Good afternoon and welcome to the Aethlon Medical Second Quarter Fiscal 2020 Earnings and Corporate Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jim Frakes, Chief Financial Officer. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical’s second quarter 2020 earnings conference call. My name is Jim Frakes, and I am Aethlon's Chief Financial Officer. At 4:15 p.m. Eastern Time today, Aethlon Medical released financial results for its second quarter ended September 30, 2019. If you have not seen or received Aethlon Medical's earnings release, please visit the Investors page at www.aethlonmedical.com. Following this introduction and the reading of our forward-looking statements, Aethlon's CEO, Tim Rodell, and our Chairman, Dr. Chuck Fisher, will provide an overview of Aethlon's strategy and recent developments. I will then make some brief remarks on Aethlon's financials. We will then open up the call for the Q&A session. Before I hand the call over to Dr. Rodell, please note that the news release today and this call contain forward-looking statements within the meaning of the Federal Securities Act of 1933 and the Securities Exchange Act of 1934. The Company cautions you that any statement that is not a statement of historical facts is a forward-looking statement. These statements are based on expectations and assumptions as of the date of this conference call. Such forward-looking statements are subject to significant risks and uncertainties, and actual results may differ materially from the results anticipated in the forward-looking statements. Factors that could cause results to differ materially from those anticipated in forward-looking statements can be found under the caption Risk Factors in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and in the Company's other filings with the Securities and Exchange Commission. Except as may be required by law, the Company does not intend, nor does it undertake any duty to update this information to reflect future events or circumstances. With that, I will now turn the call over to Tim Rodell, Aethlon Medical's CEO. Tim?

Thank you, Jim, and thank you, everybody, for calling in, late on the Friday afternoon. We thought that it would be better to have the call on Friday, rather than on Halloween when some of you with school aged children would be trick-or-treating. So, we appreciate you taking time to hear this update. At Aethlon, we are continuing to develop our proprietary device, the Hemopurifier, which is the first in class therapeutic device that’s designed for the single use depletion of circulating viruses and cancer promoting exosomes. The Hemopurifier was previously designated a Breakthrough Device by the FDA for the treatment of glycosylated viruses, including Ebola, other hemorrhagic fever viruses, and virtually all viruses that affect humans. And then, in late 2018, the Hemopurifier received a second breakthrough designation for the treatment of individuals with advanced and 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 the severity of the disease. So, we actually have two separate Breakthrough Device designations that were granted by different divisions at the FDA, recognizing the potential for the Hemopurifier in the treatment of multiple different diseases. Now, we've actually had a very eventful quarter. We previously announced that we were preparing for the initiation of clinical trials in patients with advanced and metastatic cancer. This work follows on a number of years of work in viral disease, representing over 400 Hemopurifier treatments in patients with various viral infections, predominantly Hepatitis C, establishing a very strong safety database for the Hemopurifier. In June of this year, our team, including me, Dr. Chuck Fisher, who has joined us this afternoon and is with me, and Lisa Boswell, our newly recruited Head of Quality Affairs and…

Sure. Thanks very much, Tim, and good afternoon, everybody. And again, thank you for taking this call late on a Friday afternoon. We deeply appreciate it. In my own career and in Tim's career, both of us kind of saw medical first, and been successful in actually getting drugs and/or devices approved in this space. So, when we looked at making the management changes that we made, I wanted to bring in somebody that had a history of turnaround and a passion to seek medical first and do something to make a difference, and Tim, we found a real winner. To make the point that Tim just touched on this breakthrough therapy is quite dramatic from what we've seen in the past. And to have a really vibrant dialogue with the FDA, both over the phone and in person during the time of working through the submission of the IDE is as just Tim says, is extraordinarily unique and very productive. In addition to Tim, he’s brought, he’s recruited a couple of really very key and very strong people. So, we have a very small team, we're being quite financially rigorous in terms of watching where we are. But, we need key people. And I think it's worth noting that an IDE of this quality or NDA of this quality usually in a larger company, having run large companies as well as small companies, you would probably have 40 or 60 people involved and would take six to nine months. And this six-person team did it in a very short period time. So, I just want to emphasize the fact that not only have we expanded the target opportunities in this case, we think as Tim mentioned, to market on the regulatory process far way [ph] to cancer one is the one that's going to move to switch us to be able to have as we start moving into that space, to be aligned with what has become the number one in treatment of cancer. I think it also burnishes opportunity. And we hope to -- over time that proves that we have an additive effect. And thirdly, I just like to call out the team again, and in this case also Jim Frakes, which is a small team, but it's very effective. I'm very pleased and honored to serve with them. Back to you, Tim.

Thanks, Chuck. Now, I'd like to spend a few minutes talking about Exosome Sciences, before I turn it over to Jim to review the financial data for the quarter. Exosome Sciences, as I think many of you know, is our majority owned subsidiary and is really the diagnostic side of our business. We’ve had two major developments in the last quarter on this side of the business. First, we announced very an important -- I think it's going to turn out to be a very important collaboration with the Precision Medicine Group, that's run by an old colleague of mine at Hoag Hospital Systems in Newport Beach, California, to identify exosomal markers in patients with and in families at risk for a number of different cancers. Hoag is a large private hospital group with a very busy genetics and oncology practice. It looks in many ways like a university center and is very heavily devoted to clinical research. Under this collaboration, we hope to advance our work in liquid biopsies that is an identifying blood-borne markers rather than requiring a surgical or a needle biopsy, identifying blood-borne markers based on exosomes that will predict the onset and the progression of various cancers. We're moving that collaboration forward, and we should have more to say about that in the reasonably near future. Perhaps more importantly, we just announced that we’ve just been awarded a $1.86 million two-year contract from the National Cancer Institute under the Small Business Innovative Research program to develop a benchtop instrument for the isolation and characterization of exosomes in cancer. This Phase 2 contract followed the successful completion of a Phase 1 contract in the same area, and demonstrates both the importance of the exosomes story to the NCI and to other scientists as well as their confidence in our team. Now, I just received in my inbox this morning an offer to buy a market study for gigantic price, but the title of the study is the exosomes market, a multibillion dollar market identifying hidden gems. And I think that shows that this is an area that now the business community and the commercial community are starting to pay attention to. But over the last 10 years, it’s become one of the most important areas of research in cancer. And if you look at the number of general articles here being published that are really meaningful in terms of understanding the mechanisms of cancer, this is probably one of the hottest areas in oncology today. We hope to have more to tell you in the coming months about our progress. So, I will stop here, we’ll happy to take questions after Jim presents the financial results for the quarter. Jim?

Thanks, Tim, and good afternoon, again, everybody. Our net loss was approximately $1.7 million or $1.29 per share for the second quarter ended September 30, 2019 compared to a net loss of approximately $1.4 million or $1.17 per share for the quarter ended September 30, 2018. Our consolidated operating expenses for the quarter ended September 30, 2019 were approximately $1.7 million compared to approximately $1.35 million for the quarter ended September 30, 2018. This increase of approximately $350,000 in 2019 was due to increases in professional fees of $360,000 and in general and administrative expenses of $71,000, which were partially offset by a decrease in payroll and related expenses of $75,000. The $360,000 increase in professional fees in 2019 was primarily due to a $279,000 increase in legal fees, a $69,000 increase in accounting fees and a $65,000 payment to the University of Pittsburgh, a subcontractor on our SBIR breast cancer grant related to their work on that grant. The increase in legal and accounting fees related to increased activity in our registration statement filings and in intellectual property actions, among other matters. The $71,000 increase in general and administrative expenses in 2019 was primarily due to the combination of a $21,000 increase in our clinical trial expense, primarily costs associated with the manufacturing of Hemopurifiers for an expected clinical trial in the cancer space, and a $45,000 increase in our lab supplies expense, primarily related to the SBIR breast cancer grant and lab work related to the IDE application. The $75,000 decrease in payroll and related expenses in the quarter ended September 30, 2019 was due to the combination of a $65,000 reduction in our cash-based compensation expense and a $10,000 decrease in stock-based compensation compared with the same period in 2018. Other expense during the three months ended…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Brian Marckx with Zacks Investment Research. Please go ahead.

Hi, guys. Congrats on all the progress. Wonder if you guys can talk a little bit more about the EFS study and things like -- do you the -- I assume you have the site identified or has that not happened?

Yes. Thanks for the question, Brian, and thanks for calling in. So, the site is identified. We’ve been very closely working with them actually for the entire time that I’ve been at the Company. And they have were heavily involved in developing the clinical protocol that we filed with the IDE. We haven’t disclosed the name of the site, because like all large academic centers, they also have PR groups that need to approve things. So, the way that we wanted to do it was to announce the approval of the IDE and the indication. And then, as we start up the study, we’ll talk more about where we’re doing it, why we’re doing it there and more about the study design. What I didn’t say in my initial remarks is a little bit more of a detail of the study. Like all early studies of Phase 1 study with a drug or biological, in this case, an early feasibility study, with the device, the primary consideration initially is safety. Now, we don’t have any major concerns about safety. Obviously, you’re always paying attention to that, and this is the primary thing that both FDA and we as physicians and clinicians are concerned about. But, because of our previous history in viral disease and the multiple times the Hemopurifier has been used, we don’t have any reason to think that safety in this particular patient population will be an issue in a different way than it has been with viral disease. We’re also going to be looking at the clinic of exosomes, both the kinetics and the characterization of the exosomes that are being cleared by the Hemopurifier. And we’ll be looking at clinical outcomes, like response to therapy, progression-free and overall survival. But, like any early study in a…

And maybe this is an obvious answer to this question, but just for clarity. So, assuming this EFS study is “successful”, should we assume that you would be looking to move to a formal regulatory program in this indication?

I think, that's a fair assumption. But, I think that the answer is much broader than that. So, we selected head and neck as the kind of pilot setting in which to study the drug for a couple of reasons. The first is that head neck cancer is an incredibly high need area. If you look at diseases like melanoma, like non-small cell lung cancer, there has been a lot of progress. They are still awful diseases, but in patients with melanoma or with lung cancer who respond for instance to drugs like pembrolizumab, some of those patients are alive at five years, and that's almost unheard of. But, in head and neck, it really is not that good. So, even the patients who respond, still don't do that well. They may live three months longer, but they don't live long term. So, it's a very high need area. Secondly, both, laboratories that we collaborate with and other labs have demonstrated that the immunosuppression in head and neck cancer is a critical component of the reason that disease is so deadly. These patients have profoundly suppressed immune systems and there are good data out there demonstrating that a major component of that immune suppression is mediated by exosomes. So, it's a perfect target area for us to start out in. But data from this trial showing that we can clear exosomes obviously supported safety data and hopefully some kind of a squint at whether we're having a clinical impact. Although, as you know, 10 patients is not enough to really develop any kind of meaningful confidence about ultimate clinical efficacy. But, this is a pilot trial, not only for head and neck, but also for multiple other solid tumors. So, we view this as being the beginning of a process. Over the course of the next year, we plan to review with FDA our overall data development program, not only in head and neck cancer but also in other solid tumors. So, this is kind of the first shot, but it can lead to -- assuming a successful trial, it can lead to multiple pivotal programs in other tumor types. Chuck, do you want to comment on that at all? Sorry, Chuck may be on mute.

I was on mute. The only thing I’d just like to emphasize what Tim just mentioned is, since it's a small trial, I don't think, we should look for anything other than the safety side of it. We always look for signals, we will look at the degree of exosomes recapture things like that, that can help us further characterize it going forward, but the number is small. However, this is a critical first step because as Tim just mentioned, it then opens the door going broader after dialogue with the FDA and laying out our data development plan.

Okay.

Thanks Chuck.

Just kind of curious about how much is known about exosomes in cancer, and if it’s homogenous, I don’t know if that's the right word to use. But, if it's similar to way that they act in head and neck, would they act the same way in say melanoma for example or a different type of cancer? So, could you potentially -- what you learned from this study, would it have potential crossover to other tumors?

Yes. It's a great question, and thank you. And without going into too much depth, what I will say is first of all, there is malignancy that has not been -- that has been described that is not at least currently characterized by the shedding of tumor-derived exosomes. So, head and neck is simply an example of a process that happens in all malignancies, including hematologic malignancies, like leukemias and lymphomas. We actually have done a great deal of work in other areas in preclinical studies. We finished about a year ago another NCI-funded grant, looking at exosomes in melanoma and demonstrated not only that melanoma sheds gigantic quantities of exosomes, but also that benchtop devices that are essentially small versions of the Hemopurifier can trap those exosomes. And we're currently working on another NCI-funded study in triple negative breast cancer. So, the short answer is, they're everywhere. Exactly how, what they do in different cancers, may be somewhat different. We focused on head and neck because of the immunosuppression and because of a prominent role of exosomes in generating that immunosuppression, but exosomes in other tumors have been shown immediate resistance to chemotherapy, resistance to targeted agents and metastasis. They actually contain fragments of the tumor proteins and nucleic acids that can move through the circulation, be taken up by normal cells and transform those normal cells to metastatic cancer cells. So, they’re an agent of metastasis. So, I think the bottom line is if we are able share that we can capture them in had a knack and that that has a meaningful impact that pretty much opens up all of oncology to development of the Hemopurifier. It’s a really good question and I appreciate it.

Yes. I appreciate that. Thanks, Tim. Just one last one, I don’t want to take all the Q&A time here. Is there anybody else that is -- any other organization that's involved in this EFA study or is it all Aethlon?

Well, I would say, it is Aethlon and it is our academic collaborators, both, bench collaborators, bench researchers and clinical collaborators who are actually taking care of these patients. Those are the primary groups that are involved. We have lots of other people that are involved at the scientific level, developing antibodies that are able to characterize exosomes and other institutions. So, I mean, it's a very broad-reaching effort, but it's primarily the relationship between Aethlon and a couple of related academic institutions.

[Operator instructions] The next question is from Ken Seel, [ph] a private investor. Please go ahead.

Yes. There's been a lot of public writings lately about the mosquito borne virus that has killed several people. I think, it's the EE virus is what I want to say. Was Hemopurifier considered for any type of treatment in those circumstances?

It’s a great question, Ken. Thank you for asking. And the virus you're referring to is EEE, which Eastern Equine Encephalitis virus that's killed a number of people, predominantly kids. And we have been paying very close attention to that. Whether the Hemopurifier could be used in that indication, we don't absolutely know. We have looked at it with other very closely related viruses, but not with EEE. And the other issue that we would have to deal with from a practical perspective is that by the time patients exhibit life-threatening manifestations of encephalitis with that virus, the virus is already in their brain, and the Hemopurifier may or may not be able to help clear it. And so, it's potentially a target and it's an area where we could get involved. But, we don't have adequate data quite yet to be able to say that. But, I think that it’s an important consideration because, as I said earlier, virtually all of the viruses that affect humans, and I'm not just talking about Ebola and viruses like EEE but also influenza and a number of those viruses as well as chronic viral infections, those viruses have surface [ph] on their surface and therefore should be capable of being trapped by the Hemopurifier. But, Chuck alluded earlier that part of the issue is -- part of the reason cancer is a faster pathway for us is because we can identify a fairly large target patient population that we can get to quickly. Whereas trying to intervene in individual viral infections with multiple different viruses, it's a little bit more complicated but it's one we're looking at. So, it could be a potential target, we don't have enough data quite yet to say so.

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Rodell for any closing remarks.

Thank you, Gary. And let me just say once again, we very much appreciate all of you calling in and staying up to date on the Company. We think that we've made a lot of progress over the course of the last year. We are happy with our progress but not satisfied. We have a lot of work to do and we hope to have a lot more to say over the course of the next few months. I've said this before, but I'll say it again, if you have questions that you didn't get a chance to ask or that you think of after the call, we're very receptive to emails and phone calls, and we’ll be happy to discuss things in the future. As Jim said, I think, we file our next 10-Q in February. So, we'll talk to you then, if not before. And we hope everybody has a great holiday season. Thanks again for calling in.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.