Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and notes thereto included in Item 1 in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled "Cautionary Notice Regarding Forward Looking Statements."

Overview

Aethlon Medical, Inc., or Aethlon, the Company, we or us, is a medical therapeutic company focused on developing the Hemopurifier® (HP), a clinical-stage immunotherapeutic device intended for applications in cancer, life-threatening viral infections, and organ transplantation and other areas of significant unmet needs. In human studies (167 sessions with 41 patients), the Hemopurifier was used safely and demonstrated the potential to remove enveloped viruses. In pre-clinical studies, the Hemopurifier has exhibited the capacity to remove harmful extracellular vesicles (EVs) and enveloped viruses from biological fluids, utilizing its proprietary lectin-based mechanism. These extracellular vesicles have been implicated in disease processes such as immune suppression and metastasis in cancer as well as in the progression of severe life-threatening infectious diseases. The U.S. Food and Drug Administration ("FDA") has designated the Hemopurifier as a "Breakthrough Device" for two independent indications:

	·	the treatment of individuals with advanced or metastatic cancer who are unresponsive to or intolerant of standard of care therapy, and with cancer types in which extracellular vesicles have been shown to participate in the development or severity of the disease; and
	·	the treatment of life-threatening viruses for which no approved therapies currently exist.

We are also evaluating the Hemopurifier's potential in additional clinical contexts based on its mechanism of action and preclinical findings.

Three clinical sites in Australia-Royal Adelaide Hospital in Adelaide, Pindara Private Hospital in the Gold Coast, and GenesisCare North Shore Hospital in Sydney-are currently open for enrollment in our phase 1 oncology trial. As of November 3, 2025, we have treated three participants in the first of three planned treatment cohorts. The Data Safety Monitoring Board (DSMB), comprising independent medical experts in nephrology and oncology, has reviewed the data from the initial cohort. Each of the three participants received a single 4-hour Hemopurifier treatment. Based on their evaluation, the DSMB found no safety concerns and confirmed that the Hemopurifier continues to demonstrate a favorable safety and tolerability profile. To date, no serious adverse events (SAEs) or Dose-Limiting Toxicities (DLTs) related to the Hemopurifier have been reported.

Enrollment for Cohort 2 is now open. In this phase, participants will receive two Hemopurifier treatments over a one-week period at the study's three active clinical sites in Australia. This trial, which aims to enroll approximately 9 to 18 patients, is designed to evaluate the safety and feasibility of administering the Hemopurifier at varying dosing intervals in patients with solid tumors who have stable or progressive disease, while receiving treatment that includes Pembrolizumab (Keytruda®) or Nivolumab (Opdivo®).

The Company previously received formal approval from India's Central Drugs Standard Control Organization (CDSCO) to initiate an oncology clinical trial at Medanta Medicity Hospital. Following subsequent discussions with the Company's India-based contract research organization (CRO), it was determined that first patient treatment would likely not occur until early 2026. In light of this extended timeline and after evaluating the associated costs and strategic priorities, the Company elected not to proceed with the India study. This decision enables the Company to focus its resources on advancing its ongoing clinical trial in Australia, which remains more closely aligned with its objective of generating timely clinical data to support a potential Premarket Approval (PMA) trial.

The Hemopurifier is designed to address life-threatening viral infections, particularly those involving highly glycosylated viruses for which there are no approved therapies. It has previously been used under FDA and international regulatory frameworks to treat individuals infected with HIV, hepatitis C, Ebola, and SARS-CoV-2. While our COVID-19 clinical trials in the U.S. and India have been terminated due to low ICU enrollment, these programs provided real-world evidence of Hemopurifier use in critically ill patients. We maintain an open IDE for viral indications, preserving the ability to respond to future outbreaks or emerging pathogens.

In addition to our ongoing clinical trials, we continue to explore potential new applications for the Hemopurifier through internal pre-clinical research. In the quarter ended June 30, 2025 results of our pre-clinical ex-vivo study entitled "Ex Vivo Removal of CD41 positive platelet microparticles from Plasma by a Medical Device containing a Galanthus nivalis agglutinin (GNA) affinity resin" were published in the pre-print vehicle bioRxiv. In the study we evaluated the Hemopurifier's ability to remove disease-relevant extracellular vesicles (EVs), including those derived from platelets, which are implicated in cancer, autoimmune disease, and neurological disorders. The study demonstrated >98% removal of platelet-derived EVs from healthy human plasma in a simulated clinical session.

In August 2025, we presented a poster at the Keystone Symposium on Long COVID and Other Post-Acute Infection Syndromes in Santa Fe, New Mexico. In collaboration with investigators at the University of California, San Francisco Medical Center Long COVID Clinic, we analyzed samples from participants with Long COVID and from recovered individuals as controls. Data presented at the symposium showed that both large and small EVs from Long COVID participants bound to the GNA lectin and to the Hemopurifier's lectin affinity resin, supporting the potential utility of the device in this patient population. The full poster presentation is available on our website.

These exploratory programs, together with our academic collaborations, are intended to inform potential future clinical indications and expand the utility of the Hemopurifier platform.

We have sufficient inventory of Hemopurifiers to support our ongoing oncology trial in Australia as well as any near-term expansion of that study or potential trial activity in India. While we have received FDA approval to begin manufacturing at our San Diego facility under our IDE supplement, we are still awaiting FDA approval of a separate supplement to qualify an additional supplier of a key Hemopurifier component. We continue to work with the FDA on this process.

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.

We incorporated in Nevada on March 10, 1999. 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."

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Exchange Act, and must file reports, proxy statements and other information with the SEC. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, like us, which file electronically with the SEC.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2024

Operating Expenses

Consolidated operating expenses for the three months ended September 30, 2025 were approximately $1,510,000 compared to $2,902,000 for the three months ended September 30, 2024. This decrease of $1,392,000, or 48%, in the 2025 period was due to a decrease of approximately $778,000 in payroll and related, $437,000 in general and administrative expenses and $177,000 in professional fees.

Payroll and related expenses decreased by approximately $778,000, largely due to the absence of severance charges of about $507,000 recorded in the prior year related to an executive separation and a reduction in force. The remainder of the decrease reflected approximately $230,000 of lower compensation costs associated with reduced headcount and bonus accruals, as well as a $41,000 decline in stock-based compensation.

The decrease in General and Administrative expenses of approximately $437,000 for the three months ended September 30, 2025, was primarily driven by fluctuations across several categories. Supplies decreased by approximately $68,000, reflecting prior-year raw material purchases with no comparable purchases in the current period. Clinical trial expenses decreased by approximately $97,000 compared to the prior year period, primarily reflecting the recognition of a $218,000 R&D tax incentive for Australian R&D related to the trial, the timing of trial-related activities, which were higher in the prior period due to the initiation of new study sites and related startup costs and the closure of the India COVID 19 trial. Insurance expense decreased by approximately $35,000, primarily due to lower medical insurance costs associated with reduced headcount. Utilities and business-related taxes decreased by approximately $10,000 and $9,000, respectively, mainly due to timing and usage patterns. Additional variances of approximately $6,614 in computer software and $23,000 across various other categories contributed to the overall change. These variances largely reflect timing differences and routine operational adjustments during the period.

The approximate $177,000 decrease in professional fees for the three months ended September 30, 2025, was primarily driven by a $265,000 reduction in investor relations expenses, reflecting the prior year engagement of an investor relations firm and our annual meeting, with no comparable activities in the current period and an approximate $12,000 decrease in contract labor. This decrease was partially offset by approximately $79,000 in legal fees related to additional patent filings and maintenance and $20,000 in tax, audit, and financial services.

Other Income, Net

We recorded other income of $22,730 for the three months ended September 30, 2025 compared to other income of $95,146 for the three months ended September 30, 2024. Other income in both periods was primarily interest income.

Net Loss

As a result of the changes in expenses noted above, our net loss decreased to $1,487,100 in the three months ended September 30, 2025 from $2,806,973 in the three months ended September 30, 2024.

Basic and diluted loss attributable to common stockholders was ($3.74) for the three months ended September 30, 2025, compared to ($16.11) for the three-month period ended September 30, 2024.

SIX MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2024

Operating Expenses

Consolidated operating expenses for the six months ended September 30, 2025 were approximately $3,302,000, compared to approximately $5,522,000 for the six months ended September 30, 2025. This decrease of approximately $2,220,000, or 40%, in the 2025 period was due to decreases in payroll and related expenses of approximately $1,452,000, general and administrative expenses of $453,000 and professional fees of $315,000.

The $1,452,000 decrease in payroll and related expenses was primarily due to an $826,000 charge in the prior period related to severance agreements and workforce reductions, a $516,000 decrease from lower headcount and related compensation, and a $108,000 reduction in stock-based compensation associated with the reduced headcount.

General and administrative expenses decreased approximately $453,000 for the six months ended September 30, 2025, primarily due to the recognition of a $218,000 R&D tax incentive for Australian R&D related to the trial, lower insurance costs of $66,000 from reduced headcount, and a $71,000 decrease in supplies. Additional decreases of $14,000 in utilities, $8,000 in business-related taxes, $13,000 in computer software, and $28,000 across various other categories contributed to the overall change. These decreases were partially offset by an approximate $33,000 rent charge for a lost deposit.

Professional fees decreased approximately $315,000, primarily due to lower investor relations of approximately $222,000, reduced general and SEC legal fees of approximately $119,000, and a combined $72,000 decrease in scientific consulting, contract labor, and audit and accounting services, partially offset by $94,000 in patent legal fees related to new filings, maintenance, and associated costs.

Net Loss

As a result of the changes in expenses noted above, our comprehensive loss decreased from $5,375,443 in the six months ended September 30, 2024, to $3,258,202 in the six months ended September 30, 2025.

Basic and diluted loss attributable to common stockholders was ($10.65) for the six months ended September 30, 2025, compared to ($40.15) for the six-month period ended September 30, 2024.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2025, we had a cash balance of $5,853,493 and working capital of $4,848,883. This compares to a cash balance of $5,501,261 and working capital of $4,050,514 at March 31, 2025.

We do not expect our existing cash as of September 30, 2025, to be sufficient to fund our operations for at least twelve months from the issuance date of these financial statements.

As we expand our activities, our overhead costs to support personnel, laboratory materials and infrastructure will increase and significant additional financing must be obtained to provide a sufficient source of operating capital. Should the financing we require to sustain our working capital needs be unavailable to us on reasonable terms, if at all, when we require it, we may be unable to support our research and our planned clinical trials. The failure to implement our research and clinical trials would have a material adverse effect on our ability to conduct planned clinical trials and commercialize our products.

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 associated with intellectual property protection and enforcement, regulatory and compliance obligations, the competitive landscape, and our ability to enter into strategic partnerships or other collaborative arrangements. We expect to continue to incur increasing negative cash flows and net losses for the foreseeable future.

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the accompanying Condensed Consolidated Statements of Cash Flows, are summarized as follows:

		(In thousands) For the six months ended
		September 30, 2025				September 30, 2024
Cash (used in) provided by:
Operating activities		$	(3,374	)		$	(3,962	)
Financing activities			3,736				5,375
Effect of exchange rate changes on cash			(9	)			4
Net increase in cash and restricted cash		$	353			$	1,417

NET CASH USED IN OPERATING ACTIVITIES. Net cash used in operating activities was approximately $3,374,000 for the six months ended September 30, 2025, compared to approximately $3,962,000 for the same period in 2024. The decrease was primarily driven by a lower net loss in the current period. However, this improvement was largely offset by changes in working capital, including decreases of approximately $796,000 in amounts due to related parties, $420,000 in accounts payable and other current liabilities, and $211,000 in prepaid expenses and other current assets, as well as $111,000 of lower non-cash charges compared with the prior year, for a total offset of approximately $1,538,000.

NET CASH PROVIDED BY FINANCING ACTIVITIES. Net cash provided by financing activities decreased by approximately $1,640,000 for the six months ended September 30, 2025. During the current period, we raised $3,744,000, net of placement agent fees and offering costs, partially offset by approximately $9,000 used for tax withholding on restricted stock unit settlements. In comparison, for the six months ended September 30, 2024, we raised approximately $5,384,000, net of placement agent fees and offering costs, from the sale and issuance of common stock and warrants in connection with a public offering, as well as the exercise of 3,750 Class A warrants and 36,000 Class B warrants. This amount was partially offset by approximately $9,000 for tax withholding on restricted stock unit settlements, resulting in net cash provided by financing activities of approximately $5,375,000.

Material Cash Requirements

We expect our clinical trial expenses for the planned oncology trial in Australia 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.

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.

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 on favorable terms, or at all.

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.

CRITICAL ACCOUNTING POLICIES 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 most critical to the portrayal of our financial condition and results of operations-because they involve the most difficult, subjective, or complex judgments-form the basis of our most critical accounting policies. These critical estimates relate to long-lived assets, stock-based compensation, the valuation allowance for deferred tax assets, contingencies, and clinical trial accruals.

There have been no changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2025.