Aethlon Medical, Inc. — Form 10-Q
Reporting period: Quarter and six months ended September 30, 2022 (the company’s fiscal second quarter). Unaudited consolidated results. Aethlon is a clinical-stage medical therapeutics company developing the Hemopurifier for cancer and life-threatening viral infections; it reported no product revenue.
Financial highlights
| Metric | Three months ended September 30, 2022 | Six months ended September 30, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $0 | $0 | $131,966 quarter; $263,932 six months |
| Operating expenses | $3.67 million | $6.57 million | $2.14 million quarter; $4.37 million six months |
| Net loss | $3.81 million | $6.72 million | $2.01 million quarter; $4.11 million six months |
| Loss per share, basic and diluted | $0.18 | $0.37 | $0.13 quarter; $0.29 six months |
| Net cash used in operations | Not stated for quarter | $5.61 million | $3.95 million six months |
- At September 30, cash was $19.60 million, working capital was $18.40 million, and total assets were $23.05 million. Total liabilities were $3.18 million, including $1.32 million of lease liabilities; the filing reports no material borrowings.
- Cash and restricted cash increased by $2.53 million over the six months, to $19.69 million. Financing provided $8.92 million, primarily from stock sales; investing used $0.78 million, mainly for equipment purchases.
- The filing does not provide a meaningful operating margin given the absence of revenue and continuing operating losses.
Changes versus prior comparable periods
- Operating expenses rose 71% for the quarter and 50% for the six months. Increases reflected clinical-trial costs, manufacturing supplies, professional and regulatory services, rent, and higher headcount and compensation.
- Net loss increased by about $1.80 million for the quarter and $2.61 million for the six months. Government contract revenue ceased to be recognized in the 2022 periods, versus $131,966 and $263,932, respectively, in 2021.
- The company recorded a $142,121 non-cash loss on dissolution of its subsidiary, Exosome Sciences, Inc. It sold 7.48 million shares through its ATM program during the six months, raising $8.93 million net; shares outstanding rose from 15.42 million at March 31 to 22.95 million at September 30.
Outlook, commentary and risks
- Management said September 30 cash was expected to fund operations for at least 12 months from issuance of the statements. It also expects continuing losses, negative operating cash flow, rising clinical-trial costs, and a need for additional capital. The ATM facility authorized up to $15 million in aggregate sales; the filing does not state the remaining capacity.
- The Hemopurifier’s existing inventory expired September 30, 2022. FDA approval of a new GNA supplier was pending, preventing shipment of newly manufactured cartridges and potentially delaying trials. The company reported completing 112 cartridges, but said they could not be shipped without the required approval.
- The head-and-neck cancer study at UPMC treated two patients but was terminated at that site for lack of further enrollment; alternative sites were under consideration. The U.S. COVID-19 study enrolled its first patient in June 2022. The company also reported one participant completing an India COVID-19 study. The University of Pittsburgh subaward was to terminate in November 2022 due to recruitment difficulties.
- In November 2022, the company gave its CRO a 30-day termination notice, citing low COVID-19 enrollment and the supplier-approval delay. It also reported launching an Australian subsidiary in October 2022 to conduct clinical research, initially focused on oncology.
- Risks include clinical and regulatory uncertainty, dependence on specialized suppliers, future financing needs and potential dilution, and Nasdaq listing compliance. The filing reports an October 25, 2022 notice concerning the $1.00 minimum bid-price requirement, with an initial compliance deadline of April 24, 2023. It also discusses COVID-19, inflation, and the Ukraine conflict as sources of uncertainty. No pending or threatened legal proceedings were reported.
Most important facts for investors to verify
- Whether and when FDA approval for the new GNA supplier was obtained, and whether it enabled shipment of cartridges and resumed clinical-trial activity.
- Actual cash burn and financing runway against management’s 12-month estimate, including subsequent ATM sales, remaining ATM capacity, and resulting dilution.
- Progress in recruiting patients and establishing alternative sites for oncology trials, and enrollment and outcomes in the COVID-19 trials.
- The NCI contract close-out and timing of recognition of the $574,245 deferred revenue balance, which was subject to NCI review.
- Nasdaq bid-price compliance and any subsequent listing notices. The filing refers to the Nasdaq Capital Market generally but describes the notice using a Nasdaq Global Market rule; confirm the applicable listing venue and status.