Aethlon Medical, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2022 (the company’s fiscal first quarter; unaudited). Comparison period: three months ended June 30, 2021. Aethlon is a clinical-stage medical device company developing the Hemopurifier for cancer and life-threatening viral infections.
Financial performance and position
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Revenue | $0 | $131,966 |
| Operating expenses | $2,906,081 | $2,230,404 |
| Net loss | $2,906,081 | $2,098,438 |
| Net loss per share, basic and diluted | $0.19 | $0.16 |
| Cash used in operating activities | $2,728,917 | $2,071,828 |
- Revenue was entirely government-contract related in the comparison quarter. No government-contract revenue was recognized in Q1 FY2023 because specified contract milestones were not completed; related invoices were recorded as deferred revenue.
- Operating expenses increased 30.3%, led by higher general and administrative expense (up $402,174) and professional fees (up $260,559). Research and development expense was $858,347, versus $587,687.
- At June 30, 2022, cash was $14,921,775; working capital was $14,249,212; total assets were $17,132,218; and total liabilities were $2,212,020. Liabilities included lease obligations; the filing reports no conventional debt balance.
- Cash and restricted cash declined by $2,150,644 during the quarter. Investing activities used $41,169, while financing activities provided $619,442 from ATM share sales. No gross-margin measure is meaningful because the company reported no revenue.
Material changes and financing
- Compared with the prior-year quarter, revenue fell to zero and net loss increased by approximately $808,000. Operating cash use increased by approximately $657,000.
- In June, the company sold 574,560 shares through its ATM program at an average $1.08 per share, receiving net proceeds of $619,442. The ATM program permits up to $15 million of aggregate sales.
- After quarter-end, the company reported net ATM proceeds of $8,307,769 from 6,906,276 additional shares sold at an average $1.20 per share. The filing reported 22,899,999 common shares outstanding as of August 8, 2022, versus 15,993,723 at June 30.
- Rent expense rose to approximately $139,574 from $48,000, including costs related to the mobile clean room and new facilities. The company anticipated taking occupancy of its manufacturing space in Q3 2022.
Outlook, developments and risks
- Management stated that June 30 cash should fund operations for at least 12 months from the financial statements’ issuance date. It also expects continuing net losses and negative cash flows and says additional equity and/or debt financing will be needed for the foreseeable future.
- Management expects clinical-trial and rent expenses to increase. Future funding needs depend on trial progress, manufacturing, regulatory work, patents and commercialization plans.
- The Hemopurifier has FDA Breakthrough Device designation for specified cancer and viral-disease indications, but remains investigational. The head-and-neck cancer feasibility study had treated two patients and was recruiting; the U.S. COVID-19 study enrolled its first patient in June 2022, who completed the treatment phase. One patient had completed participation in the India COVID-19 study. The company also reported two COVID-19 emergency-use treatments.
- In July 2022, the FDA approved a COVID-19 trial protocol amendment removing the requirement that patients have an existing dialysis catheter and have tolerated dialysis at screening.
- Principal risks include clinical-trial completion and outcomes, regulatory approval, continued access to capital, manufacturing scale-up, competition, intellectual-property protection, Nasdaq listing compliance and possible pandemic or economic disruptions. The company reported no pending or threatened legal proceedings and said disclosure controls were effective.
Important facts for investors to verify
- Current cash runway and financing needs, especially after the substantial post-quarter ATM issuance, associated dilution and remaining ATM capacity.
- Progress, enrollment, costs and results of the oncology and COVID-19 trials, including whether planned timelines remain achievable.
- Milestone completion and revenue recognition under the NCI Phase II contract, which runs through September 15, 2022, and the status of deferred contract revenue.
- The segment disclosure appears to report consolidated net loss before noncontrolling interests as $2,096,081, while the statements of operations report $2,906,081; investors should confirm the correct figure.