|6 Months Ended|
Sep. 30, 2014
|Notes to Financial Statements|
|NOTE 8 - Capital Stock||
As indicated in Note 2, Basis of Presentation and Going Concern, we consummated the Stock Consolidation, a 1-for-20 reverse split of our authorized, and issued and outstanding shares of common stock, effective on August 14, 2014. The par value of our common stock remained unchanged at $0.001 per share following the Stock Consolidation. The Stock Consolidation was approved by the Financial Industry Regulatory Authority (FINRA) on August 13, 2014, and became effective on the OTCQB at the opening of trading on August 14, 2014. 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.
Creation of Series B Preferred Stock
On July 17, 2014, our Board of Directors authorized the creation of a class of Series B Preferred Stock (Series B Preferred) to provide for the conversion of the Senior Secured Convertible Promissory Notes held by Platinum totaling approximately $4.2 million in principal and accrued interest at September 30, 2014 (Outstanding Balance) into Series B Preferred upon consummation of the Public Offering referred to in the section entitled Note Conversion and Warrant Amendment Agreement with Platinum in Note 7 above. Notwithstanding the authorization from our Board of Directors to designate a portion of our authorized shares of preferred stock as Series B Preferred, we have yet to file a certificate of designation with the Nevada Secretary of State to amend our Articles of Incorporation to formally establish the Series B Preferred. The number of shares of Series B Preferred to be issued will be calculated based on the liquidation preference for the Series B Preferred, which will equal the Outstanding Balance as of the date of consummation of the Public Offering, divided by the lesser of (i) $10.00 and (ii) the per-share price of the common stock sold in the Public Offering. Each share of Series B Preferred will be exchangeable at the option of Platinum into shares of our common stock at the price per-share of common stock sold in the Public Offering. The Series B Preferred will rank prior to our common stock for purposes of liquidation preference.
The Series B Preferred will have no separate dividend rights. However, whenever the Board of Directors declares a dividend on the common stock, each holder of record of a share of Series B Preferred, or any fraction of a share of Series B Preferred, on the date set by the Board of Directors to determine the owners of the common stock of record entitled to receive such dividend (Record Date) will be entitled to receive out of any assets at the time legally available therefor, an amount equal to such dividend declared on one share of common stock multiplied by the number of shares of common stock into which such share, or such fraction of a share, of Series B Preferred could be exchanged on the Record Date.
Except with respect to transactions upon which the Series B Preferred shall be entitled to vote separately as a class, the Series B Preferred will have no voting rights. The common stock into which the Series B Preferred shall be exchangeable will, upon issuance, have all of the same voting rights as other issued and outstanding shares of our common stock.
In the event of the liquidation, dissolution or winding up of our affairs, after payment or provision for payment of our debts and other liabilities, the holders of Series B Preferred then outstanding will be entitled to receive, out of our remaining assets, if any, an amount per share of Series B Preferred calculated by taking the total amount available for distribution to holders of all of our outstanding common stock before deduction of any preference payments for the Series B Preferred, divided by the total of (x), all of the then outstanding shares of our common stock, plus (y) all of the shares of our common stock into which all of the outstanding shares of the Series B Preferred can be exchanged before any payment shall be made or any assets distributed to the holders of the common stock or any other junior stock.
2014 Unit Private Placement
Between late-March and September 30, 2014, we entered into securities purchase agreements with accredited investors, including Platinum, pursuant to which we sold units to such accredited investors in private placement transactions (2014 Units), for aggregate cash proceeds of $1,775,000, consisting of (i) 2014 Unit Notes in the aggregate face amount of $1,775,000 due on March 31, 2015 or automatically convertible into securities we may issue upon the consummation of a Qualified Financing, defined as (a) an equity-based public financing registered with the SEC, or (b) a private equity-based financing or series of private equity-based financings, in either case in which we receive at least $10 million in gross cash proceeds prior to March 31, 2015; (ii) an aggregate of 88,750 restricted shares of our common stock (2014 Unit Stock); and (iii) warrants exercisable through December 31, 2016 to purchase an aggregate of 88,750 restricted shares of our common stock at an exercise price of $10.00 per share (2014 Unit Warrants). The Outstanding Balance of each 2014 Unit Notes is convertible into shares of our common stock at a conversion price of $10.00 per share at or prior to maturity, at the option of each investor. In addition, however, the Outstanding Balance is automatically convertible into securities substantially similar to those we may issue in a Qualified Financing at an amount determined by multiplying the Outstanding Balance by 1.25, and dividing the resulting number by the price per share of securities offered in the Qualified Financing. Under certain circumstances, the holders of the 2014 Unit Notes may request payment in cash in lieu of automatic conversion into the securities of the Qualified Financing. We sold $50,000 of Units prior to March 31, 2014, which Units are reflected in the figures above.
We allocated the proceeds from the sale of the 2014 Units to the various securities based on their relative fair values on the dates of the sales. As described in Note 7, Convertible PromissoryNotes and Other Notes Payable, based on the short-term nature of the Unit Notes, we determined that fair value of the 2014 Unit Notes was equal to their face value. We determined the fair value of the 2014 Unit Stock based on the quoted market price of our common stock on the date of the 2014 Unit sale. We calculated the fair value of the 2014 Unit 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 2014 Unit sales proceeds based on the relative fair values of the 2014 Unit Stock, 2014 Unit Warrants and 2014 Unit Notes at the 2014 Unit sales date.
Amendment of Notes and Warrants issued in 2013/2014 Unit Private Placement
As indicated in Note 7, Convertible Promissory Notes and Other Notes Payable, effective May 31, 2014, we entered into note and warrant amendment agreements with substantially all holders of 2013/2014 Unit Notes and 2013/2014 Unit Warrants to (i) modify certain terms of their 2013/2014 Unit Notes, including the maturity date and certain conversion features, to conform to the corresponding terms of the 2014 Unit Notes and (ii) to modify certain terms of the 2013/2014 Unit Warrants, including the exercise price and expiration date, to conform to the corresponding terms of the 2014 Unit Warrants. Holders of 2013/2014 Unit Notes having an aggregate initial face amount of $895,000 and warrants to purchase an aggregate of 93,250 restricted shares of our common stock agreed to the amendments.
We calculated the fair value of the modified 2013/2014 Unit Warrants immediately before and after the modifications and determined that the fair value of the warrants increased by an aggregate of $272,900, which we treated as a component of loss on extinguishment of debt in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss, with a corresponding credit to additional paid-in capital, an equity account. The warrants subject to the exercise price modifications were valued using the Black-Scholes Option Pricing Model and the following assumptions:
Issuance of Securities in Satisfaction of Technology License and Maintenance Fees and Patent Expenses
In April 2014, we entered into an agreement with Icahn School of Medicine at Mount Sinai (Icahn School) , one of our long-term stem cell technology licensors, pursuant to which we issued (i) a 10% promissory note in the face amount of $300,000 due on the earlier of December 31, 2014, or the completion of a qualified financing, as defined, (ii) 15,000 restricted shares of our common stock and (iii) a warrant exercisable through March 31, 2019 to purchase 15,000 restricted shares of our common stock at an exercise price of $10.00 per share to,Icahn School in satisfaction of $288,400 of stem cell technology license maintenance fees and reimbursable patent prosecution costs (the Agreement). Based on the short-duration of the note, its interest rate and other terms, we determined that the fair value of the note at the date of issuance was equal to its face value. We determined the fair value of stock to be $141,000, based on the $9.40 per share quoted market price of our common stock on the date of the agreement. We calculated the fair value of the warrant to be $5.95 per share, or $89,200, using the Black Scholes Option Pricing Model and the following assumptions: market price per share: $9.40; exercise price per share: $10.00; risk-free interest rate: 1.59%; contractual term: 5.0 years; volatility: 80.3%; expected dividend rate: 0%. We recognized a loss on extinguishment of debt in the amount of $241,800 related to this settlement in the accompanying Statement of Operations and Comprehensive Loss. Under the terms of the Agreement, an additional $34,300 of license maintenance fees and reimbursable patent prosecution costs has been added to the principal amount of the promissory note through September 30, 2014.
Issuance of Common Stock to Consultant
In May 2014, we entered into a consulting agreement for strategic advisory and business development services pursuant to which we issued 10,000 restricted shares of our common stock as partial compensation for such professional services. We determined the fair value of stock to be $134,000, based on the $13.40 per share quoted market price of our common stock on the date of the agreement. The agreement also requires us to pay an aggregate of $70,000 between May 2014 and October 2014 as additional compensation for professional services rendered by the strategic consultant.
Autilion AG Securities Purchase Agreement
On April 8, 2013, we entered into the Securities Purchase Agreement with Autilion, a company organized and existing under the laws of Switzerland. Under the terms of the Securities Purchase Agreement, Autilion remains contractually obligated to consummate the Autilion Financing and 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 consideration of $36.0 million. Through our fiscal year ended March 31, 2014, Autilion had completed only a nominal initial closing under the Securities Purchase Agreement, in the amount of $25,000, and we had issued 2,500 restricted shares of our common stock. At September 30, 2014 and through the date of this report, Autilion has not completed a material closing of the Autilion Financing and, remains in default under the Securities Purchase Agreement. No assurances can be provided that Autilion will complete any material closing under the Securities Purchase Agreement.
Following the warrant issuances and modifications described above, at September 30, 2014, we had outstanding warrants to purchase shares of our restricted common stock at a weighted average exercise price of $15.74 per share as follows:
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef