VistaGen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2013, the company’s fiscal first quarter of fiscal 2014. The filing was signed August 14, 2013. VistaGen is a development-stage biotechnology company focused on human pluripotent stem-cell technology, drug rescue and regenerative cell therapy; it also has AV-101, a drug candidate for neuropathic pain.
Financial results and position
| Metric | Quarter ended June 30, 2013 | Comparable 2012 quarter / period-end |
|---|---|---|
| Revenue | $0 | $200,400 |
| Research and development expense | $695,500 | $866,300 |
| General and administrative expense | $604,600 | $1,055,300 |
| Operating loss | $1.30 million | $1.72 million |
| Interest expense, net | $316,400 | $102,800 |
| Net income (loss) | $185,700 | $(1.83) million |
| Cash used in operating activities | $731,800 | $296,200 |
| Cash and cash equivalents at June 30 | $89,800 | $638,100 at March 31, 2013 |
- The quarter’s reported net income was driven by a $1.805 million noncash gain from revaluing warrant and related option liabilities. Excluding that gain, operating activities remained loss-making; diluted loss per share was reported as $0.02.
- At June 30, total assets were $431,800, current assets $224,700 and current liabilities $2.933 million. Total liabilities were $12.381 million and stockholders’ deficit was $11.949 million.
- Debt included $3.474 million principal and accrued interest on Platinum’s 10% senior secured convertible notes before discounts, plus substantial notes payable to service providers and related parties. The balance sheet reports $1.527 million for the senior notes, $2.192 million for non-current notes payable and $1.135 million for non-current related-party notes, net of discounts and as classified.
Changes from the comparable quarter
- Revenue fell from $200,400 to zero. The NIH AV-101 grant had expired in June 2012 and was not renewed; subcontract revenue had also ended.
- R&D expense decreased 20%, principally with lower AV-101 trial-related spending, partly offset by higher salaries, stock compensation and patent/license costs. G&A expense decreased 43%, including lower investor-relations costs and a favorable warrant-modification expense effect.
- Interest expense more than tripled, mainly because of interest accruals and discount amortization on debt issued or restructured during 2012 and early 2013.
- Cash declined by $548,300 during the quarter. Operating cash use increased year over year, while financing cash inflows were $193,100, including warrant-exercise proceeds.
Outlook, financing and material risks
- Management estimated cash expenditures of approximately $4 million to $6 million over the next 12 months and stated that cash on hand alone was insufficient to fund planned operations. The filing also describes expected expenditures of approximately $5 million.
- Autilion AG was contractually committed to purchase 72 million restricted shares at $0.50 per share for total proceeds of $36 million, in tranches scheduled from June 27 through September 30, 2013. Only the initial $25,000 closing had occurred by June 30. The filing says no further scheduled closings had occurred as of the report, describes the agreement as in default, and notes delays; management could not assure receipt or timing of further funds despite being told by Autilion that the full amount would be funded.
- Failure to secure substantial financing could force VistaGen to delay, scale back or discontinue R&D and could threaten its ability to continue as a going concern. The company disclosed a $67.5 million accumulated development-stage deficit and recurring losses and negative operating cash flows.
- If the Autilion financing exceeded $11 million and more than 22 million shares were issued, Autilion would hold over 50% of outstanding common stock, causing a change in control; substantial dilution was expected if the financing closed in part or in full.
- Subsequent to quarter-end, the company reported $535,500 in private-placement proceeds through the report date, including $85,500 from warrant exercises and $200,000 from an August unit financing; it also issued Platinum a $250,000 secured convertible note. These proceeds do not establish that the Autilion financing closed.
- Management reported continued development of CardioSafe 3D and LiverSafe 3D, evaluation of drug-rescue candidates, and work to finalize AV-101 clinical-study reports. AV-101 had completed Phase 1 development; no commercial revenue or specific future operating guidance was provided.
- The filing identifies financing availability, clinical and nonclinical results, regulatory approval, competition and dilution as key risks. No legal proceedings were reported. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether Autilion made any subsequent tranche payments, the status of the agreement described as in default, and actual cash received against the $36 million commitment.
- Current cash, monthly operating cash use, near-term obligations and whether additional funding is sufficient to address the going-concern risk.
- The scope of dilution and any change in control resulting from Autilion share issuances, warrant exercises, convertible notes and other potential share issuances.
- That the reported quarterly profit chiefly reflects a noncash warrant-liability remeasurement, rather than operating profitability.
- Progress and financing plans for AV-101 and the stem-cell platform, including any updates to clinical reporting, development priorities or collaborations.