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AEMD > SEC Filings for AEMD > Form 8-K on 27-Feb-2014All Recent SEC Filings

Show all filings for AETHLON MEDICAL INC



Entry into a Material Definitive Agreement, Unregistered Sale of Equity Secur

ITEM 1.01 Entry Into A Material Definitive Agreement

On February 24, 2014, the Registrant 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, will result in the dismissal with prejudice of the complaint filed by Gemini against the Registrant 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 the Registrant's common stock. The Complaint alleged, among other things, that the Registrant was 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 the Registrant's common stock. The Complaint also alleged that the Registrant 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 its response, the Registrant 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, the Registrant had maintained on its 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 requires the Registrant to issue a total of 7,522,854 shares of common stock into an escrow and those shares will be released to Gemini ratably over a ten-month period. The shares are being issued upon partial exercise of the 2009 Warrant and 2010 Warrant as well as under a third warrant, issued by the Registrant to Gemini in 2008 (the "2008 Warrant"). No shares are to be issued as consideration for the alleged default under the Convertible Note or in consideration of the releases granted in the Settlement Agreement. In addition, the Registrant's insurance company has agreed to pay Gemini $150,000. Upon completion of the share issuances, the 2008 Warrant, the 2009 Warrant and the 2010 Warrants will be 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) is extinguished and fully satisfied.

As the Registrant previously had 6,359,999 shares of common stock reserved for issuance under the three Warrants described above, the settlement will increase the Registrant's fully diluted shares outstanding by 1,162,855 shares.

Upon the performance of the settlement terms described above, the Stipulation of Dismissal (filed as an Exhibit to this Current Report) will be filed with the Court, permanently terminating the litigation. The Settlement Agreement also provides for mutual and full releases of all other claims between the Registrant and Gemini.

As a result of the Settlement Agreement, the Registrant has no pending or threatened litigation matters.

The foregoing is a summary of the terms of the Settlement Agreement, Escrow Agreement and Stipulation of Dismissal, each of which is filed as an Exhibit to this Current Report. The Exhibits should be read in their entirety for a complete understanding of the terms of each Agreement.

ITEM 3.02 Unregistered Sales of Equity Securities

The information set forth under Item 1.01 of the Report is incorporated by reference into this Item 3.02. In addition to the incorporated information, the Registrant has relied upon the exemption from registration provided by Regulation D in making the share issuances to Gemini. Gemini is an "accredited investor" within the meaning of Rule 501 of Regulation D. The shares issued upon the exercise of the 2008 Warrant, the 2009 Warrant and the 2010 Warrant were issued on a cashless basis and the Registrant received no proceeds upon the exercise.

ITEM 9.01 Financial Statements and Exhibits

Exhibit No. Description
10.1        Settlement Agreement and General Release
10.2        Escrow Agreement
10.3        Stipulation of Dismissal

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