UNITED STATES
証券取引委員会
ワシントンDC20549
フォーム
（表1）
報告期間が終了した2023年6月30日をもって
OR
移行期間は_____から_____までです
書類記号
（会社設立時の指定名）
| （設立または組織の州または管轄区域） | （国税庁雇用者識別番号） |
| (本社の所在地) | (郵便番号) |
(
（会員の電話番号、市外局番を含む）
法第12（b）条に基づく登録証券:
|
各クラスのタイトル |
トレードシンボル |
上場している取引所の名前 |
以下のうち、申請人が
(1)証券取引法1934年第13条または15(d)条で必要とされるすべての報告書を前年12カ月間提出したか、または
（申請人がそのような報告書を提出する必要があった短い期間であった場合）、そして(2)このような報告書の提出要件に
過去90日間にわたって適合したかにマークを付けます。
過去12か月間（またはそのような短い期間内に、登録人は、この番号の規則232.405に基づくインタラクティブデータファイルを提出する必要があった期間内に、そのようなファイルを全て提出したかどうかを示します。 サイン☐
登録者が、大型加速報告者、加速報告者、非加速報告者、より小さい報告会社、または新興成長会社のどれであるかをチェックマークで示してください。 「大型加速報告者」、「加速報告者」、「より小さい報告会社」、「新興成長会社」の定義は、取引所法の規則120億2に記載されています。
| 大規模な加速ファイラー ☐ | 加速提出者 ☐ |
| 中小企業 | |
| 新興成長企業 |
新興成長企業である場合は、簡易取引所の任意の新しいまたは改訂された財務会計基準に適合するための拡大時限を使用しないことを選択した場合は、チェックマークを付けて表示します。☐
12b-2規則で定義されるシェル企業である場合は Yes ☐ 、そうでない場合は No をチェックマークで示してください。
2024年11月6日時点で、登録者は普通株式の未払い株式を持っていました 株式、$0.001の面額。
目次
| 第一部分 | 財務情報 | 4 |
| アイテム 1. | 財務諸表 | 4 |
| 2024年9月30日現在の凝縮された連結バランスシート（監査なし）および2024年3月31日 | 4 | |
| 2024年および2023年9月30日終了の三ヶ月および六ヶ月の期間に関する凝縮された連結損益計算書および包括利益損失（監査なし） | 5 | |
| 2024年および2023年9月30日終了の三ヶ月および六ヶ月の期間に関する凝縮された連結株主資本計算書（監査なし） | 6 | |
| 2024年および2023年9月30日終了の六ヶ月間に関する凝縮された連結キャッシュフロー計算書（監査なし） | 7 | |
| コンデンスド連結財務諸表注記（未監査） | 8 | |
| 品目2. | 経営陣による財務状況と業績に関する分析 | 18 |
| アイテム 3. | 市場リスクに関する定量的・質的事項の開示 | 25 |
| ITEm 4. | コントロールと手順 | 25 |
| 知られているおよび未知の多数のリスクおよび不確定要因の結果として, 当社の実際の結果やパフォーマンスは、これらの前向きの声明によって発表された結果と大きく異なる場合があります。実際の結果が異なる可能性のある要因については、Part II、Item 1Aの「リスクファクター」およびSECへのその他の提出に記載されています。 | その他情報 | 27 |
| アイテム 1. | 法的手続き | 27 |
| 1A.項目 | リスク要因 | 27 |
| アイテム 2. | 未登録の株式の販売と資金の使途 | 28 |
| アイテム 3. | 上位証券に対する不履行 | 28 |
| アイテム 4. | 鉱山安全性に関する開示。 | 28 |
| アイテム 5. | その他の情報 | 28 |
| アイテム6。 | 添付資料 | 29 |
| 署名 | 30 |
| 2 |
将来の見通しに関する警告通知
この第10-Qフォームに関する四半期報告書（この「四半期報告書」）には、1933年証券法の第27A条（修正後の「証券法」）および1934年証券取引法の第21E条（修正後の「取引所法」）の意味における「将来を展望する声明」が含まれており、これらのセクションによって作成された安全な港が適用されています。
いくつかの場合には、「予測する」「信じる」「可能性がある」「見積もる」「期待する」「意図する」「かもしれない」「計画する」「潜在的な」「予測する」「プロジェクトする」「すべきである」「意志する」「だろう」またはこれらの否定形である過去の事実ではないとされる一部の発言に使用される言葉、および今後の出来事や結果の不確実性を伝える類似の表現を使用して、これらの先行きの不確実な展望の発言を特定します。ここに含まれる声明のうち、過去の事実の声明でないと見なされるものは、先行きの展望に基づいており、当社の現在の期待、信念、見積もり、予測、および前向きな予想、多くはその性質から、不確実性が高く当社のコントロールを超えています。このような声明には、この四半期報告書に含まれる当社のビジネス、ビジネス戦略、将来提供する製品とサービス、臨床試験のタイミングと結果、当社の資金見通し、当社の臨床試験の成功、追加資本調達の可能性、ナスダックリストの維持能力、米国食品医薬品庁（FDA）の製品候補の承認、政府規制の変更への遵守、当社の独自技術の特許保護、製品責任の露出、市場受け入れの不確実性、競争、技術変化、およびその他に詳細に記載されているリスクファクター、証券取引委員会（SEC）とその他の当社の提出書類。先行きの展望には、当社のビジネス、経済、およびその他の将来の状況に関する当社の現在の期待と仮定に基づいています。先行きの展望は、未来に関わるため、予測しにくい固有の不確実性、リスク、状況の変化の影響を受けます。実際の結果は、先行きの展望によって検討されるものとは大きく異なる可能性があります。それらは過去の事実の声明でも将来のパフォーマンスの保証でもありません。したがって、これらの先行きの展望に依存しないよう注意を喚起します。実際の結果が先行きの展望とは大きく異なる要因として、国内外の一般的経済状況の低下、知的所有権権利の保護能力、他の提供者や製品との競争、製品開発のリスク、運営を続ける資本を好適な条件で（または全く）調達できないリスク、ナスダック規則の変更、政府規制の変更、ならびにその他の要因（当社の最新の年次報告書の項目1Aに記載されているリスクファクターに含まれるリスク）当社の業種、当社の業務および業務の結果、および当社が取得する可能性があるいずれかのビジネスに関するものがあります。これらのリスクまたは不確実性のいずれかが実現し、または基本となる仮定が誤っていることが判明した場合、実際の結果は、予想、信じられている、見積もられている、期待されている、意図されている、計画されているものとは大きく異なる可能性があります。
実際の結果が異なる要因や出来事は時折発生する可能性があり、私たちがすべてを予測することは不可能であり、また、全ての要因がビジネスに与える影響や，どの要因または組み合わせの要因が実際の結果が含まれる事項と実際に大きく異なる結果を引き起こすかを評価することはできません。これらの不確実性を考慮して、これらの将来を見据えた声明に過度に依存すべきではありません。将来の結果、活動レベル、パフォーマンス、または達成については保証できません。適用法に基づく限り、実際の結果に合わせるために将来を見据えた声明の一部をいつでも更新するつもりはなく、義務を負いません。
| 3 |
第I部 財務情報
第1項 財務諸表の要約
エスロンメディカル社とその子会社
連結簡易貸借対照表
| 2020年9月30日、 2024 | 3月31日 2024 | |||||||
| (未監査) | ||||||||
| 資産 | ||||||||
| 流動資産 | ||||||||
| 現金及び現金同等物 | $ | $ | ||||||
| 繰延べ発行コスト | ||||||||
| 前払費用およびその他の流動資産 | ||||||||
| 流動資産合計 | ||||||||
| 有形固定資産、正味額 | ||||||||
| オペレーティング賃貸権利資産 | ||||||||
| 特許，純利益 | ||||||||
| 制限付き現金 | ||||||||
| 入金 | ||||||||
| 総資産 | $ | $ | ||||||
| 負債及び純資産 | ||||||||
| 流動負債 | ||||||||
| 支払い勘定 | $ | $ | ||||||
| 関連当事者による | ||||||||
| リース債務の流動部分 | ||||||||
| 未払いの専門料 | ||||||||
| 流動負債合計 | ||||||||
| オペレーティングリース債務-当期法人税、 | ||||||||
| 総負債 | ||||||||
| コミットメントと偶発事項に関する注記9を参照してください | ||||||||
| 株主資本 | ||||||||
| 普通株式、割当資本金 1株の額 $ 1株あたり; 2024年9月30日および2024年3月31日現在の承認済み普通株式数は、 および 2024年9月30日および2024年3月31日時点で発行済みおよび流通中の株式 | ||||||||
| 追加出資資本 | ||||||||
| その他の総合損失 | ( | ) | ( | ) | ||||
| 累積欠損 | ( | ) | ( | ) | ||||
| 純資産合計 | ||||||||
| 負債および純資産合計 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
AETHLON MEDICAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three and Six Month Periods Ended September 30, 2024 and 2023
(Unaudited)
| 3か月間 終了しました ９月３０日、 2024 | 3ヶ月 終了 9月30日 2023 | 6か月間 終了 2023年9月30日、 2024 | 6ヶ月 終了 2023年9月30日 2023 | |||||||||||||
| 営業費用 | ||||||||||||||||
| 専門家の料金 | $ | $ | $ | $ | ||||||||||||
| 給与および関連費用 | ||||||||||||||||
| 一般および管理費 | ||||||||||||||||
| 営業費用の合計 | ||||||||||||||||
| 営業損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| その他の収益 | ||||||||||||||||
| 利息所得 | ||||||||||||||||
| 純損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| （単位：千ドル、１株当たり金額を除く）その他包括利益・損失 | ( | ) | ( | ) | ||||||||||||
| 包括的な損失 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 普通株主に帰属する基本的及び希薄化後の1株当たり損失 | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 基本および希薄化後の発行済普通株式の加重平均数 | ||||||||||||||||
添付の注記は、これらの要約された連結財務諸表の重要な部分です。
| 5 |
エスロンメディカル社とその子会社
株主資本の簡約連結貸借対照表
2024年および2023年9月30日終了の3ヶ月および6ヶ月について
(未監査)
| 普通株式 | 追加 PAID IN | ACCUmulated | 積み重なった 包括的 | 合計 | ||||||||||||||||||||
| シェア | 金額 | 資本 | 赤字累積額 | 収入（損失） | 流動負債 | |||||||||||||||||||
| 2024年3月31日の残高 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 一般募集用の普通株式の発行 | ||||||||||||||||||||||||
| クラスAおよびクラスBワラント行使のための普通株式の発行 | ||||||||||||||||||||||||
| 制限株式ユニットの分配とネットストックオプション行使に伴う普通株式の発行 | ( | ) | ( | ) | ||||||||||||||||||||
| 株式ベースの報酬費用 | – | |||||||||||||||||||||||
| 純損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| その他包括損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| 2024年6月30日の残高 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 制限株式ユニットの分配とネットストックオプション行使に伴う普通株式の発行 | ( | ) | ( | ) | ||||||||||||||||||||
| 株式報酬費用 | – | |||||||||||||||||||||||
| 純損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| その他包括利益（損失） | – | |||||||||||||||||||||||
| 2024年9月30日の残高 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 普通株式 | 追加 PAID IN | ACCUmulated | 積み重なった 包括的 | 合計 | ||||||||||||||||||||
| シェア | 金額 | 資本 | 赤字累積額 | 損失 | 流動負債 | |||||||||||||||||||
| 2023年3月31日の残高 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 市場プログラムの下で現金での普通株式の発行 | ||||||||||||||||||||||||
| 制限株式ユニットの付与に伴う普通株式の発行および純株式オプションの行使 | ( | ) | ( | ) | ||||||||||||||||||||
| 株式ベースの報酬費用 | – | |||||||||||||||||||||||
| 純損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| その他包括損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| 2023年6月30日の残高 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 制限付き株式ユニットの取得および純株式オプションの行使による普通株式の発行 | ( | ) | ( | ) | ||||||||||||||||||||
| 株式報酬費用 | – | |||||||||||||||||||||||
| 逆分割の端数処理 | ||||||||||||||||||||||||
| 純損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| その他包括損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| 残高-2023年9月30日 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
添付の注記は、これらの要約された連結財務諸表の重要な部分です。
| 6 |
エスロンメディカル社とその子会社
現金フローの要約連結貸借対照表
2024年9月30日までの6か月間および 2023年まで
(未監査)
| 6ヶ月 終了しました 2024年9月30日 | 六か月 終了 9月30日、2023年時点でレベル財務取引はありませんでした。 | |||||||
| 運営活動によるキャッシュフローの使用： | ||||||||
| 純損失 | $ | ( | ) | $ | ( | ) | ||
| 営業活動からの純キャッシュ流入に調整するための調整： | ||||||||
| Depreciation and amortization | ||||||||
| 株式報酬 | ||||||||
| リース資産の運用に関する増加 | ||||||||
| 営業資産および負債の変動: | ||||||||
| 前払費用およびその他の流動資産 | ||||||||
| 支払可能なアカウントとその他の流動負債 | ||||||||
| 関連当事者による | ||||||||
| 営業によるキャッシュフローの純流出 | ( | ) | ( | ) | ||||
| 投資活動により使用された現金流出額: | ||||||||
| 設備資産の購入 | ( | ) | ||||||
| 投資活動における純現金使用額 | ( | ) | ||||||
| 財務活動による営業活動からの資金提供: | ||||||||
| 普通株式の発行資金、純額 | ||||||||
| 制限付き株式ユニットの純株決済と純株式オプション経費に対する税金源泉徴収支払いまたは等しい支払い | ( | ) | ( | ) | ||||
| 財務活動による純現金流入額 | ||||||||
| 現金への為替レートの影響 | ( | ) | ||||||
| 現金および制限付き現金の純変化 | ( | ) | ||||||
| 期初現金および制限付現金 | ||||||||
| 期末現金及び限定された現金 | $ | $ | ||||||
| キャッシュフロー情報の補足開示 | ||||||||
| 非現金の投資と財務活動の補完的開示: | ||||||||
| ベストされた制限付き株式ユニットと株式オプション行使のために発行された株式の帳簿価額 | $ | $ | ||||||
| 現金、現金同等物および制限付き現金の調整を簡約合算貸借対照表に対して行います： | ||||||||
| 現金及び現金同等物 | $ | $ | ||||||
| 制限付き現金 | ||||||||
| 現金及び制限付き現金 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
AETHLON MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2024
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION ORGANIZATION
Aethlon Medical, Inc. (“Aethlon,” the “Company,” “we” or “us”) is a medical therapeutic company focused on developing the Hemopurifier, a clinical-stage immunotherapeutic device designed to combat cancer and life-threatening viral infections and for use in organ transplantation. In human studies, 164 sessions with 38 patients, the Hemopurifier was safely utilized and demonstrated the potential to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier has demonstrated the potential to remove harmful exosomes and exosomal particles from biological fluids, utilizing its proprietary lectin-based technology. This action has potential applications in cancer, where exosomes and exosomal particles may promote immune suppression and metastasis, and in life-threatening infectious diseases. The U.S. Food and Drug Administration (“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 or exosomal particles 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 may be a substantial advancement in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia.
We have recently launched in Australia and in India safety, feasibility and dose-finding clinical trials of the Hemopurifier in cancer patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® (pembrolizumab) or Opdivo® (nivolumab). The primary endpoint of the approximately nine to 18-patient, safety, feasibility and dose-finding trial in each country is safety.
The following two hospitals in Australia have received ethics committee approval, have gone through training on our device and are now open for patient enrollment: Royal Adelaide Hospital in Adelaide, Australia and Pindara Private Hospital in the Gold Coast section of Australia. We have also trained a third hospital in Australia, but we have not yet received ethics committee approval for that institution and have not yet begun patient enrollment.
We have received ethics committee approval from Medanta Medicity Hospital in Gurugram, India for a similar nine to 18-patient, safety, feasibility and dose-finding trial. We are completing the necessary logistical steps before they can open for patient enrollment..
We have entered into an agreement with North American Science Associates, LLC (“NAMSA”), a world leading medical technology contract research organization (“CRO”) offering global end-to-end development services, to oversee our clinical trials of the Hemopurifier for patients in Australia with various types of cancer tumors. We also have engaged Qualtran LLC as the CRO for our clinical trial in India.
We also believe that 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. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals infected with human immunodeficiency virus (“HIV”), hepatitis-C and Ebola.
| 8 |
Additionally, in vitro, the Hemopurifier has been demonstrated to capture H5N1 bird flu virus, H1N1 swine flu virus, Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus, Herpes simplex virus, Chikungunya virus, Dengue virus, West Nile virus, smallpox-related viruses, and the reconstructed Spanish flu virus of 1918. In several cases, these studies were conducted in collaboration with leading government or non-government research institutes.
On June 17, 2020, the FDA approved a supplement to our open Investigational Device Exemption (“IDE”) for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients with SARS-CoV-2/COVID-19, or COVID-19, in a new feasibility study. In June 2022, the first patient in this study was enrolled and completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we terminated this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish to preserve the option of enrolling patients if the situation with COVID-19 changes.
Under Single Patient Emergency Use regulations, Aethlon has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated with our Hemopurifier in our COVID-19 clinical trial discussed above.
We also obtained ethics review board (“ERB”) approval from and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a COVID-19 clinical trial at that location. In May 2023, we received ERB approval from the Medanta Medicity Hospital and Maulana Azad Medical College (“MAMC”), for a second site for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi, India. MAMC is affiliated with the University of Delhi and is operated by the Delhi government.
We now have two sites in India for this trial with the MAMC. One patient has been treated to date; however, we have been informed by our CRO that a new COVID-19 subvariant was detected in India recently. Our COVID-19 trial in India remains open in the event that there are COVID-19 admissions to the ICUs at our sites in India.
Additionally, based on preclinical data with acellular kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating whether the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes, RNA molecules, cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys from deceased donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer solutions, in vitro, utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation complications by improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation, and potentially reducing the number of kidneys rejected for transplant.
Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we plan to market and sell 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 to us more recently will help protect the proprietary nature of our Hemopurifier treatment technology.
In addition to the foregoing, we are monitoring closely the impact of inflation, the war between Russia and Ukraine and the military conflicts in Israel and the surrounding areas, as well as related political and economic responses and counter-responses by various global factors on our business. Given the level of uncertainty regarding the duration and impact of these events on capital markets and the U.S. economy, we are unable to assess the impact on our timelines and future access to capital. The full extent to which inflation, the ongoing military conflicts and other global instability will impact our business, results of operations, financial condition, clinical trials and preclinical research will depend on future developments, as well as the economic impact on national and international markets that are highly uncertain.
We incorporated in Nevada on March 10, 1999. Our executive offices are located at 11555 Sorrento Valley Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is www.aethlonmedical.com.
Our common stock is listed on the Nasdaq Capital Market under the symbol “AEMD.”
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During the six months ended September 30, 2024, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
REVERSE STOCK SPLIT
On October 4, 2023, we effected a
Basis of Presentation and Use of Estimates
Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of the Securities and Exchange Commission (“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, 2024, included in our Annual Report on Form 10-K filed with the SEC on June 27, 2024. The accompanying unaudited condensed consolidated financial statements include the accounts of Aethlon Medical, Inc. and its wholly owned subsidiary, Aethlon Medical Australia Pty Ltd. All significant inter-company transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements, taken as a whole, contain all adjustments that are of a normal recurring nature necessary to present fairly our operating results, cash flows, and financial position as of and for the period ended September 30, 2024. Estimates were made relating to useful lives of fixed assets, 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. The accompanying condensed consolidated balance sheet at March 31, 2024 has been derived from the audited consolidated balance sheet at March 31, 2024, contained in the above referenced 10-K. The results of operations for the three and six months ended September 30, 2024 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, including the impact of the reverse stock split.
LIQUIDITY AND GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the ordinary course of business. We have incurred continuing losses from operations
and at September 30, 2024 had limited working capital and an accumulated deficit of $
| 10 |
The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.
The condensed consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
Management expects that existing cash as of September 30, 2024 will not be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.
Restricted Cash
To comply with the terms of our laboratory and
office lease and our lease for our manufacturing space (see Note 9), we caused our bank to issue two standby letters of credit (“L/Cs”)
in the aggregate amount of $
Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional 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 September 30, 2024 and 2023, an aggregate of and potential common shares, respectively, consisting of shares underlying outstanding stock options, warrants, and restricted stock units 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 six-month periods ended September 30, 2024 and 2023, 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:
| September 30, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Three months ended | $ | $ | ||||||
| Six months ended | ||||||||
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4. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024. ASU 2023-07 is to be adopted retrospectively to all prior periods presented. We are currently assessing the impact this guidance will have on our consolidated financial statements; however, we do not expect a material impact.
In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced annual disclosures for specific categories in the rate reconciliation and income taxes paid disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating if the adoption of this new standard will have a material effect on our disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The adoption of ASU No. 2016-13 for smaller reporting companies that did not previously early adopt was January 1, 2023. The Company maintained US Treasury bills with maturities of less than three months and anticipates no credit losses from these securities. Additionally, the Company does not have any revenue or accounts receivables. As a result, the Company did not establish an allowance for expected credit losses.
5. EQUITY TRANSACTIONS IN THE SIX MONTHS ENDED SEPTEMBER 30, 2024
May 2024 Public Offering
On May 17, 2024, we closed a public offering pursuant
to which we sold an aggregate of: (i) shares of our common stock and accompanying Class A warrants to purchase up to
All pre-funded warrants issued in the offering
were exercised in the quarter ended June 30, 2024. The Class A and Class B warrants each have an
exercise price of $
Maxim Group LLC (“Maxim”),
served as the exclusive placement agent in connection with the offering. We paid Maxim a cash fee of 6.5% of the aggregate gross proceeds
raised at the closing of the offering, and reimbursement of certain expenses and legal fees in the amount of $
The gross proceeds from
the offering, before deducting the placement agent’s fees and other offering expenses, were approximately $
| 12 |
The shares of common stock, the Class A and Class B warrants, the pre-funded warrants and the Placement Agent Warrants described above and the underlying shares of common stock were offered pursuant to a Registration Statement on Form S-1, as amended (File No. 333-278188), which was declared effective by the SEC on May 15, 2024.
Warrant Exercises
In June 2024, and holders
of Class A and Class B warrants exercised shares and shares, respectively, for additional proceeds to the Company of
$
Restricted Stock Unit Grants
On April 16, 2024, our Board of Directors approved, pursuant to the terms of the Director Compensation Policy, the grant of the annual RSUs under the Director Compensation Policy to each of the four non-employee directors of the Company then serving on the Board of Directors. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year for current non-employee directors then serving on the Board of Directors, and for a grant of stock options or $75,000 worth of RSUs for a newly elected non-employee director, with each RSU priced at the average of the closing prices for the five trading days preceding and including the date of grant, or $1.52 per share for the RSUs granted in April 2024. As a result, in April 2024, the four eligible directors were each granted RSUs under the Company’s 2020 Equity Incentive Plan, as amended (the “2020 Plan”).
During the three- and six-months ended September 30, 2024, and shares were issued upon settlement of and RSUs, respectively
6. RELATED PARTY TRANSACTIONS
During the three-months ended September 30, 2024,
we accrued $
As a result of entering
into a Separation Agreement, effective October 3, 2024, with a former employee we accrued $
Amounts due to related parties were comprised of the following items:
| September 30, 2024 | March 31, 2024 | |||||||
| Accrued Board fees | $ | $ | ||||||
| Accrued vacation to all employees | ||||||||
| Accrued separation expenses | ||||||||
| Total due to related parties | $ | $ | ||||||
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The following tables summarize share-based compensation expenses relating to RSUs and stock options and the effect on basic and diluted loss per common share during the three- and six-month periods ended September 30, 2024 and 2023:
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | |||||||||||||
| Vesting of stock options and restricted stock units | $ | $ | $ | $ | ||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
| Basic and diluted loss per common share attributable to stock-based compensation expense | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
All of the stock-based compensation expense recorded during the six months ended September 30, 2024 and 2023, an aggregate of $ and $, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations. Stock-based compensation expense recorded during each of the six months ended September 30, 2024 and 2023 represented an impact on basic and diluted loss per common share of $ and $, respectively.
Stock Option and RSU Activity
We did t issue any stock options during the six months ended September 30, 2024 and 2023.
Stock options outstanding that have vested as of September 30, 2024 and stock options that are expected to vest subsequent to September 30, 2024 are as follows:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | ||||||||||
| Vested | $ | |||||||||||
| Expected to vest | $ | |||||||||||
| Total | ||||||||||||
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A summary of stock option activity during the six months ended September 30, 2024 is presented below:
| Amount | Range of Exercise Price | Weighted Average Exercise Price | ||||||||||
| Outstanding at beginning of year | $ | $ | ||||||||||
| Granted | $ | $ | ||||||||||
| Cancelled/Expired | $ | $ | ||||||||||
| Outstanding September 30, 2024 | $ | $ | ||||||||||
| Exercisable, September 30, 2024 | $ | $ | ||||||||||
There were stock option grants during the three months ended September 30, 2024 and 2023. There were RSUs granted during the three months September 30, 2024 and 2023. There were stock option exercises during the three months ended September 30, 2024 and 2023. On September 30, 2024, our outstanding stock options had intrinsic value, since the closing share price on that date of $ per share was below the exercise price of our outstanding stock options.
The table below summarizes nonvested stock options as of September 30, 2024 and changes during the three months ended September 30, 2024.
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Nonvested stock options at April 1, 2024 | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Nonvested stock options at September 30, 2024 | ||||||||
The detail of the options outstanding and exercisable as of September 30, 2024 is as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Exercise Prices | Number Outstanding | Weighted Average Remaining Life (Years) | Weighted Average Exercise Price | Number Outstanding | Weighted Average Exercise Price | |||||||||||||||||
| $ | 12.80 - 16.80 | years | $ | $ | ||||||||||||||||||
| $ | 25.20 | years | $ | $ | ||||||||||||||||||
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The table below summarizes RSUs as of September 30, 2024 and changes during the six months ended September 30, 2024.
| Shares | ||||
| Nonvested RSUs at April 1, 2024 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Tax withholding payments or tax equivalent payments for net share settlement of RSUs | ( | ) | ||
| Nonvested RSUs at September 30, 2024 | ||||
Our total stock-based compensation for the three months ended September 30, 2024 and 2023 included the following:
| Six Months Ended | ||||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Vesting of restricted stock units | $ | $ | ||||||
| Vesting of stock options | ||||||||
| Total Stock-Based Compensation | $ | $ | ||||||
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 six months ended September 30, 2024 was insignificant.
On September 30, 2024, our outstanding stock options had no intrinsic value since the closing price on that date of $ per share was below the weighted average exercise price of our outstanding stock options.
At September 30, 2024, there was approximately $ of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of years.
8. WARRANTS
During the six-months ended September 30, 2024, we issued 16,524,000 warrants in connection with the May 17, 2024 public offering. We did not issue any warrants in the six-months ended September 2023.
A summary of warrant activity during the six months ended September 30, 2024 is presented below:
| Amount | Range of Exercise Price | Weighted Average Exercise Price | ||||||||||
| Warrants outstanding at March 31, 2024 | $ | $ | ||||||||||
| Granted | $ | $ | ||||||||||
| Exercised | ( | ) | $ | $ | ||||||||
| Cancelled/Expired | $ | $ | ||||||||||
| Warrants outstanding at September 30, 2024 | $ | $ | ||||||||||
| Warrants exercisable at September 30, 2024 | $ | $ | ||||||||||
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9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
Office, Lab and Manufacturing Space Leases
The office, lab and manufacturing leases are coterminous
with a remaining term of
As of our September 30, 2024 balance sheet, we
have an operating lease right-of-use asset of $
In addition, the lease agreements for the new
office, lab and manufacturing space required us to post a standby L/C in favor of the landlord in the aggregate amount of $
Overall, our rent expense, which is included in
general and administrative expenses, approximated $
LEGAL MATTERS
We may be involved from time to time in various claims, lawsuits, and/or disputes with third parties or breach of contract actions incidental to the normal course of our business operations. We are currently not involved in any litigation or any pending legal proceedings.
10. SUBSEQUENT EVENTS
Management has evaluated events subsequent to September 30, 2024 through the date that the accompanying consolidated financial statements were filed with the SEC for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
Management/Board Changes – Effective October 3, 2024, James B. Frakes, MBA, Chief Financial Officer and formerly Interim Chief Executive Officer of Aethlon, was appointed as the permanent Chief Executive Officer of the Company. Mr. Frakes will additionally remain as Chief Financial Officer of the Company. Effective as of October 3, 2024, Guy Cipriani, MBA, was terminated as the Company’s Chief Operating Officer.
In November 2024, we received confirmation that the first two patients enrolled in our Australian safety, feasibility and dose-finding clinical trial of the Hemopurifier in patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® (pembrolizumab) or Opdivo® (nivolumab), successfully completed screening and are now advancing to the run-in period of the study. Both of the patients are enrolled in the trial at the Royal Adelaide Hospital in Australia. The enrollment of the first two eligible patients marks a significant milestone in advancing our clinical program for the Hemopurifier.
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ITEM 2. MANAGEMENT’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 “Quarterly Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled “Cautionary Notice Regarding Forward Looking Statements.”
Overview
Aethlon Medical, Inc. (“Aethlon”, the “Company,” “we” or “us”) is a medical therapeutic company focused on developing the Hemopurifier, a clinical-stage immunotherapeutic device designed to combat cancer and life-threatening viral infections and for use in organ transplantation. In human studies, 164 sessions with 38 patients, the Hemopurifier was safely utilized and demonstrated the potential to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier has demonstrated the potential to remove harmful exosomes and exosomal particles from biological fluids, utilizing its proprietary lectin-based technology. This action has potential applications in cancer, where exosomes and exosomal particles may promote immune suppression and metastasis, and in life-threatening infectious diseases. The U.S. Food and Drug Administration (“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 or exosomal particles 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 may be a substantial advancement in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia.
We have recently launched in Australia and in India safety, feasibility and dose-finding clinical trials of the Hemopurifier in cancer patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® (pembrolizumab) or Opdivo® (nivolumab). The primary endpoint of the approximately nine to 18-patient, safety, feasibility and dose-finding trial in each country is the incidence of adverse events and clinically significant changes in safety lab tests of Hemopurifier treated patients with solid tumors with stable or progressive disease at different treatment intervals, after a two-month run in period of PD-1 antibody, Keytruda® or Opdivo® monotherapy. Patients who do not respond to the therapy will be eligible to enter the Hemopurifier period of the study where sequential cohorts will receive 1, 2 or 3 Hemopurifier treatments during a one-week period. In addition to monitoring safety, the study is designed to examine the number of Hemopurifier treatments needed to decrease the concentration of extracellular vesicles (“EVs”) and whether these changes in EV concentrations improve the body's own natural ability to attack tumor cells. These exploratory central laboratory analyses are expected to inform the design of a subsequent efficacy and safety, Premarket Approval (PMA), study required by regulatory agencies.
The following two hospitals in Australia have received ethics committee approval, have gone through training on our device and are now open for patient enrollment: Royal Adelaide Hospital in Adelaide, Australia and Pindara Private Hospital in the Gold Coast section of Australia. We have also trained a third hospital in Australia, but we have not yet received ethics committee approval for that institution and have not yet begun patient enrollment. In November 2024, we received confirmation that the first two patients enrolled at the Royal Adelaide Hospital location have successfully completed screening and are advancing to the run-in period of the trial. The enrollment of the first two eligible patients marks a significant milestone in advancing our clinical program for the Hemopurifier.
We have received ethics committee approval from Medanta Medicity Hospital in Gurugram, India for a similar nine to 18-patient, safety, feasibility and dose-finding trial. We are completing the necessary logistical steps before they can open for patient enrollment.
| 18 |
We have entered into an agreement with North American Science Associates, LLC (“NAMSA”), a world leading medical technology contract research organization (“CRO”) offering global end-to-end development services, to oversee our clinical trials of the Hemopurifier for patients in Australia with various types of cancer tumors. We also have engaged Qualtran LLC as the CRO for our clinical trial in India.
We also believe that 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. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals infected with human immunodeficiency virus (“HIV”), hepatitis-C and Ebola.
Additionally, in vitro, the Hemopurifier has been demonstrated to capture H5N1 bird flu virus, H1N1 swine flu virus, Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus, Herpes simplex virus, Chikungunya virus, Dengue virus, West Nile virus, smallpox-related viruses, and the reconstructed Spanish flu virus of 1918. In several cases, these studies were conducted in collaboration with leading government or non-government research institutes.
On June 17, 2020, the FDA approved a supplement to our open Investigational Device Exemption (“IDE”), for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients with SARS-CoV-2/COVID-19, or COVID-19, in a new feasibility study. In June 2022, the first patient in this study was enrolled and completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we terminated this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish to preserve the option of enrolling patients if the situation with COVID-19 changes.
Under Single Patient Emergency Use regulations, Aethlon has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated with our Hemopurifier in our COVID-19 clinical trial discussed above.
We also obtained ethics review board (“ERB”) approval from and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a COVID-19 clinical trial at that location. In May 2023, we received ERB approval from the Medanta Medicity Hospital and Maulana Azad Medical College (“MAMC”), for a second site for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi, India. MAMC is affiliated with the University of Delhi and is operated by the Delhi government.
We now have two sites in India for this trial with the MAMC. One patient has been treated to date; however, we have been informed by our CRO that a new COVID-19 subvariant was detected in India recently. Our COVID-19 trial in India remains open in the event that there are COVID-19 admissions to the ICUs at our sites in India.
Additionally, based on preclinical data with acellular kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating whether the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes, RNA molecules, cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys from deceased donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer solutions, in vitro, utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation complications by improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation, and potentially reducing the number of kidneys rejected for transplant.
Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we plan to market and sell 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 to us more recently will help protect the proprietary nature of our Hemopurifier treatment technology.
In addition to the foregoing, we are monitoring closely the impact of inflation, the war between Russia and Ukraine and the military conflicts in Israel and the surrounding areas, as well as related political and economic responses and counter-responses by various global factors on our business. Given the level of uncertainty regarding the duration and impact of these events on capital markets and the U.S. economy, we are unable to assess the impact on our timelines and future access to capital. The full extent to which inflation, ongoing military conflicts and other global instability will impact our business, results of operations, financial condition, clinical trials and preclinical research will depend on future developments, as well as the economic impact on national and international markets that are highly uncertain.
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We incorporated in Nevada on March 10, 1999. Our executive offices are located at 11555 Sorrento Valley Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is www.aethlonmedical.com.
Our common stock is listed on the Nasdaq Capital Market under the symbol “AEMD.”
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act, and must file reports, proxy statements and other information with the SEC. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, like us, which file electronically with the SEC.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2023
Operating Expenses
Consolidated operating expenses for the three months ended September 30, 2024 were $2,902,119, compared to $3,175,346 for the three months ended September 30, 2023. The decrease of $273,227, or 8.6%, in the 2024 period was due to a decrease of $562,266 in professional fees, partially offset by an increase of $181,473 in payroll and related expenses and a $107,567 increase in general and administrative expenses.
In the three months ended September 30, 2024, professional fees decreased by $562,266, primarily due to a $270,071 reduction in legal fees following a transition to a new legal firm, a $211,417 decrease in contract labor expenses due to project completions with contract manufacturing organizations and research and development consultants, an $80,630 decrease in accounting fees, and a $62,500 reduction in recruiting fees. These decreases were partially offset by an increase in investor relations expenses to support the dissemination of progress on ongoing clinical trials.
Payroll expenses rose by $181,473, largely due to an increase of $507,307 in separation expenses related to severance agreements following the termination of an executive and a reduction in workforce. This increase was partially offset by a $172,419 reduction in ongoing payroll expenses and a $143,688 decrease in stock-based compensation as a result of completion of vesting of some existing stock options and expiration of options associated with reduced headcount.
The $107,567 increase in general and administrative expenses was primarily driven by a $162,790 increase in clinical trial expenses associated with our ongoing oncology clinical trial. A decrease of $32,551 in supplies following the completion of certain research and development efforts, a $10,361 decrease in conference and trade show expenses, and a $9,671 decrease in insurance costs.
Net Loss
As a result of the changes in expenses noted above, our comprehensive loss decreased to $2,803,169 in the three months ended September 30, 2024 from $3,036,891 in the three months ended September 30, 2023.
Basic and diluted loss attributable to common stockholders was ($0.20) for the three months ended September 30, 2024, compared to ($1.22) for the three-month period ended September 30, 2023.
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SIX MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2023
Operating Expenses
Consolidated operating expenses for the six months ended September 30, 2024 were $5,521,856, compared to $6,583,506 for the six months ended September 30, 2023. This decrease of $1,061,651, or 16.1%, in the 2024 period was due to decreases in our professional fees of $924,822 and general and administrative expenses of $449,864. These decreases were partially offset by an increase of $313,035 in payroll and related expenses.
The $924,822 decrease in professional fees was mainly due to a $430,205 reduction in contract labor costs related to completed projects with a contract manufacturing organization, as well as with outside research and development and regulatory and quality management consultants. Additional decreases included $343,656 in legal fees following a transition to a new legal firm, a $62,500 reduction in recruiting fees, a $48,784 decline in consulting fees incurred by our Australian subsidiary, and a $32,622 decrease in accounting fees for activities conducted in the prior year with no similar expenses in the current year.
The $449,864 decrease in general and administrative expenses was primarily driven by a $479,994 reduction in supplies expenses for raw materials purchased last year for the research, development, and manufacturing of our Hemopurifier. Other decreases included a $44,137 decrease in cleanroom repair and maintenance expenses, a $27,763 decline in conference, tradeshow, and travel and entertainment expenses, and a $20,897 decrease in insurance costs. These decreases were partially offset by a $141,928 increase in expenses primarily related to our ongoing oncology clinical trial.
The $313,035 increase in payroll expenses was primarily due to $827,910 in severance-related salary expenses for two executives and a reduction in workforce. This increase was partially offset by a $260,401 reduction in ongoing payroll expenses and a $254,474 decrease in stock-based compensation due to reduced headcount.
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Net Loss
As a result of the changes in expenses noted above, our comprehensive loss decreased from $6,320,064 in the six months ended September 30, 2023, to $5,375,443 in the six months ended September 30, 2024.
Basic and diluted loss attributable to common stockholders was ($0.50) for the six months ended September 30, 2024, compared to ($2.57) for the six-month period ended September 30, 2023.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2024, we had a cash balance of $6,859,075 and working capital of $4,806,633. This compares to a cash balance of $5,441,978 and working capital of $4,395,889 at March 31, 2024.
On May 17, 2024, we closed a public offering of our equity, pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants, which is equal to the public offering price per share of common stock and accompanying warrants, less the $0.001 per share exercise price of each such pre-funded warrant. The gross proceeds from the offering, before deducting the placement agent’s fees and other offering expenses, were approximately $4.7 million. Net proceeds, of the offering, after deducting the placement agent fees and expenses and other offering expenses payable by us, were approximately $3.5 million. In June 2024, holders of Class A and Class B warrants exercised 300,000 shares and 2,880,000 shares, respectively, for additional total proceeds of $1,844,400. See the section entitled “May 2024 Public Offering,” below, for additional information regarding this offering.
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We do not expect our existing cash as of September 30, 2024 to be sufficient to fund our operations for at least twelve months from the issuance date of these financial statements. Significant additional financing must be obtained to provide a sufficient source of operating capital and to allow us to continue to operate as a going concern. We intend to fund operations, working capital and other cash requirements for the twelve-month period subsequent to September 30, 2024 through a combination of debt and/or equity financing arrangements and potentially from collaborations or strategic partnerships.
As we expand our activities, our overhead costs to support personnel, laboratory materials and infrastructure will increase and significant additional financing must be obtained to provide a sufficient source of operating capital. 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 our planned clinical trials. The failure to implement our research and clinical trials would have a material adverse effect on our ability to conduct planned clinical trials and commercialize our products.
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, 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.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. We have incurred continuing losses from operations and at September 30, 2024 had limited working capital and an accumulated deficit of $159,945,141. These factors, among other matters, raise substantial doubt about our ability to continue as a going concern within one year of the date of the financial statements included in this Quarterly Report. A significant amount of additional capital will be necessary to advance the development of our products to the point at which they may become commercially viable. We intend to fund operations, working capital and other cash requirements for the twelve-month period subsequent to September 30, 2024 through a combination of debt and/or equity financing arrangements and potentially from collaborations or strategic partnerships.
The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.
The condensed consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
May 2024 Public Offering
On May 17, 2024, we closed a public offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants, which is equal to the public offering price per share of common stock and accompanying warrants, less the $0.001 per share exercise price of each such pre-funded warrant.
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All pre-funded warrants issued in the offering were exercised in the quarter ended June 30, 2024. The Class A and Class B warrants each have an exercise price of $0.58 per share, are immediately exercisable, and, in the case of Class A warrants, will expire on May 17, 2029, and in the case of Class B warrants, will expire on May 19, 2025. The exercise price of the Class A and Class B warrants is also subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in such warrants.
Maxim Group LLC (“Maxim”), served as the exclusive placement agent in connection with the offering. We paid Maxim a cash fee of 6.5% of the aggregate gross proceeds raised at the closing of the offering, and reimbursement of certain expenses and legal fees in the amount of $100,000. We also issued to designees of Maxim warrants to purchase up to an aggregate of 324,000 shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants have an exercise price of $0.58 per share and have substantially the same terms as the Class A warrants, except the Placement Agent Warrants are not subject to an exercise price reset, are non-exercisable until November 15, 2024, and will expire on May 15, 2029.
The gross proceeds from the offering, before deducting the placement agent’s fees and other offering expenses, were approximately $4.7 million. Net proceeds, of the offering, after deducting the placement agent fees and expenses and other offering expenses payable by us, were approximately $3.5 million.
The shares of common stock, the Class A and Class B warrants, the pre-funded warrants and the Placement Agent Warrants described above and the underlying shares of common stock were offered pursuant to a Registration Statement on Form S-1, as amended (File No. 333-278188), which was declared effective by the SEC on May 15, 2024.
Warrant Exercises
In June 2024, and holders of Class A and Class B warrants exercised 300,000 shares and 2,880,000 shares, respectively, for additional proceeds to the Company of $1,844,400.
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 three months ended | ||||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | $ | (3,962 | ) | $ | (5,187 | ) | ||
| Investing activities | – | (237 | ) | |||||
| Financing activities | 5,375 | 1,068 | ||||||
| Effect of exchange rate changes on cash | 4 | (1 | ) | |||||
| Net change in cash and restricted cash | $ | 1,417 | $ | (4,357 | ) | |||
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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 $3,962,000 in the six months ended September 30, 2024, compared to approximately $5,187,000 in the six months ended September 30, 2023. The primary components in the $1,225,000 decrease in cash used in our operating activities in the 2024 period was a decrease in our net loss of approximately $938,000 and a positive net change in other working capital components of $555,000, partially offset by the reduction of $268,000 in non-cash components.
NET CASH USED IN INVESTING ACTIVITIES. We did not use cash for investing activities in the six months ended September 30, 2024, compared to approximately $237,000 in the six months ended September 30, 2023. The $237,000 decrease in the 2024 period was primarily a result of equipment purchase for our laboratory incurred in the six months ended September 2023.
NET CASH PROVIDED BY FINANCING ACTIVITIES. During the six months ended September 30, 2024, we raised approximately $5,384,000, net of placement agent fees and offering costs, from the sale and issuance of our common stock and warrants in connection with a public offering and the exercise of 300,000 and 2,880,000 Class A and Class B warrants, respectively, by holders thereof. The source of cash from our financing activities was partially offset by the use of approximately $9,000 to pay for the tax withholding upon settlement of on restricted stock units, for a net aggregate amount of cash provided by financing activities of approximately $5,375,000.
During the six months ended September 30, 2023, we raised approximately $1,086,000 from the issuance of our common stock under our at the market facility. That source of cash from our financing activities was partially offset by the use of approximately $16,000 to pay for the tax withholding on restricted stock units, for a net aggregate amount of cash provided by financing activities of approximately $1,068,000.
Material Cash Requirements
We expect our clinical trial expenses for our oncology trials in Australia and India to increase for the foreseeable future. Those increases in clinical trial expenses include the cost of manufacturing additional Hemopurifiers.
In addition, we are obligated under lease agreements for our headquarters, laboratory and manufacturing facilities. We expect our rent payments to continue to increase for the foreseeable future.
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, 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. We will continue to need to raise additional capital either through equity and/or debt financing for the foreseeable future.
We plan to access the equity markets for additional capital, however, there can be no assurance that we will be able to access such additional capital on favorable terms, or at all.
Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States, including due to actual or perceived changes in interest rates and economic inflation, and worldwide resulting from macroeconomic factors. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and we may never be profitable or generate positive cash flow from operating activities.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of financial condition and results of operations is based on our interim condensed consolidated financial statements, that we prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Preparing these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. We base our estimates on historical experience and on various assumptions we believe to be reasonable under the circumstances. We believe our judgment is applied consistently and produces financial information that fairly depicts our results of operations for all periods. Actual results may differ materially from these estimates.
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 estimates relate to long lived assets, stock compensation, deferred tax asset valuation allowance, contingencies and clinical trial accruals.
There have been no changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2024.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (who is our principal executive officer and principal financial officer), to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including our Chief Executive Officer, who also serves as 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 Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act 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.
As previously reported in our Annual Report on Form 10-K for the year ended March 31, 2024, we identified a material weakness in our internal control over financial reporting related to segregation of duties within our financial systems. Specifically, user access controls were not sufficiently maintained to properly restrict both user and privileged access to financial applications within our accounting software system to initiate, record and approve entries. Also noted that check stock was secured in an authorized signatory’s office.
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Since identifying the material weakness, we have been actively engaged in implementing measures to remediate the weakness and enhance our internal control over financial reporting. These measures include but are not limited to updating the accounting software and creating distinct user roles. Transactions are recorded by personnel who are independent of those who initiate them and are approved by separate personnel who are independent of those who record them. Additionally, check stock had been relocated in November 2023.
We believe that these measures, once fully implemented and operational for a sufficient period of time, will effectively remediate the material weakness. We are committed to maintaining a strong internal control environment and will continue to monitor the effectiveness of these controls and procedures.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Other than the changes to remediate the material weakness noted above, there were no changes in our internal control over financial reporting during the quarter ending September 30, 2024 that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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.
ITEM 1A. RISK FACTORS.
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 under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on June 27, 2024, 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 losses and expect to continue to incur losses for the foreseeable future. | |
| · | We will require additional financing to sustain our operations, achieve our business objectives and satisfy our cash obligations, which may dilute the ownership of our existing stockholders. | |
| · | We have limited experience in identifying and working with large-scale contracts with medical device manufacturers; manufacture of our devices must comply with good manufacturing practices in the United States. | |
| · | Delays, interruptions or the cessation of production by our third-party suppliers of important materials or delays in qualifying new materials, has and may continue to prevent or delay our ability to manufacture our Hemopurifier. | |
| · | We face intense competition in the medical device industry. | |
| · | Our Hemopurifier technology may become obsolete. | |
| · | If we fail to comply with extensive regulations of U.S. and foreign regulatory agencies, the commercialization of our products could be delayed or prevented entirely. | |
| · | If we are unable to regain compliance with the listing requirements of the Nasdaq Capital Market, our common stock may be delisted from the Nasdaq Capital Market, which could have a material adverse effect on our financial condition and could make it more difficult for you to sell your shares. |
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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.
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We plan to expand our operations, which may strain our resources; our inability to manage our growth could delay or derail implementation of our business objectives.
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Our success is dependent in part on our executive officers.
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We have not received, and may never receive, approval from the FDA to market a medical device in the United States. Even though we have received breakthrough device designation for the Hemopurifier for two independent indications, this designation may not expedite the development or review of the Hemopurifier and does not provide assurance ultimately of PMA submission or approval by the FDA.
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| · | Delays in successfully commencing or completing our planned clinical trials could jeopardize our ability to obtain regulatory approval and sustain our operations. |
There have been no material changes to the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report. The risks described in our Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We did not issue or sell any unregistered securities during the three months ended September 30, 2024.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2024,
none of our directors or officers entered into,
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ITEM 6. EXHIBITS.
(a) Exhibits. The following documents are filed as part of this report:
| ^ | The information in Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Quarterly Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference. |
| * | The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
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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: November 13, 2024 | By: | /s/ JAMES B. FRAKES | |
| JAMES B. FRAKES | |||
| CHIEF EXECUTIVE OFFICER | |||
| CHIEF FINANCIAL OFFICER | |||
| (PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER) | |||
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