What changed in this filing

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Item 9A. Controls and Procedures

2021-06-24 compared with 2020-06-25 · 1059 added, 1025 removed, 506 unchanged (80% of the section changed)

3 unchanged sentences

controls and procedures,”

(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,

or the Exchange Act, that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded,

processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information

is accumulated and communicated to our management, including our principal executive officer and our principal financial officer,

as appropriate, to allow timely decisions regarding required disclosures.

(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or

the Exchange Act) that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded, processed,

summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated

and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to

allow timely decisions regarding required disclosures.

In designing and evaluating

the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated,

can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in

evaluating the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation as of the end of

the period covered by this report under the supervision and with the participation of our management, including our Chief Executive

Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can

provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating

the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation as of the end of the period covered

by this report under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial

Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on such evaluation,

our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report,

our disclosure controls and procedures were effective.

our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure

controls and procedures were effective.

Internal Control over Financial Reporting

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Our management is responsible

for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)

under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding

the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles.

Under the supervision

and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted

an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2020.

According to the guidelines

established by Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission, one or more material weaknesses renders a company’s internal control over financial reporting ineffective.

on this evaluation, we have concluded that our internal control over financial reporting was effective as of March 31, 2020.

for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under

the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability

of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

Under the supervision and

with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation

of the effectiveness of our internal control over financial reporting as of March 31, 2021.

According to the guidelines established by

Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, one or more

material weaknesses renders a company’s internal control over financial reporting ineffective.

Based on this evaluation, we have

concluded that our internal control over financial reporting was effective as of March 31, 2021.

Changes in Internal Control Over Financial Reporting

There was no change

in our internal control over financial reporting during the last fiscal quarter ended March 31, 2020 that has materially affected,

or is reasonably likely to materially affect, our internal control over financial reporting.

There was no change in our

internal control over financial reporting during the last fiscal quarter ended March 31, 2021 that has materially affected, or is reasonably

likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

We have no disclosure applicable to this

DIRECTORS, EXECUTIVE OFFICERS

AND CORPORATE GOVERNANCE

set forth below, the information required by this item will be contained in our Definitive Proxy Statement to be filed with the

SEC in connection with our 2020 Annual Meeting of Stockholders, the Proxy Statement, within 120 days after the end of the fiscal

year ended December 31, 2020, and is incorporated herein by reference.

We have no disclosure applicable to this item.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as set forth below,

the information required by this item will be contained in our Definitive Proxy Statement to be filed with the SEC in connection with

our 2021 Annual Meeting of Stockholders, the Proxy Statement, within 120 days after the end of the fiscal year ended March 31, 2021, and

is incorporated herein by reference.

On February 23, 2005, the

Board of Directors approved a “Code of Business Conduct and Ethics,”

or the Code, which applies to our principal executive

officer, our principal financial officer, our principal accounting officer and persons performing similar tasks.

On February 6, 2020,

the Board of Directors approved a “Code of Business Conduct and Ethics,”

or the Code, which applies to our principal

executive officer, our principal financial officer, our principal accounting officer and persons performing similar tasks.

February 6, 2020, the Board of Directors adopted an amended Code, which supersedes the Company’s existing Code previously

adopted by the Board of Directors.

the Board of Directors adopted an amended Code, which supersedes the Company’s existing Code previously adopted by the Board of

Our Code is available on our company website at www.aethlonmedical.com.

If we make any substantive

amendments to, or grant any waivers from, the Code of Business Conduct and Ethics for any officer or director, we will disclose

the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

If we make any substantive amendments to, or grant

any waivers from, the Code of Business Conduct and Ethics for any officer or director, we will disclose the nature of such amendment or

waiver on our website or in a Current Report on Form 8-K.

EXECUTIVE COMPENSATION

The information required by this item will

be contained in our Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will

be contained in our Proxy Statement and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item will

be contained in our Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND

The information required by this item will

be contained in our Proxy Statement and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENTS

The following documents are filed as part of this report on

The information required by this item will be contained

in our Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The information required by this item will be contained

in our Proxy Statement and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

The information required by this item will be contained

in our Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item will be contained

in our Proxy Statement and is incorporated herein by reference.

EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report on Form 10-K:

Consolidated Financial Statements for the years ended March 31,

2021 and 2020:

Report of Independent Registered Public

Accounting Firm

Report of Independent Registered Public Accounting

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

19 unchanged sentences

November 10, 2014

Form of Warrant to Purchase Common Stock dated June 25, 2015.

June 24, 2015

Form of Purchase Agent Warrant dated June 25, 2015.

June 26, 2015

Form of Warrant Agreement dated March 27, 2017.

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Description of Aethlon Medical, Inc.’s Securities.

June 25, 2020

Amended 2010 Stock Incentive Plan.

8 unchanged sentences

April 15, 2015

Securities Purchase Agreement, by and among the Investors set forth on the signature pages therein and Aethlon Medical, Inc., dated June 23, 2015.

June 24, 2015

Registration Rights Agreement, by and among the investors listed on the Schedule of Buyers therein and Aethlon Medical, Inc., dated June 23, 2015.

June 24, 2015

Third Amendment to Standard Industrial Net Lease, by and between AGP Sorrento Business Complex, L.P.

11 unchanged sentences

Wainwright & Co., LLC and Aethlon Medical, Inc., dated March 30, 2020.

Aethlon Medical, Inc.

2012 Non-Employee Directors Compensation Program, as Modified on August 9, 2016.

August 11, 2020

Aethlon Medical, Inc.

Amended and Restated Non-Employee Directors Compensation Policy, as Modified on October 30, 2020.

Fourth Amendment to Standard Industrial Net Lease, by and between AGP Sorrento Business Complex, L.P.

22 unchanged sentences

February 11, 2019

Strategic Joint Cross-Licensing Agreement, by and between the Registrant and SeaStar Medical, Inc., dated June 30, 2019.

August 14, 2019

Seventh Amendment to Standard Industrial Net Lease, by and between Aethlon Medical, Inc.

10 unchanged sentences

January 17, 2020

Amended and Restated Executive Employment Agreement

for Timothy C.

Rodell, M.D., FCCP, dated March 17, 2020, by and between Aethlon Medical, Inc.

and Timothy C.

Rodell, M.D.,

Aethlon Medical, Inc.

2020 Equity Incentive Plan, Form of Restricted Stock Grant, Form of Option Grant and Agreement.

September 15, 2020

Separation Agreement between the Company and Dr.

Rodell, dated October 30, 2020.

November 3, 2020

Employment Agreement between the Company and Dr.

Fisher, dated October 30, 2020.

November 3, 2020

Lease, by and between the Company and San Diego Inspire 1, LLC.

and San Diego Inspire 2, LLC, effective December 7, 2020.

February 10, 2021

Eighth Amendment to Standard Industrial Net Lease, by and between the Company and San Diego Inspire 1, LLC., effective December 7, 2020.

February 10, 2021

Executive Employment Agreement between the Company and Guy Cipriani, dated January 1, 2021.

February 10, 2021

Executive Employment Agreement between the Company and Steven P.

LaRosa, MD, dated January 4, 2021.

February 10, 2021

At the Market Offering Agreement, March 22, 2021, by and between Aethlon Medical, Inc.

Wainwright & CO., LLC.

March 22, 2021

1 unchanged sentence

December 31, 2014

Consent of Independent Registered Public Accounting Firm (Squar

Consent of Independent Registered Public Accounting Firm

Certification of our Chief 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.

14 unchanged sentences

Pursuant to the requirements

of Section 13 or 15(d) 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, on the 25 day of June, 2020.

/s/ TIMOTHY C.

of Section 13 or 15(d) 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, on the 24th day of June, 2021.

/s/ CHARLES J.

FISHER, JR., M.D.

Fisher, Jr., M.D.

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that

each person whose signature appears below constitutes and appoints James B.

KNOW ALL PERSONS BY THESE PRESENTS, that each

person whose signature appears below constitutes and appoints James B.

Frakes and Timothy C.

Rodell, his or her true and

lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in

any and all capacities, to sign any and all amendments to this Annual Report on form 10-K, and to file the same, with all exhibits

thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact

and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary

to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying

and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully

do or cause to be done by virtue hereof.

Rodell, his or her true and lawful attorney-in-fact

and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign

any and all amendments to this Annual Report on form 10-K, and to file the same, with all exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power

and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all

intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents,

or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements

of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant

and in the capacities and on the dates indicated.

/s/ TIMOTHY C.

Chief Executive Officer and Principal Executive Officer

of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in

the capacities and on the dates indicated.

/s/ CHARLES J.

FISHER, JR., MD

Chief Executive Officer, Principal Executive Officer and Director

June 24, 2021

Fisher, Jr., MD

Chief Financial Officer and Principal Accounting Officer

1 unchanged sentence

/s/ EDWARD G.

Chairman and Director

June 24, 2021

1 unchanged sentence

June 24, 2021

/s/ CHARLES J.

FISHER, JR., MD

Chairman and Director

June 25, 2020

Fisher, Jr., MD

/s/ SABRINA MARTUCCI JOHNSON

2 unchanged sentences

/s/ GUY CIPRIANI

SVP and Chief Business Officer and Director

June 24, 2021

9 unchanged sentences

Notes to Consolidated Financial Statements

Report of Independent Registered

Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

3 unchanged sentences

balance sheets of Aethlon Medical, Inc.

and its subsidiary (the Company) as of March 31, 2020 and 2019, the related consolidated

statements of operations, equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively,

and its subsidiary (the Company) as of March 31, 2021 and 2020, the related consolidated statements

of operations, equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively,

the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in

conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of

the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity

with accounting principles generally accepted in the United States of America.

Basis for Opinion

1 unchanged sentence

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

(PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Squar Milner LLP

We have served as the Company’s auditor

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

Baker Tilly US, LLP

We have served as the Company's auditor since

San Diego, California

2 unchanged sentences

AND SUBSIDIARY

CONSOLIDATED BALANCE

CONSOLIDATED BALANCE SHEETS

March 31, 2021

6 unchanged sentences

Right-of-use lease asset

Restricted cash

LIABILITIES AND STOCKHOLDERS’

2 unchanged sentences

Due to related parties

Convertible notes payable, net

Deferred revenue

18 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’

See accompanying notes to the consolidated

financial statements.

See accompanying notes to the consolidated financial

AETHLON MEDICAL, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS

OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended March 31,

19 unchanged sentences

Weighted average number of common shares outstanding - basic and diluted

See accompanying notes to the consolidated

financial statements.

See accompanying notes to the consolidated financial

AETHLON MEDICAL, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE YEARS ENDED MARCH 31, 2021 AND 2020

TO AETHLON MEDICAL, INC.

ATTRIBUTABLE TO AETHLON

MEDICAL, INC.

BALANCE - MARCH 31, 2019

1 unchanged sentence

$ (105,652,433 )

Issuances of common stock for cash under at the

market program

Issuances of common stock for cash under warrant

Issuance of common shares upon vesting of restricted

Common stock issued for services

Issuances of common stock for cash

under at the market program

Loss on debt extinguishment

Issuances of common stock for cash

under warrant exercises

Issuance of common shares upon

vesting of restricted stock units.

Proceeds from the issuance of common

stock in public offerings, net

Issuances of common stock upon

warrant exchanges

Par value of DTC roundup of shares

following reverse split

Stock-based compensation expense

2 unchanged sentences

$ (112,026,381 )

Issuances of common stock for cash under at the

market program

Loss on debt extinguishment

Issuances of common stock for cash under warrant

Issuance of common shares upon vesting of restricted

Proceeds from the issuance of common stock in public

offerings, net

Issuances of common stock upon warrant exchanges

Par value of DTC roundup of shares following reverse split

Issuances of common stock for cash

under at the market program

Issuance of common shares upon

vesting of restricted stock units and net stock option exercise

Stock-based compensation expense

2 unchanged sentences

$ (119,913,090 )

See accompanying notes to the consolidated

financial statements.

See accompanying notes to the consolidated financial

AETHLON MEDICAL, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS

OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2021 AND 2020

9 unchanged sentences

Non-cash rent expense

Fair market value of common stock issued for services

Changes in operating assets and liabilities:

13 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

Net increase in cash and restricted cash

Cash and restricted cash at beginning of year

Cash and restricted cash at end of year

Supplemental disclosures of cash flow information:

1 unchanged sentence

Supplemental information of non-cash investing and financing activities:

Issuance of shares under vested restricted stock units

Issuance of shares under vested restricted stock units, net stock option exercises and unvested share issuance for services

Issuance of common stock upon warrant exchanges

Initial recognition of right-of-use lease asset and lease liability

See accompanying notes to the consolidated

financial statements.

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:

Cash and cash equivalents

Restricted cash

Cash and restricted cash

See accompanying notes to the consolidated financial

Aethlon Medical, Inc.

and Subsidiary

Notes to Consolidated

Financial Statements

ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING

Notes to Consolidated Financial Statements

ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Food and Drug Administration, or FDA, has designated

the Hemopurifier as a “Breakthrough Device”

for two independent indications:

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.

Food and Drug Administration, or FDA, has designated the Hemopurifier as a “Breakthrough Device”

for two independent

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;

1 unchanged sentence

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 COVID-19 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

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 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 will 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 in the process of starting up.

We also believe the Hemopurifier can be

a 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 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.

The primary endpoint for the EFS, which will enroll 10 to12

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 is being conducted at the UPMC Hillman Cancer Center in Pittsburgh, PA, is in the

process of recruiting and treating patients.

We also believe the Hemopurifier can be a 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

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.

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.

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’s plan is to enroll up to 40 subjects at up to 20 centers

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 initial sites for this trial, Hoag Memorial

Hospital Presbyterian in Newport Beach, CA and Hoag Hospital –

Irvine in Irvine, CA and Loma Linda Hospital in Loma Linda, CA, have

completed clinical trial agreements, and have received IRB approval in the case of the Hoag hospitals, and are preparing to open for patient

Under Single Patient Emergency Use regulations, the Company has also treated two patients with COVID-19 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.

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 9635

Granite Ridge Drive, Suite 100, San Diego, California 92123.

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 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.”

Our common stock is listed on the Nasdaq Capital Market under the symbol

“AEMD.”

REVERSE STOCK SPLIT

Effective October 14, 2019, the Company

completed a 1-for-15 reverse stock split.

Accordingly, 15 shares of outstanding common stock then held by stockholders were combined

into one share of common stock.

Effective October 14, 2019, the Company completed

a 1-for-15 reverse stock split.

Accordingly, 15 shares of outstanding common stock then held by stockholders were combined into one share

of common stock.

Any fractional shares resulting from the reverse split were rounded up to the next whole share.

Authorized common stock remained at 30,000,000 shares (see Note 14).

The accompanying consolidated financial statements and accompanying

notes have been retroactively revised to reflect such reverse stock split as if it had occurred on April 1, 2018.

All shares and

per share amounts have been revised accordingly.

Authorized common stock

remained at 30,000,000 shares.

The accompanying consolidated financial statements and accompanying notes have been retroactively revised

to reflect such reverse stock split as if it had occurred on April 1, 2018.

All shares and per share amounts have been revised accordingly.

LIQUIDITY AND GOING CONCERN

Management expects existing cash as of

March 31, 2020 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these

consolidated financial statements.

Management expects existing cash as of March 31,

2021 and additional cash raised in June 2021 to be sufficient to fund the Company’s operations for at least twelve months from the

issuance date of these consolidated financial statements.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial

statements include the accounts of Aethlon Medical, Inc.

and its majority-owned (80% ownership) and controlled subsidiary, Exosome

Sciences, Inc., or ESI.

The accompanying consolidated financial statements

include the accounts of Aethlon Medical, Inc.

and its majority-owned (80% ownership) and controlled subsidiary, Exosome Sciences, Inc.,

All significant intercompany balances and transactions have been eliminated in consolidation.

has classified the (20% ownership) noncontrolling interests in ESI as part of consolidated net loss in the fiscal years ended

March 31, 2020 and 2019 and includes the accumulated amount of noncontrolling interests as part of equity.

The losses at ESI during the fiscal year

ended March 31, 2020 reduced the noncontrolling interests on our consolidated balance sheet by $6,093 from $(126,031) at March

31, 2019 to $(132,124) at March 31, 2020.

The Company has classified the (20%

ownership) noncontrolling interests in ESI as part of consolidated net loss in the fiscal years ended March 31, 2021 and 2020 and includes

the accumulated amount of noncontrolling interests as part of equity.

The losses at ESI during the fiscal year ended

March 31, 2021 reduced the noncontrolling interests on our consolidated balance sheet by $4,790 from $(132,124) at March 31, 2020 to $(136,914)

at March 31, 2021.

RISKS AND UNCERTAINTIES

We operate in an industry that is subject

to intense competition, government regulation and rapid technological change.

Our operations are subject to significant risk and

uncertainties including financial, operational, technological, regulatory, and including the potential risk of business failure.

We operate in an industry that is subject to intense

competition, government regulation and rapid technological change.

Our operations are subject to significant risk and uncertainties including

financial, operational, technological, regulatory, and including the potential risk of business failure.

USE OF ESTIMATES

We prepare our consolidated financial statements

in conformity with accounting principles generally accepted in the United States of America, or GAAP, which 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.

in conformity with accounting principles generally accepted in the United States of America, or GAAP, which 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.

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.

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.

CASH AND CASH EQUIVALENTS

Accounting standards define “cash

and cash equivalents”

as any short-term, highly liquid investment that is both readily convertible to known amounts of cash

and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

purpose of financial statement presentation, we consider all highly liquid investment instruments with original maturities of three

months or less when purchased, or any investment redeemable without penalty or loss of interest to be cash equivalents.

31, 2020 and 2019, we had no assets that were classified as cash equivalents.

Accounting standards define “cash and cash

equivalents”

as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their

maturity that they present insignificant risk of changes in value because of changes in interest rates.

For the purpose of financial statement

presentation, we consider all highly liquid investment instruments with original maturities of three months or less when purchased, or

any investment redeemable without penalty or loss of interest to be cash equivalents.

As of March 31, 2021 and 2020, we had no assets

that were classified as cash equivalents.

CONCENTRATIONS OF CREDIT RISKS

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Accounts at this institution are secured by the Federal Deposit Insurance Corporation up to $250,000.

March 31, 2020 cash balances were approximately $9,415,000 over such insured amount.

not believe that the Company is exposed to any significant risk with respect to its cash.

All of our accounts receivable at March 31, 2020 and all of

our revenue in the fiscal years ended March 31, 2020 and 2019 were directly from the National Cancer Institute.

31, 2021 cash balances were approximately $9,712,000 over such insured amount.

We do not believe

that the Company is exposed to any significant risk with respect to its cash.

All of our accounts receivable at March 31, 2021 and all of our revenue

in the fiscal years ended March 31, 2021 and 2020 related to our government contracts.

Restricted Cash

To comply with the terms of our new 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

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from

two to five years.

is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years.

Repairs and maintenance are charged to expense as incurred while improvements are capitalized.

Upon the sale

or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation with any

gain or loss included in the consolidated statements of operations.

Deferred tax assets and liabilities are

recognized for the future tax consequences attributable to the difference between the consolidated financial statements and their

respective tax basis.

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes, and (b) tax credit

carryforwards.

We record a valuation allowance for deferred tax assets when, based on our best estimate of taxable income (if any)

in the foreseeable future, it is more likely than not that some portion of the deferred tax assets may not be realized.

Upon the sale or retirement of property

and equipment, the accounts are relieved of the cost and the related accumulated depreciation with any gain or loss included in the consolidated

statements of operations.

Deferred tax assets and liabilities are recognized

for the future tax consequences attributable to the difference between the consolidated financial statements and their respective tax

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts reported for income tax purposes, and (b) tax credit carryforwards.

We record a valuation

allowance for deferred tax assets when, based on our best estimate of taxable income (if any) in the foreseeable future, it is more likely

than not that some portion of the deferred tax assets may not be realized.

LONG-LIVED ASSETS

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whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

If the cost basis of a

long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized.

We believe no impairment charges were necessary during the fiscal years ended March 31, 2020 and 2019.

If the cost basis of a long-lived

asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized.

We believe no

impairment charges were necessary during the fiscal years ended March 31, 2021 and 2020.

LOSS PER 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.

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 March 31, 2020 and 2019, a total

of 2,072,492 and 437,784 potential common shares, consisting of shares underlying outstanding stock options, restricted stock units,

warrants and convertible notes payable were excluded as their inclusion would be antidilutive.

Historically, we operated in one segment

that was based on our development of therapeutic devices.

However, in the December 2013 quarter, we initiated the operations of

ESI to develop diagnostic tests.

As a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for

diagnostic applications (See Note 10).

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.

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.

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 March 31, 2021 and 2020, a total of 2,836,062

and 2,072,492 potential common shares, consisting of shares underlying outstanding stock options, restricted stock units, warrants and

convertible notes payable were excluded as their inclusion would be antidilutive.

Historically, we operated in one segment that

was based on our development of therapeutic devices.

However, in the December 2013 quarter, we initiated the operations of ESI to develop

diagnostic tests.

As a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for diagnostic applications

(See Note 9).

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.

DEFERRED FINANCING COSTS

Costs related to the issuance of debt are

capitalized as a deduction to our convertible notes based on the new accounting standard on imputation of interest, and amortized

to interest expense over the life of the related debt using the effective interest method.

There was no amortization related to

our deferred financing costs in the fiscal years ended March 31, 2020 and 2019.

Costs related to the issuance of debt are capitalized

as a deduction to our convertible notes based on the new accounting standard on imputation of interest, and amortized to interest expense

over the life of the related debt using the effective interest method.

There was no amortization related to our deferred financing costs

in the fiscal years ended March 31, 2021 and 2020.

REVENUE RECOGNITION

Our revenues consist entirely of amounts

earned under contracts and grants with the National Institutes of Health, or NIH.

During the fiscal years ended March 31, 2020

and 2019, we recognized revenues totaling $650,187 and $229,625, respectively, under such contracts.

We have concluded that these

agreements are not within the scope of ASC Topic, 606, Revenue from Contracts with Customers, or Topic 606, as the NIH grants

and contracts do not meet the definition of a “customer”

Our revenues consist entirely of amounts earned

under contracts and grants with the National Institutes of Health, or NIH.

During the fiscal years ended March 31, 2021 and 2020, we recognized

revenues totaling $659,104 and $650,187, respectively, under such contracts.

We have concluded that these agreements are not within the

scope of ASC Topic, 606, Revenue from Contracts with Customers, or Topic 606, as the NIH grants and contracts do not meet the definition

of a “customer”

as defined by Topic 606.

Prior to the effective date of ASC

Topic 606, which for the Company was April 1, 2018, we accounted for our grant/contract revenues under the Milestone Method as

prescribed by the legacy guidance of ASC 605-28, Revenue Recognition –

Prior to the effective date of ASC Topic 606, which for the Company was April 1,

2018, we accounted for our grant/contract revenues under the Milestone Method as prescribed by the legacy guidance of ASC 605-28, Revenue

Recognition –

Milestone Method, or Milestone Method.

In the absence

of other applicable guidance under US GAAP, effective April 1, 2018, we elected to continue to use the Milestone Method by analogy

to recognize revenue under these grants/contracts.

We identify the deliverables included within

these agreements and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including

whether the delivered element has standalone value to the collaborator.

The consideration received is allocated among the separate

units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.

A milestone is an event having all of the

following characteristics:

(1) There is substantive uncertainty at

the date the arrangement is entered into that the event will be achieved.

A vendor’s assessment that it expects to achieve

a milestone does not necessarily mean that there is not substantive uncertainty associated with achieving the milestone.

(2) The event can only be achieved based

in whole or in part on either:

In the absence of other applicable guidance under US GAAP, effective April

1, 2018, we elected to continue to use the Milestone Method by analogy to recognize revenue under these grants/contracts.

We identify the deliverables included within these

agreements and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether

the delivered element has standalone value to the collaborator.

The consideration received is allocated among the separate units of accounting,

and the applicable revenue recognition criteria are applied to each of the separate units.

A milestone is an event having all of the following

characteristics:

(1) There is substantive uncertainty at the date

the arrangement is entered into that the event will be achieved.

A vendor’s assessment that it expects to achieve a milestone does

not necessarily mean that there is not substantive uncertainty associated with achieving the milestone.

(2) The event can only be achieved based in whole

or in part on either:

(a) the vendor’s performance;

or (b) a specific outcome resulting from the vendor’s

(3) If achieved, the event would result

in additional payments being due to the vendor.

A milestone does not include events for

which the occurrence is either:

or (b) a specific outcome resulting from the vendor’s performance.

(3) If achieved, the event would result in additional

payments being due to the vendor.

A milestone does not include events for which

the occurrence is either:

(a) contingent solely upon the passage of time;

or (b) the result of a counterparty’s performance.

The policy for recognizing deliverable

consideration contingent upon achievement of a milestone must be applied consistently to similar deliverables.

The assessment of whether a milestone is

substantive is performed at the inception of the arrangement.

The consideration earned from the achievement of a milestone must

meet all of the following for the milestone to be considered substantive:

(1) The consideration is commensurate with

The policy for recognizing deliverable consideration

contingent upon achievement of a milestone must be applied consistently to similar deliverables.

The assessment of whether a milestone is substantive

is performed at the inception of the arrangement.

The consideration earned from the achievement of a milestone must meet all of the following

for the milestone to be considered substantive:

(1) The consideration is commensurate with either:

(a) the vendor’s performance to achieve the milestone;

or (b) the enhancement of the value of the delivered item

or items as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone;

(2) The consideration relates solely to

past performance;

(3) The consideration is reasonable relative

to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

A milestone is not considered substantive

if any portion of the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e.,

it does not relate solely to past performance).

To recognize the milestone consideration in its entirety as revenue in the period

in which the milestone is achieved, the milestone must be substantive in its entirety.

Milestone consideration cannot be bifurcated

into substantive and nonsubstantive components.

In addition, if a portion of the consideration earned from achieving a milestone

may be refunded or adjusted based on future performance, the related milestone is not considered substantive.

We have entered into the following three

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 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 (see Phase 1 Melanoma Cancer Contract 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.

During the fiscal year ended March 31,

2020, we recognized $620,187 in government contract revenue under this contract as a result of the work involved completing the

first three milestones in the project as reported in the kick-off presentation to the NCI and the first and second quarterly reports.

The kick-off presentation covered the Company's organization and project status, recent achievements, the status of the field,

the status of commercial and academic competitors, where the proposed project was positioned against the state of the art, the

IP landscape, a refresher on the proposed technology, the detailed plan for the first budget period of the contract and technical

risks and alternative approaches.

The first and second quarterly reports covered a summary of technical objectives, a description

of activities accomplished in the quarter, an analysis of experimental data, comments regarding the timeliness of performance,

and a brief explanation of activities to be pursued in the following quarter.

or (b) the enhancement of the value of the delivered item or items as a result

of a specific outcome resulting from the vendor’s performance to achieve the milestone;

(2) The consideration relates solely to past performance;

(3) The consideration is reasonable relative to

all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

A milestone is not considered substantive if any

portion of the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate

solely to past performance).

To recognize the milestone consideration in its entirety as revenue in the period in which the milestone

is achieved, the milestone must be substantive in its entirety.

Milestone consideration cannot be bifurcated into substantive and nonsubstantive

In addition, if a portion of the consideration earned from achieving a milestone may be refunded or adjusted based on future

performance, the related milestone is not considered substantive.

We have recognized revenue under the following

three government contracts/grants over the past two years:

Phase 2 Melanoma Cancer Contract

We entered into a contract with the NCI

in September 2017.

This award was under the NIH’s SBIR program.

The title of the award was “SBIR Topic 359 Phase 1

Device Strategy for Selective Isolation of Oncosomes and Non-Malignant Exosomes.”

The award from NIH was a firm, fixed-price

contract with potential total payments to us of $299,250 over the course of nine months.

Fixed price contracts require the achievement

of multiple, incremental milestones to receive the full award during each period of the contract.

The NIH also had the unilateral

right to require us to perform additional work under an option period for an additional fixed amount of $49,800.

Under the terms

of the contract, we were required to perform certain incremental work toward the achievement of specific milestones against which

we invoiced the government for fixed payment amounts.

The Phase 1 Melanoma Cancer Contract was completed in June 2018.

In the fiscal year ended March 31, 2019,

we performed work under the contract covering the remainder of the technical objectives of the contract (Aim 1:

To validate the

Hemopurifier as a device for capture and recovery of melanoma exosomes from plasma, and Aim 2:

To validate a method of melanoma

exosome isolation consisting of the Hemopurifier followed by mab-based immunocapture to select out the tumor-derived exosomes from

non-malignant exosomes, and Aim 3:

To evaluate the functional integrity of melanoma exosomes purified by the Hemopurifier and immunocapture

isolation steps).

As a result we invoiced NIH for $149,625 during the fiscal year ended March 31, 2019.

The Melanoma Cancer Contract

is now completed.

On September 12, 2019, the National Cancer Institute,

or NCI, part of the National Institutes of Health, or NIH, 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.

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.

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.

During the fiscal year ended March 31, 2021, we

completed the milestones relevant to the first nine months of the fiscal year.

As a result, we recorded $436,427 of government contract

revenue on the Phase 2 Melanoma Cancer Contract in the fiscal year ended March 31, 2021.

Of the total revenue recognized during

the current period relating to this grant, a total of $117,849 was invoiced to the NCI during the three months ended December 31, 2020

and we recorded $318,578 which had previously been recognized as deferred revenue.

During the three month period ended March 31,

2021, we did not complete all of the milestones relevant to that time period, as a result, we recorded $114,849 as deferred revenue related

to the Phase 2 Melanoma Cancer Contract.

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.”

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.

calls for two subcontractors to work with us.

Those subcontractors are University of Pittsburgh and Massachusetts General Hospital.

During the fiscal year ended March 31,

2020, 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”).

We also invoiced the NCI for an additional $100,000 during the fiscal year ended March 31, 2020 in order

to pay our subcontractors under the contract.

As we did not complete any additional technical objectives beyond Aim 2 noted above

during the period, we recorded this $100,000 as deferred revenue as of March 31, 2020.

During the fiscal year ended March 31,

2019, we recognized $80,000 in government contract revenue under this grant as a result of the work involved in completing one

of the three technical objectives of the contract (Aim 1.

“To evaluate Hemopurifier-mediated capture of breast cancer exosomes”).

In the fiscal year ended March 31, 2021, we completed

and submitted the final reports applicable to this NCI 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 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;

through August 31, 2020.

The total amount of the firm grant was $298,444.

The grant called for two subcontractors to work with us.

subcontractors were University of Pittsburgh and Massachusetts General Hospital.

As of December 31, 2020, we have received all of the

funds allocated to the Breast Cancer Grant.

During the fiscal year ended March 31, 2021, we

recorded the remaining $188,444 of revenue related to the Breast Cancer Grant, as we achieved two of the three milestones related to the

Breast Cancer Grant.

We concluded in our final report to the SBIR that our pre-clinical results demonstrated that our work under the grant

provided support that the Hemopurifier has the capacity to clear exosomes from breast cancer patients.

That amount previously was recorded

as deferred revenue.

As of March 31, 2021, we received all of the funds

allocated to the Breast Cancer Grant and have submitted the final reports applicable to this grant.

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 $34,233 of revenue related to this subaward in the

fiscal year ended March 31, 2021.

STOCK-BASED COMPENSATION

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shares under stock participation plans are accounted for under the fair value method.

Accordingly, share-based compensation is

measured when all granting activities have been completed, generally the grant date, based on the fair value of the award.

exercise price of options is generally equal to the market price of the Company’s common stock (defined as the closing price

as quoted on the Nasdaq Capital Market or OTCBB on the date of grant).

Compensation cost recognized by the Company includes (a)

compensation cost for all equity incentive awards granted prior to April 1, 2006, but not yet vested, based on the grant-date fair

value estimated in accordance with the original provisions of the then current accounting standards, and (b) compensation cost

for all equity incentive awards granted subsequent to March 31, 2006, based on the grant-date fair value estimated in accordance

with the provisions of subsequent accounting standards.

We use a Binomial Lattice option pricing model for estimating fair value

of options granted (see Note 5).

The following table summarizes share-based

compensation expenses relating to shares and options granted and the effect on loss per common share during the years ended March

31, 2020 and 2019:

Our total stock-based compensation for fiscal years ended March

31, 2020 and 2019 included the following:

Accordingly, share-based compensation is measured

when all granting activities have been completed, generally the grant date, based on the fair value of the award.

The exercise price of

options is generally equal to the market price of the Company’s common stock (defined as the closing price as quoted on the Nasdaq

Capital Market or OTCBB on the date of grant).

Compensation cost recognized by the Company includes (a) compensation cost for all equity

incentive awards granted prior to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the

original provisions of the then current accounting standards, and (b) compensation cost for all equity incentive awards granted subsequent

to March 31, 2006, based on the grant-date fair value estimated in accordance with the provisions of subsequent accounting standards.

We use a Binomial Lattice option pricing model for estimating fair value of options granted (see Note 5).

The following table summarizes share-based compensation

expenses relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2021 and 2020:

Fiscal Years Ended

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Basic and diluted loss per common share

We record share-based compensation expenses

for awards of stock options and restricted stock units, or RSUs, under ASC 718, Share-based compensation, or ASC 718.

to non-employees for periods prior to the adoption of ASU 2018-07, Compensation-Stock Compensation:

Improvements to Non-employee

Share-Based Payment Accounting, on April 1, 2019, the Company had applied ASC 505-50, Equity –

Equity-based payments to

non-employees, or ASC 505-50.

ASC 718 establishes guidance for the recognition of expenses arising from the issuance of share-based

compensation awards at their fair value at the grant date.

We record share-based compensation expenses for

awards of stock options and restricted stock units, or RSUs, under ASC 718, Share-based compensation, or ASC 718.

For awards to non-employees

for periods prior to the adoption of ASU 2018-07, Compensation-Stock Compensation:

Improvements to Non-employee Share-Based Payment Accounting,

on April 1, 2019, the Company had applied ASC 505-50, Equity –

Equity-based payments to non-employees, or ASC 505-50.

ASC 718 establishes

guidance for the recognition of expenses arising from the issuance of share-based compensation awards at their fair value at the grant

We recognize share-based compensation expense

related to stock options and SARs granted to employees, directors and consultants based on the estimated fair value of the awards

on the date of grant.

We estimate the grant date fair value, and the resulting share-based compensation expense, for stock options

that only have service vesting requirements or performance-based vesting requirements without market conditions using the binomial

lattice option-pricing model.

The grant date fair value of the share-based awards with service vesting requirements is generally

recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective

Determining the appropriate amount to expense for performance-based awards based on the achievement of stated goals requires

The estimate of expense is revised periodically based on the probability of achieving the required performance targets

and adjustments are made as appropriate.

The cumulative impact of any revisions is reflected in the period of change.

If any applicable

financial performance goals are not met, no compensation cost is recognized and any previously recognized compensation cost is

For performance-based awards with market conditions, we determine the fair value of awards as of the grant date using

a Monte Carlo simulation model.

We review share-based compensation on a

quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience.

The effect of

adjusting the forfeiture rate for all expense amortization after March 31, 2007 is recognized in the period the forfeiture estimate

The effect of forfeiture adjustments for the fiscal year ended March 31, 2020 was insignificant.

Patents include both foreign and domestic

We capitalize the cost of patents, some of which were acquired, and amortize such costs over the shorter of the remaining

legal life or their estimated economic life, upon issuance of the patent.

The unamortized costs of patents are subject to our review

for impairment under our long-lived asset policy above.

related to stock options and SARs granted to employees, directors and consultants based on the estimated fair value of the awards on the

date of grant.

We estimate the grant date fair value, and the resulting share-based compensation expense, for stock options that only

have service vesting requirements or performance-based vesting requirements without market conditions using the binomial lattice option-pricing

The grant date fair value of the share-based awards with service vesting requirements is generally recognized on a straight-line

basis over the requisite service period, which is generally the vesting period of the respective awards.

Determining the appropriate amount

to expense for performance-based awards based on the achievement of stated goals requires judgment.

The estimate of expense is revised

periodically based on the probability of achieving the required performance targets and adjustments are made as appropriate.

The cumulative

impact of any revisions is reflected in the period of change.

If any applicable financial performance goals are not met, no compensation

cost is recognized and any previously recognized compensation cost is reversed.

For performance-based awards with market conditions, we

determine the fair value of awards as of the grant date using a Monte Carlo simulation model.

We review share-based compensation on a quarterly

basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience.

The effect of adjusting the forfeiture

rate for all expense amortization after March 31, 2007 is recognized in the period the forfeiture estimate is changed.

The effect of forfeiture

adjustments for the fiscal year ended March 31, 2020 was insignificant.

Patents include both foreign and domestic patents.

We capitalize the cost of patents, some of which were acquired, and amortize such costs over the shorter of the remaining legal life or

their estimated economic life, upon issuance of the patent.

The unamortized costs of patents are subject to our review for impairment

under our long-lived asset policy above.

STOCK PURCHASE WARRANTS

We grant warrants in connection with the

issuance of common stock for cash.

Warrants issued in connection with common stock for cash, if classified as equity, are considered

issued in connection with equity transactions and the warrant fair value is recorded to additional paid-in-capital.

BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE

NOTES PAYABLE

The convertible feature of certain notes

payable provides for a rate of conversion that is below market value.

Such feature is normally characterized as a Beneficial Conversion

Feature, or BCF.

We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required

to be separated from the host instrument and accounted for separately, and record that value in the consolidated financial statements

as a discount from the face amount of the notes.

We grant warrants in connection with the issuance

of common stock for cash.

Warrants issued in connection with common stock for cash, if classified as equity, are considered issued in

connection with equity transactions and the warrant fair value is recorded to additional paid-in-capital.

BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES

The convertible feature of certain notes payable

provides for a rate of conversion that is below market value.

Such feature is normally characterized as a Beneficial Conversion Feature,

We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required to be separated

from the host instrument and accounted for separately, and record that value in the consolidated financial statements as a discount from

the face amount of the notes.

Such discounts are amortized to interest expense over the term of the notes.

As of March 31, 2021, we did

not have any unamortized debt discount relating to BCF.

RESEARCH AND DEVELOPMENT EXPENSES

Our research and development costs are

expensed as incurred.

We incurred approximately $927,000 and $896,000 of research and development expenses for the years ended

March 31, 2020 and 2019, respectively, which are included in various operating expenses in the accompanying consolidated statements

of operations.

Our research and development costs are expensed

We incurred approximately $2,072,000 and $927,000 of research and development expenses for the years ended March 31, 2021

and 2020, respectively, which are included in various operating expenses in the accompanying consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance

sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial

We have not entered into any off-balance sheet

arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial statements.

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

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Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, or ASU No.

2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from

nonemployees.

2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018 and early

adoption is permitted.

Entities must apply the guidance retrospectively with a cumulative effect adjustment to retained earnings

as of the beginning of the period of adoption.

expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption is permitted.

must apply the guidance retrospectively with a cumulative effect adjustment to retained earnings as of the beginning of the period of

The adoption of ASU No.

2018-07 on April 1, 2019 did not have a material impact

on the Company's consolidated financial position, results of operations and related disclosures.

During the fiscal year ended March 31,

2020, the Company adopted ASU Topic 842 on April 1, 2019 utilizing the alternative transition method allowed for under this guidance.

As a result, the Company recorded lease liabilities and right-of-use lease assets of $228,694 on its balance sheet as of April

The lease liabilities represent the present value of the remaining lease payments of the Company’s corporate headquarters

lease (see Note 13), discounted using the Company’s 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

its corporate headquarters lease.

The Company also elected the short-term lease recognition exemption for its laboratory lease.

For the laboratory lease that qualified as short-term, the Company did not recognize ROU assets or lease liabilities at adoption.

Topic 842 also allows lessees and lessors

to elect certain practical expedients.

2018-07 on April 1, 2019 did not have a material impact on the Company's consolidated financial position,

results of operations and related disclosures.

On April 1, 2019, the Company adopted ASC Topic

842, Leases,”

utilizing the alternative transition method allowed for under this guidance.

As a result, the Company recorded lease

liabilities and right-of-use lease assets of $228,694 on its balance sheet as of April 1, 2019.

The lease liabilities represent the present

value of the remaining lease payments of the Company’s corporate headquarters lease (see Note 13), discounted using the Company’s

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 its corporate headquarters lease.

The Company also elected the

short-term lease recognition exemption for its laboratory lease.

For the laboratory lease that qualified as short-term, the Company did

not recognize ROU assets or lease liabilities at adoption.

Topic 842 also allows lessees and lessors to elect

certain practical expedients.

The Company elected the following practical expedients:

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Accumulated depreciation

Depreciation expense for the fiscal years ended March 31, 2020

and 2019 was $17,202 and $21,531, respectively.

Depreciation expense for the fiscal years ended March 31, 2021 and

2020 was $39,389 and $17,202, respectively.

Patents, net consist of the following:

1 unchanged sentence

March 31, 2020

Issued patents

Accumulated amortization

Amortization expense for capitalized patents

for each of the fiscal years ended March 31, 2020 and 2019 was $9,164.

As several patents expired during the fiscal year ended

March 31, 2020 and only one capitalized patent remains to be amortized, future amortization expense on patents is estimated to

be approximately $550 per year based on the estimated life of the patent.

Issued patents, net of accumulated amortization

Patents pending

Amortization expense for our capitalized issued

patents for each of the fiscal years ended March 31, 2021 and 2020 was $550 and $9,164, respectively.

As several patents expired during

the fiscal year ended March 31, 2020 and only one capitalized patent remains to be amortized, future amortization expense on patents is

estimated to be approximately $550 per year based on the estimated life of the patent.

The weighted average remaining life of our remaining

1 unchanged sentence

CONVERTIBLE NOTES PAYABLE

We paid off our convertible notes in full

in July 2019.

The following table shows the activity related to our convertible notes during the fiscal year ended March 31, 2020:

We paid off our convertible notes in full in July

We also paid $83,332 of accrued interest during the fiscal year ended March 31, 2020.

The following table shows the activity related

to our convertible notes during the fiscal year ended March 31, 2020:

Total Convertible Notes Payable at March 31, 2019

1 unchanged sentence

Total Convertible Notes Payable at March 31, 2020

During the fiscal year ended March 31,

2020, we recorded interest expense of $23,759 related to the contractual interest rates of our convertible notes and interest expense

of $30,287 related to the amortization of the note discount, for a total interest expense of $54,046 related to our convertible

notes in the fiscal year ended March 31, 2020.

Convertible Notes Payable, Net consisted of the following at

March 31, 2019:

Convertible Notes Payable, Net:

November 2014 10% Convertible Notes (due July 1, 2019)

December 2016 10% Convertible Notes (due July 1, 2019)

Total Convertible Notes Payable, Net

During the fiscal year ended March 31,

2019, we recorded interest expense of $99,260 related to the contractual interest rates of our convertible notes and interest expense

of $121,148 related to the amortization of the note discount for a total interest expense of $220,408 related to our convertible

notes in the fiscal year ended March 31, 2019.

During the fiscal year ended March 31, 2020, we

recorded interest expense of $23,759 related to the contractual interest rates of our convertible notes and interest expense of $30,287

related to the amortization of the note discount, for a total interest expense of $54,046 related to our convertible notes in the fiscal

year ended March 31, 2020.

EQUITY TRANSACTIONS

1 unchanged sentence

Equity Transactions in the Fiscal Year Ended March 31, 2021.

Common Stock Sales Agreement with H.C.

On June 28, 2016, we entered into a Common Stock

Sales Agreement, or the 2016 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 2016 Agreement.

The 2016 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.

to the 2016 Agreement with Wainwright, effective as of the same date.

The amendment provides that references in the 2016 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 2016 Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices

to sell the shares under the 2016 Agreement from time to time, based upon our instructions.

We provided Wainwright with customary indemnification

rights under the 2016 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 2016 Agreement, including

up to $50,000 of the fees and disbursements of their counsel.

The 2016 Agreement will terminate upon the sale of all of the shares under

the 2016 Agreement, unless terminated earlier by either party as permitted under the 2016 Agreement.

As of March 31, 2021, no further sales will be

made under the 2016 Agreement.

On March 22, 2021, we entered into an At the Market

Offering Agreement, or the Offering Agreement, with 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.

has been 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, dated March 22, 2021, with the SEC 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

Sales of the shares, if any, under the 2016 Agreement and 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 to sell any of the shares, and, at any time, we may suspend offers under the

2016 Agreement and the Offering Agreement or terminate the Agreement.

In the fiscal year ended March 31, 2021, 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.

Restricted Stock Unit Grants to Non-Employee

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 3, 2020, pursuant to the terms of the

Company’s Non-Employee Directors Compensation Program, the Compensation Committee of the Board of Directors granted RSUs to each

non-employee director of the Company.

The Non-Employee Directors Compensation Program provided for a grant of RSUs with a grant date fair

value of $35,000, priced at the average of the closing prices for the five trading days ending on the date of grant, which was $1.41 per

share, so that the total number of RSUs to be granted to each non-employee director for fiscal year 2020 would be 24,822 shares of our

common stock.

On April 3, 2020, each eligible director was granted an RSU for 23,893 shares under the Company’s 2010

Stock Plan, or the 2010 Plan, as the number of shares that remained available for grant under the 2010 Plan was not sufficient for each

director’s full RSU grant.

The Compensation Committee also granted to each eligible director a contingent grant under our 2020 Equity

Incentive Plan, or the 2020 Plan, for the remaining portion of the annual RSU grants, or 929 RSU’s to each eligible director, contingent

upon stockholder approval of the 2020 Plan at the Company’s 2020 Annual Meeting of Stockholders, or the Annual Meeting.

are subject to vesting as follows:

50% of the RSUs subject to the grants will vest on December 31, 2020 and 50% of the RSUs will vest

on March 31, 2021, subject in each case to the continuous service of each director, through such vesting dates, as well as approval of

the 2020 Plan by the stockholders at the Annual Meeting, which was obtained at the Annual Meeting.

In June 2020, 29,866 vested RSUs held by our non-employee

directors were exchanged into the same number of shares of our common stock.

All five 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 11,947 of the vested

RSUs being cancelled in exchange for $24,251 in aggregate cash proceeds to those independent directors.

In September 2020, 29,866 vested RSUs held by

our non-employee directors were exchanged into the same number of shares of our common stock.

All five 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

11,947 of the vested RSUs being cancelled in exchange for $16,128 in aggregate cash proceeds to those independent directors.

Also in September 2020, our stockholders approved

the 2020 Plan at the Annual Meeting, at which point the grants of 929 RSUs to each of our eligible independent directors for a total of

4,645 RSUs were considered effective and no longer contingent as of that date (See Note 9).

In December 2020, 32,189 vested RSUs held by our

non-employee directors were exchanged into the same number of shares of our common stock.

All five 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 12,876 of

the vested RSUs being cancelled in exchange for $31,802 in aggregate cash proceeds to those independent directors.

In March 2021, 32,189 vested RSUs held by our

non-employee directors were exchanged into the same number of shares of our common stock.

All five 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 12,875 of the vested

RSUs being cancelled in exchange for $26,136 in aggregate cash proceeds to those independent directors.

There were no vested RSUs outstanding as of March

Restricted Stock Grant to Consultant

In February 2021, our Board of directors approved a restricted stock

grant of 7,758 shares to an investor relations consultant.

Those shares were valued at $18,000 based on our closing price on the date

of the approval.

The shares will vest quarterly over a twelve month period and were issued under our 2020 Stock Plan.

During the twelve

months ended March 31, 2021, we recorded non-cash stock-based compensation expense of $1,500 related to this grant.

Equity Transactions in the Fiscal Year Ended March 31, 2020.

December 2019 Public Offering

On December 13, 2019, we entered into an

underwriting agreement with H.C.

Wainwright and Co., or Wainwright, as representative of the several underwriters named therein,

relating to the public offering, issuance and sale of 3,333,334 shares of common stock (which includes pre-funded warrants to purchase

shares of common stock in lieu thereof), and common warrants to purchase up to an aggregate of 3,333,334 shares of common stock,

at a public offering price of $1.50 per share and common warrant.

Each share of common stock (or pre-funded warrant in lieu thereof)

was sold together with a common warrant to purchase one share of common stock.

The common warrants have an exercise price of $1.50

per share, were immediately exercisable, and will expire five years from the date of issuance.

On December 13, 2019, we entered into an underwriting

agreement with H.C.

Wainwright and Co., or Wainwright, as representative of the several underwriters named therein, relating to the public

offering, issuance and sale of 3,333,334 shares of common stock (which includes pre-funded warrants to purchase shares of common stock

in lieu thereof), and common warrants to purchase up to an aggregate of 3,333,334 shares of common stock, at a public offering price of

$1.50 per share and common warrant.

Each share of common stock (or pre-funded warrant in lieu thereof) was sold together with a common

warrant to purchase one share of common stock.

The common warrants have an exercise price of $1.50 per share, were immediately exercisable,

and will expire five years from the date of issuance.

The offering closed on December 17, 2019.

The gross proceeds of the December 2019

Public Offering were approximately $5 million, prior to deducting underwriting discounts and commissions and estimated offering

expenses and excluding the exercise of any common warrants and the underwriter's option to purchase additional securities.

net proceeds from the December 2019 Public Offering were $4,091,437.

The gross proceeds of the December 2019 Public

Offering were approximately $5 million, prior to deducting underwriting discounts and commissions and estimated offering expenses and

excluding the exercise of any common warrants and the underwriter's option to purchase additional securities.

The net proceeds from the

December 2019 Public Offering were $4,091,437.

Subsequent to the completion of the December 2019

2019 Public Offering and prior to March 31, 2020, all of the holders of pre-funded warrants exercised their pre-funded warrants

In the event of a Fundamental Transaction

(a transfer of ownership of the Company as defined in the common warrants issued in the December 2019 Public Offering) within our

control, the holders of the unexercised common stock warrants exercisable for $1.50 per share, are entitled to receive cash consideration

equal to a Black-Scholes valuation, as defined in the warrant.

If such Fundamental Transaction is not within our control,

the warrant holders would only be entitled to receive the same form of consideration (and in the same proportion) as the holders

of our common stock, hence these warrants are classified as a component of permanent equity.

January 2020 Registered Direct Offering

and Private Placement

On January 16, 2020, we engaged Wainwright

to act as our exclusive placement agent in connection with the private placement and a concurrent registered direct offering,

or together, the Offering, of an aggregate of 1,885,378 shares of our common stock at a purchase price per share of $2.00, or

the Shares, for aggregate gross proceeds to us of approximately $3.77 million, before deducting fees payable to Wainwright and

other estimated offering expenses payable by us.

We also entered into a securities purchase agreement, or the Purchase Agreement

with certain institutional investors, or the Purchasers, pursuant to which we agreed to sell and issue to the Purchasers warrants,

or the Purchase Warrants, to purchase up to an aggregate of 942,689 shares of our common stock, or the Purchase Warrant Shares.

We agreed to pay Wainwright a cash fee of 6.0% of the aggregate gross proceeds in the Offering, excluding the proceeds, if any,

from the exercise of the Purchase Warrants.

We paid Wainwright an additional 1.0% of the aggregate gross proceeds in the Offering

as a management fee and also paid Wainwright an additional $70,000 for certain expenses in connection with the Offering.

Wainwright received placement agent warrants on substantially the same terms as the Purchase Warrants in an amount equal to 3.0%

of the aggregate number of Shares sold in the offering, or 56,561 shares of Common Stock, at an exercise price of $2.50 per share

and a term expiring on January 17, 2025, or the Placement Agent Warrants, and the shares of common stock issuable thereunder,

or the Placement Agent Warrant Shares.

On January 22, 2020, the Company closed

the Offering and issued the Purchase Warrants to the Purchasers.

The Purchase Warrants are exercisable immediately at an exercise

price of $2.75 per share and will expire five and one-half years from the issuance date.

The net proceeds from the January 2020

Registered Direct Offering and Private Placement were $3,364,878.

Public Offering and prior to March 31, 2020, all of the holders of pre-funded warrants exercised their pre-funded warrants in full.

In the event of a Fundamental Transaction (a transfer

of ownership of the Company as defined in the common warrants issued in the December 2019 Public Offering) within our control, the holders

of the unexercised common stock warrants exercisable for $1.50 per share, are entitled to receive cash consideration equal to a Black-Scholes valuation,

as defined in the warrant.

If such Fundamental Transaction is not within our control, the warrant holders would only be entitled to receive

the same form of consideration (and in the same proportion) as the holders of our common stock, hence these warrants are classified as

a component of permanent equity.

January 2020 Registered Direct Offering and

Private Placement

On January 16, 2020, we engaged Wainwright to

act as our exclusive placement agent in connection with the private placement and a concurrent registered direct offering, or together,

the Offering, of an aggregate of 1,885,378 shares of our common stock at a purchase price per share of $2.00, or the Shares, for aggregate

gross proceeds to us of approximately $3.77 million, before deducting fees payable to Wainwright and other estimated offering expenses

payable by us.

We also entered into a securities purchase agreement, or the Purchase Agreement with certain institutional investors, or

the Purchasers, pursuant to which we agreed to sell and issue to the Purchasers warrants, or the Purchase Warrants, to purchase up to

an aggregate of 942,689 shares of our common stock, or the Purchase Warrant Shares.

We agreed to pay Wainwright a cash fee of 6.0% of

the aggregate gross proceeds in the Offering, excluding the proceeds, if any, from the exercise of the Purchase Warrants.

We paid Wainwright

an additional 1.0% of the aggregate gross proceeds in the Offering as a management fee and also paid Wainwright an additional $70,000

for certain expenses in connection with the Offering.

In addition, Wainwright received placement agent warrants on substantially the same

terms as the Purchase Warrants in an amount equal to 3.0% of the aggregate number of Shares sold in the offering, or 56,561 shares of

Common Stock, at an exercise price of $2.50 per share and a term expiring on January 17, 2025, or the Placement Agent Warrants, and the

shares of common stock issuable thereunder, or the Placement Agent Warrant Shares.

On January 22, 2020, the Company closed the Offering

and issued the Purchase Warrants to the Purchasers.

The Purchase Warrants are exercisable immediately at an exercise price of $2.75 per

share and will expire five and one-half years from the issuance date.

The net proceeds from the January 2020 Registered

Direct Offering and Private Placement were $3,364,878.

Common Stock Sales Agreement with H.C.

On June 28, 2016, we entered into a Common

Stock Sales Agreement, or the Agreement, with H.C.

Wainwright & Co., LLC, or H.C.

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 provides for the sale of shares, or the 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, H.C.

Wainwright agreed to 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 is entitled to a commission at a fixed rate equal to three percent (3.0%) of the gross

proceeds per Share sold.

In addition, we 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.

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 H.C.

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 fiscal year ended March 31, 2020,

we raised aggregate net proceeds of $896,031 (net of $27,896 in commissions to H.C.

Wainwright and $5,929 in other offering expenses)

under this Agreement through the sale of 161,149 shares at an average price of $5.56 per share of net proceeds.

In the fiscal year ended March 31, 2020, we raised

aggregate net proceeds of $896,031 (net of $27,896 in commissions to H.C.

Wainwright and $5,929 in other offering expenses) under this

Agreement through the sale of 161,149 shares at an average price of $5.56 per share of net proceeds.

Warrant Exercises

2 unchanged sentences

Restricted Stock Unit Grants to Non-Employee

In 2012, as amended on August 9, 2016,

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 unites, or RSUs, as well as an annual grant of RSUs at the beginning of each fiscal year.

are subject to vesting and represent the right to be issued on a future date shares of our common stock for upon vesting.

In April 2019, pursuant to the Non-Employee

Directors Compensation Program, we issued RSUs with a value of $35,000, in accordance with the terms of the plan, to each of our

non-employee directors, as the stock-based compensation element of their overall directors’

compensation, for the fiscal

year ending March 31, 2020.

Those grants were based on the closing price of our common stock on the grant date, or $14.25 per share,

resulting in 2,456 RSUs being issued to each of our five non-employee directors, for a total of 12,280 RSUs.

All of the RSUs were

subject to vesting in equal quarterly installments on June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020.

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 for upon vesting.

In April 2019, pursuant to the Non-Employee Directors

Compensation Program, we issued RSUs with a value of $35,000, in accordance with the terms of the plan, to each of our non-employee directors,

as the stock-based compensation element of their overall directors’

compensation, for the fiscal year ending March 31, 2020.

grants were based on the closing price of our common stock on the grant date, or $14.25 per share, resulting in 2,456 RSUs being issued

to each of our five non-employee directors, for a total of 12,280 RSUs.

All of the RSUs were subject to vesting in equal quarterly installments

on June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020.

During the fiscal year ended March 31, 2020, 12,280

vested RSUs held by our outside directors were exchanged into the same number of shares of our common stock.

of our five independent directors elected to return 40% of their RSUs in exchange for cash in order to pay their withholding taxes

on the share issuances, 3,926 of the RSUs were cancelled and we paid $11,230 in cash to those independent directors.

In addition, during the fiscal year ended

March 31, 2020, 8,793 vested RSUs then held by our executive officers were exchanged into the same number of shares of our common

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, 4,657 of the RSUs were cancelled and we issued a net 4,136 shares to our executives.

There were no vested RSUs outstanding as

of March 31, 2020.

Common Stock for Warrant Cancellation

During the fiscal year ended March 31,

2020, we agreed with seven accredited investors to issue an aggregate of 3,992 shares of our common stock to these investors in

exchange for the cancellation of outstanding warrants then held by the investors to purchase an aggregate of 39,900 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 gain of $51,190 on those exchanges based on the changes in fair value between the instruments exchanged.

Equity Transactions in the Fiscal Year

Ended March 31, 2019.

Common Stock Sales Agreement with H.C.

On June 28, 2016, we entered into a Common

Stock Sales Agreement, or the Agreement, with H.C.

Wainwright & Co., LLC, or 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, or

Subject to the terms and conditions set

forth in the Agreement, 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 Wainwright with customary indemnification rights,

and 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 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 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 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 fiscal year ended March 31, 2019,

we raised aggregate net proceeds of $1,048,371 (net of $32,471 in commissions to Wainwright and $5,447 in other offering expenses)

under the Agreement through the sale of 51,548 shares at an average price of $20.34 per share of net proceeds.

Warrant Exercises

In the fiscal year ended March 31, 2019,

investors that participated in our October 2017 public offering exercised 18,887 warrants for aggregate cash proceeds to us of

Restricted Shares Issued for Services

During the fiscal year ended March 31,

2019, we issued 1,000 shares of restricted common stock at a price of $19.35 per share, the market price at time of issuance, in

payment for investor relations consulting services.

The aggregate value of this share issuance was $19,350.

Stock Option Issuances

During the fiscal year ended March 31,

2019, we issued an option to our new CEO under the Company’s 2010 Stock Incentive Plan to purchase 36,842 shares of our common

stock at an exercise price of $18.75 per share, the closing price on the date of the option grant.

Restricted Stock Unit Grants to Non-Employee

During the fiscal year ended March

31, 2019, 13,831 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, 7,484 of the RSUs were cancelled and we issued a net 6,347 shares to our executives.

During the fiscal year ended March 31, 2019, 9,699 RSUs held

by our outside directors were exchanged into the same number of shares of our common stock.

As four of our five independent directors

elected to return 40% of their RSUs in exchange for cash in order to pay their withholding taxes on the share issuances, 3,165

As four of our five independent

directors elected to return 40% of their RSUs in exchange for cash in order to pay their withholding taxes on the share issuances, 3,926

of the RSUs were cancelled and we paid $11,230 in cash to those independent directors.

During the fiscal year ended March 31,

2020, we issued 4,432,585 warrants in association with our December 2019 Public Offering and our January 2020 Registered Direct

Financing and associated private placement (see Note 6).

All of those warrants had a five year term and had exercise prices as

In addition, during the fiscal year ended March

31, 2020, 8,793 vested RSUs then held by our executive officers were exchanged into the same number of shares of our common stock.

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, 4,657 of the RSUs were cancelled and we issued a net 4,136 shares to our executives.

There were no vested RSUs outstanding as of March

Common Stock for Warrant Cancellation

During the fiscal year ended March 31, 2020, we

agreed with seven accredited investors to issue an aggregate of 3,992 shares of our common stock to these investors in exchange for the

cancellation of outstanding warrants then held by the investors to purchase an aggregate of 39,900 shares of our common stock.

the fair value of the shares issued and the fair value of the warrants exchanged for those shares and recorded a gain of $51,190 on those

exchanges based on the changes in fair value between the instruments exchanged.

We did not issue any warrants during the fiscal

year ended March 31, 2021.

During the fiscal year ended March 31, 2020, we issued 4,432,585 warrants in association with our December

2019 Public Offering and our January 2020 Registered Direct Financing and associated private placement (see Note 6).

All of those warrants

had a five year term and had exercise prices as follows:

Warrants Issued

8 unchanged sentences

Placement Agents’

Based on the above assumptions, we valued the warrants issued

during the fiscal year ended March 31, 2020 as follows:

The 999,251 warrants

issued in our January 2020 Registered Direct Financing were valued at $2,388,776 and we classified that fair value as equity.

The 3,433,334 warrants issued in our December 2019 public offering were valued at $3,021,334 and we classified that fair value

We did not issue any warrants in the fiscal year ended March

A summary of the aggregate warrant activity for the years ended

March 31, 2020 and 2019 is presented below:

Based on the above assumptions, we valued the warrants issued during

the fiscal year ended March 31, 2020 as follows:

The 999,251 warrants issued in our January 2020 Registered Direct Financing were valued at $2,388,776 and we classified that fair value as equity.

The 3,433,334 warrants issued in our December 2019 public offering were valued at $3,021,334 and we classified that fair value as equity.

A summary of the aggregate warrant activity for the years ended March

31, 2021 and 2020 is presented below:

Fiscal Year Ended March 31,

8 unchanged sentences

The following outlines the significant weighted average assumptions

used to estimate the fair value of warrants granted in the fiscal year ended March 31, 2020 utilizing the Binomial Lattice option

pricing model:

used to estimate the fair value of warrants granted in the fiscal year ended March 31, 2020 utilizing the Binomial Lattice option pricing

Fiscal Year Ended

7 unchanged sentences

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.

The detail of the warrants outstanding and exercisable as of

March 31, 2020 is as follows:

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.

The detail of the warrants outstanding and exercisable as of March

31, 2021 is as follows:

Warrants Outstanding

7 unchanged sentences

STOCK-BASED COMPENSATION:

2010 STOCK INCENTIVE PLAN

In August 2010, we adopted the 2010 Stock

Incentive Plan, to provide incentives to attract, retain and motivate employees, directors and consultants, whose present and potential

contributions are important to our success, by offering them an opportunity to participate in our future performance through awards

of options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards.

2020 EQUITY INCENTIVE PLAN

In September 2020, our stockholders approved

the adoption of the 2020 Plan, to provide incentives to attract, retain and motivate employees, directors and consultants, whose present

and potential contributions are important to our success, by offering them an opportunity to participate in our future performance through

awards of options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards.

We initially authorized

a total of 4,667 common shares for issuance under the 2010 Stock Incentive Plan.

On January 26, 2016, our Board of Directors

approved an amendment to the 2010 Stock Incentive Plan to increase the total number of shares of common stock authorized for issuance

under the plan to 211,333 shares, subject to amendment of our Articles of Incorporation to increase our authorized common stock.

On March 29, 2016, at which our stockholders approved the Amended 2010 Stock Incentive Plan and an amendment of our Articles of

Incorporation to increase our authorized common stock to 30,000,000 shares.

On March 31, 2016, we filed a Certificate of Amendment

to our Articles of Incorporation to effect the increase in our authorized common stock.

As a result of such amendment, the Amended

2010 Stock Incentive Plan became effective on March 31, 2016.

Effective October 14, 2019, we completed

a 1-for-15 reverse stock split.

Accordingly, 15 shares of outstanding common stock then held by stockholders were combined into

one share of common stock.

a total of 1,842,556 common shares for issuance under the 2020 Plan pursuant to stock option grants, RSUs or other forms of stock-based

compensation.

2010 STOCK INCENTIVE PLAN

In August 2010, we adopted the 2010 Stock Incentive

Plan, to provide incentives to attract, retain and motivate employees, directors and consultants, whose present and potential contributions

are important to our success, by offering them an opportunity to participate in our future performance through awards of options, the

right to purchase common stock, stock bonuses and stock appreciation rights and other awards.

We initially authorized a total of 4,667

common shares for issuance under the 2010 Stock Incentive Plan.

On January 26, 2016, our Board of Directors approved

an amendment to the 2010 Stock Incentive Plan to increase the total number of shares of common stock authorized for issuance under the

plan to 211,333 shares, subject to amendment of our Articles of Incorporation to increase our authorized common stock.

On March 29, 2016,

at which our stockholders approved the Amended 2010 Stock Incentive Plan and an amendment of our Articles of Incorporation to increase

our authorized common stock to 30,000,000 shares.

On March 31, 2016, we filed a Certificate of Amendment to our Articles of Incorporation

to effect the increase in our authorized common stock.

As a result of such amendment, the Amended 2010 Stock Incentive Plan became effective

on March 31, 2016.

Effective October 14, 2019, we completed a 1-for-15

reverse stock split.

Accordingly, 15 shares of outstanding common stock then held by stockholders were combined into one share of common

Any fractional shares resulting from the reverse split were rounded up to the next whole share.

common stock remained at 30,000,000 shares.

At March 31, 2020, we had 119,343 shares

available for issuance under this plan See Note 11 to cross reference April 2020 RSU issuance to independent directors.

Authorized common stock remained

at 30,000,000 shares.

No future grants will be made under the 2010 Stock

Incentive Plan.

2012 NON-EMPLOYEE DIRECTORS COMPENSATION PROGRAM

In July 2012, our Board of Directors approved

a board compensation program that modified and superseded the Company’s 2005 Directors Compensation Program, or the Non-Employee

Director Plan, which was previously in effect for our non-employee Directors.

Under the Non-Employee Director Plan, an eligible

director will receive initial and annual equity grants and cash compensation.

In June 2014 and August 2016, our Board

of Directors approved further amendments to the Non-Employee Director Plan.

Under this modified program, a new eligible director

will receive an initial grant of $50,000 worth of RSUs or, at the discretion of our Board of Directors, options to acquire shares

of common stock.

RSUs granted under this provision will be valued based on the average of the closing prices of the common stock

for the five trading days preceding and including the date of grant and will vest at a rate determined by our Board of Directors

in its discretion, typically over one year, partially on the date of grant and in equal quarterly installments thereafter.

granted under this plan will have an exercise price equal to the fair market value on the date of grant.

Such options will have

a term of ten years and will vest at a rate determined by our Board of Directors in its discretion.

In addition, under the Non-Employee Director

Plan, at the beginning of each fiscal year, each existing director eligible to participate will receive a grant of $35,000 worth

of RSUs or, at the discretion of our Board of Directors, options to acquire shares of common stock.

RSUs granted under this provision

will be valued based on the average of the closing prices of the common stock for the five trading days preceding and including

the first day of the fiscal year (or preceding and including the date of grant, if such grant is not made on the first day of the

fiscal year) and will vest at a rate determined by our Board of Directors in its discretion, typically in equal quarterly installments

over one year.

Options granted under this plan will have an exercise price equal to the Fair Market value on the date of grant.

Such options will have a term of ten years and will vest at a rate determined by our Board of Directors in its discretion.

In lieu of per meeting fees, eligible directors

receive an annual board retainer fee of $30,000.

The Non-Employee Director Plan also provides for the following annual retainer

Audit Committee Chair - $5,000, Compensation Committee chair - $5,000, Nominating Committee chair - $5,000, Audit Committee

member - $4,000, Compensation Committee member - $4,000, Nominating Committee member - $4,000 and lead independent director - $15,000.

The RSU grants and the changes to the Non-Employee

Director Plan were approved and recommended by our Compensation Committee prior to approval by our Board of Directors.

Fisher additionally is compensated

$90,000 per year for his services as Chairman of our Board, which our Board of Directors considers to be fees payable as a member

of our Board of Directors or a Committee of our Board for purposes of Section 10A-3 of the rules promulgated under the Securities

Exchange Act of 1934, as amended.

To the extent payment of such fees are construed to not be fees payable as a member of our Board

of Directors or a Committee of our Board, then our Board of Directors considers that Dr.

Fisher may act as a member of its Audit

Committee under Nasdaq Rule 5605(c)(2)(B) as our Board of Directors has determined that it is in the best interests of our Company

and its stockholders for Dr.

Fisher to continue to serve on its Audit Committee.

The Board has awarded compensation to non-employee

directors in the past outside of the Non-Employee Director Plan.

In April 2019, pursuant to the Non-Employee

Directors Compensation Program, we issued RSUs with a value of $35,000, in accordance with the terms of the plan, to each of our

non-employee directors, as the stock-based compensation element of their overall directors’

compensation, for the fiscal

year ending March 31, 2020.

Those grants were based on the closing price of our common stock on the grant date, or $14.25 per share,

resulting in 2,456 RSUs being issued to each of our five non-employee directors, for a total of 12,280 RSUs.

All of the RSUs were

subject to vesting in equal quarterly installments on June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020.

During the fiscal year ended March 31,

2020, 12,280 vested RSUs held by our outside directors were exchanged into the same number of shares of our common stock.

of our five independent directors elected to return 40% of their RSUs in exchange for cash in order to pay their withholding taxes

on the share issuances, 3,926 of the RSUs were cancelled and we paid $11,230 in cash to those independent directors.

In addition, during the fiscal year ended

March 31, 2020, 8,793 vested RSUs then held by our executive officers were exchanged into the same number of shares of our common

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, 4,657 of the RSUs were cancelled and we issued a net 4,136 shares to our executives.

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 3, 2020, pursuant to the terms of the

Company’s Non-Employee Directors Compensation Program, the Compensation Committee of the Board of Directors granted RSUs to each

non-employee director of the Company.

The Non-Employee Directors Compensation Program provided for a grant of RSUs with a grant date fair

value of $35,000, priced at the average of the closing prices for the five trading days ending on the date of grant, which was $1.41 per

share, so that the total number of RSUs to be granted to each non-employee director for fiscal year 2020 would be 24,822 shares of our

common stock.

On April 3, 2020, each eligible director was granted an RSU for 23,893 shares under the Company’s 2010

Stock Plan, or the 2010 Plan, as the number of shares that remained available for grant under the 2010 Plan was not sufficient for each

director’s full RSU grant.

The Compensation Committee also granted to each eligible director a contingent grant under our 2020 Equity

Incentive Plan, or the 2020 Plan, for the remaining portion of the annual RSU grants, or 929 RSU’s to each eligible director, contingent

upon stockholder approval of the 2020 Plan at the Company’s 2020 Annual Meeting of Stockholders, or the Annual Meeting.

were subject to vesting as follows:

50% of the RSUs subject to the grants vested on December 31, 2020 and 50% of the RSUs vested on March

31, 2021, subject in each case to the continuous service of each director, through such vesting dates, as well as approval of the 2020

Plan by the stockholders at the Annual Meeting, which was obtained at the Annual Meeting.

In June 2020, 29,866 vested RSUs held by our non-employee

directors were exchanged into the same number of shares of our common stock.

All five 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 11,947 of the vested

RSUs being cancelled in exchange for $24,251 in aggregate cash proceeds to those independent directors.

In September 2020, 29,866 vested RSUs held by

our non-employee directors were exchanged into the same number of shares of our common stock.

All five 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

11,947 of the vested RSUs being cancelled in exchange for $16,128 in aggregate cash proceeds to those independent directors.

Also in September 2020, our stockholders approved

the 2020 Plan at the Annual Meeting, at which point the grants of 929 RSUs to each of our eligible independent directors for a total of

4,645 RSUs were considered effective and no longer contingent as of that date.

In December 2020, 32,189 vested RSUs held by our

non-employee directors were exchanged into the same number of shares of our common stock.

All five 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 12,876 of

the vested RSUs being cancelled in exchange for $31,802 in aggregate cash proceeds to those independent directors.

In March 2021, 32,189 vested RSUs held by our

non-employee directors were exchanged into the same number of shares of our common stock.

All five 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 12,875 of the vested

RSUs being cancelled in exchange for $26,136 in aggregate cash proceeds to those independent directors.

There were no vested RSUs outstanding as of March 31, 2021.

STAND-ALONE GRANTS

From time to time our Board of Directors

grants common stock or options to purchase common stock or warrants exercisable to common stock to selected directors, officers,

employees and consultants as equity compensation to such persons on a stand-alone basis outside of any of our formal stock plans.

The terms of these grants are individually negotiated.

From time to time our Board of Directors grants

common stock or options to purchase common stock or warrants exercisable to common stock to selected officers, employees and consultants

as equity compensation to such persons on a stand-alone basis outside of any of our formal stock plans.

The terms of these grants are

individually negotiated.

STOCK OPTION ACTIVITY

During the fiscal year ended March 31,

2019, we issued an option to our new CEO to purchase 36,842 shares of common stock at a price of $18.75 per share, the closing

price on the date of the option grant.

The following is a summary of the stock

options outstanding at March 31, 2020 and 2019 and the changes during the years then ended:

From February 2020 through May 2020, our compensation

committee granted options to purchase 521,476 shares of our common stock that were contingent upon stockholder approval of the 2020 Plan.

Upon approval of the 2020 Plan at the Annual Meeting, these option grants were considered effective and no longer contingent as of that

The 2020 Plan approved by our stockholders at

the 2020 Annual Meeting of Stockholders, authorizes up to 1,842,556 shares for issuance pursuant to stock option grants, RSUs or other

forms of stock-based compensation.

No future grants will be made under the 2010 Plan.

Effective as of October 30, 2020, we issued an

option to purchase 239,122 shares of our common stock pursuant to the 2020 Plan to our Chief Executive Officer, in connection with

the appointment of Dr.

Fisher as our Chief Executive Officer.

In connection with the Separation Agreement and

pursuant to Dr.

Rodell’s employment agreement with the Company, the vesting was accelerated on 50% of outstanding and unvested options

to purchase shares of our common stock held by Dr.

Rodell as of the Separation Date of October 30, 2020, such that the accelerated stock

options were fully vested and exercisable as of the Separation Date.

In December 2020, Dr.

Rodell elected to net exercise

a portion of his stock options.

As a result, we issued Dr.

Rodell an aggregate of 15,896 shares of our common stock and we paid the estimated

withholding taxes of $34,209 related to the net exercise.

Options outstanding that were vested as of March

31, 2021 and options that are expected to vest subsequent to March 31, 2021 are as follows:

Expected to vest

The following is a summary of the stock options

outstanding at March 31, 2021 and 2020 and the changes during the years then ended:

Fiscal Year Ended March 31,

6 unchanged sentences

Weighted average estimated fair value of options granted

The detail of the options outstanding and exercisable as of

March 31, 2020 is as follows:

The detail of the options outstanding and exercisable as of March 31,

2021 is as follows:

Options Outstanding

4 unchanged sentences

$18.75 - $142.50

We recorded stock-based compensation expense

related to restricted stock unit issuances and to options granted totaling $843,998 and $1,319,001 for the fiscal years ended March

31, 2020 and 2019, respectively.

These expenses were recorded as stock compensation included in payroll and related expenses in

the accompanying consolidated statement of operations for the years ended March 31, 2019 and 2018.

Our total stock-based compensation for

fiscal years ended March 31, 2020 and 2019 included the following:

We recorded stock-based compensation expense related

to restricted stock unit issuances and to options granted totaling $779,421 and $843,998 for the fiscal years ended March 31, 2021 and

2020, respectively.

These expenses were recorded as stock compensation included in payroll and related expenses in the accompanying consolidated

statement of operations for the years ended March 31, 2021 and 2020.

Our total stock-based compensation for fiscal

years ended March 31, 2021 and 2020 included the following:

Fiscal Year Ended

2 unchanged sentences

Vesting of restricted stock units

Vesting of restricted shares issued for services

Vesting of stock options

Total Stock-Based Compensation

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 fiscal year ended March 31, 2020 was insignificant.

As of March 31, 2020, we had $1,528,684

of remaining unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average remaining

vesting period of 4.33 years.

On March 31, 2020, our stock options had

a negative intrinsic value since the closing price on that date of $1.52 per share was below the weighted average exercise price

of our stock options.

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 fiscal year ended March 31, 2021 was insignificant.

On March 31, 2021, our outstanding stock options

had no intrinsic value since the closing price on that date of $2.03 per share was below the weighted average exercise price of our outstanding

stock options.

At March 31, 2021, there was approximately $2,668,000

of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of

RELATED PARTY TRANSACTIONS

DUE TO RELATED PARTIES

Historically, certain of our officers and

other related parties have advanced us funds, agreed to defer compensation and/or paid expenses on our behalf to cover working

capital deficiencies.

There were no such related party transactions during the fiscal year ended March 31, 2020, except that we

had accrued unpaid Board fees of $69,750 owed to our outside directors as of March 31, 2020.

Historically, certain of our officers and other

related parties have advanced us funds, agreed to defer compensation and/or paid expenses on our behalf to cover working capital deficiencies.

There were no such related party transactions during the fiscal year ended March 31, 2021, except that we had accrued unpaid Board fees

of $52,000 owed to our outside directors as of March 31, 2021.

Due to related parties were comprised of the following items:

8 unchanged sentences

March 31, 2020

Accrued interest

Accrued separation expenses for former executives (see Note 6 and Note 12)

Accrued separation expenses for former executive (see Note 11)

Accrued professional fees

Total other current liabilities

For the years ended March 31, 2020 and

2019, we had no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance.

At March 31, 2020 and 2019, we had net

deferred tax assets as detailed below.

These deferred tax assets are primarily composed of capitalized research and development

costs and tax net operating loss carryforwards.

Due to uncertainties surrounding our ability to generate future taxable income

to realize these assets, a 100% valuation has been established to offset the net deferred tax assets.

Significant components of our net deferred

tax assets at March 31, 2020 and 2019 are shown below:

For the years ended March 31, 2021 and 2020, we

had no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance.

At March 31, 2021 and 2020, we had net deferred

tax assets as detailed below.

These deferred tax assets are primarily composed of capitalized research and development costs and tax net

operating loss carryforwards.

Due to uncertainties surrounding our ability to generate future taxable income to realize these assets,

a 100% valuation allowance has been established to offset the net deferred tax assets.

Significant components of our net deferred tax

assets at March 31, 2021 and 2020 are shown below:

YEAR ENDED MARCH 31,

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Net deferred tax assets

At March 31, 2020, we had tax net operating loss carryforwards

for federal and state purposes approximating $71 million and $53 million, which begin to expire in the year 2021.

The provision for income taxes on earnings subject to income

taxes differs from the statutory federal rate for the years ended March 31, 2020 and 2019 due to the following:

At March 31, 2021, we had tax net operating loss carryforwards for

federal and state purposes approximating $77 million and $60 million, portions of which began to expire in the year 2021.

The provision for income taxes on earnings subject to income taxes

differs from the statutory federal rate for the years ended March 31, 2021 and 2020 due to the following:

Income taxes (benefit) at federal statutory rate of 21.00%

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______________

(1) Pursuant to Internal Revenue Code Sections 382, use of our

tax net operating loss carryforwards may be limited.

(1) Pursuant to Internal Revenue Code Section 382, use of our tax net

operating loss carryforwards may be limited.

ASC 740, “Income Taxes”, clarifies

the accounting for uncertainty in income taxes recognized in an entity's financial statements, and prescribes recognition thresholds

and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.

ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that

is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not

be recognized if it has less than a 50% likelihood of being sustained.

Additionally, ASC 740 provides guidance on derecognition,

classification, interest and penalties, accounting in interim periods, disclosure and transition.

Our practice is to recognize

interest and/or penalties related to income tax matters in income tax expense.

During the years ended March 31, 2020 and 2019,

we did not recognize any interest or penalties relating to tax matters.

At and for the years ended March 31, 2020

and 2019, management does not believe the Company has any uncertain tax positions.

Accordingly, there are no unrecognized tax benefits

at March 31, 2020 or March 31, 2019.

Our tax returns remain open for examination

by the applicable authorities, generally 3 years for federal and 4 years for state.

We are currently not under examination by

any taxing authorities.

the accounting for uncertainty in income taxes recognized in an entity's financial statements, and prescribes recognition thresholds and

measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.

Under ASC 740,

the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not

to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than

a 50% likelihood of being sustained.

Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties,

accounting in interim periods, disclosure and transition.

Our practice is to recognize interest and/or penalties related to income tax

matters in income tax expense.

During the years ended March 31, 2021 and 2020, we did not recognize any interest or penalties relating

to tax matters.

At and for the years ended March 31, 2021 and

2020, management does not believe the Company has any uncertain tax positions.

Accordingly, there are no unrecognized tax benefits at March

31, 2021 or March 31, 2020.

Our tax returns remain open for examination by

the applicable authorities, generally 3 years for federal and 4 years for state.

We are currently not under examination by any taxing

We operate our businesses principally through

two reportable segments:

Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic

business activities.

Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic business

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.

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.

The following tables set forth certain information regarding

our segments:

We have not included any allocation of corporate overhead to

the ESI segment.

The following tables set forth certain information regarding our segments:

Fiscal Years Ended March 31,

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SUBSEQUENT EVENTS

Management has evaluated events subsequent to March 31, 2020

through the date that the accompanying consolidated financial statements were filed with the Securities and Exchange Commission

Management has evaluated events subsequent to

March 31, 2021 through the date that the accompanying 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.

Management Update

In June 2020, Thomas L.

Taccini joined

our management team as Vice President, Manufacturing and Product Development.

Taccini has over 35 years of experience in leading

teams in engineering, product development, project management, quality systems and regulatory affairs for multiple different classes

of medical devices.

IDE Supplement

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.

SALES UNDER ATM FACILITY

In June 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

described above through the sale of 2,685,600 shares at an average price of $2.70 per share of net proceeds.

COVID-19 Update

In March 2020, the World Health Organization declared COVID-19

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.

On April 3, 2020, pursuant to the terms

of the Company’s 2012 Non-Employee Directors Compensation Program, as modified on August 9, 2016, or the Directors Plan,

the Compensation Committee of the Board granted RSUs under the Company’s 2010 Stock Incentive Plan, or the 2010 Plan, to

each non-employee director of the Company.

The Director’s Plan provides for a grant of $35,000 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 $1.41 per share as of April 3, 2020.

Each eligible director was granted an RSU in the amount of 23,893 shares under the 2010

Plan, as the number of available shares under the 2010 Plan was not sufficient for each director’s full grant.

The RSU’s

are subject to vesting in four equal quarterly installments on June 30, September 30, December 31, 2020, and March 31, 2021, subject

to the recipient's continued service with the Company on each such vesting date.

Each eligible director will receive the remaining

portion of the annual RSU grants, or 929 RSU’s, contingent upon stockholder approval at the 2020 annual meeting of the Company’s

stockholders, of a new 2020 Equity Incentive Plan.

In June 2021, we raised aggregate net proceeds

under the 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.

REGISTERED DIRECT FINANCING

In June 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 gross proceeds to us of approximately $12.425 million,

before 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.

and a prospectus supplement thereunder.

WARRANT EXERCISES

In June 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 June 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 EXERCISE

In June 2021, a former employee paid us $22,969

to exercise 9,375 stock options.

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 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.

CONTINGENT BONUS AWARDS

Pursuant to the terms of the Executive Employment Agreement, dated

October 30, 2020, between the Company and Charles J.

Fisher, Jr., M.D., or the Employment Agreement, the Company’s Chief Executive

Fisher is entitled to a cash bonus equal to 50% of his annual base salary upon achievement of certain qualified events, or

a Qualifying Event, as set forth in the Employment Agreement, as well as a stock option grant of a number of shares of common stock, pursuant

to the 2020 Plan, such that Dr.

Fisher’s equity holdings in the Company after the additional grant will equal 3% of the Company,

on a fully diluted basis.

Based on the market capitalization of the Company and the Company’s recent registered direct financing,

the Company believes, subject to approval of the Compensation Committee of the Company’s Board of Directors, that in June 2021 a

Qualifying Event has occurred and that Dr.

Fisher has earned the cash bonus award in the amount of $215,000 and an additional stock option

grant under the terms of the Employment Agreement.

COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We have had the following material changes to our contractual

obligations and commitments outside the ordinary course of business during the fiscal year ended March 31, 2020:

On March 17, 2020, we entered into an Amended

and Restated Executive Employment Agreement, or the Amended Agreement, for Timothy C.

Rodell, M.D., FCCP, or Executive, dated March

17, 2020, by and between the Company and Executive.

This Amended Agreement supersedes and replaces Executive’s current Executive

Employment Agreement with the Company, dated December 10, 2018, or Prior Agreement.

The Amended Agreement updated the Prior

Agreement to set forth (i) Executive’s base salary for calendar year 2020, previously approved by the Company, of $430,000

(ii) Executive’s title of Chief Executive Officer;

(iii) Executive’s eligibility to participate in and receive

additional stock option or equity award grants under the Company’s equity incentive plans from time to time, in the discretion

of the Board or the Compensation Committee, and in accordance with the terms and conditions of such plans;

and (iv) severance payments

in the event that Executive’s employment is terminated by the Company for any reason other than Cause (as defined in the

Amended Agreement) or if it is terminated by Executive for Good Reason (as defined in the Amended Agreement).

We have had the following material changes to

our contractual obligations and commitments outside the ordinary course of business during the fiscal year ended March 31, 2021:

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 this agreement, we agreed

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.

We also paid Dr.

Rodell accrued vacation in the amount

of $20,260 in November 2020.

The total expense accrued at March 31, 2021 relating

to the Separation Agreement, was $284,270 (see Note 7).

LEASE COMMITMENTS

We currently lease approximately 2,600

square feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego , California 92123 under a 39-month

gross plus utilities lease that commenced on December 1, 2014 and expires on August 31, 2021 the “Granite Ridge Lease.”

The current rental rate under the lease extension is $8,265 per month.

We believe this leased facility will be satisfactory for

our office needs over the term of the lease.

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 $4,700 per month

on a one-year lease that originally was to expire on November 30, 2019.

In October 2019, we entered into a lease extension for

an additional twelve months running from December 1, 2019 through November 30, 2020, at the rate of $5,961 per month.

Rent expense, which is included in general

and administrative expenses, approximated $178,000 and $169,000 for the fiscal years ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, our commitments under the lease agreements

We currently lease approximately 2,600 square

feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego , California 92123 under a 39-month gross plus

utilities lease that commenced on December 1, 2014 and expires on August 31, 2021.

The current rental rate under the lease extension is

$8,265 per month.

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 $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 planned new laboratory space which is adjacent to our current laboratory.

Rent expense, which is included in general and

administrative expenses, approximated $192,000 and $178,000 for the fiscal years ended March 31, 2021 and 2020, respectively.

Future minimum lease payments under the Granite Ridge Lease as of March

31, 2021, are as follows:

9635 Granite Ridge Drive, Suite 100, San Diego, CA 92123 office lease

11585 Sorrento Valley Road, Suite 109, San Diego, CA 92121 office lease

Total Lease Commitments

April 1, 2021 through August 31, 2021

Total lease liability

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.

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 its corporate headquarters lease.

We also elected the short-term lease recognition exemption

for its laboratory lease.

For the laboratory lease that qualified as short-term, we did not recognize right-of-use 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 third quarter of 2021.

Upon taking occupancy of the space, we will record lease liabilities and right-of-use lease assets related to this agreement on our balance

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.

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.

are not presently a party to any pending or threatened 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures