AETHLON MEDICAL INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under 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 Annual 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. 58 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 Annual Report, our disclosure controls and procedures were effective. Internal Control over Financial Reporting (a) Management’s Report on Internal Control Over Financial Reporting 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, 2022. 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, 2022. (b) 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, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION We have no disclosure applicable to this item. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS We have no disclosure applicable to this item. 59 PART III Certain information required by Part III is omitted from this Annual Report and incorporated by reference to our definitive proxy statement for our 2022 Annual Meeting of Stockholders, or the Proxy Statement, to be filed pursuant to Regulation 14A of the Exchange Act. If our Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report, the omitted information will be included in an amendment to this Annual Report filed not later than the end of such 120-day period. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Except as set forth below, the information required by this item will be contained in the sections titled “Information About our Board of Directors and Executive Officers,” “Information About our Board of Directors and Executive Officers – Code of Ethics,” “Delinquent Section 16(a) Reports,” “Information About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Nominating and Corporate Governance Committee,” “Information About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Audit Committee and Audit Committee Financial Expert,” “Information About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Compensation Committee” and “Executive Compensation and Director Compensation” in our Proxy Statement and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item will be contained in the sections titled “Executive and Director Compensation” and “Information About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Compensation Committee” in our Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item will be contained in the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Executive and Director Compensation – Narrative Disclosure to Executive Summary – Equity-Based Incentive Awards” in our Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this item will be contained in the sections titled “Information About our Board of Directors and Executive Officers – Board of Directors” and “Certain Relationships and Related Transactions” in our Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item will be contained in the section titled “Ratification of Appointment of Independent Registered Public Accounting Firm” in our Proxy Statement and is incorporated herein by reference. 60 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report: 1. Consolidated Financial Statements for the years ended March 31, 2022 and 2021: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 2. Exhibits Incorporated by Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit Number Date Filed Herewith 3.1 Articles of Incorporation. S-3 333-211151 3.1 May 5, 2016 3.2 Amended and Restated Bylaws of the Company. 8-K 001-37487 3.1 September 12, 2019 4.1 Form of Common Stock Certificate. S-1 333-201334 4.1 December 31, 2014 4.2 Form of Common Stock Purchase Warrant dated August 29, 2012. 8-K 000-21846 4.1 September 6, 2012 4.3 Form of Common Stock Purchase Warrant dated October, November and December 2012. 10-Q 000-21846 4.1 February 13, 2013 4.4 Form of Common Stock Purchase Warrant dated June 14, 2013. 10-Q 000-21846 4.1 August 13, 2013 4.5 Form of Common Stock Purchase Warrant dated June 24, 2014. 8-K 000-21846 4.1 June 30, 2014 4.6 Form of Common Stock Purchase Warrant dated July 24, 2014. 8-K 000-21846 4.1 July 28, 2014 4.7 Form of Common Stock Purchase Warrant dated August and September 2014. 10-Q 000-21846 4.3 November 10, 2014 61 4.10 Form of Warrant Agreement dated March 27, 2017. 8-K 001-37487 4.1 March 22, 2017 4.11 Form of Warrant dated _______, 2017. S-1/A 333-219589 4.29 September 18, 2017 4.12 Form of Warrant to Purchase Common Stock. S-1/A 333-234712 4.14 December 11, 2019 4.13 Form of Underwriter Warrant. S-1/A 333-234712 4.15 December 11, 2019 4.14 Form of Common Stock Purchase Warrant. 8-K 001-37487 4.1 January 17, 2020 4.15 Description of Aethlon Medical, Inc.’s Securities. 10-K 001-37487 4.16 June 25, 2020 10.1 Aethlon Medical, Inc. Amended and Restated Non-Employee Directors Compensation Policy, as Modified on February 10, 2022.++ 10-Q 001-37487 10.2 February 14, 2022 10.2 Employment Agreement, by and between Aethlon Medical, Inc. and James Frakes, dated December 12, 2018. ++ 10-Q 001-37487 10.3 February 11, 2019 10.3 Form of Indemnification Agreement for Officers and Directors. ++ 10-Q 001-37487 10.4 February 11, 2019 10.4 Form of Option Grant Agreement for Officers and Directors. ++ 10-Q 001-37487 10.5 February 11, 2019 10.5 Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for Directors. ++ 10-Q 001-37487 10.6 February 11, 2019 10.6 Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for Executives. ++ 10-Q 001-37487 10.7 February 11, 2019 10.7 SBIR Phase II Award Contract, by and among Aethlon Medical, Inc., the National Institutes of Health and the National Cancer Institute, dated September 12, 2019. 10-Q 001-37487 10.2 November 1, 2019 10.8 Amendment to SBIR Phase II Award Contract, by and among Aethlon Medical, Inc., the National Institutes of Health and the National Cancer Institute, dated October 28, 2020. X 62 10.9 Assignment Agreement, by and between Aethlon Medical, Inc. and London Health Sciences Center Research Inc., dated November 7, 2006. S-1 001-37487 10.27 November 15, 2019 10.10 Aethlon Medical, Inc. 2020 Equity Incentive Plan, Form of Restricted Stock Grant, Form of Option Grant and Agreement. ++ 8-K 001-37487 10.1 September 15, 2020 10.11 Employment Agreement between the Company and Dr. Fisher, dated October 30, 2020. ++ 8-K 001-37487 10.2 November 3, 2020 10.12 Lease, by and between the Company and San Diego Inspire 1, LLC. and San Diego Inspire 2, LLC, effective December 7, 2020. 10-Q 001-37487 10.3 February 10, 2021 10.13 Executive Employment Agreement between the Company and Guy Cipriani, dated January 1, 2021. ++ 10-Q 001-37487 10.5 February 10, 2021 10.14 Executive Employment Agreement between the Company and Steven P. LaRosa, MD, dated January 4, 2021. ++ 10-Q 001-37487 10.6 February 10, 2021 10.15 Lease between Aethlon Medical, Inc. and San Diego Inspire 5, LLC, effective October 27, 2021. 10-Q 001-37487 10.1 November 9, 2021 10.16 At the Market Offering Agreement, dated March 24, 2022, by and between Aethlon Medical, Inc. and H.C. Wainwright & Co., LLC. 8-K 001-37487 1.1 March 24, 2022 21.1 List of Subsidiaries. S-1 333-201334 21.1 December 31, 2014 23.1 Consent of Independent Registered Public Accounting Firm X 31.1 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. X 31.2 Certification of our Chief Financial 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. X 32.1 Statement of our Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). X 32.2 Statement of our Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). X 63 101.INS XBRL Instance Document X 101.SCH XBRL Schema Document X 101.CAL XBRL Calculation Linkbase Document X 101.DEF XBRL Definition Linkbase Document X 101.LAB XBRL Label Linkbase Document X 101.PRE XBRL Presentation Linkbase Document X ___________________ ++ Indicates management contract or compensatory plan. ITEM 16. FORM 10-K SUMMARY None. 64 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, o n the 28 th d ay of June, 2022. By: /s/ CHARLES J. FISHER, JR., M.D. Charles J. 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. Frakes and Charles J. Fisher, Jr., M.D., 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, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ CHARLES J. FISHER, JR., MD Chief Executive Officer, Principal Executive Officer and Director June 28, 2022 Charles J. Fisher, Jr., MD /s/ JAMES B. FRAKES Chief Financial Officer and Principal Accounting Officer June 28, 2022 James B. Frakes /s/ EDWARD G. BROENNIMAN Chairman and Director June 28, 2022 Edward G. Broenniman /s/ CHETAN S. SHAH Director June 28, 2022 Chetan S. Shah /s/ ANGELA ROSSETTI Director June 28, 2022 Angela Rossetti /s/ GUY CIPRIANI SVP and Chief Business Officer and Director June 28, 2022 Guy Cipriani 65 AETHLON MEDICAL, INC. AND SUBSIDIARY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 23 ) F-2 Consolidated Balance Sheets as of March 31, 2022 and 2021 F-3 Consolidated Statements of Operations for the Years Ended March 31, 2022 and 2021 F-4 Consolidated Statements of Equity for the Years Ended March 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 2022 and 2021 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Aethlon Medical, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Aethlon Medical, Inc. and its subsidiary (the Company) as of March 31, 2022 and 2021, 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, 2022 and 2021, 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 These financial statements are the responsibility 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. 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. 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 that: (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 2001. San Diego, California June 28, 2022 F- 2 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS March 31, 2022 March 31, 2021 ASSETS CURRENT ASSETS Cash $ 17,072,419 $ 9,861,575 Accounts receivable 127,965 149,082 Prepaid expenses and other current assets 956,623 341,081 TOTAL CURRENT ASSETS 18,157,007 10,351,738 Property and equipment, net 441,238 160,976 Right-of-use lease asset 696,698 40,363 Patents, net 2,200 56,954 Restricted cash 87,506 46,726 Deposits 33,305 12,159 TOTAL ASSETS $ 19,417,954 $ 10,668,916 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 499,962 $ 337,678 Due to related parties 155,742 118,520 Deferred revenue 344,547 114,849 Lease liability, current portion 126,905 42,543 Other current liabilities 696,893 761,636 TOTAL CURRENT LIABILITIES 1,824,049 1,375,226 Lease liability, less current portion 602,505 – TOTAL LIABILITIES 2,426,554 1,375,226 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 30,000,000 shares authorized at March 31, 2022 and 2021; 15,419,163 and 12,150,597 issued and outstanding at March 31, 2022 and 2021, respectively 15,421 12,152 Additional paid-in capital 147,446,868 129,331,542 Accumulated deficit ( 130,329,181 ) ( 119,913,090 ) TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS’ EQUITY BEFORE NONCONTROLLING INTERESTS 17,133,108 9,430,604 NONCONTROLLING INTERESTS ( 141,708 ) ( 136,914 ) TOTAL STOCKHOLDERS’ EQUITY 16,991,400 9,293,690 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 19,417,954 $ 10,668,916 See accompanying notes to the consolidated financial statements. F- 3 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended March 31, 2022 2021 REVENUES: Government contract and grant revenue $ 294,165 $ 659,104 Total revenues 294,165 659,104 OPERATING COSTS AND EXPENSES Professional fees 2,634,026 2,637,664 Payroll and related expenses 4,625,802 3,454,941 General and administrative 3,455,222 2,457,998 Total operating expenses 10,715,050 8,550,603 OPERATING LOSS ( 10,420,885 ) ( 7,891,499 ) NET LOSS BEFORE NONCONTROLLING INTERESTS ( 10,420,885 ) ( 7,891,499 ) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 4,794 ) ( 4,790 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 10,416,091 ) $ ( 7,886,709 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.71 ) $ ( 0.65 ) Weighted average number of common shares outstanding - basic and diluted 14,756,967 12,090,884 See accompanying notes to the consolidated financial statements. F- 4 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED MARCH 31, 2022 AND 2021 ATTRIBUTABLE TO AETHLON MEDICAL, INC. COMMON STOCK ADDITIONAL PAID IN ACCUMULATED NON- CONTROLLING TOTAL SHARES AMOUNT CAPITAL DEFICIT INTERESTS EQUITY BALANCE - MARCH 31, 2020 9,366,873 $ 9,368 $ 121,426,563 $ ( 112,026,381 ) $ ( 132,124 ) $ 9,277,426 Issuances of common stock for cash under at the market program 2,685,600 2,686 7,258,183 – – 7,260,869 Issuance of common shares upon vesting of restricted stock units and net stock option exercise 98,124 98 ( 132,625 ) – – ( 132,527 ) Stock-based compensation expense – – 779,421 – – 779,421 Net loss – – – ( 7,886,709 ) ( 4,790 ) ( 7,891,499 ) BALANCE - MARCH 31, 2021 12,150,597 12,152 129,331,542 ( 119,913,090 ) ( 136,914 ) 9,293,690 Issuances of common stock for cash under at the market program 626,000 626 4,947,159 – – 4,947,785 Issuances of common stock for cash in registered direct financing 1,380,555 1,381 11,657,663 – – 11,659,044 Issuances of common stock for cash under warrant exercises 531,167 531 820,407 – – 820,938 Issuances of common stock for cash under stock option exercises 11,562 11 28,314 – – 28,325 Issuances of common stock under cashless warrant exercises 675,554 676 ( 676 ) – – – Issuance of common shares upon vesting of restricted stock units and net stock option exercise 43,728 44 ( 88,162 ) – – ( 88,118 ) Stock-based compensation expense – – 750,621 – – 750,621 Net loss – – – ( 10,416,091 ) ( 4,794 ) ( 10,420,885 ) BALANCE - MARCH 31, 2022 15,419,163 $ 15,421 $ 147,446,868 $ ( 130,329,181 ) $ ( 141,708 ) $ 16,991,400 See accompanying notes to the consolidated financial statements. F- 5 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2022 AND 2021 2022 2021 Cash flows from operating activities: Net loss $ ( 10,420,885 ) $ ( 7,891,499 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 123,685 39,939 Stock based compensation 750,621 779,421 Accretion of right-of-use lease asset 30,532 ( 2,491 ) Changes in operating assets and liabilities: Accounts receivable 21,117 57,647 ) Prepaid expenses and other current assets ( 636,688 ) ( 111,477 ) Accounts payable and other current liabilities 97,541 341,858 ) Deferred revenue 229,698 14,849 Due to related parties 37,222 6,813 Net cash used in operating activities ( 9,767,157 ) ( 6,764,940 ) Cash flows from investing activities: Purchases of property and equipment ( 349,193 ) ( 59,881 ) Net cash used in investing activities ( 349,193 ) ( 59,881 ) Cash flows from financing activities: Tax withholding payments or tax equivalent payments for net share settlement of restricted stock units ( 88,118 ) ( 132,527 ) Net proceeds from the issuance of common stock and exercise of warrants 17,456,092 7,260,869 Net cash provided by financing activities 17,367,974 7,128,342 Net increase in cash and restricted cash 7,251,624 303,521 Cash and restricted cash at beginning of year 9,908,301 9,604,780 Cash and restricted cash at end of year $ 17,159,925 $ 9,908,301 Supplemental information of non-cash investing and financing activities: Issuances of common stock under cashless warrant exercises $ 676 $ – Initial recognition of right-of-use lease asset and lease liability $ 744,430 $ – Issuance of shares under vested restricted stock units, net stock option exercises and unvested share issuance for services $ 44 $ 98 Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: Cash and cash equivalents $ 17,072,419 $ 9,861,575 Restricted cash 87,506 46,726 Cash and restricted cash $ 17,159,925 $ 9,908,301 See accompanying notes to the consolidated financial statements. F- 6 Aethlon Medical, Inc. and Subsidiary Notes to Consolidated Financial Statements 1. ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Aethlon Medical, Inc. (collectively, “Aethlon”, the “Company”, “we” or “us”) is a medical technology company focused on developing products to diagnose and treat life and organ threatening diseases. The Aethlon Hemopurifier is a clinical-stage immunotherapeutic device designed to combat cancer and life-threatening viral infections. In cancer, the Hemopurifier is designed to deplete the presence of circulating tumor-derived exosomes that promote immune suppression, seed the spread of metastasis and inhibit the benefit of leading cancer therapies. The U.S. Food and Drug Administration, or FDA, has designated the Hemopurifier as a “Breakthrough Device” for two independent indications: · the treatment of individuals with advanced or metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes have been shown to participate in the development or severity of the disease; and · the treatment of life-threatening viruses that are not addressed with approved therapies. We believe the Hemopurifier can be a substantial advance in the treatment of patients with advanced and metastatic cancer through the clearance of exosomes that promote the growth and spread of tumors through multiple mechanisms. We are currently conducting a clinical trial in patients with advanced and metastatic head and neck cancer. We are initially focused on the treatment of solid tumors, including head and neck cancer, gastrointestinal cancers and other cancers. As we advance our clinical trials, we are in close contact with our clinical sites to navigate and assess the impact of the COVID-19 global pandemic on our clinical trials and current timelines. On October 4, 2019, the FDA approved our Investigational Device Exemption, or IDE, application to initiate an Early Feasibility Study, or EFS, of the Hemopurifier in patients with head and neck cancer in combination with standard of care pembrolizumab (Keytruda). The primary endpoint for the EFS, which is designed to enroll 10 to 12 subjects at a single center, is safety, with secondary endpoints including measures of exosome clearance and characterization, as well as response and survival rates. This study, which is being conducted at the UPMC Hillman Cancer Center in Pittsburgh, Pennsylvania, has treated two patients and is in the process of recruiting additional patients. We are considering adding one or more additional sites to this trial to accelerate patient recruitment and we are also considering starting additional trials in other forms of cancer. We also believe the Hemopurifier can be part of the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already approved treatment. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals infected with human immunodeficiency virus, or HIV, hepatitis C, and Ebola. Additionally, in vitro , the Hemopurifier has been demonstrated to capture Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus, Herpes simplex virus, Chikungunya virus, Dengue virus, West Nile virus, smallpox-related viruses, H1N1 swine flu virus, H5N1 bird flu virus, and the reconstructed Spanish flu virus of 1918. In several cases, these studies were conducted in collaboration with leading government or non-government research institutes. F- 7 On June 17, 2020, the FDA approved a supplement to our open IDE for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients with SARS-CoV-2/COVID-19 in a New Feasibility Study. That study is designed to enroll up to 40 subjects at up to 20 centers in the U.S. Subjects will have established laboratory diagnosis of COVID-19, be admitted to an intensive care unit, or ICU, and will have acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety, include reduction in circulating virus as well as clinical outcomes (NCT # 04595903). Under Single Patient Emergency Use regulations, the Company has also treated two patients with COVID-19 with the Hemopurifier. In September 2021, we entered into an agreement with PPD, Inc., or PPD, a leading global contract research organization, or CRO, to oversee our U.S. clinical studies investigating the Hemopurifier for critically ill COVID-19 patients. We now have nine hospitals activated for patient enrollment and they are actively screening patients for the trial. These sites include LSU Shreveport, Valley Baptist Medical Center in Texas, Loma Linda Medical Center, Hoag Irvine and Newport Beach, University of California Davis, University of Miami Medical Center, Cooper Medical and Thomas Jefferson Medical Center. We are in the site activation process with three additional U.S. medical centers. We also obtained ethics review board approval and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a COVID-19 clinical trial at that location. We have completed all site initiation activities at Medanta Medicity Hospital and this site is now open for enrollment and is actively screening patients. One patient recently has completed treatment protocol in this trial. We are also the majority owner of Exosome Sciences, Inc., or ESI, a company formed to focus on the discovery of exosomal biomarkers to diagnose and monitor life-threatening diseases. We consolidate ESI’s activities in our consolidated financial statements. Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we plan to sell the Hemopurifier. Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or other patents issued more recently will help protect the proprietary nature of the Hemopurifier treatment technology. In addition to the foregoing, we are monitoring closely the impact of the COVID-19 global pandemic on our business and have taken steps designed to protect the health and safety of our employees while continuing our operations. Given the level of uncertainty regarding the duration and impact of the COVID-19 pandemic on capital markets and the U.S. economy, we are unable to assess the impact of the worldwide spread of SARS-CoV-2 and the resulting COVID-19 pandemic on our timelines and future access to capital. We are continuing to monitor the spread of COVID-19 and its potential impact on our operations. The full extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition, clinical trials, and preclinical research will depend on future developments that are highly uncertain, including actions taken to contain or treat COVID-19 and their effectiveness, as well as the economic impact on national and international markets. Our executive offices are located at 11555 Sorrento Valley Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is www.aethlonmedical.com. Our common stock is listed on the Nasdaq Capital Market under the symbol “AEMD.” LIQUIDITY AND GOING CONCERN Management expects existing cash as of March 31, 2022 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these consolidated financial statements. F- 8 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. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has classified the (20% ownership) noncontrolling interests in ESI as part of consolidated net loss in the fiscal years ended March 31, 2022 and 2021 and includes the accumulated amount of noncontrolling interests as part of equity. The losses at ESI during the fiscal year ended March 31, 2022 reduced the noncontrolling interests on our consolidated balance sheet by $4,794 from $( 136,914 ) at March 31, 2021 to $( 141,708 ) at March 31, 2022. 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. 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. 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. 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. 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, 2022 and 2021, we had no assets that were classified as cash equivalents. CONCENTRATIONS OF CREDIT RISKS Cash is maintained at one financial institution in checking accounts. Accounts at this institution are secured by the Federal Deposit Insurance Corporation up to $250,000. Our March 31, 2022 cash balances were approximately $ 16,982,000 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, 2022 and all of our revenue in the fiscal years ended March 31, 2022 and 2021 related to our government contracts. RESTRICTED CASH To comply with the terms of our new laboratory, office, and manufacturing space leases, we caused our bank to issue two standby letters of credit, or the L/C’s, in the amount of $ 87,506 in favor of the landlord. The L/C’s are in lieu of a security deposit. In order to support the L/C’s, we agreed to have our bank withdraw $87,506 from our operating accounts and to place that amount in restricted certificates of deposit. We have classified that amount as restricted cash, a long-term asset, on our balance sheet. F- 9 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. 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. INCOME TAXES 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. LONG-LIVED ASSETS Long-lived assets are reviewed for impairment 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, 2022 and 2021. 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, 2022 and 2021, a total of 2,243,838 and 2,836,062 potential common shares, consisting of shares underlying outstanding stock options, restricted stock units, or RSUs, and warrants were excluded as their inclusion would be antidilutive. SEGMENTS We operate our businesses principally through two reportable segments: 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, consisting of patent maintenance costs. Aethlon’s revenue is generated primarily from government contracts to date and ESI does not have any revenues or activities other than patent maintenance. We have not included any allocation of corporate overhead to the ESI segment. F- 10 DEFERRED FINANCING COSTS Costs related to the issuance of debt are capitalized as a deduction to our convertible notes based on the 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, 2022 and 2021. 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, 2022 and 2021, we recognized revenues totaling $ 294,165 and $ 659,104 , 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 – 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: (a) the vendor’s performance; 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 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; and (3) The consideration is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. F- 11 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 recognized revenue under the following three government contracts/grants over the past two years: Phase 2 Melanoma Cancer Contract 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. The Award Contract amount is $ 1,860,561 and, as amended, runs for the period from September 16, 2019 through September 15, 2022. The work performed pursuant to this Award Contract focused 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, 2022, we recorded $ 229,698 of government contract revenue on the Phase 2 Melanoma Cancer Contract. That revenue related to work performed in the three months ended March 31, 2021 and June 30, 2021 that had previously been recorded as deferred revenue as a result of falling short on certain milestones. We then achieved those March period milestones in the June quarter and the June period milestones in the September quarter and therefore recorded the previously deferred revenue as government contract revenue in the quarter ended September 30, 2021. We recorded the invoices related to the September 30, 2021, December 31, 2021 and March 31, 2022 periods as deferred revenue, since we fell short of certain milestones related to those periods. During the fiscal year ended March 31, 2021, we completed the milestones relevant to the first nine months of the fiscal year and, as a result, we recorded $ 436,427 of government contract revenue on the Phase 2 Melanoma Cancer Contract in that fiscal year. Breast Cancer Grant 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. Those 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. F- 12 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 $ 64,467 and $ 34,233 of revenue related to this subaward in the fiscal years ended March 31, 2022 and March 31. 2021, respectively. STOCK-BASED COMPENSATION Employee stock options and rights to purchase 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. 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 4). 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, 2022 and 2021: Share-based compensation expenses Fiscal Years Ended March 31, 2022 March 31, 2021 Vesting of Stock Options and Restricted Stock Units $ 750,621 $ 779,421 Total Stock-Based Compensation Expense $ 750,621 $ 779,421 Weighted average number of common shares outstanding – basic and diluted 14,756,967 12,090,884 Basic and diluted loss per common share $ ( 0.05 ) $ ( 0.06 ) We record share-based compensation expenses for awards of stock options and 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 date. F- 13 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 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, 2022 was insignificant. PATENTS 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 In the past we issued warrants for the purchase of shares of our common stock 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. RESEARCH AND DEVELOPMENT EXPENSES Our research and development costs are expensed as incurred. We incurred approximately $ 2,341,000 and $ 2,072,000 of research and development expenses for the years ended March 31, 2022 and 2021, 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 statements. SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, or ASU No. 2018-07. ASU No. 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU No. 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018. Entities must apply the guidance retrospectively with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. 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. F- 14 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 on its balance sheet. Topic 842 also allows lessees and lessors to elect certain practical expedients. The Company elected the following practical expedients: · Transitional practical expedients, which must be elected as a package and applied consistently to all of the Company’s leases: ° The Company need not reassess whether any expired or existing contracts are or contain leases. ° The Company need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be classified as finance leases). ° The Company need not reassess initial direct costs for any existing leases. · Hindsight practical expedient. The Company elected the hindsight practical expedient in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Company’s right-of-use assets. 2. PROPERTY AND EQUIPMENT, NET Property and equipment, net, consist of the following: Schedule of property and equipment March 31, 2022 March 31, 2021 Furniture and office equipment, at cost $ 813,412 $ 585,910 Leasehold improvements 121,690 – Accumulated depreciation ( 493,864 ) ( 424,934 ) Furniture and office equipment, net $ 441,238 $ 160,976 Depreciation expense for the fiscal years ended March 31, 2022 and 2021 was $ 68,931 and $ 39,389 , respectively. F- 15 3. PATENTS, NET Patents, net consist of the following: Schedule of patents March 31, 2022 March 31, 2021 Issued patents $ 157,442 $ 157,442 Accumulated amortization ( 155,242 ) ( 154,691 ) Issued patents, net of accumulated amortization 2,200 2,751 Patents pending – 54,203 Patents, net $ 2,200 $ 56,954 Amortization expense for our capitalized issued patents for each of the fiscal years ended March 31, 2022 and 2021 was $ 54,754 and $ 550 , respectively. As 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 capitalized patent is approximately 4 years. 4. EQUITY TRANSACTIONS ISSUANCES OF COMMON STOCK AND WARRANTS Equity Transactions in the Fiscal Year Ended March 31, 2022. 2021 At The Market Offering Agreement with H.C. Wainwright & Co., LLC On March 22, 2021, we entered into an At the Market Offering Agreement, or the 2021 ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to which we could offer and sell shares of our common stock, from time to time as set forth in the 2021 ATM Agreement. The offering was registered under the Securities Act of 1933, as amended, or Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the Securities and Exchange Commission, or SEC, and declared effective on March 30, 2020. We filed a prospectus supplement with the SEC, dated March 22, 2021, in connection with the offer and sale of the shares of common stock, pursuant to which we could 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 2021 ATM Agreement, Wainwright agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares under the 2021 ATM Agreement from time to time, based upon our instructions. We provided Wainwright with customary indemnification rights under the 2021 ATM Agreement, and Wainwright was entitled to a commission at a fixed rate equal to up 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 2021 ATM Agreement. The 2021 ATM Agreement provided that it would terminate upon the written termination by either party as permitted thereunder. Sales of the shares, under the 2021 ATM Agreement are 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. The 2021 ATM Agreement provided that we have no obligation under the 2021 ATM Agreement to sell any of the shares, and, at any time, we could suspend offers under the 2021 ATM Agreement or terminate the agreement. In the fiscal year ended March 31, 2022, we raised aggregate net proceeds under the 2021 ATM Agreement described above of $ 4,947,785 , net of $ 126,922 in commissions to Wainwright and $ 2,154 in other offering expense, through the sale of 626,000 shares of our common stock at an average price of $ 7.90 per share of net proceeds. No further sales can be made under the 2021 ATM Agreement. F- 16 Registered Direct Financing In the fiscal year ended March 31, 2022, we sold an aggregate of 1,380,555 shares of our common stock at a purchase price per share of $ 9.00 , for aggregate net proceeds to us of $ 11,659,044 , after deducting fees payable to Maxim Group LLC, the placement agent, and other offering expenses. These shares were sold through a securities purchase agreement with certain institutional investors. The shares were issued pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the SEC on March 19, 2020, and was declared effective on March 30, 2020 (File No. 333-237269) and a prospectus supplement thereunder. Warrant Exercises In the fiscal year ended March 31, 2022, pursuant to the exercise of outstanding warrants to purchase 531,167 shares of our common stock, we received proceeds in the amount of $ 820,938 from institutional investors. Also in the fiscal year ended March 31, 2022, pursuant to the exercise of 874,664 outstanding warrants on a cashless basis, we issued 675,554 shares of our common stock. The difference of 199,110 shares of common stock issuable pursuant to the warrants were cancelled. Stock Option Exercises In the fiscal year ended March 31, 2022, former employees paid us an aggregate of $ 28,325 for the exercise of outstanding options to purchase 11,562 shares of our common stock. 2022 At The Market Offering Agreement with H.C. Wainwright & Co., LLC On March 24, 2022, we entered into an At The Market Offering Agreement, or the 2022 ATM 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 2022 ATM Agreement. The 2022 ATM Agreement provides for the sale of shares of our common stock having an aggregate offering price of up to $ 15,000,000 , or the 2022 ATM Shares. The offering was registered under the Securities Act pursuant to our shelf registration statement on S-3 (Registration Statement No. 333-259909), as previously filed with the SEC and declared effective on October 21, 2021. We filed a prospectus supplement, dated March 24, 2022, with the SEC in connection with the offer and sale of 2022 ATM Shares. Under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made directly on the Nasdaq Capital Market, or on any other existing trading market for the 2022 ATM Shares. In addition, under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares in privately negotiated transactions with our consent and in block transactions. Under certain circumstances, we may instruct Wainwright not to sell the 2022 ATM Shares if the sales cannot be effected at or above the price designated by us from time to time. We are not obligated to make any sales of the 2022 ATM Shares under the 2022 ATM Agreement. The offering of the 2022 ATM Shares pursuant to the 2022 ATM Agreement will terminate upon the termination of the 2022 ATM Agreement by Wainwright or us, as permitted therein. The 2022 ATM Agreement contains customary representations, warranties and agreements by us, and customary indemnification and contribution rights and obligations of the parties. We agreed to pay Wainwright a placement fee of up to 3.0% of the aggregate gross proceeds from each sale of the 2022 ATM Shares. We also agreed to reimburse Wainwright for certain specified expenses in connection with entering into the 2022 ATM Agreement. As of March 31, 2022, we had not sold any 2022 ATM Shares under the 2022 ATM Agreement. F- 17 RSU Grants to Non-Employee Directors The Company maintains an Amended and Restated Non-Employee Director Compensation Policy, which was most recently amended on February 10, 2022, or the Director Compensation Policy, that provides cash and equity compensation for persons serving as non-employee directors of the Company. Under this policy, each new director receives either stock options or a grant of RSUs upon appointment/election as well as either an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock upon vesting. On April 1, 2021, pursuant to the Director Compensation Policy, the Compensation Committee, or Compensation Committee, of the Company’s Board of Directors, or Board, granted RSUs under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, to each non-employee director of the Company. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year, with the RSUs 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 RSUs were subject to vesting in four equal quarterly installments on June 30, September 30, December 31, 2021, and March 31, 2022, subject to the recipient’s continued service with the Company on each such vesting date. In June 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $ 35,786 in aggregate cash proceeds to those independent directors. In September 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $ 28,134 in aggregate cash proceeds to those independent directors. In December 2021, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $ 13,557 in aggregate cash proceeds to those independent directors. In March 2022, 18,221 vested RSUs held by our non-employee directors were exchanged into the same number of shares of our common stock. All three non-employee directors elected to return 40% of their vested RSUs in exchange for cash, in order to pay their withholding taxes on the share issuances, resulting in 7,289 of the vested RSUs being cancelled in exchange for $ 10,641 in aggregate cash proceeds to those independent directors. There were no vested RSUs outstanding as of March 31, 2022. Equity Transactions in the Fiscal Year Ended March 31, 2021. 2016 Common Stock Sales Agreement with H.C. Wainwright & Co., LLC 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. F- 18 On March 30, 2020, we executed Amendment No. 2 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. No further sales can be made under the 2016 Agreement. 2021 At the Market Offering Agreement with H.C. Wainwright & Co., LLC On March 22, 2021, we entered into the 2021 ATM Agreement with Wainwright. 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 2021 ATM Agreement through the sale of 2,685,600 shares at an average price of $ 2.70 per share of net proceeds. RSU Grants to Non-Employee Directors The Company maintains the Director Compensation Policy which provides 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 RSUs upon appointment/election as well as an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) 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 Director Compensation Policy, the Compensation Committee granted RSUs to each non-employee director of the Company. The then current Director Compensation Policy 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 RSU grant under our 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 2020 Annual Meeting, which approval was obtained in September 2020. These grants 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. 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. F- 19 As noted above, in September 2020, our stockholders approved the 2020 Plan at the 2020 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. Restricted Stock Grant to Consultant In February 2021, our Board 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 vested quarterly over a twelve month period and were issued under our 2020 Plan. During the years ended March 31, 2022 and 2021, we recorded non-cash stock-based compensation expense of $ 16,500 and $ 1,500 , respectively, related to this grant. WARRANTS: We did not issue any warrants during the fiscal years ended March 31, 2022 and 2021. A summary of the aggregate warrant activity for the years ended March 31, 2022 and 2021 is presented below: Summary of warrant activity Fiscal Year Ended March 31, 2022 2021 Warrants Weighted Average Exercise Price Warrants Weighted Average Exercise Price Outstanding, beginning of year 1,991,973 $ 5.23 2,021,368 $ 5.21 Granted – $ N/A – $ N/A Exercised ( 1,206,721 ) $ 2.21 – $ N/A Cancelled/Forfeited ( 208,514 ) $ 6.11 ( 29,395 ) $ 91.17 Outstanding, end of year 576,738 $ 11.21 1,991,973 $ 5.23 Exercisable, end of year 576,738 $ 11.21 1,991,973 $ 5.23 Weighted average estimated fair value of warrants granted $ N/A $ 1.22 F- 20 The detail of the warrants outstanding and exercisable as of March 31, 2022 is as follows: Summary of warrant activity exercisable and outstanding Warrants Outstanding Warrants Exercisable Range of Exercise Prices Number Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number Outstanding Weighted Average Exercise Price $2.75 or Below 326,753 2.78 $ 2.01 326,753 $ 2.01 $16.50 - $59.25 249,985 0.43 $ 23.24 249,985 $ 23.24 576,738 576,738 STOCK-BASED COMPENSATION: 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 1,842,556 common shares for issuance under the 2020 Plan pursuant to stock option grants, RSUs or other forms of stock-based compensation. NON-EMPLOYEE DIRECTORS COMPENSATION POLICY The Company maintains the Director Compensation Policy which provides cash and equity compensation for persons serving as non-employee directors of the Company. Under this policy, each new director receives either stock options or a grant of RSUs upon appointment/election, as well as either an annual grant of stock options or RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future date shares of our common stock upon vesting. Please see above under the heading "Equity Transactions in the Fiscal Year Ended March 31, 2022—RSU Grants to Non-Employee Directors" for disclosure regarding equity awards under the Director Compensation Policy during the fiscal year ended March 31, 2022. F- 21 STOCK OPTION ACTIVITY During the fiscal year ended March 31, 2022, we issued a stock option grant to our Chief Executive Officer, or CEO, for the purchase of 266,888 shares of our common stock under our 2020 Plan. The purchase price for the shares subject to the option is $ 5.17 per share, the fair market value of the common stock on the date of the grant. The shares subject to the option are subject to vesting over four years, commencing on the date of grant, or Vesting Commencement Date, with twenty-five percent (25%) of the shares subject to the option vesting on the first anniversary of the Vesting Commencement Date and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, in each case subject to Dr. Fisher’s Continuous Service (as defined in the 2020 Plan) through each vesting date. On February 10, 2022, after review of data provided by the Company’s independent compensation consultant, our Compensation Committee awarded stock option grants to each of our executive officers. Each executive officer was granted an option to purchase shares of our common stock under the 2020 Plan, at an exercise price equal to the fair market value on the date of grant, or $1.41 per share. The Compensation Committee awarded the grants as follows: the Chief Executive Officer was granted an option to purchase 192,600 shares of common stock, and the Chief Medical Officer, Chief Operating Officer and Chief Financial Officer each were granted an option to purchase 100,200 shares of common stock. The options are subject to vesting over four years at the rate of 25 % at the end of the first year following the grant date, then monthly vesting over the following 36 months, subject to Continuous Service with the Company, as defined in the 2020 Plan. Options outstanding that were vested as of March 31, 2022 and options that are expected to vest subsequent to March 31, 2022 are as follows: Options outstanding that have vested and are expected to vest Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Vested 267,221 $ 2.51 8.21 Expected to vest 1,398,727 $ 2.27 9.17 Total 1,665,948 F- 22 The following is a summary of the stock options outstanding at March 31, 2022 and 2021 and the changes during the years then ended: Summary of stock options outstanding Fiscal Year Ended March 31, 2022 2021 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding, beginning of year 844,089 $ 3.07 51,124 $ 44.12 Granted 941,188 $ 2.48 1,011,860 $ 1.71 Exercised ( 11,562 ) $ 2.45 ( 15,896 ) $ 1.28 Cancelled/Forfeited ( 107,767 ) $ 9.66 ( 202,999 ) $ 6.76 Outstanding, end of year 1,665,948 $ 2.31 844,089 $ 3.07 Exercisable, end of year 267,221 $ 2.51 58,954 $ 20.06 Weighted average estimated fair value of options granted $ 2.41 $ 1.58 The detail of the options outstanding and exercisable as of March 31, 2022 is as follows: Detail of options outstanding and exercisable by exercise price Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Life (Years) Weighted Average Exercise Price Number Outstanding Weighted Average Exercise Price $1.28 - $1.68 1,154,114 9.39 years $ 1.38 193,526 $ 1.33 $2.45 - $5.17 508,654 9.09 years $ 3.91 70,515 $ 2.52 $57.00 - $142.50 3,180 1.43 years $ 84.50 3,180 $ 84.50 1,665,948 267,221 We recorded stock-based compensation expense related to restricted stock unit issuances and to options granted totaling $ 750,621 and $ 779,421 for the fiscal years ended March 31, 2022 and 2021, 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, 2022 and 2021. Our total stock-based compensation for fiscal years ended March 31, 2022 and 2021 included the following: Schedule of stock-based compensation Fiscal Year Ended March 31, 2022 March 31, 2021 Vesting of restricted stock units $ 150,000 $ 175,000 Vesting of restricted shares issued for services 16,500 1,500 Vesting of stock options 584,121 602,921 Total Stock-Based Compensation $ 750,621 $ 779,421 F- 23 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, 2022 was insignificant. On March 31, 2022, our outstanding stock options had no intrinsic value since the closing price on that date of $ 1.46 per share was below the weighted average exercise price of our outstanding stock options. At March 31, 2022, there was approximately $ 2,724,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 3.3 years. 5. 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, 2022, except that we had accrued unpaid Board fees of $ 55,750 owed to our outside directors as of March 31, 2022. Due to related parties were comprised of the following items: Due to related parties March 31, 2022 March 31, 2021 Accrued Board fees $ 55,750 $ 52,000 Accrued vacation 99,992 66,520 Total due to related parties $ 155,742 $ 118,520 6. OTHER CURRENT LIABILITIES Other current liabilities were comprised of the following items: Other Current Liabilities March 31, 2022 March 31, 2021 Accrued separation expenses for former executive $ – $ 284,270 Accrued professional fees 696,893 477,366 Total other current liabilities $ 696,893 $ 761,636 7. INCOME TAXES For the years ended March 31, 2022 and 2021, we had no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance. At March 31, 2022 and 2021, 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. F- 24 Significant components of our net deferred tax assets at March 31, 2022 and 2021 are shown below: Schedule of deferred tax assets YEAR ENDED MARCH 31, 2022 2021 Deferred tax assets: Capitalized research and development $ 3,442,000 $ 3,442,000 Net operating loss carryforwards 1 22,039,000 19,921,000 Stock compensation 1,609,000 1,399,000 Total deferred tax assets 27,090,000 24,762,000 Total deferred tax liabilities – – Net deferred tax assets 27,090,000 24,762,000 Valuation allowance for deferred tax assets ( 27,090,000 ) ( 24,762,000 ) Net deferred tax assets $ – $ – At March 31, 2022, we had tax net operating loss carryforwards for federal and state purposes approximating $ 87 million and $ 69 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, 2022 and 2021 due to the following: Provision for income taxes 2022 2021 Income taxes (benefit) at federal statutory rate of 21.00% $ ( 2,188,000 ) $ ( 1,657,000 ) Tax effect on non-deductible expenses and credits 1,000 1,000 True up items ( 5,000 ) 25,000 Expiration of net operating loss carryforwards (1) 593,000 427,000 Change in valuation allowance 1,599,000 1,204,000 Income Tax Expense (Benefit) $ – $ – ______________ (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. 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, 2022 and 2021, we did not recognize any interest or penalties relating to tax matters. At and for the years ended March 31, 2022 and 2021, management does not believe the Company has any uncertain tax positions. Accordingly, there are no unrecognized tax benefits at March 31, 2022 or March 31, 2021. 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. F- 25 8. SEGMENTS We operate our businesses principally through two reportable segments: 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, consisting of patent maintenance costs. Aethlon’s revenue is generated primarily from government contracts to date and ESI does not have any revenues or activities other than patent maintenance. We have not included any allocation of corporate overhead to the ESI segment. The following tables set forth certain information regarding our segments: Schedule of segments Fiscal Years Ended March 31, 2022 2021 Revenues: Aethlon $ 294,165 $ 659,104 ESI – – Total Revenues $ 294,165 $ 659,104 Operating Losses: Aethlon $ ( 10,396,914 ) $ ( 7,867,547 ) ESI ( 23,971 ) ( 23,952 ) Total Operating Loss $ ( 10,420,885 ) $ ( 7,891,499 ) Net Losses: Aethlon $ ( 10,396,914 ) $ ( 7,867,547 ) ESI ( 23,971 ) ( 23,952 ) Net Loss Before Non-Controlling Interests $ ( 10,420,885 ) $ ( 7,891,499 ) Cash: Aethlon $ 17,072,222 $ 9,861,378 ESI 197 197 Total Cash $ 17,072,419 $ 9,861,575 Total Assets: Aethlon $ 19,417,757 $ 10,668,719 ESI 197 197 Total Assets $ 19,417,954 $ 10,668,916 Depreciation and Amortization: Aethlon $ 123,685 $ 39,939 ESI – – Total Depreciation and Amortization $ 123,685 $ 39,939 Capital Expenditures: Aethlon $ 349,193 $ 59,881 ESI – – Capital Expenditures $ 349,193 $ 59,881 F- 26 9. 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, 2022: LEASE COMMITMENTS Previous Office and Lab Leases In September 2021, our lease of approximately 2,600 square feet of our previous executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123 expired. Through December 31, 2021, we rented approximately 1,700 square feet of laboratory space at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121, at the rate of $6,148 per month on a one-year lease that originally was to expire on November 30, 2020. In December 2020, we entered into a short-term lease extension running from December 1, 2020 through the completion date of our construction of our new laboratory space which is adjacent to our current laboratory. New Office and Lab Leases 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 located at 11555 Sorrento Valley Road, Suite 203, San Diego, California 92121 and 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121, respectively. The agreement carries a term of 63 months and we took possession of the office space effective October 1, 2021. We took possession of the lab space effective January 1, 2022. On October 1, 2021, we recorded a $ 343,633 right-of-use lease asset and associated lease liability related to the office space component of the lease based on the present value of lease payments over the expected lease term of 63 months, discounted using our estimated incremental borrowing rate of 4.25 %. The current monthly base rent under the office component of the lease is $ 6,121 . During the three months ended March 31, 2022, we recorded a $ 400,797 right-of-use lease asset and associated lease liability related to the lab space component of the lease based on the present value of lease payments over the expected lease term of 63 months, discounted using our estimated incremental borrowing rate of 4.25 %. The initial monthly base rent under the lab component of the lease is $ 7,456 . As of our March 31, 2022 consolidated balance sheet, we have a right-of-use lease asset of $ 696,698 . In addition, the new lease agreement of the new office and lab 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. F- 27 Manufacturing Space Lease In October 2021, we entered into another lease for an initial period of 58 months for (i) approximately 22,260 square feet of space located at 11588 Sorrento Valley Road, San Diego, California 92121, or the Building, and (ii) 2,655 square feet of space located in the Building and commonly known as Suite 18 to house our manufacturing operations. That manufacturing space is located at 11588 Sorrento Valley Road, San Diego, California 92121 and it is near our new lab and office locations. We anticipate that the landlord will complete construction on this new space in the third calendar quarter of 2022 and we will take occupancy at that time. The initial base rent for the manufacturing space will be $12,080 per month. Based on the assumptions that we used to calculate the right-of-use lease asset for the new office and lab spaces, we estimate that we will record a right- of- use lease asset of $614,240 and associated lease liability for the manufacturing space lease when we take possession of that space. The lease for the manufacturing space also required us to post a standby letter of credit in favor of the landlord in the amount of $ 40,780 in lieu of a security deposit. We arranged for our bank to issue the standby letter of credit in October 2021 and transferred a like amount to a restricted certificate of deposit which secured the bank’s risk in issuing that letter of credit. We have classified that restricted certificate of deposit on our balance sheet as restricted cash. Mobile Clean Room In addition, we rent a mobile clean room on a short term, month-to-month basis, where we house our manufacturing operations until our permanent manufacturing space is completed. We also rent the land on which the mobile clean room is based on a month-to-month basis. The mobile clean room is located on leased land near our office and lab and we pay $ 2,000 per month for the right to locate it there. We paid approximately $ 189,000 in rent expense to lease the mobile clean room located on this space during the fiscal year ended March 31, 2022. Overall, our rent expense, which is included in general and administrative expenses, approximated $ 401,000 and $ 192,000 for the fiscal years ended March 31, 2022 and 2021, respectively. LEGAL MATTERS From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods. We are not presently a party to any pending or threatened legal proceedings. F- 28 10. SUBSEQUENT EVENTS Management has evaluated events subsequent to March 31, 2022 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. Sales Under 2022 ATM Agreement In June 2022, we raised net proceeds of $448,760, net of $11,583 in commissions to Wainwright and $2,994 in other offering expense, through the sale of, 411,055 shares of our common stock at an average price of $1.09 per share under the 2022 ATM Agreement. RSU GRANTS The Compensation Committee approved, effective as of April 1, 2022, pursuant to the terms of the Directors Compensation Policy, the grant of the annual RSUs under the Director Compensation Policy to each of the two non-employee directors of the Company then serving on the Board and a new grant for the newly appointed director, with each such grant subject to stockholder approval of an increase of 1,800,000 shares of common stock in the number of authorized shares of common stock, or the 2022 Plan Increase, available for issuance under the 2020 Plan at the Company’s 2022 annual meeting of stockholders, or the 2022 Annual Meeting. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year for current directors then serving on the Board and for a grant of stock options or $75,000 worth of RSUs for a newly elected director, with each RSU priced at the average for the closing prices for the five days preceding and including the date of grant, or $1.46 per share as of April 1, 2022. The two then-current eligible directors each was granted a contingent RSU in the amount of 34,247 shares under the 2020 Plan and the newly appointed director received a contingent RSU grant for 51,370 shares under the 2020 Plan. The contingent RSUs are subject to vesting in three installments, 50% on September 30, 2022, and 25% on each of December 31, 2022, and March 31, 2023, subject to stockholder approval of the 2022 Plan Increase at the 2022 Annual Meeting and subject to the recipient's continued service with the Company on each such vesting date. F- 29