Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K (Report) includes forward-looking statements. All statements contained in this Report other than statements of historical fact, including statements regarding our future outcomes and results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Our business is subject to significant risks including, but not limited to, our ability to obtain substantial additional financing, the results of our research and development efforts, the results of nonclinical and clinical testing, the effect of regulation by the FDA and other domestic and foreign regulatory agencies, our ability to obtain, maintain and enforce patents on our products once approved for marketing, the impact of competitive products, product development, commercialization potential and technological difficulties, the effect of our accounting policies, and other risks as detailed in the section entitled “Risk Factors” in this Report. Further, even if our product candidates appear promising at various stages of development, our share price may decrease such that we are unable to raise additional capital without significant dilution or other terms that may be unacceptable to our management and Board or disadvantageous to our stockholders.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management or Board to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make in this Report or otherwise. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Accordingly, you should not rely upon forward-looking statements in this Report as predictions of future events. The events and circumstances reflected in the forward-looking statements in this Report may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements in this Report are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of these forward-looking statements after the date of this Report or to conform these statements to actual results or revised expectations. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Business Overview

We are a neuroscience-focused biopharmaceutical company dedicated to pursuing a pioneering approach to the development and commercialization of groundbreaking therapies for psychiatric and neurological disorders based on our deep understanding of nose-to-brain neurocircuitry. Our clinical-stage pipeline consists of intranasal product candidates from a new class of potential neuroscience therapies called pherines. Designed exclusively as nasal sprays, each of our pherine product candidates is centered on our innovative approach to addressing neuroscience disorders with the nose as a new portal for the administration of novel, rapid-onset neuroactive therapies that do not require systemic absorption or binding to neurons in the brain to achieve desired therapeutic effects. In addition, our neuroscience pipeline also includes a clinical-stage investigational oral prodrug candidate, AV-101, focused on neurological disorders involving the NMDA receptor. We are advancing our pipeline with multiple clinical and nonclinical studies underway or planned, including our ongoing PALISADE-3 Phase 3 trial and open label extension for fasedienol as an acute treatment of SAD.

Our primary goal is to develop and commercialize a broad and diversified pipeline of innovative neuroactive pherine therapies for multiple highly prevalent neuroscience indications, such as SAD, MDD, and vasomotor symptoms (hot flashes) associated with menopause, with limited or inadequate current treatment options to meet the needs of millions of underserved patients in the U.S. and worldwide. See “Our Neuroscience Pipeline,” “Our Lead Programs” and “Our Other Programs” in Part I, Item 1 above.

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The following summarizes material developments during the fiscal year ended March 31, 2024.

•Results of PALISADE-2.In early August 2023, we received and reported positive topline results from our PALISADE-2 Phase 3 clinical trial of fasedienol in adults with SAD. The PALISADE-2 trial met its primary efficacy endpoint, the difference in mean SUDS scores during the public speaking challenge at baseline (Visit 2) and treatment (Visit 3) for subjects treated with fasedienol versus placebo at Visit 3. The trial also met its secondary endpoint, demonstrating a statistically significant difference in the proportion of clinician-assessed responders between fasedienol and placebo as measured by the CGI-I. Fasedienol was observed to be well-tolerated with no SAEs, and the adverse event profiles were comparable between fasedienol and placebo.

•Exclusive Negotiation Agreement with Fuji Pharma Co., Ltd.On September 1, 2023, we entered into an Exclusive Negotiation Agreement (the Negotiation Agreement) with Fuji Pharma Co., Ltd. (Fuji Pharma), a Tokyo Stock Exchange-listed, Japan-based pharmaceutical company. Pursuant to the terms and conditions of the Negotiation Agreement, we agreed, for a limited period of time, to negotiate exclusively with Fuji Pharma for a potential exclusive license agreement to develop and commercialize our PH80 product candidate in Japan (the Potential Definitive Agreement). As consideration for the Exclusive Negotiation Period, Fuji Pharma paid to us $1.5 million (Purchase Price). Should we enter into the Potential Definitive Agreement with Fuji Pharma, the Purchase Price will be creditable against any upfront fee due in connection with the execution of such agreement.

•October 2023 Public Offering.On October 2, 2023, we entered into an underwriting agreement (the Underwriting Agreement) with Jefferies, Stifel, Nicolaus & Company, Incorporated, and William Blair & Company, L.L.C., as the representatives of the underwriters identified therein (the Underwriters), in connection with the underwritten offering, issuance and sale by us of 15,010,810 shares of our common stock, pre-funded warrants to purchase up to 3,577,240 shares of common stock (the Pre-Funded Warrants), warrants to purchase up to 9,294,022 shares of common stock (or pre-funded warrants to purchase up to 9,294,022 shares of common stock in lieu thereof) (the T1 Warrants) and warrants to purchase 11,265,086 shares of common stock (or pre-funded warrants to purchase up to 11,265,086 shares of common stock in lieu thereof) (the T2 Warrants). The combined offering price for each share of common stock, accompanying T1 Warrant, and accompanying T2 Warrant was $5.38. The combined offering price per Pre-Funded Warrant, accompanying T1 Warrant, and accompanying T2 Warrant was $5.379 (the October 2023 Public Offering). We received net proceeds of approximately $93.5 million from the October 2023 Public Offering, after deducting underwriting discounts and commissions and estimated offering expense payable by us.

•Launch of PALISADE-3 and Planned Launch of PALISADE-4. To complement the positive topline results from PALISADE-2, we launched PALISADE-3 in March 2024, and are preparing to launch PALISADE-4 in the second half of 2024. Like PALISADE-2, both PALISADE-3 and PALISADE-4 are or are planned to be multi-center, randomized, double-blind, placebo-controlled studies designed to evaluate the efficacy, safety, and tolerability of the acute administration of fasedienol to relieve anxiety symptoms in adult patients with SAD after a single dose of fasedienol during a simulated, anxiety-provoking public speaking challenge in a clinical setting, as measured using the patient-reported SUDS as the primary efficacy endpoint. In addition, both PALISADE-3 and PALISADE-4 will have an open-label extension for a period of up to 12 months. We are also planning to initiate the Repeat Dose Study in the second half of 2024. The Repeat Dose Study will be a multi-center, randomized, double-blind, placebo-controlled, clinical trial designed to evaluate repeated dosing of fasedienol in adult patients with SAD during a single simulated, anxiety-provoking public speaking challenge in a clinical setting. The Repeat Dose Study trial will consist of three different dosing arms, with an open-label extension for a period of up to 12 months.

•Reverse Stock Split. On June 6, 2023, we implemented a stockholder-approved one-for-thirty (1-for-30) reverse split of our common stock (the Reverse Stock Split). All share and per share data for all periods presented in the accompanying Consolidated Financial Statements and related disclosures in this Annual Report have been adjusted retrospectively to reflect the Reverse Stock Split.

Subsidiaries

Our wholly-owned subsidiaries consist of Pherin Pharmaceuticals, Inc, a Delaware corporation (Pherin), and Vistastem, Inc., a California corporation founded in 1998 (Vistastem). For the relevant periods, our condensed consolidated financial statements in this Report also include the accounts of Vistastem’s two wholly-owned inactive subsidiaries, Artemis Neuroscience, Inc., a Maryland corporation (Artemis), which was dissolved in April 2022, and VistaStem Canada, Inc., a corporation organized under the laws of Ontario, Canada (VistaStem Canada), which was dissolved in June 2022.

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Components of Results of Operations

Sublicense and Other Revenue

Sublicense and other revenue consists of revenue recognized under the AffaMed Agreement and Negotiation Agreement with Fuji Pharma. Revenue is recognized as identified performance obligations are satisfied.

Operating Expenses

Research and Development Expenses

To date, our research and development expenses consist primarily of external and internal costs related to the development of our product candidates and development programs. Our research and development expenses primarily include:

•External costs, including:

◦expenses incurred in connection with conducting clinical trials, including investigator grants and site payments for time and pass-through expenses and expenses incurred under agreements with CROs, central laboratories and other vendors and service providers engaged to conduct our trials;

◦expenses incurred in connection with the discovery and preclinical development of our product candidates, including under agreements with third parties, such as consultants and CROs;

◦costs associated with consultants for CMC development, and other services;

◦the cost of manufacturing compounds for use in our preclinical studies, including under agreements with third parties, such as consultants and third-party manufacturers; and

◦costs related to compliance with drug development regulatory requirements.

•Internal costs, including:

◦employee-related expenses, including salaries, related benefits, travel and share-based compensation expenses for employees engaged in research and development functions;

◦the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials; and

◦facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, and supplies.

We expense research and development expenses in the periods in which they are incurred. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date.

Research and development activities are central to our business model. There are numerous factors associated with the successful development of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our clinical development programs. Product candidates in later stages of development generally have higher development costs than those in earlier stages of development.

Our future research and development expenses may vary significantly based on a wide variety of factors, such as:

•the number and scope, rate of progress, expense and results of our discovery and preclinical development activities and clinical trials;

•the number of trials required for regulatory approval;

•the number of sites included in each of our clinical trials;

•the countries in which clinical and non-clincial trials are conducted;

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•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the ability to identify appropriate patients eligible for our clinical trials;

•the number of doses that patients receive, during such clinical trials;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the phase of development of the product candidate;

•the efficacy and safety profile of the product candidate;

•the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;

•maintaining a continued acceptable safety profile of our product candidates following approval, if any;

•the cost and timing of manufacturing our product candidates;

•significant and changing government regulation and regulatory guidance;

•the impact of any business interruptions to our operations or to those of the third parties with whom we work;

•geopolitical instability, such as the war in Ukraine and, more recently, the war between Israel and Hamas;

•adverse effects on the financial markets, the global economy, the supply chain and our expenses due to pandemics or other epidemic diseases, geopolitical instability, inflation, rising interest rates and other factors; and

•the extent to which we establish additional strategic collaborations or other arrangements.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. The process of conducting the necessary preclinical and clinical research and development to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates or any future candidates may be affected by a variety of factors. We may never succeed in achieving regulatory approval for any of our product candidates or any future candidates.

General and Administrative Expenses

General and administrative expenses consist of salaries, bonuses, related benefits and stock-based compensation expense for personnel in executive, legal, finance and administrative functions; professional fees for legal, consulting, accounting and audit services; and travel expenses, technology costs and other allocated expenses. We expense general and administrative expenses in the periods in which they are incurred.

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Results of Operations for the Years Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands):

Year Ended March 31,

Revenues:

Sublicense and other revenue $ 1,064 $ (227)

Operating expenses:

Other income (expense)

Other income 312 —

Total other income, net 3,663 26

Income taxes (4) (6)

Sublicense and Other Revenue

Sublicense and other revenue was $1.1 million and $(0.2) million for the years ended March 31, 2024 and 2023, respectively. The increase in sublicense and other revenue of $1.3 million is due to timing of revenue recognized under the AffaMed Agreement and a one-time true up of expense during the year ended March 31, 2023 due to a change in estimate, as well as revenue recognized under the Negotiation Agreement with Fuji Pharma executed in September 2023.

Absent the achievement of milestones under the AffaMed Agreement, or the execution of similar agreements in the future, if any, we expect sublicense and other revenue to stay consistent in future periods as we continue to recognize revenue under the AffaMed Agreement.

Research and Development Expenses

The following table summarizes our research and development expenses by development program for the years ended March 31, 2024 and 2023 (in thousands):

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Year Ended March 31,

Clinical and nonclinical studies and development expenses by program

Total clinical and nonclinical studies and development expenses 9,154 31,561

Cost of Pherin Acquisition — 3,559

Consulting and professional services 1,374 817

Occupancy and all other costs 997 820

Total research and development expenses $ 20,022 $ 44,377

Research and development expenses were $20.0 million and $44.4 million for the years ended March 31, 2024 and 2023, respectively. The overall decrease of $24.4 million was primarily due to a decrease in preclinical expenses and clinical trial costs of $25.9 million due to the timing of expenses incurred for the PALISADE-1 and PALISADE-2 Phase 3 trials of fasedienol in SAD, including closing costs associated with these studies. The decrease was partially offset by an increase in compensation and related costs of $0.9 million and an increase in consulting professional fees of $0.6 million.

We expect that our research and development expenses will increase substantially over the next several years as we advance our product candidates through clinical trials, continue to develop additional product candidates and expand our pipeline, maintain, expand, protect and enforce our intellectual property portfolio, and hire additional personnel.

General and Administrative Expenses

General and administrative expenses were $14.1 million and $14.7 million for the years ended March 31, 2024 and 2023, respectively. The decrease of $0.6 million was primarily due to a decrease of $1.4 million in professional fees related to pre-commercial activities as well as service fees associated with a potential credit facility offering that was not consummated in Fiscal 2023 as a result of the outcome of our PALISADE-1 clinical trial, which did not recur, as well as a decrease in stock-based compensation expense of $1.0 million. This decrease was partially offset by an increase in compensation and related expenses of $1.5 million and an increase in IT-related costs of $0.3 million.

We expect that our general and administrative expenses will increase substantially over the next several years as we hire additional personnel to support the growth of our business and incur additional expenses associated with being a public company.

Other Income

Other income was $3.7 million and $26 thousand for the years ended March 31, 2024 and 2023, respectively. The increase of $3.6 million was primarily related to an increase in interest rate return on our cash, cash equivalents, and marketable securities due to increased cash balances.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. To date, 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 $338.5 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, intellectual property licensing payments, and other revenues. Additionally, we have issued equity securities with an approximate value

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at issuance of $41.3million in non-cash acquisitions of product licenses, the Pherin Acquisition, and in settlements of certain liabilities, including liabilities for professional services rendered to us or as compensation for such services.

In May 2021, we entered into an Open Market Sale Agreement (the Sales Agreement) with Jefferies LLC (Jefferies) as sales agent, with respect to an at-the-market offering program (the ATM) under which we were permitted, at our option, offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $75.0 million through Jefferies as our sales agent. During the first-half of the fiscal year ended March 31, 2024, we sold 4,698,495 shares of our common stock under the terms of our Sales Agreement for net cash proceeds of approximately $36.2 million. We did not sell any shares of our common stock under the Sales Agreement during the second half of the fiscal year ended March 31, 2024. Pursuant to a registration statement on SEC Form S-3 declared effective during the quarter ended March 31, 2024, we may now, at our option, offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $100.0 million through Jefferies as our sales agent. In addition, during the fiscal year ended March 31, 2024, we received net proceeds of approximately $93.5 million from the October 2023 Public Offering and $1.5 million from Fuji Pharma under the Negotiation Agreement.

We had cash and cash equivalents of approximately $119.2 million at March 31, 2024, which we believe is sufficient to fund our planned operations for the at least twelve months following the issuance of these Consolidated Financial Statements. We are continuing to manage our cash resources with primary emphasis on our lead pipeline programs, including our registration-directed PALISADE Phase 3 program for fasedienol as a potential new acute treatment of anxiety in adults with SAD, as well as planning for potential Phase 2B development of itruvone for treatment of moderate-to-severe MDD, standard U.S. IND-enabling nonclinical studies of PH80 to facilitate potential Phase 2B development for the treatment of vasomotor symptoms (hot flashes) associated with menopause and certain limited pre-commercialization activities. However, as we have not yet developed products that generate recurring revenue and, in the event we successfully complete future clinical and/or nonclinical programs, we will need to obtain and invest substantial additional capital resources to develop and commercialize our drug candidates.

When necessary and/or advantageous, we will seek additional capital to fund our planned operations through (i) sales of our equity and/or debt securities in one or more public offerings and/or private placements, including sales of our securities under the Sales Agreement, (ii) non-dilutive government grants and research awards and/or (iii) non-dilutive strategic partnering collaborations to advance development and commercialization of our product candidates. However, no assurance can be provided that any such sales of our securities, awards, agreements or collaborations will occur in the future. While we may make additional sales of our equity securities, we do not have an obligation to do so.

Our future working capital requirements will depend on many factors, including, without limitation, potential impacts related to adjustments in the size of our staff, the scope and nature of opportunities related to our success or failure and the success or failure of certain other companies in nonclinical and clinical trials, including the development and commercialization of our current product candidates, and the availability of, and our ability to enter into financing transactions and research, development and commercialization collaborations on terms acceptable to us. In the future, to further advance the clinical development of our product candidates, as well as support our operating activities, we plan to seek additional financing, including both equity-based capital and funding from non-dilutive sources, and continue to carefully manage our operating costs, including, but not limited to, our clinical, nonclinical, and pre-commercialization programs.

Notwithstanding the foregoing, there can be no assurance that future financings will be available to us in sufficient amounts, in a timely manner, or on terms acceptable to us, if at all, or that current or future development and commercialization collaborations will generate revenue from future potential milestone payments or otherwise.

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Cash Flows

The following table summarizes changes in cash and cash equivalents for the fiscal years stated (in thousands):

Year Ended March 31,

Net cash used in operating activities $ (25,813) $ (49,716)

Net cash used in investing activities (61) (740)

Net cash provided by (used in) financing activities 128,402 (1,041)

Net decrease in cash and cash equivalents 102,528 (51,497)

Cash and cash equivalents at beginning of period 16,638 68,135

Cash and cash equivalents at end of period $ 119,166 $ 16,638

Operating Activities

Net cash used in operating activities for the year ended March 31, 2024 was $25.8 million, consisting primarily of our net loss of $29.4 million, adjusted for $2.8 million of non-cash charges primarily related to stock-based compensation expense and amortization of our operating lease right-of-use asset, and $0.8 million for net changes in operating assets and liabilities.

Net cash used in operating activities for the year ended March 31, 2023 was $49.7 million, consisting primarily of our net loss of $59.2 million, adjusted for $7.5 million of non-cash charges primarily related to stock-based compensation expense, non-operating expenses related to our acquisition of Pherin Pharmaceuticals, Inc. completed in February 2023 (the Pherin Acquisition), and amortization of our operating right-of-use asset, partially offset by $2.0 million for net changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the year ended March 31, 2024 was $0.1 million, consisting of purchases of property and equipment.

Net cash used in investing activities for the year ended March 31, 2023 was $0.7 million, consisting of $0.5 million related to the Pherin Acquisition and $0.2 million for purchases of property and equipment.

Financing Activities

Net cash provided by financing activities during the year ended March 31, 2024 was $128.4 million. This consisted primarily of net proceeds of $93.5 million resulting from the October 2023 Public Offering, net proceeds of $35.9 million resulting from the sale of shares of our common stock under the Sales Agreement, partially offset by costs related to repayment of notes payable of $1.0 million.

Net cash used in financing activities during the year ended March 31, 2023 was $1.0 million. This consisted primarily of repayment of notes payable of $1.0 million.

Future Funding Requirements

Based on our current operating plan, we believe that our existing cash and cash equivalents, will be sufficient to meet our anticipated operating expenses and capital expenditures through at least the next twelve months. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. See "Risk Factors" above. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain.

Our future capital requirements will depend on many factors, including:

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•the initiation, type, number, scope, results, costs and timing of, our ongoing and planned preclinical studies and clinical trials of existing product candidates or clinical trials of other potential product candidates we may choose to pursue in the future, including based on feedback received from regulatory authorities;

•the costs and timing of manufacturing for current or future product candidates, including commercial scale manufacturing if any product candidate is approved;

•the costs, timing and outcome of regulatory review of current or future product candidates;

•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

•our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

•the costs and timing of establishing or securing sales and marketing capabilities if any current or future product candidate is approved;

•our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payers and adequate market share and revenue for any approved products;

•costs associated with any products or technologies that we may in-license or acquire; and

•delays or issues with any of the above, including that the risk of each may be exacerbated any future pandemics or epidemic diseases, potential geopolitical instability and war, inflation or rising interest rates.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Contractual Obligations and Commitments

We lease our corporate office and laboratory space in South San Francisco, California. As of March 31, 2024, total future aggregate operating lease commitments were $2.4 million, with approximately $0.7 million due during the year ending March 31, 2025, and the remaining due in periods ending March 31, 2026 through 2028. These obligations are further described in Note 5 to our audited consolidated financial statements.

In addition, we enter into agreements in the normal course of business with certain vendors for the provision of goods and services, which includes manufacturing services with CMOs, development services with CROs, and research and development services from other industry consultants. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement. These obligations and commitments are not separately presented.

Critical Accounting Policies and Significant Judgements and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The

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preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our Consolidated Financial Statements included elsewhere in this Annual Report, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.

Revenue Recognition

Under ASC Topic 606, we recognize revenue when our customer obtains 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.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct combined performance obligation is identified. We then allocate the transaction price (that is, the amount of consideration we expect to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied. Our estimate of the transaction price for each contract includes all variable consideration to which we expect to be entitled, subject to the constraint on variable consideration. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized at the contract level is not significant.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time, based on the use of an output or input method.

License Rights — If the license to our intellectual property (IP) is determined to be distinct from the other promises or performance obligations identified in the arrangement, which generally include research and development services, we recognize revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a license is distinct from the other promises, we consider relevant facts and circumstances of each arrangement, including the research and development capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the collaboration partner can benefit from the license for its intended purpose without the receipt of the remaining promises, whether the value of the license is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises and whether it is separately identifiable from the remaining promises. For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined performance obligation and whether the license is the predominant promise within the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. If the license is the predominant promise, and it is determined that the license represents functional IP, revenue is recognized at the point in time when control of the license is transferred. If it is determined that the license does not represent functional IP, revenue is recognized over time using an appropriate method of measuring progress.

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added to the initial transaction price at the time in which the option exercise becomes probable. Any such adjustments to the transaction price are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. If the additional services are distinct, we evaluate the customer options for material rights, or options to acquire additional goods or services for free or at a discount. Material rights are recognized as a separate performance obligation at the inception of the arrangement. We allocate the transaction price to material rights based on the relative stand-alone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised or expires.

Milestone Payments — At the inception of an arrangement that includes development milestone payments, we evaluate whether the milestones are considered likely of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue recognized would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable to be achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Royalties — For arrangements that include sales-based royalties, including milestone payments based on a level of sales, where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from licensing agreements.

Amounts due to us for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as accounts receivable in our consolidated balance sheet. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amounts expected to be recognized as revenue within the one year following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within one year of the balance sheet date are classified as deferred revenue, net of current portion.

Research and Development Expenses

Research and development expenses consist of external and internal costs associated with our research and development activities, including its discovery and research efforts and the preclinical and clinical development of its product candidates. Research and development costs are expensed in the period incurred.

We have entered into various research and development contracts with clinical research organizations, clinical manufacturing organizations, clinical sites and other vendors and consultants. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of or after performance are reflected in the accompanying balance sheets as prepaid expenses or accrued liabilities, respectively. We record accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued liabilities, we analyze progress of the services, including the phase or completion of events, invoices received and contracted costs. We hold discussions with applicable personnel and outside service providers as to the progress of our clinical trials, or the services completed. Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from our estimates. Non-refundable advance payments for goods and services, including fees for process development, are deferred and recognized as expense in the period that the related goods are consumed, or services are performed.

Costs incurred in obtaining product or technology licenses are charged immediately to research and development expense if, at acquisition, the product or technology licensed has not achieved regulatory approval or reached technical feasibility and has no alternative future uses. We treated the Pherin Acquisition as an acquisition of assets for accounting purposes. Since, at the date of the acquisition, neither fasedienol, itruvone nor the other three pherines acquired had achieved regulatory approval and each required significant additional development and were without alternative future use, we recorded the costs related to acquiring the assets as research and development expense in our Consolidated Statement of Operations and Comprehensive Loss for our fiscal year ended March 31, 2023.

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Stock-Based Compensation

We recognize compensation cost for all stock-based awards to employees, non-employee directors, and consultants based on the grant date fair value of the award. For awards with only service periods, we record stock-based compensation expense over the requisite service period using the straight-line method. We have not granted restricted stock awards to employees or consultants, nor do we have any awards with market or performance conditions.

Estimating the fair value of equity-settled awards as of the grant date using the Black-Scholes option pricing model is based on assumptions. Changes in the assumptions can materially impact the fair value and ultimately how much stock-based compensation is recognized. These inputs are subjective and generally require significant analysis and judgement to develop. The inputs are as follows:

•Fair Value of Common Stock - The fair value of common stock is based on the closing stock price on the date of grant as reported on The Nasdaq Capital Market.

•Expected Term - The expected term represents the period that our options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for our stock option grants.

•Expected Volatility - The expected volatility of stock options is estimated based on the average historical volatility of our own common stock over a period equal to the expected term of the grant.

•Risk-Free Interest Rate - The risk-free interest rate is based on U.S. Treasury yields in effect at the grant date for notes with comparable terms as the awards.

•Expected Dividend Yield - We have never paid dividends on our common stock and have no plans to do so in the future. Therefore, we used an expected dividend of zero.

Warrants Issued in Connection with Equity Financing

We evaluate the appropriate balance sheet classification of warrants we issue as either equity or as a derivative liability. In accordance with ASC 815-40, Derivatives and Hedging-Contracts in the Entity’s Own Equity (ASC 815-40), we classify a warrant as equity if it is “indexed to the Company’s equity” and meets several specific conditions for equity classification. A warrant is not considered “indexed to the Company’s equity,” in general, when it contains certain types of exercise contingencies or potential adjustments to its exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized immediately in the Statement of Operations and Comprehensive Loss.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial condition and results of operations is disclosed in Note 2 to our audited Consolidated Financial Statements appearing elsewhere in this Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The disclosures in this section are not required because we qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Exchange Act.

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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 95

Consolidated Balance Sheets 97

Consolidated Statements of Operations and Comprehensive Loss 98

Consolidated Statements of Stockholders’ Equity 99

Consolidated Statements of Cash Flows 100

Notes to Consolidated Financial Statements 101

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Vistagen Therapeutics, Inc.

South San Francisco, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Vistagen Therapeutics, Inc. (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for each of the two years in the period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenues from Contracts with Customers

Description of the Matter

As discussed in Note 11 to the consolidated financial statements, the Company recognized approximately $0.9 million in revenue under the sublicense agreement with AffaMed Therapeutics, Inc. (“AffaMed”) during the fiscal year ended March 31, 2024.

Auditing management’s timing of revenue recognition attributed to the performance obligation of the agreement was challenging, as significant judgment was required in the evaluation of the period in which the performance obligation was satisfied.

We identified sublicense revenue recognition as a critical audit matter because of the judgments necessary for management to determine the timing of recognition for such revenue. Because of the complexity associated with applying the recognition criteria of Accounting Standards Codification, Topic 606, Revenue Recognition, notably related to the

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determination of timing of revenue recognition, this required extensive audit effort and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How We Addressed the Matter in Our Audit

Our audit procedures related to the recognition of sublicense revenue, included the following, among others:

•We evaluated the Company’s revenue recognition for the sublicense agreement through an inspection of the agreement and an evaluation of management’s revenue recognition analysis corresponding to the agreement. Our objective was to validate that revenue from the agreement was recognized in a manner commensurate with the terms of the underlying agreement and the relevant accounting guidance.

•We analyzed the sublicense agreement to determine the terms that may have an impact on revenue recognition were identified and properly considered in the evaluation of the accounting for the contract.

•We tested the measurement of completion of the identified performance obligation which included, among other procedures:

◦Performed procedures over management’s revenue schedules for accuracy and completeness by agreeing data to the underlying agreement.

◦Evaluated the manner in which the identified performance obligation was satisfied, and corroborated management estimates and judgments through a review of consistency with press releases and third-party data as a potential source of corroborating or contradictory evidence.

◦Discussed management’s judgments with the Company’s research and development personnel that oversee aspects of the license agreement.

◦Performed a sensitivity analysis on the inputs and assumptions used in the estimates and evaluated the impact of any subsequent events.

/s/ WithumSmith+Brown, PC

We have served as the Company's auditor since 2006.

San Francisco, California

June 11, 2024

PCAOB ID Number 100

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VISTAGEN THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

ASSETS

Current assets:

Prepaid expenses and other current assets 1,432 802

Deferred contract acquisition costs - current portion 74 67

Property and equipment, net 435 507

Right-of-use asset - operating lease 1,820 2,260

Deferred offering costs 495 496

Deferred contract acquisition costs - non-current portion 130 218

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Note payable — 105

Deferred revenue - current portion 791 714

Operating lease liability - current portion 550 486

Deferred revenue - non-current portion 2,674 2,315

Operating lease liability - non-current portion 1,570 2,120

Commitments and contingencies (Note 13)

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 123,653 $ 21,089

See accompanying notes to consolidated financial statements

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VISTAGEN THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

Year EndedMarch 31,

Revenues:

Sublicense and other revenue $ 1,064 $ (227)

Operating expenses:

Other income, net:

Other income 312 —

Income taxes (4) (6)

Net loss and comprehensive loss $ (29,362) $ (59,248)

Basic and diluted net loss per common share $ (1.52) $ (8.51)

See accompanying notes to consolidated financial statements

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VISTAGEN THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

Shares Amount

Stock-based compensation expense — — 3,336 — — 3,336

Issuance of common stock upon exercise of options (cashless) 3,646 — — — — —

Issuance of common stock upon exercise of options for cash 3,700 — 104 — — 104

Increase in fair value attributed to warrant modifications — — 78 — — 78

Stock-based compensation expense — — 2,182 — — 2,182

See accompanying notes to consolidated financial statements

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VISTAGEN THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 127 130

Loss on disposal of fixed assets 6 —

Warrant modification expense — 78

Amortization of operating lease right-of-use asset 441 402

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 250 3,188

Operating lease liability (495) (433)

Deferred sublicense revenue, net of deferred contract acquisition costs 516 206

Accounts payable and accrued expenses 522 (934)

Net cash used in operating activities (25,813) (49,716)

Cash flows from investing activities:

Purchases of property and equipment (61) (212)

Net cash used in investing activities (61) (740)

Cash flows from financing activities:

Net proceeds from issuance of common stock, including option exercises — 104

Net proceeds from sale of common stock under Employee Stock Purchase Plan 8 63

Repayment of note payable (985) (1,034)

Net cash (used in) provided by financing activities 128,402 (1,041)

Net increase (decrease) in cash and cash equivalents 102,528 (51,497)

Cash and cash equivalents at beginning of year 16,638 68,135

Cash and cash equivalents at end of year $ 119,166 $ 16,638

Supplemental disclosure of noncash activities:

Non-cash investing and financing activities:

Insurance premiums settled by issuing note payable $ 879 $ 1,140

Purchases of equipment included in accounts payable $ 29 $ -

See accompanying notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

Overview

Vistagen Therapeutics, Inc., a Nevada corporation (Vistagen, the Company, we, our, or us), is a clinical-stage biopharmaceutical company pioneering neuroscience to deliver differentiated therapies for psychiatric and neurological disorders. The majority of our clinical-stage product candidates belong to a new class of drugs known as pherines, which have the potential to rapidly deliver meaningful efficacy with a differentiated safety profile. Pherines are investigational neuroactive nasal sprays with innovative proposed mechanisms of action that activate chemosensory neurons in the nasal passages to impact fundamental neural circuits in the brain without the need for systemic absorption or binding to receptors in the brain. Our clinical-stage neuroscience pipeline also includes an investigational oral prodrug candidate with the potential to inhibit, but not block, NMDA receptor activity. We are passionate about transforming what is possible in the treatment of anxiety, depression, and other neuroscience disorders.

2.Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and reflect the operations of Vistagen and our wholly owned subsidiaries. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB). All material intercompany accounts and transactions have been eliminated in consolidation.

Liquidity

In order to complete the development of our neuroscience product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional capital. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we may seek to raise any necessary additional capital through equity or debt and equity financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, we are unable to estimate the exact amount and timing of our capital requirements. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, that will occur.

We have incurred significant losses and negative cash flows from operations since inception. As of March 31, 2024, we had an accumulated deficit of $356.2 million. We expect that our operating losses and negative cash flows will continue for the foreseeable future as we continue to develop our product candidates. We currently expect that our cash, and cash equivalents of $119.2 million as of March 31, 2024 will be sufficient to fund our operating expenses and capital requirements for at least 12 months from the date these audited consolidated financial statements are issued.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with 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. Significant estimates include, but are not limited to, those relating to stock-based compensation, revenue recognition, research and development expenses, determination of right-of-use assets under lease transactions and related lease obligations, and the assumptions used to value warrants. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may materially differ from these estimates and assumptions.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

have not experienced any losses in such accounts, and management believes that we are not exposed to significant credit risk due to the nature of the instruments held in the depository institutions.

Cash and Cash Equivalents

Cash and cash equivalents are considered to be highly liquid investments with maturities of three months or less at the date of purchase. Cash equivalents primarily represent funds invested in readily available money market accounts. As of March 31, 2024, we had cash and cash equivalents balances deposited at multiple major financial institutions.

Property and Equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three to ten years, or the remaining term of the lease).

Impairment of Long-Lived Assets

We evaluate our long-lived assets, which consist of property and equipment, for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. To date, we have not recorded any impairment losses on long-lived assets.

Deferred Offering Costs

Deferred offering costs include registration expenses related to our current registration statement on SEC Form S-3, which became effective on February 29, 2024,and expenses related to the Sales Agreement (as described in Note 8, Capital Stock). These expenses consist primarily of legal, accounting, SEC filing fees, and, as appropriate, Nasdaq filing fees. Upon the completion or partial completion of an applicable equity offering, the deferred expenses are charged to additional paid-in capital. If there are any deferred offering costs remaining at the expiration of our current registration statement on SEC Form S-3 or the equity financing agreement, or if the financing is abandoned, terminated or significantly delayed, such costs are charged to expense.

Revenue Recognition

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct combined performance obligation is identified. We then allocate the transaction price (that is, the amount of consideration we expect to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognize the associated revenue when (or as) each performance obligation is satisfied. Our estimate of the transaction price for each contract includes all variable consideration to which we expect to be entitled, subject to the constraint on variable consideration. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized at the contract level is not significant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

promises, we consider relevant facts and circumstances of each arrangement, including the research and development capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the collaboration partner can benefit from the license for its intended purpose without the receipt of the remaining promises, whether the value of the license is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises and whether it is separately identifiable from the remaining promises. For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined performance obligation and whether the license is the predominant promise within the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. If the license is the predominant promise, and it is determined that the license represents functional IP, revenue is recognized at the point in time when control of the license is transferred. If it is determined that the license does not represent functional IP, revenue is recognized over time using an appropriate method of measuring progress.

Customer Options — Our arrangements may provide a collaborator with the right to acquire additional goods or services in the future. If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the additional goods and services underlying the customer options are evaluated in order to determine if these additional goods or services are distinct from those included as a performance obligation at the outset of the arrangement. If the additional services are not determined to be distinct, the variable consideration pertaining to the customer option is added to the initial transaction price at the time in which the option exercise becomes probable. Any such adjustments to the transaction price are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. If the additional services are distinct, we evaluate the customer options for material rights, or options to acquire additional goods or services for free or at a discount. Material rights are recognized as a separate performance obligation at the inception of the arrangement. We allocate the transaction price to material rights based on the relative stand-alone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised or expires.

Milestone Payments — At the inception of an arrangement that includes development milestone payments, we evaluate whether the milestones are considered likely to be achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue recognized would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable to be achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Amounts due to us for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as accounts receivable on the consolidated balance sheets. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amounts expected to be recognized as revenue within the one year following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within the one year following the balance sheet date are classified as deferred revenue, net of current portion.

Research and Development Expenses

Research and development expenses are composed of both internal and external costs. Internal costs include salaries and employment-related expenses, including stock-based compensation expense, of scientific personnel and direct project

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

costs. External research and development expenses consist primarily of costs associated with clinical and nonclinical development programs and are charged to expense as incurred.

We also record accruals for estimated ongoing clinical trial costs. Clinical trial costs primarily represent costs incurred by contract research organizations (CROs) and clinical trial sites. We analyze the progress of the clinical trial, including levels of subject enrollment, invoices received and contracted costs when evaluating the adequacy of accrued liabilities. In accruing for these services, we estimate the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers and our estimates of accrued expenses based on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.

Income Taxes

We account for income taxes using the asset and liability approach promulgated by ASC 740,Income Taxes, for financial reporting purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce the deferred tax assets to an amount expected to be realized.

Uncertain tax positions, for which our assessment is that there is a more than 50% probability of sustaining the position upon challenge by a taxing authority based on its technical merits, are subject to certain recognition and measurement criteria. The nature of the uncertain tax positions is often very complex and subject to change, and the amounts at issue can be substantial. We develop our cumulative probability assessment of the measurement of uncertain tax positions using internal experience, judgment and assistance from our professional advisors. We re-evaluate these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to, changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.

Leases

At the inception of a contractual agreement, we determine whether the contract is or contains a lease, by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, we record the associated lease liability and corresponding right-of-use asset upon commencement of the lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. When determining the lease term, we include options to extend or terminate the lease when it is reasonably certain, at inception, that we will exercise that option. Additionally, we evaluate leases at their inception to determine if they are to be accounted for as an operating lease or a finance lease.

Operating lease assets represent our right to use an underlying asset for the lease term (Right-of-use assets) and operating lease liabilities represent our obligation to make lease payments arising from the lease. The lease payments used to determine our operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in determining our Right-of-use assets.

Operating lease liabilities with a term greater than one year and their corresponding right-of-use assets are recognized on the balance sheets at the commencement date of the lease based on the present value of lease payments over the expected lease term. The Company excludes short-term leases, if any, having initial terms of 12 months or less at lease commencement as an accounting policy election. Variable lease payments are amounts owed by us to a lessor that are not fixed, such as reimbursement for common area maintenance costs for our facility lease; and are expensed when incurred. Operating right-of-use assets are reflected in right-of-use assets in the accompanying balance sheets. Operating lease liabilities are reflected in operating lease obligations, current and non-current in the accompanying balance sheets.

Financing leases, formerly referred to as capitalized leases, are treated similarly to operating leases except that the asset subject to the lease is included in the appropriate fixed asset category, rather than recorded as a Right-of-use asset, and depreciated over its estimated useful life, or lease term, if shorter.

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Stock-Based Compensation

Stock-based compensation is accounted for in accordance with ASC 718, Compensation - Stock Compensation (ASC 718) and is measured at the grant date fair value for employee, officer, director and non-employee equity awards and is recognized over the requisite service period, which is generally the vesting period. The Company recognizes forfeitures as they occur. Stock-based compensation is classified in the Consolidated Statements of Operations and Comprehensive Loss in the same manner in which the recipient's payroll or fees are classified.

The fair value of stock options is estimated using a Black-Scholes valuation model on the date of grant. This method requires certain assumptions be used as inputs, such as the fair value of the underlying common stock, expected term of the option before exercise, expected volatility of our common stock, risk-free interest rate and expected dividend. Options granted have a maximum contractual term of ten years. We have limited historical stock option activity and therefore estimates the expected term of stock options granted using the simplified method, which represents the arithmetic average of the original contractual term of the stock option and its weighted-average vesting term. The expected volatility of stock options is estimated based on the average historical volatility of our own common stock. The risk-free interest rates used are based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. treasury notes with maturities approximately equal to the expected term of the stock options. We have historically not declared or paid any dividends and we do not currently expect to do so in the foreseeable future, and therefore have estimated the dividend yield to be zero.

Fair Value Measurements

Financial assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the price we would receive to sell an investment in a timely transaction or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. A framework is used for measuring fair value utilizing a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

•Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

•Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

•Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

Warrants Issued in Connection with Equity Financing

We evaluate the appropriate balance sheet classification of warrants we issue as either equity or as a derivative liability. In accordance with ASC 815-40, Derivatives and Hedging-Contracts in the Entity’s Own Equity (ASC 815-40), we classify a warrant as equity if it is “indexed to the Company’s equity” and meets several specific conditions for equity classification. A warrant is not considered “indexed to the Company’s equity,” in general, when it contains certain types of exercise contingencies or potential adjustments to its exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement provisions that result in the warrants being accounted for under ASC 480, Distinguishing Liabilities from Equity or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheets at fair value with any changes in its fair value recognized immediately in the Statements of Operations and Comprehensive Loss. AtMarch 31, 2024and 2023 all of our outstanding warrants were classified as equity.

Comprehensive Loss

We have no components of other comprehensive loss other than net loss, and accordingly, our comprehensive loss is equivalent to our net loss for the periods presented.

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Net Loss Per Share

We calculate basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Certain warrants participate in distributions of the Company. The Pre-Funded Warrants associated with the October 2023 Public Offering (see Note 8 below) are considered outstanding shares in the basic earnings per share calculation given their nominal exercise price. The net loss attributable to common stockholders is not allocated to the warrant holders as the holders of warrants do not have a contractual obligation to share in losses. Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities, including outstanding warrants to purchase common stock and outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position.

The following table summarizes the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

As of March 31,

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. We manage our operations as a single reportable segment for the purposes of assessing performance and making operating decisions.

Related Parties

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. ASC 850, Related Party Disclosures (ASC 850) requires that transactions with related parties that would make a difference in decision-making shall be disclosed so that users of the financial statements can evaluate their significance.

Recently Adopted Accounting Principles

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard amended the impairment model requiring that credit losses be reported using an expected losses model rather than the incurred losses model. For available-for-sale debt securities with expected credit losses, this standard requires allowances to be recorded instead of reducing the amortized cost of the investment. We adopted ASU 2016-13, and related updates, using modified retrospective approach on April 1, 2023. The adoption had an immaterial impact on our financial statements and related disclosures.

Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after

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December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this guidance on our financial statements.

Although there were several other new accounting pronouncements issued or proposed by the FASB, we do not believe any of those accounting pronouncements have had or will have a material impact on our financial position or operating results.

3. Fair Value Measurements

We have certain financial assets that are measured at fair value on a recurring basis, which consist of cash equivalents held in money market funds. These assets, which are classified within Level 1 of the fair value hierarchy and are reflected as a component of cash and cash equivalents on the consolidated balance sheets, totaled $115.3 million and $5.0 million at March 31, 2024 and 2023, respectively. We had no financial liabilities measured at fair value on a recurring basis at March 31, 2024 or March 31, 2023.

4. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

As of March 31,

Office furniture and equipment 22 40

Manufacturing equipment 211 211

Accumulated depreciation and amortization (1,254) (1,193)

Property and equipment, net $ 435 $ 507

We recognized depreciation expense of $127,000 and $130,000 for the years ended March 31, 2024 and 2023, respectively.

5. Leases

Operating Lease

We have a single lease for our headquarters, which includes office and laboratory space, in South San Francisco, California. The lease commenced in April 2013, and was subsequently amended in 2016 to extend the lease term to July 31, 2022, and included onefive-year extension option. For the purpose of determining the right-of-use asset and associated lease liability, we determined that we would likely exercise the five-year extension option through July 2027. On October 14, 2021, we entered into an amendment to the lease (the Lease Amendment), pursuant to which the term of the lease was extended from August 1, 2022 to July 31, 2027. Under the terms of the Lease Amendment, we have the option to renew the lease for an additional five-year term commencing on August 1, 2027. We did not include the remaining renewal option in determining the lease term, as we were not reasonably certain to exercise either renewal option.

The following table summarizes the effect of operating lease costs in our consolidated statements of operations (in thousands):

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Year EndedMarch 31,

Operating lease cost $ 645 $ 645

Maturities of lease liabilities as of March 31, 2024 were as follows (in thousands):

Year ending March 31, Amount

Thereafter —

Total minimum lease payments 2,449

Less: amount representing interest (329)

Present value of operating lease liabilities 2,120

Less: operating lease liabilities - current portion 550

Operating lease liabilities - non-current portion $ 1,570

The lease had a remaining term of 3.3 years and 4.3 years as of March 31, 2024 and 2023, respectively. The lease liability was calculated based on a weighted-average discount rate of 8.54% as of March 31, 2024 and 2023. During the years ended March 31, 2024 and 2023, we made cash payments for amounts included in the measurement of lease liabilities of $0.7 million and $0.9 million, respectively.

6. Accrued Expenses

Accrued expenses are composed of the following (in thousands):

As of March 31,

Accrued research and development costs $ 482 $ 412

Accrued employee and non-employee director compensation costs 1,619 337

Accrued legal and professional service fees 117 38

Total accrued expenses $ 2,235 $ 796

7. Note Payable

In May 2023, we executed a 7.43% promissory note in the principal amount of $0.9 million in connection with certain insurance policy renewal premiums. The note was payable in monthly installments of $0.1 million, including principal and interest, through February 2024. We paid this note in full in August 2023.

In May 2022, we executed a 3.88% promissory note in the principal amount of $1.1 million in connection with certain insurance policy premiums. The note was payable in monthly installments of $0.1 million, including principal and interest, and we paid this note in full in April 2023.

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8. Capital Stock

Common Stock

October 2023 Public Offering

On October 2, 2023, we completed an underwritten public offering (the October 2023 Public Offering), whereby we offered and sold, for gross proceeds of approximately $100,000,000, a total of 15,010,810 shares of our common stock and, to certain investors, 3,577,240 pre-funded warrants to purchase up to 3,577,240 shares of common stock in lieu of shares of common stock (the Pre-Funded Warrants). Each share of common stock and/or Pre-Funded Warrant was issued together with a ratably allocated portion of both warrants to purchase up to 9,294,022 shares of common stock (or pre-funded warrants to purchase up to 9,294,022 shares of common stock in lieu thereof) with an exercise price of $5.38 per share (the T1 Warrants) and warrants to purchase 11,265,086 shares of common stock (or pre-funded warrants to purchase up to 11,265,086 shares of common stock in lieu thereof) with an exercise price of $8.877 per share (the T2 Warrants). The combined offering price for each share of common stock, accompanying T1 Warrant and accompanying T2 Warrant was $5.38. The combined offering price per Pre-Funded Warrant, accompanying T1 Warrant and accompanying T2 Warrant was $5.379. The securities were issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-254299) and a related prospectus supplement filed with the SEC on October 3, 2023. The October 2023 Public Offering closed on October 4, 2023. The net proceeds to us from the October 2023 Public Offering were approximately $93.5 million, after deducting expenses related to the offering, including commissions, legal expenses and other offering costs.

The Pre-Funded Warrants, T1 Warrants and T2 Warrants are exercisable, only at the option of the holder, at any time after October 4, 2023. Holders of Pre-Funded Warrants, T1 Warrants, and T2 Warrants are entitled to receive dividends, if declared, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the common stock. We may not effect the exercise of any Pre-Funded, T1 Warrant, or T2 Warrant, and a holder will not be entitled to exercise any portion of any Pre-Funded, T1 or T2 Warrant, which, upon giving effect to such exercise, would cause the aggregate number of shares of common stock beneficially owned by the holder of such warrant (together with its affiliates) to exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. However, any holder may increase or decrease such percentage to any other percentage (not to exceed 19.99% if exceeding such percentage would result in a change of control under Nasdaq Listing Rule 5636(b) or any successor rule) upon at least 61 days’ prior notice from the holder to us subject to the terms of the respective warrant agreement.

We evaluated the terms of the warrants issued and determined that they should be classified as equity instruments within additional paid-in capital.

Open Market Sale Agreement

In May 2021, we entered into an Open Market Sale AgreementSM (the Sales Agreement) with Jefferies LLC, as sales agent (Jefferies), with respect to an at-the-market offering program (the ATM) under which we may, at our sole discretion, offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $75.0 million (the Shares) through Jefferies. We will pay Jefferies a commission of up to three percent (3.0%) of the aggregate gross proceeds from any sales of the Shares under the Sales Agreement. If and when we direct Jefferies to offer and sell Shares under the Sales Agreement, Jefferies may sell the Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including block transactions, sales made directly on the Nasdaq Capital Market or any other trading market for our common stock. In addition, with our consent, Jefferies may sell the Shares in negotiated transactions. Under certain circumstances, we may instruct Jefferies not to sell the Shares if the sales cannot be effected at or above the price we may designate from time to time. Pursuant to our registration statement on SEC Form S-3, filed on February 13, 2024 and declared effective on February 29, 2024, we may now, at our option, offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $100.0 million through Jefferies as our sales agent.

During the years ended March 31, 2024 and 2023, we sold an aggregate of 4,698,495 and no shares, respectively, under the Sales Agreement, for net proceeds of $36.2 million and $0, respectively. As of March 31, 2024, $100.0 million of common stock remained available for sale under the Sales Agreement.

We record transactions under the Sales Agreement on a settlement date basis. All legal fees and accounting expenses incurred in connection with the Sales Agreement are recorded as Deferred Offering Costs and are amortized to Additional

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Paid-in Capital as sales of shares are made under the Sales Agreement. With execution of the Sales Agreement and subsequent amendment,we incurred legal fees and accounting expenses aggregating approximately $0.8 million, of which approximately $0.3 million and $0 were amortized to additional paid-in capital during the year ending March 31, 2024 and 2023, respectively. The Sales Agreement will terminate upon the earlier of (i) the sale of all shares subject to the Sales Agreement or (ii) the termination of the Sales Agreement by Jefferies or by us, as permitted.

Warrant Exercises, Expirations and Modifications

There were no warrant exercises during the years ended March 31, 2024 and 2023. Warrants to purchase 263,510 shares of our common stock at a weighted average exercise price of $48.94 per share expired unexercised during the year ended March 31, 2023.

At March 31, 2024, the following common stock warrants were outstanding:

(a) The warrants will expire 60 days after the later of (i) the date on which the Company first publicly discloses, whether by press release or Form 8-K filing, the top-line data for its PALISADE-3 Phase 3 clinical trial of fasedienol for the acute treatment of anxiety in adults with SAD and (ii) the date on which the Company first publicly discloses, whether by press release or Form 8-K filing, the top-line data for its PALISADE-4 Phase 3 clinical trial of fasedienol for the acute treatment of anxiety in adults with SAD.

The weighted average exercise price of all outstanding warrants at March 31, 2024 is $6.24 per share. No outstanding warrant is subject to any down-round anti-dilution protection feature. All outstanding warrants are exercisable by the holders only by payment in cash of the stated exercise price per share.

Reserved Shares

The Company had the following shares of common stock reserved for future issuance:

Issuance of common stock upon exercise of outstanding warrants 44,741,142 45,685

At March 31, 2024, we have 222,872,371 authorized shares of our common stock not subject to reserves and available for future issuance.

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9. Stock-Based Compensation

Equity Incentive Plans

2016 Equity Incentive Plan

Our 2016 Stock Incentive Plan (the 2016 Plan) provided for the grant of stock options, restricted shares of common stock, stock appreciation rights and dividend equivalent rights to employees, officers, members of the board of directors, consultants and advisors of the Company. Upon the adoption of our 2019 Plan, no further grants were permissible under the 2016 Plan and 46,280 authorized shares were transferred to the 2019 Plan and became issuable therefrom. Any options or awards outstanding under the 2016 Plan remained outstanding and effective.

2019 Equity Incentive Plan

Our Board approved the Vistagen Therapeutics, Inc. 2019 Omnibus Equity Incentive Plan (the 2019 Plan) on May 27, 2019, and our stockholders adopted it and ratified all previously issued grants on September 5, 2019. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.

On June 28, 2021, our Board approved and, at our Annual Meeting of Stockholders on September 17, 2021, our stockholders approved certain amendments to the 2019 Plan (Amended 2019 Plan). Upon approval of the Amended 2019 Plan by our stockholders, the total number of shares authorized to be issued under the 2019 Plan increased to 600,000 shares.

At March 31, 2024, there were 466,438 registered shares of our common stock remaining available for grant under the Amended 2019 Plan. On April 3, 2024, the Company granted 436,000options to employees with a weighted average exercise price of $5.38.

Awards granted under the Company’s equity plans expire no later than 10 years from the date of grant. Options and restricted stock granted to employees typically vest over a four-year period but may have been granted with different vesting terms.

A summary of the Company’s stock option activity for the year ended March 31, 2024 is as follows (in thousands, except share and per share data and years):

Exercised — $ —

Stock-Based Compensation Expense

The fair value of stock options was estimated using the following assumptions (excluding option modifications):

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Year Ended December 31,

Risk-free interest rate 3.9% - 4.6% 2.6% - 4.1%

Dividend yield — —

Stock-based compensation expense recognized for all equity awards has been included in the consolidated statements of operations and comprehensive loss as follows (in thousands):

Year Ended March 31,

Research and development expense $ 1,174 $ 1,365

General and administrative expense 1,008 1,972

Total stock-based compensation expense $ 2,182 $ 3,337

The weighted-average grant date fair value of options granted for the years ended March 31, 2024 and 2023 was $4.40 and $8.10 per share, respectively. For the years ended March 31, 2024 and 2023, the total fair value of options vested was $2.3 million and $3.5 million, respectively. The aggregate intrinsic value of options exercised for the years ended March 31, 2024 and 2023 was $0 and $0.1 million, respectively. As of March 31, 2024, total compensation cost not yet recognized related to unvested stock options was $2.1 million, which is expected to be recognized over a weighted-average period of 1.6 years.

Option Modifications

On September 12, 2022, outstanding options to purchase an aggregate of 44,071 shares of our common stock previously granted to a terminated employee and otherwise set to expire on September 13, 2022, were modified to extend the exercisability of such options for a period of 90 days. No other term of the options, including exercise price, was modified. The option modification resulted in incremental expense of $0.1 million which was recognized during the year ended March 31, 2023. These options were subsequently modified on December 12, 2022, to extend the exercisability of such options through March 31, 2023, resulting in immaterial incremental expense.

2019 Employee Stock Purchase Plan

Our Board approved the Vistagen Therapeutics, Inc. 2019 Employee Stock Purchase Plan (the 2019 ESPP) on June 13, 2019. Our stockholders approved the 2019 ESPP at our annual meeting on September 5, 2019. A maximum of 33,334 shares of our common stock were originally reserved for purchase under the 2019 ESPP.

The 2019 ESPP permits eligible employees who elect to participate in an offering under the 2019 ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the 2019 ESPP. The price of common stock purchased under the 2019 ESPP is equal to 85% of the lower of the fair market value of the common stock at the commencement date of each offering period or the relevant date of purchase. Each offering period is six months, with new offering periods commencing every six months on or about the dates of January 1 and July 1 of each year.

During the years ended March 31, 2024 and 2023, the Company issued 4,843 and 5,167 shares, respectively, of common stock in connection with the 2019 ESPP. As of March 31, 2024, there were 19,480 shares available for future purchase under the 2019 ESPP.

During the years ended March 31, 2024 and 2023, the Company recognized an immaterial amount of expense under the 2019 ESPP.

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10. Income Taxes

We had no current or deferred federal and state income tax expense or benefit for the year ended March 31, 2024, because we generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized.

Income tax expense (benefit) differed from the amounts computed by applying the statutory federal income tax rate of 21% to pretax income (loss) as a result of the following:

Year Ended March 31,

Computed expected tax benefit (21.00) % (21.00) %

State income taxes, net of federal benefit 0.00 % 0.00 %

Tax effect of warrant modifications 0.00 % 0.03 %

Tax effect of research and development credits 0.00 % (0.78) %

Tax effect of stock compensation 1.11 % 0.50 %

Tax effect of other non-deductible items 0.03 % 1.27 %

Expired net operating loss carryforwards 0.92 % 0.17 %

Change in valuation allowance (federal only) 18.45 % 18.57 %

Income tax expense 0.00 % 0.00 %

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

Deferred tax assets:

Basis differences in property and equipment - —

Research and development credit carryforwards — 3,591

Operating lease Right-of-Use asset 64 73

Capitalized research and development costs 10,188 8,215

Total deferred tax assets net of valuation allowance 20 5

Deferred tax liabilities:

Basis differences in property and equipment (20) (5)

Total deferred tax liabilities (20) (5)

Net deferred tax asset (liability) $ - $ -

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Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $1.3 million and $10.6 million during the fiscal years ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had U.S. federal net operating loss carryforwards of approximately $208.0 million. Federal net operating loss carryforwards of approximately $82.8 million generated through our fiscal year ended March 31, 2018 will expire in our fiscal years ending March 31, 2025 through March 31, 2038. Federal net operating loss carryforwards of approximately $125.2 million generated in fiscal years ending after March 31, 2018 will carry forward indefinitely, but are subject to an 80% taxable income limitation. As of March 31, 2024, we had state net operating loss carryforwards of approximately $65.8 million, which will expire in fiscal years ending in 2029 through 2043. We also have federal and state research and development tax credit carryforwards of approximately $3.3 million and $1.6 million, respectively. The federal tax credits will expire at various dates beginning with our fiscal year ending March 31, 2029, unless previously utilized. The state tax credits do not expire and will carry forward indefinitely until utilized.

The Tax Cuts and Jobs Act of 2017 (TCJA) made a significant change to Internal Revenue Code Section 174 that went into effect for taxable years beginning after December 31, 2021. The change eliminated the ability to currently deduct research and development costs. Instead, these costs must be capitalized and amortized. As a result, we capitalized research and development costs of approximately $19.4 million for tax purposes for the year ended March 31, 2024.

U.S. federal and state tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of a change in a corporation's ownership. We have not performed a change in ownership analysis since our inception in 1998, and accordingly, some or all of our net operating loss carryforwards may not be available to offset future taxable income, if any.

We file income tax returns in the U.S. federal, and various U.S. state jurisdictions. We are subject to U.S. federal and state income tax examinations by tax authorities for tax years 2004 through 2024 due to net operating losses that are being carried forward for tax purposes, but we are not currently under examination by tax authorities in any jurisdiction.

Uncertain Tax Positions

Our unrecognized tax benefits at March 31, 2024 and 2023 relate entirely to research and development tax credits. The total amount of unrecognized tax benefits at March 31, 2024 and 2023 is $4.9 million and $1.3 million, respectively. If recognized, none of the unrecognized tax benefits would impact our effective tax rate. The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

Year Ended March 31,

Unrecognized benefit - beginning of period $ 1,283 $ 1,088

Prior period position increases (decreases) 3,648 —

Current period tax position increases — 195

Unrecognized benefit - end of period $ 4,931 $ 1,283

Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. We incurred no interest or penalties related to unrecognized tax benefits in the years ended March 31, 2024 or 2023. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date.

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11. Sublicense and Collaborative Agreements

The following table presents changes in the balances of receivables and contract liabilities related to strategic collaboration agreements during the year ended March 31, 2024 (in thousands):

Balance atMarch 31, 2023 Additions Deductions Balance atMarch 31, 2024

Contract assets:

Deferred contract acquisition costs $ 285 $ — $ (81) $ 204

Contract liabilities:

AffaMed Agreement

On June 24, 2020,we entered into a license and collaboration agreement with EverInsight Therapeutics Inc. (EverInsight). Subsequent to entering into the agreement with EverInsight, in October 2020,EverInsight merged with AffaMed Therapeutics, Inc., which as a combined entity is focusing on developing and commercializing therapeutics to address ophthalmologic and neurological disorders in Greater China (which includes Mainland China, Hong Kong, Macau and Taiwan) and beyond. Accordingly, we are now referring to EverInsight as AffaMed and the agreement originally entered into with EverInsight as the AffaMed Agreement. Under the AffaMed Agreement, we granted AffaMed an exclusive license to develop and commercialize fasedienol for SAD and other anxiety-related disorders in Greater China, South Korea and Southeast Asia (which includes Indonesia, Malaysia, Philippines, Thailand and Vietnam) (collectively, the Territory). We retain exclusive development and commercialization rights for fasedienol in the U.S. and throughout the rest of the world.

Under the terms of the AffaMed Agreement, AffaMed is responsible for all costs related to developing, obtaining regulatory approval of, and commercializing fasedienol for treatment of SAD, and potentially other anxiety-related indications, in the Territory. A joint development committee has been established between AffaMed and us to coordinate and review the development and commercialization plans with respect to fasedienol in the Territory.

We are responsible for pursuing clinical development and regulatory submissions of fasedienol for acute treatment of anxiety in adults with SAD, and potentially other anxiety-related indications, in the United States on a ‘‘best efforts’’ basis, with no guarantee of success. AffaMed may participate in the Phase 3 global clinical trial of fasedienol and will assume all direct costs and expenses of conducting such clinical trial in the Territory and a portion of the indirect costs of a global trial in which they participate. We will transfer all development data (nonclinical and clinical data) and our regulatory documentation related to fasedienol throughout the term as it is developed or generated or otherwise comes into our control. We will grant to AffaMed a Right of Reference to our regulatory documentation and our development data.

Under the terms of the AffaMed Agreement, AffaMed paid us a non-refundable upfront license payment of $5.0 million in August 2020.Additionally, upon successful development and commercialization of fasedienol in the Territory, we are eligible to receive milestone payments of up to $172.0 million. Further, we are eligible to receive royalty payments on a country-by-country basis on net sales for the later of ten years or the expiration of market or regulatory exclusivity in the jurisdiction, except that payments will be reduced on a country-by-country basis in the event that there is no market exclusivity in the period. Royalty payments mayalso be reduced if there is generic competitive product in the period.

We have determined that we have one combined performance obligation for the license to develop and commercialize fasedienol in the Territory and related development and regulatory services. In addition, AffaMed has an option that may create manufacturing obligations for us during development if exercised by AffaMed. This option for manufacturing services was evaluated and determined not to include a material right.

Development and commercialization milestones were not considered probable at inception and therefore were excluded from the initial transaction price. The royalties were excluded from the initial transaction price because they relate to a license of intellectual property and are subject to the royalty constraint.

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We recognize revenue as the combined performance obligation is satisfied over time using an output method. Significant management judgment is required to determine the level of effort attributable to the performance obligation included in the AffaMed Agreement and the period over which we expect to complete our performance obligation under the arrangement. The performance period or measure of progress was estimated at the inception of the arrangement and is re-evaluated in subsequent reporting periods. This re-evaluation may shorten or lengthen the period over which we recognize revenue. Because our PALISADE-1 trial did not meet its primary efficacy endpoint and due to the resulting anticipated delay in subsequent clinical and regulatory processes for fasdienol, at September 30, 2023, we estimated that our performance obligation under the AffaMed Agreement will be completed at the end of calendar 2026 rather than mid-calendar 2024. We have not subsequently revised our estimate, however, we will further adjust our estimates, as necessary, in subsequent periods as we obtain additional information on which to base our projections, including our ability to finance future clinical trials and satisfy other NDA-enabling requirements and/or our prospects for partnering future development of fasedienol in SAD with other entities. Contract acquisition costs and deferred revenue was $0.2 million and $2.8 million, respectively, as of March 31, 2022. As a result of the change in our estimate of the time required to complete our performance obligation, we recorded a cumulative catch-up adjustment for the quarter ending September 30, 2022 pursuant to which we de-recognized $0.9 million of previously recognized revenue, resulting in a $0.2 million net de-recognition of income for the year ended March 31, 2023. During the year ended March 31, 2024, we recognized revenue of $0.9 million related to the performance obligation under the AffaMed Agreement, all of which was included in the liability balance at the beginning of the period. At March 31, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligation (deferred revenue) is $2.2 million which will be recognized as revenue as our performance obligation is completed.

Contract Acquisition Costs

During the quarter ended September 30, 2020,we made cash payments aggregating $0.4 million for sublicense fees, which we were obligated to make pursuant to our fasedienol license from Pherin, and fees for consulting services exclusively related to the AffaMed Agreement. Additionally, onJune 24, 2020,we issued 7,788 unregistered shares of our common stock, valued at $0.1 million, as partial compensation for consulting services exclusively related to the AffaMed Agreement. These sublicense fees and consulting payments and the fair value of the common stock issued, aggregating $0.5 million, were capitalized as deferred contract acquisition costs in our Consolidated Balance Sheets. Similar to the related deferred revenue, capitalized contract acquisition costs are amortized over the periods during which we expect to satisfy the performance obligation under the AffaMed Agreement. As with deferred revenue, we recorded a cumulative catch-up adjustment inSeptember 2023pursuant to which we reversed $0.1 million of previously recognized contract acquisition cost expense related to the reassessment of the timeline for satisfying our performance obligation. Amortization expense related to the contract acquisition costs was immaterial for the years ended March 31, 2024 and 2023.

Unless earlier terminated due to certain material breaches of the contract, or otherwise, the AffaMed Agreement will expire on a jurisdiction-by-jurisdiction basis until the latest to occur of the expiration of the last valid claim under a licensed patent of fasedienol in such jurisdiction, the expiration of regulatory exclusivity in such jurisdiction or ten years after the first commercial sale of fasedienol in such jurisdiction.

Fuji Pharma Agreement

On September 1, 2023, we entered into an Exclusive Negotiation Agreement (the Negotiation Agreement) with Fuji Pharma Co., Ltd. (Fuji Pharma), a Tokyo Stock Exchange-listed, Japan-based pharmaceutical company. Pursuant to the terms and conditions of the Negotiation Agreement, we agreed, for a limited period of time, to negotiate exclusively with Fuji Pharma for a potential exclusive license agreement to develop and commercialize our PH80 product candidate in Japan (the Potential Definitive Agreement). The Negotiation Agreement provides for an exclusive negotiation period beginning on the date of formal written notice being received by Fuji Pharma that we have selected a contract development and manufacturing organization to conduct preclinical toxicology studies for the product candidate (the Payment Event), and terminating on the later to occur of (i) fourteen (14) months from the date of the Payment Event or (ii) ninety (90) days from the date that the U.S. Food and Drug Administration accepts an Investigational New Drug application for PH80 for the treatment of vasomotor symptoms (hot flashes) due to menopause (the Exclusive Negotiation Period).

As consideration for the Exclusive Negotiation Period, Fuji Pharma agreed to make a payment to us of $1.5 million (the Purchase Price), payable upon occurrence of the Payment Event. The Payment Event occurred in October 2023, and we received payment of the Purchase Price in full in November 2023. The Purchase Price is non-refundable, except upon a material breach of the Negotiation Agreement by the Company; however, should the Company and Fuji Pharma enter into

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Potential Definitive Agreement, the Purchase Price will be creditable against any upfront fee due in connection with the execution of such agreement. Neither the Company nor Fuji Pharma is obligated to enter into the Potential Definitive Agreement, and if the Company and Fuji Pharma have not entered into the Potential Definitive Agreement on or before the end of the Exclusive Negotiation Period, either the Company or Fuji Pharma may terminate any further negotiations.

During the year ended March 31, 2024, we recognized an immaterial amount of revenue, at the inception of the Negotiation Agreement. The remaining deferred revenue under the Negotiation Agreement will be recognized upon termination of the Exclusive Negotiation Period, which is currently expected in April 2025, or accounted for as a creditable prepayment under ASC 606, should an exclusive license agreement be reached with Fuji Pharma prior to the date of termination. Remaining deferred revenue under the Negotiation Agreement of $1.3 million is reflected as non-current on the consolidated balance sheets as of March 31, 2024.

12. Related Party Transactions

In August 2023, in connection with his retirement, we entered into a consulting agreement with our former Chief Financial Officer, Jerrold D. Dotson, to assist in transition matters related to the employment of our new Chief Financial Officer. During the year ended March 31, 2024, we recorded expense under the agreement of $170,000.

In January 2022, we entered into a consulting agreement with FitzPatrick Co. LLC, a consulting firm for which Margaret FitzPatrick, an independent member of our Board of Directors, is Managing Director, to provide corporate development and public relations advisory services. The consulting agreement, as amended, was set to expire on December 31, 2023. However, the Company and FitzPatrick Co. LLC mutually agreed to conclude the term of the FitzPatrick Co. Consulting Agreement effective October 1, 2023, as all matters set forth in the statement of work were completed as of that date. We recorded expense of $70,000 and $170,000 for the years ended March 31, 2024 and 2023, respectively.

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VTGN · 10-K · period ended 2024-03-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

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VTGN · 10-K · period ended 2024-03-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

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