These reserves wer e based on the amounts earned or to be claimed on the related sales and were classified as reductions of accounts receivable (if the amount wa s payable to the customer) or a current liability (if the

Aptevo Therapeutics, Inc. ("we," "our" or the "Company") is filing this Exhibit 99.1 to our Current Report on Form 8-K (this "Exhibit") to recast certain changes described below with respect to the financial information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "2019 Form 10-K"), which was filed with the Securities and Exchange Commission (the "SEC") on March 25, 2020. The information included in this Exhibit presents the financial results of our former Aptevo BioTherapeutics LLC ("Aptevo BioT") business and related assets as a discontinued operation (collectively, the "Aptevo BioT Business") and retroactively adjusts all share and per share amounts to reflect the March 2020 Reverse Stock Split (as defined below) for all periods presented. The information in this Exhibit is not an amendment to, or restatement of, the 2019 Form 10-K.

Beginning in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "Form 10 Q"), we presented the Aptevo BioT Business as discontinued operations and held for sale in our interim condensed financial statements for all periods presented as a result of meeting the criteria for held for sale and discontinued operations during the quarter ended March 31, 2020. Accordingly, we are filing this Exhibit to recast the relevant financial information in the 2019 Form 10-K for the Aptevo BioT Business as discontinued operations and held for sale and for the change in the measure of profit or loss and reportable segments as of and for each of the periods covered by the 2019 Form 10-K.

As previously disclosed, on February 28, 2020, we entered into an LLC Purchase Agreement with Medexus Pharma Inc. ("Medexus"), pursuant to which we sold all of the issued and outstanding limited liability company interests of our former wholly-owned subsidiary, Aptevo BioT. As a result of the transaction, Medexus acquired the Aptevo BioT Business, including all right, title and interest to the IXINITY product and the related Hemophilia B business and intellectual property. In addition, Aptevo BioT personnel responsible for the sale and marketing of IXINITY also transitioned to Medexus as part of the transaction. The Aptevo BioT Business met all the conditions to be classified as a discontinued operation, since the sale of the Aptevo BioT Business represented a strategic shift that will have a major effect on our operations and financial results. We will not have further significant involvement in the operations of the discontinued Aptevo BioT business. The operating results of the Aptevo BioT Business are reported as income (loss) from discontinued operations, in the consolidated statements of operations for all periods presented. The gain recognized on the sale of the Aptevo BioT Business is presented in income (loss) from discontinued operations in the consolidated statement of operations.

From the $30 million payment at closing, we used $22.1 million of the $30 million in proceeds to repay in full our term debt facility with MidCap Financial Trust ("Midcap"), including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees.

As previously disclosed, on March 11, 2020, we held a Special Meeting of Stockholders 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 our common stock at a ratio ranging from 1-for-2 to 1-for-20, 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-14 reverse split ratio was subsequently approved by the Board on March 23, 2020. On March 26, 2020, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation (the "Amendment") with the Secretary of State of the State of Delaware to effect a 1-for-14 reverse stock split of our outstanding common stock (the "March 2020 Reverse Stock Split"). 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. As a result of the March 2020 Reverse Stock Split, all share and per share amounts have been adjusted retroactively for all periods presented in this Exhibit.

The information included in this Exhibit is presented in connection with the reporting changes described above and does not otherwise amend or restate our audited consolidated financial statements that were included in the 2019 10-K. Unaffected items and unaffected portions of the 2019 10-K have not been repeated in, and are not amended or modified by this Exhibit . This Exhibit does not reflect events occurring after we filed the 2019 10-K and does not

modify or update the disclosures therein in any way, other than to reflect the presentation of our former Aptevo BioT Business as a discontinued operation and to retroactively adjust all share and per share amounts to reflect the March 2020 Reverse Stock Split. Therefore, this Exhibit should be read in conjunction with our other filings made with the SEC, including, and subsequent to, the respective dates of the 2019 10-K.

Accordingly, this Exhibit revises the following portions of the 2019 10-K:

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with the financial statements and the related notes to those statements included elsewhere in this Exhibit. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the 2019 10-K under the caption titled "Risk Factors" and elsewhere, our actual results may differ materially from those anticipated in these forward-looking statements.

Aptevo Therapeutics Inc. (Aptevo, we, us, or the Company) is a clinical stage, research and development biotechnology company focused on developing novel immunotherapies for the treatment of cancer. Our lead clinical candidate, APVO436, and preclinical candidates, ALG.APV-527 and APVO603 were developed based on the Company's versatile and robust ADAPTIR modular protein technology platform. The ADAPTIR platform is capable of generating highly differentiated bispecific antibodies with unique mechanisms of action for the treatment of different types of cancer. At December 31, 2019, we had one revenue-generating product in the area of hematology, IXINITY, which was acquired by Medexus on February 28, 2020.

In this regard, on February 28, 2020, Aptevo entered into an LLC Purchase Agreement with Medexus, pursuant to which Aptevo sold all of the issued and outstanding limited liability company interests of Aptevo BioT, a subsidiary of Aptevo which wholly owns the IXINITY and related Hemophilia B business. As a result of the transaction, Medexus obtained all rights, title and interest to the IXINITY product and intellectual property. In addition, Aptevo BioT personnel responsible for the sale and marketing of IXINITY also transitioned to Medexus as part of the transaction.

As consideration for the sale, at closing Aptevo received an amount equal to $30 million in cash. From the $30 million payment at closing, we used $22.1 million of the $30 million in proceeds to repay in full our term debt facility with MidCap financial, including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. The parties also agreed that Aptevo would provide transition services for a limited period of time. We will not generate commercial revenues from our development stage product candidates unless and until we or potential collaborators successfully complete development and obtain regulatory approval for such product candidates, which we expect will take a number of years and is subject to significant uncertainty. If we obtain regulatory approval for one of our development stage product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution, to the extent that such costs are not paid by collaborators. We did not have sufficient cash to complete the clinical development of any of our development stage product candidates and will require additional funding in order to complete the development activities required for regulatory approval of such product candidates.

For the years ended December 31, 2019 and 2018, we had net losses of $40.4 million and $53.7 million, respectively. We had an accumulated deficit of $167.9 million as of December 31, 2019. For the year ended December 31, 2019, net cash used in our operating activities was $42.4 million.

Corporate Highlights:

Results of Operations

Except as otherwise stated below, the following discussions of our results of operations reflect the results of our continuing operations for the periods described herein, excluding the results related to Aptevo BioT, which has been separated from continuing operations and reflected as a discontinued operation. See Note 14 - Sale of Aptevo BioTherapeutics LLC to the accompanying financial statements for additional information.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Research and Development Expenses

We expense research and development costs as incurred. These expenses consist primarily of the costs associated with our research and discovery activities, including conducting pre-clinical studies and clinical trials, fees to professional service providers for analytical testing, independent monitoring or other administration of our clinical trials and obtaining and evaluating data from our clinical trials and non-clinical studies, as well as costs of contract manufacturing services for clinical trial material, and costs of materials used in clinical trials and research and development. Our research and development expenses primarily consist of:

We expect our research and development spending will be dependent upon such factors as the results from our clinical trials, the availability of reimbursement of research and development spending, the number of product candidates under development, the size, structure and duration of any clinical programs that we may initiate, and the costs associated with manufacturing our product candidates on a large-scale basis for later stage clinical trials. While programs are still in the pre-clinical trial phase, we do not provide a breakdown of the initial associated expenses as we are often evaluating multiple product candidates simultaneously. Costs are reported in pre-clinical research and discovery until the program enters the clinic.

Our principal research and development expenses by program for the year ended December 31, 2019 and 2018 are shown in the following table:

Research and development expenses decreased by $9.8 million, to $24.8 million for the year ended December 31, 2019 from $34.6 million for the year ended December 31, 2018. Research and development expenses decreased primarily due to a decrease in expenses for APVO436 related to the timing of manufacturing and clinical trial activities, a decrease in expenses for other clinical programs, including lower costs for programs discontinued in 2018 and APVO210, which was discontinued in October 2019.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs and professional fees in support of our executive, business development, finance, accounting, information technology, legal and human resource functions. Other costs include facility costs not otherwise included in research and development expenses.

For the year ended December 31, 2019, general and administrative expenses decreased by $2.0 million, or 11%, to $16.2 million from $18.2 million for December 31, 2018. This decrease was primarily due to reduced personnel and professional services costs.

Other expense, net consists primarily of interest on debt financing income. Other expense was $2.1 million for the year ended December 31, 2019 and $2.0 million for the year ended December 31, 2018.

Discontinued Operations

The accompanying financial statements include discontinued operations from two separate transactions: the sale of our Hyperimmune business in 2017, from which milestone payments were recognized in 2019, and our Aptevo BioTherapeutics LLC business, which was sold in 2020.

In the third quarter of 2019, we received a $4.25 million milestone payment from Saol International Limited, in connection with the sale of our hyperimmune business in September 2017. No additional amounts are outstanding related to the milestones. This was recorded as a gain in discontinued operations of $4.25 million.

On February 28, 2020, we entered into an LLC Purchase Agreement with Medexus, pursuant to which we sold all of the issued and outstanding limited liability company interests of Aptevo BioT, our former wholly-owned subsidiary which owns the IXINITY and related Hemophilia B business. As a result of the transaction, Medexus obtained all rights, title and interest to the IXINITY product and intellectual property. In addition, Aptevo BioT personnel responsible for the sale and marketing of IXINITY also transitioned to Medexus as part of the transaction.

In addition to the payment received at closing, we may also earn milestone and deferred payments from Medexus in the future. Pursuant to the LLC Purchase Agreement, we agreed to provide certain transition services for a limited period of time following the closing. We used $22.1 million of the $30 million in proceeds to repay in full our term debt facility with MidCap, including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees.

During the periods prior to the spin-off from Emergent, the Company did not file separate tax returns as it was included in the tax returns of Emergent entities within the respective tax jurisdictions. The income tax provision included in these financial statements was calculated using a separate return basis, as if the Company was a separate taxpayer. Under this approach, the Company determines its current taxes, deferred tax assets and liabilities and related tax expense as if it were filing separate tax returns in each tax jurisdiction.

The following table provides information regarding our pre and post-tax for both continuing and discontinued operations for the periods ended December 31, 2019 and 2018:

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements at December 31, 2019.

Liquidity and Capital Resources

We have financed our operations to date primarily through revenue generated from the sale of our hyperimmune business, public offerings of our common stock, loan proceeds, license fees, milestone payments and research and development funding from strategic partners, and funds received at the date of our spin-off from Emergent. As of December 31, 2019, we had cash, and cash equivalents in the amount of $12.4 million and restricted cash of $7.5 million. In February 2020, we used $22.1 million of the $30 million in proceeds from the sale of Aptevo BioT to Medexus to repay in full our term debt facility with MidCap financial, including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. Under the terms of our credit facility agreement with MidCap, we were required to maintain a restricted cash account of $5 million. Repayment of the debt relieved us of the obligation to keep $5 million of cash restricted.

The following table provides information regarding our cash flows for year ended December 31, 2019 and 2018:

Net cash used in operating activities for the year ended December 31, 2019 and 2018 was primarily due to our net operating loss and changes in working capital accounts.

Net cash provided by investing activities for the year ended December 31, 2019, was primarily due to the receipt of the $4.25 million milestone payment from Saol International Limited, in conjunction with the sale in September 2017 of our hyperimmune business, net of the purchase of property and equipment. For the year ended December 31, 2018, the largest components of the cash provided by investing activities were primarily due to the maturity and redemption of investments of $90.2 million, offset by investment purchases of $16.5 million.

Net cash provided by financing activities for the year ended December 31, 2019 is primarily due to $20.3 million received from the issuance of common stock and related warrants and the exercise of warrants. Net cash used in financing activities for the year ended December 31, 2018 was primarily due to the payment of tax liability associated with restricted stock units that vested in the quarter.

Sources of Liquidity

Public Offering - March 2019

On March 11, 2019, we completed a public offering relating to the issuance and sale of 1,417,857 shares of our common stock and warrants to purchase up to 1,417,857 shares of common stock at $14.00 per share and warrants at $18.20 per share, as well as pre-funded warrants to purchase up to 153,571 shares of common stock at an exercise prices of $0.14 per share and 153,571 of related warrants to purchase shares of common stock at $18.20 per share. We received net proceeds of $20.2 million, after underwriting fees, legal fees, and other expenses. If the remaining warrants are fully exercised in the future, additional proceeds to be received upon exercise of these warrants totals up to $28.6 million, which have a five-year life.

During 2018 and 2019, we were party to an Amended and Restated Credit and Security Agreement or the Credit Agreement, with MidCap. In February 2020, we used a portion of the $30 million in proceeds from the sale of the IXINITY business to repay in full our obligations to MidCap, inclusive of $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. Under the terms of our credit facility agreement with MidCap we were required to maintain a restricted cash account of $5 million. Repayment of the debt relieved us of the obligation to keep $5 million of cash restricted.

Equity Distribution Agreement

On November 9, 2017, we entered into an Equity Distribution Agreement with Piper Jaffray & Co ("Piper"). The Equity Distribution Agreement provides that, upon the terms and subject to the conditions set forth therein, we may issue and sell through Piper, acting as sales agent, shares of our common stock having an aggregate offering price of up to $17.5 million. We have no obligation to sell any such shares under the Equity Distribution Agreement. The sale of the shares of our common stock by Piper will be effected pursuant to a Registration Statement on Form S-3 which we filed on November 9, 2017. We issued 947 shares under the Equity Distribution Agreement in the fourth quarter of 2018, and 12,887 shares in the third quarter of 2019 and received net proceeds of $0.2 million from these transactions. Following such prior sales, we have the ability to sell up to an additional $17.3 million of common stock under the Equity Distribution Agreement.

The Equity Distribution Agreement will terminate upon the issuance and sale of all shares under the Equity Distribution Agreement or upon the earlier termination thereof at any time by us or Piper upon notice to the other party.

On December 20, 2018 we entered into the Purchase Agreement, and a registration rights agreement with Lincoln Park. Pursuant to the purchase agreement Lincoln Park has committed to purchase up to $35.0 million worth of our common stock over a 36-month period commencing on February 13, 2019, the date the registration statement covering the resale of the shares was declared effective by the SEC. Pursuant to this purchase agreement, we issued 7,533 commitment shares of common stock in December 2018, and 13,990 commitment shares of common stock in the first quarter of 2019.

Under the Purchase Agreement, on any business day selected by us, we may direct Lincoln Park to purchase shares of our common stock provided that Lincoln Park's maximum commitment on any single day does not exceed $2.0 million. The purchase price per share will be based off of prevailing market prices of our common stock immediately preceding the time of sale; provided, however, that we cannot direct any such purchase if the prevailing market price is less than $1.00. In addition, we may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of our common stock exceeds certain threshold prices as set forth in the Purchase Agreement.

Actual sales of shares of our common stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors as determined by us from time to time, including, among others, market conditions, the trading price of our common stock and additional determinations as to the appropriate sources of funding for our operations. Lincoln Park has no right to require any sales but is obligated to make purchases as we direct in accordance with the Purchase Agreement.

Due to our significant research and development expenditures, we have generated significant operating losses from inception and we expect to incur significant operating losses in the future. We have funded our operations primarily through sales of our equity securities, utilization of our credit agreement, the sale of our former hyperimmune business, product sales, and payments from our former parent. We had a net loss of $40.4 million and $53.7 million for the years ended December 31, 2019 and December 31, 2018, respectively. We had cash and cash equivalents of $12.5 million, restricted cash of $7.5 million and an accumulated deficit of $167.9 million as of December 31, 2019.

For the year ended December 31, 2019, net cash used in our operating activities was $42.4 million.

On February 28, 2020, Aptevo entered into an LLC Purchase Agreement with Medexus, pursuant to which Aptevo sold all of the issued and outstanding limited liability company interests of Aptevo BioT, a subsidiary of Aptevo which wholly owns the IXINITY and related Hemophilia B business. As a result of the transaction, Medexus obtained all rights, title and interest to the IXINITY product and intellectual property. In addition, Aptevo BioT personnel responsible for the sale and marketing of IXINITY also transitioned to Medexus as part of the transaction.

As consideration for the sale, at closing Aptevo received an amount equal to $30 million in cash. From the $30 million payment at closing, we used $22.1 million of the $30 million in proceeds to repay in full our term debt facility with MidCap financial, including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. Under the terms of our credit facility agreement with MidCap Financial Trust, we were required to maintain a restricted cash account of $5 million. Repayment of the debt relieved us of the obligation to keep $5 million of cash restricted.

While we expect to generate cash inflows from milestones and deferred payments from Medexus' future sales of IXINITY and regulatory approval, our results of operations will be highly dependent on our research and development spending. 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 the financial statements contained in this Exhibit. Our ability to continue as a going concern will require us to generate positive cash flow from operations, obtain additional financing, enter into strategic alliances and/or sell assets.

Our plans to address this condition include pursuing one or more of the following options to secure additional funding, none of which can be guaranteed or are entirely within our control:

There can be no assurance, however, that we will receive cash proceeds from any of these potential resources or to the extent cash proceeds are received such proceeds would be sufficient to support our current operating plan for at least the next twelve months from the date of filing this Exhibit.

There are numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products. Accordingly, our future funding requirements may vary from our current expectations and will depend on many factors, including, but not limited to:

If we are unable to raise substantial additional capital in the next year, whether on terms that are acceptable to us, or at all then we may be required to:

The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock or through additional credit facilities, these securities and/or the loans under credit facilities could provide for rights senior to those of our common stock and could contain covenants that would restrict our operations. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. We also expect to seek additional funds through arrangements with collaborators, licensees or other third parties. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or drug candidates, and we may not be able to enter into such arrangements on acceptable terms, if at all.

Our future success is dependent on our ability to develop our product candidates and ultimately upon our ability to attain profitable operations. We anticipate that we will continue to incur significant operating losses for the next several years as we incur expenses to continue to execute on our development strategy to advance our preclinical and clinical stage assets. We will not generate revenues from our development stage product candidates unless and until we or our collaborators successfully complete development and obtain regulatory approval for such product candidates, which we expect will take a number of years and is subject to significant uncertainty. If we obtain regulatory approval for one of our development stage product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution, to the extent that such costs are not paid by collaborators. We did not have sufficient cash to complete the clinical development of any of our development stage product candidates and will require additional funding in order to complete the development activities required for regulatory approval of such product candidates. We will require substantial additional funds to continue our development programs and to fulfill our planned operating goals.

Contractual Obligations

Our contractual obligations as of December 31, 2019 were as follows:

In January 2020, we entered into a contract with The Leukemia & Lymphoma Society (LLS) to be part of an ongoing national AML master clinical trial called the Beat AML Master Clinical Trial.' The Beat AML Master Clinical Trial provides access to leading academic cancer centers and allows us to study APVO436 in a front-line AML setting. Our purchase obligation for the Beat AML Master Clinical Trial totals $8.1 million over the next three years. We note that the Clinical Trial Participation Agreement contains a termination for convenience clause where we may terminate the agreement with 180 days prior written notice.

Critical Accounting Policies and Significant Judgements and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from those estimates. An accounting policy is considered critical if it is important to a company's financial condition and results of operations and if it requires the exercise of significant judgment and the use of estimates on the part of management in its application. Although we believe that our judgments and estimates are appropriate, Actual results may differ materially from our estimates.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development costs primarily consist of internal labor costs, fees paid to outside service providers and the costs of materials used in clinical trials and research and development. Other research and development expenses include facility, maintenance and related support expenses.

A substantial portion of our pre-clinical studies and all of our clinical studies have been performed by third-party contract research organizations (CRO). We review the activities performed by the CROs each period. For pre-clinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical study expenses, the significant factors used in estimating accruals include the number of patients enrolled and percentage of work completed to date. Our estimates are highly dependent upon the timeliness and accuracy of the data provided by its CRO's regarding the status of each program and total program spending and adjustments are made when deemed necessary.

Stock-Based Compensation

Under the Financial Accounting Standards Board's (FASB) ASC 718, Compensation-Stock Compensation, we measure and recognize compensation expense for restricted stock units (RSUs), and stock options granted to our employees and directors based on the fair value of the awards on the date of grant. The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model that requires management to apply judgment and make estimates, including:

Stock-based compensation expense for RSUs, and stock options is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. We are required to estimate a forfeiture rate to calculate the stock-based compensation expense for our awards. Our forfeiture rate is based on an analysis of our actual forfeitures since the adoption of our equity award plan. We routinely evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and expectations of future option exercise behavior.

Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.

Aptevo's ability to realize deferred tax assets depends upon future taxable income as well as the limitations discussed below. For financial reporting purposes, a deferred tax asset must be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized prior to expiration. Aptevo considers historical and future taxable income, future reversals of existing taxable temporary differences, taxable income in prior carryback years, and ongoing tax planning strategies in assessing the need for valuation allowances. In general, if Aptevo determines that it is more likely than not to realize more than the recorded amounts of net deferred tax assets in the future, Aptevo will reverse all or a portion of the valuation allowance established against its deferred tax assets, resulting in a decrease to the provision for income taxes in the period in which the determination is made. Likewise, if Aptevo determines that it is not more likely than not to realize all or part of the net deferred tax asset in the future, Aptevo will establish a valuation allowance against deferred tax assets, with an offsetting increase to the provision for income taxes, in the period in which the determination is made.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, Aptevo makes certain estimates and assumptions, in (1) calculating Aptevo's income tax expense, deferred tax assets and deferred tax liabilities, (2) determining any valuation allowance recorded against deferred tax assets and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. Aptevo's estimates and assumptions may differ significantly from tax benefits ultimately realized.

New Accounting Standards

On January 1, 2019 we adopted ASU No. 2016-02, Leases (ASC 842), which amended the existing standards for lease accounting, requiring lessees to recognize most leases on their balance sheets and disclose key information about leasing arrangements. We adopted the new standard using a modified retrospective transition approach at the beginning of the current fiscal year, January 1, 2019. We did not adjust comparative periods in our financial statements prior to that period. For further discussion of new accounting standards, please see Note 1 of the Consolidated Financial Statements contained in this Current Report on Form 8-K.

On December 18, 2019 we adopted ASU No. 2019-12, Income Taxes (Topic 740), which amended the existing standards for income tax accounting, eliminating the legacy exception on how to allocate income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholder's equity. We did not adjust comparative periods in our financial statements prior to that period as the impact on 2018 was not material. For further discussion of new accounting standards, please see Note 1 of the Consolidated Financial Statements contained in this Current Report on Form 8-K.

Index to Consolidated Financial Statements

Item 8. Financial Statements and Supplementary Data

APTEVO THERAPEUTICS INC.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Aptevo Therapeutics Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Aptevo Therapeutics Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated financial statements'). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Adoption of FASB Accounting Standard Update Leases (Topic 842)

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU Topic 842, Leases.

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP