VistaGen Therapeutics Inc.
06/15/2026 | Press release | Distributed by Public on 06/15/2026 14:50
Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)
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; our ability to successfully complete ongoing or future clinical trials of our product candidates within estimated timelines or at all, receive regulatory approval or be commercially successful; our dependence on third-party collaborators for the development, manufacturing, regulatory approval, and/or commercialization of our product candidates and other aspects of our business, which are outside of our full control; the effect of regulation by the U.S. Food and Drug Administration (the FDA) and other domestic and foreign regulatory agencies; current and potential future healthcare reforms; our ability to obtain, maintain and enforce patents on our products if/or when we receive regulatory approval of any of our products; 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 Annual 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 our Board of Directors (the Board) or disadvantageous to our stockholders.
Moreover, the biopharmaceutical industry in which we operate is very competitive and rapidly changing. New challenges and risks emerge frequently. It is not possible for our management or Board to predict all challenges and risks we will face, 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 Annual Report or otherwise. In light of these risks, challenges, uncertainties and assumptions, the future events and trends discussed in this Annual 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 the forward-looking statements in this Annual Report as predictions of future events. The events and circumstances reflected in the forward-looking statements in this Annual Report may not be achieved or occur in part or at all. Although we believe that the expectations reflected in the forward-looking statements in this Annual Report are reasonable as of the date of this Annual Report, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements in this Annual Report after the date of this Annual Report or to conform the forward-looking statements to actual results or revised expectations. If we do update one or more of the forward-looking statements in this Annual Report, no inference should be drawn that we will make additional updates with respect to those or any other forward-looking statements.
Business Overview
We are a late clinical-stage biopharmaceutical company leveraging a deep understanding of nose-to-brain neurocircuitry to develop and commercialize a new class of non-systemic intranasal product candidates called pherines. Our broad and diverse neuroscience pipeline currently consists of five clinical-stage pherine product candidates, each with a novel mechanism of action (MOA) and positive clinical data in their targeted indication(s). Pherines specifically and selectively bind to peripheral receptors in human nasal chemosensory neurons, and are designed to rapidly activate nose-to-brain neurocircuits believed to regulate brain areas without requiring systemic absorption or uptake into the brain to achieve desired therapeutic benefits.
Our most advanced intranasal pherine product candidate is fasedienol, which is being investigated in our U.S. registration-directed PALISADE Program for the acute treatment of social anxiety disorder (SAD). Our PALISADE Program includes the PALISADE-1, PALISADE-2, PALISADE-3, and PALISADE-4 Phase 3 clinical trials and a small exploratory Phase 2 repeat dose study (the Repeat Dose Study). PALISADE-2 achieved its primary efficacy endpoint, as reported in August 2023. Neither PALISADE-1, completed in 2022, nor PALISADE-3, the randomized portion of which was completed in December 2025, achieved its primary endpoint.
On May 8, 2026, we announced that the last patient had completed the last visit in the randomized portion of PALISADE-4, and we expect to announce topline results from the randomized portion of PALISADE-4 in the second quarter of calendar 2026. The FDA has granted Fast Track designation for the investigation of fasedienol for the acute treatment of SAD. We believe PALISADE-4, if successful, together with the positive results from PALISADE-2 and confirmatory evidence from our overall fasedienol development program in SAD, including the Repeat Dose Study and Open Label Extension data, as well as confirmatory evidence we plan to generate based on FDA feedback to support the clinical meaningfulness of the duration and magnitude of effect of fasedienol, may establish substantial evidence of the effectiveness of fasedienol in support of a potential New Drug Application (NDA) submission to the FDA for the acute treatment of SAD.
We have also reported positive results from an exploratory Phase 2A clinical trial for each of our next most advanced pherine product candidates, itruvone for treatment of major depressive disorder, and refisolone (formerly PH80) for both vasomotor symptoms (hot flashes) due to menopause and premenstrual dysphoric disorder (PMDD), as well as a pilot Phase 2A study of PH15 for improvement of psychomotor impairment due to mental fatigue and an exploratory Phase 2A study of PH284 for treatment of cancer cachexia. In April 2026, we announced receipt of a 'Study May Proceed' letter from the FDA under our U.S. Investigational New Drug (IND) application for refisolone for the treatment of moderate to severe vasomotor symptoms (hot flashes) due to menopause.
In March 2026, our Board of Directors approved a reduction of approximately 20% in our workforce, intended to provide disciplined cash management while prioritizing efficient execution of the ongoing clinical studies in our PALISADE Program. See 'Liquidity and Capital Resources' below for additional discussion.
We are passionate about developing transformative treatment options with potential to meet clear and growing unmet needs and bring meaningful relief to patients underserved by the current standard of care for multiple highly prevalent indications, all while delivering long-term value to our stockholders.
Subsidiaries
Our wholly-owned subsidiaries consist of Pherin Pharmaceuticals, Inc, a Delaware corporation (Pherin), which we acquired in February 2023, and Vistastem, Inc., a California corporation founded in 1998 (Vistastem).
Components of Results of Operations
Sublicense and Other Revenue
Sublicense and other revenue consist of revenue recognized under the AffaMed Agreement and Negotiation Agreement with Fuji Pharma. Revenue is recognized as identified performance obligations are satisfied. See Note 11 to our consolidated financial statements for a complete description of the AffaMed Agreement and Fuji Pharma Negotiation Agreement.
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 planning, preparing for and conducting clinical trials, including investigator grants and site payments, 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 chemistry, manufacturing, and control (CMC) development, and other manufacturing-related services;
◦the cost of manufacturing compounds for use in our nonclinical studies and clinical trials, including under agreements with third parties, such as consultants and third-party contract manufacturers; and
◦costs related to compliance with 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 and developing 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 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 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;
•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.
Results of Operations for the Years Ended March 31, 2026 and 2025
The following table summarizes our results of operations for the periods indicated (in thousands):
| Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenues: | |||||||||||
| Sublicense and other revenue | $ | 1,269 | $ | 486 | |||||||
| Total revenues | 1,269 | 486 | |||||||||
| Operating expenses: | |||||||||||
| Research and development | 54,974 | 39,375 | |||||||||
| General and administrative | 18,421 | 17,084 | |||||||||
| Total operating expenses | 73,395 | 56,459 | |||||||||
| Loss from operations | (72,126) | (55,973) | |||||||||
| Other income (expense) | |||||||||||
| Interest Income | 2,441 | 4,557 | |||||||||
| Other income | 7 | 5 | |||||||||
| Total other income, net | 2,448 | 4,562 | |||||||||
| Loss before income taxes | (69,678) | (51,411) | |||||||||
| Income taxes | (7) | (7) | |||||||||
| Net loss | $ | (69,685) | $ | (51,418) | |||||||
Sublicense and Other Revenue
Sublicense and other revenue was $1.3 million for the year ended March 31, 2026, compared to $0.5 million for the year ended March 31, 2025, an increase of $0.8 million. The increase in sublicense and other revenue is due to timing of revenue recognized under the AffaMed Agreement.
As of March 31, 2026, approximately $0.4 million of deferred revenue under the AffaMed Agreement remained to be recognized, which we expect to recognize in fiscal 2027. Approximately $1.3 million of deferred revenue under the Negotiation Agreement with Fuji Pharma also remained as of March 31, 2026. The recognition of remaining deferred revenue under the Negotiation Agreement is dependent on the outcome of the Exclusive Negotiation Period, as further described in Note 11 to our consolidated financial statements included with this Annual Report.
The amount and timing of future sublicense and other revenue will also depend on the achievement of milestones under existing agreements, if any, and the execution of new licensing or sublicensing agreements, if any.
Research and Development Expenses
The following table summarizes our research and development expenses for the years ended March 31, 2026 and 2025 (in thousands):
| Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Clinical and nonclinical studies and development expenses by program | |||||||||||
| Fasedienol | $ | 38,513 | $ | 21,892 | |||||||
| Other clinical stage candidates | 1,230 | 3,103 | |||||||||
| Total clinical and nonclinical studies and development expenses | 39,743 | 24,995 | |||||||||
| Salaries and benefits | 10,399 | 9,402 | |||||||||
| Stock-based compensation | 1,732 | 1,938 | |||||||||
| Consulting and professional services | 1,559 | 1,565 | |||||||||
| Occupancy and all other costs | 1,541 | 1,475 | |||||||||
| Total research and development expenses | $ | 54,974 | $ | 39,375 | |||||||
Research and development expense was $55.0 million for the year ended March 31, 2026 compared to $39.4 million for the year ended March 31, 2025, an increase of $15.6 million or 39.6%. The increase was primarily driven by higher clinical trial activity within our fasedienol program, partially offset by lower spend on our other clinical-stage pherine product candidates.
Clinical and nonclinical studies and development expenses by program increased by $14.7 million, from $25.0 million in fiscal 2025 to $39.7 million in fiscal 2026. PALISADE Program expenses increased by $16.6 million, from $21.9 million in fiscal 2025 to $38.5 million in fiscal 2026. The increase was attributable to three clinical studies within our U.S. registration-directed PALISADE Program, including our PALISADE-3 and PALISADE-4 Phase 3 clinical trials and the Repeat Dose Study conducted concurrently during fiscal 2026. By comparison, fiscal 2025 reflected only a partial period of activity for these studies as each was in earlier stages of enrollment and start-up. The fiscal 2026 increase reflects higher CRO costs, investigator and site payments, and pass-through expenses associated with the expanded scale of patient enrollment, dosing, and trial conduct activities.
Other clinical-stage product candidates under active development include refisolone and itruvone. Expenses for these candidates decreased $1.9 million, from $3.1 million in fiscal 2025 to $1.2 million in fiscal 2026, primarily reflecting reduced clinical and nonclinical activity as we prioritized resources toward our PALISADE Program.
Salaries and benefits expense increased by $1.0 million from $9.4 million in fiscal 2025 to $10.4 million in fiscal 2026, primarily due to increased headcount supporting our clinical development activities. Stock-based compensation decreased by $0.2 million from $1.9 million in fiscal 2025 to $1.7 million in fiscal 2026. Consulting and professional services expenses were substantially unchanged at $1.6 million in each of fiscal 2026 and 2025. Occupancy and all other costs were also substantially unchanged at $1.5 million in each of fiscal 2026 and 2025.
We expect that our research and development expense may fluctuate over the next fiscal year. The fluctuation depends on when we conduct nonclinical studies and clinical trials, and expand third-party contract manufacturing and regulatory activities required to advance further research and development of our current pherine product candidates and additional pherine product candidates, and when and to what extent we maintain, expand, protect and enforce our intellectual property portfolio, and hire additional headcount. At this time, we cannot accurately estimate or know the nature, timing and costs of these efforts that will be necessary to complete the preclinical and clinical development of any pherine product candidates we may develop. A change in the outcome of any number of variables with respect to product candidates we may develop could significantly change the costs and timing associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expense was $18.4 million for the year ended March 31, 2026, compared to $17.1 million for the year ended March 31, 2025, an increase of $1.3 million or 7.8%. The increase was primarily attributable to higher corporate legal expense, including costs associated with the defense of pending shareholder litigation, higher salaries and wages, and higher consulting fees, partially offset by lower incentive bonus expense in fiscal 2026.
Our expectation for general and administrative expense is largely dependent on the results of the randomized portion of our PALISADE-4 clinical trial. We expect that our general and administrative expenses may increase substantially over the next fiscal year in the event of positive results from PALISADE-4. Under a positive scenario, we will prepare to submit a NDA to the FDA and begin commercialization efforts to support product launch or partnering of commercialization for
fasedienol. However, in the event of negative results from PALISADE-4, we expect to further cash conservation efforts that were implemented following the announcement of negative results from the randomized portion of our PALISADE-3 clinical trial, resulting in an anticipated decrease to general and administrative expense.
Other income, net was $2.4 million for the year ended March 31, 2026, compared to $4.6 million for the year ended March 31, 2025, a decrease of $2.1 million, or 46%. The decrease was primarily attributable to lower average balances of cash, cash equivalents, and marketable securities during fiscal 2026 as compared to fiscal 2025, reflecting the use of cash to fund our operations.
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. As of March 31, 2026, we have financed our operations and technology acquisitions primarily through the issuance and sale of our equity securities for cash proceeds of approximately $371.2 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 at issuance of $41.3 million for 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, to 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. The aggregate offering price available under the Sales Agreement was increased to $100.0 million in February 2024 and to $175.0 million in June 2025. During our fiscal years ended March 31, 2026 and 2025, we sold an aggregate of 10,403,244 and 1,108,587 shares, respectively, under the Sales Agreement, for net proceeds of $30.6 million and $3.0 million, respectively, after sales agent commissions. We pay Jefferies a commission of up to three percent (3.0%) of the aggregate gross proceeds from any sales under the Sales Agreement.
As of March 31, 2026 and 2025, we had cash, cash equivalents, and marketable securities of $45.4 million and $80.5 million, respectively. As of June 15, 2026, the issuance date of the consolidated financial statements in this Annual Report, we concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date these consolidated financial statements are issued.
When necessary and/or advantageous, we will seek additional capital to fund our planned operations through, among other options, (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 and commercialization of our product candidates, as well as support our operating activities, we plan to seek substantial additional financing, including both equity-based and/or debt-based capital and potentially from non-dilutive sources other than debt-based capital, and continue to carefully manage our operating costs, including, but not limited to, our clinical, nonclinical, and pre-commercialization programs. However, there can be no assurance that future financing 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. See Note 2 to our consolidated financial statements contained in this Annual Report for additional information regarding our going concern assessment.
Cash Flows
The following table summarizes changes in cash and cash equivalents for the fiscal years stated (in thousands):
| Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (66,436) | $ | (42,097) | |||||||
| Net cash used in investing activities | (877) | (13,148) | |||||||||
| Net cash provided by (used in) financing activities | 30,971 | 3,210 | |||||||||
| Net decrease in cash and cash equivalents | (36,342) | (52,035) | |||||||||
| Cash and cash equivalents at beginning of period | 67,131 | 119,166 | |||||||||
| Cash and cash equivalents at end of period | $ | 30,789 | $ | 67,131 | |||||||
Operating Activities
Net cash used in operating activities for the year ended March 31, 2026 was $66.4 million, consisting primarily of our net loss of $69.7 million, adjusted for $4.2 million of non-cash charges primarily related to stock-based compensation expense and amortization of our operating lease right-of-use asset, and a $0.9 million use of cash for net changes in operating assets and liabilities.
Net cash used in operating activities for the year ended March 31, 2025 was $42.1 million, consisting primarily of our net loss of $51.4 million, adjusted for $4.5 million of non-cash charges primarily related to stock-based compensation expense and amortization of our operating lease right-of-use asset, and $4.8 million for net changes in operating assets and liabilities.
Investing Activities
Net cash used in investing activities for the year ended March 31, 2026 was $0.9 million, consisting of purchases of marketable securities and property and equipment, partially offset by the sale and maturity of marketable securities.
Net cash used in investing activities for the year ended March 31, 2025 was $13.1 million, consisting primarily of net purchases of marketable securities and, to a lesser extent, purchases of property and equipment.
Financing Activities
Net cash provided by financing activities during the year ended March 31, 2026 was $31.0 million, consisting primarily of net proceeds from the sale of our common stock in ATM transactions under the Sales Agreement.
Net cash provided by financing activities during the year ended March 31, 2025 was $3.2 million, consisting primarily of net proceeds from the sale of our common stock in ATM transactions under the Sales Agreement and to a lesser extent, proceeds from activity in our Employee Stock Purchase Plan.
Future Funding Requirements
Based on our current operating plan, we believe that our existing cash, cash equivalents, and marketable securities will not be sufficient to fund our operations beyond the next twelve months from the date of this Annual Report. We anticipate that we will continue to seek substantial additional funding, though the precise timing and nature of such additional funding may prove uncertain or unavailable to us. 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 current capital resources sooner than we expect. Additionally, the process of conducting nonclinical 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:
•the initiation, type, number, scope, costs, timing and results of, the recently completed randomized portion of PALISADE-4, our ongoing and planned nonclinical studies and clinical trials of 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, and should we decide to commercialize them on our own;
•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 likely will, 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 potentially 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, 2026, total undiscounted future aggregate operating lease commitments were $1.0 million, with approximately $0.8 million due during the year ending March 31, 2027, and the remaining due in periods ending March 31, 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 third-party contract manufacturing services with CDMOs, development services with CROs, and research and development services from other industry consultants. These arrangements are generally cancelable by either party with notice, and we are not committed to any material non-cancelable purchase obligations as of March 31, 2026.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation of these consolidated 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 consolidated 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 estimates to be most critical to the preparation of our financial statements.
Research and Development Expenses, Prepaids, and Accruals
Research and development expenses consist of external and internal costs associated with our research and development activities, including our discovery and research efforts and the manufacturing, nonclinical and clinical development of our neuroscience product candidates. Research and development costs are expensed in the period incurred.
We have entered into various research and development contracts with CROs, CDMOs, 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 regarding the status and progress of our manufacturing, nonclinical studies, clinical trials, and other contracted services. Significant judgments and estimates may be made in assessing the phase or completion of events to determine the expense and the resulting prepaid or accrued balances at the end of any reporting period. Our R&D accruals are most sensitive to assumptions about CRO progress on clinical trials, where invoices may lag actual services performed by several months. If our estimates of vendor progress differ from actual progress, our research and development expense and accrued liabilities could be materially different from the amounts reported. 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.
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.
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