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 amounts) (Unaudited) March 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 28,989 $ 32,093 Marketable securities 15,554 16,175 Funds receivable from New Jersey net operating loss 1,641 1,641 Prepaid expenses and other current assets 296 304 Assets held for sale 3,900 — Total current assets 50,380 50,213 Property and equipment, net 137 4,047 Right of use asset, net 144 149 Patent and trademark rights, net 1,988 1,974 Other assets 1,506 1,316 Total assets $ 54,155 $ 57,699 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 378 $ 198 Accrued expenses 328 438 Current portion of operating lease liability 60 37 Total current liabilities 766 673 Long-term liabilities: Operating lease liability 84 112 Redeemable warrants 4 35 Commitments and contingencies (Notes 12, 13 and 14) - - Stockholders’ equity: Series B Convertible Preferred Stock, stated value $ 1,000 per share, 715 issued and outstanding 715 715 Common Stock, par value $ 0.001 per share, authorized 350,000,000 shares; 47,994,672 issued and outstanding 48 48 Additional paid-in capital 417,459 417,217 Accumulated deficit ( 364,921 ) ( 361,101 ) Total stockholders’ equity 53,301 56,879 Total liabilities and stockholders’ equity $ 54,155 $ 57,699 See accompanying notes to consolidated financial statements. 2 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Loss (in thousands, except share and per share data) (Unaudited) Three months ended March 31, 2022 2021 Revenues: Clinical treatment programs – US $ 33 $ 28 Clinical treatment programs – Europe — — Total Revenues 33 28 Costs and Expenses: Production costs 77 237 Research and development 1,036 1,424 General and administrative 2,072 2,112 Total Costs and Expenses 3,185 3,773 Operating loss ( 3,152 ) ( 3,745 ) (Loss) on investments ( 934 ) — Interest and other income 45 72 Interest expense and other finance costs — ( 50 ) Redeemable warrants valuation adjustment 31 ( 37 ) Gain from sale of income tax operating losses 190 181 Net Loss ( 3,820 ) ( 3,579 ) Other comprehensive loss Reclassification adjustment for realized investment loss — 2 Change in unrealized loss on marketable securities available for sale — ( 163 ) Net comprehensive loss $ ( 3,820 ) $ ( 3,740 ) Basic and diluted loss per share $ ( 0.08 ) $ ( 0.08 ) Weighted average shares outstanding basic and diluted 47,994,672 45,726,855 See accompanying notes to consolidated financial statements. 3 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity (in thousands except share data) Series B Preferred Shares Common Stock Shares Common Stock .001 Par Value Additional Paid-in Capital Accumulated other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Balance December 31, 2021 715 - 47,994,672 $ 48 $ 417,217 $ — $ ( 361,101 ) $ 56,879 Shares issued for: Equity based compensation — - — — 242 — — 242 Net comprehensive loss — — — — — ( 3,820 ) ( 3,820 ) Balance March 31, 2022 715 - 47,994,672 $ 48 $ 417,459 $ — $ ( 364,921 ) $ 53,301 Series B Preferred Shares Common Stock Shares Common Stock .001 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 Shares issued for: Common Stock issuance, net of costs — 5,678,626 6 12,881 — — 12,887 Equity-based compensation — — — 526 — — 526 Series B preferred shares converted to Common shares ( 7 ) — — 7 — — — Net comprehensive loss — — — — ( 161 ) ( 3,579 ) ( 3,740 ) Balance March 31, 2021 725 47,832,997 $ 48 $ 415,995 $ ( 208 ) $ ( 345,553 ) $ 70,967 See accompanying notes to consolidated financial statements. 4 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2022 and 2021 (in thousands) (Unaudited) 2022 2021 Cash flows from operating activities: Net loss $ ( 3,820 ) $ ( 3,579 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 10 162 Redeemable warrants valuation adjustment ( 31 ) 37 Amortization of patent, trademark rights 19 65 Changes in ROU assets 5 11 Loss on available for sale marketable securities 19 2 Gain from sale of income tax operating losses ( 190 ) ( 181 ) Equity-based compensation 242 526 Unrealized loss on marketable securities 915 — Amortization of finance and debt issuance costs — 36 Change in assets and liabilities: Prepaid expenses and other current assets and other non current assets 8 26 Lease liability ( 5 ) ( 11 ) Accounts payable 180 ( 194 ) Accrued expenses ( 110 ) 55 Net cash used in operating activities ( 2,758 ) ( 3,045 ) Cash flows from investing activities: Proceeds from sale of marketable securities 407 2,039 Purchase of marketable securities ( 720 ) ( 1,151 ) Purchase of patent and trademark rights ( 33 ) ( 365 ) Net cash (used in) provided by investing activities ( 346 ) 523 Cash flows from financing activities: Financing obligation payments — ( 93 ) Proceeds from sale of stock, net of issuance costs — 12,887 Net cash provided by financing activities — 12,794 Net (decrease) increase in cash and cash equivalents ( 3,104 ) 10,272 Cash and cash equivalents at beginning of period 32,093 38,501 Cash and cash equivalents at end of period $ 28,989 $ 48,773 Supplemental disclosures of non-cash investing and financing cash flow information: Conversion of Series B preferred $ — 7 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”, “the Company”,) 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. The Company has 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. Our 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”). Our primary present business focus involves Ampligen. Ampligen represents a dsRNA being developed for globally important cancers, viral diseases and disorders of the immune system. The Company is currently proceeding primarily in four areas: ● A randomized controlled study to evaluate efficacy and safety of Ampligen compared to a control group to treat locally advanced pancreatic cancer patients. ● Evaluate Ampligen in other cancers, as a potential therapy that modifies the tumor microenvironment with the goal of increasing anti-tumor responses to check point inhibitors. ● Exploring Ampligen’s antiviral activities and potential use as a prophylactic or treatment for existing viruses, new viruses and mutated viruses thereof. ● Ampligen as a treatment for myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”) and fatigue and/or difficulty thinking/concentrating as the predominate Post-COVID conditions (as referenced on CDC website Sept. 16, 2021). The Company is prioritizing activities in an order related to the stage of development, with those clinical activities such as pancreatic cancer, ME/CFS and Post-COVID conditions having priority over antiviral experimentation. The Company intends that priority clinical work be conducted in FDA or EMA authorized trials which could support a potential future New Drug Application (“NDA”). However, AIM’s antiviral experimentation is designed to accumulate additional preliminary data supporting their hypothesis that Ampligen is a powerful, broad-spectrum prophylaxis and early-onset therapeutic that may confer enhanced immunity and cross-protection. Accordingly, AIM will conduct antiviral programs in those venues most readily available and able to generate valid proof-of-concept data, including foreign venues. In May 2021, AIM exercised the option to re-purchase the New Brunswick manufacturing facility, pursuant to the terms of the March 2018 sale and lease-back agreement. The Company thereafter sold certain equipment and machinery that they determined to be obsolete and no longer needed for current or future manufacturing. Then, on March 3, 2022, AIM entered into an Agreement of Sale and Purchase with Acellories, Inc. as purchaser pursuant to which the Company will sell the property for $ 3.9 million. The buyer has a mortgage contingency, with the clause expiring on June 1, 2022. Assuming that condition is met, we would anticipate closing on or before July 1, 2022. Moving forward, AIM will require one or more Contract Manufacturing Organizations (“CMO”) to produce Ampligen API. While AIM believes they have sufficient Ampligen API to meet their current needs, they are also continually exploring new efficiencies so as to maximize their ability to fulfill future obligations. In this regard, in April 2021, AIM approved a proposal from Polysciences Inc. (“Polysciences”) for the manufacture of Poly I and Poly C 12 U polynucleotides and associated test methods at Polysciences’ Warrington, PA location to enhance their capacity to produce the polymer precursors to the drug Ampligen. The Company is utilizing Polysciences’s expertise to refine their approach to polymer production. Additionally, AIM continues to be open to the possibility of agreements with other CMOs, so as to create redundancy and to meet the potential need for larger quantities of API. 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. 6 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, 2021 and 2020, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 31, 2022. 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 2,453,782 and 1,672,825 , are excluded from the calculation of diluted net loss per share for the three months ended March 31, 2022, and 2021, 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. During the three months ended March 31, 2022 there were 300,000 options granted and no options granted in the three months ended March 31, 2021. Stock option for employees’ activity during the three months ended March 31, 2022, 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, 2022 1,498,798 $ 4.22 9.11 $ — Granted 150,000 0.70 9.75 — Forfeited — 233.54 — — Expired ( 739 ) — — — Outstanding March 31, 2022 1,648,059 $ 3.80 8.94 $ — Vested and expected to vest March 31, 2022 1,648,059 $ 3.80 8.94 $ — Exercisable March 31, 2022 1,216,894 $ 3.15 6.08 $ — 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, 2022 412,500 $ 4.15 5.85 $ — Granted 150,000 0.70 9.75 — Expired ( 739 ) 233.54 — — Vested ( 130,596 ) 1.52 9.88 — Unvested March 31, 2022 431,165 $ 2.69 7.32 $ — 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, 2022 279,723 $ 6.12 7.93 $ — Granted 150,000 0.70 9.75 — Forfeited — — — — Expired — — — — Outstanding March 31, 2022 429,723 $ 4.23 8.40 $ — Vested and expected to vest March 31, 2022 429,723 $ 4.23 8.40 $ — Exercisable March 31, 2022 222,770 $ 6.05 7.96 $ — 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, 2022 97,831 $ 3.89 7.82 $ — Granted 150,000 0.70 9.75 — Expired — — — — Vested ( 40,878 ) 1.35 — — Unvested March 31, 2022 206,953 $ 3.66 7.60 $ — Stock-based compensation expense was approximately $ 242,000 and $ 526,000 for the three months ended March 31, 2022 and 2021, resulting in an increase in general and administrative expenses, respectively. As March 31, 2022, and 2021, respectively, there was approximately $ 729,000 and $ 914,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan. Note 4: Marketable Securities Marketable securities consist of mutual funds. At March 31, 2022 and December 31, 2021, it was determined that none of the marketable securities had an other-than-temporary impairment. At March 31, 2022 and December 31, 2021, all securities were measured as Level 1 instruments of the fair value measurements standard (See Note 11: Fair Value). As of March 31, 2022, and December 31, 2021 the Company held $ 15,554,000 and $ 16,175,000 in mutual funds. 8 Mutual Funds classified as available for sale consisted of: Schedule of Available for Sale March 31, 2022 (in thousands) Securities Fair Value Short-Term Investments Mutual Funds $ 15,554 $ 15,554 Totals $ 15,554 $ 15,554 Schedule of Equity Securities March 31, 2022 (in thousands) Securities Net losses recognized during the period on equity securities $ ( 934 ) Less: Net gains and losses recognized during the period on equity securities sold during the period ( 19 ) Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date $ ( 915 ) Mutual Funds classified as available for sale consisted of: December 31, 2021 (in thousands) Securities Fair Value Short-Term Investments Mutual Funds $ 16,175 $ 16,175 Totals $ 16,175 $ 16,175 December 31, 2021 (in thousands) Securities Net losses recognized during the period on equity securities $ ( 88 ) Less: Net gains and losses recognized during the period on equity securities sold during the period — Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date $ ( 88 ) Note 5: Accrued Expenses Accrued expenses consist of the following: Schedule of Accrued Expenses March 31, 2022 December 31, 2021 (in thousands) March 31, 2022 December 31, 2021 Compensation $ 14 $ 1 Professional fees 94 169 Clinical trial expenses 61 61 Other expenses 159 207 Accrued expenses $ 328 $ 438 Note 6: Property and Equipment, net Schedule of Property and Equipment March 31, 2022 December 31, 2021 (in thousands) March 31, 2022 December 31, 2021 Land, buildings and improvements $ — $ 3,900 Furniture, fixtures, and equipment 2,353 2,353 Total property and equipment 2,353 6,253 Less: accumulated depreciation ( 2,216 ) ( 2,206 ) Property and equipment, net $ 137 $ 4,047 9 Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to thirty-nine years. Depreciation expense for the periods ending March 31, 2022 and March 31, 2021 was $ 10,000 and $ 162,000 , respectively. The Company made a strategic shift on in-house manufacturing and recorded an impairment of the facility in the amount of $ 1,800,000 during the year ended December 31, 2021. During the period ending March 31, 2022, the Company reported assets held for sale related to the pending sale of the manufacturing facility located at 783 Jersey Avenue, which is expected to close within 120 days of the effective date of the Agreement of Sale and Purchase effective March 3, 2022. (See Note 11 Fair Value). Note 7: Patents Schedule of Patents, Trademark Rights December 31, 2020 $ 1,498 Acquisitions 592 Amortization ( 116 ) December 31, 2021 $ 1,974 Acquisitions 33 Amortization ( 19 ) March 31, 2022 $ 1,988 Patents and trademarks are stated at cost and are amortized using the straight-line method of the estimated useful life of 17 years. Amortization of patents and trademarks for each of the next five years and thereafter is as follows: Schedule of Amortization of Patents and Trademarks Year Ending December 31, 2022 $ 59 2023 153 2024 177 2025 199 2026 235 Thereafter 1,165 Total $ 1,988 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 our 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 March 31, 2022, and December 31, 2021, the Company had 715 and 715 shares of Series B Convertible Preferred Stock outstanding, respectively. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividend actually paid on shares of Common Stock when as and if such dividends are paid on shares of the Common Stock. Each such Preferred Share is convertible into 114 shares of common stock. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders shall be entitled to receive out of the assets, whether capital or surplus of the Company the same amount that a holder of Common Stock would receive if the Preferred Stock was fully converted. The Series B Convertible Preferred Stock shall no voting Rights. 10 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 three months ending March 31, 2022, 0 shares of Series B Convertible Preferred Stock were converted into common stock. (b) Common Stock The Company has authorized shares of 350,000,000 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. When this plan expired, the board of directors approves 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 March 2, 2022. During the three months ended March 31, 2022, the Company issued a total of 0 shares of its common stock. During the twelve months ended December 31, 2021, the Company issued a total of 132,238 shares of its common stock at prices ranging from $ 1.16 to $ 2.35 for a total of $ 205,000 . 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 . As of March 31, 2022, there are 15,000 Warrants outstanding. 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 December 31, 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. 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. During first quarter of 2022, 300,000 options were issued to employees with an exercise price of $ .70 for a period of ten years with a vesting period of one year. During fourth quarter of 2021, 613,512 options were issued to employees with an exercise price range of $ 1.11 to $ 1.71 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. 11 As of both periods March 31, 2022, and December 31, 2021, there were 47,994,672 shares outstanding. 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 During the first quarter of 2022 accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements. Note 11: Fair Value 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 occurrence of a Fundamental Transaction. The fair value of the redeemable warrants (“Warrants”) related to the Company’s February 2017, June 2017, April 2018, and March 2019 common stock and warrant issuance, 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 March 31, December 31, 2022 2021 Underlying price per share $ 1.06 $ 0.92 Exercise price per share $ 30.25 -$ 33.00 $ 30.25 -$ 33.00 Risk-free interest rate 0.71 %- 0.74 % 0.22 %- 0.23 % Expected holding period 0.34 - 0.35 0.58 - 0.60 Expected volatility 85 % 45 % Expected dividend yield — — 12 The Company utilized the following assumptions to estimate the fair value of the June 2017 Warrants: March 31, December 31, 2022 2021 Underlying price per share $ 1.06 $ 0.92 Exercise price per share $ 27.50 $ 27.50 Risk-free interest rate 0.35 % 0.15 % Expected holding period 0.17 0.42 Expected volatility 85 % 50 % Expected dividend yield — — The Company utilized the following assumptions to estimate the fair value of the April 2018 Warrants: March 31, December 31, 2022 2021 Underlying price per share $ 1.06 $ 0.92 Exercise price per share $ 17.16 $ 17.16 Risk-free interest rate 2.00 % 0.67 % Expected holding period 1.57 1.81 Expected volatility 70 % 120 % Expected dividend yield — — The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants: March 31, December 31, 2022 2021 Underlying price per share $ 1.06 $ 0.92 Exercise price per share $ 8.80 $ 8.80 Risk-free interest rate 2.24 % 0.78 % Expected holding period 1.94 2.19 Expected volatility 75 % 125 % 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 % and this assumption will be continued in future calculations unless the Company changes its dividend policy. 13 (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: 1. The Company only has one product that is FDA approved but is currently not available for commercial sales. 2. The Company will have to perform additional clinical trials for FDA approval of its flagship product. 3. Industry and market conditions continue to include uncertainty, adding risk to any transaction. 4. Available capital for a potential buyer in a cash transaction continues to be limited. 5. The nature of a life sciences company is heavily dependent on future funding and high fixed costs, including Research & Development. 6. The Company has minimal revenues streams which are insufficient to meet the funding needs for the cost of operations or construction at their manufacturing facility; and 7. The Company’s Rights Agreement and Executive Agreements make it less attractive to a potential buyer. 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 elucidated above, the Company utilized a discrete uniform probability distribution over the Expected Holding Period to model in 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., utilizing historical stock prices), the numbers input change from period to period (e.g., the actual historical prices input for the relevant period). The carrying amount and estimated fair value of the above Warrants was approximately $ 4,000 and $ 35,000 at March 31, 2022 and December 31, 2021, respectively. The Company applies FASB ASC 820 (formerly Statement No. 157 Fair Value Measurements ) that defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, 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 (formerly SFAS No. 157) 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: 1. Level 1 – Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes debt and equity securities that are traded in an active market. 2. Level 2 – Observable inputs other than Level 1 prices such as quote 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. 3. 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 March 31, 2022, 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 the warrants. 14 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 March 31, 2022 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 15,554 $ 15,554 $ — $ — Liabilities: Redeemable warrants $ 4 — $ — 4 (in thousands) As of December 31, 2021 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 16,175 $ 16,175 $ — $ — Liabilities: Redeemable warrant $ 35 — — $ 35 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, 2021 $ 35 Fair value adjustments ( 31 ) Balance at March 31, 2022 $ 4 The table below presents the balances of assets and liabilities measured at fair value on a nonrecurring basis by level within the hierarchy as: Schedule of Assets and Liabilities Measured at Fair Value on a NonRecurring Basis (in thousands) As of December 31, 2021 Total Level 1 Level 2 Level 3 Total Gains (Losses) Assets: Long lived assets held and used (a) $ 3,900 $ — $ — $ 3,900 $ 1,800 (a) In accordance with Subtopic 360-10, long-lived assets held and used with a carrying amount of $ 5,700,000 were written down to their fair value of $ 3,900,000 , resulting in an impairment charge of $ 1,800,000 , which was included in earnings for the period ending December 31, 2021. Note 12: 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 would increase 2.5% per year for the next three years through March 31, 2023, and the lease payments would 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 included 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 included the option to repurchase the property and included 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. 15 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. Interest expense relating to this financing agreement was $ 0 for the period ended March 31, 2022 and $ 14,000 for the period ended March 31, 2021. Note 13: Leases The Company leases office and storage space, and other equipment under non-cancellable operating leases with initial terms typically ranging from 1 to 5 years. At contract inception, the Company reviews the facts and circumstances of the arrangement to determine if the contract is or contains a lease. The Company follows the guidance in Topic 842 “ Leases ” to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if the Company has the right to direct the use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to direct the use of an underlying asset, the Company considers if it has the right to direct how and for what purpose the asset is used throughout the period of use and if it controls the decision-making rights over the asset. The Company’s lease terms may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when extension or termination options are present and include such options in the calculation of the lease term when it is reasonably certain that it will exercise those options. The Company has elected to include both lease and non-lease components in the determination of lease payments. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments. At lease commencement, lease-related assets and liabilities are measured at the present value of future lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company exercises judgment in determining the incremental borrowing rate based on the information available when the lease commences to measure the present value of future payments. Operating leases are included in other assets, current operating lease obligations, and operating lease obligations (less current portion) on the Company’s consolidated balance sheet. Short term leases with an initial term of 12 months or less are not presented on the balance sheet with expense recognized as incurred. 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 $ 2,500 per month for the term of the lease. On October 4, 2021, the Company executed a request to renew the lease for a one-year term as defined in the Lease Agreement. The request was accepted and the one-year term commenced on April 30, 2022. 16 On February 17, 2022, the Company entered into a Lease Agreement for a term of two years commencing on March 1, 2022, pursuant to which the Company agreed to lease a Canon copier. The base rent is $ 322 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 13 months and 5 years. As of March 31, 2022, and December 31, 2021, the weighted-average remaining term is 3.7 and 2.72 years, respectively. The Company has determined that the incremental borrowing rate is 10 % as of March 31, 2022, and December 31, 2021, respectively, based upon the recently completed financing transaction in December 2019. Future minimum payments as of March 31, 2022, are as follows: Schedule of Operating lease Future Payments Year Ending December 31, 2022 $ 49 2023 60 2024 35 2025 14 Less imputed interest ( 14 ) Total $ 144 As of March 31, 2022, and December 31, 2021, the balance of the right of use assets was $ 144,000 and $ 149,000 , respectively, and the corresponding lease liability balance was $ 144,000 and $ 149,000 , respectively. The total rent expense for the period ended March 31, 2022, and December 31,2021 amounted to approximately $ 17,000 and $ 67,000 , respectively. Total rent expense for short term leases for the period ended March 31, 2022 and December 31, 2021 amounted to approximately $ 3,000 and $ 12,000 , respectively. Note 14: Research, Consulting and Supply Agreements 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 $ 61,000 , to be paid in the second quarter of 2022. In April 2021, the Company approved a proposal from Polysciences Inc. (“Polysciences”) for the manufacture of our Poly I and Poly C12U polynucleotides and associated test methods at Polysciences’ Warrington, PA location to enhance our capacity to produce the polymer precursors to the drug Ampligen. The Company is working with Polysciences to negotiate and finalize both a Service Agreement and a Quality Agreement. For the year ended December 31, 2021 the Company has incurred an expense and paid Polysciences approximately $ 250,000 . For the period ended March 31, 2022, the Company paid Polysciences $ 51,390 . In April 2022, AIM executed a work order with Amarex Clinical Research LLC, our contract research organization, pursuant to which Amarex will manage a Phase 2 clinical trial in advanced pancreatic cancer patients designated AMP-270. Per the work order, AIM anticipates that the study will cost approximately $ 8.2 million, which includes pass through costs of approximately $ 1.0 million and excludes certain third-party costs and escalations. AIM anticipates that the study will take approximately 4.6 years to complete. Note 15: Subsequent Events None. 17