AETHLON MEDICAL, INC. AND SUBSIDIARY
AETHLON MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2021
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION ORGANIZATION
Aethlon Medical, Inc. and its subsidiary (collectively,
“Aethlon”, the “Company”, “we” or “us”), is a medical technology company focused on developing
products to diagnose and treat life and organ threatening diseases. The Aethlon Hemopurifier is a clinical-stage immunotherapeutic device
designed to combat cancer and life-threatening viral infections. In cancer, the Hemopurifier is designed to deplete the presence of circulating
tumor-derived exosomes that promote immune suppression, seed the spread of metastasis and inhibit the benefit of leading cancer therapies.
The U.S. Food and Drug Administration, or FDA, has designated the Hemopurifier as a “Breakthrough Device” for two independent
indications:
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·
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the treatment of individuals with advanced or metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes have been shown to participate in the development or severity of the disease; and
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the treatment of life-threatening viruses that are not addressed with approved therapies.
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We believe the Hemopurifier can be a substantial
advance in the treatment of patients with advanced and metastatic cancer through the clearance of exosomes that promote the growth and
spread of tumors through multiple mechanisms. We are currently conducting a clinical trial in patients with advanced and metastatic head
and neck cancer. We are initially focused on the treatment of solid tumors, including head and neck cancer, gastrointestinal cancers and
other cancers. As we advance our clinical trials, we are in close contact with our clinical sites to navigate and assess the impact of
the COVID-19 global pandemic on our clinical trials and current timelines.
On October 4, 2019, the FDA approved our
Investigational Device Exemption, or IDE, application to initiate an Early Feasibility Study, or EFS, of the Hemopurifier in
patients with head and neck cancer in combination with standard of care pembrolizumab (Keytruda). The primary endpoint for the EFS,
which is designed to enroll 10 to 12 subjects at a single center, is safety, with secondary endpoints including measures of exosome
clearance and characterization, as well as response and survival rates. This study, which is being conducted at the UPMC Hillman
Cancer Center in Pittsburgh, PA, has treated one patient and is in the process of recruiting additional patients.
We also believe the Hemopurifier can be part of
the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already
approved treatment. In small-scale or early feasibility human studies, the Hemopurifier has been used to treat individuals infected with
human immunodeficiency virus, or HIV, hepatitis-C, and Ebola.
Additionally, in vitro, the Hemopurifier
has been demonstrated 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 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 IDE for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients with SARS-CoV-2/COVID-19
in a New Feasibility Study. That study is designed to enroll up to 40 subjects at up to 20 centers
in the U.S. Subjects will have established laboratory diagnosis of COVID-19, be admitted to an intensive care unit, or ICU, and will have
acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety, will
include reduction in circulating virus as well as clinical outcomes (NCT # 04595903). Under Single Patient Emergency Use regulations,
the Company has also treated two patients with COVID-19 with the Hemopurifier.
In September 2021, we entered
into an agreement with PPD, Inc., or PPD, a leading global contract research organization, or CRO, to oversee our U.S. clinical studies
investigating the Hemopurifier for critically ill COVID-19 patients. Together with PPD, we are currently advancing site readiness for
Cooper Medical Center, Loma Linda Medical Center, Hoag Hospitals in Southern California, University of California Davis, Virginia Commonwealth
University Medical Center, University of Miami Medical Center, and Thomas Jefferson Medical Center. Additionally, we obtained institutional
research board approval and have entered into a clinical trial agreement with Stanford Hospital and we are in discussions to bring on
board other key U.S. medical centers.
We also obtained ethics review board approval
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.
We are also the majority owner of Exosome Sciences,
Inc., or ESI, a company formed to focus on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. We
consolidate ESI’s activities in our consolidated financial statements.
Successful outcomes of human trials will also
be required by the regulatory agencies of certain foreign countries where we plan to 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 more recently will help protect the proprietary nature of the Hemopurifier treatment technology.
In addition to the foregoing, we are monitoring
closely the impact of the COVID-19 global pandemic on our business and have taken steps designed to protect the health and safety of our
employees while continuing our operations. Given the level of uncertainty regarding the duration and impact of the COVID-19 pandemic on
capital markets and the U.S. economy, we are unable to assess the impact of the worldwide spread of SARS-CoV-2 and the resulting COVID-19
pandemic on our timelines and future access to capital. We are continuing to monitor the spread of COVID-19 and its potential impact on
our operations. The full extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition, clinical
trials, and preclinical research will depend on future developments that are highly uncertain, including actions taken to contain or treat
COVID-19 and their effectiveness, as well as the economic impact on national and international markets.
Our executive offices are located at 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.”
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During the three months ended September 30, 2021,
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, 2021.
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for
interim financial information and with the instructions to Form 10-Q and Article 8 of the Securities and Exchange Commission, or SEC Regulation
S-X. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended
March 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on June 24, 2021. The accompanying unaudited
condensed consolidated financial statements include the accounts of Aethlon Medical, Inc. and its majority-owned subsidiary. All significant
inter-company transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements
contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the condensed
consolidated financial statements as of and for the six months ended September 30, 2021, and the condensed consolidated statement of cash
flows for the six months ended September 30, 2021. 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, 2021 has been derived from the audited consolidated
balance sheet at March 31, 2021, contained in the above referenced 10-K. The results of operations for the six months ended September
30, 2021 are not necessarily indicative of the results to be expected for the full year or any future interim periods.
Reclassifications
Certain prior year balances within the unaudited condensed consolidated
financial statements have been reclassified to conform to the current year presentation.
LIQUIDITY AND GOING CONCERN
Management expects existing cash as of September
30, 2021 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these condensed
consolidated financial statements.
Restricted Cash
To comply with the terms of our laboratory and
office lease, we caused our bank to issue a standby letter of credit, or the L/C, in the amount of $46,726 in favor of the landlord. The
L/C is in lieu of a security deposit. In order to support the L/C, we agreed to have our bank withdraw $46,726 from our operating accounts
and to place that amount in a restricted certificate of deposit. We have classified that amount as restricted cash, a long-term asset,
on our balance sheet.
2. LOSS PER COMMON SHARE
Basic loss per share is computed by dividing net
loss by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share is computed
similar to basic loss per share, except that the denominator is increased to include the number of additional dilutive common shares that
would have been outstanding if potential common shares had been issued, if such additional common shares were dilutive. Since we had net
losses for all periods presented, basic and diluted loss per share are the same, and additional potential common shares have been excluded,
as their effect would be antidilutive.
As of September 30, 2021 and 2020, an aggregate
of 1,616,866 and 2,620,567 potential common shares, respectively, consisting of shares underlying outstanding stock options, warrants
and unvested restricted stock units, were excluded, as their inclusion would be antidilutive.
3. RESEARCH AND DEVELOPMENT EXPENSES
Our research and development costs are expensed
as incurred. We incurred research and development expenses during the three and six month periods ended September 30, 2021 and 2020, which
are included in various operating expense line items in the accompanying condensed consolidated statements of operations. Our research
and development expenses in those periods were as follows:
Research and Development expenses
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September 30,
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September 30,
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2021
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2020
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Three months ended
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$
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478,201
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$
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508,897
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Six months ended
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$
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1,045,539
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$
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884,985
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4. RECENT ACCOUNTING PRONOUNCEMENTS
None.
5. EQUITY TRANSACTIONS IN THE SIX MONTHS ENDED SEPTEMBER 30,
2021
Common Stock Sales Agreement with H.C. Wainwright & Co., LLC
On March 22, 2021, we entered into an At the Market
Offering Agreement, or the Offering Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to which we
may offer and sell shares of our common stock, from time to time as set forth in the Offering Agreement.
The offering
was registered under the Securities Act of 1933, as amended, or Securities Act, pursuant
to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the SEC
and declared effective on March 30, 2020. We filed a prospectus supplement with the SEC, dated March 22, 2021, in connection with the
offer and sale of the shares of common stock, pursuant to which we may offer and sell shares of
common stock having an aggregate offering price of up to $5,080,000 from time to time.
Subject to the terms and conditions set forth
in the Offering Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices
to sell the shares under the Offering Agreement from time to time, based upon our instructions. We provided Wainwright with customary
indemnification rights under the Offering Agreement, and Wainwright is entitled to a commission at a fixed rate equal to three percent
of the gross proceeds per share sold. In addition, we agreed to reimburse Wainwright for certain specified expenses in connection with
entering into the Offering Agreement. The Offering Agreement will terminate upon the written termination by either party as permitted
thereunder.
Sales of the shares, if any, under the Offering
Agreement will be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities
Act, including sales made by means of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or
as otherwise agreed with Wainwright. We have no obligation under the Offering Agreement to sell any of the shares, and, at any time, we
may suspend offers under the Offering Agreement or terminate the agreement.
In the six months ended September 30, 2021, we
raised aggregate net proceeds under the Offering Agreement described above of $4,947,785, net of $126,922 in commissions to Wainwright
and $2,154 in other offering expense through the sale of 626,000 shares of our common stock at an average price of $7.90 per share of
net proceeds. No further sales can be made under the Offering Agreement.
Registered Direct Financing
In the six months ended September 30, 2021, we
sold an aggregate of 1,380,555 shares of our common stock at a purchase price per share of $9.00, for aggregate net proceeds to us of
$11,659,044 after deducting fees payable to Maxim Group LLC, the placement agent and other offering expenses. These shares were sold through
a securities purchase agreement with certain institutional investors. The shares were issued pursuant to an effective shelf registration
statement on Form S-3, which was originally filed with the SEC on March 19, 2020, and was declared effective on March 30, 2020 (File No.
333-237269) and a prospectus supplement thereunder.
Warrant Exercises
In the six months ended September 30, 2021, pursuant
to the exercise of outstanding warrants to purchase 531,167 shares of our common stock, we received proceeds in the amount of $820,938
from institutional investors.
Also in the six months ended September 30, 2021,
pursuant to the exercise of 874,664 outstanding warrants on a cashless basis, we issued 675,554 shares of our common stock. The difference
of 199,110 shares of common stock issuable pursuant to the warrants were cancelled.
Stock Option Exercises
In the six months ended September 30, 2021, former
employees paid us an aggregate of $28,325 for the exercise of outstanding options to purchase 11,562 shares of our common stock.
Restricted Stock Unit Grants
In 2012, as amended through October 30, 2020,
our Board of Directors established the Non-Employee Directors Compensation Program, to provide for cash and equity compensation for persons
serving as non-employee directors of the Company. Under this program, each new director receives either stock options or a grant of restricted
stock units, or RSUs, as well as an annual grant of RSUs at the beginning of each fiscal year. The RSUs are subject to vesting and represent
the right to be issued on a future date shares of our common stock upon vesting.
On April 1, 2021, pursuant to the terms of the
Company’s 2012 Non-Employee Directors Compensation Program, as amended, or the Directors Plan, the Compensation Committee of the
Board granted RSUs under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, to each non-employee director of the Company.
The Director’s Plan provides for a grant of $50,000 worth of RSUs at the beginning of each fiscal year, priced at the average for
the closing prices for the five days preceding and including the date of grant, or $2.06 per share as of April 1, 2021. Each eligible
director was granted an RSU in the amount of 24,295 shares under the 2020 Plan. The RSU’s are subject to vesting in four equal quarterly
installments on June 30, September 30, December 31, 2021, and March 31, 2022, subject to the recipient’s continued service with
the Company on each such vesting date.
In June 2021, 18,221 vested RSUs held by our non-employee
directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of
their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested
RSUs being cancelled in exchange for $35,786 in aggregate cash proceeds to those independent directors.
In September 2021, 18,221 vested RSUs held by
our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected
to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in
7,289 of the vested RSUs being cancelled in exchange for $28,134 in aggregate cash proceeds to those independent directors.
RSUs outstanding that have vested as of, and are
expected to vest subsequent to, September 30, 2021 are as follows:
Schedule of RSU activity
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Number of RSUs
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Vested
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–
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Expected to vest
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36,443
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Total
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36,443
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6. RELATED PARTY TRANSACTIONS
During the three months ended September 30, 2021,
we accrued unpaid fees of $52,000 owed to our non-employee directors as of September 30, 2021. Amounts due to related parties were comprised
of the following items:
Due to related parties
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September 30,
2021
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March 31,
2021
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Accrued Board fees
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$
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52,000
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$
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52,000
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Accrued vacation to all employees
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82,207
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66,520
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Total due to related parties
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$
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134,207
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$
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118,520
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7. OTHER CURRENT LIABILITIES
Other current liabilities were comprised of the following items:
Other Current Liabilities
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September 30,
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March 31,
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2021
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2021
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Accrued separation expenses for former executive (see Note 12)
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$
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50,249
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$
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284,270
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Accrued professional fees
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420,868
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477,366
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Total other current liabilities
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$
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471,117
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$
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761,636
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8. STOCK COMPENSATION
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, 2021 and 2020:
Share-based compensation expense relating to RSUs
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Three Months
Ended
September 30,
2021
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Three Months
Ended
September 30,
2020
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Six Months
Ended
September 30,
2021
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Six Months
Ended
September 30,
2020
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Vesting of stock options and restricted stock units
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$
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201,061
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$
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167,042
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$
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321,216
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$
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251,249
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Total stock-based compensation expense
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$
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201,061
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$
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167,042
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$
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321,216
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$
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251,249
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Weighted average number of common shares outstanding – basic and diluted
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15,386,486
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12,070,592
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14,114,639
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10,845,049
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Basic and diluted loss per common share attributable to stock-based compensation expense
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$
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(0.01
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)
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$
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(0.01
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)
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$
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(0.02
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)
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$
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(0.02
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)
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All of the stock-based compensation expense recorded
during the six months ended September 30, 2021 and 2020, an aggregate of $321,216 and $251,249, 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, 2021 and 2020 represented an impact on basic and diluted loss per common share of $(0.02) and $(0.02),
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, 2021 was insignificant.
Stock Option Activity
During the six months ended September 30, 2021,
we issued a stock option grant to our Chief Executive Officer, or CEO, for the purchase of 266,888 shares of our common stock under our
2020 Plan. The purchase price for the shares subject to the option is $5.17 per share, the fair market value of the common stock on the
date of the grant. The shares subject to the option are subject to vesting over four years, commencing on the date of grant, or Vesting
Commencement Date, with twenty-five percent (25%) of the shares subject to the option vesting on the first anniversary of the Vesting
Commencement Date and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, in each case
subject to Dr. Fisher’s Continuous Service (as defined in the 2020 Plan) through each vesting date.
From February 2020 through May 2020, our compensation
committee granted 521,476 stock options that were contingent upon stockholder approval of the 2020 Plan at the Aethlon 2020 Annual Meeting
of Stockholders. Upon approval of the 2020 Plan at that meeting, these option grants were considered effective and no longer contingent
as of that date.
Under the 2020 Plan, up to 1,842,556 shares of
common stock are
authorized for issuance, pursuant to the grant of stock options, RSUs or other forms of stock-based compensation.
Stock options outstanding that have vested as of September 30, 2021
and stock options that are expected to vest subsequent to September 30, 2021 are as follows:
Options outstanding that have vested and are expected to vest
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Number of
Shares
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Weighted
Average
Exercise
Price
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Weighted
Average
Remaining
Contractual
Term in
Years
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Vested
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87,685
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$
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8.10
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7.98
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Expected to vest
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908,896
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$
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2.78
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9.19
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Total
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996,581
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A summary of stock option activity during the six months ended September
30, 2021 is presented below:
Schedule of stock option activity
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Amount
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Range of
Exercise Price
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Weighted
Average
Exercise
Price
|
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Stock options outstanding at March 31, 2021
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844,089
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$
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1.28 - 142.50
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$
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3.07
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Exercised
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(11,562
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)
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$
|
2.45
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$
|
2.45
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Granted
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266,888
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$
|
5.17
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|
$
|
5.17
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Cancelled/Expired
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(102,834
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)
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$
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2.45 – 25.20
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$
|
6.83
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Stock options outstanding at September 30, 2021
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996,581
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$
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1.28 - 142.50
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$
|
3.25
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|
Stock options exercisable at September 30, 2021
|
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87,685
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$
|
1.28 - 142.50
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$
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7.98
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On September 30, 2021, our outstanding stock options
had an intrinsic value of approximately $610,000 based on our closing share price of $3.86 on that date.
At September 30, 2021, there was approximately
$3,521,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average
period of 4.4 years.
9. WARRANTS
During the six months ended September 30, 2021 and 2020, we did not
issue any warrants.
A summary of warrant activity during the six months ended September
30, 2021 is presented below:
Schedule of Warrant Activity
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Amount
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Range of
Exercise
Price
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|
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Weighted
Average
Exercise
Price
|
|
Warrants outstanding at March 31, 2021
|
|
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1,991,973
|
|
|
$
|
1.50 – 99.00
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|
|
$
|
5.23
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|
Exercised
|
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(1,206,721
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)
|
|
$
|
1.50 – 2.50
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|
|
$
|
2.21
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Cancelled/Expired
|
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(201,410
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)
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$
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2.50 – 99.00
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|
|
$
|
3.73
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|
Warrants outstanding at September 30, 2021
|
|
|
583,842
|
|
|
$
|
1.50 – 91.50
|
|
|
$
|
11.97
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|
Warrants exercisable at September 30, 2021
|
|
|
583,842
|
|
|
$
|
1.50 – 91.50
|
|
|
$
|
11.97
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10. GOVERNMENT CONTRACTS AND RELATED REVENUE RECOGNITION
We entered into the following contract with the National Cancer Institute,
or NCI, part of the National Institutes of Health, or NIH, over the past two years:
Phase 2 Melanoma Cancer Contract
On September 12, 2019, the NCI awarded to us an
SBIR Phase II Award Contract, for NIH/NCI Topic 359, entitled “A Device Prototype for Isolation of Melanoma Exosomes for Diagnostics
and Treatment Monitoring”, or the Award Contract. The Award Contract amount is $1,860,561 and, as amended, runs for the period from
September 16, 2019 through September 15, 2022.
The work to be performed pursuant to this Award
Contract will focus on melanoma exosomes. This work follows from our completion of a Phase I contract for the Topic 359 solicitation that
ran from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program
involve the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform.
We recorded $229,698 of government contract revenue
on the Phase 2 Melanoma Cancer Contract in the six months ended September 30, 2021. That revenue related to work performed in the three
months ended March 31, 2021 and June 30, 2021 that had previously been recorded as deferred revenue as a result of falling short on certain
milestones. We then achieved those March period milestones in the June quarter and the June period milestones in the September quarter
and therefore recorded the previously deferred revenue as government contract revenue in the quarter ended September 30, 2021. We recorded the invoice related to the September
30, 2021 period as deferred revenue, since we fell short of certain milestones related to that period.
We did not record any government contract revenue
during the six months ended September 30, 2020 as we did not achieve certain milestones for that period.
Subaward with University of Pittsburgh
In 2020, we entered into a cost reimbursable subaward
arrangement with the University of Pittsburgh in connection with an NIH contract entitled “Depleting Exosomes to Improve Responses
to Immune Therapy in HNNCC.” Our share of the award is $256,750. We recorded $34,234 of revenue related to this subaward in the
six months ended September 30, 2021.
11. SEGMENTS
We operate our businesses principally through
two reportable segments: Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic business
activities. Our reportable segments have been determined based on the nature of the potential products being developed. We record discrete
financial information for ESI and our chief operating decision maker reviews ESI’s operating results in order to make decisions
about resources to be allocated to the ESI segment and to assess its performance.
Aethlon’s revenue is generated primarily
from government contracts to date and ESI does not have any revenues. We have not included any allocation of corporate overhead to
the ESI segment.
The following tables set forth certain information regarding our segments:
Schedule of segment activity
|
|
|
|
|
|
|
|
|
Six Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Revenues:
|
|
|
|
|
|
|
Aethlon
|
|
$
|
263,932
|
|
|
$
|
–
|
|
ESI
|
|
|
–
|
|
|
|
–
|
|
Total Revenues
|
|
$
|
263,932
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
Operating Losses:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
(4,097,441
|
)
|
|
$
|
(3,174,095
|
)
|
ESI
|
|
|
(9,801
|
)
|
|
|
(8,440
|
)
|
Total Operating Loss
|
|
$
|
(4,107,242
|
)
|
|
$
|
(3,182,535
|
)
|
|
|
|
|
|
|
|
|
|
Net Losses:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
(4,097,441
|
)
|
|
$
|
(3,174,095
|
)
|
ESI
|
|
|
(9,801
|
)
|
|
|
(8,440
|
)
|
Net Loss Before Non-Controlling Interests
|
|
$
|
(4,107,242
|
)
|
|
$
|
(3,182,535
|
)
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
23,224,728
|
|
|
$
|
14,473,035
|
|
ESI
|
|
|
197
|
|
|
|
197
|
|
Total Cash
|
|
$
|
23,224,925
|
|
|
$
|
14,473,232
|
|
|
|
|
|
|
|
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
23,873,988
|
|
|
$
|
15,056,193
|
|
ESI
|
|
|
197
|
|
|
|
197
|
|
Total Assets
|
|
$
|
23,874,185
|
|
|
$
|
15,056,390
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
78,861
|
|
|
$
|
23,137
|
|
ESI
|
|
|
–
|
|
|
|
–
|
|
Capital Expenditures
|
|
$
|
78,861
|
|
|
$
|
23,137
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Aethlon
|
|
$
|
80,690
|
|
|
$
|
18,041
|
|
ESI
|
|
|
–
|
|
|
|
–
|
|
Total Depreciation and Amortization
|
|
$
|
80,690
|
|
|
$
|
18,041
|
|
12. COMMITMENTS AND CONTINGENCIES
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
On September 29, 2021, we entered into an agreement
with PPD, Inc., a leading global contract research organization, for PPD to oversee our clinical studies investigating the Hemopurifier
(the PPD Agreement). Pursuant to the PPD Agreement, PPD agreed to manage our ongoing study of the Hemopurifier for patients who are critically
ill with COVID-19 (NCT04595903), with the option for the parties to agree to include additional studies under the PPD Agreement. The agreement
has a five year term, but may be extended by mutual agreement. The PPD Agreement also may be terminated by Aethlon without cause upon
30 days’ prior written notice and may be terminated by either party following notice for breach or insolvency of the other party.
SEPARATION AGREEMENT
On October 30, 2020, we entered into a Separation
Agreement with Timothy Rodell, M.D., our former Chief Executive Officer, or the Separation Agreement. Under the Separation Agreement,
we agreed to pay Dr. Rodell a total of $444,729 and to cover his medical insurance costs over a twelve-month period that began on November
1, 2020, all in accordance with the terms of his employment agreement with the Company.
The total expense accrued at September 30, 2021
relating to the Separation Agreement, was $50,249 (see Note 7).
LEASE COMMITMENTS
In September 2021, our lease of approximately
2,600 square feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123 expired.
We rent approximately 1,700 square feet of laboratory
space at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 at the rate of $6,148 per month on a one-year lease that originally
was to expire on November 30, 2020. In December 2020, we entered into a short-term lease extension running from December 1, 2020 through
the completion date of our construction of our new laboratory space which is adjacent to our current laboratory and is expected to be
completed in the December 2021 quarter.
In addition, we rent a mobile clean room on a
short term basis where we will house our manufacturing operations until our permanent manufacturing space is completed. We paid approximately
$59,000 in rent expense to lease the mobile clean room during the three months ended September 30, 2021.
Overall, our rent expense, which is included in
general and administrative expenses, approximated $167,000 and $94,000 for the six month periods ended September 30, 2021 and 2020, respectively.
During the fiscal year ended March 31, 2020, we
adopted ASU Topic 842 on April 1, 2019 utilizing the alternative transition method allowed for under this guidance. As a result, we recorded
lease liabilities and right-of-use lease assets of $228,694 on our balance sheet as of April 1, 2019 related to our former office located
at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123. The lease liabilities represent the present value of the remaining
lease payments of our corporate headquarters lease, discounted using our incremental borrowing rate as of April 1, 2019. The corresponding
right-of-use lease assets are recorded based on the lease liabilities and the cumulative difference between rent expense and amounts paid
under our corporate headquarters lease.
We also elected the short-term lease recognition
exemption for our laboratory lease and therefore, we did not recognize right-of-use assets or lease liabilities at adoption.
As the corporate office lease has ended, as of
September 30, 2021, we no longer carried any right-of-use lease assets or lease liabilities.
In December 2020, we entered into an agreement
to lease approximately 2,823 square feet of office space and 1,807 square feet of laboratory space. The agreement carries a term of 63
months and we will commence paying rent when we take occupancy of those spaces, which is expected to occur in the fourth quarter of 2021.
We are currently operating out of the office space located at 11555 Sorrento Valley Road, Suite 203, San Diego, CA 92121, while construction
is being completed.
Upon taking occupancy of the new lab and office
spaces, we will record lease liabilities and right-of-use lease assets related to this agreement on our balance sheet. We estimate that
the present value of the contractual payments under the lease agreement to be approximately $806,000.
In addition, the new lease agreement required
us to post a standby letter of credit in favor of the landlord in the amount of $46,726 in lieu of a security deposit. We arranged for
our bank to issue the standby letter of credit in the fiscal year ended March 31, 2021 and transferred a like amount to a restricted certificate
of deposit which secured the bank’s risk in issuing that letter of credit. We have classified that restricted certificate of deposit
on our balance sheet as restricted cash.
In October 2021, we entered into another lease
for an initial period of 58 months for (i) approximately 22,260 square feet of space located at 11588 Sorrento Valley Road, San Diego,
California 92121 (the “Building”) and (ii) 2,655 square feet of space located in the Building and commonly known as Suite
18 to house our manufacturing operations (see Note 13). That manufacturing space is located at 11588 Sorrento Valley Road, San Diego,
California 92121 and it is near our new lab and office locations. We anticipate that the landlord will complete construction on this new
space in the second or third quarter of 2022 and we will take occupancy at that time. The initial base rent for the manufacturing space
will be $12,080 per month.
The lease for the manufacturing space required
us to post a standby letter of credit in favor of the landlord in the amount of $40,780 in lieu of a security deposit. We arranged for
our bank to issue the standby letter of credit in October 2021 and transferred a like amount to a restricted certificate of deposit which
secured the bank’s risk in issuing that letter of credit. We will classify that restricted certificate of deposit on our balance
sheet as restricted cash.
LEGAL MATTERS
From time to time, claims are made against us
in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties
and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more
products or engaging in other activities.
The occurrence of an unfavorable outcome in any
specific period could have a material adverse effect on our results of operations for that period or future periods. We are not presently
a party to any pending or threatened legal proceedings.
13. SUBSEQUENT EVENTS
Management has evaluated events subsequent to
September 30, 2021 through the date that the accompanying condensed 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.
New Lease Arrangement
In October 2021, we entered into another lease for an initial period
of 58 months for (i) approximately 22,260 square feet of space located at 11588 Sorrento Valley Road, San Diego, California 92121 (the
“Building”) and (ii) 2,655 square feet of space located in the Building and commonly known as Suite 18 to house our manufacturing
operations (see Note 12). That manufacturing space is located near our new lab and office locations. We anticipate that the landlord will
complete construction on this new space in the second or third quarter of 2022 and we will take occupancy at that time. The initial base
rent for the manufacturing space will be $12,080 per month.
The lease for the manufacturing space required
us to post a standby letter of credit in favor of the landlord in the amount of $40,780 in lieu of a security deposit. We arranged for
our bank to issue the standby letter of credit in October 2021 and transferred a like amount to a restricted certificate of deposit which
secured the bank’s risk in issuing that letter of credit. We will classify that restricted certificate of deposit on our balance
sheet as restricted cash.
Clinical Trial in India
In October 2021, we obtained ethics review board approval 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.