Vistagen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended December 31, 2012; comparative periods ended December 31, 2011. The filing was signed February 14, 2013. VistaGen is a development-stage biotechnology company focused on stem-cell-based drug discovery and toxicology screening, and AV-101 development.
Financial performance and position
| Metric | Three months ended Dec. 31, 2012 | Nine months ended Dec. 31, 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $0 | $200,400 | $2,400 quarter; $873,300 nine months |
| Research and development expense | $1.12 million | $3.09 million | $1.31 million quarter; $3.56 million nine months |
| General and administrative expense | $799,000 | $2.43 million | $1.55 million quarter; $3.57 million nine months |
| Net loss | $5.34 million | $9.12 million | $4.50 million quarter; $9.17 million nine months |
| Net loss attributable to common stockholders | $12.46 million | $16.24 million | $4.50 million quarter; $9.17 million nine months |
| Operating cash used | — | $2.49 million | $2.85 million nine months |
At December 31, 2012, cash was $24,200, total assets $326,000, current liabilities $2.58 million, total liabilities $10.85 million, and stockholders’ deficit $10.52 million. The resulting working-capital deficit was approximately $2.47 million. Cash was $81,000 at March 31, 2012. Nine-month investing cash outflow was $131,100; financing cash inflow was $2.57 million.
The filing reports no sustainable revenue base. Its financial statements identify a $63.9 million accumulated development-stage deficit and state that substantial doubt exists about the company’s ability to continue as a going concern.
Changes and significant transactions
- Nine-month revenue fell to $200,400 from $873,300, primarily because NIH grant revenue declined; the AV-101 NIH grant expired June 30, 2012 and was not renewed. Quarter revenue was zero.
- Nine-month operating expenses declined: R&D by 13% and G&A by 32%. The lower G&A included reduced professional fees and stock compensation, partly offset by investor-relations costs.
- The $7.125 million deemed dividend from changes to Platinum’s Series A preferred-stock exchange rights increased the loss attributable to common stockholders; it was not an operating expense. A $3.537 million debt-extinguishment loss also materially affected the reported loss and was described as non-cash.
- Debt and payables were restructured, including obligations to Platinum, Morrison & Foerster, Cato Research and University Health Network. Some obligations were converted to notes payable in shares upon warrant exercise, but certain default or change-of-control provisions may require cash payment.
- Platinum’s senior secured notes bear 10% interest and have conversion features. The balance-sheet warrant liability was $3.91 million and was valued using Level 3 inputs.
- The company reported 22.1 million common shares issued at December 31, 2012 and substantial additional potential dilution from preferred stock, warrants, options and convertible notes. The filing states that these transactions may substantially dilute existing holders.
Outlook, risks and other disclosures
Management estimated cash expenditures of $4 million to $6 million over the next 12 months and said available cash would not fund operations for that period. Planned funding sources include securities placements, collaborations, licensing and grants; management cautioned that sufficient financing may not be available on acceptable terms. Failure to raise funds could require delaying, reducing or discontinuing programs and could threaten continued operations.
After quarter-end, investors committed approximately $525,000 for additional private-placement units. The company notified Platinum on February 14, 2013 that it had met the financing condition for an additional $1 million senior secured note, which it expected to issue by February 22. This was an expectation at filing, not a completed issuance disclosed in the period-end statements.
Management said AV-101 Phase 1 development was complete; work during the quarter focused on analyzing Phase 1b results and preparing study reports. CardioSafe 3D and LiverSafe 3D development and drug-rescue candidate review continued. The filing gives no revenue or earnings guidance. Management reported effective disclosure controls and no material change in internal control over financial reporting. It disclosed no ongoing legal proceedings and no off-balance-sheet arrangements.
Key facts for investors to verify
- Whether the anticipated $1 million Platinum note was issued after the filing date, and its final terms and cash proceeds.
- Actual cash runway, subsequent financing needs and whether the company can meet its stated $4 million–$6 million spending plan.
- AV-101 Phase 1b results, next development steps, and potential funding after expiration of the NIH grant.
- Potential dilution and the economic effects of Platinum’s preferred-stock exchange rights, convertible notes, warrants and other equity-linked obligations.
- Debt maturity, repayment and default provisions, including obligations payable in cash under specified circumstances.