VistaGen Therapeutics(VTGN) - 2023 Q1 - Quarterly Report

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) 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 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] - Total stockholders' equity decreased by approximately $18.7 million, primarily due to the net loss incurred during the quarter[8] Condensed Consolidated Statements of Operations and Comprehensive Loss 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] - Net loss more than doubled, increasing from $7.7 million in Q2 2021 to $(19.8 million) in Q2 2022[10] Condensed Consolidated Statements of Cash Flows 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] - Cash and cash equivalents decreased by $16.1 million during the quarter, ending at $52.0 million[13] Condensed Consolidated Statement of Changes in Stockholders' Equity 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] - 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] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business 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] - 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] - PALISADE-1, a Phase 3 study of PH94B for acute SAD, did not achieve its primary efficacy endpoint[21] 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][22] Note 2. Basis of Presentation 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] - 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] - 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] - Future funding may come from equity/debt sales, warrant exercises, strategic collaborations, and government grants, with no assurance of availability or acceptable terms[31][32][34] Note 3. Summary of Significant Accounting Policies 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][49] - Research and development expense is charged as incurred, including internal costs (salaries, stock-based compensation) and external costs (clinical/nonclinical development)[53] 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] - 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][66] Note 4. Prepaid Expense and Other Current Assets 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] - A new receivable of $343,900 from a collaboration partner was recorded at June 30, 2022[78] Note 5. Property and Equipment 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] - A new financing lease for office equipment was initiated in April 2022, replacing fully-depreciated equipment[79][80] Note 6. Accrued Expense 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 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] Note 8. Capital Stock 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][174] - During the quarter ended June 30, 2022, $156,100 was received from stock option exercises and ESPP purchases[86][174] 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 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] Note 10. Commitments and Contingencies 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] 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 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] - 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] - 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] - The company is currently assessing the impact of PALISADE-1 results on the completion of its performance obligations under the AffaMed Agreement[103] Note 12. Subsequent Events 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][109] Business Overview 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] - PH94B, a pherine nasal spray, is being evaluated for multiple anxiety disorders, including SAD[112] 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][115] - 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] - 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] Financial Operations Overview and Results of Operations This section provides management's analysis of the company's financial performance and key operational drivers 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] 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] Summary of the Three Months Ended June 30, 2022 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] - Recruitment and enrollment in PALISADE-2 are paused pending an independent interim data analysis, and enrollment in PALISADE OLS has ended[142] - The company expanded its employee infrastructure across multiple functional areas, including clinical operations, regulatory affairs, and commercial operations[143] - 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] Results of Operations 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 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 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] - 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] Research and Development Expense 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] - Salaries and benefits increased by $345,000 due to additional personnel and salary increases, partially offset by reduced accruals for compensation expense[153] - 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] - 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][156] General and Administrative Expense 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] - Pre-commercialization expenditures are expected to substantially decrease due to the PALISADE-1 results and resulting delay in commercialization timeline[164] - Stock-based compensation for G&A increased, reflecting new option grants and amortization[160] - Insurance expense increased due to higher directors' and officers' liability coverage and new cybersecurity coverages[165] Interest and Other Expense 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] - 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] Liquidity and Capital Resources 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] - 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] - 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][178][180] Cash and Cash Equivalents 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] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[183] Recent Accounting Pronouncements 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] Item 4. Controls and Procedures 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 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] Internal Control over Financial Reporting 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] - Previously identified material weaknesses in internal control over financial reporting were remediated as of March 31, 2022[295] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings - There are no legal proceedings to report[188] Item 1A. Risk Factors 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 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] - 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] Risks Related to Product Development, Regulatory Approval and Commercialization 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] - 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] - 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][199] - Fast Track designations for PH94B and AV-101 do not guarantee faster development, review, or approval[201][202] - Results from earlier clinical trials may not predict later-stage success, as demonstrated by PALISADE-1[204] - Reliance on third parties for clinical trials and manufacturing exposes the company to risks of delays, non-compliance, and quality control issues[216][217][222][223] - Failure to establish broad sales and marketing capabilities or secure collaborations could prevent revenue generation[232][247] - Market acceptance of approved products is uncertain and depends on efficacy, safety, pricing, and competition[233][234] - The pharmaceutical industry is highly competitive, with many larger companies developing similar products, posing a significant challenge to market penetration[243][246] Risks Related to Our Financial Position 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] - Additional financing is required to execute the long-term business plan, including development and commercialization, with no guarantee of availability on acceptable terms[283][288] - Raising additional capital through equity offerings is likely to cause substantial dilution to existing stockholders[299] - Current volatile economic conditions could adversely affect business and access to capital markets[291] - While previously identified material weaknesses in internal control over financial reporting were remediated, future weaknesses could arise, impacting financial reporting accuracy[295] - 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] General Company-Related Risks 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][304] - Product liability lawsuits could result in substantial liabilities, decreased demand, and reputational harm, potentially limiting commercialization[308][309] - Unfavorable global economic or political conditions, natural disasters, and cybersecurity failures could adversely affect business operations and financial stability[311][312][313][316] - Acquisitions or strategic alliances may not realize expected benefits due to integration difficulties or unforeseen challenges[317] Risks Related to Our Intellectual Property Rights 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][322] - The issuance, scope, validity, and enforceability of patents are uncertain due to complex legal and factual questions, prior art, and varying international standards[325][326] - Third parties may initiate legal proceedings alleging infringement, which could delay product development, stop commercialization, or increase costs[342][344] - Dependence on licensed intellectual property means loss of rights due to breach or termination could prevent continued development or commercialization[362][365] - 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][368][370] - 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][376][379] Risks Related to our Securities 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] - The market price for common stock is highly volatile, influenced by clinical trial results, regulatory approvals, competition, and general market conditions[387] - Future sales and issuances of common stock, including under the ATM program, could cause substantial dilution and a decline in stock price[388][390] - The company does not intend to pay dividends, meaning returns depend solely on stock price appreciation[393] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Secured Securities The company reported no defaults upon senior secured securities - No defaults upon senior secured securities were reported[399] Item 6. Exhibits 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]