Vistagen Therapeutics, Inc.VTGN
Vistagen Therapeutics, Inc. Income Taxes Disclosure
10. Income Taxes
For the fiscal years ended March 31, 2026 and 2025, the Company's pre-tax loss of $69.7 million and $51.4 million, respectively, was derived entirely from U.S. operations. The Company had no foreign operations during either period.
For each of the fiscal years ended March 31, 2026 and 2025, income tax expense consisted of current state income tax expense of approximately $7,000, with no federal, foreign or deferred income tax expense in either period.
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, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||
| Computed expected tax benefit | $ | (14,633) | (21.00) | % | $ | (10,798) | (21.00) | % | |||||||||
| State income taxes, net of federal benefit | 7 | 0.01 | % | 7 | 0.01 | % | |||||||||||
| Tax effect of research and development credits | (748) | (1.08) | % | (2,204) | (4.29) | % | |||||||||||
| Tax effect of stock compensation | — | — | % | 309 | 0.60 | % | |||||||||||
| Tax effect of other non-deductible items | 430 | 0.62 | % | 618 | 1.20 | % | |||||||||||
| Change in valuation allowance (federal only) | 13,998 | 20.09 | % | 11,923 | 23.20 | % | |||||||||||
| All other | 953 | 1.37 | % | 152 | 0.29 | % | |||||||||||
| Income tax expense | $ | 7 | 0.01 | % | $ | 7 | 0.01 | % | |||||||||
The 'All other' reconciling item for fiscal year 2026 consists of a return-to-provision adjustment relating to the difference between the estimated tax provision recorded as of March 31, 2025 and the actual amounts reflected in the fiscal year 2025 income tax return.
Income taxes paid, net of refunds received, for the years ended March 31, 2026 and 2025 were as follows (in thousands):
| Year ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Federal | $ | — | $ | — | |||||||
| State | 3 | — | |||||||||
| Foreign | — | — | |||||||||
| Total income taxes paid, net of refunds | $ | 3 | $ | — | |||||||
State and local income taxes paid during the fiscal year ended March 31, 2026 consisted primarily of income taxes paid to the Commonwealth of Massachusetts.
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryovers | $ | 70,861 | 51,324 | ||||||||
| Basis differences in property and equipment | 38 | — | |||||||||
| Research and development credit carryforwards | 7,731 | 6,875 | |||||||||
| Stock based compensation | 2,835 | 3,041 | |||||||||
| Operating lease Right-of-Use asset | 31 | 37 | |||||||||
| Capitalized research and development costs | 11,734 | 15,087 | |||||||||
| Deferred revenue | — | 632 | |||||||||
| Accruals and other reserves | 138 | 709 | |||||||||
| Total deferred tax assets | 93,368 | 77,705 | |||||||||
| Valuation allowance | (93,368) | (77,681) | |||||||||
| Total deferred tax assets net of valuation allowance | — | 24 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangibles | — | (12) | |||||||||
| Basis differences in property and equipment | — | (12) | |||||||||
| Total deferred tax liabilities | — | (24) | |||||||||
| Net deferred tax asset (liability) | $ | — | $ | — | |||||||
The valuation allowance increased by $15.7 million and $17.2 million during the fiscal years ended March 31, 2026 and 2025, respectively.
We continually evaluates the likelihood of the realization of the deferred tax assets and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is more likely than not. We consider many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by tax jurisdiction, expectation of future taxable income or loss, the carryforward periods available to us for tax reporting purposes and other relevant factors. As of March 31, 2026, based on our history of earnings and its assessment of future earnings, management does not believe that it is more likely than not that future taxable income will be sufficient to realize the deferred tax assets. Therefore, a full valuation allowance has been applied to the deferred tax assets.
As of March 31, 2026, we had U.S. federal net operating loss carryforwards of approximately $314.3 million. Federal net operating loss carryforwards of approximately $80.6 million generated through our fiscal year ended March 31, 2018 will expire in our fiscal years ending March 31, 2027 through March 31, 2038. Federal net operating loss carryforwards of approximately $233.7 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, 2026, we had state net operating loss carryforwards of approximately $63.7 million, which will expire in fiscal years ending in 2029 through 2045. State net operating loss carryforwards of approximately $10.8 million will carry forward indefinitely. We also have federal and state research and development tax credit carryforwards of approximately $8.6 million and $2.2 million, respectively. The federal tax credits will expire at various dates beginning with our fiscal year ending March 31, 2029 through March 31, 2045 unless previously utilized. The state tax credits do not expire and will carry forward indefinitely until utilized.
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
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
On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions.
The provisions of OBBBA most relevant to us are the restoration of immediate expensing for domestic R&E expenditures and the related transition rules for amounts previously capitalized under TCJA. For the fiscal year ended March 31, 2026, our first tax year subject to OBBBA, domestic R&E expenditures are currently deductible. With respect to the remaining unamortized balance of domestic R&E previously capitalized for tax years 2022 through 2024, we elected to continue amortizing the balance over its remaining recovery period. Because we maintain a full valuation allowance against its deferred tax assets, these changes did not result in a net income tax provision impact. We have not yet evaluated whether it qualifies for the small-business retroactive expensing election under OBBBA, which is available to taxpayers with average annual gross receipts of $31 million or less. The other significant provisions of OBBBA, including the changes to international tax rules (NCTI, FDDEI, and BEAT) and the modifications to Section 163(j) and bonus depreciation, do not have a material impact on us because it has no foreign operations, limited interest expense, and limited property and equipment.
The provisions of OBBBA most relevant to us are the restoration of immediate expensing for domestic R&E expenditures and the related transition rules for amounts previously capitalized under TCJA. For the fiscal year ended March 31, 2026, our first tax year subject to OBBBA, domestic R&E expenditures are currently deductible. With respect to the remaining unamortized balance of domestic R&E previously capitalized for tax years 2022 through 2024, we elected to continue amortizing the balance over its remaining recovery period. Because we maintain a full valuation allowance against its deferred tax assets, these changes did not result in a net income tax provision impact. We have not yet evaluated whether it qualifies for the small-business retroactive expensing election under OBBBA, which is available to taxpayers with average annual gross receipts of $31 million or less. The other significant provisions of OBBBA, including the changes to international tax rules (NCTI, FDDEI, and BEAT) and the modifications to Section 163(j) and bonus depreciation, do not have a material impact on us because it has no foreign operations, limited interest expense, and limited property and equipment.
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 2026 due to net operating losses that are being carried forward for tax purposes, but we are not currently under examination by tax authorities in any jurisdiction.
Uncertain Tax Positions
As required by the uncertain tax position guidance in ASC No. 740, Income Taxes the we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. We applied the uncertain tax position guidance in ASC 740 to all tax positions for which the statute of limitations remained open. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision.
Our unrecognized tax benefits at March 31, 2026 and 2025 relate entirely to research and development tax credits. The total amount of unrecognized tax benefits at March 31, 2026 and 2025 is $2.6 million and $2.4 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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Unrecognized benefit - beginning of period | $ | 2,399 | $ | 4,931 | |||||||
| Prior period position increases (decreases) | — | (3,329) | |||||||||
| Current period tax position increases (decreases) | 178 | 797 | |||||||||
| Unrecognized benefit - end of period | $ | 2,577 | $ | 2,399 | |||||||
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, 2026 or 2025. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jun 15, 2026 | Showing above |
| 2025 | Jun 17, 2025 | |
| 2024 | Jun 11, 2024 | |
| 2023 | Jun 28, 2023 | |
| 2022 | Jun 23, 2022 | |
| 2021 | Jun 29, 2021 | |
| 2020 | Jun 29, 2020 | |
| 2019 | Jun 25, 2019 | |
| 2018 | Jun 26, 2018 | |
| 2017 | Jun 29, 2017 | |
| 2016 | Jun 24, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.