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Item 5. Market for Registrant’s Common Equity

2021-03-31 compared with 2020-03-30 · 343 added, 664 removed, 48 unchanged (95% of the section changed)

Market for Registrant’s Common Equity,

Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is listed

and traded on the NYSE American under the symbol AIM.

Holders of Common Stock

As of March 21, 2019,

there were approximately 166 holders of record of our Common Stock.

This number was determined from records maintained by our

transfer agent and does not include beneficial owners of our securities whose securities are held in the names of various dealers

and/or clearing agencies.

Securities Authorized for Issuance Under

Equity Compensation Plans

for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

common stock is listed and traded on the NYSE American under the symbol AIM.

of Common Stock

of March 26, 2021, there were approximately 148 holders of record of our Common Stock.

This number was determined from

records maintained by our transfer agent and does not include beneficial owners of our securities whose securities are held in

the names of various dealers and/or clearing agencies.

Authorized for Issuance Under Equity Compensation Plans

about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of

Part III of this Annual Report.

We have not paid any cash

dividends on our Common Stock in recent years.

It is management’s intention not to declare or pay dividends on our Common

Stock, but to retain earnings, if any, for the operation and expansion of our business.

have not paid any cash dividends on our Common Stock in recent years.

It is management’s intention not to declare or pay

dividends on our Common Stock, but to retain earnings, if any, for the operation and expansion of our business.

Sales of Unregistered Securities

During the year ended December 31, 2019, we

issued and sold the following unregistered securities:

All share and per share

numbers in this have been adjusted to reflect the one-for-44 reverse stock split of our issued and outstanding shares of common

stock effected on June 10, 2019.

On June 11, 2019, the

board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at

the market price.

As of June 28, 2019, the Company has issued 67,767 shares of its common stock at prices between $4.03 and $4.37

for a total of $274,000.

the year ended December 31, 2020, we issued and sold the following unregistered securities:

share and per share numbers in this have been adjusted to reflect the one-for-44 reverse stock split of our issued and outstanding

shares of common stock effected on June 10, 2019.

July 7, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from

us at the market price.

As of August 31, 2020, we had issued 10,730 shares of our common stock at a price of $2.33 for a total

This plan expired September 10, 2020.

September 4, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares

from us at the market price.

As of October 31, 2020, we have issued 12,316 shares of our common stock at a price of $2.03 for

a total of $25,000.

This plan expired November 1 ,2020.

November 5, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares

from the Company at the market price.

As of December 31, 2020, the Company has issued 14,435 shares of its common stock at a price

of $1.72 for a total of $25,000.

This plan expired January 2, 2021.

June 11, 2019, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares

from the Company at the market price.

As of June 28, 2019, the Company has issued 67,767 shares of its common stock at prices

between $4.03 and $4.37 for a total of $274,000.

This plan expired August 19, 2019.

As part of the cash conservation

program adopted on August 28, 2017, starting with the month of September 2017, the directors agreed to defer 100% of their fees

until cash is available.

In consideration of this deferral, 5,137 options were issued to each of the two independent directors

in February 2018 with an exercise price of $16.28;

3,456 options were issued to each of the two independent directors in May 2018

with an exercise price of $13.20, and 2,230 options were issued in July 2018 with an exercise price of $13.64.

All of the foregoing

options and the options discussed below are exercisable for a period of 10 years with a vesting period of three years.

was suspended as of July 15, 2018 and all remaining deferred fees were paid in July 2018.This Program was reactivated as of August

16, 2018 with the understanding that options would not be issued on the deferred amounts until the 2018 Equity Incentive Plan

was approved by the stockholders.

The 2018 Equity Incentive Plan was approved by the stockholders on October 17, 2018, and

3,927 options were issued to each of the two independent directors with an exercise price on $9.68 for a period of ten years

with a vesting period of one year.

On January 28, 2019, an aggregate of 11,698 options were issued to each of the directors with

an exercise price of $9.68 for a period of ten years with a vesting period of one year for the deferral of fees and for chairing

various committees, respectively.

Starting April 1, 2019, 50% of the Directors fees have being paid in Company stock.

As of September

23, 2019, each of the two independent Directors has received 20,383 shares.

Also, as part of the cash

conservation program adopted on August 28, 2017, starting with the month of September 2017, certain officers agreed to defer 40%

of their salaries until cash is available.

In consideration of this deferral, 20,102 options were issued to these officers in

February 2018 with an exercise price of $16.20;

13,618 options were issued to these officers in May 2018 with an exercise price

of $13.20, and 8,847 options were issued to these officers in July 2018 with an exercise price of $13.64.

This program was suspended

as of July 15, 2018 and all remaining deferred salaries were paid on July 2018.

This Program was reactivated as of August 16,

2018 for 50% of their salaries with the understanding that options would not be issued on the deferred amounts until the 2018

Equity Incentive Plan was approved by the stockholders.

The 2018 Equity Incentive Plan has been approved by the stockholders

and on October 17, 2018, 18,380 options were issued to these officers with an exercise price on $9.68 for a period of ten

years with a vesting period of one year.

On January 28, 2019, 27,570 options were issued to each of these officers with an exercise

price of $9.68 for a period of ten years with a vesting period of one year.

Also as part of the cash

conservation program adopted on August 28, 2017, all employees agreed to be paid 50% of their salaries in the form of unrestricted

common stock of the Company.

Starting with the month of September 2017, the salaries of all the employees of the Company were

paid 50% in the form of unrestricted common stock of the Company.

The total number of shares issued as of June 30, 2018 to the

employees under this program was 48,111 shares at stock prices ranging from $13.64 to $24.20 per share.

This program was suspended

by the board of directors on June 30, 2018.

On March 24, 2018, the

Company sold 28,409 shares of common stock under its S-3 shelf registration.

The Company realized net proceeds of $475,000 from

this stock offering and paid $25,000 in placement agent fees.

The 2009 Equity Incentive

Plan, effective June 24, 2009, as amended, authorizes the grant of non-qualified and incentive stock options, stock appreciation

rights, restricted stock and other stock awards.

A maximum of 500,000 shares of common stock is reserved for potential issuance

pursuant to awards under the 2009 Equity Incentive Plan.

Unless sooner terminated, the 2009 Equity Incentive Plan will continue

in effect for a period of 10 years from its effective date.

During 2018, there were 106,255 options granted by the Company under

The 2018 Equity Incentive

Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii)

Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii)

Performance Cash Awards, and (viii) Other Stock Awards.

Initially, a maximum of 159,091 shares of common stock is reserved for

2009 Equity Incentive Plan, effective June 24, 2009, as amended, authorizes the grant of non-qualified and incentive stock options,

stock appreciation rights, restricted stock and other stock awards.

A maximum of 500,000 shares of common stock is reserved for

potential issuance pursuant to awards under the 2009 Equity Incentive Plan.

1 unchanged sentence

Plan will continue in effect for a period of 10 years from its effective date.

On October 17, 2018, the board of directors issued

26,234 options to the officers and directors at the exercise price of $9.68 expiring in 10 years, and on November 14, 2018, the

board of directors issued 23 options to each employee, officer and director at the exercise price of $9.68 expiring in ten years.

On January 28, 2019, 39,268 options were issued to the officers and directors with an exercise price of $9.68 for a period of

ten years with a vesting period of one year.

The offers, sales and issuances of securities

described above was deemed to be exempt from registration under the Securities Act in reliance on either Section 4(a)(2) in that

the issuance of securities to the accredited investors did not involve a public offering, or Rule 701 in that the transactions

were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701.

Selected Financial Data.

Not Applicable.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations.

The following discussion

and analysis is related to our financial condition and results of operations for the two years ended December 31, 2019.

This information

should be read in conjunction with our consolidated financial statements and related notes thereto beginning on F-1 of this Form

During 2018, there were 106,255 options granted

by the Company under this Plan.

2018 Equity Incentive Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory

Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance

Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards.

Initially, a maximum of 159,091 shares of common stock

is reserved for potential issuance pursuant to awards under the 2018 Equity Incentive Plan.

Unless sooner terminated, the 2018

Equity Incentive Plan will continue in effect for a period of 10 years from its effective date.

On October 17, 2018, the board

of directors issued 26,234 options to the officers and directors at the exercise price of $9.68 expiring in 10 years, and on November

14, 2018, the board of directors issued 23 options to each employee, officer and director at the exercise price of $9.68 expiring

in ten years.

On January 28, 2019, 39,268 options were issued to the officers and directors with an exercise price of $9.68 for

a period of ten years with a vesting period of one year.

offers, sales and issuances of securities described above was deemed to be exempt from registration under the Securities Act in

reliance on either Section 4(a)(2) in that the issuance of securities to the accredited investors did not involve a public offering,

or Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided

under Rule 701.

Financial Data.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations.

following discussion and analysis is related to our financial condition and results of operations for the two years ended December

31, 2020 This information should be read in conjunction with our consolidated financial statements and related notes thereto beginning

on F-1 of this Form 10-K.

Please also see “Special Note Regarding Forward Looking Statements”

Risk Factors.

We have issued warrants

(the “Warrants”) in August 2016, February 2017, June 2017, August 2017, April 2018, and March 2019 that

are single compound derivatives containing both an embedded right to obtain stock upon exercise (a “Call”) and a series

of embedded rights to settle the Warrants for cash upon the occurrence of certain events (each, a “Put”).

the Put provisions allow the Warrant Holders liquidity protection;

the right to receive cash in certain situations where the Holders

would not have a means of readily selling the shares issuable upon exercise of the Warrants (e.g., where there would no longer

be a significant public market for our common stock).

However, because the contractual formula used to determine the cash settlement

value of the embedded Put requires use of certain assumptions, the cash settlement value of the embedded Put can differ from the

fair value of the unexercised embedded Call option at the time the embedded Put option is exercised.

We recompute the fair

value of the Warrants at the end of each quarterly reporting period.

Such value computation includes subjective input assumptions

that are consistently applied each period.

If we were to alter our assumptions or the numbers input based on such assumptions,

the resulting fair value could be materially different.

On September 28, 2018,

we entered into a $3,170,000 10% Secured Convertible Promissory Note (the “IR Note”) with Iliad Research and

Trading, L.P.

(“Iliad”), which was issued to Iliad in conjunction with 500,000 shares of Common Stock (the “Origination

Shares”).

We collected $3,000,000 in cash from Iliad during September 2018 and the remaining $170,000 was retained by Iliad

for its legal fees of $20,000 for the issuance of the IR Note and the Original Issue Discount of $150,000.

We incurred $210,000

in third-party fees directly attributed to the issuance of this Note.

We determined the IR Note

should be recorded at fair value with subsequent changes in fair value recorded in earnings.

This conclusion is based on the redemption

conversion feature, which allows IR to trigger the redemption of the IR Note for cash or conversion of the IR Note for common

shares prior to its maturity date at a price of the lesser of $0.30 per share or the Market Price as defined within the IR Note.

The choice of cash redemption or conversion of the IR Note for common shares is at our option.

This feature may require that we

issue a variable number of common shares to settle the IR Note which was determined to have a predominantly fixed monetary value

at inception.

In connection with the IR Note, we recorded a loss in the Company’s Consolidated Statements of Operations

equal to $582,000 for the year ended December 31, 2018.

March 13, 2019, we amended the Purchase Agreement pursuant to which we issued the IR Note (the “Amendment”).

The Amendment

extends the maturity of the IR Note to September 28, 2020.

In addition, the redemption conversion rates were revised to a price

to be determined by mutual agreement between us and IR.

In the event that we and IR are unable to reach a mutually agreeable price,

we will be required to pay the applicable redemption amount in cash.

The maximum amount of the IR Note the Lender will be able

to redeem in any given calendar month is $300,000.

evaluated the Amendment in accordance with ASC 470, Debt (“ASC 470”) and determined the Amendment is considered

an extinguishment of the existing debt and issuance of new debt.

have issued warrants (the “Warrants”) in August 2016, February 2017, June 2017, August 2017, April 2018, and March

2019 that are single compound derivatives containing both an embedded right to obtain stock upon exercise (a “Call”)

and a series of embedded rights to settle the Warrants for cash upon the occurrence of certain events (each, a “Put”).

Generally, the Put provisions allow the Warrant Holders liquidity protection;

the right to receive cash in certain situations

where the Holders would not have a means of readily selling the shares issuable upon exercise of the Warrants (e.g., where there

would no longer be a significant public market for our common stock).

However, because the contractual formula used to determine

the cash settlement value of the embedded Put requires use of certain assumptions, the cash settlement value of the embedded Put

can differ from the fair value of the unexercised embedded Call option at the time the embedded Put option is exercised.

recompute the fair value of the Warrants at the end of each quarterly reporting period.

Such value computation includes subjective

input assumptions that are consistently applied each period.

If we were to alter our assumptions or the numbers input based on

such assumptions, the resulting fair value could be materially different.

September 28, 2018, we entered into a $3,170,000 10% Secured Convertible Promissory Note (the “IR Note”) with Iliad

Research and Trading, L.P.

(the “Holder”), which was issued to the Holder in conjunction with 500,000 shares of common

stock (the “Origination Shares”).

We collected $3,000,000 in cash from the Holder during September 2018 and the remainder

$170,000 was retained by the Holder for the Holder’s legal fees of $20,000 for the issuance of the IR Note and the Original

Issue Discount of $150,000.

We incurred $210,000 in third-party fees directly attributed to the issuance of the IR Note.

to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest

on the IR Note due and payable on September 28, 2019, unless converted under terms and provisions as set forth within the IR Note.

The IR Note provided the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued

but unpaid interest into shares of our common stock at a conversion price of $0.30 per share.

In addition, beginning on March

28, 2019, the IR Note also provided the Holder with the right to redeem all or any portion of the IR Note (“Redemption Amount”).

The payments of each Redemption Amount may be made, at our option, in cash, by converting such Redemption Amount into shares of

common stock (“Redemption Conversion Shares”), or a combination thereof.

The number of Redemption Conversion Shares

equals the portion of the applicable Redemption Amount being converted divided by the lesser of $0.30 or 80% of the lowest Volume

Weighted Average Price (“VWAP”) during the ten (10) trading days immediately preceding the applicable measurement

date (the “Market Price”).

The Purchase Agreement required us to reserve at least 8,900,000 shares of common stock

from our authorized and unissued common stock to provide for all issuances of common stock under the IR Note.

However, the IR

Note provided that the aggregate number shares of common stock issued to the Holder under the IR Note and Purchase Agreement shall

not exceed 19.99% of the total number of shares of common stock outstanding as of the closing date unless we have obtained stockholder

approval of the issuance.

The Origination Shares were to be returned to us in the event that we could provide within 30 days of

the closing of the transaction certain requested assets as security for repayment of the IR Note.

The security was not provided

so the Origination Shares remained with the Holder.

determined the IR Note should be recorded at fair value with subsequent changes in fair value recorded in earnings.

This conclusion

is based on the redemption conversion feature, which allows the Holder to trigger the redemption of the IR Note for cash or conversion

of the IR Note for common shares prior to its maturity date at a price of the lesser of $0.30 per share or the Market Price as

defined within the IR Note.

The choice of cash redemption or conversion of the IR Note for common shares was at our option.

feature may require us to issue a variable number of common shares to settle the IR Note which was determined to have a predominantly

fixed monetary value at inception.

On March 13, 2019, we amended the Purchase Agreement pursuant to which we issued the Convertible

IR Note (the “Amendment”).

The Amendment extended the maturity of the IR Note to September 28, 2020.

the redemption conversion rates were revised to a price to be determined by mutual agreement between us and the Holder.

event that we and the Holder were unable to reach a mutually agreeable price, we would be required to pay the applicable redemption

amount in cash.

The maximum amount of the IR Note the Holder will be able to redeem in any given calendar month was $300,000.

evaluated the Amendment in accordance with ASC 470, Debt (“ASC 470”) and determined the Amendment was considered

an extinguishment of the existing debt and issuance of net debt.

As a result, we derecognized the liability and recorded a loss

on the extinguishment of debt of $272,812 which was equal to the difference between the reacquisition price of the debt and the

net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt.

Subsequently, the amended

note was recorded in accordance with ASC 480 at the fair value that the note was issued with changes in fair value recorded through

earnings at each reporting period.

the second quarter there were a series of debt conversions in the period, which

partially converted $1,400,000 of the $3,408,000 convertible debt, as amended, into stockholders’

equity, adding approximately

$1,500,000 to stockholders’

The number of shares issued in these conversions were 204,246 shares.

5, 2019, we issued a Secured Promissory Note (the “CV Note”) to Chicago Venture Partners, L.P.

on the extinguishment of debt of $345,000 in 2019 which was equal to the difference between the reacquisition price of the debt

and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt.

Subsequently,

the amended note was recorded in accordance with ASC 480 at the fair value that the note was issued with changes in fair value

recorded through earnings at each reporting period.

were a series of debt conversions during 2019 which partially converted $1,400,000 of the $3,408,000 convertible debt, as amended,

into stockholders’

equity, adding approximately $1,400,000 to stockholders’

The number of shares issued in

these conversions were 204,246 shares.

In October 2019 and November 2019 respectively, the Holder redeemed $300,000 pursuant to

the terms of the modification.

In connection with the IR Note, we recorded a gain equal to $127,000 for the year-end December

See Note 14 Convertible Note Payable.

August 5, 2019, we issued a Secured Promissory Note (the “CV Note”) with Chicago Venture Partners, L.P.

(“CV”).

The CV Note has an original principal amount of $2,635,000, bears interest at a rate of 10% per annum and will mature in 24 months,

The Note had an original principal amount of $2,635,000, bore interest at a rate of 10% per annum and was to mature in 24 months,

unless earlier paid in accordance with its terms.

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of CV’s legal fees.

Pursuant to a Security Agreement between us and CV, repayment of the CV Note is secured by substantially

all of our assets other than our intellectual property.

We utilized the net proceeds from the CV Note for the manufacturing

of Ampligen, ongoing clinical trials and general administrative and operational expenses associated with our ongoing activities.

On December 5, 2019,

we issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P.

Pursuant to a Security Agreement between us and CV, repayment of the Convertible Note is secured by

substantially all of our assets other than our intellectual property.

the quarter ending June 30, 2020, CV made redemptions of $650,000 reducing the principal to $1,985,000.

On May 29, 2020, we paid

off the outstanding CV Note which consisted of principal of $1,985,000, and accrued interest payable of $220,000.

The net payment

of $1,795,000, less the write off of the origination discount of $369,000 and issuance costs of $6,000, resulted in a gain on

extinguishment of $66,000.

December 5, 2019, we issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P.

(“AS”).

the Note has an

original principal amount of $2,175,000, bears interest at a rate of 10% per annum and will mature in 24 months, unless earlier

paid in accordance with it term.

We received proceeds of $1,649,000, after an original issue discount of $516,000 and payment

of AS legal fees.

Pursuant to a Security Agreement between us and AS, prepayment of the AS Note is secured by substantially

all of our assets other than our intellectual property.

We utilized the $1,649,000 of the net proceeds from the AS Note to pay

off in full our obligation to Iliad, an entity with affiliations to AS, pursuant to the IR Note.

RESULTS OF OPERATIONS

Year ended December 31, 2019 versus

year ended December 31, 2018

Our net loss was approximately

$9,533,000 and $9,827,000 for the years ended December 31, 2019 and 2018, respectively, representing a decrease

in loss of approximately $294,000 or 3% when compared to the same period in 2018.

This decrease in loss for the

year ended December 31, 2019 was primarily due to the following:

a decrease in revenues of $227,000 or 62%.

an increase in interest and finance costs

the quarterly revaluation of certain redeemable

warrants resulted in a non-cash gain of $1,510,000 in the year ended December 31, 2019 compared to a gain of $1,165,000 in

the year ended December 31, 2018, an increase of $345,000.

the fair value adjustment for the convertible

note resulted in a gain of $90,000 in the year ended December 31, 2019, and a loss of $582,000 in the year ended December

a decrease in research and development

expense of $127,000 or 3%.

an increase in production costs of $9,000.

an increase in general and administrative expenses of $838,000.

a gain resulting from a settlement with as insurance claim of $1,217,000.

Net loss per share was

$(2.62) and $(9.77) for the years ended December 31, 2019 and 2018, respectively.

The weighted average number of shares of our

common stock outstanding as of December 31, 2019 was 10,386,754 as compared to 1,107,607 as of December 31, 2018.

Revenues from our Ampligen®

AS Note has an original principal amount of $2,175,000, bears interest at a rate of 10% per annum and will mature in 24 months,

unless earlier paid in accordance with its term.

In conjunction with the AS Note, we utilized $1,650,000 of the net proceeds from

the AS Note to pay off in full our obligation to Iliad, an entity with affiliations to AS, pursuant to the IR Note We evaluated

the IR Note in accordance with ASC 470, Debt (“ASC 470”) and determined the exchange is considered an extinguishment

of the existing debt and issuance of new debt.

As a result, we derecognized the liability and recorded a loss on the extinguishment

of debt of $250,000 which was equal to the difference between the reacquisition price of the debt and the net carrying amount

(amount due at maturity, adjusted for unamortized discounts) of the extinguished debt.

Subsequently, the AS Note will be recorded

in accordance with ASC 470 whereby we will record a liability equal to the proceeds received on December 5, 2019.

June 19, 2020, we paid off the outstanding AS note consisting of the original principal of $2,175,000 and accrued interest payable

of $122,000 less origination discount of $376,000 and issuance costs of $7,000, with a net note payable of $1,838,000, including

a gain on extinguishment of $76,000.

OF OPERATIONS

ended December 31, 2020 versus year ended December 31, 2019

net loss was approximately $14,400,000 and $9,404,000 for the years ended December 31, 2020 and 2019, respectively, representing

an increase in loss of approximately $4,996,000 or 53% when compared to the same period in 2019.

This increase in loss

for the year ended December 31, 2020 was primarily due to the following:

increase in the loss of the quarterly revaluation of certain redeemable warrants of $1,633,000 which resulted in a non cash

loss of $123,000 in the year-ended December 31, 2020 compared to a non-cash gain of $1,510,000 in the year ended December

increase in research and development expenses of $1,069,000 or 23%;

increase in general and administrative expenses of $1,615,000 or 23%;

increase in other assets impairment losses of $135,000;

increase in interest expense and finance costs of $245,000;

decrease in the gain resulting from a settlement with as insurance claim of $1,217,000 in 2019 which did not occur in 2020;

decrease of $90,000 in the gain for the fair value adjustment for the convertible note which was paid in full in 2019;

decrease in the extinguishment of debt of $487,000 which resulted in a gain of $142,000 for the year ended December 31, 2020

compared to a loss of $345,000 in the year-ended December 31, 2019:

decrease in production costs of $87,000 or 10%;

increase in interest/other income of $130,000;

increase in revenue from cost recovery of $23,000.

loss per share was $ (0.45) and $(2.58) for the years ended December 31, 2020 and 2019, respectively.

The weighted average

number of shares of our common stock outstanding as of December 31, 2020 was 31,842,799 as compared to 3,642,717 as of December

from our Ampligen®

Cost Recovery Program were $163,000 and $140,000 for the years ended December 31, 2020 and 2019, respectively.

The decrease in

revenues of $227,000, a decrease of 62%, between periods was primarily due to the clinical site inventory build in the fourth

quarter of 2018.

For the years ended December

31, 2019 and 2018, we had no Alferon N Injection®

Finished Good product to commercially sell and all revenue was generated

from the EAP and our FDA approved open-label treatment protocol, (“AMP 511”), that allows patient access to Ampligen®

The increase in revenues of $23,000, or 16%, between periods was primarily due to the clinical sites usage.

the years ended December 31, 2020 and 2019, we had no Alferon N Injection®

Finished Good product to commercially sell and

all revenue was generated from the EAP and our FDA approved open-label treatment protocol, (“AMP 511”), that allows

patient access to Ampligen®

for treatment in an open-label safety study.

Production Costs

Production costs were

approximately $893,000 and $884,000, respectively, for the years ended December 31, 2019 and 2018, representing an increase of

$9,000 in production costs in the current period.

Research and Development Costs

Overall Research and Development

(“R&D”) costs for the year ended December 31, 2019 were approximately $4,651,000 as compared to $4,778,000 for

the same period a year ago, reflecting a decrease of approximately $127,000.

The primary reason for the decrease in research and

development costs was due to a decrease in Ampligen®

contract manufacturing of $946,000 and Ampligen®

stability and compliance

of $183,000 offset by an increase in polymer production of $853,000 and clinical trials of $199,000.

General and Administrative Expenses

General and Administrative

(“G&A”) expenses for the years ended December 31, 2019 and 2018, were approximately $7,039,000 and $6,201,000,

respectively, reflecting an increase of approximately $838,000 or 14%.

The increase in G&A expenses during the current period

was mainly due to increases in professional and legal fees of $431,000, stock compensation of $323,000, public relations of $129,000

and investment bank fees of $120,000.

Interest Expense and Finance Costs

Interest and finance costs

for the year ended December 31, 2019 was $427,000 compared to $502,000 in the prior year, a decrease of $75,000

The increase is mainly attributed to the redemption of the IR Note in the second quarter of 2019.

note/mortgage payable incurred in May 2017 which was paid off in March 2018 with the resulting write off of the balance of the

unamortized mortgage settlement costs in addition to the interest expense on the mortgage;

plus the interest settlement costs

on the Finance Obligation from the sale leaseback of the main New Brunswick building and finance costs and interest related to

the convertible note from September 2018.

Interest and Other Income

Interest and other income

for the years ended December 31, 2019 and 2018 was approximately $89,000 and $32,000, respectively, representing

costs were approximately $806,000 and $893,000, respectively, for the years ended December 31, 2020 and 2019, representing a decrease

of $87,000 related to repairs and maintenance in the current period.

and Development Costs

Research and Development (“R&D”) costs for the year ended December 31, 2020 were approximately $5,720,000 as compared

to $4,651,000 for the same period a year ago, reflecting an increase of approximately $1,069,000.

The primary reason for the increase

in research and development costs was due to increases in Scrap from expired material of $1,095,000, clinical trials of $197,000,

outside labs $194,000, patent and trademark abandonments of $113,000 offset by decreases in wages and benefits of $401,000 and

outside contractors $123,000.

and Administrative Expenses

and Administrative (“G&A”) expenses for the years ended December 31, 2020 and 2019, were approximately $8,654,000

and $7,039,000, respectively, reflecting an increase of approximately $1,615,000 or 23%.

The increase in G&A expenses during

the current period was mainly due to increases in salaries and benefits of $973,000, accounting, professional and legal fees of

$349,000, stock compensation of $184,000, taxes and licenses of $163,000, scientific advisory board of $159,000, offset

by decreases in public relations of $90,000 and investment bank fees of $135,000, and travel of $31,000.

and Other Income

and other income for the years ended December 31, 2020 and 2019 was approximately $219,000 and $89,000, respectively, representing

an increase of approximately $130,000 or 146%.

The primary cause for the increase in investment income during the

current period was primarily due to higher balances available to invest in the current period as compared to the prior period.

Redeemable Warrants

The quarterly revaluation

of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability for the year ended December

31, 2019 amounted to a gain of approximately $1,510,000, compared to a gain of $1,165,000 for the year ended December 31, 2018,

which represents an increase of $345,000 or 30% (see “Financial Statements:

The primary cause for the increase in investment income during the current

period was primarily due to higher balances available to invest in the current period as compared to the prior period.

of other assets

the year ended December 31, 2020 there was a loss of $135,000 related to the impairment of other assets consisting of the loss

of a deposit to a supplier for use of technology which we are no longer utilizing and was written off.

Expense and Finance Costs

and finance costs for the year ended December 31, 2020 was $672,000 compared to $427,000 in the prior year, an increase

of $245,000 or 57%.

The increase is mainly attributed to the interest and amortization of costs of the Chicago Ventures and Atlas

notes which were extinguished in the second quarter of 2020.

Extinguishment

extinguishment costs decreased $487,000.

There was a gain of $142,000 for the year ended December 31, 2020 compared to a loss

of $345,000 in the year-ended December 31, 2019.

quarterly revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability amounted

to a loss of $123,000 for the year ended December 31, 2020 compared to a gain of approximately $1,510,000 in December 31, 2019

which represents a decrease of $1,633,000 or 108% (see “Financial Statements:

Fair Value”

for the various factors

considered in the valuation of redeemable warrants).

Sale of New Jersey Tax Net Operating

In December 2019,

the Company effectively sold $10,000,000 New Jersey state net operating loss for approximately $776,000.

In December 2018, the

Company effectively sold $8,000,000 New Jersey state net operating loss for approximately $859,000.

Convertible Note Payable

The quarterly revaluation

of the convertible note resulted in a non-cash adjustment.

For the year ended December 31, 2019 valuation amounted

to a gain of $90,000, compared to the 2018 valuation of a non-cash loss of $582,000.

Other Transactions

During the year ended

December 31, 2019 there was a gain from the insurance loss claim of $1,217,000.

For the year ended December 31, 2018,

there was a gain of $474,000 resulting from the settlement of litigation with Nitto Avecia Pharma Services, Inc.

(“NAPS”).

There was also a gain

of $223,000 resulting from the sale of the second building in New Brunswick, New Jersey in February 2018.

Liquidity and Capital Resources

In 2018, we sold an under-utilized

warehouse at 5 Jules Lane for $1,050,000 and we sold our manufacturing facility for $4,080,000 while simultaneously entering into

a favorable long-term lease with an option to repurchase the facility.

In 2018, we also realized $1,260,000 through the

exercising of outstanding warrants.

In March 2019, we completed

a rights offering to our stockholders and certain option and warrant holders, pursuant to which we issued Preferred Stock convertible

into an aggregate of 26,560,000 shares of common stock and warrants exercisable for up to an additional 26,560,000 shares of common

We netted approximately $4.69 million from the sale of securities in the rights offering.

In September 2019, we

raised approximately $8,000,000 in a public offering underwritten by A.G.P./Alliance Global Partners, LLC (“AGP”)

for the various

factors considered in the valuation of redeemable warrants).

from sale of income tax operating losses

December 2020, we effectively sold $11,000,000 New Jersey state net operating loss for approximately $1,090,000 and recorded a

deferred tax asset of 96,000.

In December 2019, we effectively sold $10,000,000 New Jersey state net operating loss for approximately

$776,000 and recorded a deferred tax asset of $129,000.

quarterly revaluation of the convertible note resulted in a non-cash adjustment in 2020 of zero and in 2019 amounted to a gain

the year ended December 31, 2020 there were no gains or losses from insurance claims, however, in 2019 there was a gain from the

insurance loss claim of $1,217,000.

and Capital Resources

September 2019, we raised approximately $8,000,000 in a public offering underwritten by A.G.P./Alliance Global Partners, LLC (“AGP”)

pursuant to which we issued (i) 1,740,550 shares of our common stock;

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of common stock (the “Representative’s Warrant”).

During 2019, an aggregate of 5,278,310 shares were issued

During 2020, an aggregate of 8,874,000 shares of common stock

were issued upon exercise of the Prefunded Warrants.

Subsequent to 2019 through

the date of this report, an aggregate of 8,746,990 shares were issued upon exercise of the Warrants for gross proceeds of approximately

the first quarter of 2020 an aggregate of 8,746,990 shares were issued upon exercise of the Warrants for gross proceeds of approximately

$8,658,000 and an aggregate of 1,870,000 shares were issued upon exercise of the Prefunded Warrants.

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2020, the Representative’s Warrant was amended to permit exercise of such warrant to commence on March 30, 2020.

warrants were recently exercised and an aggregate of 266,665 shares are being issued upon exercise of this warrant

for gross proceeds of approximately $264,000.

We reactivated our 2012

EDA with Maxim under our universal shelf registration statement in December 2017.

From December 5, 2017 through July 18, 2019,

we sold an aggregate of 114,342 shares under the 2012 EDA for proceeds of $1,841,788 net of $56,963 in commissions.

was terminated in July 2019, and a new Equity Distribution Agreement was entered into on July 19, 2019.

On July 19, 2019, we entered

into a new Equity Distribution Agreement (the “2019 EDA”) with Maxim, pursuant to which we may sell from time to time,

shares of our common stock through Maxim, as agent (the “Offering”).

The 2019 EDA replaced our prior 2012 Equity Distribution

Agreement with Maxim.

On July 19, 2019, we filed a prospectus supplement with the Securities and Exchange Commission (the “SEC”)

in connection with the Offering (the “Prospectus Supplement”) under its existing Registration Statement on Form S-3

(File No 333-226059), which became effective on August 3, 2018 (the “Registration Statement”), related to the sale

of Shares having an aggregate offering price of up to $4,508,244, the maximum number of Shares permitted to be sold under the

2019 EDA and Registration Statement at that time.

As of December 31, 2019, the Company sold 905,869 shares under the Distribution

Agreement for a total of $2,553,079 which includes a 3.5% fee to Maxim of $89,358.

Cash used in operating

activities for the year ended December 31, 2019 was approximately $9,067,000 compared to approximately $10,640,000 for

the same period in 2018, a decrease of $1,573,000.

The primary reasons for this decrease in cash used in operations in 2019

was related to funds in 2018 from the sale of our New Jersey state net operating loss carryforwards.

In 2019, we did not receive

the funds from the sale of our New Jersey net operating loss carryforwards.

In 2018, we also expended about $1,500,000 toward

the manufacturing of additional polymers for Ampligen for future commercial launch in Argentina.

Cash used in investing activities for the year ended December 31, 2019 was approximately $6,147,000 compared to cash provided by

investing activities of approximately $92,000 for the same period in 2018, representing a change of $6,239,000.

The primary reason for the change was the purchase of marketable securities of approximately $5,782,000 during the

current period compared to the sale of marketable securities $831,000, plus proceeds from the sale of the building of $1,050,000,

in the year ended December 31, 2018.

Cash provided by financing

activities for the year ended December 31, 2019 was approximately $16,385,000 compared to approximately $9,435,000 for

the same period in 2018, an increase of $6,950,000.

The primary reasons for this increase was that we received net proceeds

of $15,303,000 from the sale of shares compared to $5,070,000 from the sale of shares in 2018.

As of December 31, 2019,

we had approximately $8,778,000 in cash, cash equivalents and marketable securities, inclusive of approximately $7,308,000 in

Marketable Securities, representing an increase of approximately $6,950,000 from December 31, 2018.

If we are unable to commercialize

and sell Ampligen and/or recommence material sales of Alferon N Injection, our operations, financial position and liquidity may

be adversely impacted, and additional financing may be required.

In this regard, due to the high cost estimates to bring the facility

back online, we will need additional funds to finance the revalidation process in our facility and to initiate commercial manufacturing,

thereby readying ourselves for an FDA Pre-Approval Inspection and to commercialize our products.

However, there is no assurance

that such financing will be available.

In an effort to conserve

cash, effective with the semi-monthly period ended April 30, 2017, all of the members of the Company’s Board of Directors

agreed to accept 100% of their directors’

fees in the form of options to purchase Company common stock.

This program was

terminated as of August 31, 2017.

As of September 1, 2017, the directors agreed to defer 100% of their fees until cash is available.

On February 13, 2018, 5,137 options were issued to each of the two independent directors with an exercise price of $16.28 for

a period of 10 years with a vesting period of 3 years.

In addition, commencing with the semi-monthly period ended June 15, 2017,

certain officers of the Company, and certain other employees of the Company, agreed to accept 20% of their salary in options to

purchase Company common stock.

This program was also terminated as of August 31, 2017.

In this regard, options to purchase 4,883

shares of Company common stock were issued with exercise prices ranging from $15.84 to $29.48, a holding period of 10 years and

vesting over three years.

As part of the cash conservation

program adopted on August 28, 2017, starting with the month of September 2017, the directors agreed to defer 100% of their fees

until cash is available.

In consideration of this deferral, 5,137 options were issued to each of the two independent directors

in February 2018 with an exercise price of $16.28;

3,456 options were issued to each of the two independent directors in May 2018

with an exercise price of $13.20, and 2,230 options were issued in July 2018 with an exercise price of $13.64.

All of the foregoing

options and the options discussed below are exercisable for a period of 10 years with a vesting period of three years.

was suspended as of July 15, 2018 and all remaining deferred fees were paid in July 2018.This Program was reactivated as of August

16, 2018 with the understanding that options would not be issued on the deferred amounts until the 2018 Equity Incentive Plan

was approved by the stockholders.

The 2018 Equity Incentive Plan was approved by the stockholders and the securities issuable

thereunder were registered with the SEC and, on October 17, 2018, 3,297 options were issued to each of the two independent directors

with an exercise price on $9.68 for a period of ten years with a vesting period of one year.

On January 28, 2019, 4,712 options

were issued to each of the two independent directors with an exercise price of $9.68 for a period of ten years with a vesting

period of one year.

Also on January 28, 2019, 1,136 options were issued to each of the two independent directors with an exercise

price of $9.68 for a period of ten years with a vesting period of one year for chairing the committees in 2018.

Also as part of the cash

conservation program adopted on August 28, 2017, starting with the month of September 2017, certain officers agreed to defer 40%

of their salaries until cash is available.

In consideration of this deferral, 20,101 options were issued to these officers

in February 2018 with an exercise price of $16.28;

13,167 options were issued to these officers in May 2018 with an exercise price

of $13.20, and 8,847 options were issued to these officers in July 2018 with an exercise price of $13.64.

This program was suspended

as of July 15, 2018 and all remaining deferred salaries were paid on July 2018.

This Program was reactivated as of August 16,

2018 for 50% of their salaries with the understanding that options would not be issued on the deferred amounts until the 2018

Equity Incentive Plan was approved by the stockholders and the plan registered with the SEC.

The 2018 Equity Incentive

Plan has been approved by the stockholders and registered with the SEC and on October 17, 2018, 13,380 options were issued

to these officers with an exercise price on $9.68 for a period of ten years with a vesting period of one year.

On January 28,

2019, 27,570 options were issued to these officers with an exercise price of $9.68 for a period of ten years with a vesting period

Also as part of the cash

conservation program adopted on August 28, 2017, all employees agreed to be paid 50% of their salaries in the form of unrestricted

common stock of the Company.

Starting with the month of September 2017, the salaries of all the employees of the Company were

paid 50% in the form of unrestricted common stock of the Company.

The total number of shares issued as of June 30, 2018 to the

employees under this program was 48,111 shares at stock prices ranging from $13.64 to $24.20 per share.

This program was suspended

by the Board of Directors on June 30, 2018.

On March 24, 2018, the

Company sold 28,409 shares of common stock under its S-3 shelf registration.

The Company realized net proceeds of $475,000 from

this stock offering and paid $25,000 in placement agent fees.

On April 20, 2018, the

Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”)

for the sale by the Company of an aggregate of 150,000 shares (the “Common Shares”) of the Company’s common

stock, at a purchase price of $17.16 per share.

Concurrently with the sale of the Common Shares, pursuant to the Purchase Agreements

the Company also sold 150,000 warrants, 50% of which are Class A Warrants and 50% of which are Class B Warrants (collectively,

the “Warrants”).

The Company received gross proceeds from the sale of the Warrants solely to the extent such Warrants

are exercised for cash.

Both classes of Warrants will not be exercisable until six months after issuance and will have an exercise

price of $17.16 per share, subject to adjustments as provided under the terms of the Warrants.

The Class A Warrants and Class

B Warrants will expire, respectively, two and five years after the date on which they are first exercisable.

The closing of the

sales of these securities under the Purchase Agreements took place on April 24, 2018.

The Company received net proceeds from the

transactions of $2,343,820 after deducting certain fees due to the placement agent and the Company’s transaction expenses.

On November 27, 2017,

we reactivated the EDA.

During the year ended December 31, 2018, we sold an aggregate of 49,463 shares under the EDA for proceeds

of $827,000 net of $25,000 in commissions.

Pursuant to a prospectus supplement dated February 7, 2018, we were able to sell up

to 148,844 of our common stock (inclusive of shares already sold under the prospectus supplement) under the EDA.

1, 2019 through March 25, 2019 we sold an aggregate of 2,627 shares under the EDA for proceeds of $26,000 net of $1,000 in commissions.

The actual number of shares that we can sell and the proceeds to be received therefrom are dependent upon the market price of

our common stock.

In February 2017, we entered

into Securities Purchase Agreements (each, a “Purchase Agreement”) with certain investors for the sale by us of 41,322

shares of our common stock at a purchase price of $24.20 per share.

Concurrently with the sale of the common stock,

pursuant to the Purchase Agreement, we also sold warrants to purchase 30,992 shares of common stock for aggregate net proceeds

of approximately $875,000.

We also issued placement agent warrants for the purchase of an aggregate of 90,910 shares of our common

During 2019, we raised

additional funds through both convertible and non-convertible debt financing.

Please see “

Convertible Notes Payable ”

In May 2017, we entered

into a mortgage and note payable agreement with a bridge funding company to obtain a two-year funding line of up to $4,000,000

secured by our assets and property located at 783 Jersey Ave., New Brunswick, New Jersey.

We paid interest on this note at a fixed

rate of 12% per annum.

We were permitted to prepay the line without penalty commencing after six months.

The balance on this note

was $1,835,000 as of December 31, 2017;

however, it was paid off on March 16, 2018 in conjunction with the sale of 783 Jersey

On March 16, 2018, we

sold our property located at 783 Jersey Ave, New Brunswick, NJ for $4,080,000 and the purchasers received 3,225,806 warrants to

purchase common stock.

Simultaneously therewith, we leased the facility back.

See PART I, Item 2 - “Properties.”

In February 2018, the

Company sold the unencumbered, unutilized, and wholly owned property located at 5 Jules Lane, New Brunswick, New Jersey to Acellories,

NJ LLC, a New Jersey limited liability company, pursuant to a sale agreement dated September 11, 2017.

The sale price was $1,050,000.

There can be no assurances

that, if needed, we will be able to raise adequate funds from these or other sources or enter into licensing, partnering or other

arrangements to advance our business goals.

Our inability to raise such funds or enter into such arrangements, if needed, could

have a material adverse effect on our ability to develop our products.

Also, we have the ability to curtail discretionary spending,

including some research and development activities, if required to conserve cash.

Because of our long-term capital requirements,

the first quarter of 2020, the amended warrants were exercised and an aggregate of 266,665 shares are being issued

upon exercise of the warrant for gross proceeds of approximately of $264,000.

entered into an Equity Distribution Agreement (the “2019 EDA”) with Maxim Group LLC (“Maxim”), pursuant

to which we could sell from time to time, shares of our Common Stock through Maxim, as agent (the “Offering”).

the year ended December 31, 2020, we sold 20,444,807 shares under the 2019 EDA for total gross proceeds of $53,936,615, which

included a 3.5% fee to Maxim of $1,888,727.

During 2021, we sold 5,655,731 shares under the 2019 EDA for total gross proceeds

of $13,301,526, which includes a 3.5% fee to Maxim of $465,553.

The 2019 EDA was terminated in early February 2021.

used in operating activities for the year ended December 31, 2020 was approximately $10,368,000 compared to approximately

$9,067,000 for the same period in 2019, an increase of $1,301,000.

The primary reasons for this increase in cash used in

operations in 2020 was related production cost of 2 Ampligen batches in the amount of $664,000, increase in New

Jersey NOL of $314,000, and decrease in accounts payable of $89,000.

used in investing activities for the year ended December 31, 2020 was approximately $9,164,000 compared to $6,147,000 for

the same period in 2019, representing a change of $3,017,000.

The primary reason for the increase in cash used in investing

activities resulted from the purchase of marketable securities of approximately $12,831,000 offset by the sale of marketable securities

provided by financing activities for the year ended December 31, 2020 was approximately $56,563,000 compared to approximately

$16,385,000 for the same period in 2019, an increase of $40,178,000.

The primary reasons for this increase was our receipt

of $61,216,000 in net proceeds from the sale of shares compared to $15,303,000 from the sale of shares in 2019.

of December 31, 2020, we had approximately $54,378,000 in cash, cash equivalents and marketable securities, inclusive of approximately

$15,877,000 in Marketable Securities, representing an increase of approximately $45,600,000 from December 31, 2019.

are committed to a focused business plan oriented toward finding senior co-development partners with the capital and expertise

needed to commercialize the many potential therapeutic aspects of our experimental drugs and our FDA approved drug Alferon.

development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical

development, and clinical trials that are necessary to bring pharmaceutical products to market.

We believe, based on our current

financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials

over approximately the next twenty-four months.

At present we do not generate any material revenues from operations and

we do not anticipate doing so in the near future.

We may need to obtain additional funding in the future for new studies and/or

if current studies do not yield positive results, require unanticipated changes and/or additional studies.

If we are unable to

commercialize and sell Ampligen and/or recommence material sales of Alferon N Injection, our operations, financial position and

liquidity may be adversely impacted, and additional financing may be required.

There can be no assurances that, if needed, we

will be able to raise adequate funds or enter into licensing, partnering or other arrangements to advance our business goals.

We may seek to access the public equity market whenever conditions are favorable, even if we do not have an immediate need for

4 unchanged sentences

and could involve the issuance of securities with rights, which are senior to those of existing stockholders.

We may also need

additional funding earlier than anticipated, and our cash requirements, in general, may vary materially from those now planned,

for reasons including, but not limited to, changes in our research and development programs, clinical trials, acquisitions of

intellectual property or assets, enhancements to the manufacturing process, competitive and technological advances, the regulatory

processes including the commercializing of Ampligen®

products or new utilization of Alferon®

See Part I, Item

1A - “Risk Factors;

We will require additional financing which may not be available ”.

Subsequent to the year

ended December 31, 2019, we sold 5,359,983 shares under the Distribution Agreement for a total of $16,376,093 which includes

a 3.5% fee to Maxim of $555,713.

Also subsequent to the year ended December 31, 2019 warrant holders from the September 27, 2019

public offering, exercised 8,746,090 warrants at an exercise price of $0.99, and the Company realized $8,658,000 in net proceeds.

These post year end proceeds

have significantly helped our financial condition.

However, we most likely will need additional funding in the future and no assurance

can be given that we will continue to be able to obtain such financing when needed.

The proceeds from our financing in 2019 have

been used to fund infrastructure growth including manufacturing, regulatory compliance and market development along with our efforts

regarding the Ampligen®

NDA and preparedness for the FDA pre-approval inspections of the New Brunswick manufacturing facility.

The proceeds to date from our financing in 2020 are being used to fund the manufacturing of Ampligen, ongoing clinical trials

and general administrative and operational expenses associated with our ongoing activities.

There can be no assurances

that, if needed, we will raise adequate funds from these or other sources, which may have a material adverse effect on our ability

to develop our products.

Also, we have the ability to curtail discretionary spending, including some research and development

activities, if required to conserve cash.

Certain Relationships and Related Transactions

Refer to PART III, ITEM

13 - “Certain Relationships and Related Transactions, and Director Independence.”

New Accounting Pronouncements

Refer to “Note 2(h)

We may require additional financing which may not be available ”.

Relationships and Related Transactions

to PART III, ITEM 13 - “Certain Relationships and Related Transactions, and Director Independence.”

Accounting Pronouncements

to “Note 2(h) –

Recent Accounting Standards and Pronouncements”

under Notes to Consolidated Financial Statements.

Disclosure about Off-Balance Sheet Arrangements

Critical Accounting Policies

Financial Reporting Release

60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial

Our significant accounting policies are described in the Notes to Consolidated Financial Statements.

The significant

accounting policies that we believe are most critical to aid in fully understanding our reported financial results are the following:

We have elected to apply

the Full Retrospective Application to implement the new revenue recognition standard ASC 606.

Based on the nature of our Ampligen®

sales under our cost recovery programs, we determined that there were no material differences between the new accounting standard

and legacy U.S.

GAAP and that difficulties will not arise for any “open”

contract issues with our customers

during the transition period.

We also determined that the adoption of this standard will have little or no impact to our opening

balance of retained earnings.

Revenue from the sale

of Ampligen®

under cost recovery clinical treatment protocols approved by the FDA is recognized when the treatment is provided

to the patient.

Revenues from the sale

of product are recognized when the product is delivered, as title is then transferred to the customer.

We have no other obligation

associated with our products once shipment has been accepted by the customer

We use the lower of first-in,

first-out (“FIFO”) cost and net realizable value method of accounting for inventory.

Patents and Trademarks

Patents and trademarks

are stated at cost (primarily legal fees) and are amortized using the straight-line method over the estimated useful life of 17

We review our patents and trademark rights periodically to determine whether they have continuing value.

Such review includes

an analysis of the patent and trademark’s ultimate revenue and profitability potential.

In addition, Management’s

review addresses whether each patent continues to fit into our strategic business plans.

Long-Lived Assets

We assess long-lived assets

for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may

not be recoverable.

Factors that we consider in deciding when to perform an impairment review include significant under-performance

of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes

or planned changes in its use of the assets.

We measure the recoverability of assets that it will continue to use in its operations

by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows.

If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping

is considered to be impaired.

We measure the impairment

by comparing the difference between the asset grouping’s carrying value and its fair value.

Long-lived assets are considered

a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

Impairments are determined for

groups of assets related to the lowest level of identifiable independent cash flows.

We make subjective judgments in determining

the independent cash flows that can be related to specific asset groupings.

In addition, as we review our manufacturing process

and other manufacturing planning decisions, we must make subjective judgments regarding the remaining useful lives of assets.

about Off-Balance Sheet Arrangements

Accounting Policies

Reporting Release No.

60 requires all companies to include a discussion of critical accounting policies or methods used in the

preparation of financial statements.

Our significant accounting policies are described in the Notes to Consolidated Financial

The significant accounting policies that we believe are most critical to aid in fully understanding our reported financial

results are the following:

assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets

or the asset grouping may not be recoverable.

Factors that we consider in deciding when to perform an impairment review include

significant under-performance of a business or product line in relation to expectations, significant negative industry or economic

trends, and significant changes or planned changes in its use of the assets.

We measure the recoverability of assets that it will

continue to use in its operations by comparing the carrying value of the asset grouping to our estimate of the related total future

undiscounted net cash flows.

If an asset grouping’s carrying value is not recoverable through the related undiscounted cash

flows, the asset grouping is considered to be impaired.

measure the impairment by comparing the difference between the asset grouping’s carrying value and its fair value.

assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

are determined for groups of assets related to the lowest level of identifiable independent cash flows.

We make subjective judgments

in determining the independent cash flows that can be related to specific asset groupings.

In addition, as we review our manufacturing

process and other manufacturing planning decisions, we must make subjective judgments regarding the remaining useful lives of

When we determine that the useful lives of assets are shorter than originally estimated, we accelerate the rate of depreciation

1 unchanged sentence

new, shorter useful lives.

Stock-Based Compensation

Under FASB ASC 718-Compensation-Stock

Compensation (“ASC 718”) share-based compensation cost is measured at the grant date, based on the estimated fair

value of the award, and is recognized as expense over the requisite service period.

Under this method, compensation cost is recognized

for all share-based payments granted, modified or settled after the date of adoption, as well as for any unvested awards that

were granted prior to the date of adoption.

The fair value of each

option award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model.

Expected volatility

is based on the historical volatility of the price of our common stock.

The risk-free interest rate is based on U.S.

issues with a term equal to the expected life of the option.

We use historical data to estimate expected dividend yield, expected

life, which represents the period of time the options are expected to be outstanding until they are exercised, and forfeiture

Redeemable Warrants

We utilize the guidance

contained in ASC 480 in the determination of whether to record warrants and options as Equity and/or Liability.

If the guidance

of ASC 480 is deemed inconclusive, we continue our analysis utilizing ASC 815.

Our method of recording

the related value attempts to be consistent with the standards as defined by the Financial Accounting Standards Board utilizing

the concept of “Fair Value”

from ASC 820-10-55-1 that states that any fair value measurement requires that the reporting

entity, to determine the valuation technique(s) appropriate for the measurement, consider the availability of data with which

to develop inputs that represent the assumptions that market participants would use in pricing the asset or liability and the

level in the fair value hierarchy within which the inputs fall.

We recomputed the value

of the redeemable warrants at the end of each quarterly period.

We use the Monte Carlo Simulation approach which includes subjective

input assumptions that are consistently applied each quarter.

If we were to alter our assumptions or the numbers input based on

such assumptions, the resulting fair value could be materially different.

As discussed in greater detail in “Fair Value”

utilize the guidance contained in ASC 480 in the determination of whether to record warrants and options as Equity and/or Liability.

If the guidance of ASC 480 is deemed inconclusive, we continue our analysis utilizing ASC 815.

method of recording the related value is consistent with the standards as defined by the Financial Accounting Standards

Board utilizing the concept of “Fair Value”

from ASC 820-10-55-1 that states that any fair value measurement requires

that the reporting entity, to determine the valuation technique(s) appropriate for the measurement, consider the availability

of data with which to develop inputs that represent the assumptions that market participants would use in pricing the asset or

liability and the level in the fair value hierarchy within which the inputs fall.

recomputed the value of the redeemable warrants at the end of each quarterly period.

We use the Monte Carlo Simulation approach

which includes subjective input assumptions that are consistently applied each quarter.

If we were to alter our assumptions or

the numbers input based on such assumptions, the resulting fair value could be materially different.

As discussed in greater detail

in “Fair Value”

at the beginning of this ITEM 7, the significant assumptions using this model are:

(i) Risk-Free Interest Rate;

(ii) Expected

Holding Period;

(i) Risk-Free Interest

(ii) Expected Holding Period;

(iii) Expected Volatility;

(iv) Expected Dividend Yield;

(v) Expected Probability of a Fundamental Transaction;

(v) Expected Probability of a Fundamental

(vi) Expected Timing of Announcement of a Fundamental Transaction;

(vii) Expected 100 Day Volatility at Announcement of a Fundamental

(vii) Expected 100 Day Volatility at Announcement

of a Fundamental Transaction;

(viii) Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction;

and (ix) Expected Time Between

Announcement and Consummation of a Fundamental Transaction.

Convertible Notes Payable

In September 2018, we

entered into a $3,170,000 10% Secured Convertible Promissory Note with Iliad Research and Trading, L.P.

(the “Note”).

We determined the Note should be recorded at fair value with subsequent changes in fair value recorded in earnings.

This conclusion

is based on the redemption conversion feature, which allows the Holder to trigger the redemption of the Note for cash or conversion

of the Note for common shares prior to its maturity date at a price of the lesser of $0.30 per share or the Market Price as defined

within the Note.

The choice of cash redemption or conversion of the Note for common shares is at our option.

This feature may

require that we issue a variable number of common shares to settle the Note which was determined to have a predominantly fixed

monetary value at inception.

In connection with the Note, we recorded a loss in our Consolidated Statements of Operations

equal to $582,000 for the year ended December 31, 2018.

For more detail about the Note, please see the disclosure in “Fair

March 13, 2019, we amended the Purchase Agreement pursuant to which we issued the Convertible Note (the “Amendment”).

The Amendment extends the maturity of the Note to September 28, 2020.

In addition, the redemption conversion rates were revised

to a price to be determined by mutual agreement between us and the Holder.

In the event that we and the Holder are unable to reach

a mutually agreeable price, we will be required to pay the applicable redemption amount in cash.

The maximum amount of the Convertible

Note the Lender will be able to redeem in any given calendar month is $300,000.

evaluated the Amendment in accordance with ASC 470, Debt (“ASC 470”) and determined the Amendment is considered

an extinguishment of the existing debt and issuance of new debt.

As a result, we derecognized the liability and recorded

a loss on the extinguishment of debt of $272,812 which was equal to the difference between the reacquisition price of the debt

and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt.

Subsequently,

the amended note was recorded in accordance with ASC 480 at the fair value that the note was issued with changes in fair value

recorded through earnings at each reporting period.

were a series of debt conversions in the period, which partially converted $1,400,000 of the $3,408,000 convertible debt, as amended,

into stockholders’

equity, adding approximately $1,500,000 to stockholders’

The number of shares issued

in these conversions were 204,246 shares.

5, 2019, we issued a Secured Promissory Note (the “CV Note”) to Chicago Venture Partners, L.P.

(“CV”),

The CV Note has an original principal amount of $2,635,000, bears interest at a rate of 10% per annum and will mature in 24 months,

unless earlier paid in accordance with its terms.

We received proceeds of $1,900,000 after an original issue discount and payment

of CV’s legal fees.

Pursuant to a Security Agreement between us and CV, repayment of the CV Note is secured by substantially

all of our assets other than our intellectual property.

We utilized the net proceeds from the CV Note for the manufacturing

of Ampligen, ongoing clinical trials and general administrative and operational expenses associated with our ongoing activities.

On December 5, 2019, we

issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P.

(“AS”).

The AS Note has an original

principal amount of $2,175,000, bears interest at a rate of 10% per annum and will mature in 24 months, unless earlier paid in

accordance with its terms.

We received proceeds of $1,650,000 after an original issue discount and payment of AS’

Pursuant to a Security Agreement between us and AS, prepayment of the AS Note is secured by substantially all of our

assets other than its intellectual property.

We utilized $1,610,000 of the net proceeds from the AS Note to pay off in

full our obligation to Iliad pursuant to the IR Note.

Concentration of Credit Risk

Our policy is to limit

the amount of credit exposure to any one financial institution and place investments with financial institutions evaluated as

being credit worthy, or in short-term money markets, which are exposed to minimal interest rate and credit risks.

bank deposits and overnight repurchase agreements that exceed federally insured limits.

Concentration of credit

risk, with respect to receivables, is limited through our credit evaluation process.

We do not require collateral on our receivables.

and (ix) Expected

Time Between Announcement and Consummation of a Fundamental Transaction.

Concentration

of Credit Risk

policy is to limit the amount of credit exposure to any one financial institution and place investments with financial institutions

evaluated as being credit worthy, or in short-term money markets, which are exposed to minimal interest rate and credit risks.

We have had bank deposits and overnight repurchase agreements that exceed federally insured limits.

Concentration

of credit risk, with respect to receivables, is limited through our credit evaluation process.

We do not require collateral on

our receivables.

Our receivables historically consisted principally of amounts due from wholesale drug companies.

Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

and Qualitative Disclosures About Market Risk.

Statements and Supplementary Data.

see the “Index to Financial Statements and Financial Statement Schedule”

in and Disagreements with Accountants on Accounting and Financial Disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity