UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017June 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
COMMISSION FILE NUMBER 001-37487
AETHLON MEDICAL, INC.
(Exact name of registrant as specified in its charter)
13-3632859 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
9635 GRANITE RIDGE DRIVE, SUITE 100, SAN DIEGO, CA | 92123 | |
(Address of principal executive offices) | (Zip Code) |
9635 GRANITE RIDGE DRIVE, SUITE 100, SAN DIEGO, CA 92123(858) 459-7800
(Address of principal executive offices) (Zip Code)
(858) 459-7800
(Registrant'sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock | AEMD | The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESYes ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESYes ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated | Accelerated |
Non-accelerated | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of January 31, 2018,August 4, 2021, the registrant had outstanding 16,580,326 shares of common stock, $0.001 par value.
2 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AETHLON MEDICAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2017 | March 31, 2017 | June 30, 2021 | March 31, 2021 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash | $ | 5,610,799 | $ | 1,559,701 | $ | 25,171,679 | $ | 9,861,575 | ||||||||
Accounts receivable | 131,966 | 149,082 | ||||||||||||||
Prepaid expenses and other current assets | 14,537 | 37,551 | 244,121 | 341,081 | ||||||||||||
Total current assets | 5,625,336 | 1,597,252 | 25,547,766 | 10,351,738 | ||||||||||||
Property and equipment, net | 32,398 | 29,223 | 187,821 | 160,976 | ||||||||||||
Patents and patents pending, net | 78,123 | 84,996 | ||||||||||||||
Right-of-use lease asset | 15,722 | 40,363 | ||||||||||||||
Patents, net | 56,817 | 56,954 | ||||||||||||||
Restricted cash | 46,726 | 46,726 | ||||||||||||||
Deposits | 14,897 | 14,897 | 12,159 | 12,159 | ||||||||||||
Total assets | $ | 5,750,754 | $ | 1,726,368 | $ | 25,867,011 | $ | 10,668,916 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 211,406 | $ | 484,423 | $ | 243,650 | $ | 337,678 | ||||||||
Due to related parties | 64,466 | 57,866 | 119,578 | 118,520 | ||||||||||||
Deferred revenue | 114,849 | 114,849 | ||||||||||||||
Lease liability, current portion | 16,835 | 42,543 | ||||||||||||||
Other current liabilities | 60,534 | 69,467 | 636,387 | 761,636 | ||||||||||||
Total current liabilities | 336,406 | 611,756 | 1,131,299 | 1,375,226 | ||||||||||||
Convertible notes payable, net | 810,866 | 519,200 | ||||||||||||||
Total liabilities | 1,147,272 | 1,130,956 | ||||||||||||||
Commitments and Contingencies (Note 13) | ||||||||||||||||
Commitments and Contingencies (Note 12) | ||||||||||||||||
Stockholders’ Equity | ||||||||||||||||
Common stock, par value $0.001 per share; 30,000,000 shares authorized as of December 31, 2017 and March 31, 2017; 15,367,658 and 8,797,086 shares issued and outstanding as of December 31, 2017 and March 31, 2017, respectively | 15,368 | 8,796 | ||||||||||||||
Common stock, par value $ | per share; shares authorized; and shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively15,388 | 12,152 | ||||||||||||||
Additional paid-in capital | 102,820,906 | 94,445,739 | 146,868,766 | 129,331,542 | ||||||||||||
Accumulated deficit | (98,138,853 | ) | (93,778,156 | ) | (122,010,393 | ) | (119,913,090 | ) | ||||||||
Total Aethlon Medical, Inc. stockholders’ equity before noncontrolling interests | 4,697,421 | 676,379 | 24,873,761 | 9,430,604 | ||||||||||||
Noncontrolling interests | (93,939 | ) | (80,967 | ) | (138,049 | ) | (136,914 | ) | ||||||||
Total stockholders’ equity | 4,603,482 | 595,412 | 24,735,712 | 9,293,690 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 5,750,754 | $ | 1,726,368 | $ | 25,867,011 | $ | 10,668,916 |
See accompanying notes.
3 |
AETHLON MEDICAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Month Periods Ended December 31, 2017June 30, 2021 and 20162020
(Unaudited)
Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | |||||||||||||
REVENUES | ||||||||||||||||
Government contract revenue | $ | 74,813 | $ | – | $ | 74,813 | $ | 392,073 | ||||||||
OPERATING EXPENSES | ||||||||||||||||
Professional fees | 439,117 | 416,866 | 1,165,318 | 1,495,597 | ||||||||||||
Payroll and related expenses | 663,245 | 635,698 | 1,911,553 | 2,793,888 | ||||||||||||
General and administrative | 136,078 | 182,982 | 557,991 | 696,662 | ||||||||||||
Total operating expenses | 1,238,440 | 1,235,546 | 3,634,862 | 4,986,147 | ||||||||||||
OPERATING LOSS | (1,163,627 | ) | (1,235,546 | ) | (3,560,049 | ) | (4,594,074 | ) | ||||||||
OTHER EXPENSE (INCOME) | ||||||||||||||||
Interest and other debt expenses | 55,912 | 36,565 | 306,495 | 115,308 | ||||||||||||
Loss on share for warrant exchanges | – | – | 130,214 | – | ||||||||||||
(Gain)/loss on debt extinguishment | – | (58,691 | ) | 376,909 | 558,198 | |||||||||||
Warrant repricing expense | – | – | – | 345,841 | ||||||||||||
Total other expense (income) | 55,912 | (22,126 | ) | 813,618 | 1,019,347 | |||||||||||
NET LOSS BEFORE NONCONTROLLING INTERESTS | (1,219,539 | ) | (1,213,420 | ) | (4,373,667 | ) | (5,613,421 | ) | ||||||||
LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (4,532 | ) | (7,689 | ) | (12,972 | ) | (23,088 | ) | ||||||||
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (1,215,007 | ) | $ | (1,205,731 | ) | $ | (4,360,695 | ) | $ | (5,590,333 | ) | ||||
BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.08 | ) | $ | (0.15 | ) | $ | (0.40 | ) | $ | (0.72 | ) | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED | 14,950,701 | 7,927,031 | 10,927,106 | 7,768,682 |
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||
REVENUES | ||||||||
Government contract revenue | $ | 131,966 | $ | 0 | ||||
OPERATING EXPENSES | ||||||||
Professional fees | 583,469 | 564,284 | ||||||
Payroll and related expenses | 1,016,742 | 436,911 | ||||||
General and administrative | 630,068 | 409,223 | ||||||
Total operating expenses | 2,230,279 | 1,410,418 | ||||||
OPERATING LOSS | (2,098,313 | ) | (1,410,418 | ) | ||||
OTHER EXPENSE | ||||||||
Interest and other debt expenses | 125 | 728 | ||||||
Total other expense | 125 | 728 | ||||||
NET LOSS | (2,098,438 | ) | (1,411,146 | ) | ||||
LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (1,135 | ) | (863 | ) | ||||
NET LOSS ATTRIBUTABLE TO AETHLON MEDICAL, INC. | $ | (2,097,303 | ) | $ | (1,410,283 | ) | ||
BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.16 | ) | $ | (0.15 | ) | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED | 12,828,816 | 9,632,977 |
See accompanying notes.
4 |
AETHLON MEDICAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY
For the NineThree Months Ended December 31, 2017June 30, 2021 and 20162020
(Unaudited)
Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,373,667 | ) | $ | (5,613,421 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 27,402 | 26,365 | ||||||
Stock based compensation | 887,607 | 1,880,150 | ||||||
Warrant repricing expense | – | 345,841 | ||||||
Common stock issued for services | 33,600 | – | ||||||
Loss on share for warrant exchanges | 130,214 | – | ||||||
Loss on debt extinguishment | 376,909 | 558,198 | ||||||
Amortization of debt discount and deferred financing costs | 215,376 | 65,637 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | – | 199,471 | ||||||
Prepaid expenses and other current assets | 23,014 | 21,522 | ||||||
Accounts payable and other current liabilities | (219,806 | ) | 51,053 | |||||
Due to related parties | 6,600 | (86,750 | ) | |||||
Net cash used in operating activities | (2,892,751 | ) | (2,551,934 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (23,705 | ) | (2,961 | ) | ||||
Net cash used in investing activities | (23,705 | ) | (2,961 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the issuance of common stock, net | 7,166,081 | 554,306 | ||||||
Proceeds from the issuance of convertible notes payable, net | – | 577,460 | ||||||
Cash paid for repurchase of restricted stock units | (198,527 | ) | (71,993 | ) | ||||
Net cash provided by financing activities | 6,967,554 | 1,059,773 | ||||||
Net increase (decrease) in cash | 4,051,098 | (1,495,122 | ) | |||||
Cash at beginning of period | 1,559,701 | 2,123,737 | ||||||
Cash at end of period | $ | 5,610,799 | $ | 628,615 | ||||
Supplemental disclosures of non-cash investing and financing activities: | ||||||||
Issuance of shares under conversions of convertible notes payable and related accrued interest | $ | 362,765 | $ | 61,766 | ||||
Issuance of shares under vested restricted stock units | $ | 120 | $ | 33 | ||||
Recorded debt discount on convertible notes | $ | – | $ | 863,868 | ||||
Issuance of shares under cashless warrant exchanges | $ | – | $ | 3 | ||||
Reclassification of accrued interest to convertible notes payable | $ | – | $ | 85,031 |
COMMON STOCK | ADDITIONAL PAID IN | ACCUMULATED | NON- CONTROLLING | TOTAL STOCKHOLDERS’ | ||||||||||||||||||||
SHARES | AMOUNT | CAPITAL | DEFICIT | INTERESTS | EQUITY | |||||||||||||||||||
BALANCE - MARCH 31, 2021 | 12,150,597 | $ | 12,152 | $ | 129,331,542 | $ | (119,913,090 | ) | $ | (136,914 | ) | $ | 9,293,690 | |||||||||||
Issuances of common stock for cash under at the market program | 626,000 | 626 | 4,947,159 | – | – | 4,947,785 | ||||||||||||||||||
Issuances of common stock for cash in registered direct financing | 1,380,555 | 1,381 | 11,657,663 | – | – | 11,659,044 | ||||||||||||||||||
Issuances of common stock for cash under warrant exercises | 531,167 | 531 | 820,407 | – | – | 820,938 | ||||||||||||||||||
Issuances of common stock for cash under stock option exercises | 11,562 | 11 | 28,314 | – | – | 28,325 | ||||||||||||||||||
Issuances of common stock under cashless warrant exercises | 675,554 | 676 | (676 | ) | – | – | – | |||||||||||||||||
Issuance of common shares upon vesting of restricted stock units | 10,932 | 11 | (35,797 | ) | – | – | (35,786 | ) | ||||||||||||||||
Stock-based compensation expense | – | – | 120,154 | – | – | 120,154 | ||||||||||||||||||
Net loss | – | – | – | (2,097,303 | ) | (1,135 | ) | (2,098,438 | ) | |||||||||||||||
BALANCE - June 30, 2021 | 15,386,367 | $ | 15,388 | $ | 146,868,766 | $ | (122,010,393 | ) | $ | (138,049 | ) | $ | 24,735,712 |
5 |
COMMON STOCK | ADDITIONAL PAID IN | ACCUMULATED | NON- CONTROLLING | TOTAL STOCKHOLDERS’ | ||||||||||||||||||||
SHARES | AMOUNT | CAPITAL | DEFICIT | INTERESTS | EQUITY | |||||||||||||||||||
BALANCE MARCH 31, 2020 | 9,366,873 | $ | 9,368 | $ | 121,426,563 | $ | (112,026,381 | ) | $ | (132,124 | ) | $ | 9,277,426 | |||||||||||
Issuances of common stock for cash under at the market program | 2,685,600 | 2,686 | 7,258,183 | – | – | 7,260,869 | ||||||||||||||||||
Issuance of common shares upon vesting of restricted stock units and net stock option exercise | 17,920 | 18 | (24,269 | ) | – | – | (24,251 | ) | ||||||||||||||||
Stock-based compensation expense | – | – | 84,207 | – | – | 84,207 | ||||||||||||||||||
Net loss | – | – | – | (1,410,283 | ) | (863 | ) | (1,411,146 | ) | |||||||||||||||
BALANCE June 30, 2020 | 12,070,393 | $ | 12,072 | $ | 128,744,684 | $ | (113,436,664 | ) | $ | (132,987 | ) | $ | 15,187,105 |
See accompanying notes.
AETHLON MEDICAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2021 and 2020
(Unaudited)
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||
Cash flows used in operating activities: | ||||||||
Net loss | $ | (2,098,438 | ) | $ | (1,411,146 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 11,666 | 8,770 | ||||||
Stock based compensation | 120,154 | 84,207 | ||||||
Accretion of right-of-use lease asset | (1,067 | ) | (188 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 96,960 | 62,660 | ||||||
Accounts receivable | 17,116 | 0 | ||||||
Accounts payable and other current liabilities | (219,277 | ) | (73,142 | ) | ||||
Deferred revenue | – | 206,729 | ||||||
Due to related parties | 1,058 | 20,137 | ||||||
Net cash used in operating activities | (2,071,828 | ) | (1,101,973 | ) | ||||
Cash flows used in investing activities: | ||||||||
Purchases of property and equipment | (38,374 | ) | (17,809 | ) | ||||
Net cash used in investing activities | (38,374 | ) | (17,809 | ) | ||||
Cash flows provided by financing activities: | ||||||||
Proceeds from the issuance of common stock, net | 17,456,092 | 7,260,869 | ||||||
Tax withholding payments or tax equivalent payments for net share settlement of restricted stock units | (35,786 | ) | (24,251 | ) | ||||
Net cash provided by financing activities | 17,420,306 | 7,236,618 | ||||||
Net increase in cash | 15,310,104 | 6,116,836 | ||||||
Cash at beginning of period | 9,861,575 | 9,604,780 | ||||||
Cash at end of period | $ | 25,171,679 | $ | 15,721,616 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Supplemental disclosures of non-cash investing and financing activities: | ||||||||
Issuance of common stock under cashless warrant exercises | $ | 676 | $ | 0 | ||||
Par value of shares issued for vested restricted stock units | $ | 11 | $ | 18 |
See accompanying notes.
7 |
AETHLON MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 2017
June 30, 2021
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
ORGANIZATION
Aethlon Medical, Inc. and its subsidiary (collectively, “Aethlon”, the “Company”, “we” or “us”) are, is a medical technology company focused on addressing unmet needs in global healthdeveloping products to diagnose and biodefense.treat life and organ threatening diseases. The Aethlon Hemopurifier®Hemopurifier is an earlya clinical-stage therapeuticimmunotherapeutic device designed to combat cancer and life-threatening viral infections. In cancer, the Hemopurifier is designed to deplete the presence of circulating tumor-derived exosomes that promote immune suppression, seed the spread of metastasis and inhibit the benefit of leading cancer therapies. The U.S. Food and Drug Administration, or FDA, has designated the Hemopurifier as a “Breakthrough Device” for two independent indications:
· | the treatment of individuals with advanced or metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes have been shown to participate in the development or severity of the disease; and |
· | the treatment of life-threatening viruses that are not addressed with approved therapies. |
We believe the Hemopurifier can be a substantial advance in the treatment of patients with advanced and metastatic cancer through the clearance of exosomes that promote the growth and spread of tumors through multiple mechanisms. We are currently preparing for the single-use removalinitiation of life-threatening viruses fromclinical trials in patients with advanced and metastatic cancers. We are initially focused on the circulatory systemtreatment of infected individuals. solid tumors, including head and neck cancer, gastrointestinal cancers and other cancers. As we advance our clinical trials, we are in close contact with our clinical sites to navigate and assess the impact of the COVID-19 global pandemic on our clinical trials and current timelines.
On October 4, 2019, the FDA approved our Investigational Device Exemption, or IDE, application to initiate an Early Feasibility Study, or EFS, of the Hemopurifier in patients with head and neck cancer in combination with standard of care pembrolizumab (Keytruda). The primary endpoint for the EFS, which will enroll 10 to12 subjects at a single center, will be safety, with secondary endpoints including measures of exosome clearance and characterization, as well as response and survival rates. This study, which is being conducted at the UPMC Hillman Cancer Center in Pittsburgh, PA, is in the process of recruiting and treating patients.
We also believe the Hemopurifier can be a part of the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already approved treatment countermeasure objectives set forth by the U.S. Government to protect citizens from bioterror and pandemic threats.treatment. In small-scale or early feasibility human studies, the Hemopurifier has been administeredused to treat individuals infected with human immunodeficiency virus, or HIV, Hepatitis-C,hepatitis-C, and Ebola.
Additionally,in vitro, the Hemopurifier has been validateddemonstrated to capture Zika virus, Lassa virus, MERS-CoV, Cytomegalovirus,cytomegalovirus, Epstein-Barr virus, Herpes Simplexsimplex virus, Chikungunya virus, Dengue virus, West Nile virus, Smallpox-relatedsmallpox-related viruses, H1N1 Swine Fluswine flu virus, H5N1 Bird Flubird flu virus, and the reconstructed Spanish flu virus of 1918. In several cases, these validationsstudies were conducted in collaboration with leading government or non-government research institutes. Domestically, we are focused on
On June 17, 2020, the clinical advancementFDA approved a supplement to our open IDE for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier through investigational device exemptions (IDEs) approved by FDA. We recently concludedin patients with SARS-CoV-2/COVID-19 in a feasibilityNew Feasibility Study. This study is designed to demonstrateenroll up to 40 subjects at up to 20 centers in the U.S. Subjects will have established laboratory diagnosis of COVID-19, be admitted to an intensive care unit, or ICU, and will have acute lung injury and/or severe or life threatening disease, among other criteria. Endpoints for this study, in addition to safety, will include reduction in circulating virus as well as clinical outcomes (NCT # 04595903). The initial sites for this trial, Hoag Memorial Hospital Presbyterian in Newport Beach, CA, Hoag Hospital – Irvine in Irvine, CA, Loma Linda Hospital in Loma Linda, CA, and Cooper Medical in Camden, NJ, have completed clinical trial agreements, and have received IRB approval in the case of our device in health-compromised individuals infectedthe Hoag hospitals, and are preparing to open for patient enrollment. Under Single Patient Emergency Use regulations, the Company has also treated two patients with a viral pathogen.COVID-19 with the Hemopurifier.
8 |
We are also the majority owner of Exosome Sciences, Inc. (ESI), or ESI, a company focused on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. Included among ESI’s endeavorsactivities is the advancement of a TauSomeTMTauSome™ biomarker candidate to diagnose Chronic Traumatic Encephalopathy (CTE)chronic traumatic encephalopathy, or CTE, in the living. ESI previously documented that TauSome levels in former NFL players to be nine times higher than same age-group control subjects. Through ESI, we are also developing exosome based biomarkers in patients with, or at risk for, a number of cancers. We consolidate ESI’s activities in our consolidated financial statements.
Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we intendplan to sell this device.the Hemopurifier. 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 treatment technology.
In addition to the foregoing, we are monitoring closely the impact of the COVID-19 global pandemic on our business and have taken steps designed to protect the health and safety of our employees while continuing our operations. Given the level of uncertainty regarding the duration and impact of the COVID-19 pandemic on capital markets and the U.S. economy, we are unable to assess the impact of the worldwide spread of SARS-CoV-2 and the resulting COVID-19 pandemic on our timelines and future access to capital. We are continuing to monitor the spread of COVID-19 and its potential impact on our operations. The full extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition, clinical trials, and preclinical research will depend on future developments that are highly uncertain, including actions taken to contain or treat COVID-19 and their effectiveness, as well as the economic impact on national and international markets.
Our executive offices are located at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123. Our telephone number is (858) 459-7800. Our website address iswww.aethlonmedical.com. www.aethlonmedical.com.
Our common stock is quotedlisted on the Nasdaq Capital Market under the symbol “AEMD.”
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During the ninethree months ended December 31, 2017,June 30, 2021, there have beenwere no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.2021.
BASIS OF PRESENTATIONBasis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, (GAAP)or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 8 of the Securities and Exchange Commission, (SEC)or SEC Regulation S-X. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended March 31, 2017,2021, included in the Company'sCompany’s Annual Report on Form 10-K filed with the SEC on June 28, 2017.24, 2021. The accompanying unaudited condensed consolidated financial statements include the accounts of Aethlon Medical, Inc. and its majority-owned subsidiary. All significant intercompanyinter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the condensed consolidated financial statements as of and for the ninethree months ended December 31, 2017.June 30, 2021, and the condensed consolidated statement of cash flows for the three months ended June 30, 2021. Estimates were made relating to useful lives of fixed assets, valuation allowances, the fair value of warrants, impairment of assets, share-based compensation expense and accruals for clinical trial and research and development expenses. Actual results could differ materially from those estimates. Certain amounts previously reported in the financial statements have been reclassified to conform to the current presentation. Such reclassifications did not affect net loss, equity or cash flows. The accompanying condensed consolidated balance sheet at March 31, 20172021 has been derived from the audited consolidated balance sheet at March 31, 2017,2021, contained in the above referenced 10-K. The results of operations for the ninethree months ended December 31, 2017June 30, 2021 are not necessarily indicative of the results to be expected for the full year or any future interim periods.
Reclassifications
Certain prior year balances within the unaudited condensed consolidated financial statements have been reclassified to conform to the current year presentation.
LIQUIDITY AND GOING CONCERN
Management expects existing cash as of December 31, 2017June 30, 2021 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these interimcondensed consolidated financial statements.
Restricted Cash
To comply with the terms of our new laboratory and office lease, we caused our bank to issue a standby letter of credit, or the L/C, in the amount of $46,726 in favor of the landlord. The L/C is in lieu of a security deposit. In order to support the L/C, we agreed to have our bank withdraw $46,726 from our operating accounts and to place that amount in a restricted certificate of deposit. We have classified that amount as restricted cash, a long-term asset, on our balance sheet.
Basic loss per share is computed by dividing net income available to common stockholdersloss by the weighted average number of common shares outstanding during the period of computation. The weighted average number of common shares outstanding for the three and nine months ended December 31, 2017 includes 46,125 vested restricted stock units. Diluted loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional dilutive 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 December 31, 2017June 30, 2021 and 2016, a total2020, an aggregate of 9,143,480 and 3,810,642 potential common shares, respectively, consisting of shares underlying outstanding stock options, warrants and unvested restricted stock units, and convertible notes payable were excluded, as their inclusion would be antidilutive.
3. RESEARCH AND DEVELOPMENT EXPENSES
Our research and development costs are expensed as incurred. We incurred research and development expenses during the three and nine month periods ended December 31, 2017June 30, 2021 and 2016,2020, which are included in various operating expense line items in the accompanying condensed consolidated statements of operations. Our research and development expenses in those periods were as follows:
Research and Development expenses | ||||||||||||||||
December 31, | December 31, | June 30, | June 30, | |||||||||||||
2017 | 2016 | 2021 | 2020 | |||||||||||||
Three months ended | $ | 129,207 | $ | 178,440 | $ | 587,687 | $ | 377,167 | ||||||||
Nine months ended | $ | 462,640 | $ | 497,075 |
4. FUTURERECENT ACCOUNTING PRONOUNCEMENTS
Management is evaluating significant recent accounting pronouncements that are not yet effective for us, including the new accounting standard on improvements to employee share based payment accounting, ASU 2016-09 (Topic 718), the new accounting standard related to leases, ASU 2016-02 (Topic 842), the new accounting standard for recognition and measurement of financial assets and financial liabilities, and have not yet concluded whether any such pronouncements will have a significant effect on our future consolidated financial statements.
Regarding the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606), which will be effective on April 1, 2018, management believes that as long as its contracts with government entities consist of firm, fixed price arrangements with payments that are triggered by achieving contractually stated milestones that new standard will not have a significant effect on our future consolidated financial statements.
5. CONVERTIBLE NOTES PAYABLE, NET
Convertible Notes Payable, Net consisted of the following at December 31, 2017:
Principal | Unamortized Discount | Net Amount | Accrued Interest | |||||||||||||
Convertible Notes Payable, Net – Non-Current Portion: | ||||||||||||||||
November 2014 10% Convertible Notes | $ | 612,811 | $ | (112,194 | ) | $ | 500,617 | $ | 19,066 | |||||||
December 2016 10% Convertible Notes | 379,780 | (69,531 | ) | 310,249 | 11,820 | |||||||||||
Total Convertible Notes Payable, Net | $ | 992,591 | $ | (181,725 | ) | $ | 810,866 | $ | 30,886 |
During the nine months ended December 31, 2017, we recorded interest expense of $87,641 related to the contractual interest rates of our convertible notes and interest expense of $215,376 related to the amortization of the note discount for a total interest expense of $303,017 related to our convertible notes. All of the unamortized discount at December 31, 2017 related to the note discount established upon the June 2017 amendment to both the November 2014 10% Convertible Notes and the December 2016 10% Convertible Notes (see below).
During the nine months ended December 31, 2016, we recorded interest expense of $47,730 related to the contractual interest rates of our convertible notes, interest expense of $27,641 related to the amortization of deferred financing costs and interest expense of $37,996 related to the amortization of note discounts for a total interest expense of $113,367 related to our convertible notes.
Convertible Notes Payable, Net consisted of the following at March 31, 2017 (our most recent fiscal year end):
Principal | Unamortized Discount | Net Amount | Accrued Interest | |||||||||||||
Convertible Notes Payable, Net – Non-Current Portion: | ||||||||||||||||
November 2014 10% Convertible Notes | $ | 612,811 | $ | (275,363 | ) | $ | 337,448 | $ | 2,555 | |||||||
December 2016 10% Convertible Notes | 680,400 | (498,648 | ) | 181,752 | 2,836 | |||||||||||
Total Convertible Notes Payable, Net | $ | 1,293,211 | $ | (774,011 | ) | $ | 519,200 | $ | 5,391 |
NOVEMBER 2014 10% CONVERTIBLE NOTES
In November 2014, we entered into a subscription agreement with two accredited investors providing for the issuance and sale of (i) convertible promissory notes in the aggregate principal amount of $527,780 (the “Notes”) and (ii) five year warrants to purchase up to 47,125 shares of common stock at a fixed exercise price of $8.40 per share (the “Warrants”). These Notes bear interest at the annual rate of 10% and originally matured on April 1, 2016.
The aggregate gross cash proceeds to us were $415,000 after subtracting legal fees of $35,000, a $27,780 due diligence fee and an original issuance discount of $50,000. We recorded deferred financing costs of $112,780 to reflect the legal fees, due diligence fee and original issuance discount and will amortize those costs over the life of the Notes using the effective interest method.
These Notes are convertible at the option of the holders into shares of our common stock at a fixed price of $5.60 per share, for up to an aggregate of 94,246 shares of common stock. There are no registration requirements with respect to the shares of common stock underlying the Notes or the Warrants.
The estimated relative fair value of Warrants issued in connection with the Notes was recorded as a debt discount and is amortized as additional interest expense over the term of the underlying debt. We recorded debt discount of $240,133 based on the relative fair value of these Warrants. In addition, as the effective conversion price of the Notes was less than market price of the underlying common stock on the date of issuance, we recorded an additional debt discount of $287,647 related to the beneficial conversion feature.
Initial Amendment of the November 2014 10% Convertible Note Terms
On November 12, 2015, we entered into an amendmentApril 1, 2019, the Company adopted ASC Topic 842, Leases, utilizing the alternative transition method allowed for under this guidance. As a result, the Company recorded lease liabilities and right-of-use lease assets of terms (“Amendment$228,694 on its balance sheet as of Terms”) withApril 1, 2019. The lease liabilities represent the two investors that participated in the November 2014 10% Convertible Notes. The Amendment of Terms modified the termspresent value of the subscription agreement, Notes and Warrants held by those investors to, among other things, extended the maturity dateremaining lease payments of the Notes fromCompany’s corporate headquarters lease (see Note 12), discounted using the Company’s incremental borrowing rate as of April 1, 2016 to June 1, 2016, temporarily reduced2019. The corresponding right-of-use lease assets are recorded based on the number of shares that we must reserve with respect to conversion of the Notes, and temporarily suspended the time period during which one of the investors may exercise its Warrants. In exchange for the investors’ agreements in the Amendment of Terms, we paid one of the investors a cash fee of $90,000, which we recorded as deferred financing costs and amortized over the remaining term of the notes.
Second Amendment and Extension of the November 2014 10% Convertible Notes
On June 27, 2016, we and certain investors entered into further Amendments (the “Amendments”) to the Noteslease liabilities and the Warrants.cumulative difference between rent expense and amounts paid under its corporate headquarters lease. The Amendments provideCompany also elected the short-term lease recognition exemption for its laboratory lease. For the laboratory lease that qualified as short-term, the Maturity Date (as defined in the Notes) was extended from June 1, 2016 to July 1, 2017 and that the conversion price per share of the Notes was reduced from $5.60 per share of common stock to $5.00 per share of common stock. In addition, we reduced the purchase price (as defined in the Warrants) from $8.40 per share to $5.00 per share of common stock. In connection with these modifications, each of the investors signed a Consent and Waiver providing its consent under certain restrictive provisions, and waiving certain rights, including a right to participate in certain offerings made by us, under a Securities Purchase Agreement dated June 23, 2015, (the “2015 SPA”) to which we, the investors and certain other investors are parties, in order to facilitate an at-the-market equity program (see Note 6).Company did not recognize ROU assets or lease liabilities at adoption.
Topic 842 also allows lessees and lessors to elect certain practical expedients. The Amendments also increaseCompany elected the principal amount of the Notes to $692,811 (in the aggregate) to (i) include accrued and unpaid interest through June 15, 2016, and (ii) increase the principal amount by $80,000 (in the aggregate) as an extension fee for the extended maturity date of the Notes. With respect to each Note, we entered into an Allonge to Convertible Promissory Note (each, an “Allonge”) reflecting the changes in the principal amount, Maturity Date and conversion price of the Note.following practical expedients:
We also issued to the investors new warrants (the “New Warrants”) to purchase an aggregate of 30,000 shares of common stock with a Purchase Price (as defined in the New Warrants) of $5.00 per share of common stock. We issued the New Warrants in substantially the same form as the prior Warrants, and the New Warrants will expire on November 6, 2019, the same date on which the prior Warrants will expire.
The modification of the Notes was evaluated under FASB Accounting Standards Codification (“ASC”) Topic No. 470-50-40, “Debt Modification and Extinguishments” (“ASC 470-50-40”). Therefore, according to the guidance, the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting. As a result, we recorded a loss on debt extinguishment of $536,889 and recognized an extension fee expense of $80,000, which are included in other (income) expenses in the accompanying condensed consolidated statements of operations. The debt extinguishment is comprised from the fair value of prior warrants issued in connection with the Notes of $287,676, as well as $325,206 related to beneficial conversion feature and offset by debt discount of $75,993. The beneficial conversion feature is a result of the effective conversion price of the new Notes being less than the market price of the underlying common stock on the date of modification.
Third Amendment and Extension of the November 2014 10% Convertible Notes
In connection with the issuance of the December 2016 10% Convertible Notes, the conversion price of the November 2014 10% Convertible Notes was reduced from $5.00 to $4.00 per share and the expiration date of the November 2014 10% Convertible Notes was extended from July 1, 2017 to July 1, 2018.
The modification of the Notes was evaluated under ASC 470-50-40 and the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting. As a result, we recorded a gain on debt extinguishment of $58,691, which is included in other (income) expenses in the accompanying condensed consolidated statements of operations. The recording of the modified Notes resulted in a beneficial conversion of $233,748 which is the result of the effective conversion price of the new Notes being less than the market price of the underlying common stock on the date of modification.
June 2017 Amendment to the November 2014 10% Convertible Notes
In June 2017, we agreed with the holders of the November 2014 10% Convertible Notes to an extension of the expiration dates of the notes from July 1, 2018 to July 1, 2019 in exchange for the reduction of the conversion price of those notes from $4.00 per share to $3.00 per share. The modification of the Notes was evaluated under ASC 470-50-40 and the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting. Under the extinguishment accounting we recorded a loss on debt extinguishment of $178,655 and recalculated a revised debt discount on the notes.
The following table shows the changes to the principal balance of the November 2014 10% Convertible Notes:
Activity in the November 2014 10% Convertible Notes | ||||
Initial principal balance | $ | 527,780 | ||
Increase in principal balance under the second amendment (see above) | 165,031 | |||
Conversions during the fiscal year ended March 31, 2017 | (80,000 | ) | ||
Balance as of December 31, 2017 | $ | 612,811 |
DECEMBER 2016 10% CONVERTIBLE NOTES
In December 2016, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with two accredited investors (collectively, the “Holders”), pursuant to which the Holders purchased an aggregate of $680,400 principal amount of Notes (inclusive of due diligence fee of $30,000 deemed paid as a subscription amount in the form of a Note in the principal amount of $32,400) for an aggregate cash subscription amount of $600,000 and (b) warrants to purchase 127,575 shares of Common Stock (collectively, the “Warrants”).
· | Transitional practical expedients, which must be elected as a package and applied consistently to all of the Company’s leases: | |
The Company need not reassess whether any expired or existing contracts are or contain leases. | ||
The Company need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be classified as finance leases). | ||
The Company need not reassess initial direct costs for any existing leases. |
The Notes bear interest at the rate of 10% per annum, and the principal amount and all accrued and unpaid interest thereon is convertible into shares of our common stock at a $4.00 per share conversion price, which is subject to customary adjustment provisions for stock splits, dividends, recapitalizations and the like. The Notes mature on July 1, 2018 and are subject to customary and usual terms for events of default and the like. Each Holder has contractually agreed to restrict its ability to convert its Note such that the number of shares of the Common Stock held by the Holder and its affiliates after such exercise does not exceed 4.99% of our then issued and outstanding shares of Common Stock.
· | Hindsight practical expedient. The Company elected the hindsight practical expedient in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Company’s right-of-use assets. |
The Warrants issued to the Holders are exercisable for a period of five years from the date of issuance at an exercise price of $4.50, subject to adjustment. A Holder may exercise a Warrant by paying the exercise price in cash or by exercising the Warrant on a cashless basis. In the event a Holder exercises a Warrant on a cashless basis, we will not receive any proceeds. The exercise price of the Warrants is subject to customary adjustments provision for stock splits, stock dividends, recapitalizations and the like. Each Holder has contractually agreed to restrict its ability to exercise its Warrant such that the number of shares of the Common Stock held by the Holder and its affiliates after such exercise does not exceed 4.99% of our then issued and outstanding shares of Common Stock.
The estimated relative fair value of Warrants issued in connection with the Notes was recorded as a debt discount and is being amortized as additional interest expense over the term of the underlying debt. We recorded debt discount of $232,718 based on the relative fair value of these Warrants. In addition, as the effective conversion price of the Notes was less than market price of the underlying common stock on the date of issuance, we recorded an additional debt discount of $262,718 related to the beneficial conversion feature. We also recorded deferred financing costs of $102,940, which was composed of an 8% original issue discount of $50,400, a $30,000 due diligence fee (which was paid in the form of a note), $22,500 in legal fees, and a $40 bank charge. The combination of the above items led to a combined discount against the convertible notes of $598,376.
June 2017 Amendment to the December 2016 10% Convertible Notes
In June 2017, we agreed with the holders of the December 2016 10% Convertible Notes to an extension of the expiration dates of the notes from July 1, 2018 to July 1, 2019 in exchange for the reduction of the conversion price of those notes from $4.00 per share to $3.00 per share. The modification of the notes was evaluated under ASC 470-50-40 and the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting. Under the extinguishment accounting we recorded a loss on debt extinguishment of $198,254 and recalculated a revised debt discount on the notes.
The following table shows the changes to the principal balance of the December 2016 10% Convertible Notes:
Activity in the December 2016 10% Convertible Notes | ||||
Initial principal balance | $ | 680,400 | ||
Conversions during the nine months ended December 31, 2017 | (300,620 | ) | ||
Balance as of December 31, 2017 | $ | 379,780 |
6.5. EQUITY TRANSACTIONS IN THE NINETHREE MONTHS ENDED DECEMBER 31, 2017
October 2017 Public Offering
On October 4, 2017, we consummated a public offering of 5,454,546 shares of common stock and warrants to purchase 5,454,546 shares of common stock, for total gross proceeds of $6.0 million. The offering was priced at $1.10 per unit with each unit comprised of one share of common stock and one common stock purchase warrant. Neither the warrants nor the units are listed on an exchange and therefore do not trade. The warrants carry a five-year term with an exercise price of $1.10 per share. The net proceeds of the offering were $5,289,735. H.C. Wainwright & Co. acted as exclusive placement agent for the offering.
Warrant Exercises
In December 2017, four investors that participated in the October 2017 Public Offering exercised 218,600 warrants for aggregate cash proceeds to us of $240,460 before expenses.JUNE 30, 2021
Common Stock Sales Agreement with H.C. Wainwright & Co., LLC
On June 28, 2016,March 22, 2021, we entered into a Common Stock Salesan At the Market Offering Agreement, (the “Agreement”)or the Offering Agreement, with H.C. Wainwright & Co., LLC, (“H.C. Wainwright”) which establishes an at-the-market equity programor Wainwright, as sales agent, pursuant to which we may offer and sell shares of our common stock, from time to time as set forth in the Offering Agreement.
The Agreement provides foroffering was registered under theSecurities Act of 1933, as amended, or Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the SEC and declared effective on March 30, 2020. We filed a prospectus supplement with the SEC, dated March 22, 2021, in connection with the offer and sale of the shares of ourcommon stock, pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $12,500,000 (the “Shares”).$5,080,000 from time to time.
Subject to the terms and conditions set forth in the Offering Agreement, H.C. Wainwright willagreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the Sharesshares under the Offering Agreement from time to time, based upon our instructions. We have provided H.C. Wainwright with customary indemnification rights under the Offering Agreement, and H.C. Wainwright will beis entitled to a commission at a fixed rate equal to three percent (3.0%) of the gross proceeds per Shareshare sold. In addition, we have agreed to payreimburse Wainwright for certain specified expenses incurred by H.C. Wainwright in connection with entering into the Agreement, including up to $50,000 of the fees and disbursements of their counsel.Offering Agreement. The Offering Agreement will terminate upon the sale of all of the Shares under the Agreement unless terminated earlierwritten termination by either party as permitted under the Agreement (see Note 14).thereunder.
Sales of the Shares,shares, if any, under the Offering Agreement shallwill be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made by means of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed with H.C. Wainwright. We have no obligation under the Offering Agreement to sell any of the Shares,shares, and, at any time, we may suspend offers under the Offering Agreement or terminate the Agreement.agreement.
In July 2016, we commenced sales of common stock under our Common Stock Sales Agreement with H.C. Wainwright. In the sixthree months ended SeptemberJune 30, 2017,2021, we raised aggregate net proceeds under the Offering Agreement described above of $1,650,314 (net$4,947,785, net of $51,157$126,922 in commissions to H.C. Wainwright and $3,750$2,154 in other offering expenses) under this agreementexpense through the sale of 601,504 shares of our common stock at an average price of $2.74$ per share of net proceeds. No further sales can be made under the Offering Agreement.
Registered Direct Financing
In connection with our October 2017 Public Offering (see above), we agreed to restrict our ability to use the ATM facility for a 90 day period immediately post-closing.
Restricted Shares Issued for Services
During the ninethree months ended December 31, 2017,June 30, 2021, we issued 15,000sold an aggregate of shares of restrictedour common stock at a purchase price of $2.24 per share of $ , for aggregate net proceeds to us of $11,659,044 after deducting fees payable to Maxim Group LLC, the market price at time of issuance, in payment for investor relations consulting services valued at $33,600 based on the grant date closing market price of our common stock.
Share for Warrant Exchanges
During the nine months ended December 31, 2017, we agreed with two individual investors to exchange 11,497 restrictedplacement agent and other offering expenses. These shares for the cancellation of 22,993 warrants and we entered into an Exchange Agreement with two institutional investors under which we issued 57,844 restricted shares in exchange for the cancellation of 77,125 warrants held by those investors. We also agreed with those institutional investors that they would extend the expiration dates of convertible notes held by those investors from July 1, 2018 to July 1, 2019 in exchange for the reduction of the conversion price of those notes from $4.00 per share to $3.00 per share (see Note 5).
Additionally, we entered into anwere sold through a securities purchase agreement with certain institutional investors. The shares were issued pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the SEC on March 19, 2020, and was declared effective on March 30, 2020 (File No. 333-237269) and a former placement agent to issue 5,500 restricted shares in exchange for the cancellation of 11,000 warrants held by that placement agent. We measured the fair value of the shares issued and the fair value of the warrants exchanged for those shares and recorded losses for each of those exchanges based on the changes in fair value between the instruments exchanged. Based upon the fair value of the shares issued and warrants exchanged, we recorded a loss of $130,214 during the nine months ended December 31, 2017 for all of the above share for warrant exchanges.
Stock Option Issuances
During the nine months ended December 31, 2017, we issued options to four of our employees to purchase 34,500 shares of common stock at an exercise price of $1.68 per share, the closing price on the date of the approval of the option grants by our compensation committee (see Note 9).
Termination of Restricted Share Grant
During the nine months ended December 31, 2017, we terminated a previously recorded but unissued share issuance of 68,000 shares under a fully vested restricted stock grant to our CEO and issued to him 32,674 shares as a net settlement of shares and the Company paid the withholding taxes associated with that share issuance in return for the cancellation of 35,326 shares. The compensation cost of that restricted stock grant had been fully recorded over prior fiscal years, therefore no expense was recorded regarding this net issuance.prospectus supplement thereunder.
11 |
Warrant Exercises
In the three months ended June 30, 2021, pursuant to the exercise of outstanding warrants to purchase 820,938 from institutional investors.
shares of our common stock, we received proceeds in the amount of $Also in the three months ended June 30, 2021, pursuant to the exercise of 874,664 outstanding warrants on a cashless basis, we issued 675,554 shares of our common stock. The difference of 199,110 shares of common stock issuable pursuant to the warrants were cancelled.
Stock Option Exercises
In the three months ended June 30, 2021, former employees paid us an aggregate of $28,325 for the exercise of outstanding options to purchase shares of our common stock.
Restricted Stock Unit Grants to Directors and Executive Officers
On August 9, 2016,In 2012, as amended through October 30, 2020, our Board of Directors granted RSUs to certain of our officers and directors and effective November 7, 2017, 127,659 additional RSUs were granted to our directors pursuant toestablished the 2012 Non-Employee Directors Compensation Program.Program, to provide for cash and equity compensation for persons serving as non-employee directors of the Company. Under this program, each new director receives either stock options or a grant of restricted stock units, or RSUs, as well as an annual grant of RSUs at the beginning of each fiscal year. The RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock for vested RSUs.upon vesting.
DuringOn April 1, 2021, pursuant to the nine months endedterms of the Company’s 2012 Non-Employee Directors Compensation Program, as amended, or the Directors Plan, the Compensation Committee of the Board granted RSUs under the Company’s 2020 Equity Incentive Plan, or 2020 Plan, to each non-employee director of the Company. The Director’s Plan provides for a grant of $50,000 worth of RSUs at the beginning of each fiscal year, priced at the average for the closing prices for the five days preceding and including the date of grant, or $2.06 per share as of April 1, 2021. Each eligible director was granted an RSU in the amount of shares under the 2020 Plan. The RSU’s are subject to vesting in four equal quarterly installments on June 30, September 30, December 31, 2017, 138,3752021, and March 31, 2022, subject to the recipient’s continued service with the Company on each such vesting date.
In June 2021, executives were exchanged into the same number of shares of our common stock. As our executives elected to net settle a portion of their RSU’s in exchange for the Company paying the related withholding taxes on the share issuance, 71,081 of the RSUs were cancelled and we issued a net 67,294 shares to our executives (see Note 9).
During the nine months ended December 31, 2017, 63,829 RSUs held by our outsidenon-employee directors were exchanged into the same number of shares of our common stock. As one of ourAll three outsidenon-employee directors elected to return 40% of histheir vested RSUs in exchange for cash, in order to pay histheir withholding taxes on the share issuances, 10,638resulting in of the vested RSUs werebeing cancelled and we paid $12,127 in exchange for $ in aggregate cash proceeds to that outside director (see Note 9).those independent directors.
7. RSUs outstanding that have vested as of, and are expected to vest subsequent to, June 30, 2021 are as follows:
Schedule of RSU activity | ||||
Number of RSUs | ||||
Vested | 0 | |||
Expected to vest | 54,664 | |||
Total | 54,664 |
6. RELATED PARTY TRANSACTIONS
Due to Related Parties
During the three months ended December 31, 2017,June 30, 2021, we accrued unpaid Board fees of $35,350 which are$52,000 owed to our outsidenon-employee directors as of December 31, 2017. On March 31, 2017, we had accrued unpaid board feesJune 30, 2021. Amounts due to related parties were comprised of $28,250 owed to our outside directors.the following items:
Due to related parties | ||||||||
June 30, 2021 | March 31, 2021 | |||||||
Accrued Board fees | $ | 52,000 | $ | 52,000 | ||||
Accrued vacation to all employees | 67,578 | 66,520 | ||||||
Total due to related parties | $ | 119,578 | $ | 118,520 |
8.
12 |
7. OTHER CURRENT LIABILITIES
Other current liabilities were comprised of the following items:
December 31, | March 31, | |||||||
2017 | 2017 | |||||||
Accrued interest | $ | 30,886 | $ | 5,391 | ||||
Other accrued liabilities | 29,648 | 64,076 | ||||||
Total other current liabilities | $ | 60,534 | $ | 69,467 |
Other Current Liabilities | ||||||||
June 30, | March 31, | |||||||
2021 | 2021 | |||||||
Accrued separation expenses for former executive (see Note 12) | $ | 167,743 | $ | 284,270 | ||||
Accrued professional fees | 468,644 | 477,366 | ||||||
Total other current liabilities | $ | 636,387 | $ | 761,636 |
The following tables summarize share-based compensation expenses relating to Restricted Stock Units (“RSU”s)RSUs and stock options granted and the effect on basic and diluted loss per common share during the three and nine month periods ended December 31, 2017June 30, 2021 and 2016:2020:
Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | |||||||||||||
Vesting of stock options and restricted stock units | $ | 323,162 | $ | 306,159 | $ | 887,607 | $ | 1,880,150 | ||||||||
Total stock-based compensation expense | $ | 323,162 | $ | 306,159 | $ | 887,607 | $ | 1,880,150 | ||||||||
Weighted average number of common shares outstanding – basic and diluted | 14,950,701 | 7,927,031 | 10,927,106 | 7,768,682 | ||||||||||||
Basic and diluted loss per common share attributable to stock-based compensation expense | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.24 | ) |
Share-based compensation expense relating to RSUs | ||||||||
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||
Vesting of stock options and restricted stock units | $ | 120,154 | $ | 84,207 | ||||
Total stock-based compensation expense | $ | 120,154 | $ | 84,207 | ||||
Weighted average number of common shares outstanding – basic and diluted | 12,828,816 | 9,632,977 | ||||||
Basic and diluted loss per common share attributable to stock-based compensation expense | $ | (0.01 | ) | $ | (0.01 | ) |
All of the stock-based compensation expense recorded during the ninethree months ended December 31, 2017June 30, 2021 and 2016,2020, which totaled $887,607$ and $1,880,150,$ , respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations. Stock-based compensation expense recorded during the ninethree months ended December 31, 2017June 30, 2021 and 20162020 represented an impact on basic and diluted loss per common share of $(0.08)$(0.01) and $(0.24)$(0.01), respectively.
We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the ninethree months ended December 31, 2017June 30, 2021 was insignificant.
Restricted Stock Unit Grants to Directors and Executive Officers
On August 9, 2016, our Board of Directors granted RSUs to certain of our officers and directors and effective November 7, 2017, 127,659 additional RSUs were granted to our directors pursuant to the 2012 Non-Employee Directors Compensation Program. The RSUs represent the right to be issued on a future date shares of our common stock for vested RSUs. Our Compensation Committee recommended the grants based on a compensation assessment provided by a third-party compensation consulting firm engaged by us that developed a peer group of companies for market assessment and analyzed compensation at such companies.
The RSUs were granted under our Amended 2010 Stock Incentive Plan and we recorded expense of $842,095 in the nine months ended December 31, 2017 related to the RSU grants.
RSUs outstanding that have vested and are expected to vest as of December 31, 2017 are as follows:
During the nine months ended December 31, 2017, 138,375 vested RSUs held by our executives were exchanged into the same number of shares of our common stock. As our executives elected to net settle a portion of their RSU’s in exchange for the Company paying the related withholding taxes on the share issuance, 71,081 of the RSUs were cancelled and we issued a net 67,294 shares to our executives.
During the nine months ended December 31, 2017, 63,829 RSUs held by our outside directors were exchanged into the same number of shares of our common stock. As one of our three outside directors elected to return 40% of his RSUs in exchange for cash in order to pay his withholding taxes on the share issuances, 10,638 of the RSUs were cancelled and we paid $12,127 in cash to that outside director.
Stock Option Activity
During the ninethree months ended December 31, 2017,June 30, 2021, we issued optionsa stock option grant to fourour CEO for the purchase of shares of our employees to purchase 34,500 shares of common stock at aunder our 2020 Plan. The purchase price of $1.68for the shares subject to the option is $ per share, the closing pricefair market value of the common stock on the date of the approvalgrant. The shares subject to the option are subject to vesting over four years, commencing on the date of grant, or Vesting Commencement Date, with twenty-five percent (25%) of the shares subject to the option grants by our compensation committee. There were novesting on the first anniversary of the Vesting Commencement Date and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, in each case subject to Dr. Fisher’s Continuous Service (as defined in the 2020 Plan) through each vesting date.
We did not issue any stock option grantsoptions during the ninethree months ended December 31, 2016.June 30, 2020.
Options outstanding that have vested and are expected to vest as of December 31, 2017 are as follows:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | ||||||||||
Vested | 432,047 | $ | 10.98 | 3.64 | ||||||||
Expected to vest | 27,000 | $ | 1.68 | 9.46 | ||||||||
Total | 459,047 |
13 |
The following outlines the significant weighted average assumptions usedOptions outstanding that have vested as of June 30, 2021 and options that are expected to estimate the fair value information presented, with respectvest subsequent to stock option grants utilizing the Binomial Lattice option pricing models at, and during the nine months ended December 31, 2017:
The expected volatility was based on the historic volatility. The expected life of options granted was based on the "simplified method"June 30, 2021 are as described in the SEC's guidance due to changes in the vesting terms and contractual life of current option grants compared to our historical grants.follows:
Options outstanding that have vested and are expected to vest | ||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | ||||||||||
Vested | 87,210 | $ | 8.83 | |||||||||
Expected to vest | 926,449 | $ | 2.76 | |||||||||
Total | 1,013,659 |
A summary of stock option activity during the ninethree months ended December 31, 2017June 30, 2021 is presented below:
Schedule of stock option activity | ||||||||||||||||||||||||
Amount | Range of Exercise Price | Weighted Average Exercise Price | Amount | Range of Exercise Price | Weighted Average Exercise Price | |||||||||||||||||||
Stock options outstanding at March 31, 2017 | 432,047 | $3.80-$20.50 | $10.98 | |||||||||||||||||||||
Stock options outstanding at March 31, 2021 | 844,089 | $ | 1.28 - 142.50 | $ | 3.07 | |||||||||||||||||||
Exercised | – | – | – | (11,562 | ) | $ | 2.45 | $ | 2.45 | |||||||||||||||
Granted | 27,000 | $1.68 | $1.68 | 266,888 | $ | 5.17 | $ | 5.17 | ||||||||||||||||
Cancelled/Expired | – | – | – | (85,756 | ) | $ | 2.45 - 18.75 | $ | 7.22 | |||||||||||||||
Stock options outstanding at December 31, 2017 | 459,047 | $1.68-$20.50 | $10.44 | |||||||||||||||||||||
Stock options exercisable at December 31, 2017 | 432,047 | $3.80-$20.50 | $10.98 | |||||||||||||||||||||
Stock options outstanding at June 30, 2021 | 1,013,659 | $ | 1.28 - 142.50 | $ | 2.76 | |||||||||||||||||||
Stock options exercisable at June 30, 2021 | 87,210 | $ | 1.28 - 142.50 | $ | 8.83 |
On December 31, 2017,June 30, 2021, our stock options had noan intrinsic value since theof approximately $ based on our closing share price of $ on that date of $1.13 per share was below the weighted average exercise price of our stock options.date.
At December 31, 2017,June 30, 2021, there was approximately $2.2 million$ of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 1.72 years.
10.
9. WARRANTS
During the ninethree months ended December 31, 2017,June 30, 2021 and 2020, we issued 5,618,182 warrants, including 163,636 warrants issued to the placement agent, H.C. Wainwight & Co., in connection with our October 2017 Public Offering (see Note 6). Those warrants have a five year term and have an exercise price of $1.10 per share.did not issue any warrants.
The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to warrants utilizing the Binomial Lattice option pricing models, issued during the nine months ended December 31, 2017:
A summary of warrant activity during the ninethree months ended December 31, 2017June 30, 2021 is presented below:
Amount | Range of Exercise Price | Weighted Average Exercise Price | ||||||
Warrants outstanding at March 31, 2017 | 2,604,096 | $2.10 - $12.05 | $3.64 | |||||
Exercised | (218,600 | ) | $1.10 | $1.10 | ||||
Issued | 5,618,182 | $1.10 | $1.10 | |||||
Cancelled/Expired | (139,357 | ) | $5.00 –$15.00 | $6.52 | ||||
Warrants outstanding at December 31, 2017 | 7,864,321 | $1.10 - $12.05 | $1.38 | |||||
Warrants exercisable at December 31, 2017 | 7,864,321 | $1.10 - $12.05 | $1.38 |
Schedule of Warrant Activity | ||||||||||||
Amount | Range of Exercise Price | Weighted Average Exercise Price | ||||||||||
Warrants outstanding at March 31, 2021 | 1,991,973 | $ | 1.50 - 99.00 | $ | 5.23 | |||||||
Exercised | (1,206,721 | ) | $ | 1.50 – 2.50 | $ | 2.21 | ||||||
Cancelled/Expired | (199,111 | ) | $ | 1.50 – 2.75 | $ | 2.74 | ||||||
Warrants outstanding at June 30, 2021 | 586,141 | $ | 1.50 – 99.00 | $ | 12.28 | |||||||
Warrants exercisable at June 30, 2021 | 586,141 | $ | 1.50 – 99.00 | $ | 12.28 |
14 |
The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to warrants utilizing the Binomial Lattice option pricing models issued during the nine months ended December 31, 2016:
The expected volatility was based on the historic volatility. The expected life of options granted was based on the "simplified method" as described in the SEC's guidance due to changes in the vesting terms and contractual life of current option grants compared to our historical grants.
Based on the above assumptions, we valued the warrants that were exchanged for common stock (see Note 6) during the nine months ended December 31, 2017 at $130,214.
11. 10. GOVERNMENT CONTRACTS AND RELATED REVENUE RECOGNITION
National Institutes of Health (“NIH”)
We entered into a contractthe following contracts with the National Cancer Institute, or NCI, part of the National Institutes of Health, or NIH, onover the past two years:
Phase 2 Melanoma Cancer Contract
On September 12, 2019, the NCI awarded to us an SBIR Phase II Award Contract, for NIH/NCI Topic 359, entitled “A Device Prototype for Isolation of Melanoma Exosomes for Diagnostics and Treatment Monitoring”, or the Award Contract. The Award Contract amount is $1,860,561 and runs for the period from September 16, 2019 through September 15, 2017.2021.
The work to be performed pursuant to this Award Contract will focus on melanoma exosomes. This award is underwork follows from our completion of a Phase I contract for the NIH’s Small Business Innovation Research (SBIR)Topic 359 solicitation that ran from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program which is designedinvolve the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform.
We recorded $114,849 of government contract revenue on the Phase 2 Melanoma Cancer Contract in the three months ended June 30, 2021. That revenue related to fund early stage small businesseswork performed in the three months ended March 31, 2021 that are seekinghad previously been recorded as deferred revenue as a result of falling short on certain milestones. We then achieved those March period milestones in the June quarter and therefore recorded the previously deferred revenue as government contract revenue. We recorded the invoice related to commercialize innovative biomedical technologies. The titlethe June period as deferred revenue since we fell short of certain milestones related to that period.
We did not record any government contract revenue during the three months ended June 30, 2020 as we did not achieve certain milestones for that period.
Subaward with University of Pittsburgh
In 2020, we entered into a cost reimbursable subaward arrangement with the University of Pittsburgh in connection with an NIH contract entitled “Depleting Exosomes to Improve Responses to Immune Therapy in HNNCC.” Our share of the award is SBIR Topic 359 Phase 1 Device Strategy for Selective Isolation$256,750. We recorded $17,117 of Oncosomes and Non-Malignant Exosomes.
The award from NIH is a firm, fixed-price contract with potential total paymentsrevenue related to us of $299,250 over the course of nine months.
Fixed price contracts require the achievement of multiple, incremental milestones to receive the full award during each period of the contract. The NIH also has the unilateral right to require us to perform additional work under an option period for an additional fixed amount of $49,800.
Under the terms of the contract, we must perform certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed payment amounts.
In October 2017, we completed the first milestone on this contract and invoiced NIH for the $74,812.50 payment associated with that milestone.
The details of that milestone were as follows:
Milestone HHSN261201700022C-01 – Prepare and present the kick-off presentation to NIH. The milestone payment was $74,812.50. 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 prepared and presented the kick-off presentation to NIH. The report was accepted by NIH and the invoice was submitted thereafter.
Defense Advanced Research Projects Agency (“DARPA”)
We entered into a contract with 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 resultssubaward 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 performed certain incremental work towards the achievement of specific milestones against which we invoiced the government for fixed payment amounts.
Originally, only the base year (year one of the contract) was effective for the parties; however, DARPA subsequently exercised its option on the remaining years of the contract. The milestones were comprised of planning, engineering and clinical targets, the achievement of which in some cases required the participation and contribution of third-party participants under the contract. We commenced work under the contract in October 2011 and completed the contract in September 2016.
In February 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 reduced the possible payments under the contract by $858,469 over years three through five.
The DARPA contract concluded on September 30, 2016.
In the nine months ended December 31, 2016, we invoiced the U.S. Government for the final two milestones under our DARPA contract in the aggregate amount of $387,438.
June 30, 2021.
The details of those milestones were as follows:
Milestone 2.6.1.3 - Quantify the degree to which the MERS virus can be extracted from circulation in vitro using miniature Hemopurifiers. The milestone payment was $193,719. 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 quantified the degree to which the MERS virus can be extracted from circulation in vitro using miniature Hemopurifiers. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.
Milestone 2.6.1.4 – Prepare and present Final Report for DARPA. The milestone payment was $193,719. 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 prepared and presented the Final Report for DARPA. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.
12. 11. 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. We record discrete financial information for ESI and our chief operating decision maker reviews ESI’s operating results in order to make decisions about resources to be allocated to the ESI segment and to assess its performance.
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.
15 |
The following tables set forth certain information regarding our segments:
Schedule of segment activity | ||||||||
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Aethlon | $ | 131,966 | $ | 0 | ||||
ESI | 0 | 0 | ||||||
Total Revenues | $ | 131,966 | $ | 0 | ||||
Operating Losses: | ||||||||
Aethlon | $ | (2,092,638 | ) | $ | (1,406,103 | ) | ||
ESI | (5,675 | ) | (4,315 | ) | ||||
Total Operating Loss | $ | (2,098,313 | ) | $ | (1,410,418 | ) | ||
Net Losses: | ||||||||
Aethlon | $ | (2,092,763 | ) | $ | (1,406,831 | ) | ||
ESI | (5,675 | ) | (4,315 | ) | ||||
Net Loss Before Non-Controlling Interests | $ | (2,098,438 | ) | $ | (1,411,146 | ) | ||
Cash: | ||||||||
Aethlon | $ | 25,171,482 | $ | 15,721,419 | ||||
ESI | 197 | 197 | ||||||
Total Cash | $ | 25,171,679 | $ | 15,721,616 | ||||
Total Assets: | ||||||||
Aethlon | $ | 25,866,814 | $ | 16,427,057 | ||||
ESI | 197 | 197 | ||||||
Total Assets | $ | 25,867,011 | $ | 16,427,254 | ||||
Capital Expenditures: | ||||||||
Aethlon | $ | 38,374 | $ | 17,809 | ||||
ESI | 0 | 0 | ||||||
Capital Expenditures | $ | 38,374 | $ | 17,809 | ||||
Depreciation and Amortization: | ||||||||
Aethlon | $ | 11,666 | $ | 8,770 | ||||
ESI | 0 | 0 | ||||||
Total Depreciation and Amortization | $ | 11,666 | $ | 8,770 | ||||
Interest Expense: | ||||||||
Aethlon | $ | (125 | ) | $ | (728 | ) | ||
ESI | 0 | 0 | ||||||
Total Interest Expense | $ | (125 | ) | $ | (728 | ) |
Nine Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Revenues: | ||||||||
Aethlon | $ | 74,813 | $ | 392,073 | ||||
ESI | – | – | ||||||
Total Revenues | $ | 74,813 | $ | 392,073 | ||||
Operating Losses: | ||||||||
Aethlon | $ | (3,495,189 | ) | $ | (4,478,631 | ) | ||
ESI | (64,860 | ) | (115,443 | ) | ||||
Total Operating Loss | $ | (3,560,049 | ) | $ | (4,594,074 | ) | ||
Net Losses: | ||||||||
Aethlon | $ | (4,308,807 | ) | $ | (5,497,978 | ) | ||
ESI | (64,860 | ) | (115,443 | ) | ||||
Net Loss Before Non-Controlling Interests | $ | (4,373,667 | ) | $ | (5,613,421 | ) | ||
Cash: | ||||||||
Aethlon | $ | 5,610,061 | $ | 625,531 | ||||
ESI | 738 | 3,084 | ||||||
Total Cash | $ | 5,610,799 | $ | 628,615 | ||||
Total Assets: | ||||||||
Aethlon | $ | 5,745,031 | $ | 752,578 | ||||
ESI | 5,723 | 37,019 | ||||||
Total Assets | $ | 5,750,754 | $ | 789,597 | ||||
Capital Expenditures: | ||||||||
Aethlon | $ | 23,705 | $ | 2,961 | ||||
ESI | – | – | ||||||
Capital Expenditures | $ | 23,705 | $ | 2,961 | ||||
Depreciation and Amortization: | ||||||||
Aethlon | $ | 27,402 | $ | 16,322 | ||||
ESI | – | 10,043 | ||||||
Total Depreciation and Amortization | $ | 27,402 | $ | 26,365 | ||||
Interest Expense: | ||||||||
Aethlon | $ | (306,495 | ) | $ | (115,308 | ) | ||
ESI | – | – | ||||||
Total Interest Expense | $ | (306,495 | ) | $ | (115,308 | ) |
16 |
13. 12. COMMITMENTS AND CONTINGENCIES
Lease CommitmentsCONTRACTUAL OBLIGATIONS AND COMMITMENTS
There have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations and Commitments” as contained in our Annual Report on Form 10-K for the year ended March 31, 2021, filed by us with the SEC on June 24, 2021.
SEPARATION AGREEMENT
On October 30, 2020, we entered into a Separation Agreement with Timothy Rodell, M.D., our former Chief Executive Officer, or the Separation Agreement. Under the Separation Agreement, we agreed to pay Dr. Rodell a total of $444,729 and to cover his medical insurance costs over a twelve-month period that began on November 1, 2020, all in accordance with the terms of his employment agreement with the Company.
The total expense accrued at June 30, 2021 relating to the Separation Agreement, was $167,743 (see Note 7).
LEASE COMMITMENTS
We currently rentlease approximately 2,600 square feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego CA, California 92123 at the rate of $6,054 per month onunder a four-year39-month gross plus utilities lease that commenced on December 1, 2014 and expires in May 2018. on August 31, 2021. We recently extended that lease by one month to September 30, 2021. The current rental rate under the lease extension is $8,265 per month.
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 $4,548$6,148 per month on a one-year lease that originally was extended to an expirationexpire on November 30, 2020. In December 2020, we entered into a short-term lease extension running from December 1, 2020 through the completion date of November 30, 2018.our construction of our planned new laboratory space which is adjacent to our current laboratory.
Rent expense, which is included in general and administrative expenses, approximated $100,000$48,000 and $114,000$44,000 for the ninethree month periods ended December 31, 2017June 30, 2021 and 2016,2020, respectively.
Legal MattersFuture minimum lease payments under the Granite Ridge Lease as of June 30, 2021, are as follows:
Lease commitments | ||||
July 1, 2021 through August 31, 2021 | $ | 16,835 | ||
Less: discount | 0n/a | |||
Total lease liability | $ | 16,835 |
During the fiscal year ended March 31, 2020, we adopted ASU Topic 842 on April 1, 2019 utilizing the alternative transition method allowed for under this guidance. As a result, we recorded lease liabilities and right-of-use lease assets of $228,694 on our balance sheet as of April 1, 2019. The lease liabilities represent the present value of the remaining lease payments of our corporate headquarters lease, discounted using our incremental borrowing rate as of April 1, 2019. The corresponding right-of-use lease assets are recorded based on the lease liabilities and the cumulative difference between rent expense and amounts paid under its corporate headquarters lease. We also elected the short-term lease recognition exemption for our laboratory lease. For the laboratory lease that qualified as short-term, we did not recognize right-of-use assets or lease liabilities at adoption.
17 |
In December 2020, we entered into an agreement to lease approximately 2,823 square feet of office space and 1,807 square feet of laboratory space. The agreement carries a term of 63 months and we will commence paying rent when we take occupancy of those spaces, which is expected to occur in the second half of 2021. Upon taking occupancy of the space, we will record lease liabilities and right-of-use lease assets related to this agreement on our balance sheet. We estimate that the present value of the contractual payments under the lease agreement to be approximately $806,000.
In addition, the new lease agreement required us to post a standby letter of credit in favor of the landlord in the amount of $46,726 in lieu of a security deposit. We arranged for our bank to issue the standby letter of credit in the fiscal year ended March 31, 2021 and transferred a like amount to a restricted certificate of deposit which secured the bank’s risk in issuing that letter of credit. We have classified that restricted certificate of deposit on our balance sheet as restricted cash.
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. We are not presently a party to any pending or threatened legal proceedings.
14. 13. SUBSEQUENT EVENTS
Management has evaluated events subsequent to December 31, 2017June 30, 2021 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange CommissionSEC for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
Warrant Exercises –Subsequent to December 31, 2017, sixteen investors that participated in the October 2017 public offering exercised 852,700 warrants for aggregate cash proceeds to us of $937,970 before expenses.
ATM Sales-- Subsequent to December 31, 2017, we sold common stock under our Common Stock Sales Agreement with H.C. Wainwright (see Note 6) and from those sales raised net proceeds of $454,654 (after deducting $14,123 in commissions to H.C. Wainwright and $1,998 in other offering expenses), utilizing the sales agreement through the sale of 340,000 shares at an average price of $1.34 per share of net proceeds.
Restricted Stock Unit (“RSU”) Issuances – In January 2018, 46,125 RSUs held by our executives were exchanged into the same number of shares of our common stock. As our executives elected to net settle a portion of their RSUs in exchange for the Company paying the related withholding taxes on the share issuance, 26,157 of the RSUs were cancelled, and we issued a net 19,968 shares to our executives.
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and notes thereto included in Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
FORWARD LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this Form 10-Q are, or may be deemed to be, "forward-looking statements"“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act"),or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors which may cause theour actual results, performance, or achievements of Aethlon Medical, Inc. ("we" or "us") to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements contained in this Form 10-Q. Such potential risks and uncertainties include, without limitation, completion of our capital-raising activities, our ability to maintain our Nasdaq listing, U.S. Food and Drug Administration, or FDA, approval of our products, other regulations, patent protection of our proprietary technology, product liability exposure, uncertainty of market acceptance, competition, technological change, and other risk factors detailed herein and in other of our filings with the Securities and Exchange Commission, (the “Commission”).or the Commission. The forward-looking statements are made as of the date of this Form 10-Q, and we assume no obligation to update the forward-looking statements, or to update the reasons actual results could differ from those projected in such forward-looking statements.
Overview
Aethlon Medical, Inc. and subsidiary (collectively, “Aethlon”, the “Company”, “we” or “us”)We are a medical technology company focused on addressing unmet needs in global healthdeveloping products to diagnose and biodefense.treat life and organ threatening diseases. The Aethlon Hemopurifier®, or Hemopurifier, is an earlya clinical-stage therapeuticimmunotherapeutic device designed to combat cancer and life-threatening viral infections. In cancer, the Hemopurifier is designed to deplete the presence of circulating tumor-derived exosomes that promote immune suppression, seed the spread of metastasis and inhibit the benefit of leading cancer therapies. The FDA has designated the Hemopurifier as a “Breakthrough Device” for the single-use removal of life-threatening viruses from the circulatory system of infected individuals. two independent indications:
· | the treatment of individuals with advanced or metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes have been shown to participate in the development or severity of the disease; and |
· | the treatment of life-threatening viruses that are not addressed with approved therapies. |
We believe the Hemopurifier can be a substantial advance in the treatment of patients with advanced and metastatic cancer through the clearance of exosomes that promote the growth and spread of tumors through multiple mechanisms. We are currently preparing for the initiation of clinical trials in patients with advanced and metastatic cancers. We are initially focused on the treatment of solid tumors, including head and neck cancer, gastrointestinal cancers and other cancers. As we advance our clinical trials, we are in close contact with our clinical sites to navigate and assess the impact of the global COVID-19 pandemic on our clinical trials and current timelines.
On October 4, 2019, the FDA approved our Investigational Device Exemption, or IDE, application to initiate an Early Feasibility Study, or EFS, of the Hemopurifier in patients with head and neck cancer in combination with standard of care pembrolizumab (Keytruda). The primary endpoint for the EFS, which will enroll 10-12 subjects at a single center, will be safety, with secondary endpoints including measures of exosome clearance and characterization, as well as response and survival rates. This study, which will be conducted at the UPMC Hillman Cancer Center in Pittsburgh, PA, has been approved by the Institutional Review Board, or IRB, and is in the process of starting up.
We also believe the Hemopurifier can be part of the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already approved treatment countermeasure objectives set forth by the U.S. Government to protect citizens from bioterror and pandemic threats.treatment. In small-scale or early feasibility human studies, the Hemopurifier has been administeredused to treat individuals infected with HIV, Hepatitis-C,hepatitis-C, and Ebola.
19 |
Additionally,in-vitro, the Hemopurifier has been validateddemonstrated to capture Zika virus, Lassa virus, MERS-CoV, Cytomegalovirus,cytomegalovirus, Epstein-Barr virus, Herpes Simplexsimplex virus, Chikungunya virus, Dengue virus, West Nile virus, Smallpox-relatedsmallpox-related viruses, H1N1 Swine Fluswine flu virus, H5N1 Bird Flubird flu virus, and the reconstructed Spanish flu virus of 1918. In several cases, these validations were conducted in collaboration with leading government or non-government research institutes. Domestically, we are focused on
On June 17, 2020, the clinical advancementFDA approved a supplement to the Company’s open IDE for the Company’s Hemopurifier in viral disease to allow for the testing of the Hemopurifier through investigational device exemptions (IDEs) approved by FDA. We recently concludedin patients with SARS-CoV-2/COVID-19 in a feasibilityNew Feasibility Study. This study is designed to demonstrateenroll up to 40 subjects at up to 20 centers in the U.S. Subjects will have established laboratory diagnosis of COVID-19, be admitted to an intensive care unit, or ICU and will have acute lung injury and/or severe or life threatening disease among other criteria. Endpoints for this study, in addition to safety, of our devicewill include reduction in health-compromised individuals infected with a viral pathogen.circulating virus as well as clinical outcomes. The Company is currently recruiting sites to conduct this trial.
We are also the majority owner of Exosome Sciences, Inc. (ESI),ESI, a company focused on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. Included among ESI’s endeavorsactivities is the advancement of a TauSomeTMTauSome™ biomarker candidate to diagnose Chronic Traumatic Encephalopathy (CTE)chronic traumatic encephalopathy, or CTE, in the living. ESI previously documented that TauSome levels in former NFL players to be nine times higher than same age-group control subjects. Through ESI, we are also developing exosome based biomarkers in patients with, or at risk for, a number of cancers. We consolidate ESI’s activities in our consolidated financial statements.
Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we intendplan to sell this device.the Hemopurifier. 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 treatment technology.
We were formed on March 10, 1999. Our executive offices are located at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123. Our telephone number is (858) 459-7800. Our website address is www.aethlonmedical.com.
Our common stock is quotedlisted on the Nasdaq Capital Market under the symbol “AEMD.”
COVID-19 Update
In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets.
We are monitoring closely the impact of the COVID-19 global pandemic on our business and have taken steps designed to protect the health and safety of our employees while continuing our operations, including clinical trials. Given the level of uncertainty regarding the duration and impact of the COVID-19 pandemic on capital markets and the U.S. economy, we are unable to assess the impact of the worldwide spread of SARS-CoV-2 and the resulting COVID-19 pandemic on our future access to capital. Further, while we have not experienced significant disruptions to our manufacturing supply chain, business, results of operations, financial condition, clinical trials, or preclinical research to date, we are unable to assess the potential impact this pandemic could have on our manufacturing supply chain, business, results of operations, financial condition, clinical trials, or preclinical research in the future.
As we continue to actively advance our clinical trials, we remain in close contact with our clinical sites and are assessing the impact of COVID-19 on our trials, expected timelines and costs on an ongoing basis. We will assess any potential delays in our ability to timely ship clinical trial materials, including internationally, due to transportation interruptions. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. Given these uncertainties, we cannot reasonably estimate the related impact to our business, operating results and financial condition, if any.
20 |
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act, and must file reports, proxy statements and other information with the Commission. The reports, information statements and other information we file with the Commission can be inspected and copied at the Commission Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at (800) SEC-0330. The Commission also maintains a Webweb site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, like us, which file electronically with the Commission. Our headquarters are located at 9635 Granite Ridge Drive, Suite 100, San Diego, CA 92123. Our phone number at that address is (858) 459-7800. Our Web sitewebsite ishttp://www.aethlonmedical.com.www.aethlonmedical.com.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2021 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2016JUNE 30, 2020
Government Contract Revenues
We entered into the following contract with the NCI, part of the NIH, over the past two years:
Phase 2 Melanoma Cancer Contract
On September 12, 2019, the NCI awarded to us an SBIR Phase II Award Contract, for NIH/NCI Topic 359, entitled “A Device Prototype for Isolation of Melanoma Exosomes for Diagnostics and Treatment Monitoring”, or the Award Contract. The Award Contract amount is $1,860,561 and runs for the period from September 16, 2019 through September 15, 2021.
The work to be performed pursuant to this Award Contract will focus on melanoma exosomes. This work follows from our completion of a Phase I contract for the Topic 359 solicitation that ran from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program involve the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform.
We recorded any $74,813$114,849 of government contract revenue on the Phase 2 Melanoma Cancer Contract in the three months ended DecemberJune 30, 2021. That revenue related to work performed in the three months ended March 31, 20172021 that had previously been recorded as deferred revenue as a result of falling short on certain milestones. We then achieved those March period milestones in the June quarter and therefore recorded the previously deferred revenue as government contract revenue. We recorded the invoice related to the June period as deferred revenue since we fell short of certain milestones related to that period.
We did not record any government contract revenue during the three month period ended June 30, 2020 as we did not achieve certain milestones for that period.
Subaward with University of Pittsburgh
In 2020, we entered into a cost reimbursable subaward arrangement with the University of Pittsburgh in connection with an NIH contract entitled “Depleting Exosomes to Improve Responses to Immune Therapy in HNNCC.” Our share of the award is $256,750. We recorded $17,117 of revenue related to this subaward in the three months ended December 31, 2016. That revenue arose from work performed under our government contract with the National Institutes of Health, or NIH, as follows:
Three Months Ended 12/31/17 | Three Months Ended 12/31/16 | Change in Dollars | ||||||||||
NIH Contract | $ | 74,813 | $ | – | $ | 74,813 | ||||||
Total Government Contract Revenue | $ | 74,813 | $ | – | $ | 74,813 |
NIH Contract
We entered into a contract with the NIH on September 15, 2017. This award is under the NIH’s Small Business Innovation Research (SBIR) program which is designed to fund early stage small businesses that are seeking to commercialize innovative biomedical technologies. The title of the award is SBIR Topic 359 Phase 1 Device Strategy for Selective Isolation of Oncosomes and Non-Malignant Exosomes.
The award from NIH is a firm, fixed-price contract with potential total payments to us of $299,250 over the course of nine months.
Fixed price contracts require the achievement of multiple, incremental milestones to receive the full award during each period of the contract. The NIH also has the unilateral right to require us to perform additional work under an option period for an additional fixed amount of $49,800.
Under the terms of the contract, we must perform certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed payment amounts.
In the three months ended December 31, 2017, we completed the first milestone on this contract and invoiced NIH for the $74,812.50 payment associated with that milestone.June 30, 2021.
Operating Expenses
Consolidated operating expenses for the three months ended December 31, 2017June 30, 2021 were $1,238,440 in comparison with $1,235,546$2,230,279, compared to $1,410,418 for the comparable period a year ago.three months ended June 30, 2020. This increase of $2,894,$819,861, or 0.2%58.1%, in the 2021 period was due to an increaseincreases in payroll and related expenses of $27,547, a $22,251 increase in professional fees and a $46,904 decrease in general and administrative expenses.
The $27,547 increase in payroll and related expenses was due to a $17,003 increase in stock-based compensation and to a $10,545 increase in our cash-based payroll and related expenses due to bonuses given to our support and scientific staff.
The $22,251 increase in our professional fees was due to an increase in our professional fees of $37,962, which was partially offset by a decrease in our professional fees at ESI of $15,711. The $37,962 decrease in our professional fees was due to a $62,864 increase in our legal fees, a $22,022 increase in our investor relations fees, a $14,069 increase in our accounting fees, a $7,358 increase in our marketing expenses, and a $6,100 increase in our directors’ fees due to an increase in our Board of Directors, which were partially offset by a $51,548 decrease in our scientific consulting expenses and a $25,000 decrease in business development expenses.
The $46,904 decrease$579,831, in general and administrative expenses was primarily due to a $34,324 decrease in our clinical trial expenses, a $6,519 decrease in the cost of our lab supplies$220,845, and a $4,743 refund on previous state franchise tax payments.
Other Expense
Other expense during the three months ended December 31, 2017 and 2016 consisted of interest expense and a gain on debt extinguishment. Other expense for the three months ended December 31, 2017 was other expense of $55,912 in comparison with other income of $22,126 for the three months ended December 31, 2016.
The following table breaks out the various components of our other expense (income) for both periods:
Three Months Ended | Three Months Ended | |||||||||||
12/31/17 | 12/31/16 | Change | ||||||||||
Gain on Debt Extinguishment | $ | – | $ | (58,691 | ) | $ | 58,691 | |||||
Interest Expense | 55,912 | 36,565 | 19,347 | |||||||||
Total Other Expense (Income) | $ | 55,912 | $ | (22,126 | ) | $ | 78,038 |
Interest Expense
Interest expense was $55,912 for the three months ended December 31, 2017 compared to $36,565 in the corresponding prior period, an increase of $19,347. The various components of our interest expense are shown in the following table:
Three Months Ended | Three Months Ended | |||||||||||
12/31/17 | 12/31/16 | Change | ||||||||||
Interest Expense | $ | 25,625 | $ | 17,567 | $ | 8,058 | ||||||
Amortization of Note Discounts | 30,287 | 18,998 | 11,289 | |||||||||
Total Interest Expense | $ | 55,912 | $ | 36,565 | $ | 19,347 |
As noted in the above table, the factors in the $19,347 increase in interest expense were the $8,058 increase in our contractual interest expense and the $11,289 increase in the amortization of note discounts, which related to the amortization against the discount on our convertible notes.
Net Loss
As a result of the changes in revenues and expenses noted above, our net loss before noncontrolling interests increased from approximately $1,213,000 in the three month period ended December 31, 2016 to $1,220,000 in the three month period ended December 31, 2017.
Basic and diluted loss attributable to common stockholders were ($0.08) for the three month period ended December 31, 2017 compared to ($0.15) for the period ended December 31, 2016.
NINE MONTHS ENDED DECEMBER 31, 2017 COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 2016
Revenues
We recorded government contract revenue of $74,813 in the nine months ended December 31, 2017 and we recorded government contract revenue of $392,073 in the nine months ended December 31, 2016. This revenue arose from work performed under our government contracts with the National Institutes of Health, or NIH, with the Defense Advanced Research Projects Agency, or DARPA, and our government subcontract with Battelle Memorial Institute as follows:
Nine Months Ended 12/31/17 | Nine Months Ended 12/31/16 | Change in Dollars | ||||||||||
NIH Contract | $ | 74,813 | $ | – | $ | 74,813 | ||||||
DARPA Contract | – | 387,438 | (387,438 | ) | ||||||||
Battelle Subcontract | – | 4,635 | (4,635 | ) | ||||||||
Total Government Contract Revenue | $ | 74,813 | $ | 392,073 | $ | (317,260 | ) |
NIH Contract
We entered into a contract with the NIH on September 15, 2017. This award is under the NIH’s Small Business Innovation Research (SBIR) program which is designed to fund early stage small businesses that are seeking to commercialize innovative biomedical technologies. The title of the award is SBIR Topic 359 Phase 1 Device Strategy for Selective Isolation of Oncosomes and Non-Malignant Exosomes.
The award from NIH is a firm, fixed-price contract with potential total payments to us of $299,250 over the course of nine months.
Fixed price contracts require the achievement of multiple, incremental milestones to receive the full award during each period of the contract. The NIH also has the unilateral right to require us to perform additional work under an option period for an additional fixed amount of $49,800.
Under the terms of the contract, we must perform certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed payment amounts.
In the nine months ended December 31, 2017, we completed the first milestone on this contract and invoiced NIH for the $74,812.50 payment associated with that milestone.
DARPA Contract & Battelle Subcontract
Previously, we generated contract revenue under a contract with DARPA that we entered into on September 30, 2011. Under the DARPA award, we were 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. That contract was completed on September 30, 2016 and the related subcontract with Battelle was completed in March 2017. In the nine months ended December 31, 2016, we invoiced the U.S. Government for the final two milestones under our DARPA contract in the aggregate amount of $387,438.
Operating Expenses
Consolidated operating expenses for the nine months ended December 31, 2017 were $3,634,862 in comparison with $4,986,148 for the comparable period a year ago. This decrease of $1,351,286, or 27.1%, was due to a decrease in payroll and related expenses of $882,335, a decrease in professional fees of $330,279 and a $138,672 decrease in general and administrative expenses.$19,185.
The $882,335 decrease$579,831 increase in payroll and related expenses was primarily due to the combination of a $992,543 decrease$233,858 increase in stock-based compensation. The decrease in stock-based compensation was due toour R&D payroll as the upfront vesting percentageresult of the RSU grantshiring additional scientists, a $210,216 bonus payment to our officers and directorsCEO as the result of achieving certain milestones in August 2016. Our cash-based payroll and related expenses increased by $110,208 due to headcount additions in our scientific staff.
The $330,279 decrease in our professional fees was due to decreases in our non-DARPA-related professional fees of $263,328, in our DARPA-related professional fees of $38,928 and in our professional fees at ESI of $28,023. The $263,328 decrease in our non-DARPA-related professional fees was due tohis employment contract, a $124,941 decrease in our legal fees, a $123,859 decrease in scientific consulting expenses, and a $110,000 decrease in business development expenses which were partially offset by a $64,949$63,884 increase in marketing expenses, a $17,014 increase in website service expense and a $5,732 increase in investor relations expenses.
The $138,672 decrease in general and administrative expenses was primarily due to decreasespayroll expense as the result of $101,757additional headcount and a $35,947 increase in our DARPA-related general and administrative expenses and $22,224 in the general and administrative expenses at ESI.stock-based compensation.
Other Expense
Other expense during the nine months ended December 31, 2017 and 2016 consisted of losses on debt extinguishment, warrant repricing expense, losses on share for warrant exchanges and interest expense. Other expense for the nine months ended December 31, 2017 was other expense of $813,618 in comparison with other expense of $1,019,347 for the nine months ended December 31, 2016.
The following table breaks out the various components of our other expense for both periods:
Nine Months Ended | Nine Months Ended | |||||||||||
12/31/17 | 12/31/16 | Change | ||||||||||
Loss on Debt Extinguishment | $ | 376,909 | $ | 558,198 | $ | (181,289 | ) | |||||
Loss on Warrant Repricing | – | 345,841 | (345,841 | ) | ||||||||
Loss on Share for Warrant Exchanges | 130,214 | – | 130,214 | |||||||||
Interest Expense | 306,495 | 115,308 | 191,187 | |||||||||
Total Other Expense | $ | 813,618 | $ | 1,019,347 | $ | (205,729 | ) |
21 |
Loss on Debt ExtinguishmentThe $220,845 increase in general and administrative expenses was primarily due to a $132,542 increase in our subcontractor expenses related to our government contracts and a $73,800 increase in our insurance expenses.
Our loss on debt extinguishment forThe $19,185 increase in our professional fees was primarily due to a $50,306 increase in our legal fees which was partially offset by a $21,962 decrease in our scientific consulting expenses and a $5,984 decrease in our accounting expenses.
Other Expense
Other expense during the ninethree months ended December 31, 2017 arose from a $376,909 loss associated with the June 2017 amendments to our convertible notes. This compared to a loss30, 2021 and 2020 consisted of debt extinguishment of $558,198 for the nine months ended December 31, 2016 - see below for additional information.
June 2017 Amendments – The $376,909 loss on debt extinguishment in the six months ended September 30, 2017 arose from an Exchange Agreement with two institutional investors under which we issued 57,844 restricted shares in exchange for the cancellation of 77,125 warrants held by those investors (see Loss on Share for Warrant Exchanges below). Additionally, we agreed with those investors that they would extend the expiration dates of the convertible notes held by those investors from July 1, 2018 to July 1, 2019 in exchange for the reduction of the conversion price of those notes from $4.00 per share to $3.00 per share. The modification of the notes was evaluated under FASB Accounting Standards Codification (“ASC”) Topic No. 470-50-40, “Debt Modification and Extinguishments”. Therefore, according to the guidance, the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting.
June 2016 Amendments - This loss on debt extinguishment arose from the Amendments (the “Amendments”) to our November 2014 convertible notes The Amendments provided that the maturity date of the notes was extended from June 1, 2016 to July 1, 2017 and that the conversion price was reduced from $5.60 per share of common stock to $5.00 per share of common stock. In addition, we reduced the purchase price of warrants issued in connection with the notes from $8.40 per share to $5.00 per share. In connection with these modifications, each of the Investors signed a consent and waiver providing its consent under certain restrictive provisions, and waiving certain rights, including a right to participate in certain offerings made by us, under a securities purchase agreement dated June 23, 2015, (the “2015 SPA”) to which we, the Investors and certain other investors are parties, in order to facilitate an at-the-market equity program described in the liquidity and capital resources section of this report below. This loss also included an $80,000 fee to extend the November 2014 convertible notes from June 1, 2016 to July 1, 2017. The $80,000 amount was not a cash payment but rather was added to the principal of the notes.
This modification of the notes was also evaluated under ASC Topic No. 470-50-40, “Debt Modification and Extinguishments”. Therefore, according to the guidance, the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting.
Loss on Warrant Repricing
On June 27, 2016, we and certain investors (the “Unit Investors”) entered into Consent and Waiver and Amendment agreements (the “CWAs”), relating to an aggregate of 264,000 Warrants to Purchase Common Stock (the “Unit Warrants”) we had issued to the Unit Investors on December 2, 2014 pursuant to a Securities Purchase Agreement dated November 26, 2014 (the “2014 SPA”). In the CWAs, each of the Unit Investors provided its consent under certain restrictive provisions, and waived certain rights, including a right to participate in certain offerings made by us, under the 2014 SPA in order to facilitate the at-the-market equity program described in the notes to the Financial Statements. Pursuant to the CWAs, we reduced the Exercise Price (as defined in the Unit Warrants) from $15.00 per share of common stock to $5.00 per share of common stock.
On June 27, 2016, each of the Unit Investors also entered into a Consent and Waiver providing its consent under certain provisions, and waiving certain rights, including a right to participate in certain offerings made by us, under the 2015 SPA in order to facilitate the at-the market equity program described in the notes to the Financial Statements.
We measured the change in fair value that arose from the reduction in exercise price from $15.00 to $5.00 and recorded a charge of $345,841 to our otherinterest expense to reflect this change.only as follows:
Loss on Share for Warrant Exchanges
During the nine months ended December 31, 2017, we agreed with two individual investors to exchange 11,497 restricted shares for the cancellation of 22,993 warrants and we entered into an Exchange Agreement with two institutional investors under which we issued 57,844 restricted shares in exchange for the cancellation of 77,125 warrants held by those investors. Additionally, we entered into an agreement with a former placement agent to issue 5,500 restricted shares in exchange for the cancellation of 11,000 warrants held by that placement agent. We measured the fair value of the shares issued and the fair value of the warrants exchanged for those shares and recorded losses for each of those exchanges based on the changes in fair value between the instruments exchanged.
Interest Expense
Interest expense was $306,495$125 and $728 for the ninethree months ended December 31, 2017 compared to $115,308 in the corresponding prior period, an increase of $191,187. The various components of our interest expense are shown in the following table:June 30, 2021 and 2020, respectively.
Nine Months Ended | Nine Months Ended | |||||||||||
12/31/17 | 12/31/16 | Change | ||||||||||
Interest Expense | $ | 91,119 | $ | 49,671 | $ | 41,448 | ||||||
Amortization of Deferred Financing Costs | – | 27,641 | (27,641 | ) | ||||||||
Amortization of Note Discounts | 215,376 | 37,996 | 177,380 | |||||||||
Total Interest Expense | $ | 306,495 | $ | 115,308 | $ | 191,187 |
As noted in the above table, the most significant factor in the $191,187 increase in interest expense was the $177,380 increase in the amortization of note discounts, which related to the amortization against the discount on our convertible notes. Other smaller factors in the change in our total interest were a $27,641 decrease in the amortization of deferred financing costs and a $41,448 increase in our contractual interest expense.
Three Months Ended | Three Months Ended | |||||||||||
6/30/21 | 6/30/20 | Change | ||||||||||
Interest Expense | $ | 125 | $ | 728 | $ | (603 | ) | |||||
Total Interest Expense | $ | 125 | $ | 728 | $ | (603 | ) |
Net Loss
As a result of the changes in revenues and expenses noted above, our net loss before noncontrolling interests decreasedincreased to approximately $2,097,000 in the three months ended June 30, 2021, from approximately $5,613,000$1,410,000 in the nine monththree months period ended December 31, 2016 to $4,374,000 in the nine month period ended December 31, 2017.June 30, 2020.
Basic and diluted loss attributable to common stockholders were ($0.40)0.16) for the nine monththree months period ended December 31, 2017June 30, 2021, compared to ($0.72)0.15) for the three months period ended December 31, 2016.June 30, 2020.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2017,As of June 30, 2021, we had a cash balance of $5,610,799$25,171,679 and working capital of $5,288,930.$24,416,467. This compares to a cash balance of $1,559,701$9,861,575 and working capital of $985,496$8,976,512 at March 31, 2017.2021. We expect our existing cash as of June 30, 2021 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these financial statements.
On October 4, 2017, we consummated a public offeringThe primary sources of 5,454,546 shares of common stock and warrants to purchase 5,454,546 shares of common stock, for total gross proceeds of $6.0 million. The offering was priced at $1.10 per unit with each unit comprised of one share of common stock and one common stock purchase warrant. The warrants carry a five-year term with an exercise price of $1.10 per share. The net proceeds ofour increase in cash during the offering were $5,289,735. H.C. Wainwright & Co. acted as exclusive placement agent for the offering. We expect the net proceedsthree months ended June 30, 2021 resulted from that offering coupled with cash on hand will finance our operations for the twelve month period from the date of this report.
In December 2017, four investors in the October 2017 Public Offering exercised 218,600 warrants through the payment of an aggregate of $240,460 before expenses to us.
Subsequent to December 31, 2017, sixteen investors that participated in the October 2017 Public Offering exercised 852,700 warrants for aggregate cash proceeds to us of $937,970 before expenses.
Also subsequent to December 31, 2017, we sold common stock under our Common Stock Sales Agreement with H.C. Wainwright (see Note 6)& Co., LLC, or Wainwright and our registered direct financing through Maxim Group LLC. The cash raised from those sales raised net proceeds of $454,654 (after deducting $14,123 in commissions to H.C. Wainwright and $1,998 in other offering expenses) utilizing the sales agreement through the sale of 340,000 shares at an average price of $1.34 per share of net proceeds.
We will require significant additional financing beyond the 12 month period subsequent to the filing date of this Form 10-Q to fund the expected additional future clinical trials of our product in the U.S., as well as fund all of our continued research and development activities for the Hemopurifier. In addition, as we expand our activities, our overhead costs to support personnel, laboratory materials and infrastructure will increase. Should the financing we require to sustain our working capital needs be unavailable to us on reasonable terms, if at all, when we require it, we may be unable to support our research and FDA clearance activities including our planned clinical trials. The failure to implement our research and clearance activities would have a material adverse effect on our ability to commercialize our products and to remain as a going concern.is noted below:
Common Stock Sales Agreement with H.C. Wainwright & Co., LLC
On March 22, 2021, we entered into an At the Market Offering Agreement, or the Offering Agreement, with Wainwright as sales agent, pursuant to which we may offer and sell shares of our common stock, from time to time as set forth in the Offering Agreement.
The offering has been registered under the Securities Act of 1933, as amended, or Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the SEC and declared effective on March 30, 2020. We filed a prospectus supplement, dated March 22, 2021, with the SEC in connection with the offer and sale of the shares of common stock, pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $5,080,000 from time to time.
Subject to the terms and conditions set forth in the Offering Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares under the Offering Agreement from time to time, based upon our instructions. We provided Wainwright with customary indemnification rights under the Offering Agreement, and Wainwright is entitled to a commission at a fixed rate equal to three percent of the gross proceeds per share sold. In addition, we agreed to reimburse Wainwright for certain specified expenses in connection with entering into the Offering Agreement. The Offering Agreement will terminate upon the written termination by either party as permitted thereunder.
Sales of the shares, if any, under the Offering Agreement will be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made by means of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed with Wainwright. We have no obligation to sell any of the shares, and, at any time, we may suspend offers under the Offering Agreement or terminate the agreement.
In the three months ended June 30, 2021, we raised aggregate net proceeds under the Offering Agreement described above of $4,947,785, net of $126,922 in commissions to Wainwright and $2,154 in other offering expense through the sale of 626,000 shares of our common stock at an average price of $7.90 per share of net proceeds. No further sales may be made under the agreement.
Registered Direct Financing
In the three months ended June 30, 2021, we sold an aggregate of 1,380,555 shares of our common stock at a purchase price per share of $9.00, for aggregate net proceeds to us of $11,659,044 after deducting fees payable to Maxim Group LLC, the placement agent and other offering expenses. These shares were sold through a securities purchase agreement with certain institutional investors, The shares were issued pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the SEC on March 19, 2020, and was declared effective on March 30, 2020 (File No. 333-237269) and a prospectus supplement thereunder.
Future capital requirements will depend upon many factors, including progress with pre-clinical testing and clinical trials, the number and breadth of our clinical programs, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, the time and costs involved in obtaining regulatory approvals, any continued delays in completing our clinical trials, competing technological and market developments, as well as our ability to establish collaborative arrangements, effective commercialization, marketing activities and other arrangements. We expect to continue to incur increasing negative cash flows and net losses for the foreseeable future.
Management expects existing cash as of December 31, 2017 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these interim financial statements.
Cash Flows
Cash flows from operating, investing and financing activities, as reflected in the accompanying Condensed Consolidated Statements of Cash Flows, are summarized as follows:
(In thousands) For the nine months ended | (In thousands) For the three months ended | |||||||||||||||
December 31, 2017 | December 31, 2016 | June 30, 2021 | June 30, 2020 | |||||||||||||
Cash provided by (used in): | ||||||||||||||||
Operating activities | $ | (2,893 | ) | $ | (2,644 | ) | $ | (2,072 | ) | $ | (1,102 | ) | ||||
Investing activities | (24 | ) | (3 | ) | (38 | ) | (18 | ) | ||||||||
Financing activities | 6,968 | 1,060 | 17,420 | 7,237 | ||||||||||||
Net increase (decrease) in cash | $ | 4,051 | $ | (1,587 | ) | $ | 15,310 | $ | 6,117 |
23 |
NET CASH USED IN OPERATING ACTIVITIES. We used cash in our operating activities due to our losses from operations. Net cash used in operating activities was approximately $2,893,000$2,072,000 in the nine monthsthree month period ended December 31, 2017June 30, 2021, compared to $2,644,000approximately $1,102,000 in the nine monthsthree month period ended December 31, 2016, an increase of $249,000.June 30, 2020.
NET CASH USED IN INVESTING ACTIVITIES. We used approximately $24,000$38,000 of cash to purchase laboratory and office equipment in the ninethree months ended December 31, 2017June 30, 2021, compared to approximately $3,000$18,000 in the nine monthsthree month period ended December 31, 2016.June 30, 2020.
NET CASH PROVIDED BY FINANCING ACTIVITIES. InDuring the ninethree months ended December 31, 2017June 30, 2021, we generatedraised approximately $6,968,000$17,456,000 from the issuance of common stock. That source of cash from our financing activities primarily throughwas partially offset by the use of approximately $36,000 to pay for the tax withholding on restricted stock units, for an aggregate increase of cash provided by financing activities of approximately $17,420,000.
During the three months ended June 30, 2020, we raised approximately $7,261,000 from the issuance of common stock. That source of cash from our financing activities was partially offset by the use of approximately $24,000 to pay for the tax withholding on restricted stock units, for an aggregate increase of $5,908,000 over the $1,060,000 raised in the nine months ended December 31, 2016.cash provided by financing activities of approximately $7,237,000.
AtAs of the date of this filing, we plan to invest significantly into purchases of our raw materials and intoin our contractinternal manufacturing arrangement subject to successfully raising additional capital.facility for our clinical trials.
CRITICAL ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. SuchThese estimates and assumptions affect the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require the most difficult, subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These critical accounting policiesestimates relate to revenue recognition, measurement of stock purchase warrants issued with notes payable, beneficial conversion feature of convertible notes payable, impairment of intangible assets and long lived assets, stock compensation, deferred tax asset valuation allowance, and the classification of warrant obligations, and evaluation of contingencies. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial condition or results of operations.
There have been no changes to our critical accounting policies as disclosed in our Form 10-K for the year ended March 31, 2017.2021.
OFF-BALANCE SHEET ARRANGEMENTS
WeAs of June 30, 2021, we did not have no obligations required to be disclosed herein asany off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
24 |
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25 |
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. We are not presently a party to any pending or threatened legal proceedings.
RISK FACTOR SUMMARY
Below is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our securities.
· | We have incurred significant operating losses since our inception and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability. |
· | We will require substantial additional funding to sustain our operations. If we are unable to raise capital on favorable terms when needed, we could be forced to delay, reduce or eliminate our research or device development programs or any future commercialization efforts. |
· | To achieve the levels of production necessary to commercialize our Hemopurifier and any other future products, we will need to secure large-scale manufacturing agreements with contract manufacturers which comply with good manufacturing practice standards and other standards prescribed by various federal, state and local regulatory agencies in the U.S. and any other country of use. We have limited experience coordinating and overseeing the manufacture of medical device products on a large-scale. |
· | Our Hemopurifier product may be made unmarketable prior to commercialization by us by new scientific or technological developments by others with new treatment modalities that are more efficacious and/or more economical than our products. Any one of our competitors could develop a more effective product which would render our technology obsolete. |
· | Our Hemopurifier product is subject to extensive government regulations related to development, testing, manufacturing and commercialization in the U.S. and other countries. If we fail to comply with these extensive regulations of the U.S. and foreign agencies, the commercialization of our products could be delayed or prevented entirely. |
· | As a public company with limited financial resources undertaking the launch of new medical technologies, we may have difficulty attracting and retaining executive management and directors. |
· | We will need to significantly expand our operations to implement our longer-term business plan and growth strategies. We will also be required to manage multiple relationships with various strategic partners, technology licensors, customers, manufacturers and suppliers, consultants and other third parties. The time and costs to effectuate these steps may place a significant strain on our management personnel, systems and resources, particularly given the limited amount of financial resources and skilled employees that may be available at the time. |
· | Our business prospects will depend on our ability to complete studies, clinical trials, obtain satisfactory results, obtain required regulatory approvals and successfully commercialize our Hemopurifier product candidate. Delays in successfully completing the clinical trials could jeopardize our ability to obtain regulatory approval. |
· | If we are unable to adequately address these and other risks we face, our business, financial condition, operating results and prospects may be adversely affected. |
· | Our business could be adversely affected by the effects of health pandemics or epidemics, including the COVID-19 pandemic. |
26 |
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item. For a discussion of our potential risks and uncertainties, please see the information listed in the item captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
*Should any of our potential products, including the Hemopurifier, be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability to market and sell our products.
Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and third-party payors to decrease costs. Third-party payors are increasingly challenging the prices charged for medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services.
For example, in the U.S., the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limited Medicare reimbursement to certain providers. However, on December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. Additionally, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and will remain open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and litigation, and the healthcare reform measures of the Biden administration will impact the ACA and our business. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments to providers by two percent through fiscal year 2030. However, COVID-19 relief legislation suspended the two percent Medicare sequester from May 1, 2020 through December 31, 2021. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies. Furthermore, the healthcare industry in the U.S. has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the future that limits payments for our products from governmental payors. It is possible that additional governmental action is taken to address the COVID-19 pandemic. In addition, commercial payors such as insurance companies, could adopt similar policies that limit reimbursement for medical device manufacturers’ products. Therefore, it is possible that our product or the procedures or patient care performed using our product will not be reimbursed at a cost-effective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countries where we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtain international reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell our products and have a material adverse effect on our business and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
DuringWe did not issue or sell any unregistered securities during the three months ended December 31, 2017, 63,829 RSUs held by our outside directors were exchanged into the same number of shares of our common stock. As one of our three outside directors elected to return 40% of his RSUs in exchange for cash in order to pay his withholding taxes on the share issuances, 10,638 of the RSUs were cancelled and we paid $12,127 in cash to that outside director.June 30, 2021.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
We have no disclosure applicable to this item.
ITEM 4. MINE SAFETY DISCLOSURES.
We have no disclosure applicable to this item.
We have no disclosure applicable to this item.
27 |
(a) Exhibits. The following documents are filed as part of this report:
28 |
Incorporated by Reference | |||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | Exhibit Number | Date | Filed Herewith | |||||||
31.1 | Certification of | X | |||||||||||
31.2 | Certification of | X | |||||||||||
32.1 | X | ||||||||||||
32.2 | X | ||||||||||||
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data | X | ||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | |||||||||||
Inline XBRL | X | ||||||||||||
Inline XBRL | X | ||||||||||||
Inline XBRL | X | ||||||||||||
Inline XBRL | X | ||||||||||||
X |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AETHLON MEDICAL, INC. | |||
Date: | By: | /s/ JAMES B. FRAKES | |
JAMES B. FRAKES | |||
CHIEF FINANCIAL OFFICER | |||
CHIEF ACCOUNTING OFFICER |