Quarterly report pursuant to Section 13 or 15(d)

Common Stock

v2.4.0.6
Common Stock
9 Months Ended
Dec. 31, 2011
Common Stock [Text Block]
7.  Capital Stock
 
On April 29, 2011, the Company issued 157,143 shares of its common stock at a per share price of $1.75 as a prepayment for CRO services to be performed by CRL during 2011.
 
In December 2010, the Company agreed to issue 700,000 shares of common stock, valued at $1.50 per share, related to its execution of the second amendment to its SRCA with UHN as described in Note 6, Licensing and Collaborative Agreements .  Such shares were issued in May 2011. In April 2011, the Company agreed to issue to UHN 100,000 shares of its common stock valued at $1.75 per share in conjunction with its execution of the third amendment to the SRCA, as also described in Note 6.  Such shares were issued in May 2011.
 
On May 10, 2011, the Company issued 75,000 shares of common stock, valued at $1.75 per share, to a strategic consultant for services rendered.
 
2011 Private Placement
 
On May 11, 2011, and immediately preceding the closing of the Merger, VistaGen sold 2,216,106 Units in a private placement for aggregate gross offering proceeds of $3,878,197, including $2,369,194 in cash, a $500,000 short-term note receivable due on September 6, 2011, cancellation of $840,000 of short-term notes maturing on April 30, 2011, a note cancellation premium of $94,500, and cancellation of $74,503 of accounts payable (“2011 Private Placement”).  The Units were sold for $1.75 per Unit and consisted of one share of common stock and a three-year warrant to purchase one-fourth (1/4) of one share of common stock at an exercise price of $2.50 per share.  Warrants to purchase a total of 554,013 shares of common stock were issued to the purchasers of the Units.  Concurrently, VistaGen issued to its placement agent three-year warrants to purchase 114,284 shares of its common stock at $2.50 per share, and agreed to pay $200,000 in placement agent fees, $150,000 of which amount was paid on May 11, 2011.
 
In October 2011, the Company restructured the terms of the $500,000 short term promissory note received in conjunction with the 2011 Private Placement.  The note currently bears interest at 5% per annum.  The maturity date has been extended to September 1, 2012 and the revised terms require payments to the Company as follows:
 
  (a) one payment of $50,000 on or before October 31, 2011;
  (b) nine payments of $50,000 on or before the first day of each month commencing December 1, 2011 and ending August 1, 2012; and 
  (c) one final payment equal to the remaining balance of principal and interest due on or before September 1, 2012.
 
The outstanding principal balance of the note receivable at December 31, 2011 is $400,000.  
 
Conversion of Convertible Promissory Notes
 
On May 11, 2011, concurrent with the Merger, holders of certain promissory notes issued by VistaGen from 2006 through 2010 converted their notes totaling aggregate principal and interest of $6,174,793 into 3,528,290 Units.  These Units were the same Units issued in connection with the 2011 Private Placement.   
 
Conversion of Preferred Stock
 
On May 11, 2011, concurrent with the Merger, all holders of VistaGen's then-outstanding preferred stock converted all of their preferred shares into 2,884,655 shares of common stock so that, at the completion of the Merger, the Company had no shares of preferred stock outstanding.
 
Changes in Amounts of Capital Stock Authorized
 
Effective with the Merger, the Company was authorized to issue up to 400,000,000 shares of common stock, $0.001 par value and no shares of preferred stock.  On October 28, 2011, the Company held a special meeting of its stockholders at which the stockholders approved a proposal to amend the Company’s Articles of Incorporation to (1) reduce the number of shares of common stock the Company is authorized to issue from 400,000,000 shares to 200,000,000 shares; (2) authorize the Company to issue up to 10,000,000 shares of preferred stock; and (3) authorize the Company’s Board of Directors to prescribe the classes, series and the number of each class or series of preferred stock and the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of preferred stock.
 
Series A Preferred Stock
 
In December 2011, the Company’s Board of Directors authorized the creation of a series of up to 500,000 shares of Series A Preferred Stock, par value $0.001 (“Series A Preferred”).  Each share of Series A Preferred is convertible at the option of the holder into ten shares of the Company's common stock.  The Series A Preferred ranks prior to the common stock for purposes of liquidation preference.
 
The Series A Preferred has no separate dividend rights.  However, whenever the Board of Directors declares a dividend on the common stock each holder of record of a share of Series A Preferred, or any fraction of a share of Series A Preferred, on the date set by the Board of Directors to determine the owners of the common stock of record entitled to receive such dividend (the "Record Date") shall be entitled to receive out of any assets at the time legally available therefore, an amount equal to such dividend declared on one share of common stock multiplied by the number of shares of common stock into which such share, or such fraction of a share, of Series A Preferred could be converted on the Record Date.
 
Except with respect to transactions upon which the Series A Preferred shall be entitled to vote separately as a class, the Series A Preferred has no voting rights. The common stock into which the Series A Preferred is convertible shall, upon issuance, have all of the same voting rights as other issued and outstanding shares of the Company’s common stock.
 
In the event of the liquidation, dissolution or winding up of the affairs of the Company, after payment or provision for payment of the debts and other liabilities of the Company, the holders of Series A Preferred then outstanding shall be entitled to receive, out of the assets of the Company, an amount per share of Series A Preferred calculated by taking the total amount available for distribution to holders of all the Company's outstanding common stock before deduction of any preference payments for the Series A Preferred, divided by the total of (x), all of the then outstanding shares of the Company's common stock, plus (y) all of the shares of the Company's common stock into which all of the outstanding shares of the Series A Preferred can be converted before any payment shall be made or any assets distributed to the holders of the common stock or any other junior stock.
 
At December 31, 2011, there were 437,055 shares of Series A Preferred outstanding, all issued to Platinum under the terms of the Note and Warrant Exchange Agreement described in Note 5 and the Common Stock Exchange Agreement, described below.
 
Common Stock Exchange Agreement with Platinum
 
On December 22, 2011, the Company entered into a Common Stock Exchange Agreement (the "Exchange Agreement") with Platinum, pursuant to which Platinum converted 484,000 shares of the Company’s common stock into 45,980 shares of the newly created Series A Preferred (the "Exchange").  Each share of Series A Preferred issued to Platinum is convertible into ten shares of the Company’s common stock.  In consideration for the Exchange, the Series A Preferred received by Platinum in connection with the Exchange is convertible into the equivalent of 0.95 shares of common stock surrendered in connection with the Exchange.  The Company has determined the fair value of the common stock subject to the Exchange to be $1.55 per share and has reflected the 484,000 common shares as treasury stock on that basis in the accompanying Condensed Consolidated Balance Sheet at December 31, 2011.
 
Fall 2011 Follow-On Offering
 
Beginning in October 2011, the Company initiated a follow-on private placement of Units.  These Units were essentially the same as the Units issued in connection with the 2011 Private Placement, namely, each Unit was priced at $1.75 and consisted of one share of the Company’s common stock and a three-year warrant to purchase one-fourth (1/4) of one share of the Company’s common stock at an exercise price of $2.50 per share.  The Company sold a total of 63,570 Units and received aggregate cash proceeds of $111,248.
 
Discounted Warrant Exercise Program
 
During the quarter ended December 31, 2011, the Company offered certain warrant holders the opportunity to exercise their warrants to purchase the Company’s common stock at a discount of approximately 50% of the original exercise price of their warrants for a limited time (the “Discounted Warrant Exercise Program”).  Through December 31, 2011, warrants to purchase an aggregate of 3,093,396 shares of the Company’s common stock were exercised at reduced exercise prices by warrant holders, including warrants to purchase 1,599,858 shares of common stock exercised by Platinum under the terms of the Note and Warrant Exchange Agreement, as described in Note 5.  The warrants exercised by Platinum were exercised at reduced prices ranging from $0.75 per share to $1.25 per share, compared to original exercise prices ranging from $1.50 per share to $2.50 per share, resulting in proceeds of $1,719,823 which was applied to the reduce the outstanding balance of the Platinum Note and accrued interest under the terms of the Note and Exchange Agreement.
 
Other investors and service providers exercised warrants to purchase an aggregate of 1,000,997 shares of the Company’s common stock at reduced exercise prices ranging from $0.75 per share to $1.31 per share, compared to original exercise prices ranging from $1.50 per share to $2.625 per share.  In conjunction with these exercises, the Company:
 
·  
issued 937,871 shares of its common stock and received proceeds of $1,075,024, including $976,895 in cash plus amounts receivable aggregating $98,129, which amounts are included in Notes and other receivables from sale of common stock to and upon exercise of warrants by others at December 31, 2011, in the accompanying Condensed Consolidated Balance Sheets (all such amounts receivable had been collected by January 5, 2012);
·  
issued 29,426 shares of its common stock to warrant holders who elected to exercise their warrants in lieu of payment by the Company in satisfaction of outstanding indebtedness to such holders totaling an aggregate of $30,128; and
·  
issued 33,700 shares of its common stock to warrant holders who elected to exercise their warrants in lieu of payment by the Company in satisfaction of payment for services in the aggregate amount of $41,343 to be performed in the future by such holders.
 
Additionally, in December 2011, the Company entered into an Agreement Regarding Payment of Invoices and Warrant Exercises with Cato Holding Company (“CHC”), CRL, and certain individual warrant holders affiliated with CHC and CRL (collectively, the “CHC Affiliates”) under the terms of which CHC and the CHC Affiliates exercised warrants to purchase an aggregate of 492,541 shares of the Company’s common stock at reduced exercise prices ranging from $0.88 per share to $1.25 per share, compared to original exercise prices ranging from $1.75 per share to $2.50 per share.  As a result of these warrant exercises, the Company received cash payments of $60,207 in connection with the exercise of warrants to purchase 68,417 shares and, in lieu of cash payments for the remainder of the warrants to purchase 424,124 shares, CHC and CRL agreed to the satisfaction of outstanding indebtedness to CRL in the amount of $245,278 and pre-payment for future services in the amount of $226,449.
 
The Company determined that the increase in the fair value of the warrants exercised as a result of the Discounted Warrant Exercise Program was $618,352, of which $287,278 is a component of the loss on debt extinguishment related to the conversion of the Platinum Note, as described in Note 5, $101,233 is attributable to the modifications of the CHC  and CHC Affiliates warrants and reflected in research and development expense, and $229,841 is reflected in general and administrative expense for the quarter ended December 31, 2011 in the accompanying Condensed Consolidated Statements of Operations.  The warrants subject to the exercise price modifications were valued at the inception of the Discounted Warrant Exercise Program using the Black-Scholes Option Pricing Model and using the following assumptions:
 
Assumption:
 
Pre-modification
   
Post-modification
 
Market price per share
  $ 2.60     $ 2.60  
Exercise price per share
  $ 1.50 - $2.625     $ 0.75 - $1.31  
Risk-free interest rate
    0.18% - 0.45 %     0.02 %
Expected term (years)
    0.90 - 3.25       0.25  
Volatility
    65.7% - 82.8 %     41.1 %
Dividend rate
    0.0 %     0.0 %
                 
Weighted Average Fair Value per share
  $ 1.30     $ 1.50  
 

The market price per share is based on the quoted market price of the Company’s common stock on the Over-the-Counter Bulletin Board on the date of the modification or the closest subsequent date on which there was quoted trading reported.  Because of its short history as a public company, the Company has estimated volatility based on the historical volatilities of a peer group of public companies over the expected term of the option.  The risk-free rate of interest is based on the quoted constant maturity rate for U.S Treasury Bills on the date of the modification for the term corresponding with the expected term of the warrant.  The expected dividend rate is zero as the Company has not paid and does not expect to pay dividends in the near future.

 
Other Warrant Modifications
 
In December 2011, the Company entered into a consulting agreement with a strategic consultant for general and capital markets advisory services.  As consideration for the services to be provided under this agreement, the Company modified the term and exercise price of certain previously-issued warrants to purchase an aggregate of 384,184 shares of its common stock.  The Company determined that the increase in the fair value of the modified warrants was $397,538, which is reflected in general and administrative expense for the quarter ended December 31, 2011 in the accompanying Condensed Consolidated Statements of Operations.  The warrants modified were valued using the Black-Scholes Option Pricing Model and using the following assumptions:
 
Assumption:
 
Pre-modification
   
Post-modification
 
Market price per share
  $ 2.99     $ 2.99  
Exercise price per share
  $ 2.25 - $3.00     $ 1.125 - $1.50  
Risk-free interest rate
    0.02% - 0.29 %     0.29 %
Expected term (years)
    0.53 – 2.39       2.39  
Volatility
    69.4 – 81.0 %     81.0 %
Dividend rate
    0.0 %     0.0 %
                 
Weighted Average Fair Value per share
  $ 1.00     $ 2.03  
 
In December 2011, the Company also entered into a consulting agreement with an individual for strategic consulting services to be performed as requested by the Company’s Chief Executive Officer.  As consideration for the services to be provided under this agreement, the Company modified the term and exercise price of certain previously-issued warrants to purchase an aggregate of 23,138 shares of its common stock and will pay the consultant $1,000 per month for the period June 2012 through December 2012.  The Company determined that the increase in the fair value of the modified warrants was $13,052, which is reflected in general and administrative expense for the quarter ended December 31, 2011 in the accompanying Condensed Consolidated Statements of Operations.  The warrants modified were valued using the Black-Scholes Option Pricing Model and using the following assumptions:
 
Assumption:
 
Pre-modification
   
Post-modification
 
Market price per share
  $ 3.05     $ 3.05  
Exercise price per share
  $ 1.75 - $2.50     $ 0.88 - $1.25  
Risk-free interest rate
    0.25% - 0.29 %     0.29 %
Expected term (years)
    2.00 – 2.36       2.36  
Volatility
    74.8 – 78.3 %     78.3 %
Dividend rate
    0.0 %     0.0 %
                 
Weighted Average Fair Value per share
  $ 1.69     $ 2.25  
 
 

Following the exercises under the Discounted Warrant Exercise Program and other warrant modifications described above, at December 31, 2011, the Company had outstanding warrants to purchase shares of its common stock at a weighted average exercise price of $2.00 per share as follows:

 
Exercise Price   Expiration Date   Warrants Outstanding  
$ 0.88   5/17/2012 to 5/11/2014     316,042  
$ 1.00    11/4/2014     1,500  
$ 1.125    12/28/2012     119,900  
$ 1.25    5/11/2014 to 12/31/2014     120,280  
$ 1.50    12/31/2012     375,000  
$ 1.75    12/31/2013     643,184  
$ 2.00    8/3/2013 to 12/31/2014     609,000  
$ 2.25    6/28/2012     2,500  
$ 2.50    5/11/2014     618,822  
$ 2.625    12/31/2013     588,200  
$ 6.00    6/28/2012 to 12/31/2013     57,300  
            3,451,728  
 
The following table provides a roll-forward of the number of outstanding shares of the Company’s common stock from March 31, 2011 through December 31, 2011, reflecting the impact of the Merger, the exercise of modified warrants and other transactions described in the notes to these Condensed Consolidated Financial Statements.  As described in Note 1, History and Organization ,  as a result of the Merger, the business of VistaGen became the business of Excaliber and after the Merger, Excaliber changed its name to “VistaGen Therapeutics, Inc.”
 
   
Excaliber Enterprises, Ltd.
   
VistaGen Therapeutics, Inc.
 
             
Common stock outstanding at March 31, 2011
    5,848,707       3,672,110  
                 
Shares repurchased from shareholders
    (5,064,207 )     -  
                 
Shares issued in 2011 Private Placement
    -       2,216,106  
Shares issued upon conversion of convertible promissory notes
    -       3,528,290  
Shares issued upon conversion of all series of preferred stock
    -       2,884,655  
Shares issued to UHN under the SRCA
            800,000  
Shares issued for services
    -       571,743  
                 
Common stock outstanding at Merger
    784,500       13,672,904  
                 
Common stock issued for VistaGen common
    6,836,452       (13,672,904 )
                 
Common stock outstanding post-Merger
    7,620,952       -  
                 
Two-for-one post-Merger forward stock split
    7,620,952          
                 
Shares issued upon exercise of modified warrants, including 1,599,858 shares subject to Note and Warrant Exchange Agreement with Platinum
    3,093,396          
Shares issued in Fall 2011 Follow-on Offering
    63,570          
Shares issued upon exercise of employee stock options
    113,636          
                 
Common stock issued at December 31, 2011
    18,512,506          
                 
Less treasury stock:
               
Shares exchanged for Series A Preferred under the terms of the:
               
Common Stock Exchange Agreement with Platinum
    (484,000 )        
Note and Warrant Exchange Agreement with Platinum
    (1,599,858 )        
Treasury stock held at December 31, 2011
    (2,083,858 )        
                 
Common stock outstanding at December 31, 2011
    16,428,648