July 18, 2013 (Investorideas.com newswire) We have updated our report on Aethlon Medical (OTCBB:AEMD) for their 10-K filing as well as other recent events. See below for access to the full report.

10-K Filed for Fiscal 2013 (ending 3/31/2013)

Aethlon (AEMD) filed their 10-K for the fiscal year ending 3/31/2013 on July 15th. Results (excluding non-cash change in derivative liability expense) remain very much in-line with our estimates. AEMD booked $404k in DARPA contract revenue in Q4 compared to our $380k estimate. Revenue relates to the tenth and eleventh milestones under the DARPA contract (the second and third milestones under the year-2 contract). Subsequent to (in April 2013) the end of fiscal 2013 AEMD booked another $196k related to the twelfth milestone.

These three milestones are (per AEMD's 10-K):

Milestone 2.3.2.1 – Demonstrate the effectiveness of the prototype device in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow. The milestone payment amount was $195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. The prototype device was successfully used in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.

Milestone M4 – Target capture > 50% in 24 hours for at least 5 targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we were able to capture > 50% in 24 hours for at least 5 of the agreed targets in blood or blood components. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.

Milestone 2.3.2.2 (booked in fiscal Q1 2014) – Formulate initial design based on work from previous phase. Begin to build and test selected instrument design and tubing sets. The milestone payment amount was $195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had begun to build and test selected instrument design and tubing sets. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.

Through April 2013 AEMD has booked approximately $2.8 million in DARPA revenue and had approximately $790k remaining to invoice under the year 2 contract. As a reminder, DARPA has the option of entering into the remainder of the proposed contract for years three through five, which would pay Aethlon up to an additional $3.2 million, annual payments under which would range between $775k and $1.6 million.

Q4 operating expenses were $1.3 million, just slightly higher than our $1.2 million estimate. Q4 net income and EPS of ($2.8) million and ($0.02) were below our ($1.0) million and ($0.01) due to a non-cash change in derivative liability expense.

Cash

Aethlon exited fiscal 2013 with $125k in cash and equivalents, compared to $108k at the end of the prior quarter (12/31/2012). Subsequent to fiscal year end the company raised an additional $128k from the sale of equity, entered into $400k in loans from directors of the company and collected $404k from the DARPA contract.

Cash used in operations was $522k in Q4 ($2.1 million in 12 months ending 3/31/13), compared to $662k in Q3 and $1.8 million in fiscal 2012. AEMD continues to be successful in raising operating capital, raising over $2.1 million from the sale of common stock in fiscal 2013.

Along with their ongoing ability to continue to raise operating capital, we have been encouraged, from the standpoint of strengthening their financial position and balance sheet, by the success of converting some of their outstanding debt to stock. While a substantial portion of debt remains in default, the company continues to make progress on cleaning up their balance sheet, which we view as meaningful from a de-risking perspective. We reiterate, however, as we have in the past, that Aethlon will need to raise a substantial amount of cash, enter into partnering arrangements or score additional valuable contracts/grants in order to complete the recently announced <_st13a_place _w3a_st="on">U.S. safety study and to be able to maintain operations for the longer-term. Nonetheless, we believe management's recent progress should not be marginalized.

Battelle Subcontract

In mid-April AEMD announced that they have been selected as a subcontractor by Battelle Memorial Institute under Battelle's $22.8 million systems integrator contract with DARPA related to the sepsis DLT program. The systems integrator is responsible for integrating the various component technologies developed under the DLT program by the various participating organizations, including AEMD. The contract will pay AEMD on a cost (time and materials) plus margin basis so the total that AEMD will eventually bill will not be known until their work is completed. AEMD noted that they began work on this subcontract in early April.

AEMD's Bioterror Program Potentially Revitalized

Another somewhat back-burner application for AEMD's technology has been bioterrorism. Earlier in vivo studies conducted by Aethlon and in conjunction with other organizations, including the Centers for Disease Control and Prevention (CDC), have shown the Hemopurifier was able to rapidly clear viral particles and remove glycoproteins in cell cultures fluids. Pre-clinical studies have shown success with the capture of several Category A (i.e. most serious) pathogens including the Ebola virus, Dengue virus, Lassa virus, West Nile virus, Monkeypox virus, H5N1 Avian flu virus and the H1N1 Swine flu virus.

Aethlon, in collaboration with the United States Army Medical Research Institute for Infectious Diseases (USAMRIID) and other organizations, have worked in the past to validate Hemopurifier for use against Category A threats. Studies have yet to move forward, however - possibly as enrolling for a trial with Ebola infected patients would present serious challenges. As a result, Aethlon's bioterror program had been in somewhat of a holding pattern.

AEMD's bioterror program could potentially be revitalized, however, and sparked by renewed federal funding for bioterror countermeasures (including medical countermeasures) through the Pandemic and All-Hazards Preparedness Reauthorization Act (PAHPRA) of 2013. The CBO estimates that $11 billion will be spent on PAHPRA from 2014 to 2018. Included in the scope of the program is countermeasures against the new strains of bird flu. Given Hemopurifier's success in pre-clinical studies in capturing the H5N1 Avian flu virus and the H1N1 Swine flu virus, AEMD may be in a solid position to pursue any grant funding targeting the new strains of bird flu.

A copy of the full research report can be downloaded here >> Aethlon Medical Report

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