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, or the Securities Act, and Section 21E of the Securities Exchange Act
of 1934, as amended, or the Exchange Act. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties
and other factors which may cause our actual results, performance, or achievements 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. Potential risks
and uncertainties include, without limitation, completion of our capital-raising activities, our ability to maintain our Nasdaq
listing, U.S. Food and Drug Administration, 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, or 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
We are a medical technology company focused
on developing products to diagnose and treat life and organ threatening diseases. The Aethlon Hemopurifier®, or 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:
|
·
|
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
|
|
·
|
the treatment of life-threatening viruses that are not addressed with approved therapies.
|
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 preparing for the initiation of clinical trials in patients
with advanced and metastatic cancers. 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 global COVID-19 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) (NCT # 04453046). The primary endpoint
for the EFS, which is designed to enroll 10-12 subjects at a single center, will be safety, with secondary endpoints including
measures of exosome clearance and characterization, as well as response and survival rates. This study, which will be conducted
at the UPMC Hillman Cancer Center in Pittsburgh, PA, has been approved by the Institutional Review Board, or IRB, and is now open
for patient enrollment.
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 validations were conducted in collaboration with leading government
or non-government research institutes.
On June 17, 2020, the FDA approved a
supplement to the Company’s open IDE for the Company’s 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’s plan is 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). The first sites for this trial, Hoag Memorial Hospital
Presbyterian in Newport Beach, CA and Hoag Hospital – Irvine in Irvine, CA now have IRB approval and are preparing to
open for patient enrollment. Under Single Patient Emergency Use regulations, the Company has also recently treated a patient
with COVID-19, who successfully completed eight daily treatments with the Hemopurifier.
We are also the majority owner of Exosome
Sciences, Inc., or ESI, a company focused on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases.
Included among ESI’s activities is the advancement of a TauSome™ biomarker candidate to diagnose chronic traumatic
encephalopathy, or CTE, in the living. ESI previously documented TauSome levels in former NFL players to be nine times higher than
same age-group control subjects. Through ESI, we are also developing exosome based biomarkers in patients with, or at risk for,
a number of cancers. 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.
We were formed on March 10, 1999. 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 listed on the Nasdaq Capital Market under
the symbol “AEMD.”
COVID-19 Update
In March 2020, the World Health Organization
declared COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply
chains and created significant volatility and disruption of financial markets.
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, including clinical trials. 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 future access to capital. Further, while we have not experienced significant disruptions
to our manufacturing supply chain, business, results of operations, financial condition, clinical trials, or preclinical research
to date, we are unable to assess the potential impact this pandemic could have on our manufacturing supply chain, business, results
of operations, financial condition, clinical trials, or preclinical research in the future.
As we continue to actively advance our
clinical trials, we remain in close contact with our clinical sites and are assessing the impact of COVID-19 on our trials, expected
timelines and costs on an ongoing basis. We will assess any potential delays in our ability to timely ship clinical trial materials,
including internationally, due to transportation interruptions. The extent of the impact of COVID-19 on our operational and financial
performance will depend on certain developments, including the duration and spread of the outbreak, impact on our clinical trials,
employees and vendors, all of which are uncertain and cannot be predicted. Given these uncertainties, we cannot reasonably estimate
the related impact to our business, operating results and financial condition, if any.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements
of the Exchange Act, and must file reports, proxy statements and other information with the Commission. The Commission 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 website is http://www.aethlonmedical.com.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 2019
Government Contract Revenues
We did not record any government contract
revenue in the three months ended September 30, 2020. We did invoice the NCI for an aggregate of $203,293 during the
three months ended September 30, 2020, however we recorded that amount as deferred revenue since we did not achieve the milestones
associated with that quarterly billing cycle.
We have entered into the following two contracts/grants with
the NCI, part of the 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 runs for the
period from September 16, 2019 through September 15, 2021.
The work to be performed pursuant to this
Award Contract focuses 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 did not record any government contract
revenue on the Phase 2 Melanoma Cancer Contract in the three months ended September 30, 2020. We did invoice the NCI
for $114,849 during the three months ended September 30, 2020, however we have recorded that amount as deferred revenue since we
did not achieve the milestones associated with that quarterly billing cycle.
Breast Cancer Grant
In September 2018, the NCI awarded us a
government grant (number 1R43CA232977-01). The title of this Small Business Innovation Research, or SBIR, Phase I grant is “The
Hemopurifier Device for Targeted Removal of Breast Cancer Exosomes from the Blood Circulation,” or the Best Cancer Grant.
This NCI Phase I grant period originally
ran from September 14, 2018 through August 31, 2019. In August 2019, we applied for and received a no cost, twelve month extension
on this grant; through August 31, 2020. The total amount of the firm grant is $298,444. The grant calls for two subcontractors
to work with us. Those subcontractors are University of Pittsburgh and Massachusetts General Hospital.
We did not record any government contract
revenue on the Breast Cancer Grant in the three months ended September 30, 2020. We did invoice the NCI for $88,444
during the three months ended September 30, 2020, and have recorded that amount as deferred revenue since we did not achieve the
milestones associated with that quarterly billing cycle.
As of September 30, 2020, we have received
all of the funds allocated to this Best Cancer Grant and are now composing the final reports applicable to this grant.
Operating Expenses
Consolidated operating expenses for the
three months ended September 30, 2020 were $1,771,389, compared to $1,702,202 for the three months ended September 30, 2019. This
increase of $69,187, or 4.1%, in the 2020 period was due to an increase in general and administrative expenses of $212,410, which
was partially offset by decreases in professional fees of $105,941 and in payroll and related expenses of $37,282.
The $212,410 increase in general and administrative
expenses was primarily due to a $142,696 increase in lab supplies, in connection with our ongoing effort to continue to build an
inventory of Hemopurifiers for our clinical trials, and to a $54,361 increase in our clinical trial expenses.
The $105,941 decrease in our professional
fees was primarily due to a $93,640 decrease in our legal fees and a $59,614 decrease in our accounting fees, which were partially
offset by a $37,986 increase in scientific consulting expenses.
The $37,282 decrease in payroll and related
expenses was due to the combination of a $159,494 reduction in stock-based compensation expense and a $122,212 increase in our
cash-based compensation expense. The cash-based compensation increase was in turn due to additions to our headcount and to salary
increases.
Other Expense
There was no other expense during the three
months ended September 30, 2020. In the three months ended September 30, 2019, other expense consisted of interest expense and
a loss on share for warrant exchanges.
The following table breaks out the various components of our
other expense for both periods:
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
9/30/20
|
|
|
9/30/19
|
|
|
Change
|
|
Loss on Share for Warrant Exchanges
|
|
$
|
–
|
|
|
$
|
4,403
|
|
|
$
|
(4,403
|
)
|
Interest Expense
|
|
$
|
–
|
|
|
$
|
21
|
|
|
$
|
(21
|
)
|
Total Other Expense
|
|
$
|
–
|
|
|
$
|
4,424
|
|
|
$
|
(4,424
|
)
|
Loss on Share for Warrant Exchanges
We did not record a loss on share for warrant exchanges in the
three months ended September 30, 2020. During the three months ended September 30, 2019, we agreed with five accredited investors
to issue 1,078 shares of our common stock to these investors in exchange for the cancellation of outstanding warrants then held
by the investors to purchase 10,759 shares of our common stock. We measured the fair value of the shares issued and the fair value
of the warrants exchanged for those shares and recorded a loss of $4,403 on those exchanges based on the changes in fair value
between the instruments exchanged.
Interest Expense
We did not have any interest expense in
the three months ended September 30, 2020. Interest expense was $21 for the three months ended September 30, 2019. The various
components of our interest expense are shown in the following table:
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
9/30/20
|
|
|
9/30/19
|
|
|
Change
|
|
Interest Expense
|
|
$
|
–
|
|
|
$
|
21
|
|
|
$
|
(21
|
)
|
Net Loss
As a result of the changes in revenues
and expenses noted above, our net loss increased to approximately $1,771,000 in the three month period ended September 30, 2020,
from approximately $1,707,000 in the three month period ended September 30, 2019.
Basic and diluted loss attributable to
common stockholders were ($0.15) for the three month period ended September 30, 2020, compared to ($1.29) for the three month period
ended September 30, 2019.
SIX MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THE SIX MONTHS
ENDED SEPTEMBER 30, 2019
Government Contract Revenues
We did not record any government contract
revenue in the six months ended September 30, 2020. We did invoice the NCI for an aggregate of $407,022 during the
six months ended September 30, 2020, however we recorded that amount as deferred revenue since we did not achieve the milestones
associated with those quarterly billing cycles.
We have entered into the following two contracts/grants with
the NCI, part of the 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 runs for the
period from September 16, 2019 through September 15, 2021.
The work to be performed pursuant to this
Award Contract focuses 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 did not record any government contract
revenue on the Phase 2 Melanoma Cancer Contract in the six months ended September 30, 2020. We did invoice the NCI for
an aggregate of $321,578 during the six months ended September 30, 2020, however we have recorded that amount as deferred revenue
since we did not achieve the milestones associated with those quarterly billing cycles.
Breast Cancer Grant
In September 2018, the NCI awarded us a
government grant (number 1R43CA232977-01). The title of this Small Business Innovation Research, or SBIR, Phase I grant is “The
Hemopurifier Device for Targeted Removal of Breast Cancer Exosomes from the Blood Circulation,” or Breast Cancer Grant.
This NCI phase I grant period originally
ran from September 14, 2018 through August 31, 2019. In August 2019, we applied for and received a no cost, twelve month extension
on this grant; so the expiration date was extended to August 31, 2020. The total amount of the firm grant is $298,444. The grant
calls for two subcontractors to work with us. Those subcontractors are University of Pittsburgh and Massachusetts General Hospital.
We did not record any government contract
revenue on the Breast Cancer Grant in the six months ended September 30, 2020. We did invoice the NCI for $88,444 during
the six months ended September 30, 2020, however we have recorded that amount as deferred revenue since we did not achieve the
milestones associated with that quarterly billing cycle.
As of September 30, 2020, we have received
all of the funds allocated to this grant and are now composing the final reports applicable to this Breast Cancer Grant.
During the six months ended September 30,
2019, we recognized $30,000 in government contract revenue under this grant as a result of the work involved in one of the three
technical objectives of the contract: Aim 2. “Elution of a population of breast cancer exosomes from Hemopurifier cartridges
that bear the signatures of malignancy based on expression of CSPG4 and HER2, for triple-negative or HER2-overexpressing cancers,
respectively”.
Operating Expenses
Consolidated operating expenses for the
six months ended September 30, 2020 were $3,181,807, compared to $3,298,391 for the six months ended September 30, 2019. This decrease
of $116,584, or 3.5%, in the 2020 period was due to a decrease in payroll and related expenses of $206,366 and in professional
fees of $149,235, which was partially offset by an increase in general and administrative expenses of $239,017.
The $206,366 decrease in payroll and related
expenses was due to the combination of a $401,823 reduction in stock-based compensation expense and a $195,457 increase in our
cash-based compensation expense. The cash-based compensation increase was in turn due to additions to our headcount and to salary
increases.
The $149,235 decrease in our professional
fees was primarily due to a $112,285 decrease in our legal fees, a $81,242 decrease in our accounting fees, and a $65,000 decrease
in subcontractor fees on our government contracts, which were partially offset by a $62,236 increase in scientific consulting expenses
and a $28,976 increase in investor relations expenses.
The $239,017 increase in general and administrative
expenses was primarily due to a $188,081 increase in lab supplies, in connection with our ongoing effort to continue to build an
inventory of Hemopurifiers for our clinical trials, and to a $80,544 increase in our clinical trial expenses.
Other Expense
Other expense during the six months ended
September 30, 2020 consisted of interest expense and during the three months ended September 30, 2019, consisted of interest expense,
a loss on share for warrant exchanges and a loss on debt extinguishment. Other expense for the six months ended September 30, 2020
was $728, compared to other expense of $505,520 for the six months ended September 30, 2019.
The following table breaks out the various components of our
other expense for both periods:
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
9/30/20
|
|
|
9/30/19
|
|
|
Change
|
|
Loss on Debt Extinguishment
|
|
$
|
–
|
|
|
$
|
447,011
|
|
|
$
|
(447,011
|
)
|
Loss on Share for Warrant Exchanges
|
|
$
|
–
|
|
|
$
|
4,403
|
|
|
$
|
(4,403
|
)
|
Interest Expense
|
|
$
|
728
|
|
|
$
|
54,106
|
|
|
$
|
(53,378
|
)
|
Total Other Expense
|
|
$
|
728
|
|
|
$
|
505,520
|
|
|
$
|
(504,792
|
)
|
Loss on Debt Extinguishment
We did not record a loss on debt extinguishment
in the six months ended September 30, 2020. During the six months ended September 30, 2019, we reduced the conversion price on
our then outstanding convertible notes from $45.00 per share to $10.20 per share. The modification of the convertible 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 $447,011.
Loss on Share for Warrant Exchanges
We did not record a loss on share for warrant exchanges in the
six months ended September 30, 2020. During the six months ended September 30, 2019, we agreed with five accredited investors to
issue 1,078 shares of our common stock to these investors in exchange for the cancellation of outstanding warrants then held by
the investors to purchase 10,759 shares of our common stock. We measured the fair value of the shares issued and the fair value
of the warrants exchanged for those shares and recorded a loss of $4,403 on those exchanges based on the changes in fair value
between the instruments exchanged.
Interest Expense
Total interest expense was $728 for the
six months ended September 30, 2020, and $54,106 for the six months ended September 30, 2019, a decrease of $53,378. The various
components of our interest expense are shown in the following table:
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
9/30/20
|
|
|
9/30/19
|
|
|
Change
|
|
Interest Expense
|
|
$
|
728
|
|
|
$
|
23,819
|
|
|
$
|
(23,091
|
)
|
Amortization of Note Discounts
|
|
$
|
–
|
|
|
$
|
30,287
|
|
|
$
|
(30,287
|
)
|
Total Interest Expense
|
|
$
|
728
|
|
|
$
|
54,106
|
|
|
$
|
(53,378
|
)
|
The $53,378 decrease in our total interest expense in the six
months ended September 2020 was due to the payment in full of our convertible notes in July 2019.
Net Loss
As a result of the changes in revenues
and expenses noted above, our net loss decreased to approximately $3,183,000 in the six month period ended September 30, 2020,
from approximately $3,774,000 in the six month period ended September 30, 2019.
Basic and diluted loss attributable to
common stockholders were ($0.29) for the six month period ended September 30, 2020, compared to ($2.91) for the six month period
ended September 30, 2019.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2020, we had a cash
balance of $14,473,232 and current working capital of $13,262,499. This compares to a cash balance of $9,604,780 and working capital
of $8,973,393 at March 31, 2020. We expect our existing cash as of September 30, 2020 to be sufficient to fund the Company’s
operations for at least twelve months from the issuance date of these financial statements.
The primary source of our increase in cash
during the six months ended September 30, 2020 resulted from our Common Stock Sales Agreement with H.C. Wainwright & Co., LLC,
or Wainwright. The cash raised from that activity is described below:
Common Stock Sales Agreement with Wainwright
On June 28, 2016, we entered into a Common
Stock Sales Agreement, or the Agreement, with Wainwright, which established 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 provided for the sale
of shares of our common stock having an aggregate offering price of up to $12,500,000.
On March 30, 2020, we executed Amendment
No. 2 to the Agreement with Wainwright, effective as of the same date. The amendment provides that references in the Agreement
to the registration statement shall refer to the registration statement on Form S-3 (File No. 333-237269), originally filed with
the SEC on March 19, 2020, declared effective by the SEC on March 30, 2020.
Subject to the terms and conditions set
forth in the Agreement Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales
practices to sell the shares under the Agreement from time to time, based upon our instructions. We provided Wainwright with customary
indemnification rights under the 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 pay certain expenses incurred by 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.
Sales of the Shares, if any, under the
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 to sell any of the Shares, and, at any time, we
may suspend offers under the Agreement or terminate the Agreement.
In the six months ended September 30, 2020,
we raised aggregate net proceeds of $7,260,869, net of $224,825 in commissions to Wainwright and $8,472 in other offering expenses,
under the Agreement through the sale of 2,685,600 shares at an average price of $2.70 per share of net proceeds.
Future capital requirements will depend
upon many factors, including progress with pre-clinical testing and clinical trials, the number and breadth of our clinical programs,
the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights,
the time and costs involved in obtaining regulatory approvals, competing technological and market developments, as well as our
ability to establish collaborative arrangements, effective commercialization, marketing activities and other arrangements. We expect
to continue to incur increasing negative cash flows and net losses for the foreseeable future.
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,
2020
|
|
|
September 30,
2019
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(2,329
|
)
|
|
$
|
(2,321
|
)
|
Investing activities
|
|
$
|
(23
|
)
|
|
$
|
(120
|
)
|
Financing activities
|
|
$
|
7,220
|
|
|
$
|
(601
|
)
|
Net increase (decrease) in cash
|
|
$
|
4,868
|
|
|
$
|
(3,042
|
)
|
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
$2,329,000 in the six month period ended September 30, 2020, compared to approximately $2,321,000 in the six month period ended
September 30, 2019.
NET CASH USED IN INVESTING ACTIVITIES.
We used approximately $23,000 of cash to purchase laboratory and office equipment in the six months ended September 30, 2020, compared
to approximately $120,000 in the six month period ended September 30, 2019.
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES. During the six months ended September 30, 2020, we raised approximately $7,261,000 from the issuance of common stock.
That source of cash from our financing activities was partially offset by the use of approximately $40,000 to pay for the tax withholding
on restricted stock units, for an aggregate increase of cash provided by financing activities of approximately $7,220,000. During
the six months ended September 30, 2019, we raised approximately $423,000 from the issuance of common stock, which was offset by
the use of approximately $993,000 to payoff our then outstanding convertible notes and approximately $32,000 to pay for the tax
withholding on restricted stock units.
As of the date of this filing, we plan
to invest significantly into purchases of our raw materials and in our contract manufacturing arrangement, subject to successfully
raising additional capital.
CRITICAL ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, 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. These 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.
We believe that the estimates and assumptions
that are most important to the portrayal of our financial condition and results of operations, in that they require the most difficult,
subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These critical accounting
estimates relate to revenue recognition, stock purchase warrants issued with notes payable, beneficial conversion feature of convertible
notes payable, impairment of intangible assets and long lived assets, stock compensation, deferred tax asset valuation allowance,
and contingencies.
There have been no changes to our critical accounting policies
as disclosed in our Form 10-K for the year ended March 31, 2020.
OFF-BALANCE SHEET ARRANGEMENTS
As of September 30, 2020, we did not have any off-balance
sheet arrangements.