Aptevo Therapeutics Inc

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Organization and Liquidity

Aptevo Therapeutics Inc. (Aptevo, we, us, or the Company) is a clinical-stage, research and development biotechnology company focused on developing novel immuno-oncology candidates for the treatment of different forms of cancer. We have developedtwo versatile and enabling platform technologies for rational design of precision immune modulatory drugs. Our clinical candidates, mipletamig (formerly APVO436) and ALG.APV-527, and preclinical candidates, APVO603 and APVO711, were developed using our ADAPTIR™ modular protein technology platform. Our preclinical candidate APVO442 was developed using our ADAPTIR-FLEX™ modular protein technology platform.

We are currently trading on the Nasdaq Capital Market under the symbol "APVO."

The accompanying financial statements have been prepared on a basis that assumes we will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty of our ability to continue as a going concern, nor do they include adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. For the nine months ended September 30, 2024, we had a net loss of $17.8 million. We had an accumulated deficit of $241.3 million as of September 30, 2024. For the nine months ended September 30, 2024, net cash used in our operating activities was $18.0 million. We have suffered recurring losses from operations and negative cash flows from operating activities. When considered in aggregate, these factors raise substantial doubt about our ability to continue as a going concern for the one-year period from the date of issuance of these financial statements. We will need to raise additional funds to support our operating and capital needs in addition to our existing cash resources, cash to be generated from future milestones related to IXINITY sales and regulatory approvals achieved by Medexus Pharmaceuticals ("Medexus"), and exercise of common warrants. We may choose to raise additional funds to support our operating and capital needs in the future.

We continue to face significant challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to: (a) changes we may make to the business that affect ongoing operating expenses; (b) changes we may make in our business strategy; (c) changes we may make in our research and development spending plans; (d) whether and to what extent potential milestones are received from Medexus with respect to IXINITY; (e) macroeconomic conditions such as rising interest rates, inflation and costs; and (f) other items affecting our forecasted level of expenditures and use of cash resources. We may attempt to obtain other public or private financing, collaborative or licensing arrangements with strategic partners, or through credit lines or other debt financing sources to increase the funds available to fund operations. However, we may not be able to secure such funding in a timely manner or on favorable terms, if at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders. If we raise additional funds through collaboration, licensing, or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Without additional funds, we may be forced to delay, scale back, or eliminate some of our research and development activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development goals may be adversely affected. Given the continuing global economic and geopolitical climate, including rising interest rates and stock market volatility, we may experience delays or difficulties in the financing environment and raising capital due to economic uncertainty.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). These unaudited condensed consolidated financial statements include all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and changes in these estimates are recorded when known.

The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiary, Aptevo Research and Development LLC ("Aptevo R&D"). All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the unaudited condensed financial statements and accompanying notes. Estimates are used for, but not limited to, clinical accruals, useful lives of equipment, commitments and contingencies, stock-based compensation, and incremental borrowing rate (IBR) used for our lease. Given the global economic and geopolitical climate, these estimates are becoming more challenging, and actual results could differ materially from those estimates.

Significant Accounting Policies

Gain Related to Sale of Nonfinancial Asset to XOMA (US) LLC

On March 29, 2023, we entered into and closed a payment interest purchase agreement (the "Purchase Agreement") with XOMA (US) LLC ("XOMA") pursuant to which we sold to XOMA our right, title and interest in all of the deferred payments and a portion of the milestone payments from Medexus pursuant to our LLC Purchase Agreement with Medexus, dated February 28, 2020 (the "LLC Purchase Agreement"). Under the terms of the Purchase Agreement, we received $9.6 million at closing (the "Closing Payment") and an additional post-closing payment of $0.05 million.

We accounted for the $9.6 million Closing Payment and the $0.05 million post-closing payment from XOMA as other income in accordance with Accounting Standards Codification ("ASC") 610-20 Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets in the first quarter of 2023. Contractual rights sold to XOMA represent an intangible asset under ASC 610-20 Other Income - Gains and Losses from the Derecognition of Nonfinancial Assetsfor which XOMA bears all benefit and Aptevo has no obligations going forward. The Company will continue to account for its portion of future milestones under our LLC Purchase Agreement with Medexus as contingent consideration under ASC 450-30 Gain Contingenciesand will record income when proceeds are received.

Other Significant Accounting Policies

Our other significant accounting policies were reported in our Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the Securities and Exchange Commission (the "SEC") on March 5, 2024. Our other significant accounting policies have not changed materially from the policies previously reported.

Note 2. Discontinued Operations

The accompanying unaudited condensed consolidated financial statements include discontinued operations from the sale of business products and segments.

The following table represents the components attributable to income from discontinued operations in the unaudited condensed consolidated statements of operations (in thousands):

For the nine months ended September 30, 2024, we didnot record income from discontinued operations. For thenine months ended September 30, 2023, we collected $0.5 million in deferred payments from Medexus related to IXINITY sales and $0.2 million related to funds released from escrow from the sale of Aptevo BioTherapeutics in 2020. Additionally, we received $0.3 million related to the sale of hyperimmune business to Saol (later acquired by Kamada, Ltd.) as a result of the collection of certain accounts receivable.

Note 3. XOMA Transaction

On March 29, 2023, we entered into and closed a Purchase Agreement with XOMA pursuant to which we sold to XOMA our right, title and interest in and to all of the deferred payments and a portion of the milestone payments from Medexus under our LLC Purchase Agreement. Under the terms of our Purchase Agreement with XOMA, we received $9.6 million at closing and an additional post-closing payment of $0.05 million. In exchange for the Closing Payment, we sold to XOMA our right, title and interest to the following payments under the LLC Purchase Agreement: (i)100% of the Company’s entitlement to receive the deferred payments that may become due and payable following March 29, 2023 (including, for avoidance of doubt, any and all payments earned during Q1 2023), (ii)25% of the Company’s entitlement to receive the Canadian approval milestone payment; and (iii)50% of the Company’s entitlement to receive the European approval milestone payments and net sales milestone payment.

We accounted for the $9.6 million Closing Payment and the $0.05 million post-closing payment from XOMA as other income in accordance with ASC 610-20 Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets in the first quarter of 2023. Contractual rights sold to XOMA represent an intangible asset under ASC 610-20 Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets for which XOMA bears all benefit and Aptevo has no obligations going forward. The Company will continue to account for its portion of future milestones under our LLC Purchase Agreement with Medexus as contingent consideration under ASC 450-30 Gain Contingencies and will record income when proceeds are received.

Note 4. Collaboration Agreements

Alligator Bioscience AB

On July 20, 2017, our wholly owned subsidiary, Aptevo R&D, entered into a collaboration and option agreement (the "Collaboration Agreement") with Alligator Bioscience AB ("Alligator"), pursuant to which Aptevo and Alligator have been collaboratively developing ALG.APV-527, a first-in-class bispecific antibody candidate simultaneously targeting 4-1BB (CD137), a member of the TNFR superfamily of a costimulatory receptor found on activated T cells, and 5T4, a tumor antigen widely overexpressed in a number of different types of cancer.

We assessed the arrangement in accordance with ASC 606 and concluded that the contract counterparty, Alligator, is not a customer. As such the arrangement is not in the scope of ASC 606 and is instead treated as a collaborative agreement under ASC 808 –Collaborative Arrangements ("ASC 808"). In accordance with ASC 808, we concluded that because the Collaboration Agreement is a cost sharing agreement, there is no revenue.

For the nine months ended September 30, 2024 and 2023, we recorded approximately $1.9 million and $2.0 million, which represent our 50% cost share, in our research and development expense related to the Collaboration Agreement, respectively.

Note 5. Fair Value Measurements

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, it gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety. The three levels of the hierarchy are as follows:

Level 1— Quoted prices in active markets for identical assets and liabilities;

Level 2— Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

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.

At September 30, 2024 and December 31, 2023, we had $5.8 million and $13.2 million in Level 1 money market funds, respectively. The carrying amounts of our money market funds approximate their fair value. At September 30, 2024 and December 31, 2023, we didnot have any Level 2 or Level 3 assets.

Note 6. Cash and Cash Equivalents

The Company’s cash equivalents are highly liquid investments with a maturity of 90 days or less at the date of purchase and include time deposits and investments in money market funds.

The following table shows our cash and cash equivalents as of September 30, 2024 and December 31, 2023:

Note 7. Leases

Office Space Lease - Operating

We have an operating lease related to our office and laboratory space in Seattle, Washington with aterm through April 2030 andtwo options toextend the lease term, each byfive years. As of September 30, 2024, we are not reasonably certain to exercise thetwo options to extend the lease term and our lease liability is recorded through April 30, 2030.

For the three and nine months ended September 30, 2024, we recorded $0.2 million and $0.6 million, respectively, related to variable lease expense. For thethree and nine months ended September 30, 2023, we recorded $0.3 million and $0.6 million, respectively, related to variable lease expense.

Components of lease expense:

Right of use assets acquired under operating leases:

Lease payments:

As of September 30, 2024, the long-term andcurrent portion of the lease liabilities was $4.8 million and $0.7 million, respectively. As of September 30, 2023, the long-term andcurrent portion of the lease liabilities was $5.6 million and $0.7 million, respectively.

As of September 30, 2024, the weighted-average remaining lease term and weighted-average discount rate for operating leases was 5.58 years and 12.03%.

Note 8. Reverse Stock Split

On February 5, 2024, we held a Special Meeting of the Stockholders (the "Special Meeting") at which our stockholders approved a series of alternate amendments to the Amended and Restated Certificate of Incorporation to effect, at the option of our Board of Directors (the "Board"), a reverse split of Aptevo's common stock at a ratio ranging from 1-for-15 to 1-for-44, inclusive, with the effectiveness of one of such amendments and the abandonment of the other amendments, or the abandonment of all amendments, to be determined by the Board in its sole discretion following the Special Meeting. The specific 1-for-44 reverse split ratio was subsequently approved by the Board on February 27, 2024. On March 5, 2024, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-44 reverse stock split of the Company's outstanding common stock (the "Reverse Stock Split"). The Reverse Stock Split became effective on March 5, 2024 at 5:01 p.m. Eastern Time, and our common stock began trading on the Nasdaq Capital Market, on a split-adjusted basis, at market open on March 6, 2024.

No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof.

We have adjusted all common stock and stock equivalent figures retroactively in this Form 10-Q for all periods presented to reflect the Reverse Stock Split.

Note 9. Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period using the as-if converted method. Shares of the Company's common stock underlying pre-funded warrants are included in the calculation of basic and diluted earnings per share because there is little to no consideration required for delivery of shares. For the purpose of this calculation, warrants, stock options and restricted stock units ("RSUs") are only included in the calculation of diluted net income (loss) per share when their effect is dilutive.

We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common stock instruments are dilutive. The control number used is income (loss) from continuing operations or income (loss) from discontinued operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.

Common stock equivalents include warrants, stock options and unvested RSUs.

The following table presents the computation of basic and diluted net loss per share (in thousands, except share and per share amounts):

The following table represents all potentially dilutive shares:

We use the treasury stock method when determining dilutive shares. For the three and nine months ended September 30, 2024 and 2023, the Company was in a net loss position, therefore the share number used to calculate diluted earnings per share is the same as the basic earnings per share.

Note 10. Equity

August 2023 Public Offering

On August 4, 2023, we completed a public offering of common stock and warrants, which included the following:

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50,488 shares of common stock at a price of $27.28 per share.

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Pre-funded warrants to purchase up to 132,793 shares of common stock at a price of $27.28 per with an exercise price of $0.001 per share. As of September 30, 2024, all pre-funded warrants have been exercised.

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Series A and Series B common warrants to purchase up to an aggregate of 366,562 shares of common stock at an exercise price of $27.28 per share.

We received net proceeds of $4.3 million, net of transaction costs, as a result of this offering. In the fourth quarter of 2023, an aggregate of 322,691 Series A and Series B common warrants were exercised as part of our November 2023 warrant inducement agreement with certain holders of our common warrants. The Series A and Series B common warrants are exercisable immediately following the date of issuance and will expire on August 4, 2028 and February 4, 2025, respectively. In connection with a registered direct offering of the Company that closed on July 1, 2024 (the "July Registered Direct Offering"), the Company amended certain existing common warrants held by certain stockholders who participated in the July Registered Direct Offering that were issued in our August 2023 public offering, such that these common warrants will have a reduced exercise price equal to $0.515 per share and include the same exercise price adjustment terms as the common warrants issued in the July Registered Direct Offering. As of September 30, 2024, we have 1,316 Series A and 1,316 Series B common warrants outstanding to purchase shares of our common stock at an exercise price of $27.28 per share and 41,239 Series A common warrants outstanding with an amended exercise price of $0.515 per share that were issued in connection with the August 2023 public offering.

If such warrants are exercised at their current exercise price, we will receive up to an additional $0.1 million in gross proceeds in connection with the warrants issued as part of the August 2023 public offering.

November 2023 Warrant Inducement

On November 9, 2023, we entered into a warrant inducement agreement (the "Inducement Agreement") with certain holders of our Series A and Series B common warrants issued in connection with our August 2023 public offering to exercise for cash 140,726 Series A and 181,965 Series B common warrants at a reduced exercise price of $10.25. We received $3.3 million in gross proceeds from the exercise of these warrants and issued an aggregate of 645,382 new Series A and new Series B warrants as follows:

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281,452 Series A common warrants to purchase an aggregate of up to 281,452 shares of common stock at $10.25 per share, of which 140,726 Series A-1 common warrants were immediately exercisable and 140,726 Series A-2 common warrants were exercisable at any time on or after February 5, 2024. The Series A-1 and Series A-2 common warrants have terms offour years and eight months, andfive years, respectively.

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363,930 Series B common warrants to purchase an aggregate of up to 363,930 shares of common stock at $10.25 per share, of which 181,965 Series B-1 common warrants were immediately exercisable and 181,695 Series B-2 common warrants were exercisable at any time on or after February 5, 2024. The Series B-1 and Series B-2 common warrants have terms offourteen months andtwenty-four months, respectively.

In connection with the July Registered Direct Offering and a registered direct offering of the Company that closed on September 18, 2024 (the "September Registered Direct Offering"), the Company amended certain existing common warrants held by certain stockholders who participated in the registered direct offerings that were issued in our November 2023 warrant inducement, such that these common warrants will have a reduced exercise price equal to $0.515 per share and $0.33 per share, respectively, and include the same exercise price adjustment terms as the common warrants issued in the July Registered Direct Offering and September Registered Direct Offering. As of September 30, 2024, we have 17,524 Series A and 17,524 Series B common warrants outstanding with an exercise price of $10.25 per share,82,478 Series A and 164,956 Series B common warrants with an amended exercise price of $0.515 per share and 181,450 Series A common warrants and 181,450 Series B common warrants with an amended exercise price of $0.33 per share that were issued in connection with the Inducement Agreement.

If such warrants are exercised at their current exercise price, we will receive up to an additional $0.6 million in gross proceeds in connection with the warrants issued in connection with the Inducement Agreement.

April 2024 Public Offering

On April 15, 2024, we completed a public offering of common stock and warrants, in which we received net proceeds of $4.0 million, net of transaction costs, which included the following:

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926,666 shares of common stock and accompanying common warrants to purchase up to 1,853,332 shares of common stock at a public offering price of $1.35 per share; and

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Pre-funded warrants to purchase up to 2,473,334 shares of common stock and accompanying common warrants to purchase up to 4,946,668 shares of common stock at a combined public offering price of $1.3499 per pre-funded warrant, which is equal to the public offering price per share of common stock less the $0.0001 per share exercise price of each such pre-funded warrant. As of September 30, 2024, all pre-funded warrants have been exercised.

The common warrants are exercisable immediately following the date of issuance and will expire in April 2029. On July 1, 2024, and September 18, 2024, in connection with the July Registered Direct Offering and September Registered Direct Offering, respectively, the Company amended certain existing common warrants held by certain stockholders who participated in the registered direct offerings that were issued in our April 2024 public offering, such that these common warrants will have a reduced exercise price equal to $0.515 per share and $0.33 per share, respectively, and include the same exercise price adjustment terms as the common warrants issued in the July Registered Direct Offering and the September Registered Direct Offering. As of September 30, 2024, we have 133,332 common warrants outstanding with an exercise price of $1.35 per share,2,222,222 common warrants with an amended exercise price of $0.515 per share and 4,444,446 common warrants with an amended exercise price of $0.33 per share that were issued in connection with the April 2024 public offering.

If such warrants are exercised at their current exercise price, we will receive up to an additional $2.8 million in proceeds in connection with the warrants issued in connection with the April 2024 public offering.

July 2024 Registered Direct Offering

On July 1, 2024, we completed the July Registered Direct Offering with certain holders of our outstanding common warrants issued in connection with our previous offerings. Pursuant to the July Registered Direct Offering, certain holders agreed to amend the exercise price of 7,318,241 existing warrants to a reduced exercise price of $0.515 per share. We received $2.7 million in gross proceeds less total issuance costs of $0.8 million. Issuance costs include banker and legal fees of $0.4 million and non-cash warrant modification costs of $0.4 million. The Company recognized the $0.4 modification date incremental value of the modified warrants as compared to the original warrants as a non-cash issuance cost of the July Registered Direct Offering. Additionally, pursuant to the July Registered Direct Offering, we issued the following:

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3,621,460 shares of common stock and accompanying common warrants to purchase up to 7,242,920 shares of common stock at an offering price of $0.515 per share; and

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Pre-funded warrants to purchase up to 1,718,346 shares of common stock and accompanying common warrants to purchase up to 3,436,692 shares of common stock at a combined offering price of $0.5149 per pre-funded warrant, which is equal to the offering price of per share of common stock less the $0.0001 per share exercise price of each such pre-funded warrant. As of September 30, 2024, all pre-funded warrants have been exercised.

The common warrants became exercisable immediately following stockholder approval on August 6, 2024, and will expire in August 2029. In connection with the July Registered Direct Offering, the Company amended certain existing common warrants that were previously issued to certain investors such that these common warrants will have a reduced exercise price equal to $0.515 per share and include the same exercise price adjustments as the common warrants issued in the July Registered Direct Offering. These amended warrants became exercisable immediately following stockholder approval on August 6, 2024. On September 18, 2024, in connection with the September Registered Direct Offering, the Company amended certain existing common warrants held by certain stockholders who participated in the September Registered Direct Offering that were issued in the July Registered Direct Offering, such that these common warrants will have a reduced exercise price equal to $0.33 per share, and include the same exercise price adjustments as the common warrants issued in the September Registered Direct Offering. As of September 30, 2024, we have 3,664,184 common warrants outstanding at an exercise price of $0.515 per share and 7,015,428 common warrants outstanding at an amended exercise price of $0.33 per share that were issued in connection with the July Registered Direct Offering.

If such warrants are exercised at their current exercise price, we will receive up to an additional $4.2 million in proceeds in connection with the warrants issued in connection with the July Registered Direct Offering.

September 2024 Registered Direct Offering

On September 18, 2024, we completed the September Registered Direct Offering with certain holders of our outstanding common warrants issued in connection with our previous offerings. Pursuant to the September Registered Direct Offering, certain holders agreed to amend the exercise price of 11,822,774 existing warrants to a reduced exercise price of $0.33 per share. We received $3.0 million in gross proceeds less total issuance costs of $0.5 million. Issuance costs include banker and legal fees of $0.4 million and non-cash warrant modification costs of $0.1 million. The Company recognized the $0.1 million modification date incremental value of the modified warrants as compared to the original warrants as a non-cash issuance cost of the September Registered Direct Offering. Additionally, pursuant to the September Registered Direct Offering, we issued the following:

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4,020,000 shares of common stock and accompanying common warrants to purchase up to 8,040,000 shares of common stock at an offering price of $0.33 per share; and

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Pre-funded warrants to purchase up to 5,070,910 shares of common stock and accompanying common warrants to purchase up to 10,141,820 shares of common stock at a combined offering price of $0.3299 per pre-funded warrant, which is equal to the offering price of per share of common stock less the $0.0001 per share exercise price of each such pre-funded warrant. As of September 30, 2024,3,609,362 pre-funded warrants have been exercised and 1,461,548 pre-funded warrants remain outstanding.

The common warrants became exercisable immediately following the date of stockholder approval on October 25, 2024, and will expire in October 2029. In connection with the September Registered Direct Offering, the Company amended certain existing common warrants that were previously issued to certain investors such that these common warrants will have a reduced exercise price equal to $0.33 per share and include the same exercise price adjustments as the common warrants issued in the September Registered Direct Offering. These amended warrants became exercisable immediately following stockholder approval on October 25, 2024. As of September 30, 2024, we have issued and outstanding common warrants to purchase 18,181,820 shares of our common stock at an exercise price of $0.33 per share in connection with the September Registered Direct Offering, which became exercisable immediately following stockholder approval on October 25, 2024.

If such warrants are exercised at their current exercise price, we will receive up to an additional $6.0 million in proceeds in connection with the warrants issued in connection with the September Registered Direct Offering.

The following is a summary of common warrant activity for thenine months ended September 30, 2024:

(1) The weighted average exercise price of outstanding common warrants includes adjustments to the exercise price of existing common warrants during our July and September 2024 direct offerings.

Aptevo uses Black-Scholes valuation model for estimating the fair value of the common warrants included in public and direct offerings. Set forth below are the assumptions used in valuing the common warrants issued:

Equity Distribution Agreement

The Company previously entered into an Equity Distribution Agreement with Piper Sandler (the "Equity Distribution Agreement") under which we could issue and sell through Piper Sandler shares of our common stock pursuant to a Registration Statement on Form S-3 (the "Shelf Registration Statement") which we filed on December 14, 2020, and expired in December 2023. In the nine months ended September 30, 2023, the Company issued 16,611 shares of common stock at an average price of $99.43 under the Equity Distribution Agreement. We received $1.6 million in proceeds from the issuance of these shares.

Lincoln Park Purchase Agreement

On February 16, 2022, we entered into a Purchase Agreement ("2022 Purchase Agreement") and a Registration Rights Agreement with Lincoln Park (the "Registration Rights Agreement") to purchase up to $35.0 million of our common stock over a 36-month period, for which we issued 2,256 shares of our common stock to Lincoln Park forno cash consideration as an initial fee for its commitment to purchase shares of our common stock under the 2022 Purchase Agreement. For thenine months ended September 30, 2024, we didnot issue shares of our common stock and for thenine months ended September 30, 2023, we issued 6,818 shares of our common stock to Lincoln Park under the 2022 Purchase Agreement and we received $0.5 million in proceeds from issuance of these shares. Our Shelf Registration Statement on Form S-3 expired on December 18, 2023, without which we cannot issue shares pursuant to the 2022 Purchase Agreement.

Rights Plan

On November 8, 2020, our Board approved and adopted a Rights Agreement (the "Rights Agreement"), dated as of November 8, 2020, by and between the Company and Broadridge Corporate Issuer Solutions, Inc., as rights agent, pursuant to which the Board declared a dividend ofone preferred share purchase right (each, a "Right") for each outstanding share of the Company’s common stock held by stockholders as of the close of business on November 23, 2020. One Right also will be issued together with each common share issued by the Company after November 23, 2020, but before the Distribution Date (as defined in the Rights Agreement) (or the earlier redemptionor expiration of the Rights) and, in certain circumstances, after the Distribution Date. When exercisable, each Right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly-designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of ten percent (10%) or more of the Company’s common stock without the approval of the Board. On November 1, 2024, we entered into amendment No. 4 to the Rights Agreement and extended the expiration of such agreement to October 31, 2025 and changed the exercise price to $70 per one one-thousandth of a Series A Junior Participating Preferred Share (as defined in the Rights Agreement), subject to adjustment.

2018 Stock Incentive Plan

On June 1, 2018, at the 2018 annual meeting of the stockholders, the Company’s stockholders approved a new 2018 Stock Incentive Plan (the "2018 SIP"), which replaced the Restated 2016 Plan (the "2016 SIP") on a go-forward basis. All stock options, RSUs or other equity awards granted subsequent to June 1, 2018 have been and will be issued out of the 2018 SIP, which has 0.1 million shares of Aptevo common stock authorized for issuance. The 2018 SIP became effective immediately upon stockholder approval at the 2018 annual meeting of the stockholders. Any shares subject to outstanding stock awards granted under the 2016 SIP that (a) expire or terminate for any reason prior to exercise or settlement; (b) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (c) otherwise would have returned to the 2016 SIP for future grant pursuant to the terms of the 2016 SIP (such shares, the "Returning Shares") will immediately be added to the share reserve under the 2018 SIP as and when such shares become Returning Shares, up to a maximum of 0.1 million shares.

On June 7, 2022, at the 2022 annual meeting of the stockholders, our stockholders approved the Amended and Restated 2018 SIP (the "Amended 2018 SIP") to increase the number of shares authorized for issuance under the 2018 SIP by 11,363 shares of common stock (adjusted for 1-for-44 reverse stock split effective as of March 5, 2024).

On June 7, 2024, at the 2024 annual meeting of the stockholders, our stockholders approved the Second Amended and Restated 2018 SIP (the "Second Amended 2018 SIP") to increase the number of shares authorized for issuance under the Amended 2018 SIP by 165,000 shares of common stock. As of September 30, 2024, there are 0.1 million shares available to be granted under the Second Amended 2018 SIP.

Stock options and RSUs under the Second Amended 2018 SIP generally vest pro rata over aone-year orthree-year period. Stock options terminateten years from the grant date, though the specific terms of each grant are determined individually. The Company’s executive officers, members of our Board, and certain other employees and consultants may be awarded options and/or RSUs with different vesting criteria, and awards granted to non-employee directors will vest over aone-year period. Option exercise and RSU grant prices for new awards granted by the Company equal the closing price of the Company’s common stock on the Nasdaq Capital Market on the date of grant.

Stock-Based Compensation Expense

Stock-based compensation expense includes amortization of stock options and RSUs granted to employees and non-employees and has been reported in our unaudited condensed consolidated statements of operations as follows:

The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. The Company recognizes the compensation expense over the vesting period. All assumptions used to calculate the grant date fair value of non-employee equity awards are generally consistent with the assumptions used for equity awards granted to employees. In the event the Company terminates any of its consulting agreements, the unvested equity underlying the agreements would also be forfeited. The stock compensation is lower in the current period mainly due to a decrease in our stock price.

Stock Options

Aptevo utilizes the Black-Scholes valuation model for estimating the fair value of all stock options granted. Set forth below are the assumptions used in valuing the stock options granted:

The Company didnot grant stock options for thethree and nine months ended September 30, 2024, or for the three months ended September 30, 2023. For the nine months ended September 30, 2023, management has applied an estimated forfeiture rate of 30%.

The following is a summary of option activity for thenine months ended September 30, 2024:

As of September 30, 2024, we had $0.2 million of unrecognized compensation expense related to options expected to vest over a weighted-average remaining vesting period of 0.8 years. The weighted-average grant date fair value per share of options granted during thenine months ended September 30, 2023, was $73.83. The total fair value of stock options vested for thenine months ended September 30, 2024 and 2023 was $1.1 million and $1.2 million, respectively.

The aggregate intrinsic value is the total pretax intrinsic value (the difference between the closing stock price of Aptevo’s common stock on the last trading day of September 30, 2024 and the exercise price, multiplied by the number of in the money options) that would have been received by the option holders had all the option holders exercised their options on the last trading day of the quarter.

Restricted Stock Units

The following is a summary of RSU activity for thenine months ended September 30, 2024:

As of September 30, 2024, there was $0.3 million unrecognized stock-based compensation expense related to unvested RSUs expected to vest over the weighted-average period of 1.2 years.

The fair value of each RSU has been determined to be the closing trading price of the Company’s common stock on the date of grant as quoted on the Nasdaq Capital Market.

Note 11. Subsequent Events

On October 21 and October 23, 2024, holders of our September 2024 pre-funded warrants provided notice to exercise 1,190,587 and 270,961 pre-funded warrants, respectively, and 1,461,548 total shares of common stock were then issued. As of November 7, 2024, we haveno remaining pre-funded warrants outstanding and 18,512,084 shares of common stock issued and outstanding.

On October 25, 2024, the Company held a Special Meeting of Stockholders (the "Special Meeting"), at which the Company's stockholders:

Approved, in accordance with Nasdaq Listing Rule 5635(d), the issuance of more than 19.99% of our outstanding common stock, par value $0.001 per share, issuable upon the exercise of common warrants issued pursuant to the September Registered Direct Offering, which includes an exercise price adjustment provision in the event of an issuance of common stock or common stock equivalent, an option to purchase common stock or common stock equivalent, change in price of common stock or common stock equivalent or other such event as described in the common warrants and to approve the amendment of certain existing common warrants to include the same exercise price adjustment provisions and the repricing of such existing warrants pursuant to the September Registered Direct Offering ("Proposal 1");

Approved an amendment to our Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of our Common Stock at a ratio in the range of 1-for-5 to 1-for-37, with such ratio to be determined in the discretion of our Board and with such reverse stock split to be effected at such time and date, if at all, as determined by our Board in its sole discretion ("Proposal 2"); and

Approved an authorization to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of Proposal 1 or Proposal 2 ("Proposal 3").