VistaGen Therapeutics(VTGN) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) 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 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 | $91,978,500 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's revenues, expenses, and net loss for the six months ended September 30, 2021, compared to the prior-year period Statement of Operations Highlights (Unaudited) | Metric | Six Months Ended Sep 30, 2021 ($) | 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 $6.4 million in the prior-year period, primarily due to a substantial rise in research and development expenses[11] Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended September 30, 2021, and 2020 Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended Sep 30, 2021 ($) | 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] 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] Notes to the Condensed Consolidated Financial Statements 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][22][23] - As a clinical-stage company, VistaGen has experienced recurring losses, accumulating a deficit of approximately $240.4 million since inception[33] 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] - Revenue is primarily generated from the AffaMed Agreement, which includes a $5.0 million upfront license fee received in August 2020[50] 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] - Subsequent to the quarter end, the company received approximately $1.1 million from warrant exercises, converted all 2,318,012 outstanding shares of Series C Preferred Stock into common stock, and extended its headquarters lease to July 31, 2027[121][124][125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, liquidity, and operational progress, highlighting increased R&D expenses and sufficient cash for future operations Results of Operations This section analyzes the company's revenues and expenses, explaining the drivers behind changes in operating results for the six months ended September 30, 2021 Comparison of Operating Expenses (Six Months Ended Sep 30) | Expense Category | 2021 ($) | 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][179] - 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][187] Liquidity and Capital Resources 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] - 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][205][206] - 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] Item 4. Controls and Procedures 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] - 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] - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings to disclose for the period - The company reported no legal proceedings[225] Item 1A. Risk Factors 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 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] - The COVID-19 pandemic poses a significant risk, with potential to cause delays in manufacturing, clinical trial recruitment, and overall product development timelines[231][235] - 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][261] Risks Related to Our Financial Position 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] - The company requires additional financing to execute its long-term business plan[319] Future capital raises will cause substantial dilution to existing stockholders and may be on unfavorable terms[332] - 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] Risks Related to Our Intellectual Property Rights 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][353] - 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] - VistaGen is dependent on intellectual property licensed from third parties for key products like PH94B and PH10[393] Losing these license rights could halt development and harm the business[393] Risks Related to our Securities 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] - 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][421] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds for the period - None reported[429] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities for the period - None reported[430] Item 6. Exhibits 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]