Vistagen Therapeutics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 92 Consolidated Balance Sheets 94 Consolidated Statements of Operations and Comprehensive Loss 95 Consolidated Statements of Stockholders’ Equity 96 Consolidated Statements of Cash Flows 97 Notes to Consolidated Financial Statements 98 91 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors Vistagen Therapeutics, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Vistagen Therapeutics, Inc. (the Company) as of March 31, 2025, the related consolidated statement of operations and comprehensive loss, stockholders’ equity, and cash flows for the period ended March 31, 2025, and the related notes (collectively, 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, 2025, and the results of its operations and its cash flows for the year period ended March 31, 2025, in conformity with U.S. generally accepted accounting principles. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring losses and negative cash flows from operations, and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ KPMG LLP We have served as the Company’s auditor since 2024. San Francisco, California June 17, 2025 92 Table of Contents 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 sheet of Vistagen Therapeutics, Inc. (the “Company”) as of March 31, 2024, the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for the year then ended, 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 the results of its operations and its cash flows for the year then ended 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 audit. 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 audit 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 audit 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 audit 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 audit 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 audit provides a reasonable basis for our opinion. /s/ WithumSmith+Brown, PC We began serving as the Company's auditor in 2006. We became the predecessor auditor in 2024. San Francisco, California June 11, 2024 PCAOB ID Number 100 93 Table of Contents VISTAGEN THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) March 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 67,131 $ 119,166 Marketable securities 13,351 — Prepaid expenses and other current assets 1,594 1,506 Total current assets 82,076 120,672 Property and equipment, net 476 435 Right-of-use asset - operating lease 1,335 1,820 Other assets 454 726 Total assets $ 84,341 $ 123,653 LIABILITIES AND STOCKHOLDERS ’ EQUITY Current liabilities: Accounts payable $ 653 $ 1,547 Accrued expenses 8,810 2,235 Deferred revenue - current portion 2,588 791 Operating lease liability - current portion 561 550 Total current liabilities 12,612 5,123 Deferred revenue - non-current portion 391 2,674 Operating lease liability - non-current portion 948 1,570 Total liabilities 13,951 9,367 Commitments and contingencies (Note 13) Stockholders’ equity: Preferred stock, $ 0.001 par value; 10,000,000 shares authorized at March 31, 2025 and March 31, 2024; no shares outstanding at March 31, 2025 and March 31, 2024 — — Common stock, $ 0.001 par value; 325,000,000 shares authorized at March 31, 2025 and March 31, 2024; 29,001,481 and 27,029,731 shares issued at March 31, 2025 and March 31, 2024, respectively 29 27 Additional paid-in capital 481,956 474,441 Treasury stock, at cost, 4,522 shares of common stock held at March 31, 2025 and March 31, 2024 ( 3,968 ) ( 3,968 ) Accumulated other comprehensive gain 5 — Accumulated deficit ( 407,632 ) ( 356,214 ) Total stockholders’ equity 70,390 114,286 Total liabilities and stockholders’ equity $ 84,341 $ 123,653 See accompanying notes to consolidated financial statements 94 Table of Contents VISTAGEN THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share amounts) Year Ended March 31, 2025 2024 Revenues: Sublicense and other revenue $ 486 $ 1,064 Total revenues 486 1,064 Operating expenses: Research and development 39,375 20,022 General and administrative 17,084 14,063 Total operating expenses 56,459 34,085 Loss from operations ( 55,973 ) ( 33,021 ) Other income, net: Interest income, net 4,557 3,351 Other income, net 5 312 Loss before income taxes ( 51,411 ) ( 29,358 ) Income taxes ( 7 ) ( 4 ) Net loss $ ( 51,418 ) $ ( 29,362 ) Unrealized gain on marketable securities $ 5 $ — Comprehensive loss $ ( 51,413 ) $ ( 29,362 ) Basic and diluted net loss per common share $ ( 1.67 ) $ ( 1.52 ) Weighted average common shares outstanding, basic and diluted 30,877,029 19,354,500 See accompanying notes to consolidated financial statements 95 Table of Contents VISTAGEN THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (Amounts in thousands, except share amounts) Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at March 31, 2023 7,315,583 $ 7 $ 342,893 $ ( 3,968 ) $ — $ ( 326,852 ) $ 12,080 Stock-based compensation expense — — 2,182 — — — 2,182 Sale of common stock pursuant to 2019 Employee Stock Purchase Plan 4,843 — 8 — — — 8 Issuance of common stock under Open Market Sale Agreement, net of issuance costs 4,698,495 5 35,894 — — — 35,899 Issuance of common stock and pre-funded warrants through public offering, net of issuance costs 15,010,810 15 93,464 — — — 93,479 Net loss — — — — — ( 29,362 ) ( 29,362 ) Balance at March 31, 2024 27,029,731 27 474,441 ( 3,968 ) — ( 356,214 ) 114,286 Stock-based compensation expense — — 4,315 — — — 4,315 Sale of common stock pursuant to 2019 Employee Stock Purchase Plan 74,804 — 201 — — — 201 Unrealized gain on marketable securities available-for-sale, net — — — — 5 — 5 5 Issuance of common stock under Open Market Sale Agreement, net of issuance costs 1,108,587 1 2,999 — — — 3,000 Issuance of common stock upon exercise of Pre-Funded Warrants 788,359 1 — — — — 1 Net loss — — — — — ( 51,418 ) ( 51,418 ) Balance at March 31, 2025 29,001,481 $ 29 $ 481,956 $ ( 3,968 ) $ 5 $ ( 407,632 ) $ 70,390 See accompanying notes to consolidated financial statements 96 Table of Contents VISTAGEN THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 51,418 ) $ ( 29,362 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 150 127 Loss on disposal of fixed assets — 6 Stock-based compensation 4,315 2,182 Amortization of operating lease right-of-use asset 485 441 Accretion of marketable securities ( 389 ) — Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 88 ) 250 Other assets 190 — Operating lease liability ( 611 ) ( 495 ) Deferred sublicense revenue, net of deferred contract acquisition costs ( 412 ) 516 Accounts payable and accrued expenses 5,681 522 Net cash used in operating activities ( 42,097 ) ( 25,813 ) Cash flows from investing activities: Purchases of laboratory and other equipment ( 191 ) ( 61 ) Sales and maturities of marketable securities 12,027 — Purchases of marketable securities ( 24,984 ) — Net cash used in investing activities ( 13,148 ) ( 61 ) Cash flows from financing activities: Proceeds from issuance of common stock and warrants, net of issuance costs — 93,453 Net proceeds from sale of common stock under Open Market Sale Agreement, net of deferred offering costs 3,009 35,926 Net proceeds from sale of common stock under Employee Stock Purchase Plan 201 8 Repayment of note payable — ( 985 ) Net cash provided by financing activities 3,210 128,402 Net increase (decrease) in cash and cash equivalents ( 52,035 ) 102,528 Cash and cash equivalents at beginning of period 119,166 16,638 Cash and cash equivalents at end of period $ 67,131 $ 119,166 Supplemental disclosure of noncash activities: Non-cash investing and financing activities: Insurance premiums settled by issuing note payable $ — $ 879 Purchases of equipment included in accounts payable $ — $ 29 See accompanying notes to consolidated financial statements 97 Table of Contents VISTAGEN THERAPEUTICS, INC. 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 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 clinical-stage neuroscience pipeline currently consists of five investigational 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. 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 shareholders. 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 and Going Concern 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 and/or debt 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. 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, 2025, we had an accumulated deficit of $ 407.6 million and cash used in operations for the year ended March 31, 2025 was $ 42.1 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. In accordance with Accounting Standards Codification (ASC) 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year from the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future equity and/or debt issuances and other potential sources such as partnerships cannot be considered probable at this time because these plans are not entirely within our control nor have these plans been approved by the Board as of the date of these consolidated financial statements. 98 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2025 and 2024, we had cash, cash equivalents, and marketable securities of $ 80.5 million and $ 119.2 million, respectively. As of June 17, 2025 , the issuance date of the consolidated financial statements as of and for the year ended March 31, 2025, there is uncertainty about whether our combined cash, cash equivalents, and marketable securities will be sufficient to fund operations beyond twelve months from the issuance date of these consolidated financial statements and therefore we concluded that substantial doubt exists about the our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. 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. Estimates made in the accompanying consolidated financial statements 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, historical experiences, actions we may undertake in the future and on various other assumptions we believe are reasonable, actual results may materially differ from these estimates and assumptions. Concentration of Credit Risk Financial instruments which potentially subject us 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 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 and short-term treasury notes. As of March 31, 2025, 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 99 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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, 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. 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. 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. 100 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 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 and Accruals 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 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 have entered into various research and development contracts with clinical research organizations, clinical development and 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 the performance are reflected in the accompanying balance sheets as prepaid expenses or accrued liabilities, respectively. 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 relevant employees and outside service providers as to the progress of 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. Nonrefundable advance payments for goods and services, including fees for process development, are deferred and recognized as expenses in the period that the related goods are consumed or services are performed. 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 101 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. We 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. Internal-Use Software Development Costs We capitalize qualifying costs incurred during the application development stage related to software developed for internal-use and amortizes them over the estimated useful life of three years. Amortization of such costs begins when the project is substantially complete and ready for its intended use. Capitalized software development costs are classified as property and equipment, net on the consolidated balance sheet. We expense costs incurred related to the planning and post-implementation phases of development as incurred. 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. We recognize 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 102 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 We measure cash equivalents and available-for-sale debt securities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. 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). Money market funds are highly liquid investments and are classified as Level 1. The pricing information for these assets is readily available and can be independently validated as of the measurement date. Available-for sale debt securities are valued using observable inputs from similar assets, or from observable data in markets that are not active. These assets are classified as Level 2. 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. At March 31, 2025 and 2024 all of our outstanding warrants were classified as equity. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders. For the year ended March 31, 2025, these changes related to unrealized gains and losses on our available-for-sale short-term investments. There were no reclassifications out of comprehensive loss for the years ended March 31, 2025 and 2024, respectively. 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 103 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS when their effect is dilutive. Our potentially dilutive securities, including outstanding warrants to purchase common stock and outstanding stock options under the our 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 in the calculation would be anti-dilutive: As of March 31, 2025 2024 Outstanding options under the Company's Amended and Restated 2016 (formerly 2008) Stock Incentive Plan and 2019 Omnibus Equity Incentive Plan 3,239,642 815,357 Outstanding warrants to purchase common stock 20,571,460 20,604,794 Total 23,811,102 21,420,151 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 November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new standard is intended to improve annual and interim reportable segment disclosure requirements regardless of number of reporting units, primarily through enhanced disclosures of significant expenses. The amendment requires public entities to disclose significant segment expenses that are regularly provided to the Company's chief operating decision maker (CODM) and included within each reported measure of segment profit and loss. We adopted this new standard for the annual period ended March 31, 2025 on a retrospective basis, and the adoption did not have a material impact on its consolidated financial statements and related disclosures. See Note 14, Segment Information, for the updated segment disclosures as a result of adopting this ASU. 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 December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this guidance on our financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which requires new disclosures to disaggregate prescribed natural expenses underlying any income statement caption. ASU 2024-03 is effective for annual periods in fiscal years beginning after December 15, 2026, and interim periods thereafter. Early adoption is permitted. ASU 2024-03 applies on a prospective basis for periods beginning after the effective date. However, retrospective application to any or all prior periods presented is permitted. We are currently evaluating the impact of this guidance on our financial statements. 104 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED 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 The following tables show the our cash, cash equivalents and marketable securities at fair value as of March 31, 2025 and 2024 (in thousands): March 31, 2025 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents: Cash and money market funds $ 67,131 $ — $ — $ 67,131 Marketable securities U.S. treasury securities — 13,351 — 13,351 Total $ 67,131 $ 13,351 $ — $ 80,482 March 31, 2024 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents: Cash and money market funds $ 119,166 $ — $ — $ 119,166 Total $ 119,166 $ — $ — $ 119,166 The carrying amounts of the our prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to their short maturities. We had no financial liabilities measured at fair value on a recurring basis at March 31, 2025 or 2024. There were no transfers between Levels 1, 2 or 3 for any of the periods presented. We did not record any impairment charges related to our marketable debt securities during the year ended March 31, 2025 or 2024. The following table summarizes our marketable securities as of March 31, 2025 (in thousands): March 31, 2025 Maturity (in years) Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. treasury notes Less than 1 $ 13,346 $ 5 $ — $ 13,351 Total $ 13,346 $ 5 $ — $ 13,351 We did not hold any marketable securities as of March 31, 2024. 105 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): As of March 31, 2025 2024 Laboratory equipment $ 1,335 $ 1,242 Tenant improvements 221 214 Computer equipment 31 — Software 57 — Office furniture and equipment 25 22 Manufacturing equipment 211 211 1,880 1,689 Accumulated depreciation and amortization ( 1,404 ) ( 1,254 ) Property and equipment, net $ 476 $ 435 We recognized depreciation expense of $ 150,000 and $ 127,000 for the years ended March 31, 2025 and 2024, 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 one five-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): Year Ended March 31, 2025 2024 Operating lease costs $ 645 $ 645 Variable lease costs 309 246 Total lease cost $ 954 $ 891 106 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Maturities of lease liabilities as of March 31, 2025 were as follows (in thousands): Year ending March 31, Amount 2026 $ 672 2027 753 2028 254 Thereafter — Total minimum lease payments 1,679 Less: amount representing interest ( 170 ) Present value of operating lease liabilities 1,509 Less: operating lease liabilities - current portion 561 Operating lease liabilities - non-current portion $ 948 The lease had a remaining term of 2.3 years and 3.3 years as of March 31, 2025 and 2024, respectively. The lease liability was calculated based on a weighted-average discount rate of 8.54 % as of March 31, 2025 and 2024. During the years ended March 31, 2025 and 2024, we made cash payments for amounts included in the measurement of lease liabilities of $ 0.8 million and $ 0.7 million, respectively. 6. Accrued Expenses Accrued expenses are composed of the following (in thousands): As of March 31, 2025 2024 Accrued research and development costs $ 5,207 $ 482 Accrued employee compensation costs 3,360 1,619 Accrued legal and professional service fees 234 117 Other 9 17 Total accrued expenses $ 8,810 $ 2,235 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. 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 million, a total of 15,010,810 shares of our common stock and a total of 3,577,240 pre-funded warrants to purchase up to 3,577,240 shares of common stock (the Pre-Funded Warrants ) . Each share of common stock and each Pre-Funded Warrant was issued together with a ratably allocated portion of warrants to purchase up to 9,294,022 shares of common stock with an exercise price of $ 5.38 per share (the T1 Warrants) and warrants to purchase 11,265,086 shares of common stock with an exercise price of $ 8.877 per share (the T2 Warrants). The net proceeds to us from th 107 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS e 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 (collectively, the Warrants) are fully exercisable, only at the option of the holder. Holders may also exercise the T1 Warrants and T2 Warrants for Pre-Funded Warrants at their option. We may not effect the exercise of any Warrants, and a holder will not be entitled to exercise any portion of any of the Warrants, 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. The Pre-Funded Warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the other equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such Pre-Funded Warrants do not provide any guarantee of value or return. Open Market Sale Agreement In May 2021, we entered into an Open Market Sale Agreement (the Sales Agreement) with Jefferies LLC (Jefferies) which enabled us, in our sole discretion, to offer and sell, from time to time, shares of our common stock for aggregate gross proceeds of up to $ 75.0 million. In February 2024, the aggregate gross proceeds available under the Sales Agreement was increased to $ 100 million. As of March 31, 2025, approximately $ 96.9 million of common stock remained available for sale under the Sales Agreement. During the years ended March 31, 2025 and 2024, we sold an aggregate of 1,108,587 and 4,698,495 shares, respectively, under the Sales Agreement, for net proceeds of $ 3.0 million and $ 36.2 , 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. 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 Paid-in Capital as sales of shares are made under the Sales Agreement. 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 At March 31, 2025, the following common stock warrants were outstanding: Number of common shares underlying warrants Exercise price per share Expiration date 12,352 $ 21.900 7/25/2025 2,788,620 $ 0.001 N/A 9,294,022 $ 5.380 (a) 11,265,086 $ 8.877 10/4/2028 (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 108 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2025 is $ 6.43 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, except the Pre-Funded Warrants and the T2 Warrants issued in connection with the October 2023 Public Offering, which may be exercised through a cashless exercise, via exchange of a portion of warrants to cover the exercise price. In October 2024, Pre-Funded Warrants to purchase 788,620 shares of common stock were exercised on a cashless basis, resulting in the issuance of 788,359 shares of common stock. There were no warrant exercises during the year ended March 31, 2024. In December 2024, 33,334 warrants to purchase common stock, with an exercise price of $ 15.00 per share, expired. During the year ended March 31, 2024, 263,510 warrants to purchase common stock, with a weighted average exercise price of $ 48.94 per share, expired. Reserved Shares We had the following shares of common stock reserved for future issuance: As of March 31, 2025 2024 Issuance of common stock upon exercise of outstanding stock options under the Amended and Restated 2016 Stock Incentive Plan and the Amended and Restated 2019 Omnibus Equity Incentive Plan 3,239,642 815,357 Issuance of common stock upon exercise of outstanding warrants 43,952,783 44,741,142 Equity awards available under the Amended and Restated 2019 Omnibus Equity Incentive Plan 2,042,153 466,438 Shares available for issuance under the 2019 Employee Stock Purchase Plan 911,342 19,480 Shares reserved under the Sales Agreement 27,951,416 29,060,003 78,097,336 75,102,420 At March 31, 2025, we have 217,905,705 authorized shares of our common stock not subject to reserves and available for future issuance. 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. 109 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. On May 29, 2024, our Board and stockholders approved certain amendments to the 2019 Plan (Amended and Restated 2019 Plan). Upon approval of the Amended and Restated 2019 Plan by our stockholders, the total number of shares authorized to be issued under the 2019 Plan increased to 5,000,000 shares. At March 31, 2025, there were 2,010,984 registered shares of our common stock remaining available for grant under the Amended and Restated 2019 Plan. Awards granted under our 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 our stock option activity for the year ended March 31, 2025 is as follows (in thousands, except share and per share data and years): Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at March 31, 2024 815,357 $ 33.07 6.7 $ 165 Granted 2,493,700 $ 3.59 Exercised — $ — Forfeited ( 69,415 ) $ 36.09 Expired — $ — Outstanding at March 31, 2025 3,239,642 $ 10.32 8.4 $ 8 Exercisable at March 31, 2025 1,370,909 $ 19.26 7.4 $ 8 Vested and expected to vest as of March 31, 2025 3,239,642 $ 10.32 8.4 $ 8 Stock-Based Compensation Expense The fair value of stock options granted was estimated using the following assumptions: Year Ended March 31, 2025 2024 Risk-free interest rate 3.5 % - 4.5 % 3.9 % - 4.6 % Expected term (years) 5.07 - 6.14 2.53 - 6.08 Expected stock price volatility 162.4 % - 176.2 % 129.0 % - 176.6 % 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, 2025 2024 Research and development expense $ 2,377 $ 1,174 General and administrative expense 1,938 1,008 Total stock-based compensation expense $ 4,315 $ 2,182 110 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The weighted-average grant date fair value of options granted for the years ended March 31, 2025 and 2024 was $ 3.45 and $ 4.40 per share, respectively. For the years ended March 31, 2025 and 2024, the total fair value of options vested was $ 4.0 million and $ 2.3 million, respectively. The aggregate intrinsic value of options exercised for the years ended March 31, 2025 and 2024 was $ 0 . As of March 31, 2025, total compensation cost not yet recognized related to unvested stock options was $ 6.4 million, which is expected to be recognized over a weighted-average period of 2.1 years. 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. In May 2024, the 2019 ESPP was amended to increase the shares authorized to be issued under the 2019 ESPP to 1,000,000 shares. 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, 2025 and 2024, we issued 74,804 and 4,843 shares, respectively, of common stock in connection with the 2019 ESPP. As of March 31, 2025, there were 911,342 shares available for future purchase under the 2019 ESPP. During the years ended March 31, 2025 and 2024, we recognized an immaterial amount of expense under the 2019 ESPP. 10. Income Taxes We had no current or deferred federal and state income tax expense or benefit for the year ended March 31, 2025, 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, 2025 2024 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 % — % Tax effect of research and development credits ( 4.29 ) % 0.00 % Tax effect of stock compensation 1.03 % 1.11 % Tax effect of other non-deductible items 0.18 % 0.03 % Expired net operating loss carryforwards 0.29 % 0.92 % Change in valuation allowance (federal only) 23.19 % 18.45 % All other 0.60 % 0.49 % Income tax expense 0.00 % 0.00 % 111 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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): March 31, 2025 2024 Deferred tax assets: Net operating loss carryovers $ 51,324 46,463 Basis differences in property and equipment — — Research and development credit carryforwards 6,875 — Stock based compensation 3,041 2,962 Operating lease Right-of-Use asset 37 64 Capitalized research and development costs 15,087 10,188 Deferred revenue 632 460 Accruals and reserves 709 404 Total deferred tax assets 77,705 60,541 Valuation allowance ( 77,681 ) ( 60,521 ) Total deferred tax assets net of valuation allowance 24 20 Deferred tax liabilities: Intangibles ( 12 ) — Basis differences in property and equipment ( 12 ) ( 20 ) Total deferred tax liabilities ( 24 ) ( 20 ) Net deferred tax asset (liability) $ — $ — 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 $ 17.2 million and $ 1.3 million during the fiscal years ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had U.S. federal net operating loss carryforwards of approximately $ 229.2 million. Federal net operating loss carryforwards of approximately $ 82.1 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 $ 147.1 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, 2025, we had state net operating loss carryforwards of approximately $ 66.6 million, which will expire in fiscal years ending in 2029 through 2045. We also have federal and state research and development tax credit carryforwards of approximately $ 7.6 million and $ 2.0 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 $ 38.1 million for tax purposes for the year ended March 31, 2025. 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 2025 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. 112 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Uncertain Tax Positions Our unrecognized tax benefits at March 31, 2025 and 2024 relate entirely to research and development tax credits. The total amount of unrecognized tax benefits at March 31, 2025 and 2024 is $ 2.4 million and $ 4.9 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, 2025 2024 Unrecognized benefit - beginning of period $ 4,931 $ 1,283 Prior period position increases (decreases) ( 3,329 ) 3,648 Current period tax position increases 797 — Unrecognized benefit - end of period $ 2,399 $ 4,931 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, 2025 or 2024. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date. 11. Sublicense and Collaborative Agreements The following table presents changes in contract assets and liabilities during the year ended March 31, 2025 (in thousands). Contract acquisition costs are included as a component of other assets on our consolidated balance sheets. Balance at March 31, 2024 Additions Deductions Balance at March 31, 2025 Contract assets: Deferred contract acquisition costs $ 204 $ — $ ( 74 ) $ 130 Contract liabilities: Deferred revenue $ 3,465 $ — $ ( 485 ) $ 2,980 AffaMed Agreement In June 2020, we entered into a license and collaboration agreement (the AffaMed Agreement) with EverInsight Therapeutics Inc., a company incorporated under the laws of the British Virgin Islands, now AffaMed Therapeutics, Inc. (AffaMed), pursuant to which we granted AffaMed an exclusive license to develop and commercialize fasedienol for social anxiety disorder (SAD) and potentially other anxiety-related disorders in Greater China, South Korea and Southeast Asia (which includes Indonesia, Malaysia, Philippines, Thailand and Vietnam) (collectively, the Territory). 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, but retain exclusive development and commercialization rights for fasedienol in the U.S. and throughout the rest of the world outside the Territory. 113 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 may also 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, if exercised by Affamed, could create manufacturing obligations for us during development upon exercise. 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. We recognize revenue as the combined performance obligation is satisfied over time using an input method. 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. The performance period or measure of progress was estimated at the inception of the Affamed Agreement and is re-evaluated in subsequent reporting periods. This re-evaluation may shorten or lengthen the period over which we recognize revenue. As of March 31, 2025 and 2024, we had short-term deferred revenue of $ 1.3 million and $ 0.8 million, respectively, and long-term deferred revenue of $ 0.4 million and $ 1.4 million, respectively, related to the Affamed Agreement. During the year ended March 31, 2025, we recognized revenue of $ 0.5 million related to the performance obligation under the AffaMed Agreement, as compared to $ 0.9 million during the year ended March 31, 2024, all of which was included in the liability balance at the beginning of the period. The remaining deferred revenue under the AffaMed Agreement will be recognized over the expected remaining contractual term. Contract Acquisition Costs Related to the Affamed Agreement In 2020, we made cash payments to Pherin aggregating $ 0.4 million for sublicense fees and consulting services exclusively related to the AffaMed Agreement. Additionally, in 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 other assets in our Consolidated Balance Sheets. Amortization expense related to the contract acquisition costs was immaterial for the years ended March 31, 2025 and 2024. The AffaMed Agreement will expire on a jurisdiction-by-jurisdiction basis upon the latest to occur of 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 with a significant research, development, and commercial focus on pharmacological therapies for women’s health conditions. 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 PH80 in Japan. PH80, our clinical-stage pherine product candidate focused primarily on the treatment of vasomotor symptoms (hot flashes) associated with menopause (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 PH80 (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 our PH80 U.S. Investigational New Drug (IND) application for 114 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS clinical development of PH80 in the U.S. 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 (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 the Potential Definitive Agreement, the Purchase Price will be creditable against any upfront fee due in connection with the execution of such Potential Definitive 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. As of March 31, 2025, the entire amount remaining unrecognized under the Negotiation Agreement of $ 1.3 million was classified as short term, as a component of deferred revenue, current portion, on the consolidated balance sheets. During the year ended March 31, 2025, we recognized no revenue under the Negotiation Agreement. During the year ended March 31, 2024, we recognized an immaterial amount of revenue under the Negotiation Agreement. The remaining deferred revenue under the Negotiation Agreement will be recognized upon termination of the Exclusive Negotiation Period, 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. 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 January 2026, 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 deferred revenue current-portion on the consolidated balance sheets as of March 31, 2025. 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. Pursuant to the agreement, Mr. Dotson received an initial payment of $ 100,000 and $ 10,000 per month from September 2023 through August 2024. In August 2024, the agreement was amended to extend the expiration date to March 31, 2025, and subsequently amended to extend the expiration to September 30, 2025. During the years ended March 31, 2025 and 2024, we recorded expense under the agreement of $ 120,000 and $ 170,000 , respectively. 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 $ 0 and $ 70,000 for the years ended March 31, 2025 and 2024, respectively. In November 2022, Ann Cunningham resigned as our Chief Commercial Officer to serve full-time as Managing Partner of i3 Strategy Partners, a pharmaceutical consulting firm founded by Ms. Cunningham. i3 Strategy Partners began providing commercial planning advisory services to us pursuant to a consulting agreement, dated November 2022. The consulting agreement expired on March 31, 2025. We recorded expense under the consulting agreement of $ 0 and $ 200,000 for the years ended March 31, 2025 and 2024, respectively. Ms. Cunningham remains a member of our Board of Directors. 13. Commitments, Contingencies, Guarantees and Indemnifications From time to time, we may be party to litigation, arbitration or other legal proceedings in the course of our business, such as the civil action filed against the Company and its Board of Directors, certain of its executive officers, professional services and financial advisors, and industry analysts in the United States District Court for the Northern District of California (Case No. 4:25-cv-01510) on February 13, 2025, by two purported stockholders seeking compensatory and 115 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS punitive damages, as well as fees and costs, which the Company believes are wholly without merit, and intends to vigorously defend itself. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If we were unable to prevail in any such legal proceedings, our business, results of operations, liquidity, and financial condition could be adversely affected. 14. Segment Information We operates in one operating segment, which includes all activities related to the discovery and development of our clinical and preclinical product candidates, for the purposes of assessing performance, making operating decisions, and allocating our resources. Our chief operating decision maker (CODM) is its chief executive officer, who considers internal budgets and cash forecast models to guide resource allocation and evaluate cash requirements associated with conducting research and development activities, which includes evaluating the progress of ongoing clinical trials and the planning and execution of current and future research and development activities. The CODM also monitors the cash, cash equivalents and short-term investments as reported on the our consolidated balance sheets to determine the sufficiency of cash resources to support those functions. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets, and segment loss is reflected as net loss in the our consolidated statements of operations and comprehensive loss, effectively mirroring the our overall financial position due to its single-segment structure. 15. Subsequent Events We have evaluated subsequent events through the date on which the consolidated financial statements were issued, and have concluded that no subsequent events have occurred that require disclosure . 116 Table of Contents VISTAGEN THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.