Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis
should be read in conjunction with the consolidated Financial Statements and Notes thereto appearing elsewhere in this Annual Report.
48
We are
a medical therapeutic company focused on developing the Hemopurifier, a clinical-stage immunotherapeutic device designed to combat cancer
and life-threatening viral infections and for use in organ transplantation. In human studies, 164 sessions with 38 patients, the Hemopurifier
was safely utilized and demonstrated the potential to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier has demonstrated
the potential to remove harmful exosomes and exosomal particles from biological fluids, utilizing its proprietary lectin-based technology.
This action has potential applications in cancer, where exosomes and exosomal particles may promote immune suppression and metastasis,
and in life-threatening infectious diseases. The 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 or
exosomal particles 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.
Oncology
We believe the Hemopurifier may be a substantial advancement
in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal
particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially
conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia. We are currently
working with our contract research organization, or CRO, on preparations to conduct a clinical trial in Australia in patients with solid
tumors, including head and neck cancer, and gastrointestinal cancers.
In January 2023, we entered into an agreement with
North American Science Associates, LLC, or NAMSA, a world leading medical technology CRO offering global end-to-end development services,
to oversee our planned clinical trials investigating the Hemopurifier for oncology indications. Pursuant to the agreement, NAMSA agreed
to manage our planned clinical trials of the Hemopurifier for patients in the United States and Australia with various types of cancer
tumors.
We recently completed an in vitro binding study of relevant oncology
targets, to provide pre-clinical evidence to support our trial design and translational endpoints. Our study indicated positive results
from this study, providing evidence that our Hemopurifier removes extracellular vesicles, or EVs, from plasma. This translational study
provides pre-clinical evidence to support our planned phase 1 safety, feasibility and dose-finding clinical trials of our Hemopurifier
in patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® or
Opdivo®. In addition to an interested initial trial site in India, we had three interested sites in Australia that were awaiting our
completion of this in vitro binding study. We added the data from this study to our Clinical Investigator Brochure and submitted
that brochure to the Ethics Committee of Royal Adelaide Hospital in Australia and in June 2024, we received approval for our proposed
phase 1 oncology trial from the Ethics Committee from Royal Adelaide Hospital. We are currently in the process of applying to the Ethics
Committees of the two additional interested clinical trial sites in Australia and the site in India.
Life-Threatening Viral Infections
We also believe that 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, 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.
49
We believe the Hemopurifier can be part of the treatment
of severe SARS-CoV-2 viremia/COVID-19, or COVID-19, cases. COVID viremia is detected in approximately 34% of patients and is associated
with severity, requirement for intensive care unit, or ICU, stay, development of multi-organ failure and poor outcomes. EVs and exosomal
miRNAs may play a role in the spread of infection as well as ongoing inflammation, development of coagulopathy and lung injury. Our proprietary
Galanthus nivalis agglutinin, or GNA, affinity resin has been shown to bind multiple clinically relevant SARS-CoV-2 variants. Furthermore,
studies have demonstrated in vitro removal of seven SARS-CoV2 variants (104 PFU/mL) in phosphate buffered saline passed over a
column of GNA affinity resin (1g) three times, with capture efficiencies between 53% and 89%.
On June 17, 2020, the FDA approved a supplement to
our open Investigational Device Exemption, or 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 were to have established laboratory diagnosis of COVID-19, be admitted to an 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 January 2021, the Hemopurifier was used to
treat a viremic patient, under our emergency use approval, with a predicted risk of mortality of 80% and the Hemopurifier was able to
reduce the patient’s SARS-CoV-2 plasma viral load by 58.4%. In June 2022, the first patient in this study was enrolled and
completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we terminated
this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish to preserve
the option of enrolling patients if the situation with COVID-19 changes.
Under Single Patient Emergency Use regulations, Aethlon
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 previously reported a disruption in our Hemopurifier
supply, as our then existing supply of Hemopurifiers expired on September 30, 2022 and, also as previously disclosed, we are dependent
on FDA approval of qualified suppliers to manufacture our Hemopurifier. We recently completed final testing in order to begin manufacturing
Hemopurifiers at our new manufacturing facility in San Diego, California for use in planned U.S. clinical trials, using GNA from our current
supplier.
In April 2024, we received a notice of approval from
the FDA for our IDE supplement to add our San Diego manufacturing facility and we now are able to manufacture Hemopurifiers at this site.
We also have sufficient Hemopurifiers on hand for use in our planned Australia and India oncology trials. Our intended transition to a
new supplier for GNA, a component of our Hemopurifier, continues to be delayed as we work with the FDA for approval of our supplement
to our IDE, which is required to make this manufacturing supplier change. We are working with the FDA to qualify this second supplier
of our GNA.
We also obtained ethics review board, or ERB, approval
from 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 now have two sites in India for this trial with the Medanta Medicity Hospital and Maulana
Azad Medical College, or MAMC. One patient has been treated to date; however, we have been informed by our CRO that a new COVID-19 subvariant
was detected in India recently. Our COVID-19 trial in India remains open in the event that there are COVID-19 admissions to the ICUs at
our sites in India.
In May 2023, we received ERB approval from the 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. MAMC is affiliated with the University of Delhi and is operated by the Delhi government.
50
Organ Transplantation
Additionally, based on preclinical
data with acellular kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating
whether the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes,
RNA molecules, cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys
from deceased donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer
solutions, in vitro , utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation
complications by improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation,
and potentially reducing the number of kidneys rejected for transplant.
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 to us more recently will help protect the proprietary nature of our Hemopurifier treatment
technology.
In addition
to the foregoing, we are monitoring closely the impact of inflation, recent bank failures and the war between Russia and Ukraine and the
military conflicts in Israel and the surrounding areas, as well as related political and economic responses and counter-responses by various
global factors 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 ongoing military conflicts 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. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated
into, this Annual Report.
Our common stock is listed on
the Nasdaq Capital Market under the symbol “AEMD.”
Fiscal Years Ended March 31, 2024 and 2023
Results of Operations
Government Contract Revenues
For the fiscal year ended March 31, 2024, we did not have any active revenue-generating
government contracts and, consequently, did not record any government contract revenue for that period.
For the fiscal year ended March 31, 2023, we recorded government contract
revenue of $574,245 resulting from work performed under our government contract Phase 2 Melanoma Cancer with NIH.
Phase 2 Melanoma Cancer Contract
On September 12, 2019, the NCI
awarded to us 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.
We presented the required final
report to the NCI. As the NCI completed its close out review of the contract, we recognized as revenue $574,245 on our statement of operations
for the fiscal year ended March 31, 2023.
51
Operating Costs and Expenses
Consolidated operating expenses
were $12,636,568 for the fiscal year ended March 31, 2024, compared to $12,472,883 for the fiscal year ended March 31, 2023, an increase
of $163,685. The $163,685 increase in the fiscal year ended March 31, 2024 was due to an increase in payroll and related expenses of $762,899
partially offset by a decrease of $578,112 in general and administrative expenses and a decrease of $21,102 in professional fees.
The $762,899 increase in the fiscal
year ended March 31, 2024 in our payroll and related expenses was primarily due to an increase in separation expenses of $861,994 for
a former executive and an increase of $126,571 associated with an increase in average headcount, partially offset by a decrease in stock-based
compensation of $225,666.
The $578,112 decrease in the
fiscal year ended March 31, 2024 in our general and administrative expenses was primarily driven by the following: a decrease of $819,327
in clinical trial expenses related to the closed U.S. COVID-19 clinical trial, a decrease of $279,504 in subcontract expense related to
contracts and grants with the NIH, a $98,755 decrease in rent expense associated with a mobile clean room leased in the prior year, a
decrease of $29,849 in travel related expenses associated with a former remote employee and a decrease of $22,053 expenses related to
various other general office operating expenses. These decreases were partially offset by an increase of $404,918 in manufacturing and
research and development supplies related to the manufacturing of our Hemopurifier device and various research and development activities.
Other increases included $118,165 in depreciation expense and amortization expense related to leasehold improvements to our manufacturing
space, $69,894 increase in insurance expenses to include medical, D&O and liability, an increase of $82,421 primarily related to our
manufacturing facility, encompassing equipment maintenance, utilities, and outside services.
The decrease in professional
fees of $21,102 in the fiscal year ended March 31, 2024 was primarily due to a decrease in outside scientific, product research and regulatory
services of $302,390, a decrease of $60,229 in recruiting fees and a $32,631 decrease in legal fees. These decreases were partially offset
by increases in investor relations of $151,475, accounting fees of $137,026, board of director fees of $33,750 and outside operational
and administration expenses of $53,964.
As a result of the above factors,
our net loss increased to $12,208,174 for the fiscal year ended March 31, 2024, from $12,029,786 for the fiscal year ended March 31, 2023.
Liquidity and Capital Resources
As of March 31, 2024, we had
a cash balance of $5,441,978 and working capital of $4,395,889. This compares to a cash balance of $14,532,943 and working capital of
$13,585,478 at March 31, 2023.
On May 17, 2024, we closed a public
offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase
up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering
price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares
of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase
up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants,
which is equal to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price
of each such pre-funded warrant. The gross proceeds from the offering, before deducting the placement agent’s fees and other offering
expenses, were approximately $4.7 million. In June 2024, holders of Class A and Class B warrants exercised 295,000
shares and 2,875,000 shares, respectively, for total proceeds of $1,838,600.
While we currently have over
$9.1 million in cash and cash equivalents and have been carrying out certain expense reductions since November 2023, our planned expense
reductions may not materialize and/or our patient recruitment may occur more rapidly than expected along with the concomitant increases
in expenses, there is substantial doubt that our cash on hand will carry the company for 12 months beyond the filing date of the financial
statements included in this Annual Report.
52
During the fiscal years ended
March 31, 2024 and 2023, we raised capital only through our At The Market Offering Agreement, or the 2022 ATM Agreement, with H.C. Wainwright
& Co., LLC, or Wainwright.
2022 At The Market Offering Agreement with H.C.
Wainwright & Co., LLC
On March 24, 2022, we entered
into 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 offering was registered under
the Securities Act pursuant to our shelf registration statement on Form 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 that provides
for the sale of shares of our common stock, or the 2022 ATM Shares, having an aggregate offering price of up to $15,000,000, which was
subsequently and most recently updated pursuant to our prospectus supplement, dated September 29, 2022, filed with the SEC that provides
for the sale of 2022 ATM Shares having an aggregate offering price of up to $6,625,000. As of March 31, 2024, $5,302,617 of 2022 ATM Shares
remained available for sale under the 2022 ATM Agreement.
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
further 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.
Financings During the Fiscal Year Ended March
31, 2024:
In the fiscal year ended March
31, 2024, we raised aggregate net proceeds of $1,322,383, net of $34,118 in commissions to Wainwright and $8,202 in other offering expense,
through the sale of 296,056 shares of our common stock at an average price of $4.47 per share under the 2022 ATM Agreement.
Financings During the Fiscal Year Ended March
31, 2023:
During
the fiscal year ended March 31, 2023, we raised aggregate 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 748,084 shares of our common stock at an average price of $11.93 per share under
the 2022 ATM Agreement.
Material Cash Requirements
We expect our clinical trial expenses
for the planned oncology trials in Australia and India to increase for the foreseeable future. Those increases in clinical trial expenses
include the cost of manufacturing additional Hemopurifiers.
In addition, we have entered into
leases for our headquarters, laboratory and manufacturing facilities. We expect our rent payments to continue to increase for the foreseeable
future.
53
Future capital requirements will
depend upon many factors, including progress with pre-clinical testing and clinical trials, the number and breadth of our clinical programs,
the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, the
time and costs involved in obtaining regulatory approvals, competing technological and market developments, as well as our ability to
establish collaborative arrangements, effective commercialization, marketing activities and other arrangements. We expect to continue
to incur increasing negative cash flows and net losses for the foreseeable future. We will continue to need to raise additional capital
either through equity and/or debt financing for the foreseeable future.
As a result of global events,
political changes, bank failures, actual or perceived changes in interest rates and economic inflation, the global credit and financial
markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in inflation and uncertainty about economic stability. There can be no assurance that further deterioration
in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may
make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially
harm our business, results of operations and future prospects.
While we currently have over $9.1
million in cash and cash equivalents and have been carrying out certain expense reductions since November 2023, our planned additional
expense reductions may not materialize and/or our patient recruitment may occur more rapidly than expected along with the concomitant
increases in expenses; therefore there is substantial doubt that our cash on hand will carry the company for 12 months beyond the filing
date of the financial statements included in this Annual Report.
We do plan to access the equity
markets for additional capital, however, there can be no assurance that we will be able to access such additional capital.
Our ability to raise additional
funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and
financial markets in the United States, including due to bank failures, actual or perceived changes
in interest rates and economic inflation , and worldwide resulting from macroeconomic factors. Because of the numerous risks and
uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and we may never be profitable
or generate positive cash flow from operating activities.
Cash Flows
Cash flows from operating, investing
and financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized as follows (in thousands):
For the year ended
March 31,
2024
March 31,
2023
Cash (used in) provided by:
Operating activities
$ (10,130 )
$ (10,505 )
Investing activities
(251 )
(943 )
Financing activities
1,288
8,915
Effect of exchange rate on cash
2
(6 )
Net decrease in cash
$ (9,091 )
$ (2,539 )
54
Net Cash Used in Operating Activities
We used cash in our operating
activities due to our losses from operations. Net cash used in operating activities was approximately $10,130,000 in fiscal 2024, compared
to net cash used in operating activities of approximately $10,505,000 in fiscal 2023, a decrease of approximately $375,000. The decrease
in cash flows was primarily driven by a positive change in our working capital items of $413,000 mainly from the increase in accounts
payable and accrued expenses offset by an increase in net loss of approximately $38,000 before non-cash items.
Net Cash Used in Investing Activities
During the fiscal years ended
March 31, 2024 and 2023, we purchased approximately $251,000 and $943,000 of equipment, respectively.
Net Cash from Financing Activities
Net cash generated from financing
activities decreased from approximately $8,915,000 in the fiscal year ended March 31, 2023 to approximately $1,288,000 in the fiscal year
ended March 31, 2024.
In the fiscal year ended March
31, 2024, we raised approximately $1,322,383 from the issuance of common stock, which was partially offset by the use of approximately
$35,000 to pay for the tax withholding on the issuance of restricted stock units, or RSUs. During the fiscal year ended March 31, 2023,
we raised $8,927,211 from the issuance of common stock, which was partially offset by the use of approximately $12,000 to pay for the
tax withholding on the issuance of RSUs.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires us
to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements. These estimates and assumptions affect the reported amounts of expenses
during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other
factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ
from these estimates under different future conditions.
We believe that the estimates
and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require the
most difficult, subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us.
There were no accounting estimates
in the year ended March 31, 2024 with a high degree of uncertainty or amounts that are with a high likelihood to change from period to
period that would materially impact the presentation of our financial statements for the year ended March 31, 2024.
Share-based Compensation
We account for share-based compensation
awards using the fair-value method and record such expense based on the grant date fair value in the consolidated financial statements
over the requisite service period.
55
RSU Grants to Non-Employee Directors
The Company maintains the Amended
and Restated Non-Employee Director Compensation Policy, or 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 16, 2024, our Board of Directors 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 four non-employee directors of the Company then serving on the Board of Directors.
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 of Directors, and for a grant of stock options or $75,000 worth of RSUs for a
newly elected non-employee director, with each RSU priced at the average for the closing prices for the five days preceding and including
the date of grant, or $1.52 per share for the RSUs granted in April 2024. As a result, in April 2024 the four eligible directors were
each granted an RSU in the amount of 32,894 shares under the Company’s 2020 Equity Incentive Plan, or 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, 2024, September
30, 2024, December 31, 2024, and March 31, 2025, 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.
There were no vested RSUs outstanding
as of March 31, 2024.
Recent Events
On May 17, 2024, we closed a public
offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase
up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering
price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares
of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase
up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants,
which is equal to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price
of each such pre-funded warrant.
The Class A and Class B warrants
each have an exercise price of $0.58 per share, are immediately exercisable, and, in the case of Class A warrants, will expire on May
17, 2029, and in the case of Class B warrants, will expire on May 19, 2025. The exercise price of the Class A and Class B warrants is
also subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in such warrants. Maxim Group
LLC acted as the exclusive placement agent for the offering.
The gross proceeds from the offering,
before deducting the placement agent’s fees and other offering expenses, were approximately $4.7 million. The Company intends to
use the net proceeds from this offering for general corporate purposes, which may include clinical trial expenses, research and development
expenses, capital expenditures and working capital.
In June 2024, holders of Class
A and Class B warrants exercised 295,000 shares and 2,875,000 shares, respectively, for total proceeds of $1,838,600.
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RSU Grants
In April 2024, our Board of Directors
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 four non-employee directors of the Company then serving on the Board of Directors. 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 of Directors, and for a grant of stock options or $75,000 worth of RSUs for a newly elected non-employee director, with each
RSU priced at the average for the closing prices for the five days preceding and including the date of grant, or $1.52 per share for the
April 2024 RSU grants. As a result, in April 2024 the four eligible directors were each granted an RSU in the amount of 32,894 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, 2024, September 30, 2024, December 31, 2024, and March 31, 2025, 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a “smaller
reporting company” as defined under Item 10(f)(1) of Regulation S-K of the Securities Act.