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, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 29,759 $ 32,093 Marketable securities 6,986 16,175 Funds receivable from New Jersey net operating loss — 1,641 Prepaid expenses and other current assets 805 304 Assets held for sale 3,600 — Total current assets 41,150 50,213 Property and equipment, net 118 4,047 Right of use asset, net 866 149 Patent and trademark rights, net 2,013 1,974 Other assets 2,138 1,316 Total assets $ 46,285 $ 57,699 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 957 $ 198 Accrued expenses 1,767 438 Current portion of operating lease liability 171 37 Total current liabilities 2,895 673 Long-term liabilities: Operating lease liability 695 112 Redeemable warrants — 35 Commitments and contingencies (Notes 12, 13, and 14) - Stockholders’ equity: Series B Convertible Preferred Stock, stated value $ 1,000 per share, 713 and 715 issued and outstanding, respectively 713 715 Common Stock, par value $ 0.001 per share, authorized 350,000,000 shares: 48,082,275 , and 47,994,672 , issued and outstanding, respectively 48 48 Additional paid-in capital 418,091 417,217 Accumulated deficit ( 376,157 ) ( 361,101 ) Total stockholders’ equity 42,695 56,879 Total liabilities and stockholders’ equity $ 46,285 $ 57,699 See accompanying notes to consolidated financial statements. 2 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statement of Operations and Comprehensive Loss (in thousands, except share and per share data) (Unaudited) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Revenues: Clinical treatment programs - US $ 21 $ 33 $ 85 $ 85 Costs and Expenses: Production costs — 157 — 674 Research and development 1,372 2,006 4,883 4,749 General and administrative 5,170 1,799 9,569 6,055 Total Costs and Expenses 6,542 3,962 14,452 11,478 Operating loss ( 6,521 ) ( 3,929 ) ( 14,367 ) ( 11,393 ) Loss on investments ( 365 ) — ( 1,769 ) — Interest and other income, net 172 ( 20 ) 296 100 Interest expense and other finance costs — — — ( 67 ) Extinguishment of financing obligation and note payable — — — ( 2,701 ) Gain on sale of fixed assets — — — 216 Redeemable warrants valuation adjustment 1 51 35 22 Gain from sale of income tax operating losses 328 72 749 542 Net Loss ( 6,385 ) ( 3,826 ) ( 15,056 ) ( 13,281 ) 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 ) — ( 329 ) Comprehensive loss $ ( 6,385 ) $ ( 3,829 ) $ ( 15,056 ) $ ( 13,484 ) Basic and diluted loss per share $ ( 0.13 ) $ ( 0.08 ) $ ( 0.31 ) $ ( 0.28 ) Weighted average shares outstanding basic and diluted 48,079,210 47,846,074 48,036,559 47,156,158 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, 2022 (in thousands except share data) (Unaudited) Series B Preferred 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 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 Common stock issuance, net of costs — 54,150 — 55 — — 55 Equity-based compensation — — — 275 — — 275 Series B preferred shares converted to common shares ( 2 ) — — 2 — — — Net comprehensive loss — — — — — ( 4,851 ) ( 4,851 ) Balance June 30, 2022 $ 713 48,048,822 $ 48 $ 417,791 $ — $ ( 369,772 ) $ 48,780 Common stock issuance, net of costs — 32,895 — 25 — — 25 Equity-based compensation — — — 275 — — 275 Cashless Warrant Conversion — 558 — — — — — Net comprehensive loss — — — — — ( 6,385 ) ( 6,385 ) Balance September 30, 2022 713 48,082,275 48 418,091 — ( 376,157 ) 42,695 See accompanying notes to consolidated financial statements. 4 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 Equity-based compensation — — — 526 — — 526 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 ) Net 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. 5 AIM IMMUNOTECH INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2022 and 2021 (in thousands) (Unaudited) 2022 2021 Cash flows from operating activities: Net loss $ ( 15,056 ) $ ( 13,281 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 29 484 Redeemable warrants valuation adjustment ( 35 ) ( 22 ) Extinguishment of financing obligation and note payable — 2,701 Amortization of patent, trademark rights 57 97 Changes in ROU assets ( 717 ) 35 Gain on sale of property and equipment — ( 216 ) Gain from sale of income tax operating losses ( 749 ) ( 542 ) Equity-based compensation 792 1,320 Gain (Loss) on sale of marketable securities 1,768 126 Amortization of finance and debt issuance costs — 47 Change in assets and liabilities: Accounts receivable — 6 Funds Receivable from New Jersey net operating loss 1,641 1,090 Prepaid expenses and other current assets and other non-current assets ( 500 ) 64 Lease liability 717 ( 35 ) Other Assets ( 73 ) — Accounts payable 758 ( 14 ) Accrued expenses 1,329 ( 80 ) Net cash used in operating activities ( 10,039 ) ( 8,220 ) Cash flows from investing activities: Proceeds from sale of marketable securities 9,082 849 Purchase of marketable securities ( 1,661 ) ( 1,611 ) Purchase of property and equipment — ( 34 ) Proceeds from sale of property and equipment 300 245 Purchase of patent and trademark rights ( 96 ) ( 444 ) Net cash provided by (used in) investing activities 7,625 ( 995 ) Cash flows from financing activities: Payment of financing obligation — ( 4,732 ) Financing obligation payments — ( 122 ) Proceeds from sale of stock, net of issuance costs 80 12,917 Net cash provided by financing activities 80 8,063 Net decrease in cash and cash equivalents ( 2,334 ) ( 1,152 ) Cash and cash equivalents at beginning of period 32,093 38,501 Cash and cash equivalents at end of period $ 29,759 $ 37,349 Supplemental disclosures of non-cash investing and financing cash flow information: Operating lease-Right of Use Assets $ 717 $ — Unrealized loss on marketable securities $ ( 1,170 ) $ ( 329 ) Conversion of Series B preferred $ 2 $ 7 See accompanying notes to consolidated financial statements. 6 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 U.S. Food and Drug Administration (“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 double-stranded RNA 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 and other immuno oncology therapies. ● Exploring Ampligen’s antiviral activities and potential use as a prophylactic or early onset 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 Post-COVID conditions of fatigue. The Company is prioritizing activities in an order related to the stage of development, with those clinical activities in oncology, ME/CFS and Post-COVID conditions having priority over antiviral experimentation. The Company intends that priority clinical work be conducted in trials authorized by the FDA or European Medicines Agency (“EMA”), which trials support commercial development. 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 including foreign venues and able to generate valid proof-of-concept data,. 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 it determined to be obsolete and no longer needed for current or future manufacturing. On March 3, 2022, AIM entered into an Agreement of Sale and Purchase with Acellories, Inc. to purchase the property for an estimated $ 3.9 million, with AIM’s intention to keep some space specifically for its Alferon activity. The sale closed on November 1, 2022 for $ 3.7 million net of normal closing cost. AIM’s business plan requires one or more Contract Manufacturing Organizations (“CMO”) to produce Ampligen API. This includes utilizing Polysciences Inc. (“Polysciences”) for the manufacture of our Poly I and Poly C12U polynucleotides and associated test methods. While AIM believes it has sufficient Ampligen API to meet current needs, it is also continually exploring new efficiencies so as to maximize its ability to fulfill future obligations. In the opinion of management, all adjustments necessary for a fair presentation of the 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. 7 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 with the SEC on March 31, 2022. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure (“GAAP”) of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates, and those differences may be material. Accounts requiring the use of significant estimates include determination of other-than-temporary impairment on securities, valuation of deferred taxes, patent and trademark valuations, stock-based compensation calculations, building valuation, fair value of warrants, and contingency accruals. 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 2,445,805 and 1,617,145 , are excluded from the calculation of diluted net loss per share for the nine months ended September 30, 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. There were 300,000 options granted in the nine months ended September 30, 2022, and no options granted in the nine months ended September 30, 2021. Stock option for employees’ activity during the nine months ended September 30, 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, 2021 1,498,798 $ 4.22 9.11 $ — Granted 150,000 0.70 9.17 — Forfeited ( 1,684 ) 117.6 — — Expired — — — — Outstanding September 30, 2022 1,647,114 $ 3.78 8.43 $ — Vested and expected to vest September 30, 2022 1,647,114 $ 3.78 8.43 $ — Exercisable September 30, 2022 1,542,949 $ 2.43 6.66 $ — 8 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 9.17 — Expired ( 1,684 ) 117.6 — — Vested ( 456,651 ) 1.43 — — Unvested September 30, 2022 104,165 $ 6.52 3.14 $ — 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 9.42 — Forfeited — — — — Expired — — — — Outstanding September 30, 2022 429,723 $ 4.10 7.96 $ — Vested and expected to vest September 30, 2022 429,723 $ 4.10 7.96 $ — Exercisable September 30, 2022 354,526 $ 4.21 8.32 $ — 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 9.42 — Expired — — — — Vested ( 172,634 ) 1.16 — — Unvested September 30, 2022 75,197 $ 3.79 8.24 $ — Stock-based compensation expense was approximately $ 792,000 and $ 1,320,000 for the nine months ended September 30, 2022, and 2021, resulting in an increase in general and administrative expenses, respectively. As of September 30, 2022, and 2021, respectively, there was approximately $ 179,000 and $ 279,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan. 9 Note 4: Marketable Securities Marketable securities consist of mutual funds. As of September 30, 2022, and December 31, 2021, it was determined that none of the marketable securities had an other-than-temporary impairment. As of September 30, 2022, and December 31, 2021, all securities were measured as Level 1 instruments under the fair value measurements standard (See Note 11: Fair Value). As of September 30, 2022, and December 31, 2021, the Company held approximately $ 6,986,000 and $ 16,175,000 in mutual funds. Mutual Funds classified as available for sale consisted of: Schedule of Available for Sale September 30, 2022 (in thousands) Securities Fair Value Short-Term Investments Mutual Funds $ 6,986 $ 6,986 Totals $ 6,986 $ 6,986 Schedule of Equity Securities September 30, 2022 (in thousands) Securities Net losses recognized during the period on equity securities $ ( 1,769 ) Less: Net gains and losses recognized during the period on equity securities sold during the period ( 598 ) Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date $ ( 1,171 ) 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 10 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 (in thousands) September 30, 2022 December 31, 2021 Compensation $ 33 $ 1 Professional fees 1,535 169 Clinical trial expenses — 61 Other expenses 199 207 Accrued expenses $ 1,767 $ 438 Note 6: Property and Equipment, net Schedule of Property and Equipment (in thousands) September 30, 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 ( 2,235 ) ( 2,206 ) Property and equipment, net $ 118 $ 4,047 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. Depreciation expense for the nine months ending September 30, 2022 and September 30, 2021 was $ 29,000 and $ 484,000 . 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 September 30, 2022, the Company reported assets held for sale related to the pending sale of the manufacturing facility located at 783 Jersey Avenue. On November 1, 2022, AIM completed the sale of its facility at 783 Jersey Avenue, New Brunswick, N.J., for $ 3.7 million net of normal closing cost. (See Note 11 Fair Value). Note 7: Patents Schedule of Patents, Trademark Rights (in thousands) December 31, 2020 $ 1,498 Acquisitions 592 Amortization ( 116 ) December 31, 2021 $ 1,974 Acquisitions 96 Amortization ( 57 ) September 30, 2022 $ 2,013 11 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. 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) 2022 $ 23 2023 154 2024 178 2025 199 2026 235 Thereafter 1,224 Total $ 2,013 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 September 30, 2022, and December 31, 2021, the Company had 713 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 have no voting Rights. 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 ending September 30, 2022 and September 30, 2021, 2 and 7 shares, respectively, of Series B Convertible Preferred Stock were converted into common stock. 12 (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 nine months ended September 30, 2022, the Company issued a total of 87,045 shares of its common stock at prices ranging from $ 0.76 to $ 1.02 for a total of $ 80,000 as part of the employee stock purchase plan, not from the 2018 Equity Incentive Plan. 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 September 30, 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 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. 13 As of September 30, 2022, and December 31, 2021, there were 48,082,275 and 47,994,672 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 During the third 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 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 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 April 2018 Warrants: Schedule of Assumptions to Estimate Fair Value of Warrants September 30, 2022 December 31, 2021 Underlying price per share $ 0.58 $ 0.92 Exercise price per share $ 17.16 $ 17.16 Risk-free interest rate 4.06 % 0.67 % Expected holding period 1.07 1.81 Expected volatility 70 % 120 % Expected dividend yield — — 14 The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants: September 30, 2022 December 31, 2021 Underlying price per share $ 0.58 $ 0.92 Exercise price per share $ 8.80 $ 8.80 Risk-free interest rate 4.12 % 0.78 % Expected holding period 1.44 2.19 Expected volatility 65 % 125 % Expected dividend yield — — Measurement input — — 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. 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. 15 (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, 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 these warrants. 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, 2022 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 6,986 $ 6,986 $ — $ — Liabilities: Redeemable warrants $ — — — $ — 16 (in thousands) As of December 31, 2021 Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 16,175 $ 16,175 $ — $ — Liabilities: Redeemable warrants $ 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 adjustment ( 35 ) Balance at September 30, 2022 $ — 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. A $ 300,000 deposit was received in the third quarter 2022 related to the asset. 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. 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. 17 Interest expense relating to this financing agreement was $ 0 for the period ended September 30, 2022 and $ 67,000 for the nine months ended September 30, 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. On October 5, 2022, the Company executed a request to renew the lease for an additional one-year term at a monthly cost of $ 2,850 . The request was accepted and the one-year term commences on May 1, 2023 . 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. On June 16, 2022, the Company entered into a Lease Agreement for a term of five years commencing on July 1, 2022 pursuant to which the Company agreed to lease approximately 5,210 rentable square feet. The base rent increases by 3 % each year, and ranges from $ 15,630 per month for the first year to $ 18,118 per month for the fifth year. 18 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 11 months and 5 years. As of September 30, 2022, and December 31, 2021, the weighted-average remaining term is 2.67 and 2.72 years, respectively. The Company has determined that the incremental borrowing rate is 10 % as of September 30, 2022, and December 31, 2021, respectively, based upon the recently completed financing transaction in December 2019. Future minimum payments as of September 30, 2022, are as follows: Schedule of Operating lease Future Payments Period December 31, (in thousands) 2022 $ 46 2023 187 2024 183 2025 180 2026 185 Thereafter 171 Less imputed interest ( 86 ) Total $ 866 As of September 30, 2022, and December 31, 2021, the balance of the right of use assets was $ 866,000 and $ 149,000 , respectively, and the corresponding lease liability balance was $ 866,000 and $ 149,000 , respectively. Total rent expense for the nine months ended September 30, 2022, and September 30, 2021, amounted to approximately $ 75,000 and $ 39,000 , respectively. Total rent expense for short term leases for the nine months ended September 30, 2022, and September 30, 2021, amounted to approximately $ 8,000 for both periods. 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 $ 1,066,000 . In April 2021, the Company approved a proposal from 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 nine months ended September 30, 2022, the Company paid Polysciences $ 103,000 . In April 2022, AIM executed a work order with Amarex Clinical Research LLC (“Amarex”), 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. On June 13, 2022, AIM executed a work order with Amarex, pursuant to which Amarex will manage a Phase 2 trial in patients with Post-COVID Conditions. It is planned that the study will be conducted at up to 10 sites in the United States. AIM is sponsoring the study. AIM anticipates that the study will cost approximately $ 4.4 million, which includes pass through costs of approximately $ 125,470 , investigator costs estimated at about $ 2.4 million and excludes certain other third-party costs and escalations. In December 2020, AIM added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance its capacity to produce Ampligen. This addition amplifies AIM’s manufacturing capability by providing redundancy and cost savings. The contracts augment our active and in-process fill and finish capacity. For the period ended December 31, 2021, the Company has incurred an expense and paid Pii approximately $ 89,000 . For the nine months ended September 30, 2022, the Company incurred an expense and paid Pii approximately $ 259,000 . Note 15: Subsequent Events On October 5, 2022, the Delaware Court of Chancery held a hearing regarding a motion to require the AIM Board of Directors to accept the Jorgl Group’s director nominations and include the group’s nominees on a universal proxy card for the 2022 Annual Meeting of Stockholders. On October 28, 2022, the court denied Jorgl’s motion. The Jorgl Group announced on November 2, 2022, that it did not intend to appeal the decision. On October 12, 2022, the Company announced that its Investigational New Drug (IND) application filed with the FDA was granted clearance to proceed and therefore the Company could initiate a Phase 2 study evaluating Ampligen as a therapeutic for patients with post-COVID conditions (“AMP-518”). On November 1, 2022, AIM completed the sale of its facility at 783 Jersey Avenue, New Brunswick, N.J., for $ 3.7 million net of normal closing cost . In November 2022, AIM received notice that the FDA had granted Orphan Drug Designation to Ampligen for the treatment of Ebola virus disease. 19