Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2017

 

OR

 

o      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)

 

NEVADA   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)

 

(858) 459-7800

(Registrant's telephone number, including area code)

 

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.   YES       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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES     NO  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer  Accelerated filer 
Non-accelerated filer  (Do not check if a smaller reporting company) 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 November 2, 2017, the registrant had outstanding 15,095,867 shares of common stock, $0.001 par value.

 

 

 

 

 

 

   

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 3
     
ITEM 1. FINANCIAL STATEMENTS 3
     
  CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2017 (UNAUDITED) AND MARCH 31, 2017 3
     
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED) 4
     
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED) 5
     
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6
     
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25
     
ITEM 4. CONTROLS AND PROCEDURES 25
     
PART II. OTHER INFORMATION 26
     
ITEM 1. LEGAL PROCEEDINGS 26
     
ITEM 1A. RISK FACTORS 26
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26
     
ITEM 4. MINE SAFETY DISCLOSURES 26
     
ITEM 5. OTHER INFORMATION 26
     
ITEM 6. EXHIBITS 26

 

 

 

 

   

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

AETHLON MEDICAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,
2017
   March 31,
2017
 
   (Unaudited)      
ASSETS          
Current assets          
Cash  $920,072   $1,559,701 
Prepaid expenses and other current assets   91,737    37,551 
Total current assets   1,011,809    1,597,252 
           
Property and equipment, net   38,858    29,223 
Patents and patents pending, net   80,414    84,996 
Deposits   14,897    14,897 
Total assets  $1,145,978   $1,726,368 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities          
Accounts payable  $275,579   $484,423 
Due to related parties   48,616    57,866 
Other current liabilities   21,743    69,467 
Total current liabilities   345,938    611,756 
           
Convertible notes payable, net   780,579    519,200 
           
Total liabilities   1,126,517    1,130,956 
           
Commitments and Contingencies (Note 13)          
           
           
Stockholders’ Equity          
Common stock, par value $0.001 per share; 30,000,000 shares authorized as of September 30, 2017 and March 31, 2017; 9,618,909 and 8,797,086 shares issued and outstanding as of September 30, 2017 and March 31, 2017, respectively   9,618    8,796 
Additional paid-in capital   97,023,094    94,445,739 
Accumulated deficit   (96,923,845)   (93,778,156)
Total Aethlon Medical, Inc. stockholders’ equity before noncontrolling interests   108,867    676,379 
           
Noncontrolling interests   (89,406)   (80,967)
           
Total stockholders’ equity   19,461    595,412 
           
Total liabilities and stockholders’ equity  $1,145,978   $1,726,368 

 

See accompanying notes.

 

 

 

 3 

 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Month Periods Ended September 30, 2017 and 2016

(Unaudited)

 

   Three Months
Ended
September 30,
2017
   Three Months
Ended
September 30,
2016
   Six Months
Ended
September 30,
2017
   Six Months
Ended
September 30,
2016
 
                 
REVENUES                    
                     
Government contract revenue  $   $387,438   $   $392,073 
                     
OPERATING EXPENSES                    
                     
Professional fees   383,178    510,982    726,201    1,078,731 
Payroll and related expenses   618,081    1,813,003    1,248,308    2,158,190 
General and administrative   234,914    290,131    421,913    513,681 
Total operating expenses   1,236,173    2,614,116    2,396,422    3,750,602 
OPERATING LOSS   (1,236,173)   (2,226,678)   (2,396,422)   (3,358,529)
                     
OTHER EXPENSE                    
Interest and other debt expenses   61,979    36,576    250,583    78,743 
Loss on share for warrant exchanges   10,425        130,214     
Loss on debt extinguishment           376,909    616,889 
Warrant repricing expense               345,841 
Total other expense   72,404    36,576    757,706    1,041,473 
NET LOSS BEFORE NONCONTROLLING INTERESTS   (1,308,577)   (2,263,254)   (3,154,128)   (4,400,002)
                     
LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (4,671)   (7,668)   (8,439)   (15,400)
                     
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  $(1,303,906)  $(2,255,586)  $(3,145,689)  $(4,384,602)
                     
BASIC AND DILUTED LOSS PER COMMON SHARE  $(0.14)  $(0.29)  $(0.35)  $(0.57)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED   9,032,157    7,756,883    8,939,624    7,690,369 

 

 

See accompanying notes.

 

 

 

 4 

 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended September 30, 2017 and 2016

(Unaudited)

 

   Six Months
Ended
September 30, 2017
   Six Months
Ended
September 30, 2016
 
Cash flows from operating activities:          
Net loss  $(3,154,128)  $(4,400,002)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   18,651    20,612 
Stock based compensation   564,445    1,573,991 
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    616,889 
Amortization of debt discount and deferred financing costs   185,089    46,639 
Changes in operating assets and liabilities:          
Accounts receivable       5,752 
Prepaid expenses and other current assets   (54,186)   (12,507)
Accounts payable and other current liabilities   (194,421)   125,842 
Due to related parties   (9,250)   (86,750)
Net cash used in operating activities   (2,103,077)   (1,763,693)
           
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   1,650,314    266,612 
Cash paid for repurchase of restricted stock units   (163,161)   (67,343)
Net cash provided by financing activities   1,487,153    199,269 
           
Net decrease in cash   (639,629)   (1,567,385)
           
Cash at beginning of period   1,559,701    2,123,737 
           
Cash at end of period  $920,072   $556,352 
           
Supplemental disclosures of non-cash investing and financing activities:          
           
Issuance of shares under conversions of convertible notes payable and related accrued interest  $362,765   $32,321 
           
Issuance of shares under vested restricted stock units  $45   $30 
           
Recorded debt discount on convertible notes  $   $75,994 
           
Issuance of shares under cashless warrant exchanges  $   $3 
           
Reclassification of accrued interest to convertible notes payable  $   $85,031 

 

See accompanying notes.

 

 

 

 5 

 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2017

 

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

ORGANIZATION

 

Aethlon Medical, Inc. and subsidiary (collectively, “Aethlon”, the “Company”, “we” or “us”) are a medical technology company focused on addressing unmet needs in global health and biodefense. The Aethlon Hemopurifier® is an early clinical-stage therapeutic device designed for the single-use removal of life-threatening viruses from the circulatory system of infected individuals. We believe the Hemopurifier can be a part of the broad-spectrum treatment of life-threatening highly glycosylated 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. In small-scale or early feasibility human studies, the Hemopurifier has been administered to individuals infected with HIV, Hepatitis-C, and Ebola. Additionally, the Hemopurifier has been validated to capture Zika virus, Lassa virus, MERS-CoV, Cytomegalovirus, Epstein-Barr virus, Herpes Simplex virus, Chikungunya virus, Dengue virus, West Nile virus, Smallpox-related viruses, H1N1 Swine Flu virus, H5N1 Bird 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 the clinical advancement of the Hemopurifier through investigational device exemptions (IDEs) approved by FDA. We recently concluded a feasibility study to demonstrate the safety of our device in health-compromised individuals infected with a viral pathogen.

 

We are also the majority owner of Exosome Sciences, Inc. (ESI), a company focused on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. Included among ESI’s endeavors is the advancement of a TauSomeTM biomarker candidate to diagnose Chronic Traumatic Encephalopathy (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.

 

Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we intend to sell this device. Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or other patents issued more recently will help protect the proprietary nature of the Hemopurifier treatment technology.

 

On March 31, 2016, we filed a Certificate of Amendment to our Articles of Incorporation to increase our authorized common stock from 10,000,000 to 30,000,000 shares. Our stockholders approved the amendment at our annual meeting of stockholders held on March 29, 2016.

 

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 quoted on the Nasdaq Capital Market under the symbol “AEMD.”

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

During the six months ended September 30, 2017, there have been 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.

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements of the Company 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 year ended March 31, 2017, included in the Company's Annual Report on Form 10-K filed with the SEC on June 28, 2017. The accompanying unaudited condensed consolidated financial statements include the accounts of Aethlon Medical, Inc. and its majority-owned subsidiary. All significant intercompany 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 six months ended September 30, 2017, and the condensed consolidated statement of cash flows for the six months ended September 30, 2017. 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, 2017 has been derived from the audited consolidated balance sheet at March 31, 2017, contained in the above referenced 10-K. The results of operations for the six months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

 

 

 

 6 

 

 

LIQUIDITY AND GOING CONCERN

 

Management expects existing cash as of September 30, 2017 coupled with the $5,289,735 in net proceeds from an equity financing that closed on October 4, 2017 (see Note 14) to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these interim financial statements.

 

2. LOSS PER COMMON SHARE

 

Basic loss per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period of computation. The weighted average number of common shares outstanding for the three and six months ended September 30, 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 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, 2017 and 2016, a total of 3,725,423 and 3,289,606 potential common shares, consisting of shares underlying outstanding stock options, warrants, 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 six month periods ended September 30, 2017 and 2016, 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, 
    2017   2016 
 Three months ended   $168,570   $280,860 
 Six months ended   $333,433   $377,843 

 

4. FUTURE 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 the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606), and have not yet concluded whether any such pronouncements will have a significant effect on our future consolidated financial statements.

  

5. CONVERTIBLE NOTES PAYABLE, NET

 

Convertible Notes Payable, Net consisted of the following at September 30, 2017:

 

   Principal   Unamortized
Discount
   Net
Amount
   Accrued
Interest
 
Convertible Notes Payable, Net – Non-Current Portion:                    
November 2014 10% Convertible Notes  $612,811   $(130,896)  $481,915   $3,745 
December 2016 10% Convertible Notes   379,780    (81,116)   298,664    2,326 
Total Convertible Notes Payable, Net  $992,591   $(212,012)  $780,579   $6,071 

 

During the six months ended September 30, 2017, we recorded interest expense of $62,826 related to the contractual interest rates of our convertible notes and interest expense of $185,089 related to the amortization of the note discount for a total interest expense of $247,915 related to our convertible notes in the six months ended September 30, 2017. All of the unamortized discount at June 30, 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).

 

 

 

 

 7 

 

 

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 

 

During the six months ended September 30, 2016, we recorded interest expense of $30,794 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 $18,998 related to the amortization of note discounts for a total interest expense of $77,433 related to our convertible notes in the six months ended September 30, 2016.

 

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 amendment of terms (“Amendment of Terms”) with the two investors that participated in the November 2014 10% Convertible Notes. The Amendment of Terms modified the terms of the subscription agreement, Notes and Warrants held by those investors to, among other things, extended the maturity date of the Notes from April 1, 2016 to June 1, 2016, temporarily reduced 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 Notes and the Warrants. The Amendments provide that 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).

 

 

 

 8 

 

 

The Amendments also increase 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.

 

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 September 30, 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”).

 

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.

 

 

 

 

 9 

 

 

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 six months ended September 30, 2017   (300,620)
Balance as of September 30, 2017  $379,780 

 

6. EQUITY TRANSACTIONS IN THE SIX MONTHS ENDED SEPTEMBER 30, 2017

 

Common Stock Sales Agreement with H.C. Wainwright

 

On June 28, 2016, we entered into a Common Stock Sales Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC (“H.C. Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our common stock from time to time as set forth in the Agreement. The Agreement provides for the sale of shares of our common stock having an aggregate offering price of up to $12,500,000 (the “Shares”).

 

Subject to the terms and conditions set forth in the Agreement, H.C. Wainwright will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the Shares from time to time, based upon our instructions. We have provided H.C. Wainwright with customary indemnification rights, and H.C. Wainwright will be entitled to a commission at a fixed rate equal to three percent (3.0%) of the gross proceeds per Share sold. In addition, we have agreed to pay certain expenses incurred by H.C. Wainwright in connection with the Agreement, including up to $50,000 of the fees and disbursements of their counsel. The Agreement will terminate upon the sale of all of the Shares under the Agreement unless terminated earlier by either party as permitted under the Agreement (see Note 14).

  

Sales of the Shares, if any, under the Agreement shall 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 to sell any of the Shares, and, at any time, we may suspend offers under the Agreement or terminate the Agreement.

 

In July 2016, we commenced sales of common stock under our Common Stock Sales Agreement with H.C. Wainwright. In the six months ended September 30, 2017, we raised aggregate net proceeds of $1,650,314 (net of $51,157 in commissions to H.C. Wainwright and $3,750 in other offering expenses) under this agreement through the sale of 601,504 shares at an average price of $2.74 per share of net proceeds.

 

 

 

 10 

 

 

 

In connection with an equity offering that closed on October 4, 2017, we agreed to restrict our ability to use the ATM facility for a 90 day period immediately post-closing (see Note 14).

 

Restricted Shares Issued for Services

 

During the six months ended September 30, 2017, we issued 15,000 shares of restricted common stock at a price of $2.24 per share, 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 six months ended September 30, 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. 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 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. Based upon the fair value of the shares issued and warrants exchanged, we recorded a loss of $130,214 during the six months ended September 30, 2017 for all of the above share for warrant exchanges.

 

Stock Option Issuances

 

During the six months ended September 30, 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 six months ended September 30, 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.

 

Restricted Stock Unit Grants to Executive Officers

 

During the six months ended September 30, 2017, 92,250 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, 47,368 of the RSUs were cancelled and we issued a net 44,882 shares to our executives (see Note 9).

 

7. RELATED PARTY TRANSACTIONS

 

Due to Related Parties

 

During the three months ended September 30, 2017, we accrued unpaid Board fees of $19,750 which are owed to our outside directors as of September 30, 2017.

 

 

 

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8. OTHER CURRENT LIABILITIES

 

Other current liabilities were comprised of the following items:

 

   September 30,   March 31, 
   2017   2017 
Accrued interest  $6,071   $5,391 
Other accrued liabilities   15,672    64,076 
Total other current liabilities  $21,743   $69,467 

 

9. STOCK COMPENSATION

 

The following tables summarize share-based compensation expenses relating to Restricted Stock Units (“RSU”s) and options granted and the effect on basic and diluted loss per common share during the three and six month periods ended September 30, 2017 and 2016:

 

   Three Months
Ended
September 30,
2017
   Three Months
Ended
September 30,
2016
   Six Months
Ended
September 30,
2017
   Six Months
Ended
September 30,
2016
 
Vesting of stock options and restricted stock units  $283,534   $1,523,280   $564,445   $1,573,991 
Total stock-based compensation expense  $283,534   $1,523,280   $564,445   $1,573,991 
                     
Weighted average number of common shares outstanding – basic and diluted   9,032,157    7,756,883    8,939,624    7,690,369 
                     
Basic and diluted loss per common share attributable to stock-based compensation expense  $(0.03)  $(0.20)  $(0.06)  $(0.20)

 

 

All of the stock-based compensation expense recorded during the six months ended September 30, 2017 and 2016, which totaled $564,445 and $1,573,991, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations.  Stock-based compensation expense recorded during the six months ended September 30, 2017 and 2016 represented an impact on basic and diluted loss per common share of $(0.06) and $(0.20), 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 six months ended September 30, 2017 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. 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 $521,397 in the six months ended September 30, 2017 related to the RSU grants.

 

 

 

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RSUs outstanding that have vested and are expected to vest as of September 30, 2017 are as follows:

 

   Number of RSUs 
Vested   46,125 
Expected to vest   415,125 
Total   461,250 

  

During the six months ended September 30, 2017, 92,250 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, 47,368 of the RSUs were cancelled and we issued a net 44,882 shares to our executives.

 

Stock Option Activity

 

During the six months ended September 30, 2017, we issued options to four of our employees to purchase 34,500 shares of common stock at a price of $1.68 per share, the closing price on the date of the approval of the option grants by our compensation committee. There were no stock option grants during the six months ended September 30, 2016.

  

Options outstanding that have vested and are expected to vest as of September 30, 2017 are as follows:

 

   Number of
Shares
   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Term in
Years
 
             
Vested   432,047   $10.98    3.89 
Expected to vest   34,500   $1.68    9.71 
Total   466,547           

 

The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to stock option grants utilizing the Binomial Lattice option pricing models at, and during the six months ended September 30, 2017:

 

Risk free interest rate   2.21% 
Average expected life   10 years 
Expected volatility   92.14% 
Expected dividends   None 

 

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.

 

A summary of stock option activity during the six months ended September 30, 2017 is presented below:

 

   Amount   Range of
Exercise Price
   Weighted
Average
Exercise
Price
 
Stock options outstanding at March 31, 2017   432,047    $3.80-$20.50   $10.98 
Exercised            
Granted   34,500    $1.68   $1.68 
Cancelled/Expired            
Stock options outstanding at September 30, 2017   466,547    $1.68-$20.50   $10.30 
Stock options exercisable at September 30, 2017   432,047    $3.80-$20.50   $10.98 

 

 

 

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On September 30, 2017, our stock options had no intrinsic value since the closing price on that date of $1.54 per share was below the weighted average exercise price of our stock options.

 

At September 30, 2017, there was approximately $2.4 million of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 2.10 years.

   

10. WARRANTS

 

During the six months ended September 30, 2017, we did not issue any warrants.

 

A summary of warrant activity during the six months ended September 30, 2017 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        n/a    n/a 
 Issued        n/a    n/a 
 Cancelled/Expired    (139,357)   $5.00 –$15.00   $6.52 
 Warrants outstanding at September 30, 2017    2,464,739    $2.10 - $12.05   $3.48 
 Warrants exercisable at September 30, 2017    2,464,739    $2.10 - $12.05   $3.48 

   

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 at, and during the six months ended September 30, 2016:

 

Risk free interest rate   0.79% – 1.38%   
Average expected life   3 months – 2.33 years 
Expected volatility   65.9% – 111.1% 
Expected dividends   None 

 

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 six months ended September 30, 2017 at $130,214.

 

11. DARPA CONTRACT AND RELATED REVENUE RECOGNITION

 

We entered into a contract with Defense Advanced Research Projects Agency (“DARPA”) on September 30, 2011. Under the DARPA award, we have been engaged to develop a therapeutic device to reduce the incidence of sepsis, a fatal bloodstream infection that often results in the death of combat-injured soldiers. The award from DARPA was a fixed-price contract with potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement of multiple, incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we performed certain incremental work towards the achievement of specific milestones against which we invoiced the government for fixed payment amounts.

 

 

 

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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 six months ended September 30, 2016, we invoiced the U.S. Government for the final two milestones under our DARPA contract in the aggregate amount of $387,438.

 

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. 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:

 

   Six Months Ended September 30, 
   2017   2016 
Revenues:        
Aethlon  $   $392,073 
ESI        
Total Revenues  $   $392,073 
           
Operating Losses:          
Aethlon  $(2,373,066)  $(3,281,530)
ESI   (23,356)   (76,999)
Total Operating Loss  $(2,396,422)  $(3,358,529)
           
Net Losses:          
Aethlon  $(3,130,772)  $(4,323,003)
ESI   (23,356)   (76,999)
Net Loss Before Non-Controlling Interests  $(3,154,128)  $(4,400,002)
           
Cash:          
Aethlon  $919,612   $553,884 
ESI   460    2,468 
Total Cash  $920,072   $556,352 
           
Total Assets:          
Aethlon  $1,118,433   $914,179 
ESI   27,545    36,656 
Total Assets  $1,145,978   $950,835 
           
Capital Expenditures:          
Aethlon  $23,705   $2,961 
ESI        
Capital Expenditures  $23,705   $2,961 
           
Depreciation and Amortization:          
Aethlon  $18,651   $10,822 
ESI       9,790 
Total Depreciation and Amortization  $18,651   $20,612 
           
Interest Expense:          
Aethlon  $(250,583)  $(78,743)
ESI        
Total Interest Expense  $(250,583)  $(78,743)

 

 

 

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13. COMMITMENTS AND CONTINGENCIES

 

Lease Commitments

 

We currently rent approximately 2,600 square feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego, CA 92123 at the rate of $6,054 per month on a four-year lease that expires in January 2019. 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 per month on a one-year lease that was extended to an expiration date of November 30, 2018.

 

Rent expense, which is included in general and administrative expenses, approximated $77,000 and $79,000 for the six month periods ended September 30, 2017 and 2016, respectively.

 

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. SUBSEQUENT EVENTS

 

Management has evaluated events subsequent to June 30, 2017 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements.

 

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.

 

Nasdaq Continued Listing Requirement -- On August 1, 2017, we received written notification from the Listing Qualifications Staff of The NASDAQ Stock Market LLC (“Nasdaq”) indicating that, based upon our continued non-compliance with the minimum $35,000,000 market value of listed securities (“MVLS”) requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(2) (the “Rule”), the Staff had determined to delist our securities from Nasdaq (the “Staff Determination”) unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”), which we timely requested on August 8, 2017.

 

We subsequently completed Nasdaq’s appeal process and in October 2017, Nasdaq formally notified us that we have demonstrated compliance with applicable requirements for the continued listing of our common stock on The Nasdaq Capital Market, including the $2.5 million stockholders' equity requirement, although we must appoint a new independent director no later than our next Annual Meeting scheduled to occur in March 2018. 

 

Restricted Stock Unit (“RSU”) Issuances – In October 2017, 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 RSU’s in exchange for the Company paying the related withholding taxes on the share issuance, 23,713 of the RSUs were cancelled, and we issued a net 22,412 shares to our executives.

 

Billing under NIH Contract -- In October 2017, we completed the first milestone on our contract with the National Institutes of Health (“NIH”) and invoiced NIH for the $74,812.50 payment associated with that milestone. The overall potential revenue on the NIH Contract is $299,250 and the contract has a nine month term.

 

 

 

 

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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 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" within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act"), and Section 21E of the Exchange Act. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors which may cause the 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, 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”). 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”) are a medical technology company focused on addressing unmet needs in global health and biodefense. The Aethlon Hemopurifier® is an early clinical-stage therapeutic device designed for the single-use removal of life-threatening viruses from the circulatory system of infected individuals. We believe the Hemopurifier can be a part of the broad-spectrum treatment of life-threatening highly glycosylated 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. In small-scale or early feasibility human studies, the Hemopurifier has been administered to individuals infected with HIV, Hepatitis-C, and Ebola. Additionally, the Hemopurifier has been validated to capture Zika virus, Lassa virus, MERS-CoV, Cytomegalovirus, Epstein-Barr virus, Herpes Simplex virus, Chikungunya virus, Dengue virus, West Nile virus, Smallpox-related viruses, H1N1 Swine Flu virus, H5N1 Bird 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 the clinical advancement of the Hemopurifier through investigational device exemptions (IDEs) approved by FDA. We recently concluded a feasibility study to demonstrate the safety of our device in health-compromised individuals infected with a viral pathogen.

 

We are also the majority owner of Exosome Sciences, Inc. (ESI), a company focused on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. Included among ESI’s endeavors is the advancement of a TauSomeTM biomarker candidate to diagnose Chronic Traumatic Encephalopathy (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.

 

Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we intend to sell this device. Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or other patents issued more recently will help protect the proprietary nature of the Hemopurifier treatment technology.

 

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 quoted on the Nasdaq Capital Market under the symbol “AEMD.”

 

 

 

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On August 1, 2017, we received written notification from the Listing Qualifications Staff of The NASDAQ Stock Market LLC (“Nasdaq”) indicating that, based upon our continued non-compliance with the minimum $35,000,000 market value of listed securities (“MVLS”) requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(2) (the “Rule”), the Staff had determined to delist our securities from Nasdaq (the “Staff Determination”) unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”), which we timely requested on August 8, 2017.

 

We subsequently completed Nasdaq’s appeal process and in October 2017, Nasdaq formally notified us that we have demonstrated compliance with then applicable requirements for the continued listing of our common stock on The Nasdaq Capital Market, including the $2.5 million stockholders' equity requirement. We are also required to appoint a new independent director to our Board no later than our next Annual Meeting, scheduled to occur in March 2018.

 

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 Web 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 site is http://www.aethlonmedical.com.

  

RESULTS OF OPERATIONS

  

THREE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2016

 

Revenues

 

We did not record any government contract revenue in the three months ended September 30, 2017 and we recorded government contract revenue in the three months ended September 30, 2016. That revenue arose from work performed under our government contract with the Defense Advanced Research Projects Agency, or DARPA, as follows:

 

   Three Months
Ended 9/30/17
   Three Months
Ended 9/30/16
   Change in
Dollars
 
DARPA Contract       387,438    (387,438)
Total Government Contract Revenue  $   $387,438   $(387,438)

  

DARPA Contract

 

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 three months ended September 30, 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 three months ended September 30, 2017 were $1,236,173 in comparison with $2,614,116 for the comparable period a year ago. This decrease of $1,377,943, or 52.7%, was due to a decrease in payroll and related expenses of $1,194,922, a $127,804 decrease in professional fees and a $55,217 decrease in general and administrative expenses.

 

 

 

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The $1,194,922 decrease in payroll and related expenses was primarily due to a $1,239,746 decrease in stock-based compensation. The decrease in stock-based compensation was due to the upfront vesting percentage of the RSU grants to our officers and directors in August 2016. Our cash-based payroll and related expenses increased by $44,824 due to headcount additions in our scientific staff.

 

The $127,804 decrease in our professional fees was due to decreases in our non-DARPA-related professional fees of $93,054, in our DARPA-related professional fees of $27,328 and in our professional fees at ESI of $7,422. The $93,054 decrease in our non-DARPA-related professional fees was due to a $63,000 decrease in our scientific consulting fees, a $51,000 decrease in business development expenses, and a $7,731 decrease in our accounting fees, which were partially offset by a $25,698 increase in our public relations expenses.

   

The $55,217 decrease in general and administrative expenses was primarily due to decreases of $80,492 in our DARPA-related general and administrative expenses and $7,447 in the general and administrative expenses at ESI.

 

Other Expense

 

Other expense during the three months ended September 30, 2017 and 2016 consisted of losses on share for warrant exchanges and interest expense. Other expense for the three months ended September 30, 2017 was other expense of $72,404 in comparison with other expense of $36,576 for the three months ended September 30, 2016.

 

The following table breaks out the various components of our other expense for both periods:

 

   Three Months
Ended
   Three Months
Ended
     
   9/30/17   9/30/16   Change 
Loss on Share for Warrant Exchanges  $10,425   $   $10,425 
Interest Expense   61,979    36,576    25,403 
Total Other Expense  $72,404   $36,576   $35,828 

  

Loss on Share for Warrant Exchanges

 

During the three months ended September 30, 2017, 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 a loss on that exchange based on the changes in fair value between the instruments exchanged.

   

Interest Expense

 

Interest expense was $61,979 for the three months ended September 30, 2017 compared to $36,576 in the corresponding prior period, an increase of $25,403. The various components of our interest expense are shown in the following table:

 

   Three Months
Ended
   Three Months
Ended
     
   9/30/17   9/30/16   Change 
Interest Expense  $31,692   $17,578   $14,114 
Amortization of Note Discounts   30,287    18,998    11,289 
Total Interest Expense  $61,979   $36,576   $25,403 

 

As noted in the above table, the factors in the $25,403 increase in interest expense were the $14,114 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.

 

 

 

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Net Loss

 

As a result of the changes in revenues and expenses noted above, our net loss before noncontrolling interests decreased from approximately $2,263,000 in the three month period ended September 30, 2016 to $1,309,000 in the three month period ended September 30, 2017.

 

Basic and diluted loss attributable to common stockholders were ($0.14) for the three month period ended September 30, 2017 compared to ($0.29) for the period ended September 30, 2016.

 

SIX MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2016

 

Revenues

 

We did not record any government contract revenue in the six months ended September 30, 2017 and we recorded government contract revenue in the six months ended June 30, 2016. This revenue arose from work performed under our government contract with the Defense Advanced Research Projects Agency, or DARPA, and our government subcontract with Battelle Memorial Institute as follows:

 

   Six Months
Ended 9/30/17
   Six Months
Ended 9/30/16
   Change in
Dollars
 
DARPA Contract  $   $387,438   $(387,438)
Battelle Subcontract       4,635    (4,635)
Total Government Contract Revenue  $   $392,073   $(392,073)

 

DARPA Contract

 

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 six months ended September 30, 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 six months ended September 30, 2017 were $2,396,422 in comparison with $3,750,602 for the comparable period a year ago. This decrease of $1,354,180, or 36.1%, was due to a decrease in payroll and related expenses of $909,882, a decrease in professional fees of $352,530 and a $91,768 decrease in general and administrative expenses.

 

The $909,882 decrease in payroll and related expenses was primarily due to a $1,009,546 decrease in stock-based compensation. The decrease in stock-based compensation was due to the upfront vesting percentage of the RSU grants to our officers and directors in August 2016. Our cash-based payroll and related expenses increased by $99,664 due to headcount additions in our scientific staff.

 

The $352,530 decrease in our professional fees was due to decreases in our non-DARPA-related professional fees of $301,290, in our DARPA-related professional fees of $12,312 and in our professional fees at ESI of $12,312. The $301,290 decrease in our non-DARPA-related professional fees was due to a $187,805 decrease in our legal fees, a $85,000 decrease in business development expenses, a $72,311 decrease in scientific consulting expenses, and a $16,290 decrease in our investor relations fees, which were partially offset by a $57,591 increase in public relations expenses.

   

The 91,768 decrease in general and administrative expenses was primarily due to decreases of $101,757 in our DARPA-related general and administrative expenses and $22,153 in the general and administrative expenses at ESI.

 

Other Expense

 

Other expense during the six months ended September 30, 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 six months ended September 30, 2017 was other expense of $757,706 in comparison with other expense of $1,041,473 for the six months ended September 30, 2016.

 

 

 

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The following table breaks out the various components of our other expense for both periods:

 

   Six Months
Ended
   Six Months
Ended
     
   9/30/17   9/30/16   Change 
Loss on Debt Extinguishment  $376,909   $616,889   $(239,980)
Loss on Warrant Repricing       345,841    (345,841)
Loss on Share for Warrant Exchanges   130,214        130,214 
Interest Expense   250,583    78,743    171,840 
Total Other Expense  $757,706   $1,041,473   $(283,767)

  

Loss on Debt Extinguishment

 

Our loss on debt extinguishment for the six months ended September 30, 2017 arose from a $376,909 loss associated with the June 2017 amendments to our convertible notes. This compared to a loss of debt extinguishment of $616,889 for the six months ended September 30, 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.

 

 

 

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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 other expense to reflect this change.

 

Loss on Share for Warrant Exchanges

 

During the six months ended September 30, 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 $250,583 for the six months ended September 30, 2017 compared to $78,743 in the corresponding prior period, an increase of $171,840. The various components of our interest expense are shown in the following table:

 

   Six Months
Ended
   Six Months
Ended
     
   9/30/17   9/30/16   Change 
Interest Expense  $65,494   $32,104   $33,390 
Amortization of Deferred Financing Costs       27,641    (27,641)
Amortization of Note Discounts   185,089    18,998    166,091 
Total Interest Expense  $250,583   $78,743   $171,840 

 

As noted in the above table, the most significant factor in the $171,840 increase in interest expense was the $166,091 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 $33,390 increase in our contractual interest expense.

 

Net Loss

 

As a result of the changes in revenues and expenses noted above, our net loss before noncontrolling interests decreased from approximately $4,400,000 in the six month period ended September 30, 2016 to $3,154,000 in the six month period ended September 30, 2017.

 

Basic and diluted loss attributable to common stockholders were ($0.35) for the six month period ended September 30, 2017 compared to ($0.57) for the period ended September 30, 2016.

 

LIQUIDITY AND CAPITAL RESOURCES

 

At September 30, 2017, we had a cash balance of $920,072 and working capital of $665,871. This compares to a cash balance of $1,559,701 and working capital of $985,496 at March 31, 2017.

 

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. 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. We expect the net proceeds from that offering coupled with cash on hand will finance our operations for the twelve month period from the date of this report.

 

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.

 

 

 

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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 September 30, 2017 coupled with the $5,289,735 in net proceeds from an equity financing that closed on October 4, 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 six months ended
 
   September 30,
2017
   September 30,
2016
 
Cash provided by (used in):          
Operating activities  $(2,103)  $(1,764)
Investing activities   (24)   (2)
Financing activities   1,487    199 
Net decrease in cash  $(640)  $(1,567)

 

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 $2,103,000 in the six months ended September 30, 2017 compared to $1,764,000 in the six months ended September 30, 2016, an increase of $339,000.

 

NET CASH USED IN INVESTING ACTIVITIES. We used approximately $24,000 of cash to purchase laboratory and office equipment in the six months ended September 30, 2017 compared to approximately $2,000 in the six months ended September 30, 2016.

 

NET CASH PROVIDED BY FINANCING ACTIVITIES. In the six months ended September 30, 2017 we generated approximately $1,487,000 from our financing activities primarily through the issuance of common stock, an increase of $1,288,000 over the $199,000 raised in the six months ended September 30, 2016.

 

At the date of this filing, we plan to invest significantly into purchases of our raw materials and into our contract manufacturing arrangement subject to successfully raising additional capital.

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Such 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.

 

 

 

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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 policies 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, 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.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We have no obligations required to be disclosed herein as 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.

   

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 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.

 

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.

 

 

 

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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.

 

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.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the three months ended September 30, 2017 and subsequent thereto through the date of filing this report, we agreed with a broker-dealer to exchange 5,500 restricted shares for the cancellation of 11,000 warrants.

 

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.

 

ITEM 5. OTHER INFORMATION.

 

We have no disclosure applicable to this item.  

  

ITEM 6. EXHIBITS.

 

(a) Exhibits. The following documents are filed as part of this report:

 

10.1 Fifth Amendment to Standard Industrial Net Lease
   
31.1 Certification of Principal Executive Officer pursuant to Securities Exchange Act rules 13a- 14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
   
31.2 Certification of Principal Financial Officer pursuant to Securities Exchange Act rules 13a- 14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
   
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
   
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
   
101 Interactive Data Files
   
  101.INS XBRL Instance Document
  101.SCH XBRL Schema Document
  101.CAL XBRL Calculation Linkbase Document
  101.DEF XBRL Definition Linkbase Document
  101.LAB XBRL Label Linkbase Document
  101.PRE XBRL Presentation Linkbase 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 2, 2017 By: /s/ JAMES B. FRAKES  
    JAMES B. FRAKES  
    CHIEF FINANCIAL OFFICER  
    CHIEF ACCOUNTING OFFICER  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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