AIM ImmunoTech Inc. 10-Q

ITEM 1 : Financial Statements AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except for share and per share data) (Unaudited) September 30, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 37,349 $ 38,501 Marketable securities 499 501 Funds receivable from New Jersey net operating loss — 1,090 Accounts receivable 28 34 Prepaid expenses and other current assets 161 184 Total current assets 38,037 40,310 Property and equipment, net 5,994 6,473 Right of use asset, net 144 179 Patent and trademark rights, net 1,845 1,498 Marketable securities, long term 15,811 15,376 Other assets 1,249 748 Total assets $ 63,080 $ 64,584 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 369 $ 383 Accrued expenses 362 442 Current portion of operating lease liability 36 47 Current portion of financing obligation — 230 Total current liabilities 767 1,102 Long-term liabilities: Operating lease liability 108 132 Financing obligation arising from sale leaseback transaction (Note 13) — 1,876 Redeemable warrants 158 180 Commitments and contingencies (Notes 11, 12, 13, and 14) Stockholders’ equity: Series B Convertible Preferred Stock, stated value $ 1,000 per share, 725 shares designated, 732 shares issued and outstanding 725 732 Common Stock, par value $ 0.001 per share, authorized 350,000,000 shares: issued and outstanding 47,848,622 , and 42,154,371 , respectively 48 42 Additional paid-in capital 416,779 402,541 Accumulated other comprehensive loss ( 250 ) ( 47 ) Accumulated deficit ( 355,255 ) ( 341,974 ) Total stockholders’ equity 62,047 61,294 Total liabilities and stockholders’ equity $ 63,080 $ 64,584 See accompanying notes to consolidated financial statements. 1 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statement of Operations and Comprehensive Loss (in thousands, except share and per share data) (Unaudited) 2021 2020 2021 2020 Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Revenues: Clinical treatment programs - US $ 33 $ 27 $ 85 $ 110 Clinical treatment programs - Europe — 9 — 11 Total Revenues 33 36 85 121 Costs and Expenses: Production costs 157 204 674 608 Research and development 2,006 1,102 4,749 3,445 General and administrative 1,799 2,085 6,055 6,070 Total Costs and Expenses ( 3,962 ) 3,391 11,478 10,123 Operating loss ( 3,929 ) ( 3,355 ) ( 11,393 ) ( 10,002 ) Interest and other income, net ( 20 ) 69 100 131 Interest expense and other finance costs — ( 51 ) ( 67 ) ( 617 ) Extinguishment of financing obligation and note payable — — ( 2,701 ) 142 Gain on sale of fixed assets — — 216 — Redeemable warrants valuation adjustment 51 31 22 ( 120 ) Gain from sale of Income tax operating losses 72 — 542 — Net Loss ( 3,826 ) ( 3,306 ) ( 13,281 ) ( 10,466 ) Other comprehensive (loss), net of tax Reclassification adjustment for realized investment loss 101 — 126 — Change in unrealized loss on marketable securities available for sale ( 104 ) ( 75 ) ( 329 ) ( 12 ) Comprehensive loss $ ( 3,829 ) $ ( 3,381 ) $ ( 13,484 ) $ ( 10,478 ) Basic and diluted loss per share $ ( 0.08 ) $ ( 0.08 ) $ ( 0.28 ) $ ( 0.36 ) Weighted average shares outstanding basic and diluted 47,846,074 38,907,546 47,156,158 28,826,283 See accompanying notes to consolidated financial statements. 2 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders’ Equity For the Nine Months Ended September 30, 2021 (in thousands except share data) (Unaudited) Series B Preferred Common Stock Shares Common Stock Par Value Additional Paid-in Capital Accumulated other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Balance December 31, 2020 $ 732 42,154,371 $ 42 $ 402,541 $ ( 47 ) $ ( 341,974 ) $ 61,294 Common stock issuances, net of costs — 5,678,626 6 12,881 — — 12,887 Warrant modification Equity-based compensation — — — 526 — — 526 Shares issued to pay accounts payable Shares issued to pay accounts payable,shares Series B preferred shares converted to common shares ( 7 ) — — 7 — — — Comprehensive loss — — — — ( 163 ) ( 3,579 ) ( 3,742 ) Balance March 31, 2021 $ 725 47,832,997 $ 48 $ 415,955 $ ( 210 ) $ ( 345,553 ) $ 70,965 Equity-based compensation — — — 480 — — 480 Comprehensive loss — — — — ( 37 ) ( 5,876 ) ( 5,913 ) Balance June 30, 2021 $ 725 47,832,997 $ 48 $ 416,435 $ ( 247 ) $ ( 351,429 ) $ 65,532 Common stock issuances, net of costs — 15,625 — 30 — — 30 Equity-based compensation — — — 314 — — 314 Comprehensive loss — — — — ( 3 ) ( 3,826 ) ( 3,829 ) Balance September 30, 2021 $ 725 47,848,622 $ 48 $ 416,779 $ ( 250 ) $ ( 355,255 ) $ 62,047 See accompanying notes to consolidated financial statements. 3 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders’ Equity For the Nine Months Ended September 30, 2020 (in thousands except share data) (Unaudited) Series B Preferred Common Stock Shares Common Stock Par Value Additional Paid-in Capital Accumulated other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Balance December 31, 2019 $ 778 10,386,754 $ 10 $ 340,228 $ — $ ( 328,109 ) $ 12,907 Common stock issuance, net of costs — 17,628,996 18 25,746 — — 25,764 Warrant modification — — — 46 — — 46 Equity-based compensation — — — 196 — — 196 Shares issued to pay accounts payable — 4,762 — 10 — — 10 Series B preferred shares converted to common shares ( 9 ) — — 9 — — — Comprehensive loss — — — — ( 4 ) ( 3,790 ) ( 3,794 ) Balance March 31, 2020 $ 769 28,020,512 $ 28 $ 366,235 $ ( 4 ) $ ( 331,899 ) $ 35,129 Common stock issuance, net of costs — 6,230,103 6 15,010 — — 15,016 Equity-based compensation — — — 150 — — 150 Series B preferred shares converted to common shares ( 32 ) — — 32 — — 37 Comprehensive loss — — — — 67 ( 3,370 ) ( 3,303 ) Balance June 30, 2020 $ 737 34,250,615 $ 34 $ 381,427 $ 63 $ ( 335,269 ) $ 46,992 Common stock issuance, net of costs — 6,433,022 7 17,234 — — 17,241 Equity-based compensation — — — 250 — — 250 Shares issued to pay accounts payable — 1,645 — 10 — — 10 Series B preferred shares converted to common shares ( 4 ) — — 4 — — — Comprehensive loss — — — — ( 75 ) ( 3,306 ) ( 3,381 ) Balance September 30, 2020 $ 733 40,685,282 $ 41 $ 398,925 $ ( 12 ) $ ( 338,575 ) $ 61,112 See accompanying notes to consolidated financial statements. 4 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2021 and 2020 (in thousands) (Unaudited) 2021 2020 Cash flows from operating activities: Net loss $ ( 13,281 ) $ ( 10,466 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 484 500 Redeemable warrants valuation adjustment ( 22 ) 120 Warrant modification — 46 Extinguishment of financing obligation and note payable 2,701 142 Amortization of patent, trademark rights 97 41 Changes in ROU assets 35 ( 36 ) Gain on sale of property and equipment ( 216 ) — Gain from sale of income tax operating losses ( 542 ) — Equity-based compensation 1,320 596 Realized (loss) gain on sale of marketable securities 126 ( 12 ) Amortization of finance and debt issuance costs 47 77 Change in assets and liabilities: Accounts receivable 6 18 Funds Receivable from New Jersey net operating loss 1,090 776 Prepaid expenses and other current assets and other non-current assets 64 764 Lease liability ( 35 ) 36 Accounts payable ( 14 ) ( 265 ) Accrued interest expense — 230 Accrued expenses ( 80 ) ( 81 ) Net cash used in operating activities ( 8,220 ) ( 7,514 ) Cash flows from investing activities: Proceeds from sale of marketable securities 849 8,497 Purchase of marketable securities ( 1,611 ) ( 17,169 ) Purchase of property and equipment ( 34 ) ( 13 ) Proceeds from sale of property and equipment 245 — Purchase of patent and trademark rights ( 444 ) ( 297 ) Net cash used in investing activities ( 995 ) ( 8,982 ) Cash flows from financing activities: Payment on note payable — ( 4,279 ) Payment of financing obligation ( 4,732 ) — Financing obligation payments ( 122 ) ( 265 ) Proceeds from sale of stock, net of issuance costs 12,917 58,066 Net cash provided by financing activities 8,063 53,522 Net (decrease) increase in cash and cash equivalents ( 1,152 ) 37,026 Cash and cash equivalents at beginning of period 38,501 1,470 Cash and cash equivalents at end of period $ 37,349 $ 38,496 Supplemental disclosures of non-cash investing and financing cash flow information: Stock issued to settle accounts payable $ — $ 20 Unrealized loss on marketable securities $ ( 329 ) $ ( 12 ) Conversion of Series B preferred $ 7 $ 45 See accompanying notes to consolidated financial statements. 5 AIM IMMUNOTECH INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1: Business and Basis of Presentation AIM ImmunoTech Inc. and its subsidiaries (collectively, “AIM”, “Company”, “we” or “us”) are an immuno-pharma company headquartered in Ocala, Florida, and focused on the research and development of therapeutics to treat multiple types of cancers, viral diseases and immune-deficiency disorders. We have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body, and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases. AIM’s flagship products are Ampligen (rintatolimod), a first-in-class drug of large macromolecular RNA (ribonucleic acid) molecules, and Alferon N Injection (Interferon Alfa-N3). Ampligen has not been approved by the FDA or marketed in the United States. Ampligen is approved for commercial sale in the Argentine Republic for the treatment of severe Chronic Fatigue Syndrome (“CFS”). The Company’s primary present business focus involves Ampligen. Ampligen is a double-stranded RNA (“dsRNA”) molecule being developed for globally important cancers, viral diseases and disorders of the immune system. AIM currently is proceeding primarily in three areas: ● Ampligen plus Standard of Care (“SOC”) to treat pancreatic cancer patients, and in other cancers, as a potential therapeutic that modifies the tumor microenvironment with the goal of increasing anti-tumor responses to check point inhibitors and with SOC. ● Exploring Ampligen’s antiviral activities and potential use as a prophylactic or treatment for existing viruses, mutations thereof or new viruses. ● Ampligen as a treatment for myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”) and what we refer to as Post-COVID-19 Cognitive Dysfunction (“PCCD”). Today, some two years after COVID-19 first appeared, the world has a number of vaccines and some promising therapeutics. AIM’s quest to prove the antiviral activities of Ampligen continues. If Ampligen has the broad-spectrum antiviral properties that the Company believes that it has, it could be a very valuable tool in treating variants of existing viral diseases, including COVID-19, or novel ones that arise in the future. Unlike most developing therapeutics which attack the virus, Ampligen works differently. AIM believes that it activates antiviral immune system pathways that fight not just a particular virus or viral variant, but other similar viruses as well. Alferon N Injection is approved in Argentina for a category of sexually transmitted disease infections and patients that are not responsive or are intolerant to recombinant interferon. Alferon is the only natural-source, multi-species alpha interferon currently approved for sale in the United States for the intralesional treatment of refractory (i.e., resistant to other treatment) or recurring external condylomata acuminata/genital warts in patients 18 years of age or older. Certain types of human papilloma viruses cause genital warts. AIM also has approval from ANMAT for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon in Argentina. The Company owns and operates a 30,000 sq. ft. facility at 783 Jersey Ave, New Brunswick, N.J., where it conducts testing and has produced limited quantities of active pharmaceutical ingredients (“API”) for its products. AIM is in the planning stages of updating the manufacturing and laboratory suites with state-of-the-art, mobile-ready equipment that can be used either there or in future alternate space. While the Company believes it has sufficient API to meet its current needs, it is also continually exploring new opportunities to maximize its ability to fulfill future needs. AIM’s current and active production plan is to shift to the utilization of Contract Manufacturing Organizations (“CMO”), while maintaining on-site teams for QC, QA, R&D, bench and small-batch manufacturing. On May 13, 2021, the Company exercised its option to re-purchase the New Brunswick facility, pursuant to the terms of the March 16, 2018, sale and lease-back agreement. Subsequently, the Company sold certain equipment and machinery that it determined to be obsolete and no longer needed for current or future manufacturing (See Note 13: Financing Obligation Arising from Sale Leaseback Transaction). 6 In the opinion of management, all adjustments necessary for a fair presentation of such consolidated financial statements have been included. Such adjustments consist of normal recurring items. Interim results are not necessarily indicative of results for a full year. The interim consolidated financial statements and notes thereto are presented as permitted by the Securities and Exchange Commission (“SEC”), and do not contain certain information which will be included in the Company’s annual consolidated financial statements and notes thereto. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 31, 2021. Immaterial Revision of Previously Reported Amounts Subsequent to the preparation of the consolidated financial statements as of and for the period ended December 31, 2020, Management noted an error in the Company’s previously issued Consolidated Financial Statements. The error related to the Company’s income taxes footnote disclosure that resulted in the reduction of approximately $ 37,900,000 of certain Federal NOL carryforward assets limited by Internal Revenue Code Section 382 and the corresponding valuation allowance as of and for the period ended December 31, 2020. The revised balances of the NOL carryforward assets and valuation allowance are $ 8,775,000 and $ 8,473,000 , respectively, as of December 31, 2020. In evaluating whether the previously issued Consolidated Financial Statements were materially misstated, the Company applied the guidance in ASC 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Assessing Materiality and SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded that the effect of the error on prior period financial statements was immaterial. The adjustment had no effect on the consolidated balance sheet, statement of comprehensive loss, changes in stockholders’ equity or statement of cash flows for any annual or interim period. Note 2: Net Loss Per Share Basic and diluted net loss per share is computed using the weighted average number of shares of common stock outstanding during the period. Equivalent common shares, consisting of stock options and warrants which amounted to 1,617,145 and 534,283 , are excluded from the calculation of diluted net loss per share for the nine months ended September 30, 2021, and 2020, respectively, since their effect is antidilutive due to the net loss. Note 3: Equity-Based Compensation The fair value of each option and equity warrant award is estimated on the date of grant using a Black-Scholes-Merton option pricing valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option and equity warrant. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. There were no options granted in the nine months ended September 30, 2021, and 2020. Stock option for employees’ activity during the nine months ended September 30, 2021, is as follows: Stock option activity for employees: Schedule of Stock Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding January 1, 2021 1,049,695 $ 5.38 9.28 $ — Granted — — — — Forfeited ( 50,898 ) 2.39 — — Expired — — — — Outstanding September 30, 2021 998,797 $ 5.53 8.96 $ — Vested and expected to vest September 30, 2021 998,797 $ 5.53 9.23 $ — Exercisable September 30, 2021 725,198 $ 4.07 7.85 $ — Unvested stock option activity for employees: Schedule of Unvested Stock Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Unvested January 1, 2021 767,029 $ 3.71 9.68 $ — Granted — — — — Expired ( 50,898 ) 2.39 — — Vested ( 442,532 ) 2.47 — — Unvested September 30, 2021 273,599 $ 13.99 4.28 $ — 7 Stock option activity for non-employees: Schedule of Stock Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding January 1, 2021 166,533 $ 11.03 6.88 $ — Granted — — — — Forfeited — — — — Expired ( 322 ) 965.93 — — Outstanding September 30, 2021 166,211 $ 9.18 7.05 $ — Vested and expected to vest September 30, 2021 166,211 $ 9.18 6.79 $ — Exercisable September 30, 2021 166,211 $ 9.18 7.56 $ — Unvested stock option activity for non-employees: Schedule of Unvested Stock Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Unvested January 1, 2021 66,202 $ 7.24 6.13 $ — Granted — — — — Expired — — — — Vested ( 66,202 ) 3.98 — — Unvested September 30, 2021 — $ — — $ — Stock-based compensation expense was approximately $ 1,320,000 and $ 596,000 for the nine months ended September 30, 2021, and 2020, resulting in an increase in general and administrative expenses, respectively. As of September 30, 2021, and 2020, respectively, there was approximately $ 279,000 and $ 877,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan. Note 4: Marketable Securities Marketable securities consist of debt securities. As of September 30, 2021, and December 31, 2020, it was determined that none of the marketable securities had an other-than-temporary impairment. As of September 30, 2021, and December 31, 2020, all securities were measured as Level 1 instruments under the fair value measurements standard (See Note 12: Fair Value). As of September 30, 2021, and December 31, 2020, the Company held approximately $ 16,310,000 and $ 15,877,000 in debt securities. 8 Debt securities classified as available for sale consisted of: Schedule of Available for Sale September 30, 2021 (in thousands) Securities Amortized Cost Gross Unrealized Gains /(Losses) Fair Value Marketable Securities U.S. Treasury notes $ 5,730 $ ( 104 ) $ 5,626 $ 5,626 U.S. Government mortgage-backed securities 4,317 359 4,676 4,676 Corporate bonds 6,466 ( 458 ) 6,008 6,008 Totals $ 16,513 $ ( 203 ) $ 16,310 $ 16,310 December 31, 2020 (in thousands) Securities Amortized Cost Gross Unrealized Gains /(Losses) Fair Value Marketable Securities U.S. Treasury notes $ 5,746 $ ( 47 ) $ 5,699 $ 5,699 U.S. Government mortgage-backed securities 4,890 ( 52 ) 4,838 4,838 Corporate bonds 5,288 52 5,340 5,340 Totals $ 15,924 $ ( 47 ) $ 15,877 $ 15,877 The following presents available-for-sale securities’ gross unrealized losses and fair value aggregated by the short- and long-term maturity. September 30, 2021 (in thousands) Less than 12 Months 12 Months or More Total Securities Fair Value Gross Unrealized Gains Fair Value Gross Unrealized Gains /(Losses) Fair Value Gross Unrealized Gains U.S. Treasury notes $ — $ — $ 5,730 $ ( 104 ) $ 5,626 $ ( 104 ) U.S. Government mortgage-backed securities — — 4,317 359 4,676 359 Corporate bonds 499 — 5,967 ( 458 ) 6,008 ( 458 ) Totals $ 499 $ — $ 16,014 $ ( 203 ) $ 16,310 $ ( 203 ) December 31, 2020 (in thousands) Less than 12 Months 12 Months or More Total Securities Fair Value Gross Unrealized Gains Fair Value Gross Unrealized Gains/ (Losses) Fair Value Gross Unrealized Gains U.S. Treasury notes $ 501 $ — $ 5,245 $ ( 47 ) $ 5,699 $ ( 47 ) U.S. Government mortgage-backed securities — — 4,890 ( 52 ) 4,838 ( 52 ) Corporate bonds — — 5,288 52 5,340 52 Totals $ 501 $ — $ 15,423 $ ( 47 ) $ 15,877 $ ( 47 ) 9 Note 5: Accrued Expenses Accrued expenses consist of the following: Schedule of Accrued Expenses September 30, 2021 December 31, 2020 (in thousands) September 30, 2021 December 31, 2020 Compensation $ 4 $ 2 Professional fees 176 124 Other expenses 182 316 Accrued expenses $ 362 $ 442 Note 6: Property and Equipment, net Schedule of Property and Equipment September 30, 2021 December 31, 2020 (in thousands) September 30, 2021 December 31, 2020 Land, buildings and improvements $ 10,530 $ 10,547 Furniture, fixtures, and equipment 2,434 5,136 Total property and equipment 12,964 15,683 Less: accumulated depreciation ( 6,970 ) ( 9,210 ) Property and equipment, net $ 5,994 $ 6,473 Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to thirty-nine years . On March 16, 2018, the Company sold land and a building for $ 4,080,000 and concurrently entered into an agreement to lease the property back for ten years . The lease payments were initially $ 408,000 per year for two years through March 31, 2020, and will escalate in subsequent years On May 13, 2021, the Company completed its re-purchase of the land and building for $ 4,732,637 inclusive of closing costs, pursuant to its repurchase option in the property lease. (See Note 13: Financing Obligation Arising from Sale Leaseback Transaction for more details on the sale leaseback of the property and equipment). In April 2021, the Company sold some of the assets located at its facility at 783 Jersey Ave., New Brunswick, N.J. The assets sold consist of equipment and machinery that the Company determined to be obsolete and no longer needed for current and future manufacturing. The assets were sold for an aggregate of $ 245,000 , which resulted in a gain on the sale of assets of $ 216,000 . 10 Note 7: Patents Schedule of Patents, Trademark Rights (in thousands) December 31, 2019 $ 1,151 Acquisitions 573 Abandonments ( 68 ) Amortization ( 158 ) December 31, 2020 $ 1,498 Acquisitions 444 Amortization ( 97 ) September 30, 2021 $ 1,845 Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight-line method of the estimated useful life of 17 years. The costs of provisional patents and pending applications are not amortized until they are filed. Patents are reviewed each reporting period to determine if it is likely that they will be successfully filed. The costs of provisional patents and pending applications for purposes of the amortization table below are estimated for each year. Amortization of patents and trademarks for each of the next five years is as follows: Schedule of Amortization of Patents and Trademarks Period Ending December 31, (in thousands) 2021 $ 17 2022 140 2023 163 2024 185 2025 215 Thereafter 1,125 Total $ 1,845 Note 8: Stockholders’ Equity (a) Preferred Stock The Company is authorized to issue 5,000,000 shares of $ 0.01 par value preferred stock with such designations, rights and preferences as may be determined by the Board of Directors. Of its authorized preferred stock, 250,000 shares have been designated as Series A Junior Participating Preferred Stock and 8,000 shares have been designated as Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock has a stated value $ 1,000 per share. The Company is authorized to issue 8,000 Series B Convertible Preferred Stock, no par value, stated value $ 1,000 per share. As of September 30, 2021, and December 31, 2020, the Company had 725 and 732 shares of Series B Convertible Preferred Stock outstanding, respectively. Each such Preferred Share is convertible into 114 shares of common stock. Pursuant to a registration statement relating to a rights offering declared effective by the SEC on February 14, 2019, AIM distributed to its holders of common stock and to holders of certain options and warrants as of February 14, 2019, at no charge, one non-transferable subscription right for each share of common stock held or deemed held on the record date. Each right entitled the holder to purchase one unit, at a subscription price of $ 1,000 per unit, consisting of one share of Series B Convertible Preferred Stock with a face value of $ 1,000 (and immediately convertible into common stock at an assumed conversion price of $ 8.80 ) and 114 warrants with an assumed exercise price of $ 8.80 . The warrants are exercisable for five years after the date of issuance. The net proceeds realized from the rights offering were approximately $ 4,700,000 . During the nine months ended September 30, 2021, 7 shares of Series B Convertible Preferred stock were converted into common stock, and for the twelve months ending December 31, 2020, 45 shares of Series B Convertible Preferred Stock were converted into common stock. 11 (b) Common Stock The Company has authorized 350,000,000 shares of common stock with specific limitations and restrictions on the usage of 8,000,000 of the 350,000,000 authorized shares. On July 7, 2020, the board of directors approved a plan pursuant to which all directors, officers, and employees could purchase from the company up to an aggregate of $ 500,000 worth of shares at the market price. Pursuant to NYSE American rules, this plan was effective for a sixty-day period commencing upon the date that the NYSE American approved the Company’s Supplemental Listing Application. The Company issued 10,730 shares of its common stock at a price of $ 2.33 for a total of $ 25,000 under this plan. When this plan expired, the board of directors approved subsequent similar $ 500,000 plans for all directors, officers and employees to buy company shares from the Company at the market price. Subsequent plans were approved by the board of directors upon the expiration of prior plans. The latest plan was approved by the board of directors on September 14, 2021. During the fiscal year ended December 31, 2020, the Company issued a total of 27,501 shares of its common stock at prices ranging from $ 1.72 to $ 2.03 for a total of $ 50,000 . During the nine months ended September 30, 2021, the Company issued a total of 37,325 shares of its common stock at prices ranging from $ 1.92 to $ 2.35 for a total of $ 80,000 . On September 27, 2019, the Company closed a public offering underwritten by A.G.P./Alliance Global Partners, LLC (the “Offering”) of (i) 1,740,550 shares of Common Stock; (ii) pre-funded warrants exercisable for 7,148,310 shares of Common Stock (the “Pre-funded Warrants”), and (iii) warrants to purchase up to an aggregate of 8,888,860 shares of Common Stock (the “Warrants”). In conjunction with the Offering, a Representative’s Warrant to purchase up to an aggregate of 266,665 shares of common stock (the “Representative’s Warrant”) . The shares of Common Stock and Warrants were sold at a combined Offering price of $ 0.90 , less underwriting discounts and commissions. Each Warrant sold with the shares of Common Stock represents the right to purchase one share of Common Stock at an exercise price of $0.99 per share. The Pre-Funded Warrants and Warrants were sold at a combined Offering price of $0.899, less underwriting discounts and commissions. The Pre-Funded Warrants were sold to purchasers whose purchase of shares of Common Stock in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of the Company’s outstanding Common Stock immediately following the consummation of the Offering, in lieu of shares of Common Stock. Each Pre-Funded Warrant represents the right to purchase one share of Common Stock at an exercise price of $0.001 per share. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until the Pre-Funded Warrants are exercised in full. A registration statement on Form S-1, relating to the Offering was filed with the SEC and was declared effective on September 25, 2019, the net proceeds were approximately $ 7,200,000 . During the year ending December 31 , 2020, 1,870,000 of the Pre-funded Warrants were exercised and 7,687,860 Warrants were exercised. In addition, on March 25, 2020, the Representative’s Warrant was amended to permit exercise of such warrant to commence on March 30, 2020. These warrants were exercised on March 31, 2020, and an aggregate of 266,665 shares were issued upon exercise of this warrant for gross proceeds of approximately $ 264,000 and a $ 46,000 expense for the warrant modification. On July 19, 2019, the Company entered into a new Equity Distribution Agreement (the “2019 EDA”) with Maxim Group LLC (“Maxim”), pursuant to which it could sell, from time to time, shares of its Common Stock through Maxim, as agent (the “Offering”). The 2019 EDA replaced a prior EDA with Maxim. For the year ended December 31, 2020, the Company sold 20,444,807 shares under the 2019 EDA for total gross proceeds of $ 53,936,615 , which includes a 3.5 % fee to Maxim of $ 1,888,727 . During the period ended September 30, 2021, the Company sold 5,665,731 shares under the 2019 EDA for total gross proceeds of $ 13,301,526 , which includes a 3.5 % fee to Maxim of $ 465,533 . The 2019 EDA was terminated in early February 2021. 12 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 7,000,000 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 26,324 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, 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 . In August 2020, 400,000 options were issued to each of these officers with an exercise price range of $ 2.77 to $ 3.07 for a period of ten years with a vesting period of one year . During December 2020, 675,000 options were issued to employees with an exercise price range of $ 1.85 to $ 1.96 for a period of ten years with a vesting period of one year . As of September 30, 2021, and December 31, 2020, there were 47,848,622 and 42,154,371 shares outstanding, respectively. Note 9 : Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Note 10: Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) . ASU 2020-06 reduces the number of models used to account for convertible instruments, amends diluted EPS calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity. The amendments add certain disclosure requirements to increase transparency and decision-usefulness about a convertible instrument’s terms and features. Under the amendment, the Company must use the if-converted method for including convertible instruments in diluted EPS as opposed to the treasury stock method. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2023. Early adoption is allowed under the standard with either a modified retrospective or full retrospective method. The Company early adopted ASU 2020-06 on January 1, 2021, using the modified retrospective method. As a result of Management’s evaluation, the adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements. Note 11: Long-Term Debt On August 5, 2019, the Company issued a Secured Promissory Note (the “CV Note”) with Chicago Venture Partners, L.P. (the “CV”). The Note had an original principal amount of $ 2,635,000 , bore interest at a rate of 10 % per annum and will mature in 24 months, unless earlier paid in accordance with its terms. The Company received proceeds of $ 1,900,000 after an original issue discount and payment of Lender’s legal fees. Pursuant to a Security Agreement between the Company and the Lender, repayment of the Note is secured by substantially all of its assets other than its intellectual property. During the quarter ending June 30, 2020, the Holder made redemptions of $ 650,000 reducing the principal to $ 1,985,000 . On May 29, 2020, the Company paid off the outstanding CV note consisting 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 . Interest expense associated with the CV Note was $ 0 , for the period ending September 30, 2021, and approximately $ 116,000 , for the period ending September 30, 2020. On December 5, 2019, the Company issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P. (“AS”). The AS Note had an original principal amount of $ 2,175,000 , bore interest at a rate of 10 % per annum and will mature in 24 months, unless earlier paid in accordance with its term. 13 On June 19, 2020, the Company paid off the outstanding AS note which consisted of 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 . Interest expense associated with AS Note for the period ending September 30, 2021, was $ 0 and was approximately $ 106,000 for the period ending September 30, 2020. Note 12: Fair Value The Company is required under U.S. GAAP to disclose information about the fair value of all the Company’s financial instruments, whether or not these instruments are measured at fair value on the Company’s consolidated balance sheets. The Company estimates that the fair values of cash and cash equivalents, other assets, accounts payable and accrued expenses approximate their carrying values due to the short-term maturities of these items. The Company also has certain warrants with a cash settlement feature in the unlikely occurrence of a Fundamental Transaction, namely (1) a merger or consolidation with another person; (2) sale of substantially all of its assets; (3) holders of common stock sell 50% or more of outstanding shares; (4) the Company effects an exchange of all its securities for other securities, cash or property, and (5) the Company effects a stock purchase agreement or business combination for more than 50% of outstanding shares. The fair value of the redeemable warrants (“Warrants”) related to the Company’s February 2017, June 2017, August 2017, April 2018, and March 2019 common stock warrant issuances, are calculated using a Monte Carlo Simulation. While the Monte Carlo Simulation is one of a number of possible pricing models, the Company has determined it to be industry accepted and fairly presented the fair value of the Warrants. As an additional factor to determine the fair value of the Put’s liability, the occurrence probability of a Fundamental Transaction event was factored into the valuation. The Company recomputes the fair value of the Warrants at the issuance date and the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different. The Company utilized the following assumptions to estimate the fair value of the February 2017 Warrants: Schedule of Assumptions to Estimate Fair Value of Warrants September 30, 2021 December 31, 2020 Underlying price per share $ 2.02 $ 1.79 Exercise price per share $ 30.25 – 33.00 $ 30.25 - 33.00 Risk-free interest rate 0.08 % 0.12 % Expected holding period 0.84 – 0.85 1.58 – 1.60 Expected volatility 60 % 130 % Expected dividend yield - - The Company utilized the following assumptions to estimate the fair value of the June 2017 Warrants: September 30, 2021 December 31, 2020 Underlying price per share $ 2.02 $ 1.79 Exercise price per share $ 27.50 $ 27.50 Risk-free interest rate 0.06 % 0.11 % Expected holding period 0.67 12.42 Expected volatility 55 % 135 % Expected dividend yield - - 14 The Company utilized the following assumptions to estimate the fair value of the August 2017 Warrants: September 30, 2021 December 31, 2020 Underlying price per share $ 2.02 $ 1.79 Exercise price per share 19.80 $ 19.80 Risk-free interest rate 0.05 % 0.11 % Expected holding period 0.43 1.18 Expected volatility 35 % 110 % Expected dividend yield - - The Company utilized the following assumptions to estimate the fair value of the April 2018 Warrants: September 30, 2021 December 31, 2020 Underlying price per share $ 2.02 $ 1.79 Exercise price per share $ 17.16 $ 17.16 Risk-free interest rate 0.30 % 0.16 % Expected holding period 2.07 2.81 Expected volatility 140 % 105 % Expected dividend yield - - The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants: September 30, 2021 December 31, 2020 Underlying price per share $ 2.02 $ 1.79 Exercise price per share $ 8.80 $ 8.80 Risk-free interest rate 0.39 % 0.19 % Expected holding period 2.44 3.19 Expected volatility 135 % 105 % Expected dividend yield - - The significant assumptions using the Monte Carlo Simulation approach for valuation of the Warrants are: (i) Risk-Free Interest Rate . The risk-free interest rates for the Warrants are based on U.S. Treasury constant maturities for periods commensurate with the remaining expected holding periods of the warrants. (ii) Expected Holding Period . The expected holding period represents the period of time that the Warrants are expected to be outstanding until they are exercised. The Company utilizes the remaining contractual term of the Warrants at each valuation date as the expected holding period. (iii) Expected Volatility . Expected stock volatility is based on daily observations of the Company’s historical stock values for a period commensurate with the remaining expected holding period on the last day of the period for which the computation is made. (iv) Expected Dividend Yield . Expected dividend yield is based on the Company’s anticipated dividend payments over the remaining expected holding period. As the Company has never issued dividends, the expected dividend yield is $0.00 and this assumption will be continued in future calculations unless the Company changes its dividend policy. (v) Expected Probability of a Fundamental Transaction. The possibility of the occurrence of a Fundamental Transaction triggering a Put right is extremely remote. As discussed above, a Put right would only arise if a Fundamental Transaction (1) is an all cash transaction; (2) results in the Company going private; or (3) is a transaction involving a person or entity not traded on a national securities exchange. The Company believes such an occurrence is highly unlikely because: a. The Company only has one product that is FDA approved but which will not be available for commercial sales for 18 months at the earliest; b. The Company flagship product is approved only in Argentina for Severely Debilitated Chronic Fatigue Syndrome patients; c. The Company may have to perform additional clinical trials for FDA approval of its flagship product; d. Industry and global market conditions continue to include uncertainty, adding risk to any transaction; e. Available capital for a potential buyer in a cash transaction continues to be limited; f. The nature of a life science company is heavily dependent on future funding and high costs, including research & development; g. The Company has minimal revenue streams which could be insufficient to meet the funding needs for the cost of operations or construction at their manufacturing facility; and h. The Company’s Rights Agreement and Executive Agreements make it less attractive to a potential buyer. 15 With the above factors utilized in analysis of the likelihood of the Put’s potential Liability, the Company estimated the range of probabilities related to a Put right being triggered as: Schedule of Range of Probabilities Range of Probability Probability Low 0.5 % Medium 1.0 % High 5.0 % The Monte Carlo Simulation has incorporated a 5.0% probability of a Fundamental Transaction to date for the life of the securities. (vi) Expected Timing of Announcement of a Fundamental Transaction. As the Company has no specific expectation of a Fundamental Transaction, for reasons stated above, the Company used a discrete uniform probability distribution over the Expected Holding Period to model the potential announcement of a Fundamental Transaction occurring during the Expected Holding Period. (vii) Expected 100 Day Volatility at Announcement of a Fundamental Transaction . An estimate of future volatility is necessary as there is no mechanism for directly measuring future stock price movements. Daily observations of the Company’s historical stock values for the 100 days immediately prior to the Warrants’ grant dates, with a floor of 100 %, were utilized as a proxy for the future volatility. (viii) Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction . The Company utilized a risk-free interest rate corresponding to the forward U.S. Treasury rate for the period equal to the time between the date forecast for the public announcement of a Fundamental Transaction and the Warrant expiration date for each simulation. (ix) Expected Time Between Announcement and Consummation of a Fundamental Transaction. The expected time between the announcement and the consummation of a Fundamental Transaction is based on the Company’s experience with the due diligence process performed by acquirers and is estimated to be six months. The Monte Carlo Simulation approach incorporates this additional period to reflect the delay Warrant Holders would experience in receiving the proceeds of the Put. While the assumptions remain consistent from period to period (e.g., using historical stock prices), the numbers input change from period to period (e.g., the actual historical prices input for the relevant period). The Company applies FASB ASC 820 that defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. The guidance does not impose any new requirements around which assets and liabilities are to be measured at fair value, and instead applies to asset and liability balances required or permitted to be measured at fair value under existing accounting pronouncements. The Company measures its warrant liability for those warrants with a cash settlement feature at fair value. FASB ASC 820-10-35-37 establishes a valuation hierarchy based on the transparency of inputs used in the valuation of an asset or liability. Classification is based on the lowest level of inputs that is significant to the fair value measurement. The valuation hierarchy contains three levels: ● Level 1 – Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes certain U.S. and government agency debt and equity securities that are traded in an active market. ● Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Generally, this includes debt and equity securities that are not traded in an active market. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. As of September 30, 2021, the Company has classified the warrants with cash settlement features as Level 3. Management evaluates a variety of inputs and then estimates fair value based on those inputs. As discussed above, the Company utilized the Monte Carlo Simulation Model in valuing these warrants. 16 The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as: Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis (in thousands) As of September 30, 2021 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 16,310 $ 16,310 $ — $ — Liabilities: Redeemable warrants $ 158 — — $ 158 (in thousands) As of December 31, 2020 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 15,877 $ 15,877 $ — $ — Liabilities: Redeemable warrants $ 180 — — $ 180 The changes in Level 3 Liabilities measured at fair value on a recurring basis are summarized as follows (in thousands): Schedule of Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis Redeemable warrants: Balance at December 31, 2020 $ 180 Fair value adjustment ( 22 ) Balance at September 30, 2021 $ 158 Note 13: Financing Obligation Arising from Sale Leaseback Transaction On March 16, 2018, the Company sold land and a building for $ 4,080,000 and concurrently entered into an agreement to lease the property back for ten years at $408,000 per year for two years through March 31, 2020. The lease payments will increase 2.5% per year for the next three years through March 31, 2023 and the lease payments will increase 3% for the remaining five years through March 31, 2028. As part of the sale of this building, warrants were provided to the buyer for the purchase of up to 73,314 shares of Company common stock for a period of five years at an exercise price of $ 17.05 per share, 125 % of the closing price of the common stock on the NYSE American on the date of execution of the letter of intent for the purchase. The sale of the property includes an option to repurchase the property based on a contractual formula which does not permanently transfer all the risks and rewards of ownership to the buyer. Because the sale of the property includes the option to repurchase the property and includes the above attributes, the transaction was accounted for as a financing transaction whereby the Company recorded the cash received and a financing obligation. The warrants cannot be exercised to the extent that any exercise would result in the purchaser owning in excess of 4.99% of our issued and outstanding shares of common stock. On May 13, 2021, the Company completed its repurchase of the property for cash of $ 4,732,637 . The repurchase resulted in the related liability recorded upon sale being extinguished on the date of the repurchase. A loss on the extinguishment was recorded based on the difference between the carrying value of the financing obligation including unamortized debt discount and the amount exchanged to extinguish the debt. For the nine months ended September 30, 2021, the loss on extinguishment was $ 2,701,460 . Interest expense relating to this financing agreement was $ 19,000 for the nine months ended September 30, 2021, and $ 51,000 for the nine months ended September 30, 2020. 17 Note 14: Leases The Company entered into a Lease Agreement for a term of five years commencing on September 14, 2020, pursuant to which the Company agreed to lease two Sharp copiers. The base of $ 1,415 per month. On June 13, 2018, the Company entered into a Lease Agreement for a term of six years commencing on July 1, 2018, pursuant to which the Company agreed to lease approximately 3,000 rentable square feet. The base rent increases by 3 % each year, and ranges from $ 2,100 per month for the first year to $ 2,785 per month for the sixth year. On May 1, 2019, the Company entered into a Lease Agreement for a term of three years commencing on May 1, 2019 pursuant to which the Company agreed to lease approximately 3,000 rentable square feet. The base rent is $ 1,500 per month for the term of the lease. The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. The Company’s leases have remaining lease terms between 3 months and 4 years. As of September 30, 2021, the weighted-average remaining term is 2.97 years. The Company has determined that the incremental borrowing rate is 10% as of September 30, 2021, based upon the most recently completed financing transaction in December 2019. Schedule of Operating lease Future Payments Period December 31, (in thousands) 2021 $ 14 2022 48 2023 47 2024 34 2025 17 Less imputed interest ( 16 ) Total $ 144 As of September 30, 2021, the balance of the right of use assets was $ 144,000 and the corresponding lease liability balance was $ 144,000 . Total rent expense was $ 39,000 for the nine months ended September 30, 2021, and $ 38,000 for the nine months end September 30, 2020. Note 15: Research, Consulting and Supply Agreements In July 2021, the Company executed a Reservation and Start-Up Agreement (the “Agreement”) with hVIVO Services Limited (“hVIVO”), and subsequently signed a clinical trial agreement (“CTA”) in September. The Company has paid hVIVO approximately $ 672,000 , representing half of the booking fee for use of its quarantine facility. The balance of the agreement is approximately $ 3,398,000 . In January 2021, the Company entered into a Sponsor Agreement with the Centre for Human Drug Research (“CHDR”) for a Phase 1 clinical study to assess the safety, tolerability, and biological activity of Ampligen as a potential intranasal therapy. The Company has paid CHDR approximately $ 1,010,000 . The balance of the agreement is approximately $ 70,000 . Note 16: Subsequent Events None. 18