vtgn20230630

vtgn20230630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-37761

VISTAGEN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-5093315

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

343 Allerton Avenue

South San Francisco, CA 94080

(Address of principal executive offices including zip code)

(650) 577-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VTGN	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 10, 2023, 9,362,444 shares of the registrant’s common stock, $0.001 par value, were issued and outstanding.

Vistagen Therapeutics, Inc.

Quarterly Report on Form 10-Q

for the Quarter Ended June 30, 2023

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023	1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended June 30, 2023 and 2022	2
Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022	3
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended June 30, 2023 and 2022	4
Notes to the Condensed Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4. Controls and Procedures	41

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3. Defaults Upon Senior Secured Securities	75
Item 6. Exhibits	76

SIGNATURES	77

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Dollars, except share amounts)

	June 30,			March 31,
	2023			2023
	(Unaudited)			(Note 2)
*ASSETS*
Current assets:
Cash and cash equivalents	$	9,622,300		$	16,637,600
Prepaid expenses and other current assets		1,889,400			802,700
Deferred contract acquisition costs - current portion		67,100			67,100
Total current assets		11,578,800			17,507,400
Property and equipment, net		475,800			507,300
Right-of-use asset - operating lease		2,153,800			2,260,300
Deferred offering costs		522,100			495,700
Deferred contract acquisition costs - non-current portion		200,900			217,600
Security deposits		100,900			100,900
Total assets	$	15,032,300		$	21,089,200

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,623,200		$	2,473,100
Accrued expenses		424,700			787,400
Note payable		784,200			105,300
Deferred revenue - current portion		714,300			714,300
Operating lease obligation - current portion		501,100			485,600
Financing lease obligation - current portion		1,700			1,700
Total current liabilities		4,049,200			4,567,400

Non-current liabilities:
Deferred revenue - non-current portion		2,137,000			2,314,600
Operating lease obligation - non-current portion		1,990,100			2,119,800
Financing lease obligation - non-current portion		7,000			7,400
Total non-current liabilities		4,134,100			4,441,800
Total liabilities		8,183,300			9,009,200

Commitments and contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2023 and March 31, 2023: no shares outstanding at June 30, 2023 and March 31, 2023		-			-
Common stock, $0.001 par value; 325,000,000 shares authorized at June 30, 2023 and March 31, 2023; 7,879,673 and 7,315,583 shares issued at June 30, 2023 and March 31, 2023, respectively		7,900			7,300
Additional paid-in capital		344,564,000			342,892,500
Treasury stock, at cost, 4,522 shares of common stock held at June 30, 2023 and March 31, 2023		(3,968,100	)		(3,968,100	)
Accumulated deficit		(333,754,800	)		(326,851,700	)
Total stockholders’ equity		6,849,000			12,080,000
Total liabilities and stockholders’ equity	$	15,032,300		$	21,089,200

See accompanying notes to Condensed Consolidated Financial Statements, including Note 2, Basis of Presentation and Going Concern, for information on reverse split of common stock effective on June 6, 2023.

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Amounts in Dollars, except share amounts)

	Three Months Ended
	June 30,
	2023			2022
Revenues:
Sublicense revenue	$	177,600		$	310,100
Total revenues		177,600			310,100
Operating expenses:
Research and development		4,197,200			15,291,400
General and administrative		2,978,200			4,791,800
Total operating expenses		7,175,400			20,083,200
Loss from operations		(6,997,800	)		(19,773,100	)
Other income, net:
Interest income, net		97,200			2,300
Loss before income taxes		(6,900,600	)		(19,770,800	)
Income taxes		(2,500	)		(5,500	)
Net loss and comprehensive loss	$	(6,903,100	)	$	(19,776,300	)

Basic and diluted net loss	$	(0.94	)	$	(2.87	)
Weighted average shares used in computing basic and diluted net loss		7,377,005			6,886,736

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in Dollars)

	Three Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(6,903,100	)	$	(19,776,300	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		31,500			32,300
Stock-based compensation		569,100			956,900
Amortization of operating lease right-of-use asset		106,500			97,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(207,200	)		1,100,800
Operating lease liability		(114,200	)		(104,900	)
Deferred sublicense revenue, net of deferred contract acquisition costs		(160,900	)		(281,000	)
Accounts payable and accrued expenses		(1,212,600	)		2,006,900
Net cash used in operating activities		(7,890,900	)		(15,968,300	)

Cash flows from investing activities:
Purchases of laboratory and other equipment		-			(175,100	)
Net cash used in investing activities		-			(175,100	)

Cash flows from financing activities:
Net proceeds from issuance of common stock, including option exercises		-			104,500
Net proceeds (expenses) from sale of common stock under At the Market (ATM) facility, net of deferred offering costs		1,072,300			(59,400	)
Net proceeds from sale of common stock under Employee Stock Purchase Plan		4,200			51,600
Repayment of financing lease obligations		(400	)		(300	)
Repayment of note payable		(200,500	)		(101,900	)
Net cash provided by (used in) financing activities		875,600			(5,500	)
Net decrease in cash and cash equivalents		(7,015,300	)		(16,148,900	)
Cash and cash equivalents at beginning of period		16,637,600			68,135,300
Cash and cash equivalents at end of period	$	9,622,300		$	51,986,400

Supplemental disclosure of noncash activities:
Insurance premiums settled by issuing note payable	$	879,500		$	1,139,700
Acquisition of office equipment subject to financing lease	$	-		$	10,600

VISTAGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS JUNE 30, 2023 AND 2022

(Unaudited)

(Amounts in Dollars, except share amounts)

					Additional								Total
	Common Stock				Paid-in		Treasury			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Deficit			Equity
Balances at March 31, 2022		6,889,400	$	6,900	$	336,280,500	$	(3,968,100	)	$	(267,604,000	)	$	64,715,300

Share-based compensation expense		-		-		956,900		-			-			956,900
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,500		-		56,100		-			-			56,100
Issuance of common stock upon exercise of options for cash		3,333		-		100,000		-			-			100,000
Net loss for quarter ended June 30, 2022		-		-		-		-			(19,776,300	)		(19,776,300	)
Balances at June 30, 2022		6,895,233	$	6,900	$	337,393,500	$	(3,968,100	)	$	(287,380,300	)	$	46,052,000


Balances at March 31, 2023		7,315,583	$	7,300	$	342,892,500	$	(3,968,100	)	$	(326,851,700	)	$	12,080,000
Share-based compensation expense		-		-		569,100		-			-			569,100
Sale of common stock pursuant to 2019 Employee Stock Purchase Plan		2,672		-		4,200		-			-			4,200
Issuance of common stock upon ATM purchase		561,418		600		1,098,200		-			-			1,098,800
Net loss for quarter ended June 30, 2023		-		-		-		-			(6,903,100	)		(6,903,100	)
Balances at June 30, 2023		7,879,673	$	7,900	$	344,564,000	$	(3,968,100	)	$	(333,754,800	)	$	6,849,000

VISTAGEN THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business

Vistagen Therapeutics, Inc., a Nevada corporation (which may be referred to as Vistagen, the Company, we, our, or us), is a late stage biopharmaceutical company aiming to transform the treatment landscape for individuals living with anxiety, depression and other central nervous system (CNS) disorders. We are advancing therapeutics with the potential to be faster-acting and with fewer side effects and safety concerns than those currently available. Our pipeline includes six clinical-stage product candidates, including five investigational agents belonging to a new class of drugs known as pherines, in addition to AV-101, an oral prodrug of an antagonist of the glycine site of the N-methyl-D-aspartate receptor (NMDAR). Pherines are neuroactive nasal sprays with an innovative rapid-onset mechanism of action (MOA). They activate chemosensory neurons in the nasal cavity which selectively modulate key neural circuits in the brain without requiring systemic absorption or direct activity on neurons in the brain. AV-101 inhibits the activity of the ion channel of the NMDAR but does not block it, unlike approved NMDAR antagonists having significant side effects.

Our goal is to develop and commercialize, on our own or with strategic partners, a broad range of innovative therapies for neuropsychiatric, neurological and neuroendocrine disorders where current treatment options are inadequate to meet the needs of millions of patients in the U.S. and worldwide.

Our Product Candidates

Pherine Product Candidates

Five of our product candidates – fasedienol (PH94B), itruvone (PH10), PH15, PH80 and PH284 – belong to a new class of drug candidates referred to as pherines. Pherines are odorless and tasteless neuroactive nasal sprays administered in low microgram level doses to selectively engage chemosensory neurons in the nasal cavity and induce fast-acting pharmacologic and behavioral benefits without requiring systemic absorption or direct activity on neurons in the brain. Specifically, each of our pherine product candidates is a distinct chemical entity that directly modulates particular areas of the brain, such as the limbic amygdala (the main fear and anxiety center of the brain), the hypothalamus (the thermoregulatory and appetite control areas of the brain), the hippocampus, the locus ceruleus, and the prefrontal cortex. We believe each of our pherine product candidates has the potential to be a fast-acting therapy for one or more CNS disorders, including social anxiety disorder (fasedienol), major depressive disorder (itruvone), cognitive impairment caused by mental fatigue (PH15), vasomotor syndrome (hot flashes) due to menopause, premenstrual dysphoric disorder and migraine headaches (PH80) and wasting syndrome and appetite stimulation (cachexia) (PH284), all without requiring apparent systemic absorption, binding to classic abuse liability receptors or other neurons in the brain or steroidal hormone receptors.

Fasedienol Nasal Spray for Social Anxiety Disorder

Fasedienol (PH94B) is a synthetic investigational pherine nasal spray from the androstane family in Phase 3 clinical development for the treatment of adults with social anxiety disorder (SAD). When administered intranasally in microgram doses, fasedienol activates receptors of peripheral nasal chemosensory neurons connected to subsets of neurons in the olfactory bulbs that, in turn, connect to neurons in the limbic amygdala involved in the pathophysiology of SAD and potentially other anxiety and mood disorders. We believe fasedienol has the potential to achieve rapid-onset anti-anxiety effects with significantly reduced risks of side effects and other safety concerns, such as potential drug-drug interactions, abuse, misuse and addiction, associated with certain other systemic pharmaceuticals that act directly on neurons in the brain and are sometimes prescribed for anxiety disorders.

In August 2023, we announced positive, statistically significant results from our PALISADE-2 Phase 3 study of fasedienol in adult patients with SAD as measured using the Subjective Units of Distress Scale (SUDS). We are planning to initiate two Phase 3 clinical studies of fasdienol in adult patients with SAD, PALISADE-3 using SUDS as the primary endpoint and FEARLESS using the Liebowitz Social Anxiety Scale (LSAS) as the primary endpoint.

Itruvone Nasal Spray for Major Depressive Disorder (MDD)

Itruvone (PH10) is an odorless, tasteless synthetic investigational neuroactive pherine nasal spray from the pregnane family with an innovative potential MOA that is fundamentally differentiated from the MOA of all currently approved treatments for depression disorders. Itruvone neuroactive nasal spray is administered at microgram-level doses and is designed to engage and activate chemosensory neurons in the nasal cavity, which are connected to neural circuits in the brain that produce antidepressant effects. We believe itruvone has the potential to produce antidepressant effects without the side effects and safety concerns that may be associated with current antidepressants therapies. In June 2023, we completed a small Phase 1 study to investigate the safety and tolerability of itruvone in healthy adult subjects. Positive data from this study demonstrated that there were no reported treatment-related serious adverse events or discontinuations due to adverse events in the trial.

PH80 Nasal Spray for Women’s Health Disorders and Migraine

PH80 is an odorless, tasteless synthetic investigational pherine with a novel, rapid-onset potential MOA that is fundamentally differentiated from the MOA of all currently approved treatments for vasomotor symptoms (hot flashes) due to menopause and other women’s health disorders and migraine headaches. PH80 activates chemosensory neurons in the nasal cavity connected to neural circuits that modulate the basal forebrain associated with the control of body temperature, as well as the amygdala and hypothalamus, that have been linked to the pathology of migraine and other women’s health disorders such as premenstrual dysphoric disorder (PMDD). We are preparing to submit a U.S. investigational drug application (IND) to facilitate Phase 2B clinical development of PH80 for the treatment of moderate to severe vasomotor symptoms (hot flashes) due to menopause.

PH15 Nasal Spray for Cognitive and Psychomotor Performance and Improvement

PH15 is an odorless, tasteless synthetic investigational pherine with a novel, rapid-onset potential MOA that is fundamentally differentiated from the MOA of all currently approved treatments to improve cognitive impairment caused by mental fatigue and potentially other disorders. We believe intranasal PH15 has the potential to improve cognitive and psychomotor performance and improvement of reaction time in individuals with mental fatigue. We are currently evaluating the path forward to submit a U.S. IND for further clinical development of PH15 in the U.S., on our own or with collaborators, including the appropriate indication for demonstrating improvement of cognitive function.

PH284 Nasal Spray for Cachexia

PH284 is an odorless, tasteless synthetic investigational pherine with a novel, rapid-onset potential MOA that is fundamentally differentiated from the MOA of all currently approved treatments for the loss of appetite associated with chronic disorders such as cancer. We are currently evaluating the path forward to submit a U.S. IND for further clinical development of PH15 for the treatment of cachexia, on our own or with collaborators, including the appropriate patient populations for demonstrating an increase in appetite and weight gain.

AV-101 for Neurological Disorders

AV-101 (4-Cl-KYN) is a novel, oral prodrug that targets the NMDAR (N-methyl-D-aspartate receptor), an ionotropic glutamate receptor in the brain. Based on observations and findings from preclinical studies, we believe AV-101 has the potential to become a new oral treatment alternative for multiple CNS disorders, including levodopa-induced dyskinesia, neuropathic pain, seizures, MDD, and suicidal ideation. We are currently assessing a potential path forward for Phase 2A clinical development of AV-101, on our own or with collaborators, as a treatment for levodopa-induced dyskinesia associated with Parkinson’s disease therapy and possibly one or more additional neurological disorders involving the NMDAR receptor.

Subsidiaries

Our wholly-owned subsidiaries consist of Pherin Pharmaceuticals, Inc, a Delaware corporation (Pherin), and Vistastem, Inc., a California corporation founded in 1998 (Vistastem). For the relevant periods, our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q (Report) also include the accounts of Vistastem’s two wholly owned inactive subsidiaries, Artemis Neuroscience, Inc., a Maryland corporation (Artemis), which was dissolved in April 2022, and VistaStem Canada, Inc., a corporation organized under the laws of Ontario, Canada (VistaStem Canada), which was dissolved in June 2022.

Note 2. Basis of Presentation and Going Concern

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not contain all of the information and footnotes required for complete consolidated financial statements. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our interim financial information. The accompanying Condensed Consolidated Balance Sheet at March 31, 2023 has been derived from our audited consolidated financial statements at that date but does not include all disclosures required by U.S. GAAP. The operating results for the three months ended June 30, 2023 are not necessarily indicative of the operating results to be expected for our fiscal year ending March 31, 2024, or for any other future interim or other period.

The accompanying unaudited Condensed Consolidated Financial Statements and notes to the Condensed Consolidated Financial Statements contained in this Report should be read in conjunction with our audited Consolidated Financial Statements for our fiscal year ended March 31, 2023 contained in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) on June 28, 2023 (Form 10-K).

On June 6, 2023, we implemented a one-for-thirty (1-for-30) reverse split of our common stock (the Reverse Stock Split). At our 2022 Annual Meeting of Stockholders held on October 28, 2022, our stockholders authorized our Board of Directors (Board) to implement a reverse stock split of our issued and outstanding shares of common stock at a ratio of up to one-for-thirty, with the exact ratio to be determined at the discretion of the Board. The Board subsequently unanimously approved the ratio of one-for-thirty. Our common stock began trading on the Nasdaq Capital Market on a split-adjusted basis on June 7, 2023. The Reverse Stock Split reduced the number of shares of our common stock outstanding. Additionally, the number of shares and exercise prices of outstanding options to purchase common stock granted under our stockholder-approved option plans and outstanding warrants to purchase common stock have been adjusted proportionately. Our authorized shares of common stock remain at 325,000,000 and our authorized shares of preferred stock remain at 10,000,000. The par value of each of our common stock and preferred stock remains at $0.001 per share. All share and per share data for all periods presented in the accompanying financial statements and related disclosures in this Report have been adjusted retrospectively to reflect the Reverse Stock Split.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared assuming we will continue as a going concern. As a clinical-stage biopharmaceutical company having not yet developed commercial products or achieved sustainable revenues, we have experienced recurring losses and negative cash flows from operations resulting in a deficit of approximately $333.8 million accumulated from inception ( May 1998) through June 30, 2023. We expect losses and negative cash flows from operations to continue for the foreseeable future as we engage in further development of fasedienol, itruvone, AV-101 and our other pherine product candidates.

Since our inception in May 1998 through June 30, 2023, we have financed our operations and technology acquisitions primarily through the issuance and sale of our equity and debt securities for cash proceeds of approximately $209.9 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 and intellectual property licensing, and other revenues. Additionally, we have issued equity securities with an approximate value at issuance of $41.3 million in noncash 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.

Liquidity, Capital Resources and Going Concern

We did not complete any capital-raising or other significant financing activities during Fiscal 2023. During the quarter ended June 30, 2023, we sold 561,418 shares of our common stock under the terms of our Open Market Sale Agreement^SM (the Sales Agreement) for our at-the-market offering program (the ATM) resulting in gross cash proceeds of approximately $1.15 million. As disclosed in Note 12, Subsequent Events, since June 30, 2023, and through the date of the issuance of this Report, we sold an aggregate of 1,487,293 shares of our common stock under the Sales Agreement at a weighted average price of $11.36 per share and received gross cash proceeds of $16,893,700. Financing and other transactions consummated prior to Fiscal 2023 have provided the primary sources of our liquidity during Fiscal 2023 and through the date of this Report in our current fiscal year.

We had cash and cash equivalents of approximately $9.6 million at June 30, 2023, which we believe will not be sufficient to fund our planned operations for the twelve months following the issuance of these Condensed Consolidated Financial Statements, which raises substantial doubt regarding our ability to continue as a going concern. We are continuing to manage our cash resources, including cash resources received since June 30, 2023, as we evaluate the potential implications for the initiation, conduct and timing of clinical trials, including Phase 3 trials of fasedienol, the Phase 2B trial of itruvone and nonclinical studies of our other pherine candidates, and strategies for the further development and potential commercialization, on our own or with collaborators, of all of our product candidates. However, as we have not yet developed products that generate recurring revenue and, in the event we successfully complete future clinical and/or nonclinical programs, we will need to obtain and invest substantial additional capital resources to develop and commercialize any of our product candidates.

During the next twelve months, subject to availability of adequate working capital or strategic partnering arrangements, either on our own or with collaborators, we plan to (i) prepare for and initiate, on our own or with a strategic partner, our Phase 3 PALISADE-3 and Phase 3 FEARLESS clinical trials of fasedienol as a potential new treatment of anxiety in adults with SAD, (ii) prepare for and initiate, on our own or with a strategic partner, a Phase 2B clinical trial of itruvone as a potential stand-alone treatment for MDD, (iii) prepare for and initiate, on our own or with a strategic partner, U.S. IND-enabling nonclinical activities to facilitate Phase 2B development, on or own or with a strategic partner, of PH80 for the treatment of vasomotor symptoms (hot flashes) due to menopause, (iv) prepare for and initiate, on our own or with a strategic partner, U.S. IND-enabling nonclinical activities to facilitate potential Phase 2A development of PH15 for cognitive and psychomotor performance improvement, PH284 for cachexia, (v) prepare for and initiate, on our own or with a strategic partner, Phase 2A development of AV-101 for one or more neurological disorders involving the NMDAR, and (vi) conduct various nonclinical studies involving each of our product candidates.

When necessary and advantageous, we will seek additional financial resources to fund our planned operations through (i) sales of our equity and/or debt securities in one or more public offerings and/or private placements, including sales of our securities under the Sales Agreement, (ii) non-dilutive government grants and research awards and (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. Subject to certain restrictions, our Registration Statement on Form S-3 (the S-3 Shelf Registration Statement) remains available for future sales of our equity securities in one or more public offerings from time to time. While we may make additional sales of our equity securities under the S-3 Shelf Registration Statement and/or under the Sales Agreement, we do not have an obligation to do so.

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

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

Note 3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. 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. Actual results could differ from those estimates. Significant estimates include those relating to revenue recognition, share-based compensation, right-of-use assets and lease liabilities and assumptions that have been used historically to value warrants and warrant modifications.

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.

Revenue Recognition

In June 2020, we entered into a license and collaboration 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, manufacture and commercialize fasedienol for multiple anxiety-related disorders in Greater China (Mainland China, Hong Kong, Macau and Taiwan), South Korea and Southeast Asia (Indonesia, Malaysia, Philippines, Thailand and Vietnam) (the AffaMed Agreement). The AffaMed Agreement has been the basis of our reported revenue for the quarters ending June 30, 2023 and 2022. The terms of the AffaMed Agreement include a $5.0 million non-refundable upfront license fee which we received in August 2020, potential payments based upon achievement of certain development and commercial milestones, and royalties on product sales. In prior years, we have occasionally generated revenue from collaborative research and development arrangements, licensing and technology transfer agreements, including strategic licenses or sublicenses, and government grants.

Under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), we recognize revenue when our customers obtain 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 ASC 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.

Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. We assess whether these options provide a material right to the customer and if so, they are considered performance obligations. The exercise of a material right may be accounted for as a contract modification or as a continuation of the contract for accounting purposes.

We assess whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) our promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct in the evaluation of a collaboration arrangement subject to ASC 606, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, we are required to combine that good or service with other promised goods or services until we identify a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (SSP) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and satisfaction of the performance obligations. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant Company-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. In certain circumstances, we may apply the residual method to determine the SSP of a good or service if the standalone selling price is considered highly variable or uncertain. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

If the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which we will be entitled in exchange for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the most likely amount method. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensee and the transfer of the promised goods or services to the licensee will be one year or less. For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time, based on the use of an output or input method. For the single combined performance obligation under the AffaMed Agreement, the measure of progress is stand-ready straight-line over the period in which we expect to perform the services related to the license of fasedienol. Accordingly, we recognize revenue on a straight-line basis over the period in which we expect to perform the services. Revenue related to performance obligation satisfied over time could be materially impacted as a result of changes in the estimated time or effort necessary to satisfy the performance obligation.

The difference between revenue recognized to date and the consideration invoiced or received to date is recognized as either a contract asset/unbilled revenue (revenue earned exceeds cash received) or a contract liability/deferred revenue (cash received exceeds revenue earned). As described more completely in Note 11, Sublicensing and Collaborative Agreements, based on the failed results of our PALISADE-1 clinical trial of fasedienol in adult patients with SAD, during the quarter ended September 30, 2022, we extended our estimate of the time necessary to complete our performance obligation under the AffaMed Agreement. In accordance with the guidance of ASC 606, the extension of the estimated time to complete our performance obligation required recording a cumulative catch-up adjustment. Following the cumulative catch-up adjustment, through June 30, 2023, we have recognized an aggregate of $2,148,700 as revenue under the AffaMed Agreement and, at that date, we have recorded $2,851,300 as deferred revenue. The following table presents changes in our contract liabilities for the three months ended June 30, 2023:

	Balance at							Balance at
	March 31, 2023		Additions		Deductions			June 30, 2023
Deferred Revenue - current portion	$	714,300	$	-	$	-		$	714,300
Deferred Revenue - non-current portion		2,314,600		-		(177,600	)		2,137,000
Total	$	3,028,900	$	-	$	(177,600	)	$	2,851,300

During the three months ended June 30, 2022, we recognized $310,100 as revenue related to the AffaMed Agreement, which was subsequently derecognized during the quarter ended September 30, 2022 as a result of the cumulative catch-up adjustment.

Contract Acquisition Costs

During the quarter ended September 30, 2020, we made cash payments aggregating $345,000 for sublicense fees, which we were obligated to make pursuant to our prior fasedienol license agreement with Pherin, and fees for consulting services exclusively related to the AffaMed Agreement. Additionally, on June 24, 2020, we issued 7,779 unregistered shares of our common stock, valued at $125,000, as partial compensation for consulting services related exclusively to the consummation of the AffaMed Agreement. These sublicense fees and consulting payments and the fair value of the common stock issued, aggregating $470,000, were incurred solely to obtain the AffaMed Agreement, and, accordingly, have been capitalized as deferred contract acquisition costs in our Condensed Consolidated Balance Sheets. Capitalized contract acquisition costs are amortized over the period in which we expect to satisfy the performance obligation under the AffaMed Agreement and the amortization expense has been included in general and administrative expense in our Condensed Consolidated Statements of Operations and Comprehensive Loss. As described above, in September 2022, we extended our estimate for the time required to satisfy our performance obligation under the AffaMed Agreement. Accordingly, our amortization of the contract acquisition costs was also subject to a cumulative catch-up adjustment. Following the cumulative catch-up adjustment, through June 30, 2023, we have recognized an aggregate of $202,000 as contract acquisition expense under the AffaMed Agreement and, at that date, we have recorded $268,000 as deferred contract acquisition costs. There has been no impairment loss in relation to the costs capitalized.

The following table summarizes our contract acquisition costs for the three months ended June 30, 2023:

	Balance at							Balance at
	March 31, 2023		Additions		Deductions			June 30, 2023
Deferred Contract Acquisition Costs - current portion	$	67,100	$	-	$	-		$	67,100
Deferred Contract Acquisition Costs - non-current portion		217,600		-		(16,700	)		200,900
Total	$	284,700	$	-	$	(16,700	)	$	268,000

During the three months ended June 30, 2022, we recognized $29,100 as contract acquisition expense related to the AffaMed Agreement, which was subsequently derecognized during the quarter ended September 30, 2022 as a result of the cumulative catch-up adjustment.

Research and Development Expense

Research and development expense is composed of both internal and external costs. Internal costs include salaries and employment-related expense, including stock-based compensation expense, of scientific personnel and direct project costs. External research and development expense consists primarily of costs associated with clinical and nonclinical development of fasedienol, itruvone, AV-101. All such costs are charged to expense as incurred.

We also record accruals for estimated ongoing clinical trial costs. Clinical trial costs represent costs incurred by contract research organizations (CROs) and clinical trial sites. Progress payments are generally made to CROs, clinical sites, investigators and other professional service providers. We analyze the progress of clinical trials, including levels of subject enrollment, invoices received and contracted costs, when evaluating the adequacy of accrued liabilities. Significant judgments and estimates must be made and used in determining the clinical trial accrual in any reporting period. Actual results could differ from those estimates under different assumptions. Revisions are charged to research and development expense in the period in which the facts that give rise to the revision become known.

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

Stock-Based Compensation

We recognize compensation cost for all stock-based awards to employees, independent directors and non-employee consultants based on the grant date fair value of the award. We record stock-based compensation expense over the period during which the employee or other grantee is required to perform services in exchange for the award, which generally represents the scheduled vesting period. We have not granted restricted stock awards to employees or others nor do we have any awards with market or performance conditions. Non-cash expense attributable to compensatory grants of shares of our common stock to non-employees is determined by the quoted market price of the stock on the date of grant and is either recognized as fully-earned at the time of the grant or amortized ratably over the term of the related service agreement, depending on the terms of the specific agreement.

The table below summarizes stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss:

	Three Months Ended June 30,
	2023		2022
Research and development expense	$	309,400	$	329,600
General and administrative expense		259,700		627,300
Total stock-based compensation expense	$	569,100	$	956,900

Expense amounts reported above include $2,100 and $15,900 in research and development expense for the three months ended June 30, 2023 and 2022, respectively, and $1,400 and $4,900 in general and administrative expense for the three months ended June 30, 2023 and 2022, respectively, attributable to employee participation in our 2019 Employee Stock Purchase Plan (ESPP).

During the three months ended June 30, 2023, we granted from our Amended and Restated 2019 Omnibus Equity Incentive Plan (the 2019 Plan) an option to purchase an aggregate of 10,000 shares of our common stock as a component of a settlement reached with a terminated former employee. The exercise price is equal to the closing market price of our common stock on the date of the grant. The option vests 25% on the grant date with the remaining shares vesting 30 days after grant. The option has a term of five years. We valued the option granted in June 2023 using the Black-Scholes Option Pricing Model and the following assumptions:

Assumption:	Weighted Average
Market price per share at grant date	$	1.70
Exercise price per share	$	1.70
Risk-free interest rate		4.41	%
Expected term in years		2.53
Volatility		128.95	%
Dividend rate		0.0	%
Shares		10,000

Fair Value per share	$	1.21

During the three months ended June 30, 2023, options to purchase an aggregate of 136 shares of our common stock expired unexercised and were returned to the 2019 Plan to be available for future issuance. At June 30, 2023, there were stock options outstanding under our 2016 Equity Incentive Plan (the 2016 Plan) and our 2019 Plan to purchase 712,555 shares of our common stock at a weighted average exercise price of $37.23 per share. At that date, there were 169,240 shares of our common stock available for future issuance under the 2019 Plan. There are no additional shares available for issuance under our 2016 Plan.

Leases, Right-of-use Assets and Operating Lease Obligations

We account for our leases following the guidance of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires that we determine, at the inception of an arrangement, whether the arrangement is or contains a lease, based on the unique facts and circumstances present. 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. Right-of-use assets and operating lease liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. 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. The interest rate implicit in lease contracts is typically not readily determinable; accordingly, we use our incremental borrowing rate, which is the rate that would be incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment, based upon the information available at the commencement date. 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. Our operating lease is reflected in the Right-of-use asset – operating lease; Operating lease obligation – current portion; and Operating lease obligation – non-current portion in our Condensed Consolidated Balance Sheets.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. 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.

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. Refer to Note 10, Commitments and Contingencies, for additional information regarding ASC 842 and its impact on our Condensed Consolidated Financial Statements.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents. Our investment policies limit any such investments to short-term, low-risk instruments. We deposit cash and cash equivalents with financial institutions which are insured to the maximum of federal limitations. Balances in these accounts may exceed federally insured limits at times.

Comprehensive Loss

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

Loss per Common Share

Basic net loss attributable to common stockholders per share of common stock excludes the effect of dilution and is generally computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock were exercised or converted into shares of common stock.

As a result of our net loss for both periods presented, potentially dilutive securities were excluded from the computation of diluted net loss per share, as their effect would be antidilutive. Potentially dilutive securities excluded in determining diluted net loss per share at June 30, 2023 and 2022 are as follows:

	At June 30,		At June 30,
	2023		2022
Outstanding options under the Company's Amended and Restated 2016 (formerly 2008) Stock Incentive Plan and 2019 Omnibus Equity Incentive Plan		712,555		657,613

Outstanding warrants to purchase common stock		45,686		309,195
Total		758,241		966,808

Fair Value Measurements

We do not use derivative instruments for hedging market risks or for trading or speculative purposes. Our only financial assets that are measured on a recurring basis at fair value were $9,110,300 and $5,010,800 held in money market funds and classified as cash equivalents at June 30, 2023 and March 31, 2023, respectively. Our money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. We had no financial liabilities that are measured on a recurring basis at fair value at June 30, 2023 or March 31, 2023.

Warrants Issued in Connection with Equity Financing

We evaluate the appropriate balance sheet classification of warrants we issue as either equity or as a derivative liability. In accordance with ASC 815-40, Derivatives and Hedging-Contracts in the Entity’s Own Equity (ASC 815-40), we classify a warrant as equity if it is “indexed to the Company’s equity” and meets several specific conditions for equity classification. A warrant is not considered “indexed to the Company’s equity,” in general, when it contains certain types of exercise contingencies or potential adjustments to its exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the Consolidated Balance Sheets at fair value with any changes in its fair value recognized immediately in the Statements of Operations and Comprehensive Loss. At June 30, 2023 and March 31, 2023, all of our outstanding warrants were classified as equity.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326)(ASU 2016-13), which (i) significantly changes the impairment model for most financial assets that are measured at amortized cost and for certain other instruments from an incurred loss model to an expected loss model which is based on an estimate of current expected credit loss (CECL) (ASC-326-20); and (ii) provides for recording credit losses on available for sale debt securities through an allowance account (ASC 326-30). We adopted ASU 2016-13 on April 1, 2023. Our adoption of ASU 2016-13 did not have a material impact on our Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

We believe the following recent accounting pronouncement is of significance or potential significance to the Company.

In August 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), to reduce complexity in applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity.

The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives.

In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract.

The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

The amendments in ASU 2020-06 are effective for our fiscal year beginning April 1, 2024. We are evaluating the impact of this new guidance, but do not believe that our adoption of ASU 2020-06 will have a material impact on our Condensed Consolidated Financial Statements.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are composed of the following:

	June 30,		March 31,
	2023		2023
Clinical and nonclinical materials and contract services	$	179,000	$	166,700
Insurance		1,044,000		206,000
Receivable for insurance claim		380,000		-
Receivable from collaboration partner		100,000		274,700
Software licenses and all other		186,400		155,300

	$	1,889,400	$	802,700

The amounts reported as receivable from collaboration partner at June 30, 2023 and March 31, 2023 represent payments we made to a CRO and another service provider for project and clinical trial services on behalf of our collaboration partner. Our collaboration partner reimbursed us for $174,700 in May 2023. The receivable for insurance claim represents insurance reimbursement related to matters associated with a terminated former employee. We received the reimbursement from our insurance carrier in July 2023.

Note 5. Property and Equipment, Net

Property and equipment, net is composed of the following:

	June 30,			March 31,
	2023			2023
Laboratory equipment	$	1,234,800		$	1,234,800
Tenant improvements		214,400			214,400
Office furniture and equipment		40,300			40,300
Manufacturing equipment		211,200			211,200
		1,700,700			1,700,700
Accumulated depreciation and amortization		(1,224,900	)		(1,193,400	)
Property and equipment, net	$	475,800		$	507,300

We recorded depreciation and amortization expense of $31,500 and $32,300 for the three months ended June 30, 2023 and 2022, respectively. Included in amounts reported above for office furniture and equipment is the right-of-use asset related to a financing lease of certain office equipment. Amounts associated with assets subject to the financing lease are as follows:

	June 30,			March 31,
	2023			2023
Office equipment subject to financing lease	$	10,600		$	10,600
Accumulated depreciation		(2,500	)		(2,000	)
Net book value of office equipment subject to financing lease	$	8,100		$	8,600

The office equipment lease commenced in April 2022 and requires a monthly payment of approximately $200 through June 2027.

Note 6. Accrued Expenses

Accrued expenses are composed of the following:

	June 30,		March 31,
	2023		2023
Accrued expenses for clinical and nonclinical materials, development and contract services	$	364,700

SEC Form 10-Q filed by VistaGen Therapeutics Inc.