Company: AEMD
Filing Date: 2025-06-26
Form Type: 10-K
Source: 0001683168-25-004780
Chunk: 32

Company: AETHLON MEDICAL INC
Filing Date: 2025-06-26
Form: 10-K
Item: Item 1
Chunk 32
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. If we fail to maintain effective internal controls
and fail to remediate any future or present control deficiencies, our ability to produce accurate and timely financial statements could
be impaired, which could harm our operating results, our ability to operate our business and our reputation with investors, ultimately
leading to a decline in the price of our Common Stock.

As
a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley
Act, and the rules and regulations of the applicable listing standards of Nasdaq. In particular, Section 404 of the Sarbanes-Oxley Act
requires that we evaluate and determine the effectiveness of our internal controls over financial reporting. It also requires our independent
registered public accounting firm to attest to our evaluation of our internal controls over financial reporting. 

As
disclosed in Item 9A in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, management identified a material
weakness in the segregation of duties within our financial systems. Specifically, user access controls were not sufficiently maintained
to properly restrict both user and privileged access to financial applications within our accounting software system to initiate, record
and approve entries. We also noted that check stock was secured in an authorized signatory’s office. During 2017 through 2020, the
Company incorrectly recorded accrued commission liability of approximately $404,000. The Company reversed accrued commission liability
of approximately $404,000 during the year ended March 31, 2024 related to this error in accounting under U.S. GAAP. The Company originally
failed to correctly apply appropriate accounting principles in recording the transaction, and the error was not detected and corrected
in a timely manner, resulting in an adjustment to the financial statements. Management has discussed with counsel appropriate measures
to record such potential commission liabilities in the future and will implement a quarterly review of all accruals. The reversal of the
accrued commission liability into equity as of March 31, 2024 corrected the impact of the error. 

Since
that time, we have implemented several remediation measures, including enhanced user access controls, segregation of duties, relocation
of check stock to a secure, access-controlled area, and the implementation of a quarterly review process for all significant accruals.
Management has also consulted with legal counsel to clarify how potential commission liabilities should be recorded in the future. The
reversal of