Capital Stock

6 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Capital Stock

Series B Preferred Unit Offering

In April and May 2016, in self-placed private placement transactions, we sold to accredited investors an aggregate of $278,000 of units in our Series B Preferred Unit offering, which units consist of Series B Preferred and Series B Warrants (together Series B Preferred Units). We issued 39,714 shares of Series B Preferred and Series B Warrants to purchase 39,714 shares of our common stock.  Through the termination of the Series B Preferred Unit offering in May 2016, we received an aggregate of $5,303,800 in cash proceeds from our self-placed private placement and sale of the Series B Preferred Units.

We allocated the proceeds from the sale of the Series B Preferred Units during April and May 2016 to the Series B Preferred and the Series B Warrants based on their relative fair values on the dates of the sales. We determined that the fair value of a share of Series B Preferred was equal to the quoted market value of a share of our common stock on the date of a Series B Preferred Unit sale. We calculated the fair value of the Series B Warrants using the Black Scholes Option Pricing Model and the weighted average assumptions indicated in the table below. The table below also presents the aggregate allocation of the Series B Preferred Unit sales proceeds based on the relative fair values of the Series B Preferred and the Series B Warrants as of their respective Series B Preferred Unit sales dates. The difference between the relative fair value per share of the Series B Preferred, approximately $4.20 per share, and its Conversion Price (or stated value) of $7.00 per share represents a deemed dividend to the purchasers of the Series B Preferred Units. Accordingly, we have recognized a deemed dividend in the aggregate amount of $111,100 in arriving at net loss attributable to common stockholders in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Loss for the six months ended September 30, 2016.

Unit Warrants

Aggregate Allocation of

Weighted Average Issuance Date Valuation Assumptions

Per Share

Aggregate

Aggregate

Proceeds Based on

Warrant

Risk free

Fair

Fair Value

Proceeds

Relative Fair Value of:

Shares

Market

Exercise

Term

Interest

Dividend

Value of

of Unit

of Unit

Unit

Unit

Issued

Price

Price

(Years)

Rate

Volatility

Rate

Warrant

Warrants

Sales

Stock

Warrant

39,714

$

8.45

$

7.00

5.00

1.27

%

78.43

%

0.0

%

$

5.63

$

223,500

$

278,000

$

166,900

$

61,100

May 2016 Public Offering and NASDAQ Uplisting

Effective on May 16, 2016, we consummated an underwritten public offering of our securities, pursuant to which we issued an aggregate of 2,570,040 registered shares of our common stock at a public sales price of $4.24 per share and five-year warrants exercisable at $5.30 per share to purchase an aggregate of 2,705,883 shares of our common stock at a public sales price of $0.01 per warrant share, including shares and warrants issued in June 2016 pursuant to the exercise of the underwriters’ over-allotment option (the May 2016 Public Offering). We received gross proceeds of approximately $10.9 million and net proceeds of approximately $9.5 million from the May 2016 Public Offering, after deducting underwriters’ commissions and other offering expenses. The warrants issued in the May 2016 Public Offering have no anti-dilution or other exercise price or share reset features, except as is customary with respect to a change in the Company’s capital structure in the event of a stock split or dividend, and, accordingly, we have accounted for them as equity warrants.

The securities included in the May 2016 Public Offering Warrants were offered, issued and sold under a prospectus filed with the Securities and Exchange Commission (SEC) pursuant to an effective registration statement (Registration Statement) filed with the SEC on Form S-1 (File No. 333-210152) pursuant to the Securities Act of 1933, as amended (Securities Act). The Registration Statement was first filed with the SEC on March 14, 2016, and was declared effective on May 10, 2016.

In connection with the completion of our May 2016 Public Offering, our common stock was approved for listing on The NASDAQ Capital Market, and began trading under the symbol “VTGN” on May 11, 2016.

Conversion of Series B Preferred into Common Stock

During April 2016, prior to the May 2016 Public Offering, holders of an aggregate of 7,500 shares of Series B Preferred voluntarily converted such shares into an equivalent number of registered shares of our common stock.  In connection with such conversions, we issued an aggregate of 510 shares of our unregistered common stock as payment in full of $4,000 in accrued dividends on the Series B Preferred that was voluntarily converted.

On May 19, 2016, upon the consummation of the May 2016 Public Offering, an aggregate of 2,403,051 shares of Series B Preferred were automatically converted into an aggregate of 2,192,847 registered shares of our common stock and an aggregate of 210,204 shares of our unregistered common stock. Additionally, we issued an aggregate of 416,806 shares of our unregistered common stock as payment in full of $1,642,100 in accrued dividends on the Series B Preferred that was automatically converted, at the rate of one share of common stock for each $3.94 of accrued Series B Preferred dividends.  On June 15, 2016, pursuant to the underwriters’ exercise of their over-allotment option, an additional 44,500 shares of Series B Preferred were converted into 44,500 shares of our registered common stock.  We issued an additional 9,580 shares of our unregistered common stock as payment in full of $37,400 in accrued dividends on the Series B Preferred that was automatically converted, at the rate of one share of common stock for each $3.90 in accrued dividends.

In August 2016, one of the remaining holders of our Series B Preferred voluntarily converted 87,500 shares of Series B Preferred into an equivalent number of registered shares of our common stock.  In connection with this conversion, we issued 26,258 shares of our unregistered common stock as payment in full of $85,300 in accrued dividends on the Series B Preferred that was voluntarily converted.

Issuance of Common Stock to Professional Services Providers

In September 2016, we issued an aggregate of 170,000 shares of our unregistered common stock having an aggregate fair value on the date of issuance of $737,800 to various professional services providers. Of that amount, we issued 120,000 shares having a fair value of $520,800 on the date of issuance for services to be rendered from October 2016 to December 2016. The value of these shares has been recorded as a prepaid expense at September 30, 2016 and will be expensed during the quarter ended December 31, 2016.

Modification of Warrants

Between April 1, 2016 and May 4, 2016, we entered into Warrant Exchange Agreements with certain holders of outstanding warrants to purchase an aggregate of 41,469 shares of our common stock pursuant to which the holders agreed to the cancellation of such warrants in exchange for the issuance of an aggregate of 31,238 shares of our unregistered common stock.

We accounted for the exchange of these warrants as warrant modifications, comparing their fair value prior to the exchange with the fair value of the common stock issued. We calculated the weighted average fair value of the warrants prior to the exchange to be $5.37 per share, or $223,700, using the Black Scholes Option Pricing Model and the following weighted average assumptions: market price per share: $8.44; exercise price per share: $7.37; risk-free interest rate: 1.23%; remaining contractual term: 4.77 years; volatility: 79.0%; and expected dividend rate: 0%.  The weighted average fair value of the aggregate of 31,238 shares of common stock issued in the exchange was $8.45 per share or $264,000.  Accordingly, we recognized the additional fair value, $40,300, as warrant modification expense, included as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations and Comprehensive Loss for the quarter ended June 30, 2016.

In August 2016, we entered into Warrant Exchange Agreements with holders of outstanding warrants to purchase an aggregate of 20,000 shares of our common stock pursuant to which the holders agreed to the cancellation of such warrants in exchange for the issuance of an aggregate of 15,000 shares of our unregistered common stock. We likewise accounted for the exchange of these warrants as warrant modifications. We calculated the weighted average fair value of the warrants prior to the exchange to be $1.64 per share, or $32,900, using the Black Scholes Option Pricing Model and the following weighted average assumptions: market price per share: $3.33; exercise price per share: $8.00; risk-free interest rate: 1.10%; remaining contractual term: 4.58 years; volatility: 87.0%; and expected dividend rate: 0%.  The weighted average fair value of the aggregate of 15,000 shares of common stock issued in the exchange was $3.33 per share or $50,000.  Accordingly, we recognized the additional fair value, $17,100, as warrant modification expense, included as a component of general and administrative expenses in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Loss for the quarter ended September 30, 2016.

Warrants Outstanding

Following the warrant issuances in the May 2016 Public Offering, the Series B Warrant issuances and the warrant exchanges described above, at September 30, 2016, we had outstanding warrants to purchase shares of our common stock at a weighted average exercise price of $6.44 per share as follows:

Exercise Price				Shares Subject to Purchase at
per Share		Expiration		September 30, 2016
$	4.50		9/26/2019		25,000
$	5.30		5/16/2021		2,705,883
$	6.00		9/26/2019		75,000
$	7.00		12/11/2018 to 3/3/2023		1,417,125
$	8.00		3/25/2021		210,000
$	10.00		8/31/2016 to 1/11/2020		131,358
$	20.00		9/15/2019		110,448
$	30.00		11/20/2017		3,600
					4,678,414

With the exception of 2,705,883 shares of common stock underlying the warrants issued in the May 2016 Public Offering, all of the common shares underlying our outstanding warrants are unregistered.