Capital Stock

3 Months Ended

Jun. 30, 2014

Notes to Financial Statements

NOTE 8 - Capital Stock

2014 Unit Private Placement

Between late-March and June 30, 2014, we entered into securities purchase agreements with accredited investors, including Platinum, pursuant to which we sold units to such accredited investors in private placement transactions (2014 Units), for aggregate cash proceeds of $1,570,000, consisting of (i) 2014 Unit Notes in the aggregate face amount of $1,570,000 due on March 31, 2015 or automatically convertible into securities we may issue upon the consummation of a Qualified Financing, defined as (a) an equity-based public financing registered with the SEC, or (b) a private equity-based financing or series of private equity-based financings, in either case in which we receive at least $10 million in gross cash proceeds prior to March 31, 2015; (ii) an aggregate of 1,570,000 restricted shares of our common stock (2014 Unit Stock); and (iii) warrants exercisable through December 31, 2016 to purchase an aggregate of 1,570,000 restricted shares of our common stock at an exercise price of $0.50 per share (2014 Unit Warrants). The Outstanding Balance of each 2014 Unit Notes is convertible into shares of our common stock at a conversion price of $0.50 per share at or prior to maturity, at the option of each investor. In addition, however, the Outstanding Balance is automatically convertible into securities substantially equivalent to those we may issue in a Qualified Financing at an amount determined by multiplying the Outstanding Balance by 1.25, and dividing the resulting number by the price per share of securities offered in the Qualified Financing. Under certain circumstances, the holders of the 2014 Unit Notes may request payment in cash in lieu of automatic conversion into the securities of the Qualified Financing. We sold $50,000 of Units prior to March 31, 2014, which Units are reflected in the figures above.

We allocated the proceeds from the sale of the 2014 Units to the various securities based on their relative fair values on the dates of the sales. As described in Note 7, Convertible PromissoryNotes and Other Notes Payable, based on the short-term nature of the Unit Notes, we determined that fair value of the 2014 Unit Notes was equal to their face value. We determined the fair value of the 2014 Unit Stock based on the quoted market price of our common stock on the date of the 2014 Unit sale. We calculated the fair value of the 2014 Unit Warrants using the Black Scholes Option Pricing Model and the weighted average assumptions indicated in the table below. The table below also presents the aggregate allocation of the 2014 Unit sales proceeds based on the relative fair values of the 2014 Unit Stock, 2014 Unit Warrants and 2014 Unit Notes at the 2014 Unit sales date.

Unit Warrants

Weighted Average Issuance Date Valuation Assumptions

Per Share

Aggregate

Aggregate

Aggregate Allocation of Proceeds

Warrant

Risk free

Fair

Fair Value

Proceeds

Based on Relative Fair Value of:

Shares

Market

Exercise

Term

Interest

Dividend

Value of

of Unit

of Unit

Unit

Issued

Price

Price

(Years)

Rate

Volatility

Rate

Warrant

Warrants

Sales

Unit Stock

Warrant

Unit Note

1,570,000

$0.53

$0.50

2.63

0.71%

76.06%

0.0%

$0.26

$410,600

$1,570,000

$463,600

$225,000

$881,400

Amendment of Notes and Warrants issued in 2013/2014 Unit Private Placement

As indicated in Note 7, Convertible Promissory Notes and Other Notes Payable, effective May 31, 2014, we entered into note and warrant amendment agreements with substantially all holders of 2013/2014 Unit Notes and 2013/2014 Unit Warrants to (i) modify certain terms of their 2013/2014 Unit Notes, including the maturity date and certain conversion features, to conform to the corresponding terms of the 2014 Unit Notes and (ii) to modify certain terms of the 2013/2014 Unit Warrants, including the exercise price and expiration date, to conform to the corresponding terms of the 2014 Unit Warrants. Holders of 2013/2014 Unit Notes having an aggregate initial face amount of $895,000 and warrants to purchase an aggregate of 1,865,000 restricted shares of our common stock agreed to the amendments.

We calculated the fair value of the modified 2013/2014 Unit Warrants immediately before and after the modifications and determined that the fair value of the warrants increased by an aggregate of $272,900, which we treated as a component of loss on extinguishment of debt in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2014, with a corresponding credit to additional paid-in capital, an equity account. The warrants subject to the exercise price modifications were valued using the Black-Scholes Option Pricing Model and the following assumptions:

Assumption:	Pre-modification		Post-modification
Market price per share	$	0.63	$	0.63
Exercise price per share	$	1.00	$	0.50
Risk-free interest rate		0.44%		0.62%
Remaining contractual term in years		2.17		2.59
Volatility		75.6%		76.6%
Dividend rate		0.0%		0.0%
Fair Value per share	$	0.19	$	0.33

Issuance of Securities in Satisfaction of Technology License and Maintenance Fees and Patent Expenses

In April 2014, we issued (i) a 10% promissory note in the face amount of $300,000 due on the earlier of December 31, 2014, or the completion of a qualified financing, as defined, (ii) 300,000 restricted shares of our common stock and (iii) a warrant exercisable through March 31, 2019 to purchase 300,000 restricted shares of our common stock at an exercise price of $0.50 per share to Icahn School of Medicine at Mount Sinai, one of our long-term stem cell technology licensors, in satisfaction of $288,400 of stem cell technology license maintenance fees and reimbursable patent prosecution costs. Based on the short-duration of the note, its interest rate and other terms, we determined that the fair value of the note at the date of issuance was equal to its face value. We determined the fair value of stock to be $141,000, based on the $0.47 per share quoted market price of our common stock on the date of the agreement. We calculated the fair value of the warrant as $0.30 per share, or $89,200, using the Black Scholes Option Pricing Model and the following assumptions: market price per share: $0.47; exercise price per share: $0.50; risk-free interest rate: 1.59%; contractual term: 5.0 years; volatility: 80.3%; expected dividend rate: 0%.  We recognized a loss on extinguishment of debt in the amount of $241,800 related to this settlement in the accompanying Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2014.

Issuance of Common Stock to Consultant

In May 2014, we entered into a consulting agreement for strategic advisory and business development services pursuant to which we issued 200,000 restricted shares of our common stock as partial compensation for such professional services. We determined the fair value of stock to be $134,000, based on the $0.67 per share quoted market price of our common stock on the date of the agreement. The agreement also requires us to pay $17,500 per month from May 2014 through October 2014 as additional compensation for professional services rendered by the strategic consultant.

Autilion AG Securities Purchase Agreement

On April 8, 2013, we entered into the Securities Purchase Agreement with Autilion, a company organized and existing under the laws of Switzerland.  Under the terms of the Securities Purchase Agreement, Autilion remains contractually obligated to consummate the Autilion Financing and purchase an aggregate of 72.0 million restricted shares of our common stock at a purchase price of $0.50 per share for aggregate cash consideration of $36.0 million. Through our fiscal year ended March 31, 2014, Autilion had completed only a nominal initial closing under the Securities Purchase Agreement, in the amount of $25,000, and we had issued 50,000 restricted shares of our common stock. At June 30, 2014 and through the date of this report, Autilion has not yet completed a subsequent closing of the Autilion Financing. Therefore, Autilion remains in default under the Securities Purchase Agreement. No assurances can be provided that Autilion will complete an additional closing under the Securities Purchase Agreement.

Warrants Outstanding

Following the warrant issuances and modifications described above, at June 30, 2014, we had outstanding warrants to purchase shares of our restricted common stock at a weighted average exercise price of $0.79 per share as follows:

					Shares Subject to
Exercise			Weighted Average		Purchase at
Price		Expiration	Years to		June 30,
per Share		Date	Expiration		2014
$	0.50	12/31/2014 to 3/19/2019		2.93		9,541,983
$	0.64	3/3/2023		8.67		2,940,000
$	0.88	5/31/2015		0.92		15,428
$	1.00	7/30/2016 to 9/30/2017		3.18		3,526,886
$	1.25	12/31/2014 to 5/31/2015		0.55		50,280
$	1.50	11/4/2014 to 3/4/2018		2.2		2,353,052
$	2.00	9/15/2017		3.21		425,000
$	2.50	5/31/2015		0.92		42,443
$	2.625	1/31/2015		0.59		61,418
$	3.00	2/13/2016		1.62		25,000
				3.76		18,981,490