vtgn10q_dec312020
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 December 31, 2020
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)
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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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 ☒
As of February 11, 2021, 141,694,413 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 December 31, 2020
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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6
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24
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44
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44
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45
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45
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83
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83
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84
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85
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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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$104,331,100
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$1,355,100
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Prepaid
expenses and other current assets
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547,500
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225,100
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Deferred
contract acquisition costs - current portion
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116,900
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-
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Total
current assets
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104,995,500
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1,580,200
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Property
and equipment, net
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382,200
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209,600
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Right
of use asset - operating lease
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3,312,100
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3,579,600
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Deferred
offering costs
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241,300
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355,100
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Deferred
contract acquisitions cost - non-current portion
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292,200
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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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$109,271,100
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$5,772,300
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LIABILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIT)
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Current
liabilities:
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Accounts
payable
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$776,400
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$1,836,600
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Accrued
expenses
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507,200
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561,500
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Current
notes payable
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98,400
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56,500
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Deferred
revenue - current portion
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1,244,000
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-
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Operating
lease obligation - current portion
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351,500
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313,400
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Financing
lease obligation - current portion
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3,600
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3,300
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Total
current liabilities
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2,981,100
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2,771,300
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Non-current
liabilities:
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Accrued
dividends on Series B Preferred Stock
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5,923,700
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5,011,800
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Deferred
revenue - non-current portion
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3,108,400
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-
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Operating
lease obligation - non-current portion
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3,446,900
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3,715,600
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Financing
lease obligation - non-current portion
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300
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3,000
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Total
non-current liabilities
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12,479,300
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8,730,400
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Total
liabilities
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15,460,400
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11,501,700
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Commitments
and contingencies (Note 10)
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Stockholders’
equity (deficit):
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Preferred
stock, $0.001 par value; 10,000,000 shares authorized at December
31, 2020 and March 31, 2020:
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Series
A Preferred, 500,000 shares authorized, issued and outstanding at
December 31, 2020 and March 31, 2020
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500
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500
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Series
B Preferred; 4,000,000 shares authorized at December 31, 2020 and
March 31, 2020; 1,131,669 shares
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and
1,160,240 shares issued and outstanding at December 31, 2020 and
March 31, 2020, respectively
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1,100
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1,100
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Series
C Preferred; 3,000,000 shares authorized at December 31, 2020 and
March 31, 2020; 2,318,012 shares
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issued
and outstanding at September 30, 2020 and March 31,
2020
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2,300
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2,300
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Series
D Preferred; 2,000,000 shares and no shares authorized, issued and
outstanding at December 31, 2020
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and
March 31, 2020, respectively
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2,000
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-
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Common
stock, $0.001 par value; 175,000,000 shares authorized at December
31, 2020 and March 31, 2020;
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138,800,137
and 49,348,707 shares issued and outstanding at December 31, 2020
and March 31, 2020, respectively
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138,800
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49,300
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Additional
paid-in capital
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311,264,800
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200,092,800
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Treasury
stock, at cost, 135,665 shares of common stock held at December 31,
2020 and March 31, 2020
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(3,968,100)
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(3,968,100)
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Accumulated
deficit
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(213,630,700)
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(201,907,400)
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Total
stockholders’ equity (deficit)
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93,810,700
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(5,729,400)
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Total
liabilities and stockholders’ equity (deficit)
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$109,271,100
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$5,772,300
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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 December 31,
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Nine Months Ended December 31,
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Sublicense
revenue
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$313,600
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$-
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$647,600
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$-
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Total
revenues
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313,600
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-
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647,600
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-
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Operating
expenses:
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Research
and development
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3,496,100
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3,014,500
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7,585,500
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11,533,600
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General
and administrative
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2,116,800
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2,948,300
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4,776,900
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6,004,500
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Total
operating expenses
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5,612,900
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5,962,800
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12,362,400
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17,538,100
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Loss
from operations
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(5,299,300)
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(5,962,800)
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(11,714,800)
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(17,538,100)
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Other
income (expenses), net:
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Interest
income (expense), net
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600
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1,500
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(6,500)
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33,400
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Other
income
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-
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-
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600
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-
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Loss
before income taxes
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(5,298,700)
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(5,961,300)
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(11,720,700)
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(17,504,700)
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Income
taxes
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-
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(200)
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(2,600)
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(2,600)
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Net
loss and comprehensive loss
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$(5,298,700)
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$(5,961,500)
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$(11,723,300)
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$(17,507,300)
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Accrued
dividends on Series B Preferred stock
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(353,600)
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(321,800)
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(1,036,600)
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(938,100)
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Net
loss attributable to common stockholders
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$(5,652,300)
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$(6,283,300)
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$(12,759,900)
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$(18,445,400)
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Basic
and diluted net loss attributable to common
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stockholders
per common share
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$(0.07)
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$(0.15)
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$(0.19)
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$(0.43)
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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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81,086,105
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43,158,889
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66,551,962
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42,802,256
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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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Nine Months Ended December 31,
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Cash
flows from operating activities:
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Net
loss
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$(11,723,300)
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$(17,507,300)
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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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77,300
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77,600
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Stock-based
compensation
|
1,815,900
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3,088,700
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Expense
related to modification of warrants
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-
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826,900
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Amortization
of fair value of common stock issued for services
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-
|
92,100
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Amortization
of fair value of warrants issued for services
|
-
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13,800
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Changes
in operating assets and liabilities:
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Receivable
from supplier
|
-
|
300,000
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Prepaid
expenses and other current assets
|
(200)
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56,200
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Right
of use asset - operating lease
|
267,500
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249,400
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Operating
lease liability
|
(230,700)
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(196,300)
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Deferred
sublicense revenue, net of deferred contract acquisition
costs
|
4,068,300
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-
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Accounts
payable and accrued expenses
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(1,066,400)
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(178,900)
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Net
cash used in operating activities
|
(6,791,600)
|
(13,177,800)
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Cash
flows from property and investing activities:
|
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Purchases
of manufacturing and other equipment
|
(249,900)
|
-
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Net
cash used in investing activities
|
(249,900)
|
-
|
|
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|
Cash
flows from financing activities:
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Net
proceeds from issuance of common stock and Series D Preferred
stock
|
93,675,100
|
-
|
Net
proceeds from issuance of common stock and warrants, including
Units
|
12,974,900
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650,000
|
Net
proceeds from exercise of warrants
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808,500
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410,000
|
Proceeds
from sale of warrants
|
-
|
300,000
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Net
proceeds from sale of common stock under equity line
|
2,841,600
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-
|
Proceeds
from issuance of note under Payroll Protection Plan
|
224,400
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-
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Repayment
of capital lease obligations
|
(2,400)
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(2,200)
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Repayment
of notes payable, including Payroll Protection Plan
note
|
(504,600)
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(217,000)
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Net
cash provided by financing activities
|
110,017,500
|
1,140,800
|
Net
increase (decrease) in cash and cash equivalents
|
102,976,000
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(12,037,000)
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Cash
and cash equivalents at beginning of period
|
1,355,100
|
13,100,300
|
Cash
and cash equivalents at end of period
|
$104,331,100
|
$1,063,300
|
|
|
|
|
|
|
Supplemental
disclosure of noncash activities:
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Insurance
premiums settled by issuing note payable
|
$322,200
|
$230,200
|
Accrued
dividends on Series B Preferred
|
$1,036,600
|
$939,100
|
Accrued dividends on Series B Preferred settled upon
conversion by issuance
|
|
of
common stock
|
$124,600
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$-
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
VISTAGEN THERAPEUTICS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019 AND
2020
(Unaudited)
(Amounts in Dollars, except share amounts)
|
|
|
|
|
|
|
|
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|
Additional
|
|
|
Total Stockholders'
|
'
|
|
|
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Paid-in
|
Treasury
|
Accumulated
|
Equity
|
|
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|
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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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
sale of units of common stock and warrants for cash in
private placement
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
650,000
|
600
|
649,400
|
-
|
-
|
650,000
|
Proceeds from
sale of warrants in private placement
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
300,000
|
-
|
-
|
300,000
|
Proceeds from
exercise of warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
820,000
|
800
|
409,200
|
-
|
-
|
410,000
|
Accrued
dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(321,800)
|
-
|
-
|
(321,800)
|
Stock-based
compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,632,200
|
-
|
-
|
1,632,200
|
Increase in
fair value attributed to warrant modifications and
additional warrants issued
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
826,900
|
-
|
-
|
826,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for
the quarter ended December 31, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,961,500)
|
(5,961,500)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2019
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
-
|
$-
|
44,228,630
|
$44,200
|
$196,466,000
|
$(3,968,100)
|
$(198,640,700)
|
$(6,094,600)
|
(Continued on next page)
VISTAGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT) (Continued)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019 AND
2020
(Unaudited)
(Amounts in Dollars, except share amounts)
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2020
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
-
|
$-
|
49,348,707
|
$49,300
|
$200,092,800
|
$(3,968,100)
|
$(201,907,400)
|
$(5,729,400)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
sale of units of common stock and warrants for cash in
private placement
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
125,000
|
200
|
49,800
|
-
|
-
|
50,000
|
Net proceeds from sale of common stock under equity
line
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,201,995
|
6,200
|
2,741,300
|
-
|
-
|
2,747,500
|
Issuance of common stock at fair value for professional
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
233,645
|
200
|
124,800
|
-
|
-
|
125,000
|
Sale of common
stock pursuant to 2019 Employee Stock Purchase
Plan
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
28,125
|
-
|
12,600
|
-
|
-
|
12,600
|
Expenses related to S-3 registration statement for warrant
shares
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(29,400)
|
-
|
-
|
(29,400)
|
Accrued dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(335,800)
|
-
|
-
|
(335,800)
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
674,600
|
-
|
-
|
674,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the quarter ended June 30, 2020
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,126,800)
|
(3,126,800)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2020
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
-
|
$-
|
55,937,472
|
$55,900
|
$203,330,700
|
$(3,968,100)
|
$(205,034,200)
|
$(5,611,700)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sale of common stock in public
offering
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
17,868,250
|
17,900
|
12,887,200
|
-
|
-
|
12,905,100
|
Net proceeds from exercise of warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
228,000
|
200
|
113,800
|
-
|
-
|
114,000
|
Net proceeds from sale of common stock under equity
line
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
100,000
|
100
|
49,200
|
-
|
-
|
49,300
|
Accrued dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(347,200)
|
-
|
-
|
(347,200)
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
410,900
|
-
|
-
|
410,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Net loss for the quarter ended September 30, 2020
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,297,800)
|
(3,297,800)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 30, 2020
|
500,000
|
$500
|
1,160,240
|
$1,200
|
2,318,012
|
$2,300
|
-
|
$-
|
74,133,722
|
$74,100
|
$216,444,600
|
$(3,968,100)
|
$(208,332,000)
|
$4,222,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds
from sale of common stock and Series D Preferred stock in
public offering
|
-
|
-
|
-
|
-
|
-
|
-
|
2,000,000
|
2,000
|
63,000,000
|
63,000
|
93,582,900
|
-
|
-
|
93,647,900
|
Net proceeds from exercise of warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,447,782
|
1,400
|
722,500
|
-
|
-
|
723,900
|
Accrued dividends on Series B Preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(353,600)
|
-
|
-
|
(353,600)
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
730,400
|
-
|
-
|
730,400
|
Conversion of
Series B Preferred stock to common and payment of accrued
dividends in common stock
|
-
|
-
|
(28,571)
|
(100)
|
-
|
-
|
-
|
-
|
188,633
|
200
|
124,500
|
-
|
-
|
124,600
|
Sale of common
stock pursuant to 2019 Employee Stock Purchase
Plan
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000
|
100
|
13,500
|
-
|
-
|
13,600
|
Net loss for the quarter ended December 31, 2020
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,298,700)
|
(5,298,700)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2020
|
500,000
|
$500
|
1,131,669
|
$1,100
|
2,318,012
|
$2,300
|
2,000,000
|
$2,000
|
138,800,137
|
$138,800
|
$311,264,800
|
$(3,968,100)
|
$(213,630,700)
|
$93,810,700
|
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 and
commercializing differentiated new generation medications that go
beyond the current standard of care for anxiety, depression and
other central nervous system (CNS) disorders. Our pipeline includes three
CNS product candidates, PH94B, PH10 and AV-101, each with a
differentiated potential mechanism of action, favorable safety
results observed in all clinical studies to date, and therapeutic
potential in multiple CNS indications. We are currently preparing
PH94B for a pivotal Phase 3 clinical study as a potential acute
treatment of anxiety in adults with social anxiety disorder
(SAD). We are also planning
for several small exploratory Phase 2A studies in adult patients
experiencing adjustment disorder, pre-procedural anxiety,
postpartum anxiety and post-traumatic stress disorder. PH10 has
completed a successful exploratory Phase 2A study for the treatment
of major depressive disorder (MDD). We are currently preparing for
planned Phase 2B clinical development of PH10 as a potential
stand-alone treatment for MDD. In several clinical studies, AV-101
was shown to be orally bioavailable and was well-tolerated. Based
on successful these clinical studies and several preclinical
studies, we are currently planning to pursue Phase 1B, and, if
successful, subsequent Phase 2A, clinical development of AV-101 in
combination with probenecid for treatment of CNS indications
involving the N-methyl-D-aspartate receptor (NMDAR). Additionally, our wholly owned
subsidiary, VistaGen Therapeutics, Inc., d/b/a VistaStem, a
California corporation (VistaStem), has pluripotent stem cell
technology focused on assessing and developing small molecule new
chemical entities (NCEs)
for our CNS pipeline, or for out-licensing, by utilizing CardioSafe
3D, VistaStem’s customized human heart cell-based cardiac
bioassay system. Our goal is to become a biopharmaceutical company
that develops and commercializes innovative CNS therapies for
multiple large and growing neuropsychiatry and neurology markets
worldwide where current treatments are inadequate to meet the needs
of millions of patients.
Our Product Candidates
We
believe that PH94B has the potential to be a first-in-class
neuroactive steroid nasal spray for use in a wide range of
indications involving anxiety or phobia. Designed to be
self-administered in microgram level doses, PH94B does not require
systemic uptake and distribution to produce rapid-onset
anti-anxiety effects and has demonstrated a favorable safety
profile in all clinical studies to date. We are initially
developing PH94B as a potential fast-acting, non-sedating acute
treatment of anxiety in adults with SAD. We believe PH94B also has
potential to be developed as a novel treatment for a broad range of
anxiety disorders, including adjustment disorder, postpartum
anxiety, post-traumatic stress disorder, pre-procedural anxiety,
panic and others. The U.S. Food and Drug Administration
(FDA) has granted Fast
Track designation for development of PH94B for the acute treatment
of SAD.
PH10 is
an innovative investigational neuroactive steroid nasal spray
designed to have rapid-onset and therapeutic potential in several
neuropsychiatric indications involving depression.
Self-administered in microgram level doses, PH10 does not require
systemic uptake and distribution to produce rapid-onset
antidepressant effects. Following completion of a successful
exploratory Phase 2A clinical study, we are preparing for a planned
Phase 2B clinical study of PH10 as a stand-alone treatment of MDD.
With its rapid-onset pharmacology, lack of systemic exposure at
clinical doses administered to-date and favorable safety results
observed in all clinical studies to date, we believe PH10 has
potential to be a new stand-alone treatment for several additional
depression disorders.
AV-101
(4-Cl-KYN) is a potentially novel, investigational prodrug designed
to be orally administered and to target the NMDAR, an ionotropic
glutamate receptor in the brain. Abnormal NMDAR function is
associated with numerous CNS diseases and disorders. AV-101’s
active metabolite, 7-chloro-kynurenic acid (7-Cl-KYNA), has been
observed to be a potent and selective full antagonist of the
glycine co-agonist site of the NMDAR that inhibits the function of
the NMDAR, but does not block NMDAR function like ketamine and
other NMDAR antagonists. At doses administered to-date, AV-101 has
been observed in clinical trials to be orally bioavailable,
well-tolerated and not cause dissociative or hallucinogenic
psychological side effects or safety concerns similar to those that
may be caused by other NMDAR antagonists. In light of these and
findings from a wide range of preclinical studies, we believe that
AV-101, in combination with FDA-approved probenecid, has potential
to become a new oral treatment alternative for multiple large CNS
markets. We are currently preparing to evaluate AV-101’s
therapeutic potential in combination with probenecid in a Phase 1B
clinical study. The FDA has granted Fast Track designation for
development of AV-101 as both a potential adjunctive treatment for
MDD and as a non-opioid treatment for neuropathic pain
(NP).
VistaStem is applying pluripotent stem cell (hPSC) technology
and CardioSafe 3D, our customized cardiac bioassay system, to
discover and develop novel, investigational small molecule NCEs for
our CNS pipeline or for out-licensing.
Subsidiaries
As noted above, VistaStem Therapeutics, 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, 2020 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 nine months ended December 31, 2020 are not
necessarily indicative of the operating results to be expected for
our fiscal year ending March 31, 2021, 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, 2020 contained in our Annual Report on Form
10-K, as filed with the Securities and Exchange Commission
(SEC) on June 29, 2020.
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 $213.6 million
accumulated from inception (May 1998) through December 31, 2020. We
expect losses and negative cash flows from operations to continue
for the foreseeable future as we engage in further development of
PH94B, PH10 and AV-101, execute our drug rescue programs and pursue
potential drug development and regenerative medicine
opportunities.
Since our inception in May 1998 through December 31, 2020, 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 $193.6 million, as well as from an
aggregate of approximately $22.7 million of government research
grant awards (excluding the fair market value of government
sponsored and funded clinical trials), strategic collaboration
payments and intellectual property licensing, and other revenues.
Additionally, we have issued equity securities with an approximate
value at issuance of $38.2 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.
Recent Developments
As described more completely in Note 8, Capital
Stock, in December 2020,
we entered into an underwriting agreement (the December 2020 Underwriting Agreement)
pursuant to which we sold, in an underwritten public offering (the
December 2020 Public
Offering), 63,000,000 shares of our common stock, par value
$0.001 per share (Common
Stock) at a public offering price of $0.92 per share and
2,000,000 shares of a newly issued series of convertible preferred
stock (Series D Preferred)
and, together with the Common Stock, the Securities) at a public offering price
of $21.16 per share, resulting in gross proceeds to us of $100
million. Net proceeds to us from the securities sold in the
December 2020 Public Offering, after deducting underwriting
discounts and commissions and offering expenses payable by us, were
approximately $93.6 million.
As also described more completely in Note 8, Capital
Stock, in August 2020, we
entered into an underwriting agreement (the August 2020
Underwriting
Agreement) pursuant to which we
sold, in an underwritten public offering (the August 2020 Public
Offering), an aggregate of
15,625,000 shares of our common stock at a public offering price of
$0.80 per share, resulting in gross proceeds to us of $12,500,000.
Under the terms of the August 2020 Underwriting Agreement, we
granted to the underwriter an over-allotment option
(the Over-Allotment
Option) to purchase up to an
additional 2,343,750 shares of common stock at a public offering
price of $0.80 per share. The underwriter exercised the
Over-Allotment Option with respect to 2,243,250 shares (the
Exercised Option
Shares), resulting in
additional gross proceeds to us of $1,794,600. Aggregate net
proceeds to us from the August 2020 Public Offering, after
deducting underwriting discounts and commissions and offering
expenses payable by us, were approximately $12.9
million.
As more completely described in Note 11, Sublicensing and
Collaboration Agreements, in June 2020, we entered into a
strategic licensing and collaboration agreement for the clinical
development and commercialization of PH94B for acute treatment of
anxiety in adults with SAD and other potential anxiety-related
disorders (the EverInsight
Agreement), with
EverInsight Therapeutics Inc., (EverInsight), a biopharmaceutical company focused on
developing and commercializing transformative pharmaceutical
products for patients in Greater China and other parts of
Asia, and funded by CBC Group, a global healthcare-focused
venture capital firm. Subsequent to entering into the EverInsight
Agreement, in October 2020, EverInsight merged with AffaMed
Therapeutics, also funded by CBC Group, which as a combined,
complementary entity is focusing on developing and commercializing
therapeutics to address ophthalmologic and CNS disorders in Greater
China and beyond. Accordingly, we are now referring to EverInsight
and the EverInsight Agreement as AffaMed and the AffaMed Agreement,
respectively. Under the
terms of the AffaMed Agreement, AffaMed agreed to make a
non-dilutive upfront license payment of $5.0 million to us, which
we received in August 2020. Upon successful development and
commercialization of PH94B in AffaMed’s territory, we are
eligible to receive up to $172 million in additional development
and commercial milestone payments, plus royalties on commercial
sales in the licensed territory. The $5.0 million upfront license
payment resulted in net cash proceeds to us of approximately $4.655
million after the sublicense payment we agreed to make to Pherin
Pharmaceuticals, Inc. (Pherin)
pursuant to our PH94B license from Pherin, and payment for
consulting services related to the AffaMed
Agreement.
Additionally, as described in Note 8, Capital
Stock, on March 24, 2020, we
entered into a purchase agreement and a registration rights
agreement with Lincoln Park Capital Fund (Lincoln
Park) pursuant to which Lincoln
Park committed to purchase up to $10,250,000 of our common stock at
market-based prices over a period of 24 months (the
LPC
Agreement). To satisfy our
obligations under the registration rights agreement, we filed a
Registration Statement on Form S-1 (the LPC Registration
Statement) with the Securities
and Exchange Commission (the SEC) on March 31, 2020, which the SEC declared
effective on April 14, 2020 (Registration No. 333-237514).
Subsequent to the effectiveness of the LPC Registration Statement
and through July 2020, we sold 6,301,995 registered shares of our
common stock to Lincoln Park and received gross cash proceeds of
$2,891,200. We have not sold any shares of our common stock
pursuant to the Lincoln Park Agreement since July
2020.
As also described in Note 8, Capital
Stock, during December 2020,
certain holders of outstanding warrants exercised such warrants to
purchase an aggregate of 1,447,782 shares of our common stock and
we received cash proceeds of $723,900 from such exercises. As
disclosed in Note 12, Subsequent
Events, since December 31,
2020, holders of outstanding warrants have exercised warrants to
purchase an additional 2,941,027 shares of our common stock and we
have received cash proceeds of approximately $2.86
million.
Liquidity and Capital Resources
As a clinical-stage biopharmaceutical company, we have
historically financed our operations and technology acquisitions primarily through the
issuance and sale of our equity and debt securities. During the
nine months ended December 31, 2020, we generated approximately
$114.8 million in net cash proceeds from the transactions described
above. As of December 31, 2020, we had cash and cash equivalents of
approximately $104.3 million, which we believe is sufficient to
fund our planned operations for well beyond the twelve months
following the issuance of these financial statements, removing
earlier doubt regarding our ability to continue as a going concern.
Nevertheless, we have not yet developed products that generate
recurring revenue and, assuming successful completion of our
planned clinical and nonclinical programs, we will need to invest
substantial additional capital resources to commercialize any of
them.
During the next twelve months, we plan to (i) prepare for and
launch two pivotal Phase 3
clinical trials of PH94B for acute treatment of anxiety in adult
patients with SAD, one in North America and another globally, (ii)
prepare for and launch a small exploratory Phase 2A study of
PH94B for acute treatment of adult patients with adjustment
disorder, (iii) prepare for and potentially launch small
exploratory Phase 2A clinical studies of PH94B in postpartum
anxiety, post-traumatic stress disorder and/or pre-procedural (i.e.
pre-MRI) anxiety, (iv) assess and potentially launch a Phase 1B
study of AV-101 in combination with probenecid to enable
exploratory Phase 2A development of the combination for treatment
of CNS disorders, and (v) conduct
several nonclinical studies involving PH94B, PH10 and
AV-101.
Although we believe our current cash position is sufficient to fund
our planned operations for the next twelve months, when necessary
and advantageous, we may raise additional capital through the sale
of our equity securities in one or more (i) public offerings (ii)
private placements to accredited investors, and/or (iii) in
strategic licensing and development collaborations involving one or
more of our drug candidates in markets outside the United States,
similar to the AffaMedAgreement. 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 and was used to register the
securities sold in the December 2020 Public Offering and the shares
of common stock and the Exercised Option Shares sold in the August
2020 Public Offering, remains 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. Further, at December 31, 2020 and through the date of
this Report, there are approximately 2.04 million registered shares
of our common stock remaining available for sale under the LPC
Agreement. We have no obligation to sell any additional shares to
Lincoln Park under the LPC Agreement.
In addition to the potential sale of our equity securities, we may
also seek to enter research, development and/or commercialization
collaborations similar to the AffaMed Agreement and the Bayer
Agreement (defined in Note 11, below) to provide funding, including
non-dilutive funding, for development of one or more of our CNS
product candidate programs. We may also seek additional government
grant awards or agreements similar to our prior agreement with the
U.S. National Institutes of Health (NIH), Baylor University and the U.S. Department of
Veterans Affairs in connection with certain government-sponsored
studies of AV-101. 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 AffaMed Agreement and the Bayer Agreement with other
parties. Although we may seek additional collaborations that could
generate revenue and/or provide non-dilutive funding for
development of our 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, potential impacts related
to the current COVID-19 pandemic, the scope and nature of
opportunities related to our success and the success of certain
other companies in nonclinical and 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 PH94B, PH10, and AV-101 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
manufacturing, research and development, investor and public
relations, business development, legal, intellectual property
acquisition and protection, public company compliance and other
professional services and operating costs.
Notwithstanding the foregoing, there can be no assurance that our
current strategic collaborations under the AffaMed Agreement and/or
the Bayer Agreement (defined in Note 11, below) will generate
revenue from future potential milestone payments, or 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
additional financing on a timely basis when needed, 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.
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 revenue recognition, share-based
compensation, right-of-use assets and lease liabilities and
assumptions that have been used historically to value warrants and
warrant modifications.
Revenue Recognition
We
generate revenue from collaborative research and development
arrangements, licensing and technology transfer agreements,
including strategic licenses or sublicenses, and government grants.
We expect that our primary source of revenue beginning in the
quarter ended September 30, 2020 will be from the AffaMed Agreement
involving clinical development and commercialization of PH94B for
acute treatment of anxiety in adults with SAD, and potentially
other anxiety-related disorders, in Greater China, South Korea, and
Southeast Asia. The
terms of the AffaMed Agreement include a $5.0 million
non-refundable upfront license fee which we received in August
2020, potential payments based upon achievement of certain
development and commercial milestones, and royalties on product
sales. We also have the Bayer Agreement, pursuant to which we recorded sublicense revenue
in the third quarter of our fiscal year ended March 31,
2017, also described in Note
11, Sublicensing and Collaborative
Agreements, as a
potential revenue generating arrangement.
Under
Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic
606), we recognize revenue when our customers obtain control
of promised goods or services, in an amount that reflects the
consideration that we expect to receive in exchange for those goods
or services. To determine revenue recognition for arrangements that
we determine are within the scope of Topic 606, we perform the
following five steps: (i) identify the contract with a customer;
(ii) identify the performance obligations in the contract; (iii)
determine the transaction price, including variable consideration,
if any; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as)
we satisfy a performance obligation. We only apply the five-step
model to contracts when it is probable that we will collect the
consideration to which we are entitled in exchange for the goods or
services we transfer to a customer.
Performance Obligations
We
assess whether each promised good or service is distinct for the
purpose of identifying the performance obligations in the contract.
This assessment involves subjective determinations and requires
judgments about the individual promised goods or services and
whether such components are separable from the other aspects of the
contractual relationship. In assessing whether a promised good or
service is distinct in the evaluation of a collaboration
arrangement subject to Topic 606, we consider factors such as the
research, manufacturing and commercialization capabilities of the
collaboration partner and the availability of the associated
expertise in the general marketplace.
Collaboration
arrangements can have several promised goods or services including
a license for our intellectual property, product supply and
development and regulatory services. When the customer could not
obtain the intended benefit of the contract from a promised good or
service without one or more other promises in the contract, the
promise is determined to be not distinct in the context of the
contract and is combined with other promises until the combined
promises are distinct to identify performance obligations. We have
determined that the AffaMed Agreement includes a single combined
performance obligation that includes both the license to
intellectual property and development and regulatory
services.
Arrangements
can include promises for optional additional items, which are considered marketing offers and are
accounted for as separate contracts when the customer elects such
options. Arrangements that include a promise for future
supply of product for either clinical development or commercial
supply and optional research and
development services at the customer’s or the
Company’s discretion are generally considered as options. We
assess whether these options provide a material right to the
customer and if so, such material rights are accounted for as
separate performance obligations. When the customer exercises an
option, any additional payments related to the option are recorded
in revenue when the customer obtains control of the goods or
services.
Transaction Price
Arrangements
may have both fixed and variable consideration. For collaboration
agreements, the non-refundable upfront fees and product supply
selling prices are considered fixed, while milestone payments are
considered variable consideration when determining the transaction
price. At the inception of each arrangement, we evaluate whether
the development milestones are considered probable of being
achieved and estimate an amount to be included in the transaction
price using the most likely amount method. If it is probable that a
significant revenue reversal would not occur, the value of the
associated milestone is included in the transaction price.
Milestone payments that are not within our control or the
licensee’s control, such as approvals from regulators, are
generally not considered probable of being achieved until such
approvals are received.
For
sales-based royalties, including commercial milestone payments
based on the level of sales, for which the license is deemed to be
the predominant item to which the royalties relate, we recognize
revenue at the later of when (a) the related sales occur, or (b)
the performance obligation to which some or all of the royalty has
been allocated has been satisfied (or partially
satisfied).
In
determining the transaction price, we adjust consideration for the
effects of the time value of money if the timing of payments
provides us with a significant benefit of financing. We do not
assess whether a contract has a significant financing component if
the expectation at contract inception is such that the period
between payment by the licensee and the transfer of the promised
goods or services to the licensee will be one year or
less.
Allocation of Consideration
As part
of the accounting for collaboration arrangements, we must develop
assumptions that require judgment to determine the stand-alone
selling price of each performance obligation identified in the
contract. The transaction price is allocated to the identified
performance obligations in proportion to their standalone selling
prices (SSP) on a relative
SSP basis. SSP is determined at contract inception and is not
updated to reflect changes between contract inception and
satisfaction of the performance obligations. In developing the SSP
for a performance obligation, we consider applicable market
conditions and relevant Company-specific factors, including factors
that were contemplated in negotiating the agreement with the
customer and estimated costs. We validate the SSP for performance
obligations by evaluating whether changes in the key assumptions
used to determine the SSP will have a significant effect on the
allocation of arrangement consideration between multiple
performance obligations. Since the AffaMed Agreement includes a
single combined performance obligation that is not distinct, there
is no allocation of consideration.
Timing of Recognition
Significant
management judgment is required to determine the level of effort
required under collaboration arrangements and the period over which
we expect to complete our performance obligations under the
arrangement. The performance period or measure of progress is
estimated at the inception of the arrangement and re-evaluated in
each reporting period. This re-evaluation may shorten or lengthen
the period over which revenue is recognized. Changes to these
estimates are recorded on a cumulative catch up basis. Revenue is recognized for products at a point in
time and for licenses of functional intellectual property at the
point in time the customer can use and benefit from the license.
For performance obligations that are services, revenue is
recognized over time using an output or input method. For
performance obligations that are a combination of licenses to
intellectual property and interdependent services, the nature of
the combined performance obligation is considered when determining
the method and measure of progress that best represents the
satisfaction of the performance obligation. For the single combined
performance obligation of the AffaMed Agreement, the measure of
progress is stand-ready straight-line over the period in which we
expect to perform the services related to the license of
PH94B.
The
difference between revenue recognized to-date and the consideration
invoiced or received to-date is recognized as either a contract
asset/unbilled revenue (revenue earned exceeds cash received) or a
contract liability/deferred revenue (cash received exceeds revenue
earned). At December 31, 2020, we have recorded deferred revenue of
$4,352,400. The following table presents changes in our contract
liabilities for the nine months ended December 31, 2020 (in
thousands):