index=17&type=section&id=Note%209.%20Related%20Party%20Transactions) The company had a consulting agreement with an independent Board member for corporate development and public relations advisory services, incurring $45,000 in expense during the quarter ended June 30, 2022, with $15,000 remaining in accounts payable - Expense of **$45,000** was recorded for consulting services from an independent Board member during Q2 2022[89](index=89&type=chunk) [Note 10. Commitments and Contingencies](index=17&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) The company's operating lease for its South San Francisco headquarters was extended to July 31, 2027. The right-of-use asset was $2,565,000 and total operating lease liability was $2,933,800 at June 30, 2022. Operating lease cost for the quarter was $197,200 Operating Lease Liabilities | Metric | As of June 30, 2022 (USD) | As of March 31, 2022 (USD) | | :-------------------------------- | :------------------ | :------------------- | | Right of use asset – operating lease | $2,565,000 | $2,662,000 | | Current operating lease obligation | $442,600 | $433,300 | | Non-current operating lease obligation | $2,491,200 | $2,605,400 | | Total operating lease liability | $2,933,800 | $3,038,700 | - Operating lease cost for the three months ended June 30, 2022, was **$197,200**[92](index=92&type=chunk) Minimum Lease Payments (South San Francisco Operating Lease) | Fiscal Years Ending March 31, | Amount (USD) | | :---------------------------- | :----- | | 2023 (remaining nine months) | $507,000 | | 2024 | $689,500 | | 2025 | $710,200 | | 2026 | $731,500 | | 2027 | $753,500 | | Thereafter | $253,600 | | Total lease expense | $3,645,300 | | Present value of operating lease liabilities | $2,933,800 | [Note 11. Sublicensing and Collaborative Agreements](index=18&type=section&id=Note%2011.%20Sublicensing%20and%20Collaborative%20Agreements) The AffaMed Agreement grants AffaMed an exclusive license to develop and commercialize PH94B in Greater China, South Korea, and Southeast Asia. VistaGen received a $5.0 million upfront payment in August 2020 and is eligible for up to $172.0 million in milestones plus royalties. Revenue is recognized on a straight-line basis over the expected service period, with $310,100 recognized in Q2 2022. The company is reassessing the impact of PALISADE-1 results on performance obligations - The AffaMed Agreement grants an exclusive license for PH94B development and commercialization in Greater China, South Korea, and Southeast Asia[95](index=95&type=chunk) - VistaGen received a **$5.0 million** upfront license payment in August 2020 and is eligible for up to **$172.0 million** in milestone payments and royalties on product sales[99](index=99&type=chunk) - Sublicense revenue of **$310,100** and **$354,100** was recognized for the three months ended June 30, 2022 and 2021, respectively, from the AffaMed Agreement[103](index=103&type=chunk) - The company is currently assessing the impact of PALISADE-1 results on the completion of its performance obligations under the AffaMed Agreement[103](index=103&type=chunk) [Note 12. Subsequent Events](index=19&type=section&id=Note%2012.%20Subsequent%20Events) Subsequent to June 30, 2022, the company granted options to purchase 257,000 shares of common stock under its 2019 Plan to new employees and a consultant - From July 1, 2022, through the report date, options to purchase **257,000** shares of common stock were granted under the 2019 Plan[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the significant increase in net loss and R&D expenses, the impact of recent clinical trial results for PH94B, and the ongoing need for additional financing to support its clinical-stage development [Cautionary Note Regarding Forward-Looking Statements](index=20&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This note advises readers on the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements based on current expectations, subject to risks and uncertainties, including the ability to obtain financing, R&D results, regulatory approvals, competition, and the impact of accounting policies[107](index=107&type=chunk) - Readers are cautioned not to rely on forward-looking statements as predictions of future events due to the competitive and rapidly changing environment and unforeseen risks[108](index=108&type=chunk)[109](index=109&type=chunk) [Business Overview](index=20&type=section&id=Business%20Overview) This section describes the company's core business, product candidates, and strategic focus in biopharmaceutical development - VistaGen is a late clinical-stage biopharmaceutical company focused on developing innovative CNS therapeutics for anxiety, depression, and other disorders, aiming for rapid onset and fewer side effects[110](index=110&type=chunk) - PH94B, a pherine nasal spray, is being evaluated for multiple anxiety disorders, including SAD[112](index=112&type=chunk) Its Phase 3 PALISADE-1 study did not meet its primary efficacy endpoint, leading to a pause in PALISADE-2 enrollment and re-evaluation of the development strategy[114](index=114&type=chunk)[115](index=115&type=chunk) - PH10, another pherine nasal spray, is in preparation for a U.S. Phase 1 clinical program for MDD, with potential for Phase 2B development in 2023[134](index=134&type=chunk) - AV-101, an oral prodrug, is undergoing an exploratory Phase 1B drug-drug interaction study in combination with probenecid for CNS indications involving NMDAR[135](index=135&type=chunk) [Financial Operations Overview and Results of Operations](index=24&type=section&id=Financial%20Operations%20Overview%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial performance and key operational drivers [Summary](index=24&type=section&id=Summary) This summary highlights the company's financial performance, accumulated deficit, and ongoing R&D investments - The company has not achieved recurring revenue and has an accumulated deficit of approximately **$287.4 million** as of June 30, 2022[139](index=139&type=chunk) Net Loss Summary | Period | Net Loss (USD) | | :-------------------------------- | :------------- | | Three Months Ended June 30, 2022 | $(19.8) million | | Three Months Ended June 30, 2021 | $(7.7) million | | Fiscal Year Ended March 31, 2022 | $(47.8) million | | Fiscal Year Ended March 31, 2021 | $(17.9) million | - Significant resources are devoted to the research and development of PH94B, PH10, and AV-101, with losses expected to continue for the foreseeable future[139](index=139&type=chunk) [Summary of the Three Months Ended June 30, 2022](index=25&type=section&id=Summary%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202022) This section details key financial and operational developments for the quarter, including clinical trial outcomes and resource management - PALISADE-1, a Phase 3 study for PH94B in SAD, did not achieve its primary efficacy endpoint in July 2022[142](index=142&type=chunk) - Recruitment and enrollment in PALISADE-2 are paused pending an independent interim data analysis, and enrollment in PALISADE OLS has ended[142](index=142&type=chunk) - The company expanded its employee infrastructure across multiple functional areas, including clinical operations, regulatory affairs, and commercial operations[143](index=143&type=chunk) - Cash resources are being carefully monitored, and certain PH94B-related activities (PALISADE-2, PALISADE OLS, NDA-enabling nonclinical/manufacturing, pre-commercialization) are being deferred or cancelled to reduce expenditures[146](index=146&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section presents a detailed comparison of the company's financial results for the specified reporting periods [Comparison of Three Months Ended June 30, 2022 and 2021](index=26&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202022%20and%202021) This section compares the company's financial performance for the three months ended June 30, 2022, against the same period in 2021 Summary of Operations (Amounts in thousands) | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Sublicense revenue | $310 | $354 | | Research and development | $15,291 | $5,457 | | General and administrative | $4,792 | $2,643 | | Total operating expenses | $20,083 | $8,100 | | Loss from operations | $(19,773) | $(7,746) | | Net loss | $(19,776) | $(7,744) | | Net loss attributable to common stockholders | $(19,776) | $(8,106) | [Revenue](index=26&type=section&id=Revenue) This section discusses the sources and changes in the company's sublicense revenue - Sublicense revenue decreased from **$354,100** in Q2 2021 to **$310,100** in Q2 2022, derived solely from the AffaMed Agreement[150](index=150&type=chunk) - Approximately **$2.5 million** in revenue from the **$5.0 million** upfront payment under the AffaMed Agreement is expected to be recognized in future periods, subject to re-assessment due to PALISADE-1 results[150](index=150&type=chunk) [Research and Development Expense](index=26&type=section&id=Research%20and%20Development%20Expense) This section analyzes the changes and drivers of the company's research and development expenditures - R&D expense increased by **$9.8 million** (**179%**) to **$15.3 million** in Q2 2022, primarily due to the PALISADE Phase 3 Program for PH94B and nonclinical/outsourced manufacturing activities for PH94B and PH10[151](index=151&type=chunk) - Salaries and benefits increased by **$345,000** due to additional personnel and salary increases, partially offset by reduced accruals for compensation expense[153](index=153&type=chunk) - PH94B and PH10 clinical and nonclinical project expense saw a significant increase of **$9.3 million**, driven by the conduct of PALISADE-1, PALISADE-2, PALISADE OLS, and the Phase 2A AjDA study[156](index=156&type=chunk) - R&D expense is expected to decrease in subsequent periods due to the pausing of PALISADE-2 and ending enrollment in PALISADE OLS, but PH10 clinical development expense is anticipated to increase[151](index=151&type=chunk)[156](index=156&type=chunk) [General and Administrative Expense](index=28&type=section&id=General%20and%20Administrative%20Expense) This section examines the changes and components of the company's general and administrative costs - G&A expense increased by **$2.2 million** (**83%**) to **$4.8 million** in Q2 2022, driven by pre-commercialization market research (**$1.2 million**), increased salaries/benefits, and higher insurance expense[159](index=159&type=chunk) - Pre-commercialization expenditures are expected to substantially decrease due to the PALISADE-1 results and resulting delay in commercialization timeline[164](index=164&type=chunk) - Stock-based compensation for G&A increased, reflecting new option grants and amortization[160](index=160&type=chunk) - Insurance expense increased due to higher directors' and officers' liability coverage and new cybersecurity coverages[165](index=165&type=chunk) [Interest and Other Expense](index=30&type=section&id=Interest%20and%20Other%20Expense) This section details non-operating income and expenses, such as interest Interest Income, Net (Amounts in thousands) | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Interest income | $6 | $5 | | Interest expense on financing lease and insurance premium financing note | $(4) | $0 | | Interest income, net | $2 | $5 | - Interest income, net, decreased from **$5,100** in Q2 2021 to **$2,300** in Q2 2022[171](index=171&type=chunk) - In Q2 2021, **$361,800** was recognized for accrued dividends on Series B Preferred Stock; no such accrual in Q2 2022 as Series B Preferred was converted in November 2021[172](index=172&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company has historically funded operations through equity/debt sales, grants, and collaborations. With $52.0 million in cash at June 30, 2022, it believes it can fund operations for 12 months, but the PALISADE-1 results necessitate re-evaluation of cash resources and future funding strategies. Significant additional capital will be required for commercialization and ongoing R&D - Since inception, operations have been financed by **$208.7 million** from equity/debt, **$22.7 million** from grants/collaborations, and **$38.2 million** in non-cash equity for licenses/settlements[173](index=173&type=chunk) - Cash and cash equivalents were **$52.0 million** at June 30, 2022, believed sufficient for 12 months, but re-evaluation is ongoing due to PALISADE-1 results and deferred/cancelled activities[175](index=175&type=chunk) - Future funding will be sought through equity/debt sales, warrant exercises, strategic collaborations, and government grants, with no assurance of availability or acceptable terms[177](index=177&type=chunk)[178](index=178&type=chunk)[180](index=180&type=chunk) [Cash and Cash Equivalents](index=31&type=section&id=Cash%20and%20Cash%20Equivalents) This section focuses on the changes in the company's most liquid assets and their impact on overall financial position Changes in Cash and Cash Equivalents (Amounts in thousands) | Cash Flow Activity | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(15,968) | $(6,173) | | Net cash used in investing activities | $(175) | $(150) | | Net cash provided by (used in) financing activities | $(6) | $992 | | Net decrease in cash and cash equivalents | $(16,149) | $(5,331) | | Cash and cash equivalents at end of period | $51,986 | $97,777 | - Increased cash used in operations in Q2 2022 reflects continued PH94B clinical trials, manufacturing, nonclinical studies, and expanded internal capabilities[181](index=181&type=chunk) [Off-Balance Sheet Arrangements](index=32&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[183](index=183&type=chunk) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) Information regarding recent accounting pronouncements and their expected impact is provided in Note 3 to the Condensed Consolidated Financial Statements - Refer to Note 3 for information on recent accounting pronouncements[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2022. There were no material changes to internal control over financial reporting during the quarter, and previously identified material weaknesses were remediated as of March 31, 2022 [Disclosure Controls and Procedures](index=32&type=section&id=Disclosure%20Controls%20and%20Procedures) This section describes the effectiveness of controls ensuring timely and accurate financial disclosures - Management concluded that disclosure controls and procedures were effective as of June 30, 2022[185](index=185&type=chunk) [Internal Control over Financial Reporting](index=32&type=section&id=Internal%20Control%20over%20Financial%20Reporting) This section assesses the effectiveness of internal controls related to financial reporting - There was no material change in internal control over financial reporting during the quarter ended June 30, 2022[186](index=186&type=chunk) - Previously identified material weaknesses in internal control over financial reporting were remediated as of March 31, 2022[295](index=295&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[188](index=188&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the significant risks and uncertainties that could adversely affect the company's business, financial condition, and results of operations [Risk Factor Summary](index=33&type=section&id=Risk%20Factor%20Summary) This summary highlights the most critical risks facing the company, including clinical trial outcomes and financial stability - Key risks include failures or delays in clinical studies, being a development-stage company with no recurring revenues, heavy dependence on PH94B, PH10, and AV-101, inability to retain key personnel, and the impact of the COVID-19 pandemic[191](index=191&type=chunk) - Other significant risks involve intense competition, challenges in protecting proprietary technology, substantial operating losses, the need for additional financing (which may cause dilution), and potential delisting from Nasdaq[191](index=191&type=chunk) [Risks Related to Product Development, Regulatory Approval and Commercialization](index=34&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Regulatory%20Approval%20and%20Commercialization) This section details risks associated with developing, obtaining approval for, and bringing products to market - Failures or delays in clinical studies, such as the PALISADE-1 Phase 3 trial for PH94B, can increase costs and delay revenue generation[194](index=194&type=chunk) - The company's business heavily depends on the successful development, manufacturing, regulatory approval, and commercialization of PH94B, PH10, and AV-101, with no guarantee of success[195](index=195&type=chunk) - The COVID-19 pandemic has caused and may continue to cause adverse impacts, including delays in development programs, supply chain disruptions, and potential interference with PH94B/PH10 efficacy due to olfactory dysfunction[198](index=198&type=chunk)[199](index=199&type=chunk) - Fast Track designations for PH94B and AV-101 do not guarantee faster development, review, or approval[201](index=201&type=chunk)[202](index=202&type=chunk) - Results from earlier clinical trials may not predict later-stage success, as demonstrated by PALISADE-1[204](index=204&type=chunk) - Reliance on third parties for clinical trials and manufacturing exposes the company to risks of delays, non-compliance, and quality control issues[216](index=216&type=chunk)[217](index=217&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Failure to establish broad sales and marketing capabilities or secure collaborations could prevent revenue generation[232](index=232&type=chunk)[247](index=247&type=chunk) - Market acceptance of approved products is uncertain and depends on efficacy, safety, pricing, and competition[233](index=233&type=chunk)[234](index=234&type=chunk) - The pharmaceutical industry is highly competitive, with many larger companies developing similar products, posing a significant challenge to market penetration[243](index=243&type=chunk)[246](index=246&type=chunk) [Risks Related to Our Financial Position](index=49&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position) This section outlines financial risks, including ongoing losses, funding needs, and potential dilution - The company has incurred significant net losses since inception (**$287.4 million** accumulated deficit) and expects substantial operating losses to continue, making profitability uncertain[275](index=275&type=chunk) - Additional financing is required to execute the long-term business plan, including development and commercialization, with no guarantee of availability on acceptable terms[283](index=283&type=chunk)[288](index=288&type=chunk) - Raising additional capital through equity offerings is likely to cause substantial dilution to existing stockholders[299](index=299&type=chunk) - Current volatile economic conditions could adversely affect business and access to capital markets[291](index=291&type=chunk) - While previously identified material weaknesses in internal control over financial reporting were remediated, future weaknesses could arise, impacting financial reporting accuracy[295](index=295&type=chunk) - The ability to use net operating losses (NOLs) to offset future taxable income is subject to limitations under Section 382 of the Internal Revenue Code due to potential ownership changes[302](index=302&type=chunk) [General Company-Related Risks](index=53&type=section&id=General%20Company-Related%20Risks) This section covers broader risks such as management retention, product liability, and external economic factors - Failure to retain and attract senior management and key scientific personnel could hinder product development and commercialization[303](index=303&type=chunk)[304](index=304&type=chunk) - Product liability lawsuits could result in substantial liabilities, decreased demand, and reputational harm, potentially limiting commercialization[308](index=308&type=chunk)[309](index=309&type=chunk) - Unfavorable global economic or political conditions, natural disasters, and cybersecurity failures could adversely affect business operations and financial stability[311](index=311&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk)[316](index=316&type=chunk) - Acquisitions or strategic alliances may not realize expected benefits due to integration difficulties or unforeseen challenges[317](index=317&type=chunk) [Risks Related to Our Intellectual Property Rights](index=56&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This section addresses risks concerning the protection, validity, and enforcement of the company's intellectual property - Inability to adequately protect proprietary technology and obtain/maintain sufficient patents for product candidates could allow competitors to enter the market more directly[319](index=319&type=chunk)[322](index=322&type=chunk) - The issuance, scope, validity, and enforceability of patents are uncertain due to complex legal and factual questions, prior art, and varying international standards[325](index=325&type=chunk)[326](index=326&type=chunk) - Third parties may initiate legal proceedings alleging infringement, which could delay product development, stop commercialization, or increase costs[342](index=342&type=chunk)[344](index=344&type=chunk) - Dependence on licensed intellectual property means loss of rights due to breach or termination could prevent continued development or commercialization[362](index=362&type=chunk)[365](index=365&type=chunk) - Intellectual property from government-funded programs may be subject to federal regulations like 'march-in' rights, limiting exclusive rights and potentially restricting manufacturing to the U.S[367](index=367&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) - Changes in U.S. patent law, such as the America Invents Act and Supreme Court rulings, could diminish the value of patents and impair the ability to protect products[375](index=375&type=chunk)[376](index=376&type=chunk)[379](index=379&type=chunk) [Risks Related to our Securities](index=65&type=section&id=Risks%20Related%20to%20our%20Securities) This section discusses risks affecting the company's common stock, including market volatility and potential delisting - Failure to comply with Nasdaq Capital Market listing requirements (e.g., minimum bid price) could lead to delisting, reducing liquidity and negatively impacting stock price and capital access[386](index=386&type=chunk) - The market price for common stock is highly volatile, influenced by clinical trial results, regulatory approvals, competition, and general market conditions[387](index=387&type=chunk) - Future sales and issuances of common stock, including under the ATM program, could cause substantial dilution and a decline in stock price[388](index=388&type=chunk)[390](index=390&type=chunk) - The company does not intend to pay dividends, meaning returns depend solely on stock price appreciation[393](index=393&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds were reported[398](index=398&type=chunk) [Item 3. Defaults Upon Senior Secured Securities](index=67&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Secured%20Securities) The company reported no defaults upon senior secured securities - No defaults upon senior secured securities were reported[399](index=399&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including indemnification agreements, certifications of principal officers, and XBRL interactive data files Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 10.1* | Indemnification Agreement, dated May 13, 2022, by and between VistaGen Therapeutics, Inc. and Reid G. Adler J.D. | | 31.1* | Certification of the Principal Executive Officer required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Certification of the Principal Financial Officer required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32* | Certification of the Principal Executive and Financial Officers required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS * | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | 101.SCH* | Inline XBRL Taxonomy Extension Schema | | 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase | | 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase | | 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase | | 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase | | 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | SIGNATURES The report is formally signed by the principal executive and financial officers - The report is signed by Shawn K. Singh, Chief Executive Officer, and Jerrold D. Dotson, Chief Financial Officer, on August 11, 2022[404](index=404&type=chunk)

Financial Data and Key Metrics Changes - Research and development expenses increased by $23.5 million from approximately $11.9 million to $35.4 million for the fiscal year ended March 31, 2022, primarily due to clinical trials and personnel hiring [25] - General and administrative expenses rose to approximately $13.5 million for the fiscal year ended March 31, 2022, compared to approximately $7.1 million for the fiscal year ended March 31, 2021, largely due to pre-launch commercialization activities [26] - Net loss attributable to common stockholders for the fiscal year ended March 31, 2022, was approximately $48.7 million, compared to a net loss of $42.3 million for fiscal 2021 [27] Business Line Data and Key Metrics Changes - The company advanced its PALISADE Phase III program for PH94B in Social Anxiety Disorder (SAD), with significant milestones achieved, including the completion of the last patient's study protocol in PALISADE-1 [10][12] - An exploratory Phase IIA clinical study of PH94B in adjustment disorder with anxiety was initiated, with topline data anticipated near the end of the year [21] Market Data and Key Metrics Changes - The prevalence of anxiety and depression disorders has increased significantly since the pandemic, highlighting the need for new treatment options [7][8] - The company is preparing to initiate PALISADE Global, a Phase III clinical trial for PH94B in markets outside the U.S., including China and Canada [19][20] Company Strategy and Development Direction - The company aims to transform the treatment of anxiety and depression through innovative solutions, focusing on the development of differentiated treatments [9][30] - The commercialization strategy includes raising awareness among healthcare providers and patients, leveraging the increased prevalence of diagnosed SAD cases [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential of their CNS pipeline and the upcoming data readouts from the PALISADE program [9][11] - The company is optimistic about the regulatory feedback from the FDA regarding PH94B's abuse liability, which may facilitate future interactions with the DEA [13][55] Other Important Information - The company has a strong intellectual property position for PH94B, with exclusivity expected to last until at least March 2033 [45] - The Phase IB trial for AV-101 in combination with probenecid is underway, following positive preclinical results [23] Q&A Session Summary Question: Timeline for topline data from PALISADE-1 - Management anticipates topline data by mid-August, following a six to eight-week data cleaning process [34] Question: Details on topline data release - The primary endpoint will be reported, along with safety data, focusing on the Subjective Units of Distress Scale [36] Question: Role of Dr. Liebowitz in studies - Dr. Liebowitz's involvement has been crucial in executing the studies, providing valuable guidance and ensuring proper study design [39][40] Question: IP situation for PH94B - Current assessment indicates exclusivity for PH94B through March 2033, with plans for pediatric development if results are positive [45] Question: Commercialization strategy for SAD - The company plans to raise awareness among healthcare providers and patients, emphasizing the unique market position due to limited competition [58][60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K VistaGen Therapeutics, Inc. (Exact name of registrant as specified in its charter) ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Nevada 20-5093315 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) For the fiscal year ended: March 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commis ...

VistaGen Therapeutics, Inc. (NASDAQ:VTGN) Q3 2022 Earnings Conference Call February 10, 2022 5:00 PM ET Company Participants Mark Flather - Vice President, Investor Relations Shawn Singh - Chief Executive Officer Jerry Dotson - Chief Financial Officer Mark Smith - Chief Medical Officer Conference Call Participants Andrew Tsai - Jefferies Lachlan Hanbury-Brown - William Blair Luke Herrmann - Baird Joanne Lee - Maxim Group Operator Greetings and welcome to VistaGen Therapeutics’ Third Quarter of Fiscal Year 2 ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) VistaGen reported a net loss of $31.1 million for the nine months ended December 31, 2021, driven by increased R&D, with recurring losses and an accumulated deficit of $250.9 million raising going concern doubts Condensed Consolidated Balance Sheet Data (in USD) | Balance Sheet Items | Dec 31, 2021 (unaudited) | Mar 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $83,700,200 | $103,108,300 | | Total current assets | $86,770,300 | $104,117,500 | | Total assets | $90,536,100 | $108,281,300 | | Total current liabilities | $6,420,800 | $4,189,000 | | Total liabilities | $10,558,300 | $16,302,800 | | Total stockholders' equity | $79,977,800 | $91,978,500 | Condensed Consolidated Statements of Operations (in USD) | Operations Data (Nine Months Ended) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Sublicense revenue | $1,070,000 | $647,600 | | Research and development expenses | $23,637,100 | $7,585,500 | | General and administrative expenses | $8,518,800 | $4,776,900 | | Loss from operations | ($31,085,900) | ($11,714,800) | | Net loss | ($31,074,000) | ($11,723,300) | | Net loss per common share (basic and diluted) | ($0.16) | ($0.19) | Condensed Consolidated Statements of Cash Flows (in USD) | Cash Flow Data (Nine Months Ended) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($29,668,000) | ($6,791,600) | | Net cash used in investing activities | ($200,300) | ($249,900) | | Net cash provided by financing activities | $10,460,200 | $110,017,500 | | Net (decrease) increase in cash | ($19,408,100) | $102,976,000 | - The company has experienced recurring losses and negative cash flows, resulting in an accumulated deficit of approximately **$250.9 million** as of December 31, 2021[38](index=38&type=chunk)[45](index=45&type=chunk) - Management has concluded that its cash position is not sufficient to fund planned operations for the next twelve months, which raises substantial doubt about its ability to continue as a going concern without securing additional capital[197](index=197&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Increased R&D expenses, particularly for the PH94B Phase 3 program, drove a higher net loss and cash burn, necessitating additional financing despite $10.7 million raised, as current cash of $83.7 million is insufficient for the next year - The company is a late-stage clinical biopharmaceutical firm focused on CNS disorders with three clinical-stage candidates: **PH94B** (anxiety), **PH10** (depression), and **AV-101** (neurological disorders)[126](index=126&type=chunk)[127](index=127&type=chunk) - The primary focus is the **PALISADE Phase 3 Program for PH94B** for the acute treatment of social anxiety disorder (SAD), with topline results from the PALISADE-1 study anticipated in mid-2022[138](index=138&type=chunk) Comparison of Operating Expenses (Nine Months Ended Dec 31, in USD) | Expense Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Research and Development | $23,637,000 | $7,586,000 | +$16,051,000 | | General and Administrative | $8,519,000 | $4,777,000 | +$3,742,000 | - The increase in R&D expense was primarily driven by costs for the **PALISADE Phase 3 Program for PH94B**, including PALISADE-1 and PALISADE-2 trials, and manufacturing activities for both PH94B and PH10[170](index=170&type=chunk)[177](index=177&type=chunk) - The increase in G&A expense was mainly due to pre-commercialization studies for PH94B, increased personnel costs, and a noncash write-off of deferred offering costs from a terminated financing agreement[188](index=188&type=chunk) - During the nine months ended December 31, 2021, the company raised capital through: - Warrant exercises: ~**$6.2 million** in cash proceeds[40](index=40&type=chunk) - At-the-market (ATM) offering: ~**$4.45 million** in gross cash proceeds[41](index=41&type=chunk)[192](index=192&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of December 31, 2021, while actively remediating previously identified material weaknesses in internal control over financial reporting through staffing and software improvements - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[208](index=208&type=chunk) - The company previously identified two material weaknesses in internal control over financial reporting: (i) inadequate segregation of duties and (ii) limitations in accounting software functionality[209](index=209&type=chunk) - Remediation efforts began in April 2021, including hiring additional accounting staff and implementing new, state-of-the-art accounting software[313](index=313&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - There are no legal proceedings to report[212](index=212&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, product development, operational, and intellectual property risks, including recurring losses, the need for additional financing, clinical trial uncertainties, reliance on third parties, and internal control weaknesses - **Financial Risks:** The company has a history of significant net losses (**$250.9 million** accumulated deficit), requires additional financing to continue as a going concern, and has identified material weaknesses in its internal control over financial reporting[215](index=215&type=chunk)[302](index=302&type=chunk)[313](index=313&type=chunk) - **Product Development & Regulatory Risks:** The business heavily depends on the success of its three CNS product candidates, with a high risk of failure or delay in clinical trials and no certainty of obtaining regulatory approval[215](index=215&type=chunk)[221](index=221&type=chunk) - **Operational Risks:** The COVID-19 pandemic may continue to cause delays in manufacturing and clinical trial enrollment, and the company relies completely on third-party CROs and CMOs for clinical trials and manufacturing, creating dependency risk[215](index=215&type=chunk)[241](index=241&type=chunk)[246](index=246&type=chunk) - **Intellectual Property Risks:** The company's success depends on its ability to obtain and maintain patent protection for its product candidates, which is uncertain and subject to legal challenges, and it also faces risks of infringing on third-party IP rights[333](index=333&type=chunk)[353](index=353&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=86&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[404](index=404&type=chunk) [Defaults Upon Senior Securities](index=86&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Secured%20Securities) The company reported no defaults upon senior securities - None[405](index=405&type=chunk) [Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL documents[406](index=406&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents VistaGen Therapeutics' unaudited interim financial statements as of September 30, 2021, detailing balance sheets, operations, cash flows, and equity changes, reflecting increased net loss and R&D expenses [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, including assets, liabilities, and equity, as of September 30, 2021, and March 31, 2021 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2021 ($) | Mar 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $93,627,100 | $103,108,300 | | Total current assets | $96,437,400 | $104,117,500 | | Total assets | $100,499,700 | $108,281,300 | | Total current liabilities | $7,912,200 | $4,189,000 | | Total liabilities | $19,840,000 | $16,302,800 | | Total stockholders' equity | $80,659,700 | $91,978,500 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's revenues, expenses, and net loss for the six months ended September 30, 2021, compared to the prior-year period Statement of Operations Highlights (Unaudited) | Metric | Six Months Ended Sep 30, 2021 ($) | Six Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | | Sublicense revenue | $712,100 | $334,000 | | Research and development | $15,670,300 | $4,089,400 | | General and administrative | $5,587,500 | $2,660,100 | | Loss from operations | ($20,545,700) | ($6,415,500) | | Net loss | ($20,538,900) | ($6,424,600) | | Net loss per share (basic and diluted) | ($0.11) | ($0.12) | - The net loss for the six months ended September 30, 2021, increased significantly to **$20.5 million** from **$6.4 million** in the prior-year period, primarily due to a substantial rise in research and development expenses[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended September 30, 2021, and 2020 Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended Sep 30, 2021 ($) | Six Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,622,500) | ($1,803,000) | | Net cash used in investing activities | ($200,400) | ($98,800) | | Net cash provided by financing activities | $8,341,700 | $15,946,200 | | Net (decrease) increase in cash | ($9,481,200) | $14,044,400 | - Cash used in operating activities increased dramatically to **$17.6 million** for the six months ended September 30, 2021, compared to **$1.8 million** in the same period of 2020, reflecting increased R&D activities[14](index=14&type=chunk) Financing activities in 2021 were primarily driven by warrant exercises and ATM sales, whereas 2020 included proceeds from a public offering and an equity line[14](index=14&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, including business overview, significant accounting policies, and subsequent events - The company is a late-stage biopharmaceutical firm focused on CNS disorders with three clinical-stage candidates: **PH94B** (Phase 3 for social anxiety disorder), **PH10** (preparing for Phase 2B for major depressive disorder), and **AV-101** (preparing for Phase 1B)[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - As a clinical-stage company, VistaGen has experienced recurring losses, accumulating a deficit of approximately **$240.4 million** since inception[33](index=33&type=chunk) However, with **$93.6 million** in cash and cash equivalents as of September 30, 2021, management believes it has sufficient funds for operations for well beyond the next twelve months[42](index=42&type=chunk) - Revenue is primarily generated from the AffaMed Agreement, which includes a **$5.0 million** upfront license fee received in August 2020[50](index=50&type=chunk) This revenue is recognized on a straight-line basis over the period the company expects to perform related services, estimated to be completed by the end of calendar 2023[118](index=118&type=chunk) - Subsequent to the quarter end, the company received approximately **$1.1 million** from warrant exercises, converted all **2,318,012** outstanding shares of Series C Preferred Stock into common stock, and extended its headquarters lease to July 31, 2027[121](index=121&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management discusses the company's financial performance, liquidity, and operational progress, highlighting increased R&D expenses and sufficient cash for future operations [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues and expenses, explaining the drivers behind changes in operating results for the six months ended September 30, 2021 Comparison of Operating Expenses (Six Months Ended Sep 30) | Expense Category | 2021 ($) | 2020 ($) | Change ($) | | :--- | :--- | :--- | :--- | | **Research & Development** | **$15.7 million** | **$4.1 million** | **+$11.6 million** | | - PH94B and PH10 Development | $10.6 million | $1.9 million | +$8.7 million | | - Salaries and benefits | $3.2 million | $0.7 million | +$2.5 million | | **General & Administrative** | **$5.6 million** | **$2.7 million** | **+$2.9 million** | | - Salaries and benefits | $2.2 million | $0.7 million | +$1.5 million | | - Pre-launch marketing | $0.6 million | $0 | +$0.6 million | - The substantial increase in R&D expense for the six months ended September 30, 2021, was primarily due to costs for the **PALISADE Phase 3 Program for PH94B** (initiation of PALISADE-1 and PALISADE-2), preclinical activities for **PH10**, and increased personnel costs[154](index=154&type=chunk)[179](index=179&type=chunk) - G&A expenses rose due to hiring senior management, including a Chief Commercial Officer, accruals for performance-based compensation, and approximately **$577,000** in pre-commercialization market research studies for **PH94B**[162](index=162&type=chunk)[187](index=187&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations, detailing cash position, recent financing activities, and future funding plans - As of September 30, 2021, the company had cash and cash equivalents of approximately **$93.6 million**, which management believes is sufficient to fund planned operations for well beyond the next twelve months[209](index=209&type=chunk) - Recent capital inflows include net proceeds of approximately **$93.6 million** from the December 2020 Public Offering, **$4.25 million** from warrant exercises during the six months ended Sep 30, 2021, and **$4.4 million** in gross proceeds from the ATM program initiated in May 2021[203](index=203&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - Future plans include advancing the **PALISADE Phase 3 program for PH94B**, initiating **Phase 2B development for PH10**, and starting a **Phase 1B study for AV-101 with probenecid**[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding their effectiveness while addressing previously identified material weaknesses in internal control - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[221](index=221&type=chunk) - The company identified two material weaknesses in its internal control over financial reporting: (i) inadequate segregation of duties and (ii) limitations in its accounting software[222](index=222&type=chunk) - Remediation efforts to address the material weaknesses commenced in April 2021, involving the retention of additional accounting staff and the implementation of new, state-of-the-art accounting software[222](index=222&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no legal proceedings to disclose for the period - The company reported no legal proceedings[225](index=225&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section provides a comprehensive overview of substantial risks facing the company, categorized by product development, financial position, intellectual property, and securities [Risks Related to Product Development, Regulatory Approval and Commercialization](index=47&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Regulatory%20Approval%20and%20Commercialization) This section details risks associated with developing, obtaining regulatory approval for, and commercializing the company's drug candidates, including clinical trial uncertainties and reliance on third parties - The company's business depends heavily on the successful development, regulatory approval, and commercialization of its three CNS drug candidates: **PH94B**, **PH10**, and **AV-101**[236](index=236&type=chunk) - The **COVID-19 pandemic** poses a significant risk, with potential to cause delays in manufacturing, clinical trial recruitment, and overall product development timelines[231](index=231&type=chunk)[235](index=235&type=chunk) - The company relies completely on third-party Contract Manufacturing Organizations (CMOs) for manufacturing and Contract Research Organizations (CROs) for clinical trials, which introduces risks related to quality control, timelines, and regulatory compliance[256](index=256&type=chunk)[261](index=261&type=chunk) [Risks Related to Our Financial Position](index=64&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position) This section outlines financial risks, including a history of net losses, the need for future financing, and identified material weaknesses in internal control over financial reporting - VistaGen has a history of significant net losses, with an accumulated deficit of approximately **$240.4 million** as of September 30, 2021, and expects to incur substantial operating losses for the foreseeable future[315](index=315&type=chunk) - The company requires additional financing to execute its long-term business plan[319](index=319&type=chunk) Future capital raises will cause substantial dilution to existing stockholders and may be on unfavorable terms[332](index=332&type=chunk) - Material weaknesses in internal control over financial reporting have been identified, related to segregation of duties and accounting software, which could result in errors in financial statements if not adequately addressed[330](index=330&type=chunk) [Risks Related to Our Intellectual Property Rights](index=72&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This section addresses risks concerning the company's ability to obtain, maintain, and defend patent protection, as well as potential infringement claims and reliance on licensed intellectual property - The company's success depends on its ability to obtain and maintain patent protection for its product candidates, but there is no guarantee that patents will be granted or that they will provide a sufficient competitive advantage[352](index=352&type=chunk)[353](index=353&type=chunk) - The company may face costly legal proceedings from third parties alleging infringement of their intellectual property, which could prevent or delay product development and commercialization[371](index=371&type=chunk) - VistaGen is dependent on intellectual property licensed from third parties for key products like **PH94B** and **PH10**[393](index=393&type=chunk) Losing these license rights could halt development and harm the business[393](index=393&type=chunk) [Risks Related to our Securities](index=81&type=section&id=Risks%20Related%20to%20our%20Securities) This section covers risks related to the company's common stock, including market price volatility, potential dilution from future sales, and the absence of dividend payments - The market price of the company's common stock is highly volatile and can be affected by clinical trial results, regulatory decisions, and general market conditions[418](index=418&type=chunk) - Future sales of a substantial number of common shares, including from the conversion of preferred stock or exercise of warrants and options, could cause the stock price to decline[419](index=419&type=chunk)[421](index=421&type=chunk) - The company has never paid dividends on its common stock and does not intend to in the foreseeable future, meaning a return on investment depends solely on stock price appreciation[424](index=424&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or use of proceeds for the period - None reported[429](index=429&type=chunk) [Item 3. Defaults Upon Senior Securities](index=83&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities for the period - None reported[430](index=430&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a lease amendment and required officer certifications - The exhibits filed with this report include a Third Amendment to the company's lease agreement dated October 14, 2021, and various officer certifications required under the Sarbanes-Oxley Act[431](index=431&type=chunk)

VistaGen Therapeutics, Inc. (NASDAQ:VTGN) Q1 2022 Earnings Conference Call August 12, 2021 5:00 PM ET Company Participants Mark Flather - Vice President, Investor Relations Shawn Singh - Chief Executive Officer Jerry Dotson - Chief Financial Officer Mark Smith - Chief Medical Officer Conference Call Participants Andrew Tsai - Jefferies Operator Greetings, and welcome to the VistaGen Therapeutics First Quarter 2022 Results Conference Call. During the presentation, all participants will be in a listen-only m ...

PART I. FINANCIAL INFORMATION This section presents unaudited financial statements and management's analysis for the quarter ended June 30, 2021 [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of cash flows, and statements of changes in stockholders' equity, along with accompanying notes. It provides a snapshot of the company's financial position and performance for the quarter ended June 30, 2021, and comparative periods [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202021%20and%20March%2031%2C%202021) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | June 30, 2021 ($) | March 31, 2021 ($) | | :-------------------------------- | :------------ | :------------- | | Cash and cash equivalents | $97,776,900 | $103,108,300 | | Total assets | $103,907,200 | $108,281,300 | | Total liabilities | $18,290,400 | $16,302,800 | | Accumulated deficit | $(227,586,200)| $(219,841,600) | | Total stockholders' equity | $85,616,800 | $91,978,500 | - Cash and cash equivalents decreased by approximately **$5.3 million** from March 31, 2021, to June 30, 2021[10](index=10&type=chunk) - Total liabilities increased by approximately **$2.0 million** from March 31, 2021, to June 30, 2021[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20June%2030%2C%202021%20and%202020) This statement details the company's revenues, expenses, and net loss over specific reporting periods | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Sublicense revenue | $354,100 | $- | | Research and development expenses | $5,603,600 | $1,731,200 | | General and administrative expenses | $2,496,700 | $1,390,600 | | Net loss | $(7,744,500) | $(3,126,800) | | Net loss attributable to common stockholders | $(8,106,300) | $(3,462,600) | | Basic and diluted net loss per common share | $(0.04) | $(0.07) | - Sublicense revenue increased from **$0 in Q2 2020 to $354,100 in Q2 2021**[13](index=13&type=chunk) - Research and development expenses increased by approximately **$3.87 million (223%)** year-over-year[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20June%2030%2C%202021%20and%202020) This statement reports the cash generated and used by operating, investing, and financing activities | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(6,172,900) | $(2,806,700) | | Net cash used in investing activities | $(149,900) | $- | | Net cash provided by financing activities | $991,400 | $2,997,500 | | Net increase (decrease) in cash and cash equivalents | $(5,331,400) | $190,800 | | Cash and cash equivalents at end of period | $97,776,900 | $1,545,900 | - Net cash used in operating activities increased by approximately **$3.37 million (120%)** year-over-year[18](index=18&type=chunk) - Net cash provided by financing activities decreased by approximately **$2.01 million (67%)** year-over-year[18](index=18&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit)](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)%20for%20the%20three%20months%20ended%20June%2030%2C%202021%20and%202020) This statement details changes in equity components, including common stock, additional paid-in capital, and accumulated deficit | Metric | March 31, 2021 ($) | June 30, 2021 ($) | | :------------------------------------ | :------------- | :------------ | | Common Stock Shares Issued | 180,751,234 | 191,632,008 | | Common Stock Amount | $180,800 | $191,600 | | Additional Paid-in Capital | $315,603,100 | $316,975,600 | | Accumulated Deficit | $(219,841,700) | $(227,586,200)| | Total Stockholders' Equity | $91,978,400 | $85,616,800 | - Total stockholders' equity decreased by approximately **$6.36 million** from March 31, 2021, to June 30, 2021[24](index=24&type=chunk) - The conversion of Series D Preferred stock into common stock resulted in an increase of **9,249,427 common shares**[23](index=23&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=5&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering business description, accounting policies, specific balance sheet and income statement items, capital stock activities, related party transactions, commitments, contingencies, and subsequent events [Note 1. Description of Business](index=5&type=section&id=Note%201.%20Description%20of%20Business) This note outlines the company's core business, therapeutic focus, and key clinical-stage product candidates - VistaGen Therapeutics, Inc. is a biopharmaceutical company focused on developing new medicines for anxiety, depression, and other central nervous system (CNS) disorders[26](index=26&type=chunk) - The company's CNS pipeline includes three clinical-stage product candidates: PH94B Nasal Spray (anxiety disorders), PH10 Nasal Spray (depression disorders), and AV-101 (neurological indications)[26](index=26&type=chunk) - PH94B Nasal Spray has initiated its Phase 3 development program (PALISADE Phase 3 Program) for the acute treatment of anxiety in adults with social anxiety disorder (SAD) and has been granted Fast Track designation by the FDA[26](index=26&type=chunk)[27](index=27&type=chunk) [Note 2. Basis of Presentation](index=5&type=section&id=Note%202.%20Basis%20of%20Presentation) This note describes the financial statement preparation basis, including going concern considerations and funding sources - The company has an accumulated deficit of approximately **$227.6 million** from inception through June 30, 2021, and expects continued losses[34](index=34&type=chunk) - Operations have been financed primarily through equity and debt securities (**$199.0 million**) and government research grant awards, collaboration payments, and licensing (**$22.7 million**)[35](index=35&type=chunk) - Net proceeds from the December 2020 Public Offering were approximately **$93.6 million**, and an additional **$1.1 million** was received from warrant exercises during Q2 2021[36](index=36&type=chunk)[37](index=37&type=chunk)[40](index=40&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=7&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the key accounting principles and methods applied in preparing the financial statements - Revenue is generated from collaborative research and development arrangements, licensing, and government grants, with the AffaMed Agreement being a primary source[49](index=49&type=chunk) - The AffaMed Agreement is treated as a single combined performance obligation, with revenue recognized on a straight-line basis over the expected service period (estimated to complete by end of calendar 2023)[52](index=52&type=chunk)[58](index=58&type=chunk)[119](index=119&type=chunk) | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Sublicense revenue recognized | $354,100 | $0 | | Total stock-based compensation expense | $590,400 | $674,600 | [Note 4. Receivable from Collaboration Partner](index=10&type=section&id=Note%204.%20Receivable%20from%20Collaboration%20Partner) This note explains the nature and amounts of receivables from collaboration partners | Metric | June 30, 2021 ($) | March 31, 2021 ($) | | :------------------------------------ | :------------ | :------------- | | Receivable from collaboration partner | $44,000 | $40,600 | - These amounts reflect payments made to a contract manufacturing organization on behalf of a collaboration partner, which are subsequently reimbursed[87](index=87&type=chunk) [Note 5. Prepaid Expenses and Other Current Assets](index=10&type=section&id=Note%205.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note details the composition and changes in prepaid expenses and other current assets | Metric | June 30, 2021 ($) | March 31, 2021 ($) | | :------------------------------------ | :------------ | :------------- | | Prepaid expenses and other current assets | $1,871,400 | $835,100 | | Clinical and nonclinical materials and contract services | $1,332,800 | $686,900 | | Insurance | $503,000 | $121,800 | - Total prepaid expenses and other current assets increased by over **124%** from March 31, 2021, to June 30, 2021, primarily driven by clinical and nonclinical materials and insurance[88](index=88&type=chunk) [Note 6. Property and Equipment](index=10&type=section&id=Note%206.%20Property%20and%20Equipment) This note provides information on the company's property and equipment, including changes and additions | Metric | June 30, 2021 ($) | March 31, 2021 ($) | | :------------------------------------ | :------------ | :------------- | | Property and equipment, net | $482,800 | $367,400 | | Construction in progress | $146,700 | $- | - Net property and equipment increased by approximately **$115,400** from March 31, 2021, to June 30, 2021[89](index=89&type=chunk) - Construction in progress of **$146,700** at June 30, 2021, relates to laboratory analytical equipment for PH94B drug product development[91](index=91&type=chunk) [Note 7. Accrued Expenses](index=10&type=section&id=Note%207.%20Accrued%20Expenses) This note details the components and changes in accrued expenses | Metric | June 30, 2021 ($) | March 31, 2021 ($) | | :------------------------------------ | :------------ | :------------- | | Accrued expenses | $2,150,000 | $1,562,700 | | Accrued compensation | $750,000 | $- | - Total accrued expenses increased by approximately **$587,300** from March 31, 2021, to June 30, 2021, with a new accrual for compensation of **$750,000**[92](index=92&type=chunk) [Note 8. Capital Stock](index=11&type=section&id=Note%208.%20Capital%20Stock) This note describes changes in the company's capital stock, including equity offerings and conversions - The Lincoln Park Capital Fund (LPC) Agreement was terminated in June 2021, resulting in a **$232,100 noncash expense** for deferred offering costs[93](index=93&type=chunk) - All **402,149 outstanding shares** of Series D Preferred Stock were converted into **9,249,427 shares of common stock** in April 2021[94](index=94&type=chunk) - An At-The-Market (ATM) offering program was established in May 2021 with Jefferies LLC to sell up to **$75.0 million of common stock**[95](index=95&type=chunk) | Activity | Three Months Ended June 30, 2021 ($) | | :------------------------------------ | :------------------------------- | | Cash proceeds from warrant exercises | $1,109,700 | | Cash proceeds from stock option exercises | $12,900 | | Proceeds from ESPP purchases | $31,600 | [Note 9. Related Party Transactions](index=11&type=section&id=Note%209.%20Related%20Party%20Transactions) This note discloses transactions with related parties and their financial impact - In Q2 2020, the company engaged a consulting firm led by a then-independent Board member for market research, incurring **$15,000 in R&D expense**[104](index=104&type=chunk) - The Board member ceased to be independent in May 2021 upon accepting a position as Chief Commercial Officer[104](index=104&type=chunk) [Note 10. Commitments and Contingencies](index=12&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines the company's contractual commitments and potential contingent liabilities - The company leases its headquarters office and laboratory space in South San Francisco, California, with the lease expiring on July 31, 2022, and an option to renew for an additional five years[106](index=106&type=chunk) | Metric | As of June 30, 2021 ($) | As of March 31, 2021 ($) | | :------------------------------------ | :------------------ | :------------------- | | Right of use asset – operating lease | $3,125,300 | $3,219,600 | | Total operating lease liability | $3,631,100 | $3,715,600 | | Operating lease cost (Q2) | $235,700 | $212,800 | - The assumed remaining lease term is **6.08 years** with an assumed discount rate of **8.54%** as of June 30, 2021[107](index=107&type=chunk) [Note 11. Sublicensing and Collaborative Agreements](index=12&type=section&id=Note%2011.%20Sublicensing%20and%20Collaborative%20Agreements) This note details the terms and financial implications of sublicensing and collaborative agreements - The company entered into the AffaMed Agreement in June 2020, granting an exclusive license to develop and commercialize PH94B in Greater China, South Korea, and Southeast Asia[110](index=110&type=chunk) - Under the AffaMed Agreement, the company received a non-refundable upfront license payment of **$5.0 million** in August 2020 and is eligible for up to **$172.0 million** in milestone payments and royalties on net sales[115](index=115&type=chunk) - Sublicense revenue of **$354,100** was recognized in Q2 2021 under the AffaMed Agreement, with **$3,556,400** allocated to the remaining performance obligation at June 30, 2021[119](index=119&type=chunk) [Note 12. Subsequent Events](index=13&type=section&id=Note%2012.%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period but before the financial statements were issued - From July 1, 2021, through the report date, warrant holders exercised warrants to purchase **1,330,931 common shares**, generating approximately **$923,000 in cash proceeds**[121](index=121&type=chunk) - Options to purchase **400,000 common shares** were granted to newly-hired employees and two newly-appointed independent directors from July 1, 2021, through the report date[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity for the three months ended June 30, 2021, compared to the prior year. It highlights key financial trends, operational developments, and future outlook, including discussions on revenue, expenses, cash flows, and capital resources [Cautionary Note Regarding Forward-Looking Statements](index=13&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This note advises readers that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to significant risks, including financing, R&D results, regulatory effects, competition, and product development difficulties[123](index=123&type=chunk) - Future events and trends may differ materially from expectations due to the competitive and rapidly changing environment and unforeseen risks[124](index=124&type=chunk) - The company is under no duty to update any forward-looking statements after the report date[125](index=125&type=chunk) [Business Overview](index=13&type=section&id=Business%20Overview) This section provides an overview of the company's biopharmaceutical focus and its clinical-stage product pipeline - VistaGen is a biopharmaceutical company developing medicines for anxiety, depression, and other CNS disorders, with three clinical-stage product candidates: PH94B, PH10, and AV-101[126](index=126&type=chunk) - The PH94B Phase 3 development program (PALISADE Phase 3 Program) has been initiated for social anxiety disorder (SAD), and PH10 is preparing for Phase 2B clinical development for major depressive disorder (MDD)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - AV-101 is preparing for Phase 1B clinical development in combination with probenecid for neurological indications involving the NMDA receptor[126](index=126&type=chunk)[129](index=129&type=chunk) [Financial Operations Overview and Results of Operations](index=14&type=section&id=Financial%20Operations%20Overview%20and%20Results%20of%20Operations) This section provides an executive summary of the company's financial performance, highlighting the net loss, key operational advancements in its CNS pipeline, and the impact of recent financing activities. It also details the company's strategic focus on managing costs while accelerating clinical development [Summary](index=14&type=section&id=Summary) This summary highlights the company's net loss, accumulated deficit, and ongoing investment in its clinical pipeline - The company reported a net loss of approximately **$7.7 million** for the three months ended June 30, 2021, compared to **$3.1 million** for the same period in 2020, with an accumulated deficit of approximately **$227.6 million**[132](index=132&type=chunk) - Substantial resources have been devoted to research, development, and contract manufacturing of PH94B, PH10, and AV-101, including the initiation of the PALISADE Phase 3 Program for PH94B[132](index=132&type=chunk) - The company expects losses to continue for the foreseeable future due to ongoing research, development, and commercialization activities[132](index=132&type=chunk) [Summary of the Three Months Ended June 30, 2021](index=14&type=section&id=Summary%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202021) This summary outlines key operational and financial developments during the quarter, including clinical trial progress and financing activities - A strong cash position, primarily from the December 2020 public offering (**$93.6 million net proceeds**), has enabled the acceleration of the CNS pipeline, including the PALISADE Phase 3 Program for PH94B[132](index=132&type=chunk) - PALISADE-1, a Phase 3 clinical trial for PH94B in SAD, commenced in May 2021, with topline results anticipated in **mid-2022**[134](index=134&type=chunk) - The company expanded its employee infrastructure and Board of Directors, and entered into an At-The-Market (ATM) offering program for up to **$75.0 million** of common stock[135](index=135&type=chunk)[137](index=137&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three months ended June 30, 2021, versus June 30, 2020, breaking down changes in revenue, research and development expenses, general and administrative expenses, and interest and other expenses [Revenue](index=15&type=section&id=Revenue) This section analyzes the company's revenue sources and changes for the reporting period - Sublicense revenue of **$354,100** was recognized in Q2 2021 from the AffaMed Agreement, compared to none in Q2 2020[141](index=141&type=chunk) - The company expects to continue recognizing revenue from the **$5.0 million upfront payment** of the AffaMed Agreement in future periods[141](index=141&type=chunk) [Research and Development Expense](index=16&type=section&id=Research%20and%20Development%20Expense) This section details the changes and drivers of research and development expenses | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Total R&D expense | $5,604,000 | $1,731,000 | | Salaries and benefits | $1,307,000 | $348,000 | | PH94B and PH10 development expenses | $3,439,000 | $635,000 | - R&D expense increased by **$3.9 million**, primarily due to the commencement of the PALISADE Phase 3 Program for PH94B and increased salaries and benefits from new hires and compensation accruals[141](index=141&type=chunk)[142](index=142&type=chunk) - PH94B and PH10 project expenses significantly increased, reflecting development, manufacturing, and regulatory initiatives, with PH94B costs exceeding PH10 due to its later development stage[148](index=148&type=chunk) [General and Administrative Expense](index=16&type=section&id=General%20and%20Administrative%20Expense) This section analyzes the changes and components of general and administrative expenses | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Total G&A expense | $2,496,000 | $1,391,000 | | Salaries and benefits | $951,000 | $348,000 | | Write off of deferred offering costs | $232,000 | $- | - G&A expense increased by approximately **$1.1 million**, driven by higher salaries and benefits from new senior management hires, pre-commercialization market studies, and a **$232,000 noncash write-off** of deferred offering costs[151](index=151&type=chunk)[153](index=153&type=chunk)[158](index=158&type=chunk)[163](index=163&type=chunk) - Insurance expense increased due to market-rate increases for directors' and officers' liability insurance[159](index=159&type=chunk) [Interest and Other Expenses](index=17&type=section&id=Interest%20and%20Other%20Expenses) This section details the company's interest income, interest expense, and other non-operating financial items | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Interest income (expense), net | $5,100 | $(3,200) | | Accrued dividends on Series B Preferred Stock | $(361,800) | $(335,800) | - Net interest income was **$5,100** in Q2 2021, a positive change from net interest expense of **$3,200** in Q2 2020, due to cash deposits in interest-bearing accounts and repayment of the Payroll Protection Program loan[164](index=164&type=chunk)[166](index=166&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund future operations - The company had approximately **$97.8 million** in cash and cash equivalents at June 30, 2021, which is believed sufficient to fund planned operations for well beyond the next twelve months[173](index=173&type=chunk) - Future plans include continuing the PH94B PALISADE Phase 3 Program, initiating PH94B Phase 2A, PH10 Phase 2B, and AV-101 Phase 1B studies, and conducting nonclinical studies[174](index=174&type=chunk) - Additional capital may be raised through public/private equity offerings, strategic licensing/development collaborations, or government grants, with an ATM program available for up to **$75.0 million**[175](index=175&type=chunk)[176](index=176&type=chunk)[178](index=178&type=chunk) [Cash and Cash Equivalents](index=19&type=section&id=Cash%20and%20Cash%20Equivalents) This section analyzes the sources and uses of cash across operating, investing, and financing activities | Metric | Three Months Ended June 30, 2021 ($) | Three Months Ended June 30, 2020 ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(6,173,000) | $(2,807,000) | | Net cash used in investing activities | $(150,000) | $- | | Net cash provided by financing activities | $992,000 | $2,998,000 | | Cash and cash equivalents at end of period | $97,777,000 | $1,546,000 | - The increase in cash used in operations during Q2 2021 resulted from the initiation of the PALISADE Phase 3 Program and preparations for other clinical and nonclinical studies[182](index=182&type=chunk) - Cash provided by financing activities in Q2 2021 was primarily from warrant exercises, while Q2 2020 included proceeds from the LPC Agreement and a Payroll Protection Program loan[182](index=182&type=chunk) [Off-Balance Sheet Arrangements](index=19&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any material off-balance sheet arrangements that could impact the company's financial position - The company has no off-balance sheet arrangements[183](index=183&type=chunk) [Recent Accounting Pronouncements](index=19&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to disclosures regarding the impact of recently issued accounting standards - Information relating to recent accounting pronouncements and their expected impact is provided in Note 3 of the Notes to Condensed Consolidated Financial Statements[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and outlines the identified material weaknesses in internal control over financial reporting, along with the steps being taken to remediate them [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[185](index=185&type=chunk) [Internal Control over Financial Reporting](index=19&type=section&id=Internal%20Control%20over%20Financial%20Reporting) This section discusses the identified material weaknesses in internal control over financial reporting and remediation efforts - The company identified two material weaknesses in internal control over financial reporting: (i) lack of appropriate segregation of duties due to staff size and (ii) accounting software functionality that did not prevent erroneous or unauthorized changes and lacked an adequate audit trail[186](index=186&type=chunk) - Remediation steps, initiated in April 2021, include retaining additional accounting staff for appropriate review and implementing state-of-the-art accounting software[186](index=186&type=chunk) - The company believes these weaknesses have not resulted in deficient financial reporting due to the CEO and CFO's awareness and personal certification of financial reports[187](index=187&type=chunk) PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no legal proceedings for the period - The company is not currently involved in any legal proceedings[188](index=188&type=chunk) [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the significant risks and uncertainties that could materially affect the company's business, financial condition, and operating results. It covers risks related to the COVID-19 pandemic, product development, regulatory approval, commercialization, financial position, general company operations, and intellectual property rights [Risk Factor Summary](index=19&type=section&id=Risk%20Factor%20Summary) This summary highlights primary risks: pandemic impact, development stage, product dependence, competition, and financial challenges - Key risks include the impact of the COVID-19 pandemic, the company's development stage status with no recurring revenues, heavy dependence on the success of current CNS product candidates (PH94B, PH10, AV-101), and significant competition[189](index=189&type=chunk)[190](index=190&type=chunk)[197](index=197&type=chunk) - Other material risks involve failures or delays in clinical trials, inability to adequately protect proprietary technology, significant net losses since inception, identified material weaknesses in internal control over financial reporting, and the need for additional financing[197](index=197&type=chunk) [COVID-19 Pandemic Impact](index=20&type=section&id=The%20COVID-19%20pandemic%20has%20adversely%20impacted%2C%20and%20may%20continue%20to%20adversely%20impact%20our%20business.) This section details the adverse impacts of the COVID-19 pandemic on the company's operations, clinical programs, and financial stability - The COVID-19 pandemic has caused and may continue to cause delays and disruptions to ongoing development programs for PH94B, PH10, and AV-101, including potential delays in recruitment and enrollment for clinical studies[198](index=198&type=chunk) - Supply chain disruptions have led to delays in the delivery of active pharmaceutical product (API) for PH94B and PH10, which could materially disrupt clinical development[198](index=198&type=chunk) - The pandemic has created significant volatility in financial markets, potentially limiting access to capital and increasing cybersecurity risks due to remote working arrangements[195](index=195&type=chunk)[198](index=198&type=chunk) [Product Development, Regulatory Approval and Commercialization Risks](index=20&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Regulatory%20Approval%20and%20Commercialization) This section outlines risks associated with developing, obtaining regulatory approval for, and commercializing the company's drug candidates - The company heavily depends on the successful development, manufacturing, regulatory approval, and commercialization of its CNS drug candidates (PH94B, PH10, AV-101), with no assurance of achieving regulatory approval or marketability[196](index=196&type=chunk)[199](index=199&type=chunk) - Clinical trials face risks of delays or failures due to regulatory holds, recruitment challenges, supply shortages, or unexpected adverse events, which could significantly impact development timelines and commercial prospects[215](index=215&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Reliance on third-party contract research organizations (CROs) and contract manufacturing organizations (CMOs) for clinical trials and manufacturing exposes the company to risks related to their performance, compliance, and ability to meet deadlines[220](index=220&type=chunk)[221](index=221&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Financial Position Risks](index=29&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position) This section addresses risks related to the company's financial health, including historical losses, funding needs, and internal control weaknesses - The company has incurred significant net losses since inception, with an accumulated deficit of approximately **$227.6 million** at June 30, 2021, and expects to continue incurring substantial operating losses[280](index=280&type=chunk) - Additional financing is required to execute the long-term business plan, including development and commercialization of CNS product candidates, and future financing may result in substantial dilution or restrictive covenants[286](index=286&type=chunk)[289](index=289&type=chunk)[296](index=296&type=chunk) - Identified material weaknesses in internal control over financial reporting, including segregation of duties and accounting software functionality, could lead to financial statement errors if not adequately addressed[294](index=294&type=chunk)[295](index=295&type=chunk) [General Company-Related Risks](index=31&type=section&id=General%20Company-Related%20Risks) This section covers broader operational risks, including personnel dependency, product liability, and business continuity threats - The company's success depends on attracting and retaining highly qualified senior management and key scientific personnel; the loss of such individuals could delay product development[299](index=299&type=chunk) - Product liability lawsuits are an inherent risk during clinical testing and commercialization, potentially leading to substantial liabilities, commercialization limitations, and diversion of resources[304](index=304&type=chunk)[306](index=306&type=chunk) - Operations are vulnerable to natural disasters, power outages, cybersecurity attacks, and system failures, which could materially disrupt development programs and harm business[308](index=308&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) [Intellectual Property Rights Risks](index=32&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This section addresses risks related to protecting intellectual property, patent enforceability, and potential infringement claims - Inability to adequately protect proprietary technology or obtain and maintain sufficient patents could lead to direct competition and materially adverse business impacts[313](index=313&type=chunk) - The issuance, scope, validity, and enforceability of patents are uncertain due to complex legal and factual questions, prior art, and varying international standards, making patent protection unpredictable[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - Third parties may allege infringement of their intellectual property rights, leading to costly legal proceedings, potential development delays, and increased commercialization costs[333](index=333&type=chunk)[335](index=335&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities or use of proceeds to report for the period[392](index=392&type=chunk) [Item 3. Defaults Upon Senior Secured Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Secured%20Securities) The company reports no defaults upon senior secured securities for the period - There were no defaults upon senior secured securities to report for the period[393](index=393&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL taxonomy files - Key exhibits include the Open Market Sale Agreement with Jefferies LLC, Indemnification Agreements, Certifications of Principal Executive and Financial Officers, and Inline XBRL Taxonomy files[394](index=394&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q, certifying its submission by authorized officers - The report was signed by Shawn K. Singh, Chief Executive Officer, and Jerrold D. Dotson, Chief Financial Officer, on August 12, 2021[398](index=398&type=chunk)