Document_And_Entity_Informatio
Document And Entity Information (USD $) | 12 Months Ended | ||
Mar. 31, 2014 | Jul. 09, 2014 | Sep. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Aethlon Medical Inc | ' | ' |
Entity Central Index Key | '0000882291 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Mar-14 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--03-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $36,000,000 |
Entity Common Stock, Shares Outstanding | ' | 253,395,651 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 |
CURRENT ASSETS | ' | ' | ' |
Cash | $1,250,279 | $125,274 | $143,907 |
Accounts receivable | 95,177 | 208,781 | ' |
Deferred financing costs | 83,191 | 863 | ' |
Prepaid expenses | 50,699 | 29,602 | ' |
TOTAL CURRENT ASSETS | 1,479,346 | 364,520 | ' |
Property and equipment, net | 84,279 | 145 | ' |
Patents, net | 112,489 | 121,653 | ' |
Deposits | 18,988 | 10,376 | ' |
TOTAL NON-CURRENT ASSETS | 215,756 | 132,174 | ' |
TOTAL ASSETS | 1,695,102 | 496,694 | ' |
CURRENT LIABILITIES | ' | ' | ' |
Accounts payable | 517,651 | 822,832 | ' |
Due to related parties | 839,070 | 736,070 | ' |
Notes payable | 390,000 | 321,381 | ' |
Convertible notes payable, current portion | 1,367,655 | 2,367,631 | ' |
Derivative liabilities | 10,679,067 | 3,588,239 | ' |
Other current liabilities | 1,855,374 | 1,804,985 | ' |
TOTAL CURRENT LIABILITIES | 15,648,817 | 9,641,138 | ' |
NONCURRENT LIABILITIES | ' | ' | ' |
Convertible notes payable, noncurrent portion | 776,451 | 0 | ' |
TOTAL NONCURRENT LIABILITIES | 776,451 | 0 | ' |
TOTAL LIABILITIES | 16,425,268 | 9,641,138 | ' |
COMMITMENTS AND CONTINGENCIES (Note 13) | ' | ' | ' |
STOCKHOLDERS' DEFICIT | ' | ' | ' |
Common stock, $0.001 par value, 500,000,000 and 250,000,000 shares authorized at March 31, 2014 and 2013, respectively; 224,973,980 and 173,674,201 issued and outstanding at March 31, 2014 and 2013, respectively | 224,984 | 173,685 | ' |
Additional paid-in capital | 59,659,137 | 52,157,196 | ' |
Accumulated deficit | -74,832,557 | -61,475,325 | ' |
TOTAL AETHLON MEDICAL, INC STOCKHOLDERS' DEFICIT | -14,948,436 | -9,144,444 | -9,295,621 |
NONCONTROLLING INTERESTS | 218,270 | 0 | ' |
TOTAL DEFICIT | -14,730,166 | -9,144,444 | ' |
TOTAL LIABILITIES AND DEFICIT | 1,695,102 | 496,694 | ' |
Pro Forma [Member] | ' | ' | ' |
CURRENT ASSETS | ' | ' | ' |
Cash | 1,250,279 | ' | ' |
Accounts receivable | 95,177 | ' | ' |
Deferred financing costs | 83,191 | ' | ' |
Prepaid expenses | 50,699 | ' | ' |
TOTAL CURRENT ASSETS | 1,479,346 | ' | ' |
Property and equipment, net | 84,279 | ' | ' |
Patents, net | 112,489 | ' | ' |
Deposits | 18,988 | ' | ' |
TOTAL NON-CURRENT ASSETS | 215,756 | ' | ' |
TOTAL ASSETS | 1,695,102 | ' | ' |
CURRENT LIABILITIES | ' | ' | ' |
Accounts payable | 517,651 | ' | ' |
Due to related parties | 839,070 | ' | ' |
Notes payable | 390,000 | ' | ' |
Convertible notes payable, current portion | 482,655 | ' | ' |
Derivative liabilities | 0 | ' | ' |
Other current liabilities | 1,280,124 | ' | ' |
TOTAL CURRENT LIABILITIES | 3,509,500 | ' | ' |
NONCURRENT LIABILITIES | ' | ' | ' |
Convertible notes payable, noncurrent portion | 1,001,451 | ' | ' |
TOTAL NONCURRENT LIABILITIES | 1,001,451 | ' | ' |
TOTAL LIABILITIES | 4,510,951 | ' | ' |
COMMITMENTS AND CONTINGENCIES (Note 13) | ' | ' | ' |
STOCKHOLDERS' DEFICIT | ' | ' | ' |
Common stock, $0.001 par value, 500,000,000 and 250,000,000 shares authorized at March 31, 2014 and 2013, respectively; 224,973,980 and 173,674,201 issued and outstanding at March 31, 2014 and 2013, respectively | 250,994 | ' | ' |
Additional paid-in capital | 74,116,754 | ' | ' |
Accumulated deficit | -77,401,867 | ' | ' |
TOTAL AETHLON MEDICAL, INC STOCKHOLDERS' DEFICIT | -3,034,119 | ' | ' |
NONCONTROLLING INTERESTS | 218,270 | ' | ' |
TOTAL DEFICIT | -2,815,849 | ' | ' |
TOTAL LIABILITIES AND DEFICIT | $1,695,102 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Stockholders' Deficit | ' | ' |
Common stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock shares authorized | 500,000,000 | 250,000,000 |
Common stock issued | 224,973,980 | 173,674,201 |
Common stock outstanding | 224,973,980 | 173,674,201 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
REVENUES: | ' | ' |
Government contract revenue | $1,623,769 | $1,230,004 |
Total revenues | 1,623,769 | 1,230,004 |
OPERATING EXPENSES | ' | ' |
Professional fees | 1,521,397 | 1,892,270 |
Payroll and related | 2,227,194 | 2,166,989 |
General and administrative | 931,106 | 746,099 |
Total operating expenses | 4,679,697 | 4,805,358 |
OPERATING LOSS | -3,055,928 | -3,575,354 |
OTHER (INCOME) EXPENSE | ' | ' |
Loss on debt conversion | 40,257 | 139,839 |
Change in fair value of derivative liabilities | 8,547,015 | 44,705 |
Loss on litigation settlement | 583,601 | 0 |
Other expenses | -75,060 | -172 |
Interest and other debt expenses | 1,287,221 | 1,132,314 |
Total other expenses | 10,383,034 | 1,316,686 |
NET LOSS BEFORE NONCONTROLLING INTERESTS | -13,438,962 | -4,892,040 |
LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | -81,730 | 0 |
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | ($13,357,232) | ($4,892,040) |
Basic and diluted net loss per share available to common stockholders | ($0.07) | ($0.03) |
Weighted average number of common shares outstanding - basic and diluted | 194,058,972 | 149,223,601 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest [Member] | Total |
Beginning Balance, amount at Mar. 31, 2012 | $117,518 | $47,170,146 | ($56,583,285) | ' | ($9,295,621) |
Beginning Balance, shares at Mar. 31, 2012 | 117,515,892 | ' | ' | ' | ' |
Issuance of common stock for cash, shares | 29,724,545 | ' | ' | ' | ' |
Issuance of common stock for cash, amount | 29,726 | 2,080,108 | ' | ' | 2,109,834 |
Issuances of common stock upon conversions of notes payable, shares | 21,941,154 | 1,673,118 | ' | ' | 1,695,059 |
Issuances of common stock upon conversions of notes payable, amount | 21,941 | ' | ' | ' | ' |
Issuance of common stock for services, shares | 2,896,181 | ' | ' | ' | ' |
Issuance of common stock for services, amount | 2,896 | 256,139 | ' | ' | 259,035 |
Patent license fees paid with issuance of common stock, shares | 246,429 | ' | ' | ' | ' |
Patent license fees paid with issuance of common stock, amount | 246 | 17,004 | ' | ' | 17,250 |
Reclassification of derivative liability into equity | ' | 45,081 | ' | ' | 45,081 |
Issuance of common stock for interest, Shares | 116,000 | ' | ' | ' | ' |
Issuance of common stock for interest, Amount | 120 | 11,726 | ' | ' | 11,846 |
Loss on debt conversion, shares | 1,234,000 | ' | ' | ' | ' |
Loss on debt conversion, amount | 1,238 | 138,601 | ' | ' | 139,839 |
Stock-based compensation expense | ' | 765,273 | ' | ' | 765,273 |
Net loss | ' | ' | -4,892,040 | ' | -4,892,040 |
Ending Balance, amount at Mar. 31, 2013 | 173,685 | 52,157,196 | -61,475,325 | ' | -9,144,444 |
Ending Balance, shares at Mar. 31, 2013 | 173,674,201 | ' | ' | ' | ' |
Issuance of common stock for cash, shares | 16,872,739 | ' | ' | ' | ' |
Issuance of common stock for cash, amount | 16,873 | 1,660,159 | ' | ' | 1,677,032 |
Issuances of common stock upon conversions of notes payable, shares | 10,574,024 | ' | ' | ' | ' |
Issuances of common stock upon conversions of notes payable, amount | 10,572 | 716,204 | ' | ' | 726,776 |
Issuance of common stock under cashless warrant exercises, shares | 12,716,225 | ' | ' | ' | ' |
Issuance of common stock under cashless warrant exercises, amount | 12,717 | -12,717 | ' | ' | ' |
Issuance of common stock for services, shares | 3,071,150 | ' | ' | ' | ' |
Issuance of common stock for services, amount | 3,071 | 389,022 | ' | ' | 392,093 |
Reclassification of derivative liability into equity | ' | 1,456,187 | ' | ' | 1,456,187 |
Issuance of common stock for cash - ESI, Amount | ' | 1,200,000 | ' | 300,000 | 1,500,000 |
Issuance of common stock under convertible debt restructuring, Shares | 4,507,105 | ' | ' | ' | ' |
Issuance of common stock under convertible debt restructuring, Amount | 4,507 | 851,842 | ' | ' | 856,349 |
Issuance of common stock under stock option exercises for accrued expenses, Shares | 158,536 | ' | ' | ' | ' |
Issuance of common stock under stock option exercises for accrued expenses, Amount | 159 | 12,841 | ' | ' | 13,000 |
Shares issued under restricted stock grant, Shares | 3,400,000 | ' | ' | ' | ' |
Shares issued under restricted stock grant, Amount | 3,400 | -3,400 | ' | ' | ' |
Issuance of common stock on litigation settlement, Amount | ' | 583,601 | ' | ' | 583,601 |
Loss on debt conversion, amount | ' | 40,256 | ' | ' | 40,256 |
Stock-based compensation expense | ' | 607,946 | ' | ' | 607,946 |
Net loss | ' | ' | -13,357,232 | -81,730 | -13,438,962 |
Ending Balance, amount at Mar. 31, 2014 | $224,984 | $59,659,137 | ($74,832,557) | $218,270 | ($14,948,436) |
Ending Balance, shares at Mar. 31, 2014 | 224,973,980 | ' | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($13,438,962) | ($4,892,040) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 21,087 | 10,484 |
Debt restructuring cost | 856,349 | 139,839 |
Non-cash interest expense | 0 | 11,846 |
Loss on litigation settlement | 583,601 | 0 |
Change in estimated fair value of derivative liabilities | 8,547,015 | 44,705 |
Loss on debt conversion | 40,256 | 0 |
Fair market value of equity instruments issued for services | 392,093 | 259,035 |
Stock based compensation | 607,946 | 765,273 |
Patent license fees paid with issuance of common stock | 0 | 17,250 |
Amortization of debt discount and deferred financing costs | 5,147 | 594,358 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 113,604 | 191,333 |
Prepaid expenses | -21,097 | 1,850 |
Other assets | -8,612 | 0 |
Accounts payable and other current liabilities | 46,602 | 751,210 |
Due to related parties | 116,000 | 6,000 |
Net cash used in operating activities | -2,138,971 | -2,098,857 |
Cash flows from investing activities: | ' | ' |
Purchases of property and equipment | -96,056 | 0 |
Net cash used in investing activities | -96,056 | 0 |
Cash flows from financing activities: | ' | ' |
Principal repayments of notes payable | -217,000 | -29,610 |
Proceeds from the issuance of notes payable | 400,000 | 0 |
Net proceeds from the issuance of common stock | 3,177,032 | 2,109,834 |
Net cash provided by financing activities | 3,360,032 | 2,080,224 |
Net increase (decrease) in cash | 1,125,005 | -18,633 |
Cash at beginning of year | 125,274 | 143,907 |
Cash at end of year | 1,250,279 | 125,274 |
Supplemental disclosure of cash flow information | ' | ' |
Interest | 13,950 | 2,821 |
Income taxes | 0 | 0 |
Supplement information for non-cash investing and financing activities: | ' | ' |
Conversion of debt, accrued liabilities and accrued interest to common stock | 726,776 | 1,695,059 |
Reclassification of accounts payable to convertible notes payable | 47,000 | 0 |
Reclassification of accrued interest to convertible notes payable | 20,027 | 0 |
Recording deferred financing costs associated with notes payable and convertible notes payable | 83,191 | 7,500 |
Reclassification of warrant derivative liability into equity | 1,456,187 | 45,081 |
Issuance of shares under cashless warrant exercises | 12,717 | 0 |
Exercise of stock option for accrued expenses | 13,000 | 0 |
Reclassification of note payable to convertible notes payable | 0 | 75,000 |
Stock issued under restricted stock grant | $3,400 | $0 |
1_ORGANIZATION_AND_SUMMARY_OF_
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||
ORGANIZATION | |||||||||
Aethlon Medical, Inc. and subsidiary ("Aethlon", the "Company", "we" or "us") is a medical device company focused on creating innovative devices that address unmet medical needs in cancer, infectious disease and other life-threatening conditions. At the core of our developments is the Aethlon ADAPT™ (Adaptive Dialysis-Like Affinity Platform Technology) system, a medical device platform that converges single or multiple affinity drug agents with advanced plasma membrane technology to create therapeutic filtration devices that selectively remove harmful particles from the entire circulatory system without loss of essential blood components. On June 25, 2013, the United States Food and Drug Administration (FDA) approved an Investigational Device Exemption (IDE) that allows us to initiate human feasibility studies of the Aethlon Hemopurifier® in the United States. Under the feasibility study protocol, we will enroll ten end-stage renal disease patients who are infected with the Hepatitis C virus (HCV) to demonstrate the safety of Hemopurifier therapy. Successful completion of this study will allow us the opportunity to initiate pivotal studies that are required for market clearance to treat HCV and other disease conditions in the United States. | |||||||||
Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we intend to sell this device. Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or other patents issued more recently will help protect the proprietary nature of the Hemopurifier(R) treatment technology. | |||||||||
In October 2013, our subsidiary, Exosome Sciences, Inc. (“ESI”), commenced operations with a focus on advancing exosome-based strategies to diagnose and monitor the progression of cancer, infectious disease and other life-threatening conditions. | |||||||||
Our common stock is quoted on the OTCQB marketplace administered by the OTC Markets Group under the symbol "AEMD." | |||||||||
UNAUDITED PRO FORMA BALANCE SHEET INFORMATION | |||||||||
During June and July 2014, we entered into agreements with two existing convertible note holders to convert one note into common stock and to extend the second note and to restructure warrants related to the original note issuances removing certain price protection features from such warrants. The transaction resulted in not only the conversion of debt to equity but also the reclassification of such warrants from derivative liabilities to equity. As further explained in Note 16, e have presented an unaudited March 31, 2014 pro forma balance sheet to reflect such transactions as if they had occurred on March 31, 2014. | |||||||||
PRINCIPLES OF CONSOLIDATION | |||||||||
The accompanying consolidated financial statements include the accounts of Aethlon Medical, Inc. and its majority-owned and controlled subsidiary, ESI. All significant intercompany balances and transactions have been eliminated in consolidation. The Company classifies the noncontrolling interests in ESI as part of consolidated net loss in the fiscal year ended March 31, 2014 and includes the accumulated amount of noncontrolling interests as part of stockholders’ equity. For the fiscal year ended March 31, 2013, ESI was a wholly-owned subsidiary. During the fiscal year ended March 31, 2014, Aethlon Medical, Inc. reduced its ownership percentage to 80% by ESI’s issuance of 300,000 shares of ESI common stock in exchange for cash of $1,500,000. | |||||||||
The losses at ESI during the fiscal year ended March 31, 2014 reduced the noncontrolling interests on our consolidated balance sheet by $81,730 from $300,000 to $218,270 at March 31, 2014. | |||||||||
GOING CONCERN | |||||||||
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. We have incurred continuing losses from operations and at March 31, 2014 are in default on certain debt agreements, have negative working capital of approximately $14,169,000, and an accumulated deficit of approximately $74,833,000. These factors, among other matters, raise substantial doubt about our ability to continue as a going concern. A significant amount of additional capital will be necessary to advance the development of our products to the point at which they may become commercially viable. We intend to fund operations, working capital and other cash requirements for the fiscal year ending March 31, 2015 through debt and/or equity financing arrangements as well as through revenues and related cash receipts under our government contracts (see Note 11). | |||||||||
We are currently addressing our liquidity issue by seeking additional investment capital through private placements of common stock and debt and by applying for additional grants issued by government agencies in the United States. We believe that our cash on hand and funds expected to be received from additional private investment will be sufficient to meet our liquidity needs for fiscal 2015. However, no assurance can be given that we will receive any funds in addition to the funds we have received to date. | |||||||||
The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results. | |||||||||
Subsequent to March 31, 2014, we completed several significant transactions related to our convertible notes (see Note 16). | |||||||||
The consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. | |||||||||
RISKS AND UNCERTAINTIES | |||||||||
We operate in an industry that is subject to intense competition, government regulation and rapid technological change. Our operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and including the potential risk of business failure. | |||||||||
USE OF ESTIMATES | |||||||||
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, among others, realization of long-lived assets, valuation of derivative liabilities, estimating fair value associated with debt and equity transactions and valuation of deferred tax assets. Actual results could differ from those estimates. | |||||||||
CASH AND CASH EQUIVALENTS | |||||||||
Accounting standards define "cash and cash equivalents" as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation, we consider all highly liquid investment instruments with original maturities of three months or less when purchased, or any investment redeemable without penalty or loss of interest to be cash equivalents. As of March 31, 2014 and 2013, we had no assets that were classified as cash equivalents. | |||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
The carrying amount of our cash, accounts receivable, accounts payable, and other current liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments. The carrying amount of the notes payable approximates their fair value due to the short maturity of the notes and since the interest rates approximate current market interest rates for similar instruments. Derivative liabilities recorded in connection with warrants and embedded conversion features of certain convertible notes payable are reported at their estimated fair value, with changes in fair value being reported in results of operations (see Note 10). | |||||||||
Management has concluded that it is not practical to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practicable due to the lack of data regarding similar instruments, if any, and the associated potential costs. | |||||||||
Other than our derivative liabilities, we do not have any assets or liabilities that are measured at fair value on a recurring basis and, during the years ended March 31, 2014 and 2013, did not have any assets or liabilities that were measured at fair value on a nonrecurring basis except as described in Note 10 under derivative liabilities. | |||||||||
CONCENTRATIONS OF CREDIT RISKS | |||||||||
Cash is maintained at two financial institutions in checking accounts and related cash management accounts. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. Our March 31, 2014 cash balances were approximately $1,000,000 over such insured amount. We do not believe that the Company is exposed to any significant risk with respect to its cash. | |||||||||
All of our accounts receivable at March 31, 2014 and 2013 and all of our revenue in the fiscal years ended March 31, 2014 and 2013 were directly from the U.S. Department of Defense or from a subcontract under Battelle, which is a prime contractor with the U.S. Department of Defense. | |||||||||
PROPERTY AND EQUIPMENT | |||||||||
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years. Repairs and maintenance are charged to expense as incurred while improvements are capitalized. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation with any gain or loss included in the consolidated statements of operations. | |||||||||
INCOME TAXES | |||||||||
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the difference between the consolidated financial statements and their respective tax basis. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes, and (b) tax credit carryforwards. We record a valuation allowance for deferred tax assets when, based on our best estimate of taxable income (if any) in the foreseeable future, it is more likely than not that some portion of the deferred tax assets may not be realized. | |||||||||
LONG-LIVED ASSETS | |||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized. We believe no impairment charges were necessary during the fiscal years ended March 31, 2014 and 2013. | |||||||||
LOSS PER SHARE | |||||||||
Basic loss per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potential common shares had been issued, if such additional common shares were dilutive. Since we had net losses for all periods presented, basic and diluted loss per share are the same, and additional potential common shares have been excluded as their effect would be antidilutive. | |||||||||
As of March 31, 2014 and 2013, a total of 143,074,602 and 142,701,202 potential common shares, consisting of shares underlying outstanding stock options, warrants and convertible notes payable were excluded as their inclusion would be antidilutive. | |||||||||
SEGMENTS | |||||||||
Historically, we operated in one segment that was based on our development of therapeutic devices. However in the December 2013 quarter, we initiated the operations of ESI to develop diagnostic tests. As a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for diagnostic applications (See Note 14). | |||||||||
DEFERRED FINANCING COSTS | |||||||||
Costs related to the issuance of debt are capitalized and amortized to interest expense over the life of the related debt using the effective interest method. We recorded amortization expense related to our deferred offering costs of $863 and $127,200 during the fiscal years ended March 31, 2014 and 2013, respectively. | |||||||||
REVENUE RECOGNITION | |||||||||
DARPA Contract -- With respect to revenue recognition, we entered into a government contract with DARPA and have recognized revenue of $1,466,482 and $1,230,004 under that contract during the fiscal years ended March 31, 2014 and 2013, respectively. We adopted the Milestone method of revenue recognition for the DARPA contract under ASC 605-28 “Revenue Recognition – Milestone Method” and we believe we meet the requirements under ASC 605-28 for reporting contract revenue under the Milestone Method for the fiscal years ended March 31, 2014 and 2013. | |||||||||
In order to account for this contract, we identify the deliverables included within the contract and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has standalone value to the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. | |||||||||
A milestone is an event having all of the following characteristics: | |||||||||
(1) There is substantive uncertainty at the date the arrangement is entered into that the event will be achieved. A vendor’s assessment that it expects to achieve a milestone does not necessarily mean that there is not substantive uncertainty associated with achieving the milestone. | |||||||||
(2) The event can only be achieved based in whole or in part on either: (a) the vendor’s performance; or (b) a specific outcome resulting from the vendor’s performance. | |||||||||
(3) If achieved, the event would result in additional payments being due to the vendor. | |||||||||
A milestone does not include events for which the occurrence is either: (a) contingent solely upon the passage of time; or (b) the result of a counterparty’s performance. | |||||||||
The policy for recognizing deliverable consideration contingent upon achievement of a milestone must be applied consistently to similar deliverables. | |||||||||
The assessment of whether a milestone is substantive is performed at the inception of the arrangement. The consideration earned from the achievement of a milestone must meet all of the following for the milestone to be considered substantive: | |||||||||
(1) The consideration is commensurate with either: (a) the vendor’s performance to achieve the milestone; or (b) the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; | |||||||||
(2) The consideration relates solely to past performance; and | |||||||||
(3) The consideration is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. | |||||||||
A milestone is not considered substantive if any portion of the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate solely to past performance). To recognize the milestone consideration in its entirety as revenue in the period in which the milestone is achieved, the milestone must be substantive in its entirety. Milestone consideration cannot be bifurcated into substantive and nonsubstantive components. In addition, if a portion of the consideration earned from achieving a milestone may be refunded or adjusted based on future performance, the related milestone is not considered substantive. | |||||||||
See Note 11 for the additional disclosure information required under ASC 605-28. | |||||||||
Battelle Subcontract -- We entered into a subcontract agreement with Battelle Memorial Institute (“Battelle”) in March 2013. Battelle was chosen by DARPA to be the prime contractor on the systems integration portion of the original DARPA contract and we are one of several subcontractors on that systems integration project. The Battelle subcontract is cost-reimbursable under a time and materials basis. We began generating revenues under the subcontract during the three months ended September 30, 2013 and for the fiscal year 2014 recorded revenue of $157,287. | |||||||||
Our revenue under this contract is a function of cost reimbursement plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates for those employees). Battelle engages us as needed. Each payment requires approval by the program manager at Battelle. | |||||||||
STOCK-BASED COMPENSATION | |||||||||
Employee stock options and rights to purchase shares under stock participation plans are accounted for under the fair value method. Accordingly, share-based compensation is measured when all granting activities have been completed, generally the grant date, based on the fair value of the award. The exercise price of options is generally equal to the market price of the Company's common stock (defined as the closing price as quoted on the OTCBB on the date of grant). Compensation cost recognized by the Company includes (a) compensation cost for all equity incentive awards granted prior to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the original provisions of the then current accounting standards, and (b) compensation cost for all equity incentive awards granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of subsequent accounting standards. We use a Binomial Lattice option pricing model for estimating fair value of options granted (see Note 6). | |||||||||
The following table summarizes share-based compensation expenses relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2014 and 2013: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Vesting of Stock Options | $ | 541,588 | $ | 355,578 | |||||
Incremental fair value of option Modifications | 1,914 | 23,028 | |||||||
Vesting Expense Associated with CEO Restricted Stock Grant | 64,444 | 386,667 | |||||||
Total Stock-Based Compensation Expense | $ | 607,946 | $ | 765,273 | |||||
Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) | |||
We account for transactions involving services provided by third parties where we issue equity instruments as part of the total consideration using the fair value of the consideration received (i.e. the value of the goods or services) or the fair value of the equity instruments issued, whichever is more reliably measurable. In transactions, when the value of the goods and/or services are not readily determinable and (1) the fair value of the equity instruments is more reliably measurable and (2) the counterparty receives equity instruments in full or partial settlement of the transactions, we use the following methodology: | |||||||||
a) For transactions where goods have already been delivered or services rendered, the equity instruments are issued on or about the date the performance is complete (and valued on the date of issuance). | |||||||||
b) For transactions where the instruments are issued on a fully vested, non-forfeitable basis, the equity instruments are valued on or about the date of the contract. | |||||||||
c) For any transactions not meeting the criteria in (a) or (b) above, we re-measure the consideration at each reporting date based on its then current stock value. | |||||||||
We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization after March 31, 2006 is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the fiscal year ended March 31, 2014 was insignificant. | |||||||||
PATENTS | |||||||||
Patents include both foreign and domestic patents. There were several patents pending at March 31, 2014. We capitalize the cost of patents and patents pending, some of which were acquired, and amortize such costs over the shorter of the remaining legal life or their estimated economic life, upon issuance of the patent. The unamortized costs of patents and patents pending are subject to our review for impairment under our long-lived asset policy above. | |||||||||
STOCK PURCHASE WARRANTS | |||||||||
We grant warrants in connection with the issuance of convertible notes payable and the issuance of common stock for cash. When such warrants are classified as equity and issued in connection with debt, we measure the relative estimated fair value of such warrants and record it as a discount from the face amount of the convertible notes payable. Such discounts are amortized to interest expense over the term of the notes using the effective interest method. Warrants issued in connection with common stock for cash, if classified as equity, are considered issued in connection with equity transactions and the warrant fair value is recorded to additional paid-in-capital. Lastly, warrants not meeting equity classification are recorded as derivative instruments. | |||||||||
DERIVATIVE INSTRUMENTS | |||||||||
We evaluate free-standing derivative instruments (or embedded derivatives) to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. | |||||||||
The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. | |||||||||
Instruments classified as derivative liabilities are remeasured each reporting period (or upon reclassification) and the change in fair value is recorded on our consolidated statement of operations in other (income) expense. | |||||||||
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE | |||||||||
The convertible feature of certain notes payable provides for a rate of conversion that is below market value. Such feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required to be separated from the host instrument and accounted for separately, and record that value in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are amortized to interest expense over the term of the notes. | |||||||||
REGISTRATION PAYMENT ARRANGEMENTS | |||||||||
We account for contingent obligations to make future payments or otherwise transfer consideration under a registration payment arrangement separately from any related financing transaction agreements, and any such contingent obligations are recognized only when it is determined that it is probable that the Company will become obligated for future payments and the amount, or range of amounts, of such future payments can be reasonably estimated. | |||||||||
RESEARCH AND DEVELOPMENT EXPENSES | |||||||||
Our research and development costs are expensed as incurred. We incurred approximately $1,509,000 and $1,440,000 of research and development expenses for the years ended March 31, 2014 and 2013, respectively, which are included in various operating expenses in the accompanying consolidated statements of operations. | |||||||||
OFF-BALANCE SHEET ARRANGEMENTS | |||||||||
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial statements. | |||||||||
SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS | |||||||||
Management is evaluating significant recent accounting pronouncements that are not yet effective for the Company, including the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606), and has not yet concluded whether any such pronouncements will have a significant effect on the Company’s future consolidated financial statements. |
2_PROPERTY_AND_EQUIPMENT
2. PROPERTY AND EQUIPMENT | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
2. PROPERTY AND EQUIPMENT | |||||||||
Property and equipment, net, consist of the following: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Furniture and office equipment, at cost | $ | 385,088 | $ | 289,031 | |||||
Accumulated depreciation | (300,809 | ) | (288,886 | ) | |||||
$ | 84,279 | $ | 145 | ||||||
Depreciation expense for the years ended March 31, 2014 and 2013 approximated $12,000 and $1,000, respectively. |
3_PATENTS
3. PATENTS | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
PATENTS | ' | ||||||||
3. PATENTS | |||||||||
Patents consist of the following: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Patents | $ | 157,442 | $ | 157,442 | |||||
Patents pending and trademarks | 54,203 | 54,203 | |||||||
Accumulated amortization | (99,156 | ) | (89,992 | ) | |||||
$ | 112,489 | $ | 121,653 | ||||||
Amortization expense for patents for the years ended March 31, 2014 and 2013 approximated $9,000. Future amortization expense on patents is estimated to be approximately $9,000 per year based on the estimated life of the patents. The weighted average remaining life of our patents is approximately 6.5 years. |
4_NOTES_PAYABLE
4. NOTES PAYABLE | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||||||
NOTES PAYABLE | ' | ||||||||||||||||
4. NOTES PAYABLE | |||||||||||||||||
Notes payable consist of the following: | |||||||||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||||||||
Principal Balance | Accrued Interest | Principal Balance | Accrued Interest | ||||||||||||||
12% Notes payable, past due | $ | 185,000 | $ | 353,813 | $ | 185,000 | $ | 326,062 | |||||||||
10% Note payable, past due | 5,000 | 6,375 | 5,000 | 5,875 | |||||||||||||
Directors’ Note(s) | 200,000 | 14,516 | – | – | |||||||||||||
Tonaquint Note | – | – | 131,381 | 1,629 | |||||||||||||
Total | $ | 390,000 | $ | 374,704 | $ | 321,381 | $ | 333,566 | |||||||||
During the fiscal year ended March 31, 2014, we recorded interest expense of $59,901 related to the contractual interest rates of our notes payable. | |||||||||||||||||
12% NOTES | |||||||||||||||||
From August 1999 through May 2005, we entered into various borrowing arrangements for the issuance of notes payable from private placement offerings (the "12% Notes"). On April 21, 2010, a holder of $100,000 of the 12% Notes converted his principal balance and $71,758 of accrued interest into 687,033 shares of common stock at an agreed conversion price of $0.25 per share. At March 31, 2014, the 12% Notes were past due, in default, and bearing interest at the default rate of 15%. | |||||||||||||||||
10% NOTES | |||||||||||||||||
At March 31, 2014, one 10% Note in the amount of $5,000, which is past due and in default, remained outstanding and it bears interest at the default rate of 15%. | |||||||||||||||||
Management's plans to satisfy the remaining outstanding balance on these 12% and 10% Notes include converting the notes to common stock at market value or repayment with available funds. | |||||||||||||||||
TONAQUINT NOTE | |||||||||||||||||
On June 28, 2011, in conjunction with our satisfying all balances owed under a convertible note, we entered into a Termination Agreement with Tonaquint, Inc. under which both parties agreed that in consideration of the termination of a warrant, the waiving of all fees, penalties, the creation of the selling program and other factors, we agreed to issue an unsecured non-convertible promissory note (the "New Note") in the principal amount of $360,186, which provides for annual interest at a rate of 6%, payable monthly in either cash or our stock, at our option. The New Note originally had a maturity date of April 30, 2012. We subsequently extended the note initially to July 31, 2012 and then to July 31, 2013 and subsequently to August 31, 2013. We also recorded into principal $12,500 of the lender’s legal fees related to documentation of the extension agreement. | |||||||||||||||||
During the fiscal year ended March 31, 2014, we issued 1,540,426 shares of common stock to convert $136,060 of principal and accrued interest (see Note 6). As a result of those conversions, the Tonaquint Note was paid off in full during the September 2013 quarter. We recorded a loss on conversion of $40,256 on those conversions during the fiscal year ended March 31, 2014. | |||||||||||||||||
The following table shows the conversions into principal of the Tonaquint Note by fiscal year: | |||||||||||||||||
Initial principal balance | $ | 360,186 | |||||||||||||||
Lender’s legal fees | 12,500 | ||||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (241,305 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (131,381 | ) | |||||||||||||||
Balance as of March 31, 2014 | $ | – | |||||||||||||||
DIRECTORS’ NOTES | |||||||||||||||||
In July 2013, we borrowed $400,000 from two of our directors under two 90 day notes for $200,000 each bearing 10% interest (the “Notes”). At the discretion of the holders, if not paid off by October 9, 2013, the noteholders were entitled to (i) convert their principal and accrued interest into shares of common stock at $0.088 per share (the “Conversion Price”) and (ii) receive warrants to purchase common stock equal to 50% of the principal converted under the Notes, with an exercise price of $0.132 per share. Additionally, there was a provision for a penalty interest rate of 12%. | |||||||||||||||||
That potential conversion price and warrant exercise price were based on the same pricing mechanism that we have used in prior equity unit financings since March 2012 (see Note 6) which are based on 80% of the then current market price of our common stock and with the warrant exercise price based on 120% of the same then current market price. We initially reserved 6,931,818 shares of common stock to support the conversion of the Notes and accrued interest in full as well as the exercise of the warrants in full (should such conversion and/or issuance occur). | |||||||||||||||||
During the fiscal year ended March 31, 2014, the principal of $200,000 and accrued interest of $9,367 were paid on one of the notes, which extinguished all potential common stock and warrant issuance provisions related to that Note. | |||||||||||||||||
The holder of the second Note agreed to extend the expiration date of his Note to July 31, 2014. |
5_CONVERTIBLE_NOTES_PAYABLE
5. CONVERTIBLE NOTES PAYABLE | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Convertible Notes Payable [Abstract] | ' | ||||||||||||||||
CONVERTIBLE NOTES PAYABLE | ' | ||||||||||||||||
5. CONVERTIBLE NOTES PAYABLE | |||||||||||||||||
Convertible Notes Payable consisted of the following at March 31, 2014: | |||||||||||||||||
Principal | Unamortized | Net | Accrued | ||||||||||||||
Discount | Amount | Interest | |||||||||||||||
Convertible Notes Payable – Current Portion: | |||||||||||||||||
Amended and Restated Series A 12% Convertible Notes, past due | $ | 885,000 | $ | – | $ | 885,000 | $ | 575,250 | |||||||||
2008 10% Convertible Notes, past due | 25,000 | – | 25,000 | 19,167 | |||||||||||||
October & November 2009 10% Convertible Notes | 50,000 | – | 50,000 | 26,097 | |||||||||||||
April 2010 10% Convertible Note | 75,000 | – | 75,000 | 31,438 | |||||||||||||
July and August 2011 10% Convertible Notes, past due | 257,655 | – | 257,655 | 90,256 | |||||||||||||
Law Firm Note | 75,000 | – | 75,000 | 7,604 | |||||||||||||
Total – Convertible Notes Payable – Current Portion | 1,367,655 | – | 1,367,655 | 749,812 | |||||||||||||
Convertible Notes Payable – Non-Current Portion: | |||||||||||||||||
September 2010 12% Convertible Notes | 317,072 | – | 317,072 | 35,034 | |||||||||||||
April 2011 12% Convertible Notes | 448,448 | – | 448,448 | 12,117 | |||||||||||||
September 2011 12% Convertible Notes | 10,931 | – | 10,931 | -- | |||||||||||||
Total – Convertible Notes Payable – Non-Current Portion | 776,451 | – | 776,451 | 47,151 | |||||||||||||
Total Convertible Notes Payable | $ | 2,144,106 | $ | – | $ | 2,144,106 | $ | 796,963 | |||||||||
There were no discounts remaining on any of our Convertible Notes Payable as of March 31, 2014. | |||||||||||||||||
During the fiscal year ended March 31, 2014, we recorded interest expense of $354,949 related to the contractual interest rates of our convertible notes and interest expense of $4,284 related to the amortization of debt discounts on the convertible notes for a total of $359,233. | |||||||||||||||||
Convertible Notes Payable consisted of the following at March 31, 2013: | |||||||||||||||||
Principal | Unamortized | Net | Accrued | ||||||||||||||
Discount | Amount | Interest | |||||||||||||||
Amended and Restated Series A 12% Convertible Notes, past due | $ | 885,000 | $ | – | $ | 885,000 | $ | 398,250 | |||||||||
2008 10% Convertible Notes, past due | 25,000 | – | 25,000 | 15,417 | |||||||||||||
December 2006 10% Convertible Notes, past due | 17,000 | – | 17,000 | 15,888 | |||||||||||||
October & November 2009 10% Convertible Notes | 50,000 | (389 | ) | 49,611 | 20,000 | ||||||||||||
April 2010 10% Convertible Note | 75,000 | (3,895 | ) | 71,105 | 23,938 | ||||||||||||
September 2010 10% Convertible Notes, past due | 308,100 | – | 308,100 | 52,393 | |||||||||||||
April 2011 10% Convertible Notes, past due | 400,400 | – | 400,400 | 100,100 | |||||||||||||
July and August 2011 10% Convertible Notes, $257,656 past due | 357,655 | – | 357,655 | 68,704 | |||||||||||||
September 2011 Convertible Notes, past due | 178,760 | – | 178,760 | – | |||||||||||||
Law Firm Note | 75,000 | – | 75,000 | 3,854 | |||||||||||||
Total – Convertible Notes Payable | $ | 2,371,915 | $ | (4,284 | ) | $ | 2,367,631 | $ | 698,544 | ||||||||
During the fiscal year ended March 31, 2013, we recorded interest expense of $459,199 related to the contractual interest rates of our convertible notes and interest expense of $467,158 related to the amortization of debt discounts on the convertible notes for a total of $926,357. | |||||||||||||||||
AMENDED AND RESTATED SERIES A 12% CONVERTIBLE NOTES | |||||||||||||||||
In June 2010, we entered into Amended and Restated Series A 12% Convertible Promissory Notes (the "Amended and Restated Notes") with the holders of certain promissory notes previously issued by the Company, extending the due date to December 31, 2010 on the aggregate principal balance of $900,000. During the fiscal year ended March 31, 2013, the holders of $15,000 of the Notes converted their principal and related accrued interest into common stock. The balance remaining at March 31, 2014 and 2013 was $885,000 and is past due as of March 31, 2014. Such notes bear a default annual interest rate of 20%. | |||||||||||||||||
Subsequent to year end on June 24, 2014, we entered into an agreement with the Ellen R. Weiner Family Revocable Trust (the “Trust”), a holder of a Series A 12% Convertible Note (the “Note”), whereby the Trust converted a past due combined principal and interest balance of $1,003,200 (principal of $660,000 and interest of $343,200) into restricted common stock. | |||||||||||||||||
Additionally, the Trust agreed to waive anti-dilution price protection underlying warrants previously issued to the Trust. Under its agreement, the Trust converted the entire $1,003,200 past due principal and interest balance on the Note | |||||||||||||||||
In exchange for the Trust’s conversion in full of the Note and accrued interest and for the waivers of anti-dilution price protection in previously issued warrants, we (1) issued five-year warrants to acquire up to 6,809,524 shares of our common stock at an exercise price of $.042 per share and up to 397,222 shares of our common stock at an exercise price of $.108 per share (collectively, the “Conversion Securities”); (2) issued 75,000 restricted shares of common stock as a service fee; (3) changed the exercise price of all of the previously issued warrants to the Trust to $.042 per share; and (4) extended the expiration date of all of the previously issued warrants to the Trust to July 1, 2018. | |||||||||||||||||
We continue to hold discussions with the holder of the remaining note in this grouping regarding either an extension to the note or a conversion of the note but there can be no assurance that we will be able to do so on terms that we deem acceptable or at all. We are recording interest at the default rate of 20% on the remaining note. | |||||||||||||||||
DECEMBER 2006 10% CONVERTIBLE NOTES | |||||||||||||||||
In January 2014, we paid off the remaining balance of the December 2006 10% Convertible Notes and the related accrued interest balance with a cash payment of $35,055. Such payment represented the sum of the $17,000 in principal balance and $18,055 in accrued interest. | |||||||||||||||||
2008 10% CONVERTIBLE NOTES | |||||||||||||||||
One 2008 10% Convertible Note in the amount of $25,000 which matured in January 2010 remained outstanding and past due at March 31, 2014. Such note is convertible into our common stock at $0.50 per share. We are recording interest at the default rate of 15%. | |||||||||||||||||
OCTOBER & NOVEMBER 2009 10% CONVERTIBLE NOTES | |||||||||||||||||
In October and November 2009, we raised $430,000 from the sale to accredited investors of 10% convertible notes ("October & November 2009 10% Convertible Notes"). The October & November 2009 10% Convertible Notes matured at various dates between April 2011 and May 2011 and are convertible into our common stock at a fixed conversion price of $0.25 per share. The investors also received matching three year warrants to purchase unregistered shares of our common stock at an exercise price of $0.25 per share. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. Such discount was fully amortized at March 31, 2014. | |||||||||||||||||
In July 2012, we issued 461,409 shares of common stock and 230,705 warrants to purchase common stock to the holder of a $25,000 note in this grouping in exchange for the conversion of such note and related accrued interest of $8,000 (for a total of $33,000). The warrants expired in 2012 and are exercisable at $0.107 per share (see Note 6). We recorded a loss on conversion of $45,796. | |||||||||||||||||
The following table shows the conversions into principal of the October and November 2009 Convertible Notes by fiscal year: | |||||||||||||||||
Activity in October & November 2009 10% Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 450,250 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2010 | (70,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2011 | (175,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (130,250 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (25,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | -- | ||||||||||||||||
Balance as of March 31, 2014 | $ | 50,000 | |||||||||||||||
On March 31, 2012, we agreed to extend the expiration date and to change the exercise price of certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. We recorded a charge of $77,265 relating to this modification. | |||||||||||||||||
In September 2013, we agreed to extend the expiration date of certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management assessed the change in the value of the notes and related warrants before and after that extension and determined that the change in value related to the change in terms was not significant. | |||||||||||||||||
APRIL 2010 10% CONVERTIBLE NOTE | |||||||||||||||||
In April 2010, we raised $75,000 from the sale to an accredited investor of a 10% convertible note. The convertible note was originally scheduled to mature in October 2011 and is convertible into our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investor also received three year warrants to purchase 300,000 unregistered shares of our common stock at a price of $0.25 per share. | |||||||||||||||||
We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. We amortized this discount using the effective interest method over the term of the note. As of March 31, 2014, there have not been any conversions of the April 2010 10% Convertible Note. | |||||||||||||||||
On March 31, 2012, we agreed to extend the expiration date and to change the exercise price of certain warrants of the note holder by two years in exchange for his extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note by that same two year period. | |||||||||||||||||
In September 2013, we agreed to extend the expiration date of certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October & November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management assessed the change in the value of the notes and related warrants before and after that extension and determined that the change in value related to the change in terms was not significant. | |||||||||||||||||
SEPTEMBER 2010 10% CONVERTIBLE NOTES | |||||||||||||||||
On September 3, 2010, we entered into a Subscription Agreement with three accredited investors (the “Purchasers”) providing for the issuance and sale of convertible promissory notes and corresponding warrants in the aggregate principal amount of $1,430,000. The initial closing under the Subscription Agreement resulted in the issuance and sale of (i) convertible promissory notes in the aggregate principal amount of $743,600, (ii) five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.31125 per share, and (iii) five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.43575 per share. The convertible promissory notes bear interest compounded monthly at the annual rate of ten percent (10%) and mature on April 1, 2016 (see below). The aggregate gross cash proceeds were $650,000, the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price may not be more than $0.30 nor less than $0.20. There are no registration requirements with respect to the shares of common stock underlying the notes or the warrants. | |||||||||||||||||
On March 31, 2014, we entered into separate Amendments to Convertible Notes and Warrants (collectively, the “Amendments”) with three accredited investors (collectively, the “Investors”) who own certain convertible promissory notes (collectively, the “Notes”) and warrants (collectively, the “Warrants”) previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2010 Convertible Notes. | |||||||||||||||||
Prior to the Amendments, the Notes were past maturity and were in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments, the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents a reduction from the default interest rates of fifteen percent at which interest had been accruing. By entering into the Amendments, we also agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of $776,451. | |||||||||||||||||
During the period from October 2011 to February 2014, the Investors had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company’s Common Stock, which represents the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042 per share. | |||||||||||||||||
The Amendments also provide that if all of our currently outstanding promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors’ Notes and Warrants) are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors’ Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors’ Notes and Warrants are outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect, any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes and exercise price of the Warrants (with certain issuances to be excepted from this general provision). If our other note and warrant holders agree to waive the antidilution provisions of their securities on the same basis as agreed to by the Investors, then we will no longer be required to report a derivative liability in its financial statements with the accompanying quarterly adjustments to its financial statements and will transfer the amount shown as a derivative liability to equity. | |||||||||||||||||
The Amendments also set the conversion price of the Notes, as well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23, 2016 to January 1, 2017. | |||||||||||||||||
The following table shows the activity in the September 2010 10% Convertible Notes by fiscal year: | |||||||||||||||||
Activity in the September 2010 10% Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 743,600 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (405,500 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (30,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (25,000 | ) | |||||||||||||||
Increase in principal balance due to 12% extension fee | 33,972 | ||||||||||||||||
Balance as of March 31, 2014 | $ | 317,072 | |||||||||||||||
APRIL 2011 10% CONVERTIBLE NOTES | |||||||||||||||||
In April 2011, we entered into a Subscription Agreement with two accredited investors (the “Purchasers”) providing for the issuance and sale of convertible promissory notes and corresponding warrants in the aggregate principal amount of $385,000. The closing under the Subscription Agreement resulted in the issuance and sale by us of (i) convertible promissory notes in the aggregate principal amount of $385,000, (ii) five-year warrants to purchase an aggregate of 4,004,000 shares of our common stock at an exercise price of $0.125 per share, and (iii) five-year warrants to purchase an aggregate of 4,004,000 shares of our common stock at an exercise price of $0.175 per share. The convertible promissory notes bear interest compounded monthly at the annual rate of 10% and mature on April 1, 2016 (see below). The aggregate gross cash proceeds to us were $350,000, the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price may not be more than $0.20 nor less than $0.10. There are no registration requirements with respect to the shares of common stock underlying the notes or the warrants. | |||||||||||||||||
In addition, we issued (i) five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price of $0.125 per share, and (ii) five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price of $0.175 per share to the Purchasers. These warrants were issued as an antidilution adjustment under certain common stock purchase warrants held by the Purchasers that were acquired from us in September 2010. | |||||||||||||||||
On March 31, 2014, we entered into separate Amendments to Convertible Notes and Warrants (collectively, the “Amendments”) with three accredited investors (collectively, the “Investors”) who own certain convertible promissory notes (collectively, the “Notes”) and warrants (collectively, the “Warrants”) previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the April 2011 Convertible Notes. | |||||||||||||||||
Prior to the Amendments, the Notes were past maturity and were in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments, the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of $776,451. | |||||||||||||||||
During the period from October 2011 to February 2014, the Investors had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company’s Common Stock, which represents the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042 per share. | |||||||||||||||||
The Amendments also provide that if all of our currently outstanding promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors’ Notes and Warrants) are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors’ Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors’ Notes and Warrants are outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect, any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes and exercise price of the Warrants (with certain issuances to be excepted from this general provision). | |||||||||||||||||
The Amendments also set the conversion price of the Notes, as well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23, 2016 to January 1, 2017. | |||||||||||||||||
As of March 31, 2014, there have not been any conversions of the April 2011 10% Convertible Notes and the 12% extension fee noted above increased the principal balance by $48,048 to a principal balance of $448,448. | |||||||||||||||||
JULY & AUGUST 2011 10% CONVERTIBLE NOTES | |||||||||||||||||
During the three months ended September 30, 2011, we raised $357,656 in 10% convertible notes. Those notes had a fixed conversion price of $0.09 per share and carried an interest rate of 10%. The convertible notes matured in July and August 2012. We also issued those investors five year warrants to purchase 3,973,957 shares of common stock at $0.125 per share. | |||||||||||||||||
We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a $257,926 discount against the principal of the notes. We amortized this discount using the effective interest method over the term of the note. | |||||||||||||||||
Effective March 31, 2014, the holders of the three notes totaling $100,000 converted all of their principal and accrued interest into 1,438,700 shares of our common stock at the contractual conversion price of $0.09 per share. | |||||||||||||||||
At March 31, 2014, the remaining outstanding principal balance was $257,655, all of which was in default. We are recording interest at the default interest rate of 15%. | |||||||||||||||||
SEPTEMBER 2011 CONVERTIBLE NOTES | |||||||||||||||||
In September 2011, we issued $253,760 of convertible notes, convertible at $0.07 per share. Such notes originally matured in September 2012. | |||||||||||||||||
On March 31, 2014, we entered into separate Amendments to Convertible Notes and Warrants (collectively, the “Amendments”) with three accredited investors (collectively, the “Investors”) who own certain convertible promissory notes (collectively, the “Notes”) and warrants (collectively, the “Warrants”) previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2011 Convertible Notes. | |||||||||||||||||
Prior to the Amendments, the Notes were past maturity and were in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments, the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also agreed to increase the currently outstanding principal amount of the Notes by 12%, which in the case of the September 2011 Notes, they increased from $9,760 to $10,931 | |||||||||||||||||
During the period from October 2011 to February 2014, the Investors had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company’s Common Stock, which represents the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042 per share. | |||||||||||||||||
The Amendments also provide that if all of our currently outstanding promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors’ Notes and Warrants) are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors’ Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors’ Notes and Warrants are outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect, any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes and exercise price of the Warrants (with certain issuances to be excepted from this general provision). If our other note and warrant holders agree to waive the antidilution provisions of their securities on the same basis as agreed to by the Investors, then we will no longer be required to report a derivative liability in its financial statements with the accompanying quarterly adjustments to its financial statements and will transfer the amount shown as a derivative liability to equity. | |||||||||||||||||
The Amendments also set the conversion price of the Notes, as well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of the Amendments, the expiration dates of the Warrants also were extended to January 1, 2017. | |||||||||||||||||
The following table shows the conversions into principal of the September 2011 Convertible Notes by fiscal year: | |||||||||||||||||
Activity in the September 2011 Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 253,760 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (15,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (60,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (169,000 | ) | |||||||||||||||
Increase in principal balance due to extension fee | 1,171 | ||||||||||||||||
Balance as of March 31, 2014 | $ | 10,931 | |||||||||||||||
LAW FIRM NOTE NUMBER 1 | |||||||||||||||||
On March 22, 2012, we entered into a Promissory Note with our corporate law firm for the amount of $75,000, which represented the majority of the amount we owed to that firm at that time. The Promissory Note originally had a maturity date of December 31, 2012 and bears interest at 5% per annum. The note is convertible at the option of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion with a floor price on such conversions of $0.08 per share. The holder subsequently agreed to extend the Maturity Date of the Note first to October 1, 2013, then to September 30, 2013, and now the expiration date of this note is again extended to October 1, 2014. As of March 31, 2014, there have not been any conversions of the Law Firm Note. | |||||||||||||||||
LAW FIRM NOTE NUMBER 2 | |||||||||||||||||
On June 4, 2013, we entered into a Promissory Note with our corporate law firm for the amount of $47,000, which represented approximately 50% of the amount we owed to that firm for services in 2012. The Promissory Note had a maturity date of October 1, 2014 and bore interest at 5% per annum. The note was convertible at the option of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion with a floor price on such conversions of $0.07 per share. | |||||||||||||||||
Effective March 31, 2014, our law firm converted this note and all related accrued interest into 302,043 shares of our common stock at a conversion price of $0.16 per share. |
6_EQUITY_TRANSACTIONS
6. EQUITY TRANSACTIONS | 12 Months Ended | ||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||
EQUITY TRANSACTIONS | ' | ||||||||||||||||||||||
6. EQUITY TRANSACTIONS | |||||||||||||||||||||||
COMMON STOCK AND WARRANTS | |||||||||||||||||||||||
Aethlon Medical, Inc. Equity Transactions in the Fiscal Year Ended March 31, 2014 | |||||||||||||||||||||||
Common Stock Issuances in the Fiscal Year Ended March 31, 2014: | |||||||||||||||||||||||
In June 2013, we completed a unit subscription agreement with three accredited investors pursuant to which we issued 1,580,248 shares of our common stock and 790,124 warrants to purchase our common stock for net cash proceeds of $128,000. Such warrants have an exercise price of $0.121 per share. | |||||||||||||||||||||||
In June 2013, we issued to our CEO the remaining 3,400,000 shares under his restricted share grant, all of which were vested. | |||||||||||||||||||||||
During the three months ended June 30, 2013, we issued 3,675,278 shares of restricted common stock to the holders of three notes issued by the Company in exchange for the partial conversion of principal and interest in an aggregate amount of $246,500 at an average conversion price of $0.07 per share. | |||||||||||||||||||||||
During the three months ended June 30, 2013, we issued 222,734 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.10 per share in payment for legal services valued at $21,750 based on the value of the services provided. | |||||||||||||||||||||||
In August 2013, we completed a unit subscription agreement with four accredited investors (the “Purchasers”) pursuant to which we issued 900,901 shares of our common stock and 450,451 warrants to purchase our common stock in exchange for net cash proceeds of $100,000. Such warrants have an exercise price of $0.167 per share. | |||||||||||||||||||||||
During the three months ended September 30, 2013, we issued 933,522 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.14 per share in payment for legal and scientific consulting services valued at $127,593 based on the value of the services provided. | |||||||||||||||||||||||
During the three months ended September 30, 2013, we issued 1,168,343 shares of restricted common stock at an average price of $0.10 per share in payment for investor relations and public relations services valued at $115,000 based on the value of the services provided. | |||||||||||||||||||||||
During the three months ended September 30 2013, we issued 2,795,367 shares of restricted common stock to the holders of four notes issued by the Company in exchange for the partial or full conversion of principal and interest in an aggregate amount of $173,960 at an average conversion price of $0.06 per share. | |||||||||||||||||||||||
During the three months ended December 31, 2013, we entered into a unit purchase agreement and subscription agreements with 32 accredited investors pursuant to which we issued 14,367,200 shares of our common stock and warrants to purchase our common stock for gross cash proceeds of $1,795,900. Such warrants have an exercise price of $0.22 per share. A FINRA registered broker-dealer was engaged as placement agent in connection with the above Unit Purchase Agreement. We paid the placement agent an aggregate cash fee in the amount of $270,508 and will issue the placement agent or its designees warrants to purchase an aggregate of 2,155,080 shares of our common stock. We also paid $78,360 in other costs and fees, including legal fees, blue sky fees and escrow costs. The net proceeds that we received totaled $1,447,032. | |||||||||||||||||||||||
During the three months ended December 31 2013, we issued 1,465,200 shares of restricted common stock to the holders of two notes issued by us in exchange for the partial or full conversion of accrued interest in an aggregate amount of $80,000 at an average conversion price of $0.05 per share. | |||||||||||||||||||||||
During the three months ended March 31 2014, we issued 2,638,179 shares of restricted common stock to the holders of five notes issued by us in exchange for the partial or full conversion of accrued interest in an aggregate amount of $226,316 at an average conversion price of $0.09 per share. | |||||||||||||||||||||||
During the three months ended March 31, 2014, we issued 346,770 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.19 per share in payment for legal services valued at $65,250 based on the value of the services provided. | |||||||||||||||||||||||
During the three months ended March 31, 2014, we issued 399,781 shares of restricted common stock at an average price of $0.16 per share in payment for investor relations and public relations services valued at $62,500 based on the value of the services provided. | |||||||||||||||||||||||
On March 31, 2014, we entered into extension agreements with three noteholders (see Note 5). In conjunction with the extension agreements, we agreed to issue to the noteholders an aggregate 4,507,105 shares of restricted common stock as a result of the noteholders invoking the antidilution protection on their notes. | |||||||||||||||||||||||
In March 2014, a former director exercised 182,927 in vested stock options through the contribution of $2,000 in cash and $13,000 in accrued expenses owed to him based on the exercise price of $0.082 per share. | |||||||||||||||||||||||
During the fiscal year ended March 31, 2014, we issued 12,716,225 shares of restricted common stock in connection with cashless warrant exercises discussed elsewhere in this footnote. | |||||||||||||||||||||||
Exosome Sciences, Inc. Equity Transactions in the Fiscal Year Ended March 31, 2014 | |||||||||||||||||||||||
On November 21, 2013, ESI, prior to the transaction described herein, a wholly owned diagnostic subsidiary of ours, entered into a stock purchase agreement with twelve accredited investors pursuant to which such investors purchased an aggregate of 220,000 shares of ESI’s common stock at a purchase price of $5.00 per share, for an aggregate purchase price of $1,100,000 in cash. | |||||||||||||||||||||||
On December 13, 2013, ESI entered into a second stock purchase agreement with three accredited investors , pursuant to which such investors purchased an aggregate of 80,000 shares of ESI’s common stock at a purchase price of $5.00 per share, for an aggregate purchase price of $400,000 in cash. | |||||||||||||||||||||||
The aggregate gross proceeds received by ESI under these two transactions above were $1,500,000. As a result of these transactions the Company’s percentage ownership of the outstanding common stock of ESI was reduced from 100% to 80%. | |||||||||||||||||||||||
One of the investors was Dr. Chetan Shah, a director of the Company. Dr. Shah purchased 70,000 ESI shares for an aggregate purchase price of $350,000. | |||||||||||||||||||||||
Common Stock Issuances in the Fiscal Year Ended March 31, 2013: | |||||||||||||||||||||||
During the fiscal year ended March 31, 2013, we issued 22,829,754 shares of restricted common stock to holders of notes issued by the Company in exchange for the partial or full conversion of principal and interest of several notes payable in an aggregate amount of $1,707,052 at an average conversion price of $0.07 per share based upon the conversion formulae in the respective notes. | |||||||||||||||||||||||
During the fiscal year ended March 31, 2013, we issued 1,932,808 restricted shares of common stock to service providers for investor relations, corporate communications and business development services valued at $170,849 based upon the fair value of the shares issued. The average issuance price on the restricted share issuances was approximately $0.09 per share. | |||||||||||||||||||||||
During the fiscal year ended March 31, 2013, we issued 963,373 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.09 per share in payment for scientific consulting services valued at $88,186 based on the value of the services provided. | |||||||||||||||||||||||
On April 5, 2012, we completed a unit subscription agreement with one accredited investor (the “Purchaser”) pursuant to which we issued 2,500,000 shares of our common stock and 1,250,000 warrants to purchase our common stock for net cash proceeds of $200,000. Such warrants have an exercise price of $0.125 per share. | |||||||||||||||||||||||
On June 19, 2012, we completed a unit subscription agreement whereby we issued 8,222,222 shares of our common stock and 4,111,111 warrants to purchase our common stock at an exercise price of $0.108 per share in exchange for net cash proceeds of $592,000. | |||||||||||||||||||||||
On June 26, 2012, we completed a unit subscription agreement whereby we issued 139,821 shares of our common stock and 69,911 warrants to purchase our common stock at an exercise price of $0.107 per share in exchange for net cash proceeds of $10,000. | |||||||||||||||||||||||
In July 2012, we issued 461,409 shares of common stock to the holder of a $25,000 October & November 2009 10% Convertible Note (See Note 5) in exchange for the value of the principal and related accrued interest of $8,000 under the same terms that we used to sell units consisting of one share of common stock and one-half of a stock purchase warrant on June 29, 2012 (See Note 6). As part of that structure, the noteholder also received seven year warrants to purchase 230,705 shares of our common stock at an exercise price of $0.107 per share. | |||||||||||||||||||||||
On August 29, 2012, we completed a unit subscription agreement with seven accredited investors pursuant to which we issued 3,387,500 shares of our common stock and 1,693,750 warrants to purchase our common stock in exchange for net cash proceeds of $271,000.Such warrants have an exercise price of $0.12 per share. | |||||||||||||||||||||||
Between October 2012 and December 2012, we completed several unit subscription agreements with several accredited investors pursuant to which we issued 7,878,580 shares of our common stock and 3,939,292 warrants to purchase our common stock for net cash proceeds of $498,000. Such warrants have an exercise price based upon 120% of the average of the closing prices of our common stock for the five-day period immediately preceding the respective investment transaction date. | |||||||||||||||||||||||
In January 2013, we issued 246,429 shares of restricted common stock to the owner of a patent as a patent license payment valued at $17,250. | |||||||||||||||||||||||
Between January 2013 and March 2013, we completed several unit subscription agreements with several accredited investors pursuant to which we issued 7,596,423 shares of our common stock and 3,798,219 warrants to purchase our common stock for net cash proceeds of $538,834. Such warrants have an exercise price based upon 120% of the average of the closing prices of our common stock for the five-day period immediately preceding the respective investment transaction date. | |||||||||||||||||||||||
A summary of the aggregate warrant activity for the years ended March 31, 2014 and 2013 is presented below: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Warrants | Weighted Average | Warrants | Weighted Average | ||||||||||||||||||||
Exercise Price | Exercise Price | ||||||||||||||||||||||
Outstanding, beginning of year | 75,647,294 | $ | 0.11 | 59,807,849 | $ | 0.14 | |||||||||||||||||
Granted | 14,530,519 | $ | 0.18 | 16,710,445 | $ | 0.11 | |||||||||||||||||
Exercised | (12,716,225 | ) | $ | 0.08 | – | $ | – | ||||||||||||||||
Cancelled/Forfeited | (6,752,113 | ) | $ | 0.11 | (871,000 | ) | $ | 0.25 | |||||||||||||||
Outstanding, end of year | 70,709,475 | $ | 0.1 | 75,647,294 | $ | 0.11 | |||||||||||||||||
Exercisable, end of year | 70,709,475 | $ | 0.1 | 75,647,294 | $ | 0.11 | |||||||||||||||||
Weighted average estimated fair value of warrants granted | $ | 0.09 | $ | 0.07 | |||||||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value of warrants granted utilizing the Binomial Lattice option pricing model: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 1.3%-2.04% | 0.86%-1.56% | |||||||||||||||||||||
Average expected life | 5 to 7 years | 5 to 7 years | |||||||||||||||||||||
Expected volatility | 91.2% - 98.5% | 90.3% - 94.3% | |||||||||||||||||||||
Expected dividends | None | None | |||||||||||||||||||||
The detail of the warrants outstanding and exercisable as of March 31, 2014 is as follows: | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Range of | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Exercise Prices | Outstanding | Remaining | Exercise Price | Outstanding | Exercise Price | ||||||||||||||||||
Life (Years) | |||||||||||||||||||||||
$0.10 or Below | 37,094,795 | 2.42 | $ | 0.05 | 37,094,795 | $ | 0.05 | ||||||||||||||||
$0.11 - $0.19 | 21,876,000 | 4.74 | $ | 0.13 | 21,876,000 | $ | 0.13 | ||||||||||||||||
$0.20 - $0.25 | 11,738,680 | 5.05 | $ | 0.21 | 11,738,680 | $ | 0.21 | ||||||||||||||||
70,709,475 | 70,709,475 | ||||||||||||||||||||||
STOCK OPTIONS: | |||||||||||||||||||||||
2000 STOCK OPTION PLAN | |||||||||||||||||||||||
Our 2000 Stock Option Plan (the "Plan"), adopted by us in August 2000, provides for the grant of incentive stock options ("ISOs") to our full-time employees (who may also be directors) and nonstatutory stock options ("NSOs") to non-employee directors, consultants, customers, vendors or providers of significant services. The exercise price of any ISO may not be less than the fair market value of our common stock on the date of grant or, in the case of an optionee who owns more than 10% of the total combined voting power of all classes of our outstanding common stock, not be less than 110% of the fair market value on the date of grant. The exercise price, in the case of any NSO, must not be less than 75% of the fair market value of our common stock on the date of grant. The amount reserved under the Plan is 500,000 options. | |||||||||||||||||||||||
At March 31, 2012, all of the grants previously made under the Plan had expired and 10,000 restricted shares had been issued under the 2000 Stock Option Plan, with 490,000 available for future issuance. | |||||||||||||||||||||||
2003 CONSULTANT STOCK PLAN | |||||||||||||||||||||||
Our 2003 Consultant Stock Plan, as amended from time to time (the "Stock Plan"), adopted by us in August 2003, advances our interests by helping us obtain and retain the services of persons providing consulting services upon whose judgment, initiative, efforts and/or services we are substantially dependent, by offering to or providing those persons with incentives or inducements affording such persons an opportunity to become owners of our common stock. Over several years, we issued 7,500,000 shares under the Stock Plan and discontinued using the Stock Plan in October 2012. | |||||||||||||||||||||||
2010 STOCK INCENTIVE PLAN | |||||||||||||||||||||||
In August 2010, we adopted the 2010 Stock Incentive Plan (the "Incentive Plan"), which provides incentives to attract, retain and motivate employees and directors whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in our future performance through awards of options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards. A total of 3,500,000 common shares were initially reserved for issuance under the Incentive Plan. | |||||||||||||||||||||||
In August 2010, we filed a registration statement on Form S-8 for the purpose of registering 3,500,000 common shares issuable under the Incentive Plan under the Securities Act of 1933 and in July 2012, we filed a registration statement on Form S-8 for the purpose of registering an additional 5,000,000 common shares issuable under the Incentive Plan under the Securities Act of 1933. | |||||||||||||||||||||||
In May 2013, we issued to a scientific advisory board member and a scientific consultant a three year option to purchase 125,000 shares of our common stock at a price of $0.11 per share. | |||||||||||||||||||||||
At March 31, 2014, we had 2,445,626 shares available under the Incentive Plan. | |||||||||||||||||||||||
2012 DIRECTORS COMPENSATION PROGRAM | |||||||||||||||||||||||
In July 2012, our Board of Directors approved a new Board Compensation Program (the “New Program”), which modifies and supersedes the 2005 Directors Compensation Program (the “2005 Program”) that was previously in effect. Under the New Program, in which only non-employee Directors may participate, an eligible Director will receive a grant of $35,000 worth of ten year options to acquire shares of our common stock, with such grant being valued at the exercise price based on the average of the closing bid prices of our common stock for the five trading days preceding the first day of the fiscal year. In addition, under the New Program, eligible Directors will receive cash compensation equal to $500 for each committee meeting attended and $1,000 for each formal Board meeting attended. | |||||||||||||||||||||||
In the fiscal year ended March 31, 2013, our Board of Directors granted under the New Program, to our four outside directors, ten year options to acquire an aggregate of 1,667,105 shares of our common stock, all with an exercise price of $0.076 per share. | |||||||||||||||||||||||
In the fiscal year ended March 31, 2014, our Board of Directors granted under the New Program, to our five outside directors, ten year options to acquire an aggregate of 1,595,536 shares of our common stock, all with an exercise price of $0.082 per share. | |||||||||||||||||||||||
At March 31, 2014 under the 2005 Program, we had issued 1,337,825 options to outside directors and 3,965,450 options to employee-directors. Of such amounts, 514,550 outside directors’ options had been forfeited, 250,000 outside directors’ options had been exercised, and 3,671,550 options remained outstanding. | |||||||||||||||||||||||
On June 6, 2014, our Board of Directors approved certain changes to the New Program. Under the modified New Program, a new eligible Director will receive an initial grant of $50,000 worth of options to acquire shares of our common stock, with such grant being valued at the exercise price based on the average of the closing bid prices of our common stock for the five trading days preceding the first day of the fiscal year. These options will have a term of ten years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant. In addition, at the beginning of each fiscal year, each existing Director eligible to participate in the modified New Program also will receive a grant of $35,000 worth of options valued at the exercise price based on the average of the closing bid prices of our common stock for the five trading days preceding the first day of the fiscal year. Such options will vest on the first anniversary of the date of grant. In lieu of per meeting fees, under the modified New Program eligible Directors will receive an annual Board cash retainer fee of $30,000. The modified New Program also provides for the following annual cash retainer fees: Audit Committee Chair - $5,000, Compensation Committee chair - $5,000, Audit Committee member - $4,000, Compensation Committee member - $4,000, and Lead independent director - $15,000. | |||||||||||||||||||||||
STAND-ALONE GRANTS | |||||||||||||||||||||||
From time to time our Board of Directors grants restricted stock or common share purchase options or warrants to selected directors, officers, employees and consultants as equity compensation to such persons on a stand-alone basis outside of any of our formal stock plans. The terms of these grants are individually negotiated. | |||||||||||||||||||||||
On June 8, 2009, our board of directors approved the grant to Mr. Joyce of 4,000,000 shares of restricted common stock at a price per share of $0.24, the vesting and issuance of which occurred in equal installments over a thirty-six-month period that commenced on June 30, 2010. Mr. Joyce may, from time to time, defer acceptance of the shares. However, all shares must be issued and accepted by Mr. Joyce by the expiration of the thirty-six-month vesting period. Mr. Joyce has accepted all 4,000,000 shares of the grant. However, the 600,000 shares previously accepted by Mr. Joyce were pledged as collateral for a loan and have been retained and/or sold by the lender and are no longer owned by Mr. Joyce. | |||||||||||||||||||||||
In July 2013, our compensation committee and Board of Directors approved the issuance of four stock option grants to four of our executives. The options carried an exercise price of $0.10 per share, have a ten year life and vest over the following schedule: 25% on July 1, 2014, 25% on July 1, 2015, 25% on July 1, 2016 and 25% on July 1, 2017. The numbers of shares underlying each of the stock option grants were as follows: 2,000,000 shares to our chief executive officer and 500,000 shares each to our president, chief science officer and chief financial officer. | |||||||||||||||||||||||
During the three months ended March 31, 2014, a former director exercised 182,927 in vested stock options through the contribution of $2,000 in cash and $13,000 in accrued expenses owed to him based on the exercise price of $0.082 per share. | |||||||||||||||||||||||
As of March 31, 2014, we have issued 22,568,158 options (of which 3,368,942 have been exercised or cancelled) and authorized the issuance of 4,000,000 shares of restricted stock outside of the 2005 Directors Compensation Plan, the 2012 Directors Compensation Plan, the 2000 Stock Option Plan, the 2003 Consultant Stock Plan and the 2010 Incentive Stock Plan. | |||||||||||||||||||||||
In the fiscal year ended March 31, 2014, our Board of Directors granted, to our five outside directors, ten year options to acquire an aggregate of 1,595,536 shares of our common stock, all with an exercise price of $0.082 per share. | |||||||||||||||||||||||
The following is a summary of the stock options outstanding at March 31, 2014 and 2013 and the changes during the years then ended: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Options | Weighted Average | Options | Weighted Average | ||||||||||||||||||||
Exercise Price | Exercise Price | ||||||||||||||||||||||
Outstanding, beginning of year | 21,095,798 | $ | 0.28 | 19,428,693 | $ | 0.31 | |||||||||||||||||
Granted | 5,220,536 | $ | 0.09 | 1,667,105 | $ | 0.08 | |||||||||||||||||
Exercised | 182,927 | $ | 0.08 | – | $ | – | |||||||||||||||||
Cancelled/Forfeited | – | $ | – | – | $ | – | |||||||||||||||||
Outstanding, end of year | 26,133,407 | $ | 0.25 | 21,095,798 | $ | 0.28 | |||||||||||||||||
Exercisable, end of year | 22,487,563 | $ | 0.27 | 19,141,625 | $ | 0.29 | |||||||||||||||||
Weighted average estimated fair value of options granted | $ | 0.13 | $ | 0.08 | |||||||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value with respect to stock options utilizing the Binomial Lattice option pricing model for the years ended March 31, 2014 and March 31, 2013: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 0.38% to 2.65% | 1.44% | |||||||||||||||||||||
Average expected life | 3 to 10 years | 10 years | |||||||||||||||||||||
Expected volatility | 91.05% to 102.67% | 117.53% | |||||||||||||||||||||
Expected dividends | None | None | |||||||||||||||||||||
The detail of the options outstanding and exercisable as of March 31, 2014 is as follows: | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Range of | Number | Weighted | Weighted | Number | Weighted | ||||||||||||||||||
Exercise Prices | Outstanding | Average | Average | Outstanding | Average | ||||||||||||||||||
Remaining | Exercise | Exercise | |||||||||||||||||||||
Life (Years) | Price | Price | |||||||||||||||||||||
$0.08 - $0.11 | 6,704,714 | 9.68 years | $ | 0.09 | 3,204,714 | $ | 0.08 | ||||||||||||||||
$0.21 - $0.25 | 11,207,143 | 4.28 years | $ | 0.24 | 11,061,299 | $ | 0.24 | ||||||||||||||||
$0.36 - $0.41 | 8,221,550 | 2.68 years | $ | 0.38 | 8,221,550 | $ | 0.38 | ||||||||||||||||
26,133,407 | 22,487,563 | ||||||||||||||||||||||
We recorded stock-based compensation expense related to share issuances and to options granted totaling $607,946 and $765,273 for the fiscal years ended March 31, 2014 and 2013, respectively. These expenses were recorded as stock compensation included in payroll and related expenses in the accompanying consolidated statement of operations for the years ended March 31, 2014 and 2013. | |||||||||||||||||||||||
Our total stock-based compensation for fiscal years ended March 31, 2014 and 2013 included the following: | |||||||||||||||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||||||||||||||
Vesting of restricted stock grant | $ | 64,444 | $ | 386,668 | |||||||||||||||||||
Incremental fair value of option modifications | 1,914 | 23,027 | |||||||||||||||||||||
Vesting of stock options | 541,588 | 355,578 | |||||||||||||||||||||
Total Stock-Based Compensation | $ | 607,946 | $ | 765,273 | |||||||||||||||||||
As of March 31, 2014, we had $270,952 of remaining unrecognized stock option expense, which is expected to be recognized over a weighted average remaining vesting period of 2.07 years. | |||||||||||||||||||||||
On March 31, 2014, our stock options had a negative intrinsic value since the closing price on that date of $0.17 per share was below the weighted average exercise price of our stock options. |
7_RELATED_PARTY_TRANSACTIONS
7. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
7. RELATED PARTY TRANSACTIONS | |
DUE TO RELATED PARTIES | |
Certain of our officers and other related parties have advanced us funds, agreed to defer compensation and/or paid expenses on our behalf to cover working capital deficiencies. These unsecured and non-interest-bearing liabilities have been included as due to related parties in the accompanying consolidated balance sheets. | |
Other related party transactions are disclosed elsewhere in these notes to consolidated financial statements. |
8_OTHER_CURRENT_LIABILITIES
8. OTHER CURRENT LIABILITIES | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Other Liabilities Disclosure [Abstract] | ' | ||||||||
OTHER CURRENT LIABILITIES | ' | ||||||||
8. OTHER CURRENT LIABILITIES | |||||||||
Other current liabilities were comprised of the following items: | |||||||||
March 31, | March 31, | ||||||||
2014 | 2013 | ||||||||
Accrued interest | $ | 1,165,335 | $ | 1,032,110 | |||||
Accrued legal fees | 179,465 | 179,465 | |||||||
Accrued liquidated damages | 362,800 | 437,800 | |||||||
Other accrued liabilities | 147,774 | 155,610 | |||||||
Total other current liabilities | $ | 1,855,374 | $ | 1,804,985 |
9_INCOME_TAXES
9. INCOME TAXES | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
INCOME TAXES | ' | ||||||||
9. INCOME TAXES | |||||||||
For the years ended March 31, 2014 and 2013, we had no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance. | |||||||||
At March 31, 2014 and 2013, we had net deferred tax assets as detailed below. These deferred tax assets are primarily composed of capitalized research and development costs and tax net operating loss carryforwards. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a 100% valuation has been established to offset the net deferred tax assets. | |||||||||
Significant components of our net deferred tax assets at March 31, 2014 and 2013 are shown below: | |||||||||
YEAR ENDED MARCH 31, | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets: | |||||||||
Capitalized research and development | $ | 3,442,000 | $ | 3,442,000 | |||||
Net operating loss carryforwards | 15,193,000 | 14,793,000 | |||||||
Total deferred tax assets | 18,635,000 | 18,235,000 | |||||||
Total deferred tax liabilities | – | – | |||||||
Net deferred tax assets | 18,635,000 | 18,235,000 | |||||||
Valuation allowance for deferred tax assets | (18,635,000 | ) | (18,235,000 | ) | |||||
Net deferred tax assets | $ | – | $ | – | |||||
At March 31, 2014, we had tax net operating loss carryforwards for federal and state purposes approximating $39 million and $30 million, which begin to expire in the year 2020. | |||||||||
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate for the years ended March 31, 2014 and 2013 due to the following: | |||||||||
2014 | 2013 | ||||||||
Income taxes (benefit) at federal statutory rate of 34% | $ | (4,541,000 | ) | $ | (1,663,000 | ) | |||
State income tax, net of federal benefit | (156,000 | ) | (285,000 | ) | |||||
Tax effect on non-deductible expenses and credits | 4,297,000 | 215,000 | |||||||
Change in valuation allowance1 | 400,000 | 1,733,000 | |||||||
$ | – | $ | – | ||||||
Pursuant to Internal Revenue Code Sections 382, use of our tax net operating loss carryforwards may be limited. | |||||||||
ASC 740, “Income Taxes”, clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements, and prescribes recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the years ended March 31, 2014 and 2013, we did not recognize any interest or penalties relating to tax matters. | |||||||||
At and for the years ended March 31, 2014 and 2013, management does not believe the Company has any uncertain tax positions. | |||||||||
Accordingly, there are no unrecognized tax benefits at March 31, 2014 or March 31, 2013. | |||||||||
Our tax returns for the years 2010 and forward are subject to examination by the Internal Revenue Service and 2009 and forward by the California Franchise Tax Board. We are currently not under examination by any taxing authorities. | |||||||||
10_FAIR_VALUE_MEASUREMENTS
10. FAIR VALUE MEASUREMENTS | 12 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||||||
10. FAIR VALUE MEASUREMENTS | |||||||||||||||||||||
We follow FASB ASC 820, "FAIR VALUE MEASUREMENTS AND DISCLOSURES" (“ASC 820”) in connection with financial assets and liabilities measured at fair value on a recurring basis subsequent to initial recognition. | |||||||||||||||||||||
ASC 820 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: | |||||||||||||||||||||
Level 1: Quoted market prices in active markets for identical assets or liabilities. | |||||||||||||||||||||
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. | |||||||||||||||||||||
Level 3: Unobservable inputs that are not corroborated by market data. | |||||||||||||||||||||
The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. | |||||||||||||||||||||
The fair value of our recorded derivative liabilities is determined based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations. Our fair value measurements at the reporting date were as follows: | |||||||||||||||||||||
At March 31, 2014: | |||||||||||||||||||||
Description | Quoted Prices in | Significant Other | Significant | ||||||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||||||
Identical Assets | (Level 2) | Inputs (Level 3) | |||||||||||||||||||
(Level 1) | |||||||||||||||||||||
Derivative Liabilities | $ | – | $ | – | $ | 10,679,067 | |||||||||||||||
Total Assets | $ | – | $ | – | $ | 10,679,067 | |||||||||||||||
At March 31, 2013: | |||||||||||||||||||||
Description | Quoted Prices in | Significant Other | Significant | ||||||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||||||
Identical Assets | (Level 2) | Inputs (Level 3) | |||||||||||||||||||
(Level 1) | |||||||||||||||||||||
Derivative Liabilities | $ | – | $ | – | $ | 3,588,239 | |||||||||||||||
Total Assets | $ | – | $ | – | $ | 3,588,239 | |||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value information presented for the fiscal years ended March 31, 2014 and 2013, in connection with our April 2011 convertible note, July & August 2011 10% convertible notes and the September 2011 convertible note offerings and with respect to warrant and embedded conversion option derivative instruments utilizing the Binomial Lattice option pricing model: | |||||||||||||||||||||
Fiscal Year Ended March 31, 2014 | |||||||||||||||||||||
Risk free interest rate | 0.02% - 0.79% | ||||||||||||||||||||
Average expected life | 0.25 – 2.8 years | ||||||||||||||||||||
Expected volatility | 58.0% - 103.1% | ||||||||||||||||||||
Expected dividends | None | ||||||||||||||||||||
Fiscal Year Ended March 31, 2013 | |||||||||||||||||||||
Risk free interest rate | 0.05% - 1.56% | ||||||||||||||||||||
Average expected life | 0.25 – 3.6 years | ||||||||||||||||||||
Expected volatility | 76.0% - 107.1% | ||||||||||||||||||||
Expected dividends | None | ||||||||||||||||||||
The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the year ended March 31, 2014: | |||||||||||||||||||||
April 1, | Recorded New Derivative | Change in estimated fair value recognized in results | Reclassification of Derivative Liability to Paid in | March 31, | |||||||||||||||||
2013 | Liabilities | of operations | capital | 2014 | |||||||||||||||||
Derivative liabilities | $ | 3,588,239 | $ | – | $ | 5,729,780 | $ | 1,361,048 | $ | 10,679,067 | |||||||||||
The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the year ended March 31, 2013: | |||||||||||||||||||||
April 1, | Recorded New Derivative | Change in estimated fair value recognized in results | Reclassification of Derivative Liability to Paid in | March 31, | |||||||||||||||||
2012 | Liabilities | of operations | capital | 2013 | |||||||||||||||||
Derivative liabilities | $ | 3,588,615 | $ | – | $ | (44,705 | ) | $ | 44,329 | $ | 3,588,239 | ||||||||||
11_DARPA_CONTRACT_AND_RELATED_
11. DARPA CONTRACT AND RELATED REVENUE RECOGNITION | 12 Months Ended |
Mar. 31, 2014 | |
Revenue Recognition [Abstract] | ' |
DARPA CONTRACT AND RELATED REVENUE RECOGNITION | ' |
11. DARPA CONTRACT AND RELATED REVENUE RECOGNITION | |
As discussed in Note 1, we entered into a contract with the DARPA on September 30, 2011. Under the DARPA award, we have been engaged to develop a therapeutic device to reduce the incidence of sepsis, a fatal bloodstream infection that often results in the death of combat-injured soldiers. The award from DARPA was a fixed-price contract with potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement of multiple, incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we will perform certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed payment amounts. | |
Originally, only the base year (year one contract) was effective for the parties, however, DARPA subsequently exercised the option on the second and third years of the contract. DARPA has the option to enter into the contract for years four and five. The milestones are comprised of planning, engineering and clinical targets, the achievement of which in some cases will require the participation and contribution of third party participants under the contract. There can be no assurance that we alone, or with third party participants, will meet such milestones to the satisfaction of the government and in compliance with the terms of the contract or that we will be paid the full amount of the contract revenues during any year of the contract term. We commenced work under the contract in October 2011. | |
Due to budget restrictions within the Department of Defense, on February 10, 2014, DARPA reduced the scope of our contract in years three through five of the contract. The reduction in scope focused our research on exosomes, viruses and blood processing instrumentation. This scope reduction will reduce the possible payments under the contract by $858,491 over years three through five. We recently completed a rebudgeting of the expected costs on the remaining years of the DARPA contract based on the reduced milestones and have concluded that the reductions in our costs due to the scaled back level of work will almost entirely offset the anticipated revenue levels based on current assumptions. | |
Fiscal Year Ended March 31, 2014 | |
As a result of achieving eight milestones in the fiscal year ended March 31, 2014, we reported $1,466,482 in contract revenue for that fiscal year. The details of the eight milestones achieved during the fiscal year ended March 31, 2014 were as follows: | |
Milestone 2.3.2.2 – Formulate initial design work based on work from the previous phase. Begin to build and test selected instrument design and tubing sets. The milestone payment was $195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to formulate the initial design work and to build and test selected instrument design and tubing sets as part of our submission for approval. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.3.2.2 – Write and test software and conduct ergonomic research. Begin discussions with the systems integrator. The milestone payment was $195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We obtained wrote and tested software and conducted ergonomic research and began discussions with the systems integrator. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.3.3.2 – Cartridge construction with optimized affinity matrix design for each potential target. Complete the capture agent screening. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We completed the cartridge construction with optimized affinity matrix design for each potential target and completed the capture agent screening. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone M5 – Target capture > 90% in 24 hours for at least three targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to capture > 90% in 24 hours for at least three of the agreed targets in blood or blood components. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone M3 – Conduct a series of experiments aimed at characterizing the contribution of several alternate fluidic designs and methods of perfusing plasma filters and affinity columns in the performance of affinity plasmapheresis. The milestone payment was $195,576. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had conducted the relevant series of experiments. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.4.2.1 – Evaluate contribution of manufacturing process variables to binding capacity of affinity resin. The milestone payment was $197,362. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had evaluated the contribution of manufacturing process variables to binding capacity of affinity resin. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.4.1.1 – Design and fabricate optimized configuration(s) of hemopurification device(s) that contain(s) a combination of hemofilters, plasma filters and affinity columns. The milestone payment was $186,164. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had designed and fabricated optimized configuration of hemopurification devices. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.4.2.3 – Perform biocompatibility tests for the combination ADAPT device to confirm the combination cartridge does not present additional risk. The milestone payment was $78,641. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had performed biocompatibility tests for the combination ADAPT device to confirm the combination cartridge does not present additional risk. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Fiscal Year Ended March 31, 2013 | |
As a result of achieving six milestones in the fiscal year ended March 31, 2013, we reported $1,230,004 in contract revenue for that fiscal year. The details of the six milestones achieved during the fiscal year ended March 31, 2013 were as follows: | |
Milestone 2.2.2.3 – Perform preliminary quantitative real time PCR to measure viral load, and specific DNA or RNA targets. The milestone payment was $216,747. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to measure viral load of one or more targets as part of our submission for approval. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.2.1.4 – Obtain all necessary IRB documentation and obtain both institutional and Government approval in accordance with IRB documentation submission guidance prior to conducting human or animal testing. The milestone payment was $183,367. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We obtained all of the required documentation from both institutional and Government authorities. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone M2 – Target capture > 50% in 24 hours for at least one target in blood or blood components. The milestone payment was $216,747. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to capture > 50% in 24 hours of one of the agreed targets in blood or blood components. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.3.3.1 – Build the ADAPT capture cartridges with the identified affinity agents. Measure the rate of capture of the specific targets from in ex vivo recirculation experiments from cell culture and blood. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able build the ADAPT capture cartridges with the identified affinity agents and to measure the rate of capture of the specific targets from in ex vivo recirculation experiments from cell culture and blood. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone 2.3.2.1 – Demonstrate the effectiveness of the prototype device in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow. The milestone payment amount was $195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. The prototype device was successfully used in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
Milestone M4 – Target capture > 50% in 24 hours for at least 5 targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to capture > 50% in 24 hours for at least 5 of the agreed targets in blood or blood components. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter. | |
12_SIGNIFICANT_FOURTH_QUARTER_
12. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS | 12 Months Ended |
Mar. 31, 2014 | |
Quarterly Financial Information Disclosure [Abstract] | ' |
SIGNIFICANT FOURTH QUARTER ADJUSTMENTS | ' |
12. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS | |
During the fourth quarter of the fiscal years ended March 31, 2014 and 2013, we did not deem any unusual or infrequently occurring items or adjustments to be material to our fourth quarter results. |
13_COMMITMENTS_AND_CONTINGENCI
13. COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||
Mar. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
COMMITMENTS AND CONTINGENCIES | ' | ||||
13. COMMITMENTS AND CONTINGENCIES | |||||
EMPLOYMENT CONTRACTS | |||||
We entered into an employment agreement with our Chairman of the Board (“Chairman”) effective April 1, 1999. The agreement, which is cancelable by either party upon sixty days’ notice, will be in effect until the Chairman retires or ceases to be employed by us. Under the terms of the agreement, if the Chairman is terminated he may become eligible to receive a salary continuation payment in the amount of at least twelve months' base salary, which was increased to $350,000 per year in June 2014. | |||||
We entered into an employment agreement with Dr. Tullis (“Tullis”) effective January 10, 2000 as our Chief Science Officer ("CSO"). Under the terms of the agreement, if Tullis is terminated he may become eligible to receive a salary continuation payment in the amount of twelve months base salary, which is $195,000 per year. | |||||
LEASE COMMITMENTS | |||||
We currently rent approximately 2,300 square feet of executive office space at 8910 University Center Lane, Suite 660, San Diego, CA 92122 at the rate of $6,475 per month on a four year lease that expires in September 2014. We also rent approximately 1,700 square feet of laboratory space at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 at the rate of $2,917 per month on a two year lease that expires in October 2014. We are currently searching for new space in the greater San Diego area. | |||||
Our Exosome Sciences, Inc. subsidiary rents approximately 2,055 square feet of office and laboratory space at 11 Deer Park Drive, South Brunswick, NJ at the rate of $3,425 per month on a one year lease that expires in October 2014. Our current plans are to renew the lease prior to expiration. | |||||
Rent expense approximated $163,000 and $123,000 for the fiscal years ended March 31, 2014 and 2013, respectively. As of March 31, 2014, commitments under the lease agreements are as follows: | |||||
2015 | |||||
8910 University Center Lane, Suite 660, San Diego, CA 92122 office lease | $ | 43,795 | |||
11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 office lease | 22,755 | ||||
11 Deer Park Drive, South Brunswick, NJ | 23,975 | ||||
Total Lease Commitments | $ | 90,525 | |||
LEGAL MATTERS | |||||
From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. | |||||
The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods. Other than as mentioned here, we are not presently a party to any pending or threatened legal proceedings. | |||||
On February 24, 2014, we entered into a Settlement Agreement and General Release (the “Settlement Agreement”) with Gemini Master Fund, Ltd., a Cayman Islands company ("Gemini"), which, among other things, resulted in the dismissal with prejudice of the complaint filed by Gemini against us on July 5, 2012 in the Supreme Court of the State of New York, County of New York, entitled Gemini Master Fund Ltd. v. Aethlon Medical, Inc., Index No. 652358/2012 (the "Complaint"). | |||||
In the Complaint, Gemini sought relief both in the form of money damages and delivery of shares of our common stock. The Complaint alleged, among other things, that we were in default of a convertible promissory note ("Convertible Note") originally issued to Gemini on February 12, 2010 by failing to pay the Convertible Note in full and by failing to honor certain requests by Gemini to convert the principal and interest under the Convertible Note into shares of our common stock. The Complaint also alleged that we failed to issue shares upon the presentation of exercise notices under warrants originally issued to Gemini in 2009 and 2010 (respectively, the "2009 Warrant" and the "2010 Warrant"). | |||||
In the Complaint, Gemini alleged it was entitled to 22,389,382 shares of common stock upon conversion of the balance of the Convertible Note and Gemini alleged that it was entitled to receive 30,370,814 shares of common stock pursuant to the 2009 Warrant and the 2010 Warrant, for a combined sum of 52,760,196 common shares. | |||||
In response, we provided documentation that the Convertible Note had been paid in full in cash and accepted by Gemini prior to the filing of the Complaint. In addition, we had maintained on our books the total number of shares required to be issued under the 2009 Warrant, the 2010 Warrant and the 2008 Warrant (defined below) combined was 6,359,999 shares. | |||||
The Settlement Agreement required us to issue a total of 7,522,854 shares of common stock into an escrow and those shares were to be released to Gemini ratably over a ten-month period. The shares were issued upon partial exercise of the 2009 Warrant and 2010 Warrant as well as under a third warrant, issued by us to Gemini in 2008 (the "2008 Warrant"). No shares were issued as consideration for the alleged default under the Convertible Note or in consideration of the releases granted in the Settlement Agreement. In addition, our insurance company paid Gemini $150,000 in cash. Upon the completion of the share issuances, the 2008 Warrant, the 2009 Warrant and the 2010 Warrants were canceled. In addition, under the Settlement Agreement, the Convertible Note (and any other agreement to pay Gemini or issue stock or anything else of value to Gemini) was extinguished and fully satisfied. | |||||
As we previously had 6,359,999 shares of common stock reserved for issuance under the three Warrants described above, the settlement increased our fully diluted shares outstanding by 1,162,855 shares. | |||||
Following the performance of the settlement terms described above, a Stipulation of Dismissal was filed with the Court, permanently terminating the litigation. The Settlement Agreement also provided for mutual and full releases of all other claims between Gemini and us. | |||||
The Company accrued an estimate of $1,000,000 for such matter at December 31, 2013 and expensed such amount during the quarter ended December 31, 2013. Upon final settlement, management determined that the expense was approximately $583,000. Accordingly, during the fourth quarter of the year ended March 31, 2014, the Company recorded a credit to expense of approximately $417,000 related to this matter. | |||||
14_SEGMENTS
14. SEGMENTS | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
SEGMENTS | ' | ||||||||
14. SEGMENTS | |||||||||
We operate our businesses principally through two reportable segments: Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic business activities. Our reportable segments have been determined based on the nature of the potential products being developed. ESI did not have any operations in the fiscal year ended March 31, 2013. | |||||||||
Aethlon’s revenue is generated primarily from government contracts to date and ESI does not yet have any revenues. We have not included any allocation of corporate overhead to the ESI segment. | |||||||||
The following tables set forth certain information regarding our segments and other operations that conforms to the consolidated balance sheet and statement of operations presented in this Report: | |||||||||
Fiscal Years Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Revenues: | |||||||||
Aethlon | $ | 1,623,769 | $ | 1,230,004 | |||||
ESI | – | – | |||||||
Total Revenues | $ | 1,623,769 | $ | 1,230,004 | |||||
Operating Losses: | |||||||||
Aethlon | $ | (2,651,863 | ) | $ | (3,575,354 | ) | |||
ESI | (404,065 | ) | – | ||||||
Total Operating Loss | $ | (3,055,928 | ) | $ | (3,575,354 | ) | |||
Net Losses: | |||||||||
Aethlon | $ | (13,357,232 | ) | $ | (4,892,040 | ) | |||
ESI | (81,730 | ) | – | ||||||
Net Loss Before Non-Controlling Interests | $ | (13,438,962 | ) | $ | (4,892,040 | ) | |||
Cash: | |||||||||
Aethlon | $ | 208,259 | $ | 125,274 | |||||
ESI | 1,042,020 | – | |||||||
Total Cash | $ | 1,250,279 | $ | 125,274 | |||||
Total Assets: | |||||||||
Aethlon | $ | 597,026 | $ | 496,694 | |||||
ESI | 1,098,076 | – | |||||||
Total Assets | $ | 1,695,102 | $ | 496,694 | |||||
Capital Expenditures: | |||||||||
Aethlon | $ | 37,313 | $ | – | |||||
ESI | 58,743 | – | |||||||
Capital Expenditures | $ | 96,056 | $ | – | |||||
Depreciation and Amortization: | |||||||||
Aethlon | $ | 11,549 | $ | 10,484 | |||||
ESI | 9,538 | – | |||||||
Total Depreciation and Amortization | $ | 21,087 | $ | 10,484 | |||||
Interest Expense: | |||||||||
Aethlon | $ | 1,282,638 | $ | 1,132,314 | |||||
ESI | 4,583 | – | |||||||
Total Interest Expense | $ | 1,287,221 | $ | 1,132,314 | |||||
15_SUBSEQUENT_EVENTS_UNAUDITED
15. SUBSEQUENT EVENTS (UNAUDITED) | 12 Months Ended | ||
Mar. 31, 2014 | |||
Subsequent Events [Abstract] | ' | ||
SUBSEQUENT EVENTS | ' | ||
15. SUBSEQUENT EVENTS (UNAUDITED) | |||
Management has evaluated events subsequent to March 31, 2014 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements. | |||
Government Contracts | |||
Subsequent to March 31, 2014, we billed $197,362 under our DARPA contract and billed $62,696 under the Battelle subcontract and we collected $135,376 under both contracts. | |||
Common Stock Issuances | |||
Subsequent to March 31, 2014, we issued 219,127 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.17 per share in payment for internal controls, legal and scientific consulting services valued at $38,268 based on the value of the services provided. | |||
Subsequent to March 31, 2014, we completed unit subscription agreements with seven accredited investors (the “Purchasers”) pursuant to which the Purchasers purchased an aggregate of $320,800 of restricted common stock at an average price of $0.15 per share. The common stock purchase price under the subscription agreement was determined to be 80% of the average closing price of our common stock for the five-day period immediately preceding the date of each subscription agreement, resulting in the issuance of 2,192,444 shares of common stock. | |||
Each Purchaser also received one common stock purchase warrant for each two shares of common stock purchased under his subscription agreement. The warrant exercise price was calculated based upon 120% of the average of the closing prices of our common stock for the five-day period immediately preceding the parties entering into their subscription agreement. | |||
Stock Option Grants | |||
On June 6, 2014, our Board of Directors approved the following grants of options to certain officers and directors of the Company: | |||
· | To Mr. James A. Joyce, an option to acquire an aggregate of 1,500,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 500,000 shares on the grant date and will vest as to an additional 500,000 shares on each of the first two anniversaries of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024. | ||
· | To Mr. Rodney S. Kenley, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 83,333 shares on the grant date and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024. | ||
· | To Mr. James B. Frakes, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 83,333 shares on the grant date and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024. | ||
Changes to 2012 Board Compensation Program | |||
In July 2012, the Board approved a Board Compensation Program (the “2012 Program”), which modified and superseded the 2005 Directors Compensation Program that had been in effect previously. On June 6, 2014, the Board approved certain changes to the 2012 Program. Under the modified 2012 Program, in which only non-employee Directors may participate, a new eligible Director will receive an initial grant of $50,000 worth of options to acquire shares of common stock, with such grant being valued at the exercise price based on the average of the closing bid prices of our common stock for the five trading days preceding the first day of the fiscal year. These options will have a term of ten years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant. | |||
At the beginning of each fiscal year, each existing Director eligible to participate in the 2012 Program also will receive a grant of $35,000 worth of options valued at the exercise price based on the average of the closing bid prices of the Common Stock for the five trading days preceding the first day of the fiscal year. Such options will vest on the first anniversary of the date of grant. In lieu of per meeting fees, under the 2012 Program eligible Directors will receive an annual Board retainer fee of $30,000. The modified 2012 Program also provides for the following annual retainer fees: Audit Committee Chair - $5,000, Compensation Committee chair - $5,000, Audit Committee member - $4,000, Compensation Committee member - $4,000 and Lead independent director - $15,000. | |||
All of the foregoing actions - the changes in base salaries, the option grants and the changes to the Directors Compensation Program discussed herein - were approved and recommended by the Company’s Compensation Committee prior to approval by the Board. | |||
Convertible Notes Payable – See Note 16 below |
16_PRO_FORMA_BALANCE_SHEET_UNA
16. PRO FORMA BALANCE SHEET (UNAUDITED) | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Pro Forma Balance Sheet | ' | ||||||||||||||||
PRO FORMA BALANCE SHEET | ' | ||||||||||||||||
NOTE 16 – PRO FORMA BALANCE SHEET (UNAUDITED) | |||||||||||||||||
Management has presented unaudited pro forma balance sheet information as if the subsequent events discussed below had occurred on March 31, 2014. Such pro forma information is subject to future adjustment as management determines the final accounting for such transactions. | |||||||||||||||||
Weiner Note Conversion | |||||||||||||||||
On June 24, 2014, we entered into an agreement with the Ellen R. Weiner Family Revocable Trust (the “Trust”), a holder of a Series A 12% Convertible Note (the “Note”) (see Note 5), which previously was classified as being in default. As per the agreement, the Trust converted a past due combined principal and interest balance of $1,003,200 into restricted common stock. | |||||||||||||||||
Additionally, the Trust agreed to waive anti-dilution price protection underlying warrants previously issued to the Trust. On June 26, 2014, three other parties who held similar warrants also agreed to waive their anti-dilution price protection. As a result of the debt conversion and elimination of warrant anti-dilution price protection, $3.7 million of our previously classified derivative liability will convert into equity based on the fair value of securities on our fiscal year-end date of March 31, 2014. | |||||||||||||||||
As a result of the note conversion and derivative liability reclassification into equity, our balance sheet equity will increase by approximately $4.7 million. | |||||||||||||||||
Under its agreement, the Trust converted the entire $1,003,200 past due principal and interest balance on the Note, which previously was in default, into an aggregate of 23,318,254 restricted shares of our common stock and five-year warrants to acquire up to 6,809,524 shares of our common stock at an exercise price of $.042 per share and up to 397,222 shares of our common stock at an exercise price of $.108 per share (collectively, the “Conversion Securities”). | |||||||||||||||||
In exchange for the Trust’s conversion in full of the Note and accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants, in addition to the Conversion Securities, we issued to the Trust 75,000 restricted shares of common stock as a service fee, changed the exercise price of all of the previously issued warrants to $.042 per share and extended the expiration date of all of the previously issued warrants to July 1, 2018. | |||||||||||||||||
Bird Estate Extension | |||||||||||||||||
On July 8, 2014, we entered into a restructuring agreement (the “Agreement”) with the Estate of Allan Bird (the “Estate”), a holder of a Series A 12% Convertible Note (the “Note”), which previously was classified as being in default. In the Agreement, the Estate agreed to extend the expiration date of the Note to April 1, 2016, to convert approximately $116,970 of accrued interest to equity, and to waive anti-dilution price protection underlying the Note and warrants previously issued to the Estate. | |||||||||||||||||
· | As a result of the waiver of all anti-dilution price protection by the Estate, we will reclassify to equity $1,238,292 from derivative liability. | ||||||||||||||||
· | Also, the execution of the Agreement results in the waiver of anti-dilution price protection under agreements with three other note and warrant holders, which will cause an additional $5,724,761 of derivative liability to be reclassified from liability to equity. | ||||||||||||||||
· | In addition, as a result of a note conversion and waiver of anti-dilution price protection previously reported on Form 8-K on June 30, 2014, a combined $4,719,214 of principal, accrued interest and derivative liability has been reclassified into equity. | ||||||||||||||||
· | Based on the Agreement, the elimination of antidilution provisions and the note and accrued interest conversions, all previously reported derivative liabilities will be reclassified into equity. | ||||||||||||||||
Under the Agreement, the Estate converted the entire $116,970 past due interest balance on the Note, which previously was in default, into an aggregate of 2,591,846 restricted shares of our common stock. The Estate received five-year warrants to acquire up to 2,321,429 shares of our common stock at an exercise price of $.042 per share (which exercise price was the result of certain contractual price adjustments previously made during 2011). Based on our common stock prices during a period of negotiation with the Estate including during calendar year 2013, the Estate also received five-year warrants to acquire up to 135,417 shares of our common stock at an exercise price of $.108 (collectively known as the “Conversion Securities”). | |||||||||||||||||
In exchange for the Estate’s extension of the Note, conversion of accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants, in addition to the Conversion Securities, we also issued to the Estate 25,000 restricted shares of common stock as a service fee and extended the expiration date of all of the previously issued warrants to July 1, 2018. | |||||||||||||||||
Pro Forma References | |||||||||||||||||
The unaudited pro forma balance sheet information as of March 31, 2014 assumes (1) conversion of one of the Amended and Restated Series A 12% Convertible Notes (the Trust Note) in the principal amount of $660,000 as well as $343,200 of related accrued interest into 23.3 million shares of common stock, (2) the extension of the other Amended and Restated Series A 12% Convertible Note (the Estate Note) and conversion of $116,970 of related accrued interest into 2.6 million shares of common stock, (3) reduction of accrued interest balance by $85,800 for the Trust Note and by $29,280 for the Estate Note, (4) the waiver of price antidilution protection on certain warrants in exchange for an extension on those warrants with a corresponding fair value change based on June 24, 2014 inputs of $96,469 for the Trust warrant extension and based on July 8, 2014 inputs of $29,679 for the Estate warrants, (5) the reclassification of $10,679,067 of our derivative liability into paid in capital based upon the fair value of those derivatives at March 31, 2014, (6) calculation of a loss on the payment of shares and warrants as part of the conversion of accrued interest with an estimated fair value of $1,876,421 to the Trust and $665,571 to the Estate, and (7) the payment of 75,000 restricted shares of common stock to the Trust as a fee, valued at $12,000 and the payment of 25,000 restricted shares of common stock, valued at $4,250. | |||||||||||||||||
The following unaudited pro forma information has been prepared as though these subsequent event transactions had occurred on March 31, 2014. The pro forma references refer to the above paragraph. | |||||||||||||||||
Aethlon Medical, Inc. | Pro Forma | ||||||||||||||||
Consolidated | Consolidated | ||||||||||||||||
Balance Sheet | Pro Forma Adjustments | Balance Sheet | |||||||||||||||
31-Mar-14 | Amount | Reference | 31-Mar-14 | ||||||||||||||
ASSETS | |||||||||||||||||
CURRENT ASSETS | |||||||||||||||||
Cash | $ | 1,250,279 | $ | – | $ | 1,250,279 | |||||||||||
Accounts receivable | 95,177 | – | 95,177 | ||||||||||||||
Deferred financing costs | 83,191 | – | 83,191 | ||||||||||||||
Prepaid expenses | 50,699 | – | 50,699 | ||||||||||||||
TOTAL CURRENT ASSETS | 1,479,346 | – | 1,479,346 | ||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||
Property and equipment, net | 84,279 | – | 84,279 | ||||||||||||||
Patents, net | 112,489 | – | 112,489 | ||||||||||||||
Deposits | 18,988 | – | 18,988 | ||||||||||||||
TOTAL NONCURRENT ASSETS | 215,756 | – | 215,756 | ||||||||||||||
TOTAL ASSETS | $ | 1,695,102 | $ | – | $ | 1,695,102 | |||||||||||
LIABILITIES AND DEFICIT | |||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||
Accounts payable | $ | 517,651 | $ | – | $ | 517,651 | |||||||||||
Due to related parties | 839,070 | 839,070 | |||||||||||||||
Notes payable, net | 390,000 | 390,000 | |||||||||||||||
Convertible notes payable, current portion | 1,367,655 | (885,000 | ) | (1) & (2) | 482,655 | ||||||||||||
Derivative liabilities | 10,679,067 | (10,679,067 | ) | -5 | – | ||||||||||||
Other current liabilities | 1,855,374 | (575,250 | ) | (1), (2) &(3) | 1,280,124 | ||||||||||||
TOTAL CURRENT LIABILITIES | 15,648,817 | (12,139,317 | ) | 3,509,500 | |||||||||||||
NONCURRENT LIABILITIES | |||||||||||||||||
Convertible notes payable, non-current portion | 776,451 | 225,000 | -2 | 1,001,451 | |||||||||||||
TOTAL NONCURRENT LIABILITIES | 776,451 | 225,000 | 1,001,451 | ||||||||||||||
TOTAL LIABILITIES | 16,425,268 | (11,914,317 | ) | 4,510,951 | |||||||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||||||||
STOCKHOLDERS' DEFICIT | |||||||||||||||||
Common stock | 224,984 | 26,010 | (1), (5), (6) & (7) | 250,994 | |||||||||||||
Additional paid in capital | 59,659,137 | 14,457,617 | (1), (4), (5), (6) & (7) | 74,116,754 | |||||||||||||
Accumulated deficit | (74,832,557 | ) | (2,569,310 | ) | (2), (3), (4), (5), (6) & (7) | (77,401,867 | ) | ||||||||||
TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS' DEFICIT | (14,948,436 | ) | 11,914,317 | (3,034,119 | ) | ||||||||||||
Noncontrolling interests | 218,270 | – | 218,270 | ||||||||||||||
TOTAL DEFICIT | (14,730,166 | ) | 11,914,317 | (2,815,849 | ) | ||||||||||||
TOTAL LIABILITIES AND DEFICIT | $ | 1,695,102 | $ | – | $ | 1,695,102 | |||||||||||
1_ORGANIZATION_AND_SUMMARY_OF_1
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
PRINCIPLES OF CONSOLIDATION | ' | ||||||||
The accompanying consolidated financial statements include the accounts of Aethlon Medical, Inc. and its majority-owned and controlled subsidiary, ESI. All significant intercompany balances and transactions have been eliminated in consolidation. The Company classifies the noncontrolling interests in ESI as part of consolidated net loss in the fiscal year ended March 31, 2014 and includes the accumulated amount of noncontrolling interests as part of stockholders’ equity. For the fiscal year ended March 31, 2013, ESI was a wholly-owned subsidiary. During the fiscal year ended March 31, 2014, Aethlon Medical, Inc. reduced its ownership percentage to 80% by ESI’s issuance of 300,000 shares of ESI common stock in exchange for cash of $1,500,000. | |||||||||
The losses at ESI during the fiscal year ended March 31, 2014 reduced the noncontrolling interests on our consolidated balance sheet by $81,730 from $300,000 to $218,270 at March 31, 2014. | |||||||||
GOING CONCERN | ' | ||||||||
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. We have incurred continuing losses from operations and at March 31, 2014 are in default on certain debt agreements, have negative working capital of approximately $14,169,000, and an accumulated deficit of approximately $74,833,000. These factors, among other matters, raise substantial doubt about our ability to continue as a going concern. A significant amount of additional capital will be necessary to advance the development of our products to the point at which they may become commercially viable. We intend to fund operations, working capital and other cash requirements for the fiscal year ending March 31, 2015 through debt and/or equity financing arrangements as well as through revenues and related cash receipts under our government contracts (see Note 11). | |||||||||
We are currently addressing our liquidity issue by seeking additional investment capital through private placements of common stock and debt and by applying for additional grants issued by government agencies in the United States. We believe that our cash on hand and funds expected to be received from additional private investment will be sufficient to meet our liquidity needs for fiscal 2015. However, no assurance can be given that we will receive any funds in addition to the funds we have received to date. | |||||||||
The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results. | |||||||||
Subsequent to March 31, 2014, we completed several significant transactions related to our convertible notes (see Note 16). | |||||||||
The consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. | |||||||||
RISKS AND UNCERTAINTIES | ' | ||||||||
We operate in an industry that is subject to intense competition, government regulation and rapid technological change. Our operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and including the potential risk of business failure. | |||||||||
USE OF ESTIMATES | ' | ||||||||
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, among others, realization of long-lived assets, valuation of derivative liabilities, estimating fair value associated with debt and equity transactions and valuation of deferred tax assets. Actual results could differ from those estimates. | |||||||||
CASH AND CASH EQUIVALENTS | ' | ||||||||
Accounting standards define "cash and cash equivalents" as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation, we consider all highly liquid investment instruments with original maturities of three months or less when purchased, or any investment redeemable without penalty or loss of interest to be cash equivalents. As of March 31, 2014 and 2013, we had no assets that were classified as cash equivalents. | |||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||
The carrying amount of our cash, accounts receivable, accounts payable, and other current liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments. The carrying amount of the notes payable approximates their fair value due to the short maturity of the notes and since the interest rates approximate current market interest rates for similar instruments. Derivative liabilities recorded in connection with warrants and embedded conversion features of certain convertible notes payable are reported at their estimated fair value, with changes in fair value being reported in results of operations (see Note 10). | |||||||||
Management has concluded that it is not practical to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practicable due to the lack of data regarding similar instruments, if any, and the associated potential costs. | |||||||||
Other than our derivative liabilities, we do not have any assets or liabilities that are measured at fair value on a recurring basis and, during the years ended March 31, 2014 and 2013, did not have any assets or liabilities that were measured at fair value on a nonrecurring basis except as described in Note 10 under derivative liabilities. | |||||||||
CONCENTRATIONS OF CREDIT RISKS | ' | ||||||||
Cash is maintained at two financial institutions in checking accounts and related cash management accounts. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. Our March 31, 2014 cash balances were approximately $1,000,000 over such insured amount. We do not believe that the Company is exposed to any significant risk with respect to its cash. | |||||||||
All of our accounts receivable at March 31, 2014 and 2013 and all of our revenue in the fiscal years ended March 31, 2014 and 2013 were directly from the U.S. Department of Defense or from a subcontract under Battelle, which is a prime contractor with the U.S. Department of Defense. | |||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years. Repairs and maintenance are charged to expense as incurred while improvements are capitalized. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation with any gain or loss included in the consolidated statements of operations. | |||||||||
INCOME TAXES | ' | ||||||||
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the difference between the consolidated financial statements and their respective tax basis. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes, and (b) tax credit carryforwards. We record a valuation allowance for deferred tax assets when, based on our best estimate of taxable income (if any) in the foreseeable future, it is more likely than not that some portion of the deferred tax assets may not be realized. | |||||||||
LOSS PER SHARE | ' | ||||||||
Basic loss per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potential common shares had been issued, if such additional common shares were dilutive. Since we had net losses for all periods presented, basic and diluted loss per share are the same, and additional potential common shares have been excluded as their effect would be antidilutive. | |||||||||
As of March 31, 2014 and 2013, a total of 143,074,602 and 142,701,202 potential common shares, consisting of shares underlying outstanding stock options, warrants and convertible notes payable were excluded as their inclusion would be antidilutive. | |||||||||
SEGMENTS | ' | ||||||||
Historically, we operated in one segment that was based on our development of therapeutic devices. However in the December 2013 quarter, we initiated the operations of ESI to develop diagnostic tests. As a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for diagnostic applications (See Note 14). | |||||||||
DEFERRED FINANCING COSTS | ' | ||||||||
Costs related to the issuance of debt are capitalized and amortized to interest expense over the life of the related debt using the effective interest method. We recorded amortization expense related to our deferred offering costs of $863 and $127,200 during the fiscal years ended March 31, 2014 and 2013, respectively. | |||||||||
REVENUE RECOGNITION | ' | ||||||||
DARPA Contract -- With respect to revenue recognition, we entered into a government contract with DARPA and have recognized revenue of $1,466,482 and $1,230,004 under that contract during the fiscal years ended March 31, 2014 and 2013, respectively. We adopted the Milestone method of revenue recognition for the DARPA contract under ASC 605-28 “Revenue Recognition – Milestone Method” and we believe we meet the requirements under ASC 605-28 for reporting contract revenue under the Milestone Method for the fiscal years ended March 31, 2014 and 2013. | |||||||||
In order to account for this contract, we identify the deliverables included within the contract and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has standalone value to the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. | |||||||||
A milestone is an event having all of the following characteristics: | |||||||||
(1) There is substantive uncertainty at the date the arrangement is entered into that the event will be achieved. A vendor’s assessment that it expects to achieve a milestone does not necessarily mean that there is not substantive uncertainty associated with achieving the milestone. | |||||||||
(2) The event can only be achieved based in whole or in part on either: (a) the vendor’s performance; or (b) a specific outcome resulting from the vendor’s performance. | |||||||||
(3) If achieved, the event would result in additional payments being due to the vendor. | |||||||||
A milestone does not include events for which the occurrence is either: (a) contingent solely upon the passage of time; or (b) the result of a counterparty’s performance. | |||||||||
The policy for recognizing deliverable consideration contingent upon achievement of a milestone must be applied consistently to similar deliverables. | |||||||||
The assessment of whether a milestone is substantive is performed at the inception of the arrangement. The consideration earned from the achievement of a milestone must meet all of the following for the milestone to be considered substantive: | |||||||||
(1) The consideration is commensurate with either: (a) the vendor’s performance to achieve the milestone; or (b) the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; | |||||||||
(2) The consideration relates solely to past performance; and | |||||||||
(3) The consideration is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. | |||||||||
A milestone is not considered substantive if any portion of the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate solely to past performance). To recognize the milestone consideration in its entirety as revenue in the period in which the milestone is achieved, the milestone must be substantive in its entirety. Milestone consideration cannot be bifurcated into substantive and nonsubstantive components. In addition, if a portion of the consideration earned from achieving a milestone may be refunded or adjusted based on future performance, the related milestone is not considered substantive. | |||||||||
See Note 11 for the additional disclosure information required under ASC 605-28. | |||||||||
Battelle Subcontract -- We entered into a subcontract agreement with Battelle Memorial Institute (“Battelle”) in March 2013. Battelle was chosen by DARPA to be the prime contractor on the systems integration portion of the original DARPA contract and we are one of several subcontractors on that systems integration project. The Battelle subcontract is cost-reimbursable under a time and materials basis. We began generating revenues under the subcontract during the three months ended September 30, 2013 and for the fiscal year 2014 recorded revenue of $157,287. | |||||||||
Our revenue under this contract is a function of cost reimbursement plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates for those employees). Battelle engages us as needed. Each payment requires approval by the program manager at Battelle. | |||||||||
STOCK-BASED COMPENSATION | ' | ||||||||
Employee stock options and rights to purchase shares under stock participation plans are accounted for under the fair value method. Accordingly, share-based compensation is measured when all granting activities have been completed, generally the grant date, based on the fair value of the award. The exercise price of options is generally equal to the market price of the Company's common stock (defined as the closing price as quoted on the OTCBB on the date of grant). Compensation cost recognized by the Company includes (a) compensation cost for all equity incentive awards granted prior to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the original provisions of the then current accounting standards, and (b) compensation cost for all equity incentive awards granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of subsequent accounting standards. We use a Binomial Lattice option pricing model for estimating fair value of options granted (see Note 6). | |||||||||
The following table summarizes share-based compensation expenses relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2014 and 2013: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Vesting of Stock Options | $ | 541,588 | $ | 355,578 | |||||
Incremental fair value of option Modifications | 1,914 | 23,028 | |||||||
Vesting Expense Associated with CEO Restricted Stock Grant | 64,444 | 386,667 | |||||||
Total Stock-Based Compensation Expense | $ | 607,946 | $ | 765,273 | |||||
Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) | |||
We account for transactions involving services provided by third parties where we issue equity instruments as part of the total consideration using the fair value of the consideration received (i.e. the value of the goods or services) or the fair value of the equity instruments issued, whichever is more reliably measurable. In transactions, when the value of the goods and/or services are not readily determinable and (1) the fair value of the equity instruments is more reliably measurable and (2) the counterparty receives equity instruments in full or partial settlement of the transactions, we use the following methodology: | |||||||||
a) For transactions where goods have already been delivered or services rendered, the equity instruments are issued on or about the date the performance is complete (and valued on the date of issuance). | |||||||||
b) For transactions where the instruments are issued on a fully vested, non-forfeitable basis, the equity instruments are valued on or about the date of the contract. | |||||||||
c) For any transactions not meeting the criteria in (a) or (b) above, we re-measure the consideration at each reporting date based on its then current stock value. | |||||||||
We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization after March 31, 2006 is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the fiscal year ended March 31, 2014 was insignificant. | |||||||||
PATENTS | ' | ||||||||
Patents include both foreign and domestic patents. There were several patents pending at March 31, 2014. We capitalize the cost of patents and patents pending, some of which were acquired, and amortize such costs over the shorter of the remaining legal life or their estimated economic life, upon issuance of the patent. The unamortized costs of patents and patents pending are subject to our review for impairment under our long-lived asset policy above. | |||||||||
STOCK PURCHASE WARRANTS | ' | ||||||||
We grant warrants in connection with the issuance of convertible notes payable and the issuance of common stock for cash. When such warrants are classified as equity and issued in connection with debt, we measure the relative estimated fair value of such warrants and record it as a discount from the face amount of the convertible notes payable. Such discounts are amortized to interest expense over the term of the notes using the effective interest method. Warrants issued in connection with common stock for cash, if classified as equity, are considered issued in connection with equity transactions and the warrant fair value is recorded to additional paid-in-capital. Lastly, warrants not meeting equity classification are recorded as derivative instruments. | |||||||||
DERIVATIVE INSTRUMENTS | ' | ||||||||
We evaluate free-standing derivative instruments (or embedded derivatives) to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis. | |||||||||
The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. | |||||||||
Instruments classified as derivative liabilities are remeasured each reporting period (or upon reclassification) and the change in fair value is recorded on our consolidated statement of operations in other (income) expense. | |||||||||
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE | ' | ||||||||
The convertible feature of certain notes payable provides for a rate of conversion that is below market value. Such feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required to be separated from the host instrument and accounted for separately, and record that value in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are amortized to interest expense over the term of the notes. | |||||||||
REGISTRATION PAYMENT ARRANGEMENTS | ' | ||||||||
We account for contingent obligations to make future payments or otherwise transfer consideration under a registration payment arrangement separately from any related financing transaction agreements, and any such contingent obligations are recognized only when it is determined that it is probable that the Company will become obligated for future payments and the amount, or range of amounts, of such future payments can be reasonably estimated. | |||||||||
RESEARCH AND DEVELOPMENT EXPENSES | ' | ||||||||
Our research and development costs are expensed as incurred. We incurred approximately $1,509,000 and $1,440,000 of research and development expenses for the years ended March 31, 2014 and 2013, respectively, which are included in various operating expenses in the accompanying consolidated statements of operations. | |||||||||
OFF-BALANCE SHEET ARRANGEMENTS | ' | ||||||||
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial statements. | |||||||||
SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS | ' | ||||||||
Management is evaluating significant recent accounting pronouncements that are not yet effective for the Company, including the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606), and has not yet concluded whether any such pronouncements will have a significant effect on the Company’s future consolidated financial statements. |
1_ORGANIZATION_AND_SUMMARY_OF_2
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Share-based compensation expenses | ' | ||||||||
The following table summarizes share-based compensation expenses relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2014 and 2013: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Vesting of Stock Options | $ | 541,588 | $ | 355,578 | |||||
Incremental fair value of option Modifications | 1,914 | 23,028 | |||||||
Vesting Expense Associated with CEO Restricted Stock Grant | 64,444 | 386,667 | |||||||
Total Stock-Based Compensation Expense | $ | 607,946 | $ | 765,273 | |||||
Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) |
2_PROPERTY_AND_EQUIPMENT_Table
2. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Sumarry of Property and equipment | ' | ||||||||
Property and equipment, net, consist of the following: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Furniture and office equipment, at cost | $ | 385,088 | $ | 289,031 | |||||
Accumulated depreciation | (300,809 | ) | (288,886 | ) | |||||
$ | 84,279 | $ | 145 | ||||||
3_PATENTS_Tables
3. PATENTS (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Schedule for Patents | ' | ||||||||
Patents consist of the following: | |||||||||
31-Mar-14 | 31-Mar-13 | ||||||||
Patents | $ | 157,442 | $ | 157,442 | |||||
Patents pending and trademarks | 54,203 | 54,203 | |||||||
Accumulated amortization | (99,156 | ) | (89,992 | ) | |||||
$ | 112,489 | $ | 121,653 |
4_NOTES_PAYABLE_Tables
4. NOTES PAYABLE (Tables) | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||||||
Notes payable, all current liabilities and unsecured | ' | ||||||||||||||||
Notes payable consist of the following: | |||||||||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||||||||
Principal Balance | Accrued Interest | Principal Balance | Accrued Interest | ||||||||||||||
12% Notes payable, past due | $ | 185,000 | $ | 353,813 | $ | 185,000 | $ | 326,062 | |||||||||
10% Note payable, past due | 5,000 | 6,375 | 5,000 | 5,875 | |||||||||||||
Directors’ Note(s) | 200,000 | 14,516 | – | – | |||||||||||||
Tonaquint Note | – | – | 131,381 | 1,629 | |||||||||||||
Total | $ | 390,000 | $ | 374,704 | $ | 321,381 | $ | 333,566 | |||||||||
Activity in Tonaquint Note | ' | ||||||||||||||||
The following table shows the conversions into principal of the Tonaquint Note by fiscal year: | |||||||||||||||||
Initial principal balance | $ | 360,186 | |||||||||||||||
Lender’s legal fees | 12,500 | ||||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (241,305 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (131,381 | ) | |||||||||||||||
Balance as of March 31, 2014 | $ | – |
5_CONVERTIBLE_NOTES_PAYABLE_Ta
5. CONVERTIBLE NOTES PAYABLE (Tables) | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Convertible Notes Payable [Abstract] | ' | ||||||||||||||||
Convertible notes payable | ' | ||||||||||||||||
Convertible Notes Payable consisted of the following at March 31, 2014: | |||||||||||||||||
Principal | Unamortized | Net | Accrued | ||||||||||||||
Discount | Amount | Interest | |||||||||||||||
Convertible Notes Payable – Current Portion: | |||||||||||||||||
Amended and Restated Series A 12% Convertible Notes, past due | $ | 885,000 | $ | – | $ | 885,000 | $ | 575,250 | |||||||||
2008 10% Convertible Notes, past due | 25,000 | – | 25,000 | 19,167 | |||||||||||||
October & November 2009 10% Convertible Notes | 50,000 | – | 50,000 | 26,097 | |||||||||||||
April 2010 10% Convertible Note | 75,000 | – | 75,000 | 31,438 | |||||||||||||
July and August 2011 10% Convertible Notes, past due | 257,655 | – | 257,655 | 90,256 | |||||||||||||
Law Firm Note | 75,000 | – | 75,000 | 7,604 | |||||||||||||
Total – Convertible Notes Payable – Current Portion | 1,367,655 | – | 1,367,655 | 749,812 | |||||||||||||
Convertible Notes Payable – Non-Current Portion: | |||||||||||||||||
September 2010 12% Convertible Notes | 317,072 | – | 317,072 | 35,034 | |||||||||||||
April 2011 12% Convertible Notes | 448,448 | – | 448,448 | 12,117 | |||||||||||||
September 2011 12% Convertible Notes | 10,931 | – | 10,931 | -- | |||||||||||||
Total – Convertible Notes Payable – Non-Current Portion | 776,451 | – | 776,451 | 47,151 | |||||||||||||
Total Convertible Notes Payable | $ | 2,144,106 | $ | – | $ | 2,144,106 | $ | 796,96 | |||||||||
Convertible Notes Payable consisted of the following at March 31, 2013: | |||||||||||||||||
Principal | Unamortized | Net | Accrued | ||||||||||||||
Discount | Amount | Interest | |||||||||||||||
Amended and Restated Series A 12% Convertible Notes, past due | $ | 885,000 | $ | – | $ | 885,000 | $ | 398,250 | |||||||||
2008 10% Convertible Notes, past due | 25,000 | – | 25,000 | 15,417 | |||||||||||||
December 2006 10% Convertible Notes, past due | 17,000 | – | 17,000 | 15,888 | |||||||||||||
October & November 2009 10% Convertible Notes | 50,000 | (389 | ) | 49,611 | 20,000 | ||||||||||||
April 2010 10% Convertible Note | 75,000 | (3,895 | ) | 71,105 | 23,938 | ||||||||||||
September 2010 10% Convertible Notes, past due | 308,100 | – | 308,100 | 52,393 | |||||||||||||
April 2011 10% Convertible Notes, past due | 400,400 | – | 400,400 | 100,100 | |||||||||||||
July and August 2011 10% Convertible Notes, $257,656 past due | 357,655 | – | 357,655 | 68,704 | |||||||||||||
September 2011 Convertible Notes, past due | 178,760 | – | 178,760 | – | |||||||||||||
Law Firm Note | 75,000 | – | 75,000 | 3,854 | |||||||||||||
Total – Convertible Notes Payable | $ | 2,371,915 | $ | (4,284 | ) | $ | 2,367,631 | $ | 698,544 | ||||||||
Activity in Convertible Notes | ' | ||||||||||||||||
The following table shows the conversions into principal of the October and November 2009 Convertible Notes by fiscal year: | |||||||||||||||||
Activity in October & November 2009 10% Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 450,250 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2010 | (70,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2011 | (175,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (130,250 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (25,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | -- | ||||||||||||||||
Balance as of March 31, 2014 | $ | 50,000 | |||||||||||||||
The following table shows the activity in the September 2010 10% Convertible Notes by fiscal year: | |||||||||||||||||
Activity in the September 2010 10% Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 743,600 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (405,500 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (30,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (25,000 | ) | |||||||||||||||
Increase in principal balance due to 12% extension fee | 33,972 | ||||||||||||||||
Balance as of March 31, 2014 | $ | 317,072 | |||||||||||||||
The following table shows the conversions into principal of the September 2011 Convertible Notes by fiscal year: | |||||||||||||||||
Activity in the September 2011 Convertible Notes | |||||||||||||||||
Initial principal balance | $ | 253,760 | |||||||||||||||
Conversions during the fiscal year ended March 31, 2012 | (15,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2013 | (60,000 | ) | |||||||||||||||
Conversions during the fiscal year ended March 31, 2014 | (169,000 | ) | |||||||||||||||
Increase in principal balance due to extension fee | 1,171 | ||||||||||||||||
Balance as of March 31, 2014 | $ | 10,931 | |||||||||||||||
6_EQUITY_TRANSACTIONS_Tables
6. EQUITY TRANSACTIONS (Tables) | 12 Months Ended | ||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||
Summary of warrant activity | ' | ||||||||||||||||||||||
A summary of the aggregate warrant activity for the years ended March 31, 2014 and 2013 is presented below: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Warrants | Weighted Average | Warrants | Weighted Average | ||||||||||||||||||||
Exercise Price | Exercise Price | ||||||||||||||||||||||
Outstanding, beginning of year | 75,647,294 | $ | 0.11 | 59,807,849 | $ | 0.14 | |||||||||||||||||
Granted | 14,530,519 | $ | 0.18 | 16,710,445 | $ | 0.11 | |||||||||||||||||
Exercised | (12,716,225 | ) | $ | 0.08 | – | $ | – | ||||||||||||||||
Cancelled/Forfeited | (6,752,113 | ) | $ | 0.11 | (871,000 | ) | $ | 0.25 | |||||||||||||||
Outstanding, end of year | 70,709,475 | $ | 0.1 | 75,647,294 | $ | 0.11 | |||||||||||||||||
Exercisable, end of year | 70,709,475 | $ | 0.1 | 75,647,294 | $ | 0.11 | |||||||||||||||||
Weighted average estimated fair value of warrants granted | $ | 0.09 | $ | 0.07 | |||||||||||||||||||
Weighted average assumptions used to estimate the fair value, with respect to warrants utilizing the Binomial Lattice option pricing model | ' | ||||||||||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value of warrants granted utilizing the Binomial Lattice option pricing model: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 1.3%-2.04% | 0.86%-1.56% | |||||||||||||||||||||
Average expected life | 5 to 7 years | 5 to 7 years | |||||||||||||||||||||
Expected volatility | 91.2% - 98.5% | 90.3% - 94.3% | |||||||||||||||||||||
Expected dividends | None | None | |||||||||||||||||||||
Summary of warrant activity exercisable and outstanding | ' | ||||||||||||||||||||||
The detail of the warrants outstanding and exercisable as of March 31, 2014 is as follows: | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Range of | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Exercise Prices | Outstanding | Remaining | Exercise Price | Outstanding | Exercise Price | ||||||||||||||||||
Life (Years) | |||||||||||||||||||||||
$0.10 or Below | 37,094,795 | 2.42 | $ | 0.05 | 37,094,795 | $ | 0.05 | ||||||||||||||||
$0.11 - $0.19 | 21,876,000 | 4.74 | $ | 0.13 | 21,876,000 | $ | 0.13 | ||||||||||||||||
$0.20 - $0.25 | 11,738,680 | 5.05 | $ | 0.21 | 11,738,680 | $ | 0.21 | ||||||||||||||||
70,709,475 | 70,709,475 | ||||||||||||||||||||||
Summary of the stock options outstanding | ' | ||||||||||||||||||||||
The following is a summary of the stock options outstanding at March 31, 2014 and 2013 and the changes during the years then ended: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Options | Weighted Average | Options | Weighted Average | ||||||||||||||||||||
Exercise Price | Exercise Price | ||||||||||||||||||||||
Outstanding, beginning of year | 21,095,798 | $ | 0.28 | 19,428,693 | $ | 0.31 | |||||||||||||||||
Granted | 5,220,536 | $ | 0.09 | 1,667,105 | $ | 0.08 | |||||||||||||||||
Exercised | 182,927 | $ | 0.08 | – | $ | – | |||||||||||||||||
Cancelled/Forfeited | – | $ | – | – | $ | – | |||||||||||||||||
Outstanding, end of year | 26,133,407 | $ | 0.25 | 21,095,798 | $ | 0.28 | |||||||||||||||||
Exercisable, end of year | 22,487,563 | $ | 0.27 | 19,141,625 | $ | 0.29 | |||||||||||||||||
Weighted average estimated fair value of options granted | $ | 0.13 | $ | 0.08 | |||||||||||||||||||
Weighted average assumptions used to estimate the fair value information | ' | ||||||||||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value with respect to stock options utilizing the Binomial Lattice option pricing model for the years ended March 31, 2014 and March 31, 2013: | |||||||||||||||||||||||
Year Ended March 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 0.38% to 2.65% | 1.44% | |||||||||||||||||||||
Average expected life | 3 to 10 years | 10 years | |||||||||||||||||||||
Expected volatility | 91.05% to 102.67% | 117.53% | |||||||||||||||||||||
Expected dividends | None | None | |||||||||||||||||||||
Detail of options outstanding and exercisable | ' | ||||||||||||||||||||||
The detail of the options outstanding and exercisable as of March 31, 2014 is as follows: | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Range of | Number | Weighted | Weighted | Number | Weighted | ||||||||||||||||||
Exercise Prices | Outstanding | Average | Average | Outstanding | Average | ||||||||||||||||||
Remaining | Exercise | Exercise | |||||||||||||||||||||
Life (Years) | Price | Price | |||||||||||||||||||||
$0.08 - $0.11 | 6,704,714 | 9.68 years | $ | 0.09 | 3,204,714 | $ | 0.08 | ||||||||||||||||
$0.21 - $0.25 | 11,207,143 | 4.28 years | $ | 0.24 | 11,061,299 | $ | 0.24 | ||||||||||||||||
$0.36 - $0.41 | 8,221,550 | 2.68 years | $ | 0.38 | 8,221,550 | $ | 0.38 | ||||||||||||||||
26,133,407 | 22,487,563 | ||||||||||||||||||||||
Summary of share-based compensation expenses relating to shares and options granted | ' | ||||||||||||||||||||||
Our total stock-based compensation for fiscal years ended March 31, 2014 and 2013 included the following: | |||||||||||||||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||||||||||||||
Vesting of restricted stock grant | $ | 64,444 | $ | 386,668 | |||||||||||||||||||
Incremental fair value of option modifications | 1,914 | 23,027 | |||||||||||||||||||||
Vesting of stock options | 541,588 | 355,578 | |||||||||||||||||||||
Total Stock-Based Compensation | $ | 607,946 | $ | 765,273 | |||||||||||||||||||
8_OTHER_CURRENT_LIABILITIES_Ta
8. OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Other Liabilities Disclosure [Abstract] | ' | ||||||||
Other Current Liabilities | ' | ||||||||
Other current liabilities were comprised of the following items: | |||||||||
March 31, | March 31, | ||||||||
2014 | 2013 | ||||||||
Accrued interest | $ | 1,165,335 | $ | 1,032,110 | |||||
Accrued legal fees | 179,465 | 179,465 | |||||||
Accrued liquidated damages | 362,800 | 437,800 | |||||||
Other accrued liabilities | 147,774 | 155,610 | |||||||
Total other current liabilities | $ | 1,855,374 | $ | 1,804,985 | |||||
9_INCOME_TAXES_Tables
9. INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Income Taxes Tables | ' | ||||||||
Significant components of our net deferred tax assets | ' | ||||||||
Significant components of our net deferred tax assets at March 31, 2014 and 2013 are shown below: | |||||||||
YEAR ENDED MARCH 31, | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets: | |||||||||
Capitalized research and development | $ | 3,442,000 | $ | 3,442,000 | |||||
Net operating loss carryforwards | 15,193,000 | 14,793,000 | |||||||
Total deferred tax assets | 18,635,000 | 18,235,000 | |||||||
Total deferred tax liabilities | – | – | |||||||
Net deferred tax assets | 18,635,000 | 18,235,000 | |||||||
Valuation allowance for deferred tax assets | (18,635,000 | ) | (18,235,000 | ) | |||||
Net deferred tax assets | $ | – | $ | – | |||||
Provision for income taxes on earnings subject to income taxes differs from the statutory federal rate | ' | ||||||||
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate for the years ended March 31, 2014 and 2013 due to the following: | |||||||||
2014 | 2013 | ||||||||
Income taxes (benefit) at federal statutory rate of 34% | $ | (4,541,000 | ) | $ | (1,663,000 | ) | |||
State income tax, net of federal benefit | (156,000 | ) | (285,000 | ) | |||||
Tax effect on non-deductible expenses and credits | 4,297,000 | 215,000 | |||||||
Change in valuation allowance1 | 400,000 | 1,733,000 | |||||||
$ | – | $ | – | ||||||
10_FAIR_VALUE_MEASUREMENTS_Tab
10. FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
Fair value measurements based on the valuation technique | ' | ||||||||||||||||||||
The fair value of our recorded derivative liabilities is determined based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations. Our fair value measurements at the reporting date were as follows: | |||||||||||||||||||||
At March 31, 2014: | |||||||||||||||||||||
Description | Quoted Prices in | Significant Other | Significant | ||||||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||||||
Identical Assets | (Level 2) | Inputs (Level 3) | |||||||||||||||||||
(Level 1) | |||||||||||||||||||||
Derivative Liabilities | $ | – | $ | – | $ | 10,679,067 | |||||||||||||||
Total Assets | $ | – | $ | – | $ | 10,679,067 | |||||||||||||||
At March 31, 2013: | |||||||||||||||||||||
Description | Quoted Prices in | Significant Other | Significant | ||||||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||||||
Identical Assets | (Level 2) | Inputs (Level 3) | |||||||||||||||||||
(Level 1) | |||||||||||||||||||||
Derivative Liabilities | $ | – | $ | – | $ | 3,588,239 | |||||||||||||||
Total Assets | $ | – | $ | – | $ | 3,588,239 | |||||||||||||||
Significant weighted average assumptions used to estimate the fair value information utilizing the Binomial Lattice option pricing model | ' | ||||||||||||||||||||
The following outlines the significant weighted average assumptions used to estimate the fair value information presented for the fiscal years ended March 31, 2014 and 2013, in connection with our April 2011 convertible note, July & August 2011 10% convertible notes and the September 2011 convertible note offerings and with respect to warrant and embedded conversion option derivative instruments utilizing the Binomial Lattice option pricing model: | |||||||||||||||||||||
Fiscal Year Ended March 31, 2014 | |||||||||||||||||||||
Risk free interest rate | 0.02% - 0.79% | ||||||||||||||||||||
Average expected life | 0.25 – 2.8 years | ||||||||||||||||||||
Expected volatility | 58.0% - 103.1% | ||||||||||||||||||||
Expected dividends | None | ||||||||||||||||||||
Fiscal Year Ended March 31, 2013 | |||||||||||||||||||||
Risk free interest rate | 0.05% - 1.56% | ||||||||||||||||||||
Average expected life | 0.25 – 3.6 years | ||||||||||||||||||||
Expected volatility | 76.0% - 107.1% | ||||||||||||||||||||
Expected dividends | None | ||||||||||||||||||||
Summary of changes in the fair value of our Level 3 financial instruments | ' | ||||||||||||||||||||
The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the year ended March 31, 2014: | |||||||||||||||||||||
April 1, | Recorded New Derivative | Change in estimated fair value recognized in results | Reclassification of Derivative Liability to Paid in | March 31, | |||||||||||||||||
2013 | Liabilities | of operations | capital | 2014 | |||||||||||||||||
Derivative liabilities | $ | 3,588,239 | $ | – | $ | 5,729,780 | $ | 1,361,048 | $ | 10,679,067 | |||||||||||
The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the year ended March 31, 2013: | |||||||||||||||||||||
April 1, | Recorded New Derivative | Change in estimated fair value recognized in results | Reclassification of Derivative Liability to Paid in | March 31, | |||||||||||||||||
2012 | Liabilities | of operations | capital | 2013 | |||||||||||||||||
Derivative liabilities | $ | 3,588,615 | $ | – | $ | (44,705 | ) | $ | 44,329 | $ | 3,588,239 | ||||||||||
13_COMMITMENTS_AND_CONTINGENCI1
13. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||
Mar. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Commitments under the lease agreements | ' | ||||
As of March 31, 2014, commitments under the lease agreements are as follows: | |||||
2015 | |||||
8910 University Center Lane, Suite 660, San Diego, CA 92122 office lease | $ | 43,795 | |||
11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 office lease | 22,755 | ||||
11 Deer Park Drive, South Brunswick, NJ | 23,975 | ||||
Total Lease Commitments | $ | 90,525 |
14_SEGMENTS_Tables
14. SEGMENTS (Tables) | 12 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
Information regarding our segments and other operations | ' | ||||||||
The following tables set forth certain information regarding our segments and other operations that conforms to the consolidated balance sheet and statement of operations presented in this Report: | |||||||||
Fiscal Years Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Revenues: | |||||||||
Aethlon | $ | 1,623,769 | $ | 1,230,004 | |||||
ESI | – | – | |||||||
Total Revenues | $ | 1,623,769 | $ | 1,230,004 | |||||
Operating Losses: | |||||||||
Aethlon | $ | (2,651,863 | ) | $ | (3,575,354 | ) | |||
ESI | (404,065 | ) | – | ||||||
Total Operating Loss | $ | (3,055,928 | ) | $ | (3,575,354 | ) | |||
Net Losses: | |||||||||
Aethlon | $ | (13,357,232 | ) | $ | (4,892,040 | ) | |||
ESI | (81,730 | ) | – | ||||||
Net Loss Before Non-Controlling Interests | $ | (13,438,962 | ) | $ | (4,892,040 | ) | |||
Cash: | |||||||||
Aethlon | $ | 208,259 | $ | 125,274 | |||||
ESI | 1,042,020 | – | |||||||
Total Cash | $ | 1,250,279 | $ | 125,274 | |||||
Total Assets: | |||||||||
Aethlon | $ | 597,026 | $ | 496,694 | |||||
ESI | 1,098,076 | – | |||||||
Total Assets | $ | 1,695,102 | $ | 496,694 | |||||
Capital Expenditures: | |||||||||
Aethlon | $ | 37,313 | $ | – | |||||
ESI | 58,743 | – | |||||||
Capital Expenditures | $ | 96,056 | $ | – | |||||
Depreciation and Amortization: | |||||||||
Aethlon | $ | 11,549 | $ | 10,484 | |||||
ESI | 9,538 | – | |||||||
Total Depreciation and Amortization | $ | 21,087 | $ | 10,484 | |||||
Interest Expense: | |||||||||
Aethlon | $ | 1,282,638 | $ | 1,132,314 | |||||
ESI | 4,583 | – | |||||||
Total Interest Expense | $ | 1,287,221 | $ | 1,132,314 | |||||
16_PRO_FORMA_BALANCE_SHEET_UNA1
16. PRO FORMA BALANCE SHEET (UNAUDITED) (Tables) | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Pro Forma Balance Sheet | ' | ||||||||||||||||
Unaudited pro forma information | ' | ||||||||||||||||
The following unaudited pro forma information has been prepared as though these subsequent event transactions had occurred on March 31, 2014. The pro forma references refer to the above paragraph. | |||||||||||||||||
Aethlon Medical, Inc. | Pro Forma | ||||||||||||||||
Consolidated | Consolidated | ||||||||||||||||
Balance Sheet | Pro Forma Adjustments | Balance Sheet | |||||||||||||||
31-Mar-14 | Amount | Reference | 31-Mar-14 | ||||||||||||||
ASSETS | |||||||||||||||||
CURRENT ASSETS | |||||||||||||||||
Cash | $ | 1,250,279 | $ | – | $ | 1,250,279 | |||||||||||
Accounts receivable | 95,177 | – | 95,177 | ||||||||||||||
Deferred financing costs | 83,191 | – | 83,191 | ||||||||||||||
Prepaid expenses | 50,699 | – | 50,699 | ||||||||||||||
TOTAL CURRENT ASSETS | 1,479,346 | – | 1,479,346 | ||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||
Property and equipment, net | 84,279 | – | 84,279 | ||||||||||||||
Patents, net | 112,489 | – | 112,489 | ||||||||||||||
Deposits | 18,988 | – | 18,988 | ||||||||||||||
TOTAL NONCURRENT ASSETS | 215,756 | – | 215,756 | ||||||||||||||
TOTAL ASSETS | $ | 1,695,102 | $ | – | $ | 1,695,102 | |||||||||||
LIABILITIES AND DEFICIT | |||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||
Accounts payable | $ | 517,651 | $ | – | $ | 517,651 | |||||||||||
Due to related parties | 839,070 | 839,070 | |||||||||||||||
Notes payable, net | 390,000 | 390,000 | |||||||||||||||
Convertible notes payable, current portion | 1,367,655 | (885,000 | ) | (1) & (2) | 482,655 | ||||||||||||
Derivative liabilities | 10,679,067 | (10,679,067 | ) | -5 | – | ||||||||||||
Other current liabilities | 1,855,374 | (575,250 | ) | (1), (2) &(3) | 1,280,124 | ||||||||||||
TOTAL CURRENT LIABILITIES | 15,648,817 | (12,139,317 | ) | 3,509,500 | |||||||||||||
NONCURRENT LIABILITIES | |||||||||||||||||
Convertible notes payable, non-current portion | 776,451 | 225,000 | -2 | 1,001,451 | |||||||||||||
TOTAL NONCURRENT LIABILITIES | 776,451 | 225,000 | 1,001,451 | ||||||||||||||
TOTAL LIABILITIES | 16,425,268 | (11,914,317 | ) | 4,510,951 | |||||||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||||||||
STOCKHOLDERS' DEFICIT | |||||||||||||||||
Common stock | 224,984 | 26,010 | (1), (5), (6) & (7) | 250,994 | |||||||||||||
Additional paid in capital | 59,659,137 | 14,457,617 | (1), (4), (5), (6) & (7) | 74,116,754 | |||||||||||||
Accumulated deficit | (74,832,557 | ) | (2,569,310 | ) | (2), (3), (4), (5), (6) & (7) | (77,401,867 | ) | ||||||||||
TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS' DEFICIT | (14,948,436 | ) | 11,914,317 | (3,034,119 | ) | ||||||||||||
Noncontrolling interests | 218,270 | – | 218,270 | ||||||||||||||
TOTAL DEFICIT | (14,730,166 | ) | 11,914,317 | (2,815,849 | ) | ||||||||||||
TOTAL LIABILITIES AND DEFICIT | $ | 1,695,102 | $ | – | $ | 1,695,102 | |||||||||||
1_ORGANIZATION_AND_SUMMARY_OF_3
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Total Stock-Based Compensation Expense | $607,946 | $765,273 |
Basic and diluted loss per common share | $0 | ($0.01) |
Vesting of Stock Options | ' | ' |
Total Stock-Based Compensation Expense | 541,588 | 355,578 |
Incremental fair value of option modifications | ' | ' |
Total Stock-Based Compensation Expense | 1,914 | 23,028 |
Vesting expense associated with Restricted Stock Grant | ' | ' |
Total Stock-Based Compensation Expense | $64,444 | $386,667 |
1_ORGANIZATION_AND_SUMMARY_OF_4
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Ownership percentage in ESI | 80.00% | ' |
Working capital | ($14,169,000) | ' |
Recurring losses from operations and accumulated deficit | -74,832,557 | -61,475,325 |
Cash balance over insured amount | 1,000,000 | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share | 143,074,602 | 142,701,202 |
Amortization expense related to deferred offering costs | 863 | 127,200 |
Government contract revenue | 1,466,482 | 1,230,004 |
Research and development expenses | 1,509,000 | 1,440,000 |
Battelle | ' | ' |
Government contract revenue | $157,287 | ' |
2_PROPERTY_AND_EQUIPMENT_Detai
2. PROPERTY AND EQUIPMENT (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Property, Plant and Equipment [Abstract] | ' | ' |
Furniture and office equipment, at cost | $385,088 | $289,031 |
Accumulated depreciation | -300,809 | -288,886 |
Furniture and office equipment, net | $84,279 | $145 |
2_PROPERTY_AND_EQUIPMENT_Detai1
2. PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation expense | $12,000 | $1,000 |
3_Patents_Details
3. Patents (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' |
Patents | $157,442 | $157,442 |
Patents pending and trademarks | 54,203 | 54,203 |
Accumulated amortization | -99,156 | -89,992 |
Finite-Lived Intangible Assets, Net | $112,489 | $121,653 |
3_Patents_Details_Narrative
3. Patents (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' |
Amortization of patents | $9,000 | $9,000 |
Weighted average remaining life of patents | '6 years 6 months | ' |
4_NOTES_PAYABLE_Details
4. NOTES PAYABLE (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Principal Balance | $390,000 | $321,381 |
Accrued Interest on notes payable | 374,704 | 333,566 |
12% Notes Payable | ' | ' |
Principal Balance | 185,000 | 185,000 |
Accrued Interest on notes payable | 353,813 | 326,062 |
10% Note payable | ' | ' |
Principal Balance | 5,000 | 5,000 |
Accrued Interest on notes payable | 6,375 | 5,875 |
Directors Notes | ' | ' |
Principal Balance | 200,000 | 0 |
Accrued Interest on notes payable | 14,516 | 0 |
Tonaquint Note | ' | ' |
Principal Balance | 0 | 131,381 |
Accrued Interest on notes payable | $0 | $1,629 |
4_NOTES_PAYABLE_Details_Tonaqu
4. NOTES PAYABLE (Details - Tonaquint note) (Tonaquint Note, USD $) | 12 Months Ended |
Mar. 31, 2014 | |
Tonaquint Note | ' |
Initial principal balance | $360,186 |
Lender's legal fees | 12,500 |
Conversions during the fiscal year ended March 31, 2013 | -241,305 |
Conversions during the fiscal year ended March 31, 2014 | -131,381 |
Balance as of March 31, 2014 | $0 |
4_NOTES_PAYABLE_Details_Narrat
4. NOTES PAYABLE (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Interest expense related to notes payable | $59,901 | ' |
Principal Balance | 390,000 | 321,381 |
Loss on conversion | -40,256 | 0 |
12% Notes Payable | ' | ' |
Principal Balance | 185,000 | 185,000 |
Interest rate | 15.00% | ' |
10% Note payable | ' | ' |
Principal Balance | 5,000 | 5,000 |
Interest rate | 15.00% | ' |
Tonaquint Note | ' | ' |
Principal Balance | 0 | 131,381 |
Common stock issued for conversion of note, shares issued | 1,540,426 | ' |
Common stock issued for conversion of note, amount converted | 136,060 | ' |
Loss on conversion | -40,256 | ' |
Directors Notes | ' | ' |
Principal Balance | $200,000 | $0 |
5_CONVERTIBLE_NOTES_PAYABLE_De
5. CONVERTIBLE NOTES PAYABLE (Details - Convertible notes) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Convertible Notes Payable - Current Portion | $1,367,655 | $2,367,631 |
Unamortized discount - current portion | 0 | 0 |
Convertible Notes Payable, net - Current Portion | 1,367,655 | 2,367,631 |
Accrued interest - current portion | 749,812 | 698,544 |
Convertible Notes Payable - Non-Current Portion | 776,451 | ' |
Unamortized discount - Non-current portion | 0 | ' |
Convertible Notes Payable, net - Non-Current Portion | 776,451 | 0 |
Accrued interest - non-current portion | 47,151 | ' |
Total Convertible Notes Payable | 2,144,106 | ' |
Total Unamortized Discount | 0 | ' |
Convertible Notes Payable, net | 2,144,106 | ' |
Total Accrued Interest | 796,963 | ' |
Amended and Restated Series A 12% Convertible notes | ' | ' |
Convertible Notes Payable - Current Portion | 885,000 | 885,000 |
Unamortized discount - current portion | 0 | 0 |
Convertible Notes Payable, net - Current Portion | 885,000 | 885,000 |
Accrued interest - current portion | 575,250 | 398,250 |
2008 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | 25,000 | 25,000 |
Unamortized discount - current portion | 0 | 0 |
Convertible Notes Payable, net - Current Portion | 25,000 | 25,000 |
Accrued interest - current portion | 19,167 | 15,417 |
October and November 2009 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | 50,000 | 50,000 |
Unamortized discount - current portion | 0 | -389 |
Convertible Notes Payable, net - Current Portion | 50,000 | 49,611 |
Accrued interest - current portion | 26,097 | 20,000 |
April 2010 10% Convertible Note | ' | ' |
Convertible Notes Payable - Current Portion | 75,000 | 75,000 |
Unamortized discount - current portion | 0 | -3,895 |
Convertible Notes Payable, net - Current Portion | 75,000 | 71,105 |
Accrued interest - current portion | 31,438 | 23,938 |
July and August 2011 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | 257,655 | 357,655 |
Unamortized discount - current portion | 0 | 0 |
Convertible Notes Payable, net - Current Portion | 257,655 | 357,655 |
Accrued interest - current portion | 90,256 | 68,704 |
Law Firm Note | ' | ' |
Convertible Notes Payable - Current Portion | 75,000 | 75,000 |
Unamortized discount - current portion | 0 | 0 |
Convertible Notes Payable, net - Current Portion | 75,000 | 75,000 |
Accrued interest - current portion | 7,604 | 0 |
December 2006 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | ' | 17,000 |
Unamortized discount - current portion | ' | 0 |
Convertible Notes Payable, net - Current Portion | ' | 17,000 |
Accrued interest - current portion | ' | 15,888 |
September 2010 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | ' | 308,100 |
Unamortized discount - current portion | ' | 0 |
Convertible Notes Payable, net - Current Portion | ' | 308,100 |
Accrued interest - current portion | ' | 52,393 |
April 2011 10% Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | ' | 400,400 |
Unamortized discount - current portion | ' | 0 |
Convertible Notes Payable, net - Current Portion | ' | 400,400 |
Accrued interest - current portion | ' | 100,100 |
September 2011 Convertible Notes | ' | ' |
Convertible Notes Payable - Current Portion | ' | 178,760 |
Unamortized discount - current portion | ' | 0 |
Convertible Notes Payable, net - Current Portion | ' | 178,760 |
Accrued interest - current portion | ' | 3,854 |
September 2010 12% Convertible Notes | ' | ' |
Convertible Notes Payable - Non-Current Portion | 317,072 | ' |
Unamortized discount - Non-current portion | 0 | ' |
Convertible Notes Payable, net - Non-Current Portion | 317,072 | ' |
Accrued interest - non-current portion | 35,034 | ' |
April 2011 12% Convertible Notes | ' | ' |
Convertible Notes Payable - Non-Current Portion | 448,448 | ' |
Unamortized discount - Non-current portion | 0 | ' |
Convertible Notes Payable, net - Non-Current Portion | 448,448 | ' |
Accrued interest - non-current portion | 12,117 | ' |
September 2011 12% Convertible Notes | ' | ' |
Convertible Notes Payable - Non-Current Portion | 10,931 | ' |
Unamortized discount - Non-current portion | 0 | ' |
Convertible Notes Payable, net - Non-Current Portion | 10,931 | ' |
Accrued interest - non-current portion | $0 | ' |
5_CONVERTIBLE_NOTES_PAYABLE_De1
5. CONVERTIBLE NOTES PAYABLE (Details - Convertible note activity) (USD $) | 12 Months Ended |
Mar. 31, 2014 | |
Balance as of March 31, 2014 | $2,144,106 |
2009 Convertible Notes | ' |
Initial principal balance | 450,250 |
Conversions during the fiscal year ended March 31, 2010 | -70,000 |
Conversions during the fiscal year ended March 31, 2011 | -175,000 |
Conversions during the fiscal year ended March 31, 2012 | -130,250 |
Conversions during the fiscal year ended March 31, 2013 | -25,000 |
Conversions during the fiscal year ended March 31, 2014 | 0 |
Conversions during the nine months ended December 31, 2013 | 0 |
Balance as of March 31, 2014 | 50,000 |
2010 Convertible Notes | ' |
Initial principal balance | 743,600 |
Conversions during the fiscal year ended March 31, 2012 | -405,500 |
Conversions during the fiscal year ended March 31, 2013 | -30,000 |
Conversions during the fiscal year ended March 31, 2014 | -25,000 |
Increase in principal balance due to 12% extension fee | 33,972 |
Conversions during the nine months ended December 31, 2013 | -25,000 |
Balance as of March 31, 2014 | 317,072 |
2011 Convertible Notes | ' |
Initial principal balance | 253,760 |
Conversions during the fiscal year ended March 31, 2012 | -15,000 |
Conversions during the fiscal year ended March 31, 2013 | -60,000 |
Conversions during the fiscal year ended March 31, 2014 | -169,000 |
Increase in principal balance due to 12% extension fee | 1,171 |
Conversions during the nine months ended December 31, 2013 | -169,000 |
Balance as of March 31, 2014 | $10,931 |
5_CONVERTIBLE_NOTES_PAYABLE_De2
5. CONVERTIBLE NOTES PAYABLE (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Interest expense related to convertible notes payable | $1,287,221 | $1,132,314 |
Amended and Restated Series A 12% Convertible notes | ' | ' |
Amount of notes converted into common stock | ' | 15,000 |
Debt Outstanding amount | 885,000 | 885,000 |
Interest rate | ' | 20.00% |
April 2011 10% Convertible Notes | Minimum | ' | ' |
Debt Outstanding amount | 48,048 | ' |
April 2011 10% Convertible Notes | Maximum | ' | ' |
Debt Outstanding amount | 448,448 | ' |
July and August 2011 10% Convertible Notes | ' | ' |
Debt Outstanding amount | 257,655 | ' |
Interest rate | 15.00% | ' |
Convertible Notes | ' | ' |
Interest expense related to convertible notes payable | 354,949 | 459,199 |
Debt Discounts | ' | ' |
Interest expense related to convertible notes payable | 4,284 | 467,158 |
Convertible notes and debt discount | ' | ' |
Interest expense related to convertible notes payable | $359,233 | $926,357 |
6_EQUITY_TRANSACTIONS_Details_
6. EQUITY TRANSACTIONS (Details - Warrant activity) (Warrants, USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Warrants | ' | ' |
Warrants outstanding, beginning balance | 75,647,294 | 59,807,849 |
Warrants granted | 14,530,519 | 16,710,445 |
Warrants exercised | -12,716,225 | 0 |
Warrants cancelled/forfeited | -6,752,113 | -871,000 |
Warrants outstanding, ending balance | 70,709,475 | 75,647,294 |
Warrants exercisable | 70,709,475 | 75,647,294 |
Outstanding, Weighted Average Exercise Price | $0.11 | $0.14 |
Granted, Weighted Average Exercise Price | $0.18 | $0.11 |
Exercised, Weighted Average Exercise Price | $0.08 | ' |
Cancelled/Forfeited, Weighted Average Exercise Price | $0.11 | $0.25 |
Outstanding Weighted Average Exercise Price | $0.10 | $0.11 |
Exercisable, Weighted Average Exercise Price | $0.10 | $0.11 |
Warrants Weighted average estimated fair value of warrants granted | $0.09 | $0.07 |
6_EQUITY_TRANSACTIONS_Details_1
6. EQUITY TRANSACTIONS (Details - Warrant assumptions) (Warrants, USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Warrants | ' | ' |
Risk free interest rate, minimum | 1.30% | 0.86% |
Risk free interest rate, maximum | 2.04% | 1.56% |
Average expected life Minimum | '5 years | '5 years |
Average expected life Maximum | '7 years | '7 years |
Expected Volatility Rate, Minimum | 91.20% | 90.30% |
Expected Volatility Rate, Maximum | 98.50% | 94.30% |
Expected dividends | $0 | $0 |
6_EQUITY_TRANSACTIONS_Details_2
6. EQUITY TRANSACTIONS (Details - Warrants exercisable) (USD $) | 12 Months Ended | |||||
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | |
Warrant One [Member] | Warrant Two [Member] | Warrant Three [Member] | Warrants | Warrants | Warrants | |
Range of Exercise Prices, minimum | ' | $0.11 | $0.20 | ' | ' | ' |
Range of Exercise Prices, maximum | $0.10 | $0.19 | $0.25 | ' | ' | ' |
Warrants outstanding | $37,094,795 | $21,876,000 | $11,738,680 | $70,709,475 | ' | ' |
Weighted Average Remaining Life (Years) | $251 | $4,827 | $518 | ' | ' | ' |
Outstanding Weighted Average Exercise Price | $0.05 | $0.13 | $0.21 | $0.10 | $0.11 | $0.14 |
Warrants exercisable | 37,094,795 | 21,876,000 | 11,738,680 | 70,709,475 | ' | ' |
Warrants exercisable weighted average exercise price | $0.05 | $0.13 | $0.21 | $0.10 | $0.11 | ' |
6_EQUITY_TRANSACTIONS_Details_3
6. EQUITY TRANSACTIONS (Details - Option activity) (Stock Options, USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Stock Options | ' | ' |
Stock options Outstanding, beginning balance | 21,095,798 | 19,428,693 |
Stock options granted | 5,220,536 | 1,667,105 |
Stock options exercised | 182,927 | ' |
Stock options cancelled/forfeited | ' | ' |
Stock options outstanding, ending balance | 26,133,407 | 21,095,798 |
Stock options exercisable | 22,487,563 | 19,141,625 |
Outstanding, Weighted Average Exercise Price | $0.28 | $0.31 |
Granted, Weighted Average Exercise Price | $0.09 | $0.08 |
Exercised, Weighted Average Exercise Price | $0.08 | ' |
Cancelled/Forfeited, Weighted Average Exercise Price | ' | ' |
Outstanding Weighted Average Exercise Price | $0.25 | $0.28 |
Exercisable, Weighted Average Exercise Price | $0.27 | $0.29 |
Stock options Weighted average estimated fair value of warrants granted | $0.13 | $0.08 |
6_EQUITY_TRANSACTIONS_Details_4
6. EQUITY TRANSACTIONS (Details - Option assumptions) (Stock Options, USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Stock Options | ' | ' |
Risk free interest rate, minimum | 0.38% | ' |
Risk free interest rate, maximum | 2.65% | ' |
Risk free interest rate | ' | 1.44% |
Average expected life Minimum | '3 years | ' |
Average expected life Maximum | '10 years | ' |
Average expected life | ' | '10 years |
Expected Volatility Rate, Minimum | 91.05% | ' |
Expected Volatility Rate, Maximum | 102.67% | ' |
Expected volatility | ' | 117.53% |
Expected dividends | $0 | $0 |
6_EQUITY_TRANSACTIONS_Details_5
6. EQUITY TRANSACTIONS (Details - Options exercisable) (USD $) | 12 Months Ended | |||||
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | |
Stock Option One [Member] | Stock Option Two [Member] | Stock Option Three [Member] | Stock Options | Stock Options | Stock Options | |
Range of Exercise Prices, minimum | $0.08 | $0.21 | $0.36 | ' | ' | ' |
Range of Exercise Prices, maximum | $0.11 | $0.25 | $0.41 | ' | ' | ' |
Stock options outstanding | 6,704,714 | 11,207,143 | 8,221,550 | 26,133,407 | 21,095,798 | 19,428,693 |
Weighted Average Remaining Life (Years) | '9 years 8 months 5 days | '4 years 3 months 11 days | '2 years 8 months 5 days | ' | ' | ' |
Outstanding Weighted Average Exercise Price | $0.09 | $0.24 | $0.38 | $0.25 | $0.28 | $0.31 |
Stock options exercisable | 3,204,714 | 11,061,299 | 8,221,550 | 22,487,563 | 19,141,625 | ' |
Stock options exercisable Weighted Average Exercise Price | $0.08 | $0.24 | $0.38 | $0.27 | $0.29 | ' |
6_EQUITY_TRANSACTIONS_Details_6
6. EQUITY TRANSACTIONS (Details - Stockbased Compensation) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Equity [Abstract] | ' | ' |
Vesting of restricted stock grant | $64,444 | $386,667 |
Incremental fair value of option modifications | 1,914 | 23,028 |
Vesting of stock options | 541,588 | 355,578 |
Total Stock-Based Compensation | $607,946 | $765,273 |
6_EQUITY_TRANSACTIONS_Details_7
6. EQUITY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended |
Mar. 31, 2014 | |
Unrecognized stock option expense | $270,952 |
Weighted average remaining vesting period | '2 years 25 days |
8_OTHER_CURRENT_LIABILITIES_De
8. OTHER CURRENT LIABILITIES (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Other Liabilities, Current [Abstract] | ' | ' |
Accrued interest | $1,165,335 | $1,032,110 |
Accrued legal fees | 179,465 | 179,465 |
Accrued liquidated damages | 362,800 | 437,800 |
Other accrued liabilities | 147,774 | 155,610 |
Total other current liabilities | $1,855,374 | $1,804,985 |
9_INCOME_TAXES_Details_Deferre
9. INCOME TAXES (Details - Deferred tax assets) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
Deferred tax assets: | ' | ' |
Capitalized research and development | $3,442,000 | $3,442,000 |
Net operating loss carryforwards | 15,193,000 | 14,793,000 |
Total deferred tax assets | 18,635,000 | 18,235,000 |
Total deferred tax liabilities | 0 | 0 |
Net deferred tax assets | 18,635,000 | 18,235,000 |
Valuation allowance for deferred tax assets | -18,635,000 | -18,235,000 |
Net deferred tax assets | $0 | $0 |
9_INCOME_TAXES_Details_Provisi
9. INCOME TAXES (Details - Provision for income taxes) (USD $) | 12 Months Ended | |||
Mar. 31, 2014 | Mar. 31, 2013 | |||
Income Tax Disclosure [Abstract] | ' | ' | ||
Income taxes (benefit) at federal statutory rate of 34% | ($4,541,000) | ($1,663,000) | ||
State income tax, net of federal benefit | -156,000 | -285,000 | ||
Tax effect on non-deductible expenses and credits | 4,297,000 | 215,000 | ||
Change in valuation allowance | 400,000 | [1] | 1,733,000 | [1] |
Income Tax Expense (Benefit) | $0 | $0 | ||
[1] | Pursuant to Internal Revenue Code Sections 382, use of our tax net operating loss carryforwards may be limited. |
9_INCOME_TAXES_Details_Narrati
9. INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended |
Mar. 31, 2014 | |
Net Operating Loss expiry year | 31-Dec-20 |
Domestic Tax Authority [Member] | ' |
Net operating loss carryforwards | 39,000,000 |
State and Local Jurisdiction [Member] | ' |
Net operating loss carryforwards | 30,000,000 |
10_FAIR_VALUE_MEASUREMENTS_Det
10. FAIR VALUE MEASUREMENTS (Details - Fair value levels) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 |
Fair Value Inputs Level 1 | ' | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ' |
Derivative Liabilities | $0 | $0 | ' |
Total Assets | 0 | 0 | ' |
Fair Value Inputs Level 2 | ' | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ' |
Derivative Liabilities | 0 | 0 | ' |
Total Assets | 0 | 0 | ' |
Fair Value Inputs Level 3 | ' | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ' |
Derivative Liabilities | 10,679,067 | 3,588,239 | 3,588,615 |
Total Assets | $10,679,067 | $3,588,239 | ' |
10_FAIR_VALUE_MEASUREMENT_Deta
10. FAIR VALUE MEASUREMENT (Details - Assumptions) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Fair Value Assumptions and Methodology for Assets and Liabilities | ' | ' |
Risk free interest rate minimum | 0.02% | 0.05% |
Risk free interest rate maximum | 0.79% | 1.56% |
Average expected life minimum | '3 months | '3 months |
Average expected life maximum | '2 years 9 months 18 days | '3 years 7 months 6 days |
Expected volatility minimum | 58.00% | 76.00% |
Expected volatility maximum | 103.10% | 107.10% |
Expected dividends | 0.00% | 0.00% |
10_FAIR_VALUE_MEASUREMENT_Deta1
10. FAIR VALUE MEASUREMENT (Details - Derivative liabilities) (Fair Value Inputs Level 3, USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Fair Value Inputs Level 3 | ' | ' |
Derivative liabilities | $3,588,239 | $3,588,615 |
Recorded new derivative liabilities | 0 | 0 |
Change in estimated fair value recognized in results of operations | 5,729,780 | -44,705 |
Reclassification of derivative liability to paid in capital | 1,361,048 | 44,329 |
Derivative liabilities | $10,679,067 | $3,588,239 |
11_DARPA_CONTRACT_AND_RELATED_1
11. DARPA CONTRACT AND RELATED REVENUE RECOGNITION (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Integer | Integer | |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Contract revenue | $1,466,482 | $1,230,004 |
Number Of Milestones Under Year One Contract | 8 | ' |
Number Of Milestones Achieved Under Year One Contract | ' | 6 |
Sixth Milestone [Member] | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 216,747 |
MileStoneTwoPointTwoPointTwoPointThree [Member] | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 216,747 |
MileStoneTwoPointTwoPointOnePointFour [Member] | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 183,367 |
MileStoneMTwo [Member] | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 216,747 |
MileStoneTwoPointThreePointThreePointOne [Member] | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 208,781 |
Milestone 2.3.2.1 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 195,581 |
Milestone M4 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | ' | 208,781 |
Milestone 2.3.2.2 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 195,581 | ' |
Milestone 2.3.2.2 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 195,581 | ' |
Milestone 2.3.3.2 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 208,781 | ' |
Milestone M5 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 208,781 | ' |
Milestone M3 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 195,576 | ' |
Milestone 2.4.2.1 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 197,362 | ' |
Milestone 2.4.1.1 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | 186,164 | ' |
Milestone 2.4.2.3 | ' | ' |
Revenue Recognition, Milestone Method [Line Items] | ' | ' |
Revenue Recognition, Milestone Method, Revenue Recognized | $78,641 | ' |
13_COMMITMENTS_AND_CONTINGENCI2
13. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Mar. 31, 2014 |
Operating lease payments due | $90,525 |
8910 University Center Lane, Suite 660, San Diego, CA 92122 office lease [Member] | ' |
Operating lease payments due | 43,795 |
11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 office leaser [Member] | ' |
Operating lease payments due | 22,755 |
11 Deer Park Drive, South Brunswick, NJ [Member] | ' |
Operating lease payments due | $23,975 |
13_COMMITMENTS_AND_CONTINGENCI3
13. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Rent expense | $163,000 | $123,000 |
Settlement expenses | $417,000 | ' |
14_SEGMENTS_Details
14. SEGMENTS (Details) (USD $) | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | |
Total Revenues | $1,623,769 | $1,230,004 | ' |
Total Operating Loss | -3,055,928 | -3,575,354 | ' |
Net Loss | -13,357,232 | -4,892,040 | ' |
Total Assets | 1,695,102 | 496,694 | ' |
Total Cash | 1,250,279 | 125,274 | 143,907 |
Capital Expenditures | -96,056 | 0 | ' |
Total Depreciation and Amortization | 21,087 | 10,484 | ' |
Total Interest Expense | -1,287,221 | -1,132,314 | ' |
Aethlon Medical, Inc | ' | ' | ' |
Total Revenues | 1,623,769 | 1,230,004 | ' |
Total Operating Loss | -2,651,863 | -3,575,354 | ' |
Net Loss | -13,357,232 | -4,892,040 | ' |
Total Assets | 597,026 | 496,694 | ' |
Total Cash | 208,259 | 125,274 | ' |
Capital Expenditures | 37,313 | 0 | ' |
Total Depreciation and Amortization | 11,549 | 10,484 | ' |
Total Interest Expense | 1,282,638 | 1,132,314 | ' |
Exosome Sciences, Inc | ' | ' | ' |
Total Revenues | 0 | 0 | ' |
Total Operating Loss | -404,065 | 0 | ' |
Net Loss | -81,730 | 0 | ' |
Total Assets | 1,098,076 | 0 | ' |
Total Cash | 1,042,020 | 0 | ' |
Capital Expenditures | 58,743 | 0 | ' |
Total Depreciation and Amortization | 9,538 | 0 | ' |
Total Interest Expense | $4,583 | $0 | ' |
16_PRO_FORMA_BALANCE_SHEET_Det
16. PRO FORMA BALANCE SHEET (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 |
Current assets | ' | ' | ' |
Cash | $1,250,279 | $125,274 | $143,907 |
Accounts receivable | 95,177 | 208,781 | ' |
Deferred financing costs | 83,191 | 863 | ' |
Prepaid expenses | 50,699 | 29,602 | ' |
TOTAL CURRENT ASSETS | 1,479,346 | 364,520 | ' |
Property and equipment, net | 84,279 | 145 | ' |
Patents, net | 112,489 | 121,653 | ' |
Deposits | 18,988 | 10,376 | ' |
TOTAL NON-CURRENT ASSETS | 215,756 | 132,174 | ' |
TOTAL ASSETS | 1,695,102 | 496,694 | ' |
CURRENT LIABILITIES | ' | ' | ' |
Accounts payable | 517,651 | 822,832 | ' |
Due to related parties | 839,070 | 736,070 | ' |
Notes payable | 390,000 | 321,381 | ' |
Convertible notes payable, current portion | 1,367,655 | 2,367,631 | ' |
Derivative liabilities | 10,679,067 | 3,588,239 | ' |
Other current liabilities | 1,855,374 | 1,804,985 | ' |
TOTAL CURRENT LIABILITIES | 15,648,817 | 9,641,138 | ' |
NONCURRENT LIABILITIES | ' | ' | ' |
Convertible notes payable, noncurrent portion | 776,451 | 0 | ' |
TOTAL NONCURRENT LIABILITIES | 776,451 | 0 | ' |
TOTAL LIABILITIES | 16,425,268 | 9,641,138 | ' |
COMMITMENTS AND CONTINGENCIES (Note 13) | ' | ' | ' |
STOCKHOLDERS' DEFICIT | ' | ' | ' |
Common stock | 224,984 | 173,685 | ' |
AdditionalPaid-In Capital | 59,659,137 | 52,157,196 | ' |
Accumulated deficit | -74,832,557 | -61,475,325 | ' |
TOTAL AETHLON MEDICAL, INC STOCKHOLDERS' DEFICIT | -14,948,436 | -9,144,444 | -9,295,621 |
Noncontrolling interests | 218,270 | 0 | ' |
TOTAL DEFICIT | -14,730,166 | -9,144,444 | ' |
TOTAL LIABILITIES AND DEFICIT | 1,695,102 | 496,694 | ' |
Pro Forma Adjustments Amount [Member] | ' | ' | ' |
Current assets | ' | ' | ' |
Cash | 0 | ' | ' |
Accounts receivable | 0 | ' | ' |
Deferred financing costs | 0 | ' | ' |
Prepaid expenses | 0 | ' | ' |
TOTAL CURRENT ASSETS | 0 | ' | ' |
Property and equipment, net | 0 | ' | ' |
Patents, net | 0 | ' | ' |
Deposits | 0 | ' | ' |
TOTAL NON-CURRENT ASSETS | 0 | ' | ' |
TOTAL ASSETS | 0 | ' | ' |
CURRENT LIABILITIES | ' | ' | ' |
Accounts payable | 0 | ' | ' |
Due to related parties | 0 | ' | ' |
Notes payable | 0 | ' | ' |
Convertible notes payable, current portion | -88,500 | ' | ' |
Derivative liabilities | -10,679,067 | ' | ' |
Other current liabilities | -575,250 | ' | ' |
TOTAL CURRENT LIABILITIES | -12,139,317 | ' | ' |
NONCURRENT LIABILITIES | ' | ' | ' |
Convertible notes payable, noncurrent portion | 225,000 | ' | ' |
TOTAL NONCURRENT LIABILITIES | 225,000 | ' | ' |
TOTAL LIABILITIES | -11,914,317 | ' | ' |
COMMITMENTS AND CONTINGENCIES (Note 13) | ' | ' | ' |
STOCKHOLDERS' DEFICIT | ' | ' | ' |
Common stock | 26,010 | ' | ' |
AdditionalPaid-In Capital | 14,457,617 | ' | ' |
Accumulated deficit | -2,569,310 | ' | ' |
TOTAL AETHLON MEDICAL, INC STOCKHOLDERS' DEFICIT | 11,914,317 | ' | ' |
Noncontrolling interests | 0 | ' | ' |
TOTAL DEFICIT | 11,914,317 | ' | ' |
TOTAL LIABILITIES AND DEFICIT | 0 | ' | ' |
Pro Forma [Member] | ' | ' | ' |
Current assets | ' | ' | ' |
Cash | 1,250,279 | ' | ' |
Accounts receivable | 95,177 | ' | ' |
Deferred financing costs | 83,191 | ' | ' |
Prepaid expenses | 50,699 | ' | ' |
TOTAL CURRENT ASSETS | 1,479,346 | ' | ' |
Property and equipment, net | 84,279 | ' | ' |
Patents, net | 112,489 | ' | ' |
Deposits | 18,988 | ' | ' |
TOTAL NON-CURRENT ASSETS | 215,756 | ' | ' |
TOTAL ASSETS | 1,695,102 | ' | ' |
CURRENT LIABILITIES | ' | ' | ' |
Accounts payable | 517,651 | ' | ' |
Due to related parties | 839,070 | ' | ' |
Notes payable | 390,000 | ' | ' |
Convertible notes payable, current portion | 482,655 | ' | ' |
Derivative liabilities | 0 | ' | ' |
Other current liabilities | 1,280,124 | ' | ' |
TOTAL CURRENT LIABILITIES | 3,509,500 | ' | ' |
NONCURRENT LIABILITIES | ' | ' | ' |
Convertible notes payable, noncurrent portion | 1,001,451 | ' | ' |
TOTAL NONCURRENT LIABILITIES | 1,001,451 | ' | ' |
TOTAL LIABILITIES | 4,510,951 | ' | ' |
COMMITMENTS AND CONTINGENCIES (Note 13) | ' | ' | ' |
STOCKHOLDERS' DEFICIT | ' | ' | ' |
Common stock | 250,994 | ' | ' |
AdditionalPaid-In Capital | 74,116,754 | ' | ' |
Accumulated deficit | -77,401,867 | ' | ' |
TOTAL AETHLON MEDICAL, INC STOCKHOLDERS' DEFICIT | -3,034,119 | ' | ' |
Noncontrolling interests | 218,270 | ' | ' |
TOTAL DEFICIT | -2,815,849 | ' | ' |
TOTAL LIABILITIES AND DEFICIT | $1,695,102 | ' | ' |