<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDED REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 10, 2000
----------------------
AETHLON MEDICAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 33-44567-NY 13-3632859
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No,)
7825 Fay Avenue, Suite 200, La Jolla, California 92037
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including are code (858) 456-5777
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Not applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Audited financial statements of Cell Activation, Inc. for the years
ended December 31, 1999 and 1998.
Financial statements of Cell Activation, Inc. for the Three months
ended March 31, 2000 (unaudited).
(b) Pro Forma Financial Information
Pro Forma Statement of Operations for the year ended March 31, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Aethlon Medical, Inc.
/s/ FRANKLYN S. BARRY, JR.
----------------------------------------
Franklyn S. Barry, Jr., President
Date: November 6, 2000
<PAGE>
FINANCIAL STATEMENTS
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
================================================================================
DECEMBER 31, 1999
WITH
INDEPENDENT AUDITOR'S REPORT
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
================================================================================
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT........................................................... 1
FINANCIAL STATEMENTS:
Balance Sheets.................................................................... 2
Statements of Operations and Deficit Accumulated
During Development Stage......................................................... 3
Statements of Cash Flows.......................................................... 4
NOTES TO THE FINANCIAL STATEMENTS...................................................... 5 - 7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Cell Activation, Inc.
La Jolla, California
We have audited the accompanying balance sheets of Cell Activation, Inc. (A
Development Stage Enterprise) as of December 31, 1999 and 1998, and the related
statements of operations and accumulated deficit, and cash flows for the years
then ended and for the period from October 31, 1997 (inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cell Activation, Inc. (A
Development Stage Enterprise) as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended and from October
31, 1997 (inception) to December 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and its current liabilities exceed its current assets. This raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
FREED MAXICK SACHS & MURPHY, P.C.
Buffalo, New York
October 30, 2000
1
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CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
December 31,
================================================================================
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 7,888 $ 11,270
---------- ----------
Total current assets 7,888 11,270
EQUIPMENT 2,586 2,586
ACCUMULATED DEPRECIATION (560) (43)
---------- ----------
2,026 2,543
PATENTS AND TRADEMARK 125,352 38,010
---------- ----------
$ 135,266 $ 51,823
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 104,633 $ 22,052
Accrued income taxes 2,400 1,600
---------- ----------
Total current liabilities 107,033 23,652
STOCKHOLDERS' EQUITY:
Common stock, no par value, 100,000,000 shares
authorized; 3,900,000 (3,200,000 - 1998) issued
and outstanding 95,000 60,000
Deficit accumulated during development stage (66,767) (31,829)
---------- ----------
Total stockholders' equity 28,233 28,171
---------- ----------
$ 135,266 $ 51,823
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS AND
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
FOR THE YEARS ENDED DECEMBER 31,
================================================================================
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through
December 31,
1999 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME $ 300 $ 901 $ 1,326
EXPENSES:
Legal fees 26,501 26,043 52,544
Other expenses 3,420 1,000 4,420
Consulting fees 4,000 - 4,000
Travel expenses - 3,612 3,612
Franchise taxes 800 800 2,400
Interest expense - 557 557
Depreciation 517 43 560
---------- ---------- ----------
35,238 32,055 68,093
---------- ---------- ----------
NET LOSS (34,938) (31,154) (66,767)
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - BEGINNING (31,829) (675) -
---------- ---------- ----------
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - ENDING $ (66,767) $ (31,829) $ (66,767)
========== ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
================================================================================
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through
December 31,
1999 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(34,938) $(31,154) $(66,767)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 517 43 560
Increase in liabilities:
Accounts payable 20,039 3,370 23,409
Accrued income taxes 800 800 2,400
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (13,582) (26,941) (40,398)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - (2,586) (2,586)
Investment in patents and trademark (24,800) (19,328) (44,128)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (24,800) (21,914) (46,714)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 35,000 35,000 95,000
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,000 35,000 95,000
--------- --------- ---------
Net (decrease) increase in cash (3,382) (13,855) 7,888
Cash - beginning 11,270 25,125 -
--------- --------- ---------
Cash - ending $ 7,888 $ 11,270 $ 7,888
========= ========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ - $ 557 $ 557
========= ========= =========
Patent costs included in liabilities $ 62,542 $ 18,682 $ 81,224
========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
================================================================================
NOTE 1. - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Cell Activation, Inc. (the Company) was formed on
October 31, 1997 as a start-up company engaged in research into inappropriate
cell activation, the pathological over-reaction of the body's immune system, in
various circumstances, causing the white blood cells to exacerbate, rather than
ameliorate, the underlying medical issue. Most of the Company's activities have
been devoted to the development and filing of patents relating to cell
activation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
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 and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those estimates.
EQUIPMENT AND DEPRECIATION - Equipment is recorded at cost and is being
depreciated using the straight-line method over an estimated useful life of five
years.
PATENTS/TRADEMARK AND AMORTIZATION - During the years ended December 31,
1999 and 1998, the Company capitalized costs relative to obtaining several
patents / trademark amounting to $87,342 and $38,010, respectively. The Company
will begin to amortize these costs over the lives of the patents / trademark,
upon issuance.
The Company periodically reviews the recoverability of the carrying value
of its intangible assets. In determining whether there is an impairment, the
Company compares the sum of the expected future net cash flows (undiscounted and
without interest charges) to the carrying amount of the asset. In addition, the
Company will consider other significant events or changes in the economic and
competitive environments that may indicate that the remaining estimated useful
lives of its intangibles may warrant revision. At December 31, 1999 and 1998,
the Company believed that no impairment of intangibles existed.
COMMON STOCK - During each of the years ended December 31, 1999 and 1998,
the Company issued 700,000 shares of common stock for $.05 per share.
PREFERRED STOCK - The Company is authorized to issue 50,000,000 shares of
preferred stock. The rights of this stock may be determined by the Board of
Directors upon issuance. As of December 31, 1999 and 1998, there was no
preferred stock issued or outstanding.
STOCK OPTIONS - The Company accounts for its stock option plan under APB
Opinion No. 25, "Accounting for Stock Issued to Employees," under which no
compensation expense is recognized if the fair value of the common stock is
equal to or less than the exercise price upon grant. The Company has adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS No. 123) for disclosure purposes only; accordingly, no
compensation expense has been recognized in the results of operations for its
stock option plans in conformity with APB Opinion No. 25.
5
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
================================================================================
NOTE 1. - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RESEARCH, DEVELOPMENTAL AND ORGANIZATIONAL COSTS - Research, developmental
and organizational costs are expensed as incurred.
INCOME TAXES - Income taxes are computed in accordance with Financial
Accounting Standards Board Statement No. 109, Accounting for Income Taxes.
Deferred taxes are provided on temporary differences arising from assets and
liabilities whose bases are different for financial reporting and income tax
purposes.
NOTE 2. - FINANCIAL CONDITION
The Company has sustained substantial operating losses since its inception.
Also, its current liabilities exceed its current assets by $99,145 at December
31, 1999. As discussed in Note 6, subsequent to December 31, 1999, the Company's
outstanding stock was acquired by Aethlon Medical, Inc.("Aethlon"), which is
also a Development Stage Enterprise. Management believes that consolidation will
provide the basis for the Company to make the transition from a Development
Stage Enterprise to commercial operations. Aethlon intends to raise additional
capital to continue the research activities of the combined entities. However,
there is no assurance that the Company's present plans will be successful.
NOTE 3. - ACCOUNTS PAYABLE
Accounts payable consists of amounts owing to the Company's patent attorney
in connection with the development of patents and general counsel for general
corporate legal services.
NOTE 4. - STOCK OPTIONS
On December 24, 1997, the Company granted options to two
officers/shareholders for the purchase of 2,000,000 shares of common stock of
the Company at $.01 per share. These options become exercisable at a rate of 20%
a year, starting one year after the grant date. The options expire on December
23, 2007. No exercises have taken place under these options. These options were
valued at $.004 on the date grant.
6
<PAGE>
CELL ACTIVATION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
================================================================================
NOTE 4. - STOCK OPTIONS (CONTINUED)
If the Company had elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No. 123, the
net loss would not have been significantly different than that reported.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model based on the following assumptions:
Expected dividend yield 0.0%
Expected stock price volatility 10.0%
Risk-free interest rate 5.0%
Expected life of options 10 Years
NOTE 5. - INCOME TAXES
The Company has approximately $67,000 in net operating losses as of
December 31, 1999 ($32,000 - 1998) available to offset future taxable income
through 2019. The deferred tax asset in the amount of approximately $15,000
($7,000 - 1998), resulting from this carryforward has been fully offset by a
valuation allowance as realization is contingent upon the Company generating
sufficient taxable income to offset the losses.
NOTE 6. - SUBSEQUENT EVENT
On April 10, 2000, all of the Company's outstanding common stock was
exchanged for 99,152 shares of common stock of Aethlon. In addition, all of the
outstanding stock options of the Company were exchanged for options to purchase
50,848 shares of common stock of Aethlon at $.3933 per share.
Following the sale of the Company, Aethlon initiated negotiations with an
independent third party that has a partial interest in certain patents of the
Company. It is anticipated that the agreement with the third party will provide
for the Company to acquire those partial interests for a payment of $10,000 in
cash or Aethlon common stock and a commitment to pay future royalties to the
third party of 1-1/2% of net sales of products derived from those patents.
7
<PAGE>
Cell Activation, Inc
Balance Sheet
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash-checking $ 2,286.02
Prepaid expenses 600.00
Equipment 2,586.00
Accumulated depreciation (689.60)
-------------
1,896.40
Patents and trademarks 141,041.43
-------------
Total assets $ 145,823.85
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable-Heller $ 114,012.03
Accounts payable-Kennerson 12,175.70
Stockholders' equity:
Common stock, 100 million shares authorized;
3,900,000 shares issued and outstanding 95,000.00
Retained deficit (75,363.88)
-------------
Total stockholders' equity 19,636.12
-------------
Total liabilities and stockholders' equity $ 145,823.85
=============
</TABLE>
8
<PAGE>
Cell Activation, Inc.
Statement of Operations
January 1, 2000 to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Legal fees $ 5,865.50
Accounting fees 1,900.00
Depreciation 129.30
Franchise taxes 702.00
------------
8,596.80
------------
Net loss $ (8,596.80)
============
</TABLE>
9
<PAGE>
Cell Activation, Inc.
Statement of Cash Flows
January 1, 2000 to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (8,596.80)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 129.30
Increase in prepaid expenses (600.00)
Increase (decrease) in liabilities:
Accounts payable 5,865.50
Accrued liabilities (2,400.00)
------------
Net cash provided by operating activities (5,602.00)
Net decrease in cash (5,602.00)
Cash-beginning of period 7,888.02
------------
Cash-end of period $ 2,286.02
============
Supplemental cash flow disclosures:
Patent costs included in liabilities $ 15,689.18
</TABLE>
10
<PAGE>
The following unaudited pro forma statement of operations combines the
results of operations of Aethlon Medical, Inc. and Cell Activation, Inc.
(acquired on April 10, 2000 in a purchase transaction) as if the acquisition had
occurred at the beginning of the year ended March 31, 2000. The pro forma
statement is based on the individual statements of operations of Aethlon
Medical, Inc. for the year ended March 31, 2000 and the statement of income of
Cell Activation, Inc. for the same period.
11
<PAGE>
AETHLON MEDICAL, INC.
Pro Forma Statement of Operations (Unaudited)
Fiscal Year Ended March 31, 2000
<TABLE>
<CAPTION>
Aethlon Cell Pro Forma
Medical Activation Adjustments Combined
<S> <C> <C> <C> <C>
REVENUE
Interest income $ - $ 189 $ 189
Other income 20,559 - 20,559
------------------------------------------------------------------
Total revenue 20,559 189 20,748
EXPENSES
Personnel costs 457,629 - 457,629
Interest and debt expense 425,085 - 425,085
Professional fees 254,258 36,267 290,525
Rent and office expense 76,027 - 76,027
Insurance 33,175 - 33,175
Travel and meetings 26,738 - 26,738
Depreciation 11,098 647 11,745
Amortization-patents 8,172 - 8,172
Amortization of goodwill 12,695 - (a) 119,036 131,731
Laboratory supplies 2,650 - 2,650
Miscellaneous 6,627 600 7,227
Equipment and maintenance 623 - 623
-------------------------- ----------------------------
Total expenses 1,314,777 37,514 119,036 1,471,329
LOSS BEFORE INCOME TAXES (1,294,218) (37,325) (119,036) (1,450,579)
PROVISION FOR INCOME TAXES 5,164 1,302 - 6,466
------------------------------------------------------------------
NET LOSS $ (1,299,382) $ (38,627) $ (119,036) $ (1,457,045)
==================================================================
PER SHARE:
Net loss $ (0.50) $ (0.54)
Weighted average number of
common shares outstanding 2,612,292 2,711,444
</TABLE>
(a) Amortization of goodwill over a period of 10 years.
12
