UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
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☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2019
or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from
to
.
Commission File Number: 001-37761
VistaGen Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
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Nevada
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20-5093315
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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343 Allerton Avenue
South San Francisco, CA 94080
(Address of principal executive offices including zip
code)
(650) 577-3600
(Registrant’s telephone number, including area
code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such
files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-Accelerated filer
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[ ]
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Smaller reporting company
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[X]
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Emerging growth company
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[ ]
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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Common
Stock, par value $0.001 per share
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VTGN
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Nasdaq
Capital Market
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As of November 6, 2019, 43,222,965 shares of the registrant’s
common stock, $0.001 par value, were issued and
outstanding.
VistaGen Therapeutics, Inc.
Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2019
TABLE OF CONTENTS
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Page
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1
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2
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3
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4
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5
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15
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28
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29
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29
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63
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63
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63
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64
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PART I. FINANCIAL
INFORMATION
Item 1. Condensed Consolidated Financial Statements
(Unaudited)
VISTAGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Dollars, except share amounts)
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$4,072,400
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$13,100,300
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Receivable
from supplier
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-
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300,000
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Prepaid
expenses and other current assets
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604,500
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250,900
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Total
current assets
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4,676,900
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13,651,200
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Property
and equipment, net
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260,600
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312,700
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Right
of use asset - operating lease
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3,750,200
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-
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Security
deposits and other assets
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47,800
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47,800
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Total
assets
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$8,735,500
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$14,011,700
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
EQUITY
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Current
liabilities:
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Accounts
payable
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$1,449,800
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$1,055,000
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Accrued
expenses
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2,215,500
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1,685,600
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Current
notes payable
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159,300
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57,300
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Operating
lease oligation
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289,600
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-
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Financing
lease obligation
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3,100
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3,000
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Total
current liabilities
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4,117,300
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2,800,900
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Non-current
liabilities:
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Accrued
dividends on Series B Preferred Stock
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4,364,500
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3,748,200
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Deferred
rent liability
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-
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381,100
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Operating
lease obligation
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3,879,400
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-
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Financing
lease obligation
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4,700
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6,300
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Total
non-current liabilities
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8,248,600
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4,135,600
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Total
liabilities
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12,365,900
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6,936,500
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Commitments
and contingencies
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Stockholders’
(deficit) equity:
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Preferred
stock, $0.001 par value; 10,000,000 shares authorized at September
30, 2019 and March 31, 2019:
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Series
A Preferred, 500,000 shares authorized, issued and outstanding at
September 30, 2019 and March 31, 2019
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$500
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$500
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Series
B Preferred; 4,000,000 shares authorized at September 30, 2019 and
March 31, 2019; 1,160,240 shares
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issued
and outstanding at September 30, 2019 and March 31,
2019
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1,200
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1,200
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Series
C Preferred; 3,000,000 shares authorized at September 30, 2019 and
March 31, 2019; 2,318,012 share
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issued
and outstanding at September 30, 2019 and March 31,
2019
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2,300
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2,300
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Common
stock, $0.001 par value; 175,000,000 and 100,000,000 shares
authorized at September 30, 2019 and
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March
31, 2019, respectively; 42,758,630 shares issued and outstanding at
September 30, 2019 and March 31, 2019
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42,800
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42,800
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Additional
paid-in capital
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192,970,100
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192,129,900
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Treasury
stock, at cost, 135,665 shares of common stock held at September
30, 2019 and March 31, 2019
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(3,968,100)
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(3,968,100)
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Accumulated
deficit
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(192,679,200)
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(181,133,400)
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Total
stockholders’ (deficit) equity
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(3,630,400)
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7,075,200
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Total
liabilities and stockholders’ (deficit) equity
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$8,735,500
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$14,011,700
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See accompanying notes to Condensed Consolidated Financial
Statements.
VISTAGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Unaudited)
(Amounts in dollars, except share amounts)
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Three Months Ended September 30,
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Six Months Ended September 30,
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Operating
expenses:
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Research
and development
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$4,205,200
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$5,261,100
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$8,519,100
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$8,004,800
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General
and administrative
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1,146,100
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2,171,000
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3,056,200
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3,637,300
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Total
operating expenses
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5,351,300
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7,432,100
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11,575,300
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11,642,100
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Loss
from operations
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(5,351,300)
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(7,432,100)
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(11,575,300)
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(11,642,100)
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Other
income (expenses), net:
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Interest
income (expense), net
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15,400
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(2,900)
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31,900
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(5,000)
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Loss
before income taxes
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(5,335,900)
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(7,435,000)
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(11,543,400)
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(11,647,100)
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Income
taxes
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-
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-
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(2,400)
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(2,400)
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Net
loss and comprehensive loss
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$(5,335,900)
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$(7,435,000)
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$(11,545,800)
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$(11,649,500)
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Accrued
dividend on Series B Preferred stock
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(313,800)
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(283,600)
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(616,300)
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(557,100)
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Net
loss attributable to common stockholders
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$(5,649,700)
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$(7,718,600)
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$(12,162,100)
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$(12,206,600)
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Basic
and diluted net loss attributable to common
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stockholders
per common share
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$(0.13)
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$(0.30)
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$(0.29)
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$(0.50)
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Weighted
average shares used in computing
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basic
and diluted net loss attributable to common
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stockholders
per common share
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42,622,965
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25,815,245
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42,622,965
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24,267,816
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See accompanying notes to Condensed Consolidated Financial
Statements.
VISTAGEN THERAPEUTICS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Dollars)
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Six Months Ended September 30,
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Cash
flows from operating activities:
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Net
loss
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$(11,545,800)
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$(11,649,500)
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Adjustments to reconcile net loss to net cash used in
operating activities:
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Depreciation
and amortization
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52,100
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37,900
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Stock-based
compensation
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1,456,500
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1,785,000
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Amortization
of fair value of common stock issued for services
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92,100
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207,300
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Fair
value of common stock issued for product licenses and
option
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-
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2,250,000
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Amortization
of fair value of warrants issued for services
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13,800
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25,100
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Changes
in operating assets and liabilities:
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Receivable
from supplier
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300,000
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-
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Prepaid
expenses and other current assets
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(229,200)
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365,400
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Right
of use asset - operating lease
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164,900
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-
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Operating
lease liability
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(127,100)
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-
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Accounts
payable and accrued expenses
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924,500
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(212,300)
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Deferred
rent
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-
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128,000
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Net
cash used in operating activities
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(8,898,200)
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(7,063,100)
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Cash
flows from property and investing activities:
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Construction
of tenant improvements
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-
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(169,800)
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Net
cash used in investing activities
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-
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(169,800)
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Cash
flows from financing activities:
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Net
proceeds from issuance of common stock and warrants, including
Units
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-
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4,778,700
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Proceeds
from exercise of warrants
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-
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7,500
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Repayment
of financing lease obligation
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(1,500)
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(1,300)
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Repayment
of notes payable
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(128,200)
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(98,700)
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Net
cash (used in) provided by financing activities
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(129,700)
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4,686,200
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Net
decrease in cash and cash equivalents
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(9,027,900)
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(2,546,700)
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Cash
and cash equivalents at beginning of period
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13,100,300
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10,378,300
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Cash
and cash equivalents at end of period
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$4,072,400
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$7,831,600
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Supplemental
disclosure of noncash activities:
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Insurance
premiums settled by issuing note payable
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$230,200
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$160,500
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Accrued
dividends on Series B Preferred
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$616,300
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$557,100
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See
accompanying notes to Condensed Consolidated Financial
Statements.
VISTAGEN THERAPEUTICS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
(DEFICIT) EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(Unaudited)
(Amounts in Dollars, except share amounts)
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Stockholders' |
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Balances at March 31, 2018
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500,000
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$500
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1,160,240
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$1,200
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2,318,012
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$2,300
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23,068,280
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$23,100
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$167,401,400
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$(3,968,100)
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$(156,543,800)
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$6,916,600
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Proceeds from sale of common stock and warrants for
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-
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-
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-
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-
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-
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-
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40,000
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-
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50,000
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-
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-
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50,000
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Proceeds
from exercise of warrants
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-
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-
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-
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-
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-
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-
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5,000
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-
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7,500
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-
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-
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7,500
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Accrued
dividends on Series B Preferred stock
|
-
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-
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-
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-
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-
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-
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-
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-
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(273,500)
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-
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-
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(273,500)
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Stock-based
compensation expense
|
-
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-
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-
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-
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-
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-
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-
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-
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612,600
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-
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-
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612,600
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Fair
value of common stock issued for services
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-
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-
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-
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-
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-
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-
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100,000
|
100
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122,900
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-
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-
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123,000
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|
Net
loss for the quarter ended June 30, 2018
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
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-
|
-
|
(4,214,500)
|
(4,214,500)
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|
|
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|
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Balances at June 30, 2018
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500,000
|
$500
|
1,160,240
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$1,200
|
2,318,012
|
$2,300
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23,213,280
|
$23,200
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$167,920,900
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$(3,968,100)
|
$(160,758,300)
|
$3,221,700
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Proceeds from sale of common stock and warrants for cash in private
placement offering
|
-
|
-
|
-
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-
|
-
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-
|
3,783,000
|
3,800
|
4,725,000
|
-
|
-
|
4,728,800
|
Accrued
dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
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-
|
-
|
(283,600)
|
-
|
-
|
(283,600)
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Stock-based
compensation expense
|
-
|
-
|
-
|
-
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-
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-
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-
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-
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1,172,400
|
-
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-
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1,172,400
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Fair value of common stock issued for PH94B license and PH10
option
|
-
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-
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-
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-
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-
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-
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1,630,435
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1,600
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2,248,400
|
-
|
-
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2,250,000
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Fair
value of common stock and warrants issued for services
|
-
|
-
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-
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-
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-
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-
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50,000
|
100
|
334,800
|
-
|
-
|
334,900
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net
loss for the quarter ended September 30, 2018
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,435,000)
|
(7,435,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 30, 2018
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
28,676,715
|
$28,700
|
$176,117,900
|
$(3,968,100)
|
$(168,193,300)
|
$3,989,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2019
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
42,758,630
|
$42,800
|
$192,129,900
|
$(3,968,100)
|
$(181,133,400)
|
$7,075,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(302,500)
|
-
|
-
|
(302,500)
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,063,000
|
-
|
-
|
1,063,000
|
Net
loss for the quarter ended June 30, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,209,900)
|
(6,209,900)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2019
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
42,758,630
|
$42,800
|
$192,890,400
|
$(3,968,100)
|
$(187,343,300)
|
$1,625,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(313,800)
|
-
|
-
|
(313,800)
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
393,500
|
-
|
-
|
393,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the quarter ended September 30, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,335,900)
|
(5,335,900)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 30, 2019
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
42,758,630
|
$42,800
|
$192,970,100
|
$(3,968,100)
|
$(192,679,200)
|
$(3,630,400)
|
See accompanying notes to Condensed Consolidated Financial
Statements.
VISTAGEN THERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of Business
VistaGen
Therapeutics. Inc., a Nevada corporation (which may be referred to
as VistaGen, the
Company, we, our, or us), is a clinical-stage
biopharmaceutical company committed to developing differentiated
new generation medications for central nervous system (CNS) diseases and disorders with high
unmet need. Our product candidate portfolio includes three
differentiated clinical-stage candidates, AV-101, PH10 and PH94B,
which we are developing for multiple CNS indications. We aim to
become a fully-integrated biopharmaceutical company that develops
and commercializes innovative CNS therapies for large and growing
mental health and neurology markets where current treatments are
inadequate to meet the needs of millions of patients and caregivers
worldwide.
AV-101
(4-Chlorokynurenine or 4-Cl-KYN) belongs to a new generation of
investigational medicines in neuropsychiatry and neurology known as
NMDA (N-methyl-D-aspartate) glutamate receptor modulators. The NMDA
receptor is a pivotal receptor in the brain and abnormal NMDA
function is associated with multiple CNS diseases and disorders,
including major depressive disorder (MDD), chronic neuropathic pain,
epilepsy, levodopa-induced dyskinesia and many others. AV-101 is an
oral prodrug of 7-Cl-KYNA which binds uniquely at the glycine site
of the NMDA receptor. We are developing AV-101 initially for the
treatment of MDD, a serious neurobiologically-based mood disorder
which is a leading cause of disability globally, affecting
approximately 17 million adults in the United States and nearly 300
million people worldwide according to the U.S. National Institutes
of Health (NIH). AV-101 is
currently in development in the U.S. as an adjunctive or add-on
treatment (together with current FDA-approved antidepressants
(SSRIs and SNRIs)) through the ELEVATE study, our U.S.
multi-center, randomized, double-blind, placebo-controlled Phase 2
clinical study to evaluate the efficacy and safety of adjunctive
use of AV-101 in adult MDD patients who have an inadequate response
to standard FDA-approved oral antidepressant therapy (the
ELEVATE Study). In
addition to the ELEVATE Study, we are collaborating with Baylor
College of Medicine (Baylor) and the U.S. Department of
Veterans Affairs (VA) on a
small Phase 1b clinical trial of AV-101 in healthy volunteer U.S.
Military Veterans from Operation Enduring Freedom, Operation Iraqi
Freedom or Operation New Dawn to define a dose-response
relationship between AV-101 and relevant biomarkers related to NMDA
receptor function and other biomarkers possibly related to suicidal
ideation in U.S. Military Veterans (the Baylor Study). The FDA has granted
Fast Track designation for development of AV-101 as an add-on, or
adjunctive, treatment for MDD. We believe AV-101 has potential as a
novel treatment for multiple additional CNS indications, including
as a non-opioid treatment for chronic neuropathic pain, for which
the FDA has granted a second AV-101 Fast Track designation, as well
as a novel oral therapy for dyskinesia associated with levodopa
therapy for Parkinson’s disease and suicidal
ideation.
PH10 is
a novel, rapid-acting CNS neuroactive nasal spray for MDD.
Administered in microgram doses, PH10 activates nasal chemosensory
receptors that, in turn, engage neural circuits that lead to rapid
antidepressant effects without the psychological side effects,
systemic exposure or safety concerns often associated with current
oral antidepressants and ketamine-based therapies (intravenous
ketamine or esketamine nasal spray) (KBT). In an exploratory 30-patient
Phase 2a clinical study, PH10 was well-tolerated and, at microgram
doses, demonstrated rapid-onset antidepressant effects, as measured
by the Hamilton Depression Rating Scale (HAM-D), without psychological side
effects or safety concerns. Based on positive results from this
exploratory Phase 2a study, we are planning Phase 2b clinical
development of PH10 in 2020, initially as a new stand-alone
treatment for MDD. In a manner similar to the potential of AV-101,
with its exceptional safety profile during clinical development to
date, PH10 also has potential to change the current paradigm for
treatment of treatment-resistant depression (TRD) with KBT, which must be
administered in a clinical setting, by enabling those who respond
to KBT to transition to more convenient home-based use of PH10 to
maintain the initial therapeutic benefits of
KBT.
PH94B
is also a novel, rapid-acting CNS neuroactive nasal spray
administered in microgram doses. We are initially developing PH94B
for treatment of social anxiety disorder (SAD), which affects over 20 million
Americans and, according to the NIH, is the third most common
psychiatric condition after depression and substance abuse. A
person with SAD feels symptoms of anxiety or fear in certain social
situations, such as meeting new people, dating, being on a job
interview, answering a question in class, or having to talk to a
cashier in a store. Doing everyday things in front of people - such
as eating or drinking in front of others or using a public restroom
- also causes anxiety or fear. The person is afraid that he or she
will be humiliated, judged, and rejected. The fear that
people with SAD have in social situations is so strong that they
feel it is beyond their ability to control. As a result, it gets in
the way of going to work, attending school, or doing everyday
things. People with SAD may worry about these and other things for
weeks before they happen. Sometimes, they end up staying away from
places or events where they think they might have to do something
that will embarrass them. Some people with SAD do not have
anxiety in social situations but have performance anxiety instead.
They feel physical symptoms of anxiety in performance situations,
such as giving a speech, playing a sports game, or dancing or
playing a musical instrument on stage. SAD usually starts
during youth in people who are extremely shy. Without treatment,
social anxiety disorder can last for many years or a lifetime and
prevent a person from reaching his or her full potential.
Unfortunately, SAD often predisposes to depression and substance
abuse. Only three drugs, all antidepressants, are approved by the
U.S Food and Drug Administration (FDA) specifically for treatment of
SAD. However, for treatment of both MDD and SAD, current oral
antidepressants (ADs) have
slow onset of effect (often several weeks to months) and
significant side effects that may make them inadequate treatment
alternatives for many individuals affected by MDD and
SAD.
PH94B
is fundamentally differentiated from all current treatments for
SAD. PH94B activates nasal chemosensory receptors that, in turn,
engage neural circuits that lead to rapid suppression of fear and
anxiety. In clinical studies to date, PH94B has not shown
psychological side effects, systemic exposure, sedation or other
safety concerns often associated with current antidepressants
approved by the FDA for treatment of SAD, as well as
benzodiazepines and beta blockers, which are not approved by the
FDA to treat SAD but are often prescribed for treatment of SAD
off-label. In a peer-reviewed, published double-blind,
placebo-controlled Phase 2 clinical trial, PH94B neuroactive nasal
spray was significantly more effective than placebo in reducing
public-speaking and social interaction anxiety on laboratory
challenges of individuals with SAD within 10 to 15 minutes of
self-administration. Based on its novel mechanism of
pharmacological action, rapid-onset of therapeutic effects and
exceptional safety and tolerability profile in Phase 2 clinical
trials to date, we are preparing to begin pivotal Phase 3
development of PH94B neuroactive nasal spray to become the first
FDA-approved on-demand treatment for SAD. Additional potential CNS
indications for PH94B include, general anxiety disorder
(GAD), peripartum anxiety,
preoperative anxiety, panic disorder and post-traumatic stress
disorder (PTSD).
In
addition to our current CNS product candidates, we have
pipeline-enabling programs through our wholly-owned subsidiary,
VistaStem Therapeutics (VistaStem). VistaStem is focused on
applying pluripotent stem cell (hPSC) technology to discover, rescue,
develop and commercialize proprietary new chemical entities
(NCEs) for CNS and other
diseases and regenerative medicine (RM) involving hPSC-derived blood,
cartilage, heart and liver cells. Our internal drug rescue programs
are designed to utilize CardioSafe 3D, our customized cardiac
bioassay system, to discover and develop small molecule NCEs for
our CNS pipeline or for out-licensing. To advance potential RM
applications of our cardiac stem cell technology, we have
sublicensed to BlueRock Therapeutics LP, a next generation cell
therapy and RM company recently acquired by Bayer AG (BlueRock Therapeutics), rights to
certain proprietary technologies relating to the production of
cardiac stem cells for the treatment of heart disease
(the BlueRock
Agreement). In a manner similar to the BlueRock
Agreement, we may pursue additional collaborations or licensing
transactions involving blood, cartilage, and/or liver cells derived
from hPSCs for cell-based therapy, cell repair therapy, RM and/or
tissue engineering.
Subsidiaries
As noted above, VistaStem, a California corporation, is our
wholly-owned subsidiary. Our Condensed Consolidated Financial
Statements in this Quarterly Report on Form 10-Q
(Report) also include the accounts of VistaStem and
VistaStem’s two wholly-owned inactive subsidiaries, Artemis
Neuroscience, Inc., a Maryland corporation, and VistaStem Canada,
Inc., a corporation organized under the laws of Ontario,
Canada.
Note 2. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared in accordance with accounting
principles generally accepted in the United States
(U.S.
GAAP) for interim financial
information and with the instructions to Form 10-Q and
Rule 8-03 of Regulation S-X. Accordingly, they do not contain
all of the information and footnotes required for complete
consolidated financial statements. In the opinion of management,
the accompanying unaudited Condensed Consolidated Financial
Statements reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly our interim
financial information. The accompanying Condensed Consolidated
Balance Sheet at March 31, 2019 has been derived from our audited
consolidated financial statements at that date but does not include
all disclosures required by U.S. GAAP. The operating results
for the three and six months ended September 30, 2019 are not
necessarily indicative of the operating results to be expected for
our fiscal year ending March 31, 2020, or for any other future
interim or other period.
The accompanying unaudited Condensed Consolidated Financial
Statements and notes to the Condensed Consolidated Financial
Statements contained in this Report should be read in conjunction
with our audited Consolidated Financial Statements for our fiscal
year ended March 31, 2019 contained in our Annual Report on Form
10-K, as filed with the Securities and Exchange Commission
(SEC) on June 25, 2019.
The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared assuming we will continue as a going
concern. As a clinical-stage biopharmaceutical company having not
yet developed commercial products or achieved sustainable revenues,
we have experienced recurring losses and negative cash flows from
operations resulting in a deficit of approximately $192.7 million
accumulated from inception (May 1998) through September 30, 2019.
We expect losses and negative cash flows from operations to
continue for the foreseeable future as we engage in further
development of AV-101, PH94B and PH10, execute our drug rescue
programs and pursue potential drug development and regenerative
medicine opportunities.
Since our inception in May 1998 through September 30, 2019, we have
financed our operations and technology acquisitions primarily
through the issuance and sale of our equity and debt securities for
cash proceeds of approximately $79.0 million, as well as from an
aggregate of approximately $17.7 million of government research
grant awards (excluding the fair market value of government
sponsored and funded clinical trials), strategic collaboration
payments, intellectual property sublicensing and other revenues.
Additionally, we have issued equity securities with an approximate
value at issuance of $38.1 million in noncash acquisitions of
product licenses and in settlements of certain liabilities,
including liabilities for professional services rendered to us or
as compensation for such services.
At September 30, 2019, we had cash and cash equivalents of
approximately $4.1 million. As disclosed in Note 11, Subsequent Events, since September 30,
2019, we have completed a self-placed private placement of units
consisting of unregistered shares of our common stock and warrants
to purchase unregistered shares of our common stock pursuant to
which we have received cash proceeds of $600,000 (the Fall 2019 Private
Placement). Nevertheless, we
believe that our cash position at September 30, 2019, including the
proceeds from the Fall 2019 Private Placement, considered with our
recurring and anticipated losses, negative cash flows from
operations and stockholders’ deficit make it probable, in the
absence of additional financing, that we will not have sufficient
resources to fund our planned operations for the twelve months
following the issuance of these financial statements, during which
time we plan to finalize the ELEVATE Study, prepare for and
potentially launch Phase 3 clinical trials of AV-101 and/or PH94B,
prepare for additional Phase 2 clinical studies and certain
nonclinical studies involving AV-101, PH10 and PH94B and prepare
for a Phase 2b clinical trial of PH10, and raises substantial doubt
that we can continue as a going concern. When necessary and
advantageous, we plan to raise additional capital, primarily
through the sale of our equity securities in one or more private
placements to accredited investors or in public offerings. Subject
to certain restrictions, our Registration Statement on Form S-3
(Registration No. 333-234025) (the S-3 Registration
Statement), which became
effective on October 7, 2019, is available for future sales of our
equity securities in one or more public offerings from time to
time. While we may make additional sales of our equity securities
under the S-3 Registration Statement, we do not have an obligation
to do so. As we have been in the past, we expect that, when and as
necessary, we will be successful in raising additional capital from
the sale of our equity securities either in one or more public
offerings or in one or more private placement transactions with
individual accredited investors or
institutions.
In addition to the potential sale of our equity securities, we may
also seek to enter research, development and/or commercialization
collaborations that could generate revenue or provide funding,
including non-dilutive funding, for development of AV-101, PH94B,
PH10 and/or additional product candidates. We may also seek
additional government grant awards or agreements similar to our
relationships with Baylor and the VA in connection with the Baylor
Study. Such strategic collaborations may provide non-dilutive
resources to advance our strategic initiatives while reducing a
portion of our future cash outlays and working capital
requirements. We may also pursue intellectual property arrangements
similar to the BlueRock Agreement with other parties. Although we
may seek additional collaborations that could generate revenue
and/or provide non-dilutive funding for development of AV-101,
PH94B, PH10 or other product candidates, as well as new government
grant awards and/or agreements, no assurance can be provided that
any such collaborations, awards or agreements will occur in the
future.
Our future working capital requirements will depend on many
factors, including, without limitation, the scope and nature of
opportunities related to our success and the success of certain
other companies in clinical trials, including our development and
commercialization of our current product candidates and various
applications of our stem cell technology platform, the availability
of, and our ability to obtain, government grant awards and
agreements, and our ability to enter into collaborations on terms
acceptable to us. To further advance the clinical development of
AV-101, PH94B, PH10 and, to a lesser extent, our stem cell
technology platform, as well as support our operating activities,
we plan to continue to carefully manage our routine operating
costs, including our employee headcount and related expenses, as
well as costs relating to regulatory consulting, contract research
and development, investor relations and corporate development,
legal, acquisition and protection of intellectual property, public
company compliance and other professional services and operating
costs.
Notwithstanding the foregoing, there can be no assurance that
future financings or government or other strategic collaborations
will be available to us in sufficient amounts, in a timely manner,
or on terms acceptable to us, if at all. If we are unable to obtain
substantial additional financing on a timely basis when needed in
2019 and beyond, our business, financial condition, and results of
operations may be harmed, the price of our stock may decline, we
may be required to reduce, defer, or discontinue certain of our
research and development activities and we may not be able to
continue as a going concern. As noted above, these
Condensed Consolidated Financial Statements do not include any
adjustments that might result from the negative outcome of this
uncertainty.
Note 3. Summary of Significant Accounting
Policies
Use of Estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates
include those relating to share-based compensation, right-of-use
assets and lease liabilities and assumptions that have been used
historically to value warrants and warrant modifications. With the
exception of the BlueRock Agreement pursuant to which we recorded
sublicense revenue in the third quarter of our fiscal year ended
March 31, 2017, we do not currently have, nor have we had during
the periods covered by this Report, any arrangements requiring the
recognition of revenue.
Research and Development Expenses
Research and development expenses are composed of both internal and
external costs. Internal costs include salaries and
employment-related expenses, including stock-based compensation
expense, of scientific personnel and direct project
costs. External research and development expenses
consist primarily of costs associated with clinical and
non-clinical development of AV-101, PH94B, PH10, and stem cell
research and development costs, and costs related to the
application and prosecution of patents related to those product
candidates and, to a lesser extent, our stem cell technology
platform. All such costs are charged to expense as incurred. We
also record accruals for estimated ongoing clinical trial costs.
Clinical trial costs represent costs incurred by contract research
organizations (CROs) and clinical trial sites. Progress payments are
generally made to CROs, clinical sites, investigators and other
professional service providers. We analyze the progress of the
clinical trial, including levels of subject enrollment, invoices
received and contracted costs when evaluating the adequacy of
accrued liabilities. Significant judgments and estimates must be
made and used in determining the clinical trial accrual in any
reporting period. Actual results could differ from those estimates
under different assumptions. Revisions are charged to research and
development expense in the period in which the facts that give rise
to the revision become known. Costs incurred in obtaining product
or technology licenses are charged immediately to research and
development expense if the product or technology licensed has not
achieved regulatory approval or reached technical feasibility and
has no alternative future uses. In September and October 2018, we
acquired exclusive worldwide licenses to develop and commercialize
PH94B and PH10, respectively, by issuing an aggregate of 2,556,361
unregistered shares of our common stock having an issuance-date
fair market value of $4,250,000. Since, at the date of each
acquisition, neither product candidate had achieved regulatory
approval and each will require significant additional development
and expense, we expensed the costs related to acquiring the
licenses and the option during our fiscal year ended March 31,
2019.
Stock-Based Compensation
We recognize compensation cost for all stock-based awards to
employees and non-employee consultants based on the grant date fair
value of the award. We record non-cash, stock-based
compensation expense over the period during which the employee or
other grantee is required to perform services in exchange for the
award, which generally represents the scheduled vesting
period. We have not granted restricted stock awards to
employees nor do we have any awards with market or performance
conditions. Non-cash expense attributable to compensatory
grants of stock to non-employees is determined by the quoted market
price of the stock on the date of grant and is either recognized as
fully-earned at the time of the grant or amortized ratably over the
term of the related service agreement, depending on the terms of
the specific agreement.
The table below summarizes stock-based compensation expense
included in the accompanying Condensed Consolidated Statements of
Operations and Comprehensive Loss for the three and six months
ended September 30, 2019 and 2018.
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
Research
and development expense
|
$167,500
|
$450,600
|
$558,100
|
$680,700
|
General
and administrative expense
|
226,000
|
721,800
|
898,400
|
1,104,300
|
Total
stock-based compensation expense
|
$393,500
|
$1,172,400
|
$1,456,500
|
$1,785,000
|
In May 2019, the Compensation Committee of our Board of Directors
(the Board) approved the grant of options from our 2016
Amended and Restated Stock Incentive Plan (the 2016 Plan) to purchase an aggregate of 1,220,000 shares of
our common stock at a then above-market exercise price of $1.00 per
share to the independent members of our Board, our officers and
employees and certain consultants. The options vested 25% upon
grant with the remaining shares vesting ratably over three years
for independent directors, officers and employees, and over two
years for consultants. We valued the options granted in May 2019
using the Black-Scholes Option Pricing Model and the following
weighted average assumptions:
Assumption:
|
|
Market
price per share at grant date
|
$0.80
|
Exercise
price per share
|
$1.00
|
Risk-free
interest rate
|
2.12%
|
Expected
term in years
|
5.53
|
Volatility
|
85.90%
|
Dividend
rate
|
0.0%
|
Shares
|
1,220,000
|
|
|
Fair Value per share
|
$0.54
|
Additionally, in May 2019, the Compensation Committee approved,
subject to subsequent stockholder approval at our 2019 Annual
Meeting of Stockholders (Annual
Meeting) held in September
2019, the 2019 Omnibus Equity Incentive Plan (the
2019
Plan) and designated 7.5
million shares of our authorized common stock to be reserved
thereunder. Further, in May 2019, the Compensation Committee
granted options pursuant to the 2019 Plan to one of our officers to
purchase 170,000 shares of our common stock at a then above-market
exercise price of $1.00 per share, which grant was contingent upon
the approval of the 2019 Plan by our stockholders. Our stockholders
approved the 2019 Plan at our Annual Meeting and ratified the
contingent grant. The option vested 25% upon approval of the 2019
Plan and the remaining shares vest ratably over three years. We
valued the option using the Black-Scholes Option Pricing Model and
the following assumptions:
Assumption:
|
|
Market
price per share at grant date
|
$0.84
|
Exercise
price per share
|
$1.00
|
Risk-free
interest rate
|
1.45%
|
Expected
term in years
|
5.58
|
Volatility
|
86.04%
|
Dividend
rate
|
0.0%
|
Shares
|
170,000
|
|
|
Fair Value per share
|
$0.56
|
Upon approval of the 2019 Plan by our stockholders, no further
option or other equity awards were permitted from our 2016 Plan and
all remaining authorized shares of our common stock available for
issuance under the 2016 Plan, 1,388,412 shares, became available
for issuance under the 2019 Plan.
At September 30, 2019, there were stock options outstanding under
our 2016 Plan and 2019 Plan to purchase 8,014,838 shares of our
common stock at a weighted average exercise price of $1.40 per
share. At that date, there were also 8,718,412 shares of our common
stock available for future issuance under the 2019 Plan. See Note
11, Subsequent Events, for
disclosure of additional option grants made in October
2019.
Leases, Right-of-Use Assets and Lease Liabilities
On
April 1, 2019, we adopted Financial
Accounting Standards Board (FASB) Accounting Standards Update (ASU)
No. 2016-02, Leases, which replaced the existing guidance in
Accounting Standards Codification (ASC) 840, “Leases”, and its
subsequent amendments including ASU No.
2018-11, Leases (Topic 842):
Targeted Improvements
(ASC
842) using the modified
transition method.
We
determine whether an arrangement is an operating or financing lease
at contract inception. Operating lease assets represent our right
to use an underlying asset for the lease term and operating lease
liabilities represent our obligation to make lease payments arising
from the lease. Operating lease assets and liabilities are
recognized at the commencement date of the lease based upon the
present value of lease payments over the lease term. When
determining the lease term, we include options to extend or
terminate the lease when it is reasonably certain that we will
exercise that option. In determining the present value of the lease
payments, we use the interest rate implicit in the lease when it is
readily determinable and we use our estimated incremental borrowing
rate based upon information available at the commencement date when
the implicit rate is not readily determinable.
The
lease payments used to determine our operating lease assets include
lease incentives and stated rent increases and may include
escalation or other clauses linked to rates of inflation or other
factors when determinable and are recognized in our operating lease
assets in our condensed consolidated balance sheets.
Our
operating leases are reflected in right of use asset –
operating leases, other current liabilities and non-current
operating lease liability in our condensed consolidated balance
sheets. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Short-term leases, defined
as leases that have a lease term of 12 months or less at the
commencement date, are excluded from this treatment and are
recognized on a straight-line basis over the term of the
lease.
Our
accounting for financing leases, previously referred to as
“capital leases” under prior guidance, remained
substantially unchanged with our adoption of ASC 842. Financing
leases are included in property and equipment, net and as current
and non-current financing lease liabilities in our condensed
consolidated balance sheets. Refer to “Recent Accounting
Pronouncements” below and Note 10, Commitments and Contingencies, for
additional information regarding our adoption of ASC 842 and its
impact on our condensed consolidated financial
statements.
Comprehensive Loss
We have no components of other comprehensive loss other than net
loss, and accordingly our comprehensive loss is equivalent to our
net loss for the periods presented.
Loss per Common Share
Basic net loss attributable to common stockholders per share of
common stock excludes the effect of dilution and is computed by
dividing net loss increased by the accrual of dividends on
outstanding shares of our Series B 10% Convertible Preferred Stock
(Series B Preferred),
by the weighted-average number of
shares of common stock outstanding for the period. Diluted net loss
attributable to common stockholders per share of common stock
reflects the potential dilution that could occur if securities or
other contracts to issue shares of common stock were exercised or
converted into shares of common stock. In calculating diluted net
loss attributable to common stockholders per share, we have
generally not increased the denominator to include the number of
potentially dilutive common shares assumed to be outstanding during
the period using the treasury stock method because the result is
antidilutive.
As a result of our net loss for all periods presented, potentially
dilutive securities were excluded from the computation of diluted
net loss per share, as their effect would be antidilutive.
Potentially dilutive securities excluded in determining diluted net
loss attributable to common stockholders per common share are as
follows:
|
|
|
|
|
|
|
|
Series A Preferred stock issued and
outstanding (1)
|
750,000
|
750,000
|
Series B Preferred stock issued and
outstanding (2)
|
1,160,240
|
1,160,240
|
Series C Preferred stock issued and
outstanding (3)
|
2,318,012
|
2,318,012
|
Outstanding
options under the Company's Amended and Restated 2016 (formerly
2008) Stock Incentive Plan and 2019 Omnibus Equity Incentive
Plan
|
8,014,838
|
6,160,338
|
Outstanding
warrants to purchase common stock
|
21,242,954
|
20,709,516
|
|
|
|
Total
|
33,486,044
|
31,098,106
|
____________
|
|
|
|
|
(1) Assumes exchange under the
terms of the October 11, 2012 Note Exchange and Purchase Agreement,
as amended.
|
(2) Assumes exchange under the
terms of the Certificate of Designation of the Relative Rights and
Preferences of the Series B 10% Convertible Preferred Stock,
effective May 5, 2015; excludes common shares issuable in payment
of dividends on Series B Preferred upon
conversion.
|
(3) Assumes exchange under the
terms of the Certificate of Designation of the Relative Rights and
Preferences of the Series C Convertible Preferred Stock, effective
January 25, 2016.
|
Fair Value Measurements
We do not use derivative instruments for hedging of market risks or
for trading or speculative purposes. We carried no assets or
liabilities that are measured on a recurring basis at fair value at
September 30, 2019 or March 31, 2019.
Recent Accounting Pronouncements
Except
as described below, there have been no recent accounting
pronouncements or changes in accounting pronouncements during the
six months ended September 30, 2019, as compared to the recent
accounting pronouncements described in our Form 10-K for our fiscal
year ended March 31, 2019, that are of significance or potential
significance to us.
In February 2016, the FASB issued ASU
No. 2016-02, Leases, which replaced the existing guidance in ASC 840,
“Leases”, and in July 2018, the FASB issued ASU No.
2018-11, Leases (Topic 842):
Targeted Improvements
(together, ASC 842). The new leasing standards set out the
principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract (i.e. lessees
and lessors). The new standards require lessees to apply a dual
approach, classifying leases as either finance or operating leases
based on the principle of whether or not the lease is effectively a
financed purchase by the lessee. This classification will determine
whether lease expense is recognized based on an effective interest
method or on a straight-line basis over the term of the lease,
respectively. A lessee is also required to record a right-of-use
asset and a lease liability for all leases with a term of greater
than 12 months regardless of their classification. Leases with a
term of 12 months or less will be accounted for similar to the
prior guidance for operating leases. We adopted the standards on the required effective
date of April 1, 2019 and did not restate lease expense or
lease-related assets or liabilities reported in prior comparative
periods. Presentation of our financing lease for office
equipment in the consolidated balance sheet is generally consistent
with capitalized lease presentation under the prior lease
accounting guidance. Presentation of leases within the consolidated
statements of operations and consolidated statements of cash flows
is generally consistent with the prior lease accounting guidance.
We elected the package of practical expedients permitted under the
transition guidance and, accordingly, the adoption of ASC 842 did
not change the prior classification of any of our leases. We
elected not to record a right-of-use asset or a lease liability on
the balance sheet for leases with a term of 12 months or less and
will recognize the associated lease payments in the consolidated
statements of operations over the lease term. On the April 1,
2019 adoption date, we recognized approximately $4.3 million as
total lease liabilities and $3.9 million as total right-of-use
assets in our Condensed Consolidated Balance Sheet and derecognized
a deferred rent liability of approximately $0.4 million
attributable to the operating lease of our primary office and
laboratory facilities recorded in accordance with prior
guidance.
Note 4. Prepaid Expenses and Other Current
Assets
Prepaid expenses and other current assets are composed of the
following at September 30, 2019 and March 31, 2019:
|
|
|
|
|
|
|
|
|
AV-101,
PH94B and PH10 materials and contract services
|
$357,900
|
$5,900
|
Fair
value of securities issued for professional services
|
-
|
105,900
|
Insurance
|
206,000
|
96,300
|
Public
offering filing fees and expenses
|
30,500
|
22,300
|
All
other
|
10,100
|
20,500
|
|
$604,500
|
$250,900
|
The fair value of securities issued for professional services
reflects the unamortized portion of the fair value of securities we
have issued to certain professional service providers as full or
partial compensation for services. The fair value of the securities
issued is amortized ratably over the term of the related service
agreement.
Note 5. Property and Equipment
Property and equipment is composed of the following at September
30, 2019 and March 31, 2019:
|
|
|
|
|
|
|
|
|
Laboratory
equipment
|
$892,500
|
$892,500
|
Tenant
improvements
|
214,400
|
214,400
|
Computers
and network equipment
|
54,600
|
54,600
|
Office
furniture and equipment
|
84,600
|
84,600
|
|
1,246,100
|
1,246,100
|
Accumulated
depreciation and amortization
|
(985,500)
|
(933,400)
|
Property
and equipment, net
|
$260,600
|
$312,700
|
Included in amounts reported above for office furniture and
equipment is the right-of-use asset related to a financing lease of
certain office equipment. Amounts associated with assets subject to
the financing lease at September 30, 2019 and March 31, 2019 are as
follows:
|
|
|
|
|
|
|
|
|
Office
equipment subject to financing lease
|
$14,700
|
$14,700
|
Accumulated
depreciation
|
(8,000)
|
(6,500)
|
Net
book value of office equipment subject to financing
lease
|
$6,700
|
$8,200
|
Note 6. Accrued Expenses
Accrued expenses are composed of the following at September 30,
2019 and March 31, 2019:
|
|
|
|
|
|
|
|
|
Accrued
expenses for AV-101, PH94B, and PH10
|
|
|
clinical
trial, development and related expenses
|
$2,080,700
|
$1,067,600
|
Accrued
compensation
|
-
|
439,200
|
Accrued
professional services
|
127,600
|
172,100
|
All
other
|
7,200
|
6,700
|
|
$2,215,500
|
$1,685,600
|
Note 7. Notes Payable
The following table summarizes our unsecured promissory notes at
September 30, 2019 and March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.75%
and 7.15% Notes payable
|
|
|
|
|
|
|
to
insurance premium financing company (current)
|
$159,300
|
$-
|
$159,300
|
$57,300 $
|
$-
|
$57,300
|
In May 2019, we executed a 7.15% promissory note in the principal
amount of $230,200 in connection with certain insurance policy
premiums. The note is payable in monthly installments of $23,800,
including principal and interest, through March 2020, and had an
outstanding principal balance of $139,800 at September 30, 2019. In
February 2019, we executed a 7.75% promissory note in the principal
amount of $63,500 in connection with other insurance policy
premiums. That note is payable in monthly installments of $6,600
including principal and interest, through December 2019 and had an
outstanding principal balance of $19,500 at September 30,
2019.
Note 8. Capital Stock
During the six months ended September 30, 2019, we did not engage
in any capital-raising transactions, nor did we grant any equity
securities as full or partial compensation to consultants, other
than stock options as described in Stock-Based Compensation in Note
3, Summary
of Significant Accounting Policies.
Warrants Outstanding
During the quarter ended June 30, 2019, warrants issued in private
placement transactions during calendar 2018 to purchase an
aggregate of 805,800 shares of our common stock at exercise prices
between $1.50 per share and $1.75 per share became
fully-exercisable in accordance with their terms. Accordingly, all
warrants outstanding at September 30, 2019 are now
fully-exercisable at a weighted average exercise price of $2.43 per
share as follows:
|
|
|
|
|
Average
|
Expiration
|
|
|
per Share
|
Date
|
|
|
|
|
|
$1.50
|
$1.50
|
11/30/2021
to 12/13/2022
|
14,335,200
|
$1.59 - $1.80
|
$1.67
|
2/28/2022
to 10/10/2022
|
625,619
|
$1.82
|
$1.82
|
3/7/2023
|
1,388,931
|
$2.00 - $3.51
|
$2.14
|
4/30/2021
to 10/19/2022
|
696,693
|
$5.30
|
$5.30
|
5/16/2021
|
2,705,883
|
$6.00 - $10.00
|
$7.15
|
10/11/2019
to 3/3/2023
|
1,490,628
|
|
$2.43
|
|
21,242,954
|
Of the warrants outstanding at September 30, 2019, 2,705,883 shares
of common stock underlying the warrants exercisable at $5.30 per
share issued in our May 2016 public offering, 1,388,931 shares of
common stock underlying the warrants exercisable at $1.82 per share
issued in our September 2017 public offering and 9,596,200 shares
of common stock underlying the warrants exercisable at $1.50 per
share issued in our December 2017 public offering are registered
for resale by the warrant holders. The common shares issuable upon
exercise of our remaining outstanding warrants are unregistered. At
September 30, 2019, none of our outstanding warrants are subject to
down round anti-dilution protection features and all of the
outstanding warrants are exercisable by the holders only by payment
in cash of the stated exercise price per share.
Note 9. Related Party Transactions
Cato Holding Company (CHC), doing business as Cato BioVentures
(CBV), is the parent of Cato Research Ltd.
(CRL). CRL is a contract research, development and
regulatory services organization (CRO) that we have engaged for a wide range of
material aspects related to the nonclinical and clinical
development, manufacturing and regulatory affairs associated with
our efforts to develop and commercialize AV-101 for MDD, including
our ELEVATE Study and other potential CNS indications, as well as
PH94B, PH10, and other potential product candidates. At September
30, 2019, CBV held approximately 2% of our outstanding common
stock.
In July
2017, we entered into a Master Services Agreement (MSA) with CRL, which replaced a
substantially similar May 2007 master services agreement, pursuant
to which CRL may assist us in the evaluation, development,
commercialization and marketing of our potential product
candidates, and provide regulatory and strategic consulting
services as requested from time to time. Specific projects or
services are and will be delineated in individual work orders
negotiated from time-to-time under the MSA. Under the terms of work orders issued pursuant to
the July 2017 MSA and our prior May 2007 master services agreement,
we incurred expenses of $1,610,900 and $752,200 during the quarters
ended September 30, 2019 and 2018, respectively, and $3,016,000 and
$1,603,000 for the six months ended September 30, 2019 and 2018,
respectively. At September 30, 2019 and March 31, 2019, we had
recorded accounts payable and accrued expenses related to CRL
aggregating $1,646,800 and $657,800, respectively. We anticipate
periodic expenses for CRO services from CRL related to nonclinical
and clinical development of, and regulatory affairs related to,
AV-101, PH94B, PH10 and other potential product candidates will
increase in future periods.
During our fiscal year ended March 31, 2019, we issued an
aggregate of 2,556,361 shares of our unregistered common stock
having an issue-date fair market value of $4,250,000 to Pherin
Pharmaceuticals, Inc. (Pherin) to acquire exclusive worldwide
licenses to develop and commercialize PH94B and PH10. We recorded
the acquisition of the licenses as research and development expense
during our fiscal year ended March 31, 2019. During the quarters
ended September 30, 2019 and 2018, we recorded $30,000 and $10,000,
respectively, and during the six months ended September 30, 3019
and 2018, we recorded $60,000 and $10,000 respectively,
representing monthly support payments to Pherin under the terms of
the PH94B license agreement. We recorded no amounts payable to
Pherin at September 30, 2019 or March 31, 2019. At September 30,
2019, Pherin held approximately 4% of our outstanding common
stock.
During
the six months ended September 30, 2019, we engaged the consulting
firm headed by one of the independent members of our Board to
provide various market research studies for certain of our product
pipeline candidates and recorded research and development expense
of $75,100 for the quarter ended September 30, 2019 and $102,800
for the six months ended September 30, 2019 related to such
studies. We incurred no such expenses for the three and six months
ended September 30, 2018. At September 30, 2019, we recorded
$45,000 of accrued expenses related to these studies.
Note 10. Commitments and Contingencies
Operating Leases
We lease our headquarters office and laboratory space in South San
Francisco, California under the terms of a lease that expires on
July 31, 2022 and that provides an option to renew for an
additional five years at then-current market rates. Consistent with
the guidance in ASC 842, effective beginning April 1, 2019, we have
recorded this lease in our Condensed Consolidated Balance Sheet as
an operating lease. For the purpose of determining the right-of-use
asset and associated lease liability, we determined that the
renewal of this lease is reasonably probable. The lease of our
South San Francisco facilities does not include any restrictions or
covenants requiring special treatment under ASC 842.
The following table summarizes the presentation of the operating
lease in our Condensed Consolidated Balance Sheet at September 30,
2019:
|
|
Assets
|
|
Right
of use asset – operating lease
|
$3,750,200
|
|
|
Liabilities
|
|
Current
operating lease obligation
|
$289,600
|
Non-current
operating lease obligation
|
3,879,400
|
Total
operating lease liability
|
$4,169,000
|
The following table summarizes the effect of operating lease costs
in the Company’s condensed consolidated statements of
operations:
|
For the Three Months
Ended
|
|
|
|
|
Operating
lease cost
|
$203,100
|
$411,900
|
The minimum (base rental) lease payments related to our South San
Francisco operating lease are expected to be as
follows:
Fiscal Years Ending March 31,
|
|
2020
(remaining six months)
|
$315,500
|
2021
|
645,800
|
2022
|
668,400
|
2023
|
726,000
|
2024
|
766,000
|
Thereafter
|
2,720,400
|
Total
lease expense
|
5,842,100
|
Less
imputed interest
|
(1,673,100)
|
Present
value of operating lease liabilities
|
$4,169,000
|
Under the prior lease guidance, future minimum lease payments,
under the non-cancellable portion (excluding the five-year
extension assumed under ASC 842) of the South San Francisco
operating lease were as follows at March 31, 2019:
Fiscal Years Ending March 31,
|
|
2020
|
$623,900
|
2021
|
645,800
|
2022
|
668,400
|
2023
|
225,300
|
2024
|
-
|
Thereafter
|
-
|
|
$2,163,400
|
The remaining lease term, including the assumed five-year extension
at the expiration of the current lease period, and the discount
rate assumption for our South San Francisco operating lease is as
follows:
|
|
Assumed
remaining lease term in years
|
7.84
|
Assumed
discount rate
|
8.54%
|
The interest rate implicit in lease contracts is typically not
readily determinable and, as such, we used our estimated
incremental borrowing rate based on information available at the
adoption of ASC 842, which represents an internally developed rate
that would be incurred to borrow, on a collateralized basis, over a
similar term, an amount equal to the lease payments in a similar
economic environment.
Supplemental disclosure of cash flow information related to the
Company’s operating leases included in cash flows used by
operating activities in the condensed consolidated statements of
cash flows is as follows:
|
For the Six Months
Ended
|
|
September 30, 2019
|
Cash paid for amounts
included in the measurement of lease
liabilities
|
$374,200
|
During the six months ended September 30, 2019, other than the
initial adoption of ASC 842 that required right of use assets and
lease liabilities to be recorded, we recorded no new right of use
assets arising from new lease liabilities.
We also lease a small office in the San Francisco Bay Area under a
month-to-month arrangement at insignificant cost and have made an
accounting policy election not to apply the ASC 842 operating lease
recognition requirements to such short-term lease. We recognize the
lease payments for this lease in general and administrative expense
over the lease term. We recorded rent expense of $3,500 and
$6,900 for the three and six months ended September 30, 2019,
respectively, attributable to this lease.
Note 11. Subsequent Events
We have
evaluated subsequent events through November 6, 2019 and have
identified the following matters requiring disclosure:
Grant of Options from the 2019 Plan
During October 2019, we granted options from our 2019 Plan to the
independent members of our Board, our officers and employees and
certain consultants to purchase an aggregate of 1,575,000 shares of
our common stock at an exercise price of $1.41 per share, the
quoted closing market price of our common stock on the Nasdaq
Capital Market on the grant date. The options were vested 25% at
grant with the remaining options vesting ratably over the following
24 months.
Common Stock and Warrants Issued in Fall 2019 Private
Placement
Between
October 30, 2019 and November 6, 2019, in a self-placed private
placement and pursuant to subscription agreements from accredited
investors, we sold to such investors units, at a purchase price of
$1.00 per unit, consisting of an aggregate of 600,000 unregistered
shares of our common stock and warrants, exercisable through
November 1, 2023, to purchase 300,000 unregistered shares of our
common stock at an exercise price of $2.00 per share. The
purchasers of the units have no registration rights with respect to
the shares of common stock, warrants or the shares of common stock
issuable upon exercise of the warrants comprising the units sold.
The warrants are not exercisable prior to six months and one day
following issuance.
We received aggregate cash proceeds of $600,000 from the sale of
the units.
Item 2.
|
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (Report) includes
forward-looking statements. All statements contained in this Report
other than statements of historical fact, including statements
regarding our future results of operations and financial position,
our business strategy and plans, and our objectives for future
operations, are forward-looking statements. The words
“believe,” “may,” “estimate,”
“continue,” “anticipate,”
“intend,” “expect” and similar expressions
are intended to identify forward-looking statements. We have based
these forward-looking statements largely on our current
expectations and projections about future events and trends that we
believe may affect our financial condition, results of operations,
business strategy, short-term and long-term business operations and
objectives and financial needs. These forward-looking statements
are subject to a number of risks, uncertainties and assumptions.
Our business is subject to significant risks including, but not
limited to, our ability to obtain substantial additional financing,
the results of our research and development efforts, the results of
nonclinical and clinical testing, the effect of regulation by the
U.S. Food and Drug Administration (FDA) and other agencies, the
impact of competitive products, product development,
commercialization and technological difficulties, the effect of our
accounting policies, and other risks as detailed in the section
entitled “Risk Factors” in this
Report. Further, even if our product candidates appear
promising at various stages of development, our share price may
decrease such that we are unable to raise additional capital
without significant dilution or other terms that may be
unacceptable to our management, Board of Directors (Board) and
stockholders.
Moreover, we operate in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible
for our management or Board to predict all risks, nor can we assess
the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this Report
may not occur and actual results could differ materially and
adversely from those anticipated or implied in the forward-looking
statements.
You should not rely upon forward-looking statements as predictions
of future events. The events and circumstances reflected in the
forward-looking statements may not be achieved or occur. Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are under no
duty to update any of these forward-looking statements after the
date of this Report or to conform these statements to actual
results or revised expectations. If we do update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other
forward-looking statements.
Business Overview
VistaGen Therapeutics. Inc., a Nevada corporation (which may be
referred to as VistaGen, the Company, we, our, or us), is a clinical-stage biopharmaceutical company
committed to developing differentiated new generation medications
for central nervous system (CNS) diseases and disorders with high unmet need. Our
product candidate portfolio includes three differentiated
clinical-stage candidates, AV-101, PH10 and PH94B, which we are
developing for multiple CNS indications. We aim to become a
fully-integrated biopharmaceutical company that develops and
commercializes innovative CNS therapies for large and growing
mental health and neurology markets where current treatments are
inadequate to meet the needs of millions of patients and caregivers
worldwide.
AV-101 (4-Chlorokynurenine or 4-Cl-KYN) belongs to a new generation
of investigational medicines in neuropsychiatry and neurology known
as NMDA (N-methyl-D-aspartate) glutamate receptor modulators. The
NMDA receptor is a pivotal receptor in the brain and abnormal NMDA
function is associated with multiple CNS diseases and disorders,
including major depressive disorder (MDD), chronic neuropathic pain, epilepsy,
levodopa-induced dyskinesia and many others. AV-101 is an oral
prodrug of 7-Cl-KYNA, an NMDA receptor antagonist which binds at
the glycine site of the NMDA receptor. We are developing AV-101
initially for the treatment of MDD, a serious
neurobiologically-based mood disorder which is a leading cause of
disability globally, affecting approximately 17 million adults in
the United States and nearly 300 million people worldwide according
to the U.S. National Institutes of Health (NIH). AV-101 is currently in Phase 2 development in
the U.S. as an adjunctive, or add-on, treatment (together with
current FDA-approved oral antidepressants (SSRIs and SNRIs))
through the ELEVATE study, our U.S. multi-center, randomized,
double-blind, placebo-controlled Phase 2 clinical study to evaluate
the efficacy and safety of adjunctive use of AV-101 in adult MDD
patients who have an inadequate response to standard FDA-approved
oral antidepressant therapy (the ELEVATE
Study). In addition to the
ELEVATE Study, we are collaborating with Baylor College of Medicine
(Baylor) and the U.S. Department of Veterans Affairs
(VA) on a small Phase 1b clinical trial of AV-101 in
healthy volunteer U.S. Military Veterans from Operation Enduring
Freedom, Operation Iraqi Freedom or Operation New Dawn
(the Baylor
Study). The FDA has granted
Fast Track designation for development of AV-101 as an adjunctive,
treatment for MDD. We believe AV-101 has potential as a novel
treatment for multiple additional CNS indications, including as a
non-opioid treatment for chronic neuropathic pain, for which the
FDA has granted a second AV-101 Fast Track designation, as well as
a novel oral therapy for dyskinesia associated with levodopa
therapy for Parkinson’s disease and suicidal
ideation.
PH10 is
a novel, rapid-acting CNS neuroactive nasal spray for MDD.
Administered in microgram doses, PH10 activates nasal chemosensory
receptors that, in turn, engage neural circuits that lead to rapid
antidepressant effects without the psychological side effects,
systemic exposure or safety concerns often associated with current
oral antidepressants and ketamine-based therapies (intravenous
ketamine or esketamine nasal spray) (KBT). In an exploratory 30-patient
Phase 2a clinical study, PH10 was well-tolerated and, at microgram
doses, demonstrated rapid-onset and sustained antidepressant
effects, as measured by the Hamilton Depression Rating Scale
(HAM-D), without
psychological side effects or safety concerns often associated with
KBT. Based on positive results from this exploratory Phase 2a
study, we are preparing for Phase 2b clinical development of PH10
in late-2020, initially as a new stand-alone treatment for MDD. In
a manner similar to the potential of AV-101, with its exceptional
safety profile during clinical development to date, PH10 also has
potential to change the current paradigm for treatment of
treatment-resistant depression (TRD) with KBT, which must be
administered in a clinical setting, by enabling those who respond
to such therapy to transition to more convenient home-based
administration of PH10 to maintain the therapeutic benefits of
KBT.
PH94B
is also a first-in-class, rapid-acting CNS neuroactive nasal spray
administered in microgram doses. We are initially developing PH94B
initially for treatment of social anxiety disorder (SAD), which affects over 20 million
Americans and, according to the NIH, is the third most common
psychiatric condition after depression and substance abuse. A
person with SAD feels symptoms of anxiety or fear in certain social
situations, such as meeting new people, dating, being on a job
interview, answering a question in class, or having to talk to a
cashier in a store. Doing everyday things in front of people - such
as eating or drinking in front of others or using a public restroom
- also causes anxiety or fear. The person is afraid that he or she
will be humiliated, judged, and rejected. The fear that
people with SAD have in social situations is so strong that they
feel it is beyond their ability to control. As a result, it gets in
the way of going to work, attending school, or doing everyday
things. People with SAD may worry about these and other things for
weeks before they happen. Sometimes, they end up staying away from
places or events where they think they might have to do something
that will embarrass them. Some people with SAD do not have
anxiety in social situations but have performance anxiety instead.
They feel physical symptoms of anxiety in performance situations,
such as giving a speech, playing a sports game, or dancing or
playing a musical instrument on stage. SAD usually starts
during youth in people who are extremely shy. Without treatment,
social anxiety disorder can last for many years or a lifetime and
prevent a person from reaching his or her full
potential.
PH94B
is fundamentally differentiated from all current treatments for
SAD. PH94B activates nasal chemosensory receptors that, in turn,
engage neural circuits that lead to rapid suppression of fear and
anxiety. In clinical studies to date, PH94B has not shown
psychological side effects, systemic exposure, sedation or other
safety concerns often associated with current antidepressants
approved by the FDA for treatment of SAD, as well as
benzodiazepines and beta blockers, which are not approved by the
FDA to treat SAD but are often prescribed for treatment of SAD
off-label. In a peer-reviewed, published double-blind,
placebo-controlled Phase 2 clinical trial, PH94B neuroactive nasal
spray was significantly more effective than placebo in reducing
social interaction and public speaking anxiety on laboratory
challenges of individuals with SAD within 10 to 15 minutes of
self-administration. Based on its novel mechanism of
pharmacological action, rapid-onset of therapeutic effects and
exceptional safety and tolerability profile in Phase 2 clinical
trials to date, we are preparing to begin pivotal Phase 3
development of PH94B neuroactive nasal spray to become the first
FDA-approved as-needed, on-demand treatment for SAD. Additional
potential CNS indications for PH94B include, general anxiety
disorder (GAD), peripartum
anxiety, preoperative anxiety, panic disorder and post-traumatic
stress disorder (PTSD).
In
addition to our current CNS product candidates, we have
pipeline-enabling programs through our wholly-owned subsidiary,
VistaStem Therapeutics (VistaStem). VistaStem is focused on
applying pluripotent stem cell (hPSC) technology to discover, rescue,
develop and commercialize proprietary new chemical entities
(NCEs) for CNS and other
diseases and regenerative medicine (RM) involving hPSC-derived blood,
cartilage, heart and liver cells. Our internal drug rescue programs
are designed to utilize CardioSafe 3D, our customized cardiac
bioassay system, to discover and develop small molecule NCEs for
our CNS pipeline or for out-licensing. To advance potential RM
applications of our cardiac stem cell technology, we have
sublicensed to BlueRock Therapeutics LP, a next generation cell
therapy and RM company recently acquired by Bayer AG (BlueRock Therapeutics), rights to
certain proprietary technologies relating to the production of
cardiac stem cells for the treatment of heart disease
(the BlueRock
Agreement). In a manner similar to the BlueRock
Agreement, we may pursue additional collaborations or licensing
transactions involving blood, cartilage, and/or liver cells derived
from hPSCs for cell-based therapy, cell repair therapy, RM and/or
tissue engineering.
Financial Operations Overview and Results of
Operations
Our critical accounting policies and estimates and recent
accounting pronouncements are disclosed in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2019, as filed with
the SEC on June 25, 2019, and in Note 3 to the accompanying
unaudited Condensed Consolidated Financial Statements included in
Part 1, Item 1 of this Report.
Summary
Net Loss
We have
not yet achieved recurring revenue-generating status from any of
our product candidates or technologies. Since inception, we have devoted substantially all
of our time and efforts to developing our initial CNS product
candidate, AV-101, from early nonclinical studies to our ongoing
Phase 2 clinical development program in MDD, including the ELEVATE
Study. In addition, we have devoted resources to stem cell
technology research and development, bioassay development and small
molecule drug development, as well as creating, protecting and
patenting intellectual property (IP) related to our product candidates and
technologies, with the corollary initiatives of recruiting and
retaining personnel and raising working capital. As disclosed
above, during our fiscal year ended March 31, 2019, we acquired the
rights to develop and commercialize PH94B and PH10 and are actively
pursuing initiatives to advance their nonclinical and clinical
development. As of September 30, 2019, we had an accumulated
deficit of approximately $192.7 million. Our net loss for the six
months ended September 30, 2019 and 2018 was approximately $11.5
million and $11.6 million, respectively, including $2.25 million in
non-cash expense in 2018 for the acquisition of the PH94B license
and the option to acquire a similar license for PH10. We expect
losses to continue for the foreseeable future, as we finalize our
ELEVATE Study, pursue further clinical development of AV-101 for
the adjunctive treatment of MDD, PH94B for SAD, PH10 for MDD, and
for additional CNS indications with respect to each of these drug
candidates.
Summary of the Six Months Ended September 30, 2019
During
the six months ended September 30, 2019, we continued to (i)
advance nonclinical development, including manufacturing, and
clinical development of AV-101 as a potential new generation
antidepressant and as a potential new therapeutic alternative for
several CNS indications with significant unmet need, (ii) advance
the nonclinical, including manufacturing, and regulatory
initiatives necessary to facilitate Phase 3 clinical development of
PH94B for SAD and Phase 2 clinical development of PH10 for MDD,
(iii) expand the regulatory and intellectual property foundation to
support broad clinical development and, ultimately,
commercialization of AV-101 in the U.S. and foreign markets, and
(iv) on a limited basis, advance drug rescue applications of our
stem cell technology to further expand our CNS
pipeline.
In
particular, during the six months ended September 30, 2019, we
continued to conduct the ELEVATE Study, for which the final patient
was dosed at the end of September 2019, produced supplies of
AV-101, and conducted and/or initiated certain Phase 3-enabling
nonclinical studies involving AV-101.
Pursuant
to our Material Transfer Cooperative Research and Development
Agreement with the VA and our arrangements with Baylor, Baylor has
recently completed dosing of healthy volunteer U.S. Military
Veterans in the Baylor Study to define a dose-response relationship
between AV-101 and relevant biomarkers related to NMDA receptor
function and other biomarkers possibly related to suicidal ideation
in U.S. Military Veterans.
We continue to pursue initiatives to secure a broad
portfolio of patent protection for AV-101 that covers the treatment
of multiple CNS indications, unit dose formulations of AV-101
effective to treat depression, and chemical synthesis methods. With
respect to CNS treatments, we obtained patents in several countries
for the treatment of depression and we are pursuing patent
applications related to treatment of levodopa-induced dyskinesias,
certain types of neuropathic pain, tinnitus and
obsessive-compulsive disorder. Additional patent applications to
other aspects of prognostic testing and treatment using AV-101 are
under consideration.
Over
the recent and current fiscal years, we have pursued patent
applications in the U.S., Australia, China, Europe, Japan and other
selected countries and regions with significant commercial
potential. Several of these patent applications, including a patent
for treatment of MDD with AV-101 granted in Australia, were
recently allowed or have been granted in the U.S. and other major
pharmaceutical markets. Based on patent issuances or allowances
to-date in several countries, we believe that pending counterpart
patent applications related to AV-101 currently under review in
other countries also are likely to be granted, although there can
be no assurance that all pending applications will ultimately be
granted.
We
have an exclusive license from Pherin to its portfolio of patent
assets around PH94B, under clinical development for the treatment
of SAD. Patents have issued in several countries, including the
U.S., Australia, Canada, China, Europe, Japan, Korea and
Mexico.
We
also have an exclusive license from Pherin to its portfolio of
patent assets around PH10, under clinical development for the
treatment of depressive disorders. Patents in this portfolio have
issued in the U.S., Australia, China, Europe, Japan and Hong Kong.
Applications are pending in Canada, Korea and Mexico.
As with AV-101, we plan to seek regulatory exclusivity in
countries where this is available for the therapeutic use of PH94B,
with initial emphasis on treating SAD as our lead indication, and
for the therapeutic use of PH10, with our lead indication being the
treatment of MDD.
We have obtained and are pursuing patent rights to the production
of several types of stem cells and cells differentiated from those
stem cells, including cardiomyocytes, hematopoietic cells,
chondrocytes, cartilage cells and hepatocytes, as well as the use
of certain cell types that have been differentiated from
pluripotent stem cells for therapeutic purposes, including
cell-based therapy and regenerative medicine.
Subsequent
to the completion of our public offering of common stock in
February 2019, which generated $11.5 million in gross proceeds to
us, we have not completed any additional financing transactions
during the six months ended September 30, 2019. As a matter of
course, we continue to minimize, to the greatest extent possible,
cash commitments and expenditures for both internal and external
research and development and general and administrative services.
To further advance the nonclinical and
clinical development of AV-101, PH94B, PH10 and our stem cell
technology platform, as well as support our operating activities,
we continue to carefully manage our routine operating costs,
including our internal employee related expenses, as well as
external costs relating to regulatory consulting, contract research
and development, investor relations and corporate development,
legal, acquisition and protection of intellectual property, public
company compliance and other professional services and internal
costs.
Results of Operations
Comparison of Three Months Ended September 30, 2019 and
2018
The following table summarizes the results of our operations for
the three months ended September 30, 2019 and 2018 (amounts in
thousands).
|
Three Months Ended September 30,
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
Research
and development
|
$4,205
|
$5,261
|
General
and administrative
|
1,146
|
2,171
|
Total
operating expenses
|
5,351
|
7,432
|
|
|
|
Loss
from operations
|
(5,351)
|
(7,432)
|
|
|
|
Interest
income (expense), net
|
15
|
(3)
|
|
|
|
Loss
before income taxes
|
(5,336)
|
(7,435)
|
Income
taxes
|
-
|
-
|
|
|
|
Net
loss
|
(5,336)
|
(7,435)
|
Accrued
dividend on Series B Preferred Stock
|
(314)
|
(284)
|
Net
loss attributable to common stockholders
|
$(5,650)
|
$(7,719)
|
Revenue
We reported no revenue for either the quarter ended September 30,
2019 or September 30, 2018 and we presently have no recurring
revenue generating arrangements with respect to AV-101, PH94B, PH10
or other potential product candidates. While we may potentially
receive payments or royalties in the future under our December 2016
BlueRock Agreement, which has been assumed by Bayer in connection
with its acquisition of BlueRock, in the event certain
performance-based milestones and commercial sales are achieved,
there can be no assurance that the BlueRock Agreement will provide
revenue to us in the near term or at all.
Research and Development Expense
Research and development expense decreased from $5.3 million to
$4.2 million for the quarters ended September 30, 2019 and 2018,
respectively. Expense for the quarter ended September 30, 2018
included $2.25 million noncash expense associated with the
acquisition of our license to develop and commercialize PH94B and
an option to acquire a similar license for PH10, which was
subsequently exercised. While this expense did not recur in the
quarter ended September 30, 2019, we incurred increased expenses
for the ELEVATE Study and various AV-101 nonclinical activities,
including manufacturing additional quantities of AV-101 and other
developmental studies, as well as nonclinical activities, including
manufacturing, supporting the continuing development of PH94B and
PH10. Additional noncash expenses included in research and
development expense (excluding the noncash PH94B license and PH10
option acquisition in 2018), primarily stock-based compensation and
depreciation, accounted for approximately $190,000 and $474,000 in
the quarters ended September 30, 2019 and 2018, respectively. The
following table indicates the primary components of research and
development expense for each of the periods (amounts in
thousands):
|
Three Months Ended September 30,
|
|
|
|
|
|
|
Salaries
and benefits
|
$343
|
$656
|
Stock-based
compensation
|
167
|
451
|
Consulting
and other professional services
|
188
|
29
|
Technology
licenses and royalties
|
142
|
129
|
Project-related
research and supplies:
|
|
|
ELEVATE
Study and other AV-101 expenses
|
2,521
|
1,607
|
PH94B
and PH10 license and other expenses
|
670
|
2,250
|
Stem
cell and all other
|
30
|
23
|
|
3,221
|
3,880
|
Rent
|
132
|
104
|
Depreciation
|
12
|
12
|
Total
Research and Development Expense
|
$4,205
|
$5,261
|
Salaries and benefits expense reported for the quarter ended
September 30, 2018 includes a total of approximately $319,000 for
bonus payments made to our Chief Medical Officer
(CMO), Chief Scientific Officer (CSO) and members of our scientific staff during the
quarter based on achievement of goals and objectives for the fiscal
year ended March 31, 2018. Partially offsetting the absence of a
comparable bonus amount in the quarter ended September 30, 2019 is
the impact of salary increases granted to our CMO, CSO and members
of our scientific staff effective in April 2019. Bonuses based on
the achievement of goals and objectives for the fiscal year ended
March 31, 2019 were accrued during that fiscal year and had no
expense impact during the quarter ended September 30,
2019.
Stock-based compensation expense reflects the amortization of
option grants made to our CSO, CMO, scientific staff and certain
consultants since June 2016, all earlier outstanding grants having
become fully vested and amortized. Grants awarded after September
30, 2018 account for approximately $39,000 of expense in the
quarter ended September 30, 2019. Stock-based compensation expense
for the quarter ended September 30, 2018 included (i) the impact of
new options granted to our CMO, CSO, and members of our scientific
staff in early August 2018 which options were 25% vested upon grant
and vest ratably until becoming fully-vested within two years
thereafter, and (ii) the modification in late August 2018 of
outstanding options held by our CMO, CSO and members of our
scientific staff having exercise prices over $1.56 per share to
reduce the exercise price to $1.50 per share, resulting in
approximately $265,000 of expense attributable to the new option
grants and modifications, including immediate recognition of
$104,000 attributable to the modification of exercise prices.
Expense attributable to recent option grants is generally being
amortized over two-year to three-year vesting periods, with
one-quarter of the grants made in August 2018 and May 2019 being
immediately vested and expensed upon grant, in accordance with the
terms of the respective grants.
Consulting services reflects fees paid or accrued for scientific,
nonclinical and clinical development and regulatory advisory
services rendered to us by third parties, in 2018, primarily by
members of our Scientific Advisory Board and CNS Clinical and
Regulatory Advisory Board. The increase in 2019 expense also
reflects consulting and analytical services in support of our PH94B
and PH10 initiatives.
Technology license expense reflects both recurring annual license
fees, as well as legal counsel and other costs related to patent
prosecution and protection pursuant to our stem cell technology
license agreements or that we have elected to pursue for commercial
purposes. We recognize these costs as they are invoiced to us by
the licensors or counsel and they do not occur ratably throughout
the year or between years. In both periods, this expense includes
legal counsel and other costs we have incurred to advance various
patent applications in the U.S. and numerous foreign countries with
respect to AV-101 and our stem cell technology platform. Support of
the intellectual property portfolios of PH94B and PH10 contributed
only nominally to this expense in 2019.
AV-101 project expense for each of the quarters presented primarily
reflects the costs of conducting the ELEVATE Study, including
various CRO, investigator and clinical site costs, as well as
expense incurred to manufacture additional quantities of AV-101 for
use in future Phase 3-enabling nonclinical trials and clinical
development of AV-101 for MDD and other potential CNS indications.
In addition to increased ELEVATE Study costs in 2019, we have
incurred further costs associated with various Phase 3-enabling
initiatives and nonclinical studies.
Project expenses for the quarter ended September 30, 2019 related
to PH94B and PH10 primarily reflect manufacturing and regulatory
initiatives necessary to facilitate pivotal Phase 3 clinical
development of PH94B for SAD and to facilitate Phase 2 development
of PH10 for MDD. As disclosed earlier, noncash expense of $2.25
million in 2018 related to the acquisition of the PH94B license and
PH10 option and represents the fair value of an aggregate of
1,630,435 unregistered shares of our common stock issued to Pherin
in September 2018 under the terms of the license and option
agreements.
Stem cell and other project related expenses reflects costs
associated with drug rescue applications of our stem cell
technology in both years.
The increase in rent expense reflects our implementation of ASC 842
effective April 1, 2019 and the requirement to recognize, as an
operating lease, a right-of-use asset and a lease liability, both
of which must be amortized over the expected lease term, for our
South San Francisco office and laboratory facility lease. The
underlying lease reflects commercial property rents prevalent in
the South San Francisco real estate market at the time of our
November 2016 lease amendment extending the lease of our
headquarters facilities in South San Francisco by five years from
July 31, 2017 to July 31, 2022. In implementing ASC 842, we also
projected that we would exercise a five-year option to extend our
tenancy under the lease when it expires in 2022, which extension
would be subject to market rent conditions at that time. We
allocate total rent expense for our South San Francisco facility
between research and development expense and general and
administrative expense based generally on square footage dedicated
to each function. Refer to Note 10, Commitments and
Contingencies, in the
accompanying Condensed Consolidated Financial Statements in Part I
of this Report for additional information.
General and Administrative Expense
General and administrative expense decreased to approximately $1.1
million, from approximately $2.2 million for the quarters ended
September 30, 2019 and 2018, respectively. Noncash expense,
$272,000 in the quarter ended September 30, 2019, decreased from
$792,000 in the quarter ended September 30, 2018 primarily due to
decreases in stock-based compensation and noncash components of
investor and public relations expenses, while cash-based salaries
and benefits decreased by $426,000. The following table indicates
the primary components of general and administrative expense for
each of the periods (amounts in thousands):
|
Three Months Ended September 30,
|
|
|
|
|
|
|
Salaries
and benefits
|
$340
|
$766
|
Stock-based
compensation
|
226
|
722
|
Board
fees
|
46
|
39
|
Legal,
accounting and other professional fees
|
90
|
105
|
Investor
and public relations
|
197
|
313
|
Insurance
|
88
|
71
|
Travel
expenses
|
6
|
39
|
Rent
and utilities
|
87
|
72
|
All
other expenses
|
66
|
44
|
|
$1,146
|
$2,171
|
Salaries and benefits expense reported for the quarter ended
September 30, 2018 includes a total of approximately $435,000 for
bonus payments made to our Chief Executive Officer
(CEO), Chief Financial Officer (CFO), Vice President-Corporate Development
(VP
Corporate Development) and a
non-officer member of our administrative staff during the quarter
based on achievement of goals and objectives for the fiscal year
ended March 31, 2018. Partially offsetting the absence of a
comparable bonus amount in the quarter ended September 30, 2019 is
the impact of salary increases granted to our CEO, CFO,
VP-Corporate Development and a member of our administrative staff
effective in April 2019. Bonuses based on the achievement of goals
and objectives for the fiscal year ended March 31, 2019 were
accrued during that fiscal year and had no expense impact during
the quarter ended September 30, 2019.
Stock-based compensation expense reflects the amortization of
option grants made to our CEO, CFO, VP Corporate Development,
administrative staff, independent members of our Board and certain
consultants since June 2016, all earlier grants having become fully
vested and amortized. Grants awarded after September 30, 2018
account for approximately $89,000 of the expense in the quarter
ended September 30, 2019. Stock-based compensation expense for the
quarter ended September 30, 2018 included (i) the impact of new
options granted to our CEO, CFO, VP-Corporate Development and a
member of our administrative staff in early August 2018 which
options were 25% vested upon grant and vest ratably until becoming
fully-vested within two years thereafter, and (ii) the modification
in late August 2018 of outstanding options held by our CEO, CFO,
VP-Corporate Development and a member of our administrative staff
having exercise prices over $1.56 per share to reduce the exercise
price to $1.50 per share, resulting in approximately $459,000 of
expense attributable to the new option grants and modifications,
including immediate recognition of $154,000 attributable to the
modification of exercise prices. Expense attributable to recent
option grants is generally being amortized over two-year to
three-year vesting periods, with one-quarter of the grants made in
August 2018, January 2019, May 2019 and September 2019 being
immediately vested and expensed upon grant, in accordance with the
terms of the respective grants.
Board fees represents fees paid as consideration for the Board and
Board Committee services to the independent members of our Board.
The 2019 increase reflects the addition of a new independent member
to our Board in January 2019.
Legal, accounting and other professional fees for the quarters
ended September 30, 2019 and 2018 includes expense related to
routine legal fees as well as the accounting expense related to the
quarterly review of our financial statements. In 2019 and 2018, we
also incurred $30,000 and $3,000, respectively, attributable to
services provided by international business development
consultants.
Investor and public relations expense includes the fees of our
various external service providers for a broad spectrum of investor
relations and public relations services, and well as market
awareness and strategic advisory and support functions and
initiatives that included numerous meetings in multiple U.S.
markets and other communication activities focused on expanding
market awareness of the Company and its research and development
programs, including among registered investment professionals and
investment advisors, and individual and institutional investors. In
the quarter ended September 30, 2019, in addition to cash fees and
expenses we incurred for such activities, we recognized
approximately $26,000 of noncash expense attributable to the
amortization of the fair value of stock and warrants granted in the
prior fiscal year to various corporate development, investor
relations, and market awareness service providers. At September 30,
2019, the fair value of the securities granted has been fully
amortized. In the quarter ended September 30, 2018, in addition to
cash fees and expenses we incurred, we granted an aggregate of
50,000 unregistered shares of our common stock and four-year
warrants to purchase an aggregate of 288,000 unregistered shares of
our common stock having an aggregate fair value of approximately
$336,000 to various corporate development, investor relations, and
market awareness service providers and recognized non-cash expense
of approximately $65,000. The balance of the fair value of the
securities granted was recorded as a prepaid expense at September
30, 2018 and was amortized over the remaining period of the
respective contracts.
In both periods, travel expense reflects costs associated with
management presentations and meetings held in multiple U.S.
markets, and certain international markets in 2019, with existing
and potential individual and institutional investors, investment
professionals and advisors, media, and securities analysts, as well
as various investor relations, market awareness and corporate
development and partnering initiatives and in monitoring the
progress of our ELEVATE Study in both years.
The increase in rent expense reflects our implementation of ASC 842
effective April 1, 2019 and the requirement to recognize, as an
operating lease, a right-of-use asset and a lease liability, both
of which must be amortized over the expected lease term, for our
South San Francisco office and laboratory facility lease. The
underlying lease reflects commercial property rents prevalent in
the South San Francisco real estate market at the time of our
November 2016 lease amendment extending the lease of our
headquarters facilities in South San Francisco by five years from
July 31, 2017 to July 31, 2022. In implementing ASC 842, we also
projected that we would exercise a five-year option to extend our
tenancy under the lease when it expires in 2022, which extension
would be subject to market rent conditions at that time. We
allocate total rent expense for our South San Francisco facility
between research and development expense and general and
administrative expense based generally on square footage dedicated
to each function. Refer to Note 10, Commitments and
Contingencies, in the
accompanying Condensed Consolidated Financial Statements in Part I
of this Report for additional information.
Interest and Other Expenses
Interest income, net of interest expense, totaled $15,400 for the
quarter ended September 30, 2019 compared to interest expense of
$2,900 for the quarter ended September 30, 2018. The following
table indicates the primary components of interest income and
expense for each of the periods (amounts in
thousands):
|
Three Months Ended September 30,
|
|
|
|
|
|
|
Interest
income
|
$19
|
$-
|
Interest
expense on premium financing and capital lease (2018)
|
(4)
|
(3)
|
Interest
income (expense), net
|
$15
|
$(3)
|
Following
the completion of our public offering in February 2019, which
generated $11.5 million in gross proceeds to us, during the current
fiscal year, we deposited a portion of the proceeds in
interest-bearing cash equivalent accounts and earned interest
income. Interest expense in both
periods relates to interest paid on insurance premium financing
notes and on a lease of office equipment treated as a capitalized
lease in 2018 and as a financing lease subject to ASC 842 in
2019.
We
recognized $313,800 and $283,600 for
the quarters ended September 30, 2019 and 2018, respectively,
representing the 10% cumulative dividend payable on outstanding
shares of Series B Preferred as an additional deduction in arriving
at net loss attributable to common stockholders in the
accompanying Condensed Consolidated Statement of Operations and
Comprehensive Loss included in Part I of this Report. There have
been no conversions of outstanding shares of Series B Preferred
stock into shares of our common stock since August
2016.
Comparison of Six Months Ended September 30, 2019 and
2018
The following table summarizes the results of our operations for
the six months ended September 30, 2019 and 2018 (amounts in
thousands).
|
Six Months Ended September 30,
|
|
|
|
|
|
|