Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Going Concern

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Basis of Presentation and Going Concern
6 Months Ended
Sep. 30, 2014
Notes to Financial Statements  
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 (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, 2014 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 and six months ended September 30, 2014 are not necessarily indicative of the operating results to be expected for our fiscal year ending March 31, 2015 or for any other interim period or any other future period.

 

The accompanying unaudited Condensed Consolidated Financial Statements and notes to Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements for the fiscal year ended March 31, 2014 contained in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) on June 25, 2014. Effective August 14, 2014, we consummated a 1-for-20 reverse split of our authorized, and issued and outstanding shares of common stock (the Stock Consolidation). Each reference to shares of common stock or the price per share of common stock in these financial statements is post-Stock Consolidation, and reflects the 1-for-20 adjustment as a result of the Stock Consolidation.  See Note 8, Capital Stock, for more information regarding the Stock Consolidation.

 

The accompanying Condensed Consolidated Financial Statements have been prepared assuming we will continue as a going concern. As an entity having not yet achieved sustainable revenues, we have experienced recurring losses and negative cash flows from operations resulting in a deficit of $77.2 million accumulated from inception through September 30, 2014. We expect losses and negative cash flows from operations to continue for the foreseeable future as we engage in further potential development of AV-101 and launch and execute our drug rescue programs and pursue potential drug discovery, drug development and regenerative medicine opportunities.

 

Since our inception in May 1998 through September 30, 2014, we have financed our operations and technology acquisitions primarily through the issuance and sale of equity and debt securities, including convertible promissory notes and short-term promissory notes, for cash proceeds of approximately $27.7 million, as well as from an aggregate of approximately $16.4 million of government research grant awards, strategic collaboration payments and other revenues. Additionally, we have issued equity securities with an approximate value at issuance of $13.0 million in non-cash settlements of certain liabilities, including liabilities for professional services rendered to us or as compensation for such services. At September 30, 2014, we did not have sufficient cash and cash equivalents to enable us to fund our planned operations, including expected cash expenditures of approximately $7.5 million over the next twelve months.

 

To meet our cash needs and fund our working capital requirements after September 30, 2014, from October 1, 2014 through November 17, 2014, we entered into securities purchase agreements with certain accredited investors and institutions to sell units of our securities, for aggregate proceeds of $165,000 consisting of: (i) 10% subordinate convertible promissory notes in the aggregate face amount of $165,000 maturing on March 31, 2015; (ii) an aggregate of 8,250 restricted shares of our common stock; and (iii) warrants exercisable through December 31, 2016 to purchase an aggregate of 8,250 restricted shares of our common stock at an exercise price of $10.00 per share. See Note 10, Subsequent Events, for additional information.

 

In April 2013, we entered into a Securities Purchase Agreement (as amended, Securities Purchase Agreement) with Autilion AG, a company organized and existing under the laws of Switzerland (Autilion), under which Autilion remains contractually obligated to purchase an aggregate of 3.6 million restricted shares of our common stock at a purchase price of $10.00 per share for aggregate cash proceeds to us of $36.0 million (Autilion Financing). Autilion is currently in default under the Securities Purchase Agreement. No assurances can be provided that Autilion will complete any material portion of its obligations under the Securities Purchase Agreement. We have filed a Registration Statement on Form S-1 with the SEC (File No. 333-195901) (the Registration Statement) to register up to 1.5 million shares of our common stock, and warrants to purchase up to 1.5 million shares of our common stock, in a public offering (Public Offering). The Registration Statement has been declared effective by the SEC, however we have not yet sold any of our securities pursuant to the Registration Statement. No assurances can be provided that we will complete the Public Offering in the near term, on acceptable terms, or at all. In the event that Autilion does not complete a material portion of the Autilion Financing under the Securities Purchase Agreement in the near term, or we are unable to complete a material portion of the Public Offering in the near term, we estimate that we will need to obtain approximately $7.5 million from alternative financing sources to execute our business plan during the next 12 months.

 

To the extent necessary, we may also seek to meet our future cash needs and fund our working capital requirements through a combination of additional private placements of our securities, which may include both debt and equity securities, research and development collaborations, license fees, and government grant awards.  Additionally, we believe that our participation in potential strategic collaborations, including potential licensing transactions, may provide additional cash in support of our future working capital requirements.  Notwithstanding the foregoing, substantial additional financing may not be available to us on a timely basis, on acceptable terms, or at all. If we are unable to complete a material portion of our Public Offering, or the Autilion Financing, or otherwise obtain substantial financing from alternative sources in the near term, our business, financial condition, and results of operations may be harmed, the price of our stock may decline, we may be required to reduce, defer, or discontinue certain of our research and development activities and we may not be able to continue as a going concern. The accompanying Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.