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 Chief Executive Officer and Chief Financial Officer (who are our principal executive officer and principal financial officer, respectively), to allow timely decisions regarding required disclosures. 58 In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its 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. 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, 2023. 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, 2023. (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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 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 2023 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,” “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 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: (a)(1) Financial Statements. The response to this portion of Item 15 is set forth under Part II, Item 8 above. (a)(2) Financial Statement Schedules. All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes thereto set forth under Item 8 above. (a)(3) Exhibits required by Item 601 of Regulation S-K. Incorporated by Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit No. Date Filed Herewith 3.1 Articles of Incorporation, as amended. 8-K 001-37487 3.1 September 19, 2022 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 Warrant to Purchase Common Stock. S-1/A 333-234712 4.14 December 11, 2019 4.3 Form of Underwriter Warrant. S-1/A 333-234712 4.15 December 11, 2019 4.4 Form of Common Stock Purchase Warrant. 8-K 001-37487 4.1 January 17, 2020 4.5 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 Director 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 61 Incorporated by Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit No. Date Filed Herewith 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. 10-K 001-37487 10.8 June 28, 2022 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 99.1 September 19, 2022 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++ Executive Employment Agreement, by and between Aethlon Medical, Inc. and Lee D. Arnold, Ph.D., dated February 1, 2023. 10-Q 001-37487 10.1 February 13, 2023 10.16 Lease between Aethlon Medical, Inc. and San Diego Inspire 5, LLC, effective October 27, 2021. 10-Q 001-37487 10.1 November 9, 2021 10.17 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 62 Incorporated by Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit No. Date Filed Herewith 10.18++ Amendment No. 1 to Executive Employment Agreement, by and between Aethlon Medical, Inc. and Lee D. Arnold, Ph.D., dated May 1, 2023. X 21.1 List of Subsidiaries. X 23.1 Consent of Independent Registered Public Accounting Firm. X 24.1 Power of Attorney (see signature page) X 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. X 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350. X 32.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350. X 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101) X __________________ ++ Indicates management contract or compensatory plan. ITEM 16. FORM 10-K SUMMARY None. 63 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, 2023. By: /s/ CHARLES J. FISHER 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 Chief Executive Officer, Principal Executive Officer and Director June 28, 2023 Charles J. Fisher, Jr., M.D. /s/ JAMES B. FRAKES Chief Financial Officer and Principal Financial and Accounting Officer June 28, 2023 James B. Frakes /s/ EDWARD G. BROENNIMAN Chairman and Director June 28 , 2023 Edward G. Broenniman /s/ CHETAN S. SHAH Director June 28, 2023 Chetan S. Shah, M.D. /s/ ANGELA ROSSETTI Director June 28, 2023 Angela Rossetti /s/ GUY CIPRIANI Senior Vice President, Chief Business Officer and Director June 28, 2023 Guy Cipriani 64 Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 23 ) F-2 Consolidated Balance Sheets as of March 31, 2023 and 2022 F-3 Consolidated Statements of Operations for the Years Ended March 31, 2023 and 2022 F-4 Consolidated Statements of Equity for the Years Ended March 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 2023 and 2022 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, 2023 and 2022, 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, 2023 and 2022, 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, 2023 F- 2 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS March 31, 2023 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 14,532,943 $ 17,072,419 Accounts receivable – 127,965 Prepaid expenses and other current assets 557,623 956,623 TOTAL CURRENT ASSETS 15,090,566 18,157,007 Property and equipment, net 1,144,004 441,238 Right-of-use lease asset 1,151,909 696,698 Patents, net 1,650 2,200 Restricted cash 87,506 87,506 Deposits 33,305 33,305 TOTAL ASSETS $ 17,508,940 $ 19,417,954 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 432,890 $ 499,962 Due to related parties 214,221 155,742 Deferred revenue – 344,547 Lease liability, current portion 269,386 126,905 Other current liabilities 588,592 696,893 TOTAL CURRENT LIABILITIES 1,505,089 1,824,049 Lease liability, less current portion 939,642 602,505 TOTAL LIABILITIES 2,444,731 2,426,554 COMMITMENTS AND CONTINGENCIES (Note 9) – – STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 60,000,000 and 30,000,000 shares authorized at March 31, 2023 and 2022, respectively; 22,992,466 and 15,419,163 shares issued and outstanding at March 31, 2023 and 2022, respectively 22,994 15,421 Additional paid-in capital 157,405,911 147,446,868 Accumulated other comprehensive loss ( 6,141 ) – Accumulated deficit ( 142,358,555 ) ( 130,329,181 ) TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS’ EQUITY BEFORE NONCONTROLLING INTERESTS 15,064,209 17,133,108 NONCONTROLLING INTERESTS – ( 141,708 ) TOTAL STOCKHOLDERS’ EQUITY 15,064,209 16,991,400 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 17,508,940 $ 19,417,954 See accompanying notes to the consolidated financial statements. F- 3 AETHLON MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Years Ended March 31, 2023 2022 REVENUES: Government contract and grant revenue $ 574,245 $ 294,165 Total revenues 574,245 294,165 OPERATING COSTS AND EXPENSES Professional fees 3,548,028 2,634,026 Payroll and related expenses 4,443,552 4,625,802 General and administrative 4,481,303 3,455,222 Total operating expenses 12,472,883 10,715,050 OPERATING LOSS ( 11,898,638 ) ( 10,420,885 ) OTHER EXPENSE (INCOME) Loss on dissolution of subsidiary 142,121 – Interest income ( 10,973 ) – Other expense (income) 131,148 – NET LOSS BEFORE NONCONTROLLING INTERESTS ( 12,029,786 ) ( 10,420,885 ) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS – ( 4,794 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS ( 12,029,786 ) ( 10,416,091 ) OTHER COMPREHENSIVE LOSS ( 6,141 ) – COMPREHENSIVE LOSS $ ( 12,035,927 ) $ ( 10,416,091 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.59 ) $ ( 0.71 ) Weighted average number of common shares outstanding - basic and diluted 20,537,434 14,756,967 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, 2023 AND 2022 ` ATTRIBUTABLE TO AETHLON MEDICAL, INC. COMMON STOCK ADDITIONAL PAID IN ACCUMULATED ACCUMULATED COMPREHENSIVE NON- CONTROLLING TOTAL SHARES AMOUNT CAPITAL DEFICIT LOSS INTERESTS EQUITY 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 Issuances of common stock for cash under at the market program 7,480,836 7,481 8,919,730 – – – 8,927,211 Issuance of common shares upon vesting of restricted stock units 92,467 92 ( 12,585 ) – – – ( 12,493 ) Loss on dissolution of subsidiary – – – – – 142,121 142,121 Stock-based compensation expense – – 1,051,898 – – – 1,051,898 Net loss – – – ( 12,029,373 ) – ( 413 ) ( 12,029,786 ) Other comprehensive loss – – – – ( 6,141 ) – ( 6,141 ) BALANCE - MARCH 31, 2023 22,992,466 $ 22,994 $ 157,405,911 $ ( 142,358,554 ) $ ( 6,141 ) $ – $ 15,064,209 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, 2023 AND 2022 Years Ended March 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 12,029,786 ) $ ( 10,420,885 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 240,892 123,685 Stock based compensation 1,051,898 750,621 Loss of dissolution of subsidiary 142,121 – Accretion of right-of-use lease asset 24,408 30,532 Changes in operating assets and liabilities: Accounts receivable 127,965 21,117 Prepaid expenses and other current assets 398,169 ( 636,688 ) Accounts payable and other current liabilities ( 174,727 ) 97,541 Deferred revenue ( 344,547 ) 229,698 Due to related parties 58,479 37,222 Net cash used in operating activities ( 10,505,128 ) ( 9,767,157 ) Cash flows from investing activities: Purchases of property and equipment ( 943,109 ) ( 349,193 ) Net cash used in investing activities ( 943,109 ) ( 349,193 ) Cash flows from financing activities: Tax withholding payments or tax equivalent payments for net share settlement of restricted stock units ( 12,493 ) ( 88,118 ) Net proceeds from the issuance of common stock and exercise of warrants 8,927,211 17,456,092 Net cash provided by financing activities 8,914,718 17,367,974 Effect of Exchange Rate on Changes on Cash ( 5,957 ) – Net (decrease) increase in cash and restricted cash ( 2,533,519 ) 7,251,624 Cash and restricted cash at beginning of year 17,159,925 9,908,301 Cash and restricted cash at end of year $ 14,620,449 $ 17,159,925 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 $ 625,471 $ 744,430 Issuance of shares under vested restricted stock units, net stock option exercises and unvested share issuance for services $ 92 $ 44 Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: Cash and cash equivalents $ 14,532,943 $ 17,072,419 Restricted cash 87,506 87,506 Cash and restricted cash $ 14,620,449 $ 17,159,925 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., or Aethlon, the Company, we or us, is a medical therapeutic company focused on developing products to treat cancer and life-threatening infectious 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 working with our new contract research organization, or CRO, on preparations to conduct a clinical trial in Australia in patients with solid tumors, including head and neck cancer, gastrointestinal cancers and other cancers. 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, 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 clinical trial, initially conducted at the UPMC Hillman Cancer Center in Pittsburgh, PA, or UPMC, treated two patients. Due to lack of further patient enrollment, we and UPMC terminated this trial. In January 2023, we entered into an agreement with North American Science Associates, LLC, or NAMSA, a world leading MedTech CRO offering global end-to-end development services, to oversee our clinical trials investigating the Hemopurifier for oncology indications. Pursuant to the agreement, NAMSA will manage our clinical trials of the Hemopurifier for patients in the United States and Australia with various types of cancer tumors. We anticipate that the initial clinical trials will begin in Australia. 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. F- 7 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, Monkeypox 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. 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, or COVID-19, in a New Feasibility Study. That study was designed to enroll up to 40 subjects at up to 20 centers in the United States. Subjects had to have an established laboratory diagnosis of COVID-19, be admitted to an intensive care unit, or ICU, and have acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety, included reduction in circulating virus as well as clinical outcomes (NCT # 04595903). In June 2022, the first patient in this study was enrolled and completed the Hemopurifier treatment phase of the protocol. Due to lack of COVID-19 patients in the ICUs of our trial sites, we terminated this study in 2022. Under Single Patient Emergency Use regulations, the Company has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated with our Hemopurifier in our COVID-19 clinical trial discussed above. We currently are experiencing a disruption in our Hemopurifier supply, as our existing supply of Hemopurifiers expired on September 30, 2022 and, as previously disclosed, we are dependent on FDA approval of qualified suppliers to manufacture our Hemopurifier. Our intended transition to a new supplier for galanthus nivalis agglutinin, or GNA, a component of our Hemopurifier, is delayed as we work with the FDA for approval of our supplement to our IDE, which is required to make this manufacturing change. In October 2022, we launched a wholly owned subsidiary in Australia, formed to conduct clinical research, seek regulatory approval and commercialize our Hemopurifier in that country. The subsidiary will initially focus on oncology trials in Australia. There were only insignificant expenses in that subsidiary in the three months ended December 31, 2022. We also obtained Ethics Review Board, or ERB, 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. One patient has completed participation in the Indian COVID-19 study. The relevant authorities in India have accepted the use of the Hemopurifiers made with the GNA from our new supplier. In May 2023, we also received ERB approval from the Maulana Azad Medical College, or MAMC, for a second site for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi, India. MMAC is affiliated with the University of Delhi and is operated by the Delhi government. We also recently announced that we also have begun investigating the use of our Hemopurifier in the organ transplant setting. Our objective is to confirm that the Hemopurifier, in our translational studies, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses and exosomes from harvested organs. We have previously demonstrated the removal of multiple viruses and exosomes from buffer solutions, in vitro, utilizing a scaled-down version of our Hemopurifier. This process potentially may reduce complications following transplantation of the harvested organ, which can include viral infection, delayed graft function and rejection. We believe this new approach could be additive to existing technologies that currently are in place to increase the number of viable organs for transplant. F- 8 Previously, we were 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, and thus consolidated ESI in our consolidated financial statements. For more than four years, the primary activities of ESI were limited to the payment of patent maintenance fees and applications. In September 2022, the Board of Directors of ESI and we, as the majority stockholder of ESI, approved the dissolution of ESI. Successful outcomes of human trials will also be required by the regulatory agencies of certain foreign countries where we plan to market and 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 inflation, recent bank failures and the war in Ukraine on our business. Given the level of uncertainty regarding the duration and impact of these events on capital markets and the U.S. economy, we are unable to assess the impact on our timelines and future access to capital. The full extent to which inflation, recent bank failures and the war in Ukraine will impact our business, results of operations, financial condition, clinical trials and preclinical research will depend on future developments, as well as the economic impact on national and international markets that are highly uncertain. 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, 2023 and funds raised subsequent to that date to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these consolidated financial statements. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of Aethlon Medical, Inc. and its wholly owned subsidiary, Aethlon Medical Australia Pty Ltd, as well as its previously majority-owned subsidiary, ESI, which dissolved in September 2022. All significant inter-company transactions and balances have been eliminated in consolidation. The consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the consolidated financial statements as of and for the fiscal years ended March 31, 2023 and 2022, and the consolidated statement of cash flows for the fiscal years ended March 31, 2023 and 2022. Estimates were made relating to useful lives of fixed assets, impairment of assets, share-based compensation expense and accruals for clinical trial and research and development expenses. 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. F- 9 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. Cash is carried at cost, which approximates fair value, and cash equivalents are carried at fair value. As of March 31, 2023, our cash and cash equivalents were comprised of the following instruments: Schedule of cash and cash equivalents Cash in US bank checking account $ 575,766 Cash equivalents held in US Treasury bills 13,910,973 Cash in Australian bank checking account 46,204 Total cash and cash equivalents $ 14,532,943 As of March 31, 2022, we had no assets that were classified as cash equivalents. CONCENTRATIONS OF CREDIT RISKS Cash is maintained at one US financial institution in a checking account. Accounts at this institution are secured by the Federal Deposit Insurance Corporation up to $250,000. Our March 31, 2023 cash balances were approximately $ 574,572 over such insured amount. We do not believe that the Company is exposed to any significant risk with respect to its cash in that checking account. At March 31, 2023, we maintained cash equivalents of approximately $ 13.9 million in US Treasury bills with maturities of less than three months. We do not believe that the Company is exposed to any significant risk with respect to its cash equivalents since they represent US government risk. Cash is maintained at one Australian financial institution in checking accounts. Accounts at this institution are secured by the Financial Claims Scheme for up to Australian $ 250,000 . Our March 31, 2023 Australian cash balance was below that threshold. All of our revenue in the fiscal years ended March 31, 2023 and 2022 related to our government contracts. We did not have any accounts receivable at March 31, 2023. F- 10 RESTRICTED CASH To comply with the terms of our laboratory, office, and manufacturing space leases, we caused our bank to issue two standby letters of credit, or the L/Cs, in the amount of $ 87,506 in favor of the landlord. The L/Cs are in lieu of a security deposit. In order to support the L/Cs, 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. 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, 2023 and 2022. 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, 2023 and 2022, a total of 2,045,006 and 2,243,838 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. 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, 2023 and 2022. F- 11 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, 2023 and 2022, we recognized revenues totaling $ 574,245 and $ 294,165 , 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. 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. F- 12 We have recognized revenue under the following contracts/grants: Phase 2 Melanoma Cancer Contract On September 12, 2019, the National Cancer Institute, or NCI, part of the 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 was $ 1,860,561 and, as amended, ran for the period from September 16, 2019 through September 15, 2022. The work performed pursuant to this Award Contract was focused on melanoma exosomes. This work followed from our completion of a Phase I contract for the Topic 359 solicitation that ran from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program involved the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform. The Award Contract ended on September 15, 2022 and we presented the required final report to the NCI. As the NCI completed its close out review of the contract, we recognized as revenue the $ 574,245 previously recorded as deferred revenue on our December 31, 2022 balance sheet. Subaward with University of Pittsburgh In December 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 was $ 256,750 . We did no t record revenue related to this subaward in the fiscal year ended March 31, 2023. We recorded $ 64,467 of revenue related to this subaward in the fiscal year ended March 31, 2022. In October 2022, we agreed with the University of Pittsburgh to terminate the subaward arrangement, effective as of November 10, 2022, since it related to our clinical trial in head and neck cancer in which the University of Pittsburgh was unable to recruit patients. There are no provisions in the subaward arrangement requiring repayment of cash received for work completed through November 10, 2022. 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, 2023 and 2022: Schedule of share-based compensation expenses Fiscal Years Ended March 31, 2023 March 31, 2022 Vesting of Stock Options and Restricted Stock Units $ 1,051,898 $ 750,621 Total Stock-Based Compensation Expense $ 1,051,898 $ 750,621 Weighted average number of common shares outstanding – basic and diluted 20,537,434 14,756,967 Basic and diluted loss per common share $ ( 0.59 ) $ ( 0.71 ) F- 13 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. We recognize share-based compensation expense related to stock options and stock appreciation rights 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, 2023 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 $ 2,745,000 and $ 2,341,000 of research and development expenses for the years ended March 31, 2023 and 2022, 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. F- 14 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. 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, 2023 March 31, 2022 Furniture and office equipment, at cost $ 989,987 $ 813,412 Leasehold improvements 888,224 121,690 Accumulated depreciation ( 734,207 ) ( 493,864 ) Furniture and office equipment, net $ 1,144,004 $ 441,238 Depreciation expense for the fiscal years ended March 31, 2023 and 2022 was $ 240,342 and $ 68,931 , respectively. F- 15 3. PATENTS, NET Patents, net consist of the following: Schedule of patents March 31, 2023 March 31, 2022 Issued patents $ 157,442 $ 157,442 Accumulated amortization ( 155,792 ) ( 155,242 ) Issued patents, net of accumulated amortization 1,650 2,200 Patents pending – – Patents, net $ 1,650 $ 2,200 Amortization expense for our capitalized issued patents for each of the fiscal years ended March 31, 2023 and 2022 was $ 550 and $ 54,754 , 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 3 years. 4. EQUITY TRANSACTIONS ISSUANCES OF COMMON STOCK AND WARRANTS Equity Transactions in the Fiscal Year Ended March 31, 2023. 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 H.C. Wainwright & Co., LLC, or 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 offering was registered under the Securities Act of 1933, as amended, or the Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-259909), as previously filed with the Securities and Exchange Commission, or SEC, and declared effective on October 21, 2021. We filed a prospectus supplement, dated March 24, 2022, with the SEC that 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. 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. In the fiscal year ended March 31, 2023, we raised net proceeds of $ 8,927,211 , net of $ 229,610 in commissions to Wainwright and $ 27,153 in other offering expense, through the sale of, 7,480,836 shares of our common stock at an average price of $1.19 per share under the 2022 ATM Agreement. F- 16 RSU Grants to Non-Employee Directors The Compensation Committee of the Board of Directors of the Company, or Compensation Committee, approved, effective as of April 1, 2022, pursuant to the terms of the Company’s Amended and Restated Non-Employee Director Compensation Policy, or the Director Compensation Policy, the grant of the annual RSUs to each of the two non-employee directors of the Company then serving on the Board of Directors of the Company, or Board, and the grant of an RSU for the then newly appointed director. The RSU grants were made subject to stockholder approval of an increase of 1,800,000 shares of common stock authorized for issuance under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, at the Company’s 2022 annual meeting of stockholders. The increase was approved at the Company’s 2022 annual meeting of stockholders held in September 2022. 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 non-employee 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 then newly appointed director received a contingent RSU grant for 51,370 shares under the 2020 Plan. The RSUs were 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 the recipient's continued service with the Company on each such vesting date. 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 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 pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-237269), as previously filed with the SEC and declared effective on March 30, 2020. We filed a prospectus supplement 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- 17 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. RSU Grants to Non-Employee Directors The Company maintains the Director Compensation Policy which provides for 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 of 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 granted RSUs under 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. F- 18 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. WARRANTS: We did not issue any warrants during the fiscal years ended March 31, 2023 and 2022. A summary of the aggregate warrant activity for the years ended March 31, 2023 and 2022 is presented below: Summary of warrant activity Fiscal Year Ended March 31, 2023 2022 Warrants Weighted Average Exercise Price Warrants Weighted Average Exercise Price Outstanding, beginning of year 576,738 $ 11.21 1,991,973 $ 5.23 Granted – $ N/A – $ N/A Exercised – $ N/A ( 1,206,721 ) $ 2.21 Cancelled/Forfeited ( 249,985 ) $ 23.24 ( 208,514 ) $ 6.11 Outstanding, end of year 326,753 $ 2.01 576,738 $ 11.21 Exercisable, end of year 326,753 $ 2.01 576,738 $ 11.21 Weighted average estimated fair value of warrants granted $ N/A $ N/A The detail of the warrants outstanding and exercisable as of March 31, 2023 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 $1.88 or Below 202,167 1.75 $ 1.57 202,167 $ 1.57 $2.50 - $2.75 124,586 1.83 $ 2.73 124,586 $ 2.73 326,753 326,753 F- 19 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. In September 2022, our stockholders approved an increase in the number of shares of common stock authorized for issuance under the 2020 Plan by 1,800,000 shares. As of March 31, 2023, there were 1,667,479 shares available under the 2020 Plan. NON-EMPLOYEE DIRECTOR 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, 2023—RSU Grants to Non-Employee Directors" for disclosure regarding equity awards under the Director Compensation Policy during the fiscal year ended March 31, 2023. STOCK OPTION ACTIVITY During the fiscal year ended March 31, 2023, we issued stock option grants to two executives for the purchase of an aggregate of 266,888 shares of our common stock under our 2020 Plan. The weighted-average exercise prices for the shares subject to the options is $ 0.95 per share, which exercise prices were based on the fair market value of the common stock on the applicable grant dates. The shares subject to the options are subject to vesting over four years, commencing on the grant dates, or Vesting Commencement Dates, 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. Options outstanding that were vested as of March 31, 2023 and options that are expected to vest subsequent to March 31, 2023 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 755,531 $ 2.45 7.74 Expected to vest 962,722 $ 2.07 8.45 Total 1,718,253 F- 20 The following is a summary of the stock options outstanding at March 31, 2023 and 2022 and the changes during the years then ended: Schedule of stock option activity Fiscal Year Ended March 31, 2023 2022 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding, beginning of year 1,665,948 $ 2.31 844,089 $ 3.07 Granted 122,220 $ .95 941,188 $ 2.48 Exercised – $ – ( 11,562 ) $ 2.45 Cancelled/Forfeited ( 69,915 ) $ 1.77 ( 107,767 ) $ 9.66 Outstanding, end of year 1,718,253 $ 2.24 1,665,948 $ 2.31 Exercisable, end of year 755,531 $ 2.45 267,221 $ 2.51 Weighted average estimated fair value of options granted $ .92 $ 2.41 The detail of the options outstanding and exercisable as of March 31, 2023 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 $0.69 - $1.68 1,207,034 8.28 years $ 1.35 505,246 $ 1.36 $2.45 - $5.17 508,654 8.05 years $ 3.91 247,720 $ 3.77 $57.00 - $142.50 2,565 .85 years $ 91.09 2,565 $ 91.09 1,718,253 755,531 We recorded stock-based compensation expense related to RSU issuances and to options granted totaling $ 1,051,898 and $ 750,621 for the fiscal years ended March 31, 2023 and 2022, 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, 2023 and 2022. F- 21 Our total stock-based compensation for fiscal years ended March 31, 2023 and 2022 included the following: Schedule of stock-based compensation Fiscal Year Ended March 31, 2023 March 31, 2022 Vesting of restricted stock units $ 175,000 $ 150,000 Vesting of restricted shares issued for services – 16,500 Vesting of stock options 876,898 584,121 Total Stock-Based Compensation $ 1,051,898 $ 750,621 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, 2023 was insignificant. On March 31, 2023, our outstanding stock options had no intrinsic value since the closing price on that date of $ 0.38 per share was below the weighted average exercise price of our outstanding stock options. At March 31, 2023, there was approximately $ 1,877,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 2.3 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, 2023, except that we had accrued unpaid Board fees of $ 57,000 owed to our outside directors as of March 31, 2023. Due to related parties were comprised of the following items: Due to related parties March 31, 2023 March 31, 2022 Accrued Board fees $ 57,000 $ 55,750 Accrued vacation 157,221 99,992 Total due to related parties $ 214,221 $ 155,742 6. OTHER CURRENT LIABILITIES Other current liabilities were comprised of the following items: Other Current Liabilities March 31, 2023 March 31, 2022 Accrued professional fees $ 588,592 $ 696,893 Total other current liabilities $ 588,592 $ 696,893 F- 22 7. INCOME TAXES For the years ended March 31, 2023 and 2022, we had no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance. At March 31, 2023 and 2022, we had net deferred tax assets as detailed below. These deferred tax assets are primarily composed of capitalized research and development costs and tax net operating loss carryforwards. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a 100% valuation allowance has been established to offset the net deferred tax assets. Significant components of our net deferred tax assets at March 31, 2023 and 2022 are shown below: Schedule of deferred tax assets YEAR ENDED MARCH 31, 2023 2022 Deferred tax assets: Research and development credit carryforwards $ 3,442,000 $ 3,442,000 Capitalized research and development costs 519,000 – Net operating loss carryforwards (1) 24,158,000 22,039,000 Stock compensation 1,903,000 1,609,000 Total deferred tax assets 30,022,000 27,090,000 Total deferred tax liabilities – – Net deferred tax assets 30,022,000 27,090,000 Valuation allowance for deferred tax assets ( 30,022,000 ) ( 27,090,000 ) Net deferred tax assets $ – $ – ______________ (1) Pursuant to Internal Revenue Code Section 382, use of our tax net operating loss carryforwards may be limited. At March 31, 2023, we had tax net operating loss carryforwards for federal and state purposes approximating $ 88 million and $ 80 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, 2023 and 2022 due to the following: Provision for income taxes 2023 2022 Income taxes (benefit) at federal statutory rate of 21.00% $ ( 2,526,000 ) $ ( 2,188,000 ) Tax effect on non-deductible expenses and credits 2,000 1,000 True up items 57,000 ( 5,000 ) Expiration of net operating loss carryforwards (1) 353,000 593,000 Change in valuation allowance 2,114,000 1,599,000 Income Tax Expense (Benefit) $ – $ – ______________ (1) Pursuant to Internal Revenue Code Section 382, use of our tax net operating loss carryforwards may be limited. F- 23 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, 2023 and 2022, we did not recognize any interest or penalties relating to tax matters. At and for the years ended March 31, 2023 and 2022, management does not believe the Company has any uncertain tax positions. Accordingly, there are no unrecognized tax benefits at March 31, 2023 or March 31, 2022. 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. 8. 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, 2023: LEASE COMMITMENTS Office, Lab and Manufacturing Space 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 11575 Sorrento Valley Road, Suite 200, 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 laboratory space effective January 1, 2022. In October 2021, we entered into another lease for approximately 2,655 square feet of space to house our manufacturing operations located at 11588 Sorrento Valley Road, San Diego, California 92121. The term is for 55 months and we took possession of the manufacturing space in August 2022. The current monthly base rent under the office and laboratory component of the lease is $ 13,772 . The current monthly base rent under the manufacturing component of the lease is $ 12,080 . During the fiscal year ended March 31, 2023, we recorded a $ 625,471 right-of-use lease asset and associated lease liability related to the manufacturing space component of the lease based on the present value of lease payments over the expected lease term of 55 months, discounted using our estimated incremental borrowing rate of 4.25 %. The office, lab and manufacturing leases are coterminous with a remaining term of 48 months. The weighted average discount rate is 4.25 %. As of our March 31, 2023 balance sheet, we have a right-of-use lease asset of $ 1,151,909 . The following table presents a maturity analysis of expected undiscounted cash flows for operating leases on an annual basis for the next four fiscal years. All of our leases conterminously expire during the fiscal year ending March 31, 2027. Schedule of lease maturities Fiscal Years Ended March 31, 2024 $ 314,493 2025 323,812 2026 333,462 2027 343,351 Total minimum lease payments 1,315,118 Less amount representing imputed interest ( 106,090 ) Present value of minimum lease payments $ 1,209,028 F- 24 Mobile Clean Room In addition, we rented a mobile clean room on a short term, month-to-month basis, where we housed our manufacturing operations until our permanent manufacturing space was completed. The mobile clean room was located on leased land near our office and lab and we paid $ 2,000 per month for the right to locate it there. We paid approximately $ 168,171 in total rent expense to lease the mobile clean room located on this space during the fiscal year ended March 31, 2023. The arrangement was terminated in September 2022 and the mobile clean room was returned to the vendor that leased it to us. Overall, our rent expense, which is included in general and administrative expenses, approximated $ 519,000 and $ 401,000 for the fiscal years ended March 31, 2023 and 2022, 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. 9. SUBSEQUENT EVENTS Management has evaluated events subsequent to March 31, 2023 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 Subsequent to March 31, 2023, we raised net proceeds of $1,086,119, net of $27,999 in commissions to Wainwright and $5,846 in other offering expense, through the sale of 1,778,901 shares of our common stock at an average price of $0.61 per share under the 2022 ATM Agreement. RSU GRANTS In April 2023, the Compensation Committee approved, pursuant to the terms of the Director Compensation Policy, the grant of the annual RSUs under the Director Compensation Policy to each of the three non-employee directors of the Company then serving on the Board. 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 $0.43 per share for the April 2023 RSU grants. As a result, in April 2023 the three eligible directors each was granted an RSU in the amount of 116,279 shares under the 2020 Plan. The RSUs are subject to vesting in four equal installments, with 25% of the restricted stock units vesting on each of June 30, 2023, September 30, 2023, December 31, 2023, and March 31, 2024, subject in each case to the director’s Continuous Service (as defined in the 2020 Plan), through such dates. Vesting will terminate upon the director’s termination of Continuous Service prior to any vesting date. F- 25