UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number 000-05576 

 

AIKIDO PHARMA INC.
(Exact name of registrant as specified in its charter)

 

Delaware   52-0849320
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

One Rockefeller Plaza, 11th Floor, New York, NY 10020
(Address of Principal Executive Offices, including zip code)

 

(703) 992-9325
(Registrant’s telephone number, including area code)

 

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.) Yes ☒ No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐   Accelerated Filer ☐
Non-accelerated Filer ☒   Smaller Reporting Company ☒
Emerging growth company ☐      

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.0001 par value   AIKI   The Nasdaq Capital Market LLC

 

As of November 9, 2022, there were 5,485,096 shares of the Company’s common stock issued and outstanding.

 

 

 

 

 

 

AIKIDO PHARMA INC.

Form 10-Q

For the Quarter Ended September 30, 2022

Index 

 

    Page  No.
     
Part I. Financial Information  
     
Item 1. Financial Statements (Unaudited) 1
     
  Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021 1
     
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited) 2
     
  Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited) 3
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited) 6
     
  Notes to the Condensed Consolidated Financial Statements (Unaudited) 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
     
Item 4. Controls and Procedures 30
     
Part II. Other Information  
     
Item 1. Legal Proceedings 31
     
Item 1A. Risk Factors 31
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
     
Item 6. Exhibits 32
     
Signatures 33

 

i

 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AIKIDO PHARMA INC.

Condensed Consolidated Balance Sheets

($ in thousands except share and per share amounts)

 

   September 30,   December 31, 
   2022   2021 
   (Unaudited)     
ASSETS        
Current assets        
Cash and cash equivalents  $34,496   $65,562 
Marketable securities   8,032    11,427 
Prepaid expenses and other assets   693    442 
Short-term investments at fair value   33    2,273 
Notes receivable at fair value   8,645    6,984 
Deposits   4,193    4,201 
Total current assets   56,092    90,889 
           
Convertible note receivable at fair value   -    2,147 
Notes receivable at fair value   1,100    - 
Investments   26,089    9,465 
Right-of-use assets   708      
Security deposit   458    155 
Total assets  $84,447   $102,656 
           
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued expenses  $518   $381 
Accrued salaries and benefits   1,339    680 
Lease liability - current   42    - 
Total current liabilities   1,899    1,061 
           
Lease liability   701    - 
Total liabilities   2,600    1,061 
           
Stockholders’ equity          
Preferred stock, $.0001 par value, 50,000,000 Authorized   
 
    
 
 
Series D: 5,000,000 shares designated; 3,825 shares issued and outstanding at September 30, 2022 and December 31, 2021; liquidation value of $0.0001 per share   -    - 
Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at September 30, 2022 and December 31, 2021; liquidation value of $0.0001 per share   -    - 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 5,485,096 and 5,275,329 shares issued at September 30, 2022 and December 31, 2021, respectively; 5,140,114 and 5,275,329 shares outstanding at September 30, 2022 and December 31, 2021, respectively   -    - 
Additional paid-in capital   262,973    265,633 
Treasury stock, at cost, 344,982 and 0 shares at September 30, 2022 and December 31, 2021, respectively   (2,501)   (264)
Accumulated deficit   (178,625)   (163,774)
Total stockholders’ equity   81,847    101,595 
Total liabilities and stockholders’ equity  $84,447   $102,656 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

1

 

 

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Operations

($ in thousands except share and per share amounts)

(Unaudited)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Operating costs and expenses                
General and administrative  $4,515   $1,676   $8,564   $5,231 
Research and development   61    100    2,113    497 
Research and development - license acquired   525    3    525    1,128 
Total operating expenses   5,101    1,779    11,202    6,856 
Loss from operations   (5,101)   (1,779)   (11,202)   (6,856)
                     
Other (expenses) income                    
Other income   -    -    64    135 
Interest income   187    40    586    107 
Loss on marketable securities   (1,654)   (3,033)   (4,390)   (2,574)
Change in fair value of investments   329    4,725    91    3,827 
Total other (expenses) income   (1,138)   1,732    (3,649)   1,495 
Net loss  $(6,239)  $(47)  $(14,851)  $(5,361)
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock   -    -    (4,109)   - 
Net Loss Attributable to Common Shareholders  $(6,239)  $(47)  $(18,960)  $(5,361)
                     
Net loss per share, basic and diluted                    
Basic and Diluted  $(1.17)  $(0.01)  $(3.59)  $(1.14)
                     
Weighted average number of shares outstanding, basic and diluted                    
Basic and Diluted   5,344,989    5,272,446    5,283,182    4,702,556 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2

 

 

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

 

For the Three Months Ended September 30, 2022

 

   Redeemable Convertible
Preferred Stock		                   Additional               Total 
   Series O   Series P   Common Stock   Preferred Stock   Paid-in   Treasury Stock   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Deficit   Equity 
Balance at June 30, 2022   -   $-    -   $-    5,246,852   $-    4,659   $-   $261,603    242,902   $(1,750)  $(172,386)  $87,467 
Purchase of treasury stock   -    -    -    -    -    -    -    -    -    102,080    (751)        (751)
Stock-based compensation   -    -    -    -    238,244    -    -    -    1,370    -    -    -    1,370 
Net loss   -    -    -    -    -    -    -    -    -    -    -    (6,239)   (6,239)
Balance at September 30, 2022   -   $-    -   $-    5,485,096   $-    4,659   $-   $262,973    344,982   $(2,501)  $(178,625)  $81,847 

 

For the Three Months Ended September 30, 2021

 

   Common Stock   Preferred Stock   Additional
Paid-in		   Treasury Stock   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Deficit   Equity 
Balance at June 30, 2021   5,266,500   $-    5,559   $-   $265,264        -   $(264)  $(161,917)  $103,083 
Stock-based compensation   8,823    -    -    -    139    -    -    -    139 
Net loss   -    -    -    -    -    -    -    (47)   (47)
Balance at September 30, 2021   5,275,323   $      -    5,559   $-   $265,403    -   $(264)  $(161,964)  $103,175 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

 

For the Nine Months Ended September 30, 2022

 

   Redeemable Convertible
Preferred Stock		                   Additional               Total 
   Series O   Series P   Common Stock   Preferred Stock   Paid-in   Treasury Stock   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Deficit   Equity 
Balance at December 31, 2021   
-
   $
-
    
-
   $
-
    5,275,329   $-    4,659   $-   $265,633    -   $(264)  $(163,774)  $101,595 
Issuance of Series O redeemable convertible preferred stock for cash   11,000    11,000    
 
    
 
    -    
-
    
-
    
-
    -    -    
-
    
-
    
-
 
Issuance of Series P redeemable convertible preferred stock for cash             11,000    11,000    -    
-
    
-
    
-
    -    -    
-
    
-
    
-
 
Cost on issuance of Series O and Series P Redeemable Convertible Preferred Stock   -    (1,504)   -    (1,505)   -    -    -    -    -    -    
-
    
-
    
-
 
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock   -    1,504    -    1,505    -    -    -    -    (4,109)   -    -    -    (4,109)
Redemption of Series O Redeemable Convertible Preferred Stock   (11,000)   (11,000)   -    -    -    -    -    -    -    -    -    -    - 
Redemption of  Series P Redeemable Convertible Preferred Stock   -    -    (11,000)   (11,000)   -    -    -    -    -    -    -    -    - 
Purchase of treasury stock   -    -    -    -    -    -    -    -    -    344,982    (2,237)   -    (2,237)
Stock-based compensation   -    -    -    -    238,244    -    -    -    1,475    -    -    -    1,475 
Cancellation of common stock related to investment in CBM   -    
-
    -    
-
    (22,812)   -    
-
    
-
    -    -    
-
    
-
    
-
 
Fractional shares adjusted for reverse split   -    -    -    -    (5,665)   -    -    -    (26)   -    -    -    (26)
Net loss   -    -    -    -    -    -    -    -    -    -    -    (14,851)   (14,851)
Balance at September 30, 2022   -   $-    -   $-    5,485,096   $-    4,659   $-   $262,973    344,982   $(2,501)  $(178,625)  $81,847 

 

4

 

 

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

 

For the Nine Months Ended September 30, 2021 

 

   Common Stock   Preferred Stock   Additional
Paid-in		   Treasury Stock   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Deficit   Equity 
Balance at December 31, 2020   2,054,096   $      -    5,559   $      -   $186,485         -   $(264)  $(156,603)  $29,618 
Issuance of common stock and warrants (net of offering costs of $8,260)   3,170,935    -    -    -    77,989    -    -    -    77,989 
Exercise of warrants   4,705    -    -    -    84    -    -    -    84 
Issuance of common stock for research and development license acquired   36,764    -    -    -    531    -    -    -    531 
Stock-based compensation   8,823    -    -    -    314    -    -    -    314 
Net loss   -    -    -    -    -    -    -    (5,361)   (5,361)
Balance at September 30, 2021   5,275,323   $-    5,559   $-   $265,403    -   $(264)  $(161,964)  $103,175 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5

 

 AIKIDO PHARMA INC.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)

 

   Nine Months Ended
September 30,		 
   2022   2021 
Cash flows from operating activities        
Net loss  $(14,851)  $(5,361)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of right-of-use assets   23      
Change in fair value of short-term investment   1,517    (3,827)
Change in fair value of long-term investment   (1,608)   - 
Research and development-acquired license, expensed   525    1,128 
Stock-based compensation   1,475    314 
Realized loss (gain) on marketable securities   712    (501)
Unrealized loss on marketable securities   3,889    4,296 
Realized gain on sale of digital currencies   -    - 
Changes in operating assets and liabilities:          
Prepaid expenses and other assets   (344)   (429)
Accounts payable and accrued expenses   137    5 
Accrued salaries and benefits   659    (73)
Lease liabilities   12      
Interest receivable on convertible note   (586)   (107)
Deposits   (295)   - 
Net cash used in operating activities   (8,735)   (4,555)
           
Cash flows from investing activities          
Purchase of marketable securities   (27,479)   (90,541)
Sale of marketable securities   28,503    30,439 
Proceeds from sale of digital currencies   93    - 
Proceeds from sale of DatChat common shares   -    900 
Proceeds from promissory note receivable interest received   65    - 
Funds to deposit accounts, net   -    (4,420)
Purchase of short-term and long-term investments   (15,016)   (4,066)
Purchase of research and development licenses   (525)   (597)
Purchase of short-term and long-term promissory notes   (1,600)   - 
Purchase of convertible note   -    (2,000)
Net cash used in investing activities   (15,959)   (70,285)
           
Cash flows from financing activities          
Proceeds from issuance of common stock and warrants, net of offering cost   -    77,989 
Proceeds from issuance of Series O and Series P Redeemable Convertible Preferred Stock, net of discount and offering cost   17,891    - 
Proceeds from exercise of warrants   -    84 
Payment for fractional shares   (26)   - 
Redemption of Series O and Series P Redeemable Convertible Preferred Stock   (22,000)   - 
Purchase of treasury stock   (2,237)   - 
Net cash (used in) provided by financing activities   (6,372)   78,073 
           
Net (decrease) increase in cash and cash equivalents and restricted cash   (31,066)   3,233 
Cash and cash equivalents, beginning of period   65,562    2,715 
           
Cash and cash equivalents, end of period  $34,496   $5,948 
           
Non-cash investing and financing activities          

Transfer from short-term investment to marketable securities

  $1,497   $- 
Reclassify from convertible note receivable to notes receivable at fair value  $2,147   $- 
Promissory convertible note receivable conversion into common shares  $899   $- 
Unpaid investment  $-   $1,000 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1. Organization and Description of Business and Recent Developments

 

Organization and Description of Business

 

AIkido Pharma Inc. (the “Company”), formerly known as Spherix Incorporated, was initially formed in 1967. Since 2017, the Company has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics in development. Over the past year, in an effort to enhance shareholder value, the Company has shifted its primary focus away from biotechnology to a new line of business in the fintech and financial services industries.  In furtherance of this new focus, in June of this year the Company formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”), with the purpose of making strategic acquisitions across the fintech and financial services industries.  Additionally, AIkido Labs, LLC (“Aikido Labs”), another wholly owned subsidiary of the Company, has and will continue to explore other opportunities in high growth industries.  To date, Aikido Labs has acquired equity positions in Anduril Industries, Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva Motors Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass.  Please see Notes 6, 7 and 8 below for a further discussion of the Company’s investments. Finally, the Company will continue to foster and develop its historical pipeline of biotechnology assets consisting of patented technology from leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia and acute lymphoblastic leukemia.  The Company is also developing a broad-spectrum antiviral platform, in which the lead compounds have activity in cell-based assays against multiple viruses including Influenza virus, Ebolavirus and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

 

On September 9, 2022, Dominari entered into a membership interest purchase agreement (the “FPS Purchase Agreement”) with Fieldpoint Private Bank & Trust (“Seller”), a Connecticut bank, for the purchase of its wholly owned subsidiary, Fieldpoint Private Securities, LLC, a Connecticut limited liability company (“FPS”) and broker-dealer registered with the Financial Industry Regulatory Authority (“FINRA”).   Pursuant to the terms of the FPS Purchase Agreement, Dominari will purchase from the Seller 100% of the membership interests in  of FPS (the “Membership Interests”) and, as a result thereof, will, thereafter, operate FPS’s registered broker-dealer business as a wholly owned subsidiary of the Company.  The FPS Purchase Agreement provides for Dominari’s acquisition of FPS’s Membership Interests in two closings, the first of  which occurred on October 4, 2022 (the “Initial Closing”), at which Dominari paid to the Seller $2,000,000 in consideration for a transfer by the Seller to Dominari of 20% of the Membership Interests.   Following the Initial Closing, FPS filed a continuing membership application requesting approval for a change of ownership, control, or business operations with FINRA in accordance with FINRA Rule 1017 (the “Rule 1017 Application”).  Upon FINRA’s approval of the Rule 1017 Application, the second closing will occur (the “Second Closing”), at which Dominari will pay to the Seller an additional $1.00 in consideration for a transfer by the Seller to Dominari of the remaining 80% of the Membership Interests.  The Second Closing is subject to FINRA’s final approval under FINRA Rule 1017 as well as other customary closing conditions, including the accuracy of the representations and warranties of the applicable parties under the FPS Purchase Agreement and compliance therewith.  Additionally, on October 17, 2022, the Company entered into an Amended and Restated Services Agreement with Kyle Wool, pursuant to which he has agreed to serve as Dominari’s Chief Executive Officer, upon the termination of his existing relationship with another registered broker-dealer and lead the Company’s transition to a fintech and financial services company.

 

Reverse Stock Split

 

On June 7, 2022, the Company effected a seventeen-for-one (17-for-1) reverse stock split of its class of common stock (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on June 2, 2022. The Reverse Stock Split was effective on June 7, 2022. All references to common stock, convertible preferred stock, warrants to purchase common stock, options to purchase common stock, restricted stock units, restricted stock awards, share data, per share data and related information contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $26 thousand.

 

7

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2. Liquidity and Capital Resources

 

The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities through managing current cash on hand from the Company’s past equity offerings.

 

Based upon projected cash flow requirements, the Company has adequate cash to fund its operations for at least the next twelve months from the date of the issuance of these unaudited consolidated financial statements.

 

Note 3. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, AIkido Labs and Dominari. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of September 30, 2022, condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022.

 

Use of Estimates

 

The accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP. This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include stock-based compensation, the valuation of investments, the valuation of convertible note and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

 

Significant Accounting Policies

 

Aside from the policies described below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022.

 

8

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Leases

 

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. See Note 12 – Commitment and Contingencies.

 

Treasury Stock

 

Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity.

 

Recent accounting pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if currently adopted, would have an effect on the Company’s unaudited condensed consolidated financial statements.

 

Note 4. Investments in Marketable Securities

 

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended September 30, 2022 and 2021, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of operations, are as follows ($ in thousands): 

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Realized (loss) gain  $(144)  $(583)  $(712)  $501 
Unrealized loss   (1,589)   (2,901)   (3,889)   (4,296)
Dividend income   79    451    211    1,221 
Total  $(1,654)  $(3,033)  $(4,390)  $(2,574)

 

Note 5. Short-term investments

 

The following table presents the Company’s short-term investments at September 30, 2022 and December 31, 2021 ($ in thousands):

 

   September 30,
2022		   December 31,
2021		 
Investment in Hoth Therapeutics, Inc.   -    770 
Investment in DatChat, Inc.   -    1,084 
Investment in Vicinity Motor Corp.   33    419 
Total   33    2,273 

 

The change in the fair value of the short-term investments for the nine months ended September 30, 2022 is summarized as follows: ($ in thousands):

 

Beginning balance  $2,273 
Transfer to marketable securities   (1,497)
Change in fair value of investment   (1,517)
Realized gain recognized through sale of marketable securities   774 
Ending balance  $33 

 

9

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Investment in Hoth Therapeutics, Inc.

 

On March 11, 2022, 1,130,701 shares of Hoth common stock were transferred to the marketable securities account and were sold for net proceeds of approximately $0.9 million.

 

On August 17, 2022, 35,714 shares of Hoth common stock were transferred to marketable securities account.

 

The following summarizes the Company investment in Hoth as of September 30, 2022 and December 31, 2021:

 

Security Name   Shares
Owned as of
September 30,
2022		    Fair value
per Share
as of
September 30,
2022		    Fair value as of
September 30,
2022
(in thousands)		 
HOTH   -   $-   $  - 

 

Security Name  Shares
Owned as of
December 31,
2021		   Fair value
per Share
as of December 31,
2021		   Fair value as of
December 31, 2021
(in thousands)		 
HOTH   1,166,415   $0.66   $      770 

 

Investment in DatChat, Inc.

 

On February 14, 2022, 357,916 shares (valued at $2.21 per share) of DatChat common stock were transferred to the marketable securities account and were sold for net proceeds of approximately $0.8 million.

 

Investment in Vicinity Motor Corp.

 

On October 25, 2021, the Company entered into a warrant agreement with Vicinity Motor Corp. (“Vicinity”) that entitles the Company to purchase up to 246,399 shares of Vicinity common stock at $5.10 per share. The warrant expires on October 25, 2024. The fair value was determined using a Black-Scholes simulation. The Company recorded the fair value of the Vicinity warrant of approximately $33,000 and $0.4 million in the consolidated balance sheet as of September 30, 2022 and December 31, 2021, respectively, reflecting the benefit received as part of its purchase of Vicinity common shares through its brokerage account. The initial investment in Vicinity was measured at approximately $0.6 million. Gains or losses associated with changes in the fair value of investments in Vicinity warrants are recognized as Change in fair value of investment on the consolidated statements of operations. During the nine months ended September 30, 2022, the Company recorded approximately $0.4 million of change in fair value of investment for this investment.

 

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

 

   September 30,
2022		   December 31,
2021		 
Option term (in years)   2.1%   2.8 
Volatility   88.25%   95.52%
Risk-free interest rate   4.22%   0.97%
Expected dividends   0.00%   0.00%
Stock price  $1.01   $3.50 

 

10

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6. Long-Term Investments

 

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.

 

For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.

 

The following table presents the Company’s other investments at September 30, 2022 and December 31, 2021 ($ in thousands):

 

   September 30,
2022		   December 31,
2021		 
Investment in Kerna Health Inc  $4,940   $3,800 
Investment in Kaya Now   2,540    1,665 
Investment in Tevva Motors   3,364    2,000 
Investment in ASP Isotopes   1,300    1,000 
Investment in AerocarveUS Corporation   1,000    1,000 
Investment in Qxpress   1,000    - 
Investment in Masterclass   170    - 
Investment in Kraken   597    - 
Investment in Epic Games   3,500    - 
Investment in Tesspay   1,250    - 
Investment in SpaceX   3,500    - 
Investment in Databricks   1,200    - 
Investment in Discord   476    - 
Investment in Thrasio   300    - 
Investment in Automation Anywhere   476    - 
Investment in Anduril   476    - 
Total  $26,089   $9,465 

 

The change in the value of the long-term investments for the nine months ended September 30, 2022 is summarized as follows: ($ in thousands):

 

Beginning balance  $9,465 
Purchase of investments   15,016 
Change in fair value of long-term investments   1,608 
Ending balance  $26,089 

 

Investment in Kerna Health Inc

 

In May 2022, the Company purchased additional 400,000 shares of common stock of Kerna Health Inc, (“Kerna”) for approximately $1.1 million. The investment in Kerna was valued at $4.9 million as of September 30, 2022.

 

11

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Investment in Kaya Now Inc (aka Kaya Holding Corp)

 

On March 2, 2022, the Company purchased additional 3,375,000 shares of common stock of Kaya Now Inc., aka Kaya Holding Corp., (“Kaya”) for approximately $0.6 million.

 

On July 21, 2022, in consideration for extending the maturity date of the Kaya Now Promissory Note (See Note 7 – Notes Receivable) to February 1, 2023, Kaya agreed to issue to the Company 1,000,000 shares at $0.2 per share of common stock.

 

The Company recorded approximate $0.2 million in unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Kaya was valued at approximately $2.5 million as of September 30, 2022.

 

Investment in Tevva Motors

 

Tevva Motors (“Tevva”), a private company, raised capital during the first quarter of 2022, increasing its share price value to $58.0 per share. Therefore, the Company recorded a $1.4 million unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Tevva was valued at approximately $3.4 million as of September 30, 2022.

 

Investment in ASP Isotopes

 

In August 2022, the Company purchased additional 100,000 shares of common stock of ASP Isotopes Inc. (“ASP”) for $0.3 million. The investment in ASP was valued at $1.3 million as of September 30, 2022.

 

Investment in AerocarveUS Corporation

 

The investment in AerocarveUS Corporation was valued at $1.0 million as of September 30, 2022.

 

Investment in Qxpress

 

On January 27, 2022, the Company entered into a securities purchase agreement (the “Qxpress Securities Purchase Agreement”) with Qxpress. Under the Qxpress Securities Purchase Agreement, the Company agreed to purchase 46,780 shares of common stock of Qxpress for $1.0 million. The investment in Qxpress was valued at $1.0 million as of September 30, 2022.

 

Investment in Masterclass

 

In March of 2022, the Company entered into a securities purchase agreement (the “Masterclass Securities Purchase Agreement”) with Masterclass. Under the Masterclass Securities Purchase Agreement, the Company agreed to purchase 4,841 shares of common stock of Masterclass for approximately $0.2 million. The investment in Masterclass was valued at approximately $0.2 million as of September 30, 2022.

 

12

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Investment in Kraken

 

In March of 2022, the Company entered into a securities purchase agreement (the “Kraken Securities Purchase Agreement”) with Kraken. Under the Kraken Securities Purchase Agreement, the Company agreed to purchase a total of 8,409 shares of common stock of Kraken for approximately $0.5 million. In August 2022, the Company entered into a common stock transfer agreement with a private seller to purchase 3,723 shares of Kraken for approximately $0.1 million. The investment in Kraken was valued at approximately $0.6 million as of September 30, 2022.

 

Investment in Epic Games

 

On March 22, 2022, the Company entered into a securities purchase agreement (the “Epic Games Securities Purchase Agreement”) with Epic Games. Under the Epic Games Securities Purchase Agreement, the Company agreed to purchase an aggregate of 901 shares of common stock of Epic Games for a total $1.5 million. In April 2022, the Company invested an additional $2 million for the purchase of additional shares of common stock of Epic Games. The investment in Epic Games was valued at $3.5 million as of September 30, 2022.

 

Investment in Tesspay

 

On March 23, 2022, the Company entered into a securities purchase agreement (the “Tesspay Securities Purchase Agreement”) with Tesspay. Under the Tesspay Securities Purchase Agreement, the Company agreed to purchase 1,000,000 shares of common stock of Tesspay for approximately $0.2 million. The Company also invested an additional $1.0 million for pre-IPO. Tesspay, a private company, raised capital during the first quarter of 2022, increasing its share price value to $0.25 per share. Therefore, the Company recorded $10,000 in unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Tesspay was valued at approximately $1.3 million as of September 30, 2022.

 

Investment in SpaceX

 

On March 30, 2022, the Company entered into a securities purchase agreement (the “SpaceX Securities Purchase Agreement”) with SpaceX, under which the company agreed to purchase shares of common stock of SpaceX for $1.5 million. In April 2022, the Company invested an additional $2 million for the purchase of additional shares of common stock of SpaceX. The investment in SpaceX was valued at $3.5 million as of September 30, 2022.

 

Investment in Databricks

 

On March 25, 2022, the Company entered into a securities purchase agreement (the “Databricks Securities Purchase Agreement”) with Databricks. Under the Databricks Securities Purchase Agreement, the Company agreed to purchase an aggregate of 3,830 shares of common stock of Databricks for a total $1.2 million. The investment in Databricks was valued at $1.2 million as of September 30, 2022.

 

Investment in Discord, Inc.

 

In May 2022, the Company entered into a securities purchase agreement (the “Discord Securities Purchase Agreement”) with privately-held company Discord, Inc., a social communications platform provider that is particularly popular with gamers, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Discord Securities Purchase Agreement, the Company agreed to purchase a total of 618 shares of common stock of Discord for approximately $0.5 million. The investment in Discord was valued at $0.5 million as of September 30, 2022.

 

Investment in Thrasio, LLC

 

In April 2022, the Company entered into a securities purchase agreement (the “Thrasio Securities Purchase Agreement”) with privately-held company Thrasio, LLC, an aggregator of private brands of top Amazon businesses and direct-to-consumer brands, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Thrasio Securities Purchase Agreement, the Company agreed to purchase a total of 20,000 shares of common stock of Thrasio for $0.3 million. The investment in Thrasio was valued at $0.3 million as of September 30, 2022.

 

13

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Investment in Automation Anywhere, Inc.

 

In April 2022, the Company entered into a securities purchase agreement (the “Automation Anywhere Securities Purchase Agreement”) with privately-held company Automation Anywhere, Inc., a provider of business automation solutions, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Automation Anywhere Securities Purchase Agreement, the Company agreed to purchase a total of 18,490 shares of common stock of Automation Anywhere for approximately $0.5 million. The investment in Automation Anywhere was valued at $0.5 million as of September 30, 2022.

 

Investment in Anduril Industries, Inc.

 

In April 2022, the Company entered into a securities purchase agreement (the “Anduril Securities Purchase Agreement”) with privately-held company Anduril Industries, Inc., a defense products company, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Anduril Securities Purchase Agreement, the Company agreed to purchase a total of 14,880 shares of common stock of Anduril for approximately $0.5 million. The investment in Anduril was valued at $0.5 million as of September 30, 2022.

 

Note 7. Notes Receivable

 

The following table presents the Company’s notes receivable at September 30, 2022 ($ in thousands):

 

   Maturity Date  Stated Interest Rate   Principal Amount   Interest Receivable   Fair Value 
Shor-term convertible notes receivable                       
Convergent Investment  01/29/2023   8%  $2,000   $267   $2,267 
Nano Innovations Inc Investment  12/26/2022   10%  $750   $57   $807 
                        
Short-term notes receivable                       
Mr. Jeffrey Cooper Investment  03/11/2023   8%  $2,780   $214   $2,994 
Raefan Industries LLC Investment  12/06/2022   8%  $1,950   $127   $2,077 
Kaya Now Investment  02/01/2023   8%  $500   $-   $500 
Total                    $8,645 
                        
Long-term notes receivable                       
American Innovative Robotics Investment   04/01/2027   8%  $1,100   $-   $1,100 

 

Convergent Investment

 

The Company recorded an interest income receivable of approximately $0.3 million on the Convergent Convertible Note as of September 30, 2022.

 

Mr. Jeffrey Cooper Investment

 

Raefan Group LLC promissory note was satisfied and replaced with a personal note issued to Mr. Jeffrey Cooper, of Raefan Industries. The Company recorded an interest income receivable of approximately $0.2 million on the Mr. Jeffrey Cooper Promissory Note as of September 30, 2022.

 

14

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Raefan Industries LLC Investment

 

The Company recorded an interest income receivable of approximately $0.1 million on the Raefan Industries Promissory Note as of September 30, 2022.

 

Slinger Bag Inc Investment

 

The Company recorded an interest income receivable of approximately $63,000 on the Slinger Bag Convertible Note as of June 17, 2022. On June 17, 2022, the Company received 558,659 shares of common stock of Connexa Sports Technologies Inc (also known as Slinger Bag) as a result of conversion of principal and accrued interest on the Slinger Bag Convertible Note. All the 558,659 shares of common stock of Connexa Sports received were transferred to marketable securities account.

 

Nano Innovations Inc Investment

 

The Company recorded an interest income receivable of approximately $57,000 on the Nano Convertible Note as of September 30, 2022.

 

Kaya Now Investment

 

On April 5, 2022, the Company purchased an 8% promissory note (“Kaya Now Promissory Note”) issued by Kaya Now Inc (“Kaya”) in the principal amount of $0.5 million pursuant to a Note Purchase Agreement with Kaya Now. The Company paid a purchase price for the Kaya Now Promissory Note of $0.5 million. The Company will receive interest on the Kaya Now Promissory Note at the rate of 8% per annum payable upon conversion or maturity of the Kaya Now Promissory Note. The Kaya Now Promissory Note shall mature on February 1, 2023.

 

On July 21, 2022, the Company and Kaya executed an amendment of the Kaya Now Promissory Note (“Amendment”) such that the Kaya Now Promissory Note shall mature on February 1, 2023. In consideration of the Amendment, Kaya has agreed to issue to the Company 1,000,000 additional shares at $0.2 per share of Kaya’s common stock. Under the amendment, interest on the Note during the extended term shall be paid on October 1, 2022 and January 1, 2023 at the rate of 8% per annum.

 

The Company recorded an interest income of approximately $20,000 on the Kaya Now Promissory Note as of September 30, 2022.

 

American Innovative Robotics Investment

 

On April 1, 2022, the Company purchased an 8% promissory note (“Robotics Promissory Note”) issued by American Innovative Robotics, LLC (“Robotics”) in the principal amount of $1.1 million pursuant to a Note Purchase Agreement with Robotics. The Company paid a purchase price for the Robotics Promissory Note of $1.1 million. The Company will receive interest on the Robotics Promissory Note at the rate of 8% per annum payable every three months starting from July 1, 2022. The Robotics Promissory Note shall mature on April 1, 2027.

 

The Company recorded an interest income of approximately $45,000 on the Robotics Promissory Note as of September 30, 2022.

 

Note 8. Fair Value of Financial Assets and Liabilities

 

Financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

 

15

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Company uses three levels of inputs that may be used to measure fair value:

 

Level 1 - quoted prices in active markets for identical assets or liabilities

 

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

 

The following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2022 and December 31, 2021 ($ in thousands):

 

   Fair value measured at September 30, 2022 
   Total at September 30,   Quoted prices in active
markets		   Significant other
observable inputs		   Significant unobservable
inputs		 
   2022   (Level 1)   (Level 2)   (Level 3) 
Assets                
Marketable securities:                
Equities  $8,032   $8,032   $
            -
   $
-
 
Total marketable securities  $8,032   $8,032   $
-
   $
-
 
Short-term investment  $33   $
-
   $
-
   $33 
Short-term notes receivable at fair value  $8,645   $
-
   $
-
   $8,645 
Long-term notes receivable at fair value  $1,100   $
-
   $
-
   $1,100 

 

   Fair value measured at December 31, 2021 
   Total at December 31,   Quoted prices in active
markets		   Significant other
observable inputs		   Significant unobservable
inputs		 
   2021   (Level 1)   (Level 2)   (Level 3) 
Assets                
Marketable securities:                
Equities  $11,427   $11,427   $
        -
   $
-
 
Total marketable securities  $11,427   $11,427   $
-
   $
-
 
Short-term investment  $2,273   $1,854   $
-
   $419 
Notes receivable at fair value  $6,984   $
-
   $
-
   $6,984 
Convertible note receivable  $2,147   $
-
   $
-
   $2,147 

 

16

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Level 3 Measurement

 

The following tables set forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis ($ in thousands):

 

Short-term notes receivable at fair value at December 31, 2021  $6,984 
Accrued interest receivable   522 
Reclassify from convertible note receivable to notes receivable at fair value   2,147 
Purchase of notes receivable   500 
Change in fair value of note receivable   (608)
Conversion of note receivable to marketable securities   (899)
Short-term notes receivable at fair value at September 30, 2022  $8,645 

 

Long-term notes receivable at fair value at December 31, 2021  $
-
 
Purchase of notes receivable   1,100 
Long-term notes receivable at fair value at September 30, 2022  $1,100 
Short-term investment at December 31, 2021  $419 
Change in fair value of investment   (386)
Short-term investment at September 30, 2022  $33 

 

Long term and Short-term Note Receivable and Convertible Notes Receivable

 

The Company has elected to measure the purchases of the notes using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the consolidated statements of operations.

 

The value at which the Company’s convertible note is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market conditions and those characteristics specific to the underlying investments.

 

Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the consolidated statements of operations.

 

Convergent Investment

 

As of September 30, 2022, the fair value of the Convergent Convertible Note was measured at $2.3 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

17

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Mr. Jeffrey Cooper Investment

 

As of September 30, 2022, the fair value of the Mr. Jeffrey Cooper Promissory Note was measured at approximately $3.0 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

Raefan Industries LLC Investment

 

As of September 30, 2022, the fair value of the Raefan Industries Promissory Note was measured at approximately $2.1 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

Slinger Bag Inc Investment

 

The Company recorded an interest income receivable of approximately $63,000 on the Slinger Bag Convertible Note as of June 17, 2022. On June 17, 2022, the Company received 558,659 shares of common stock of Connexa Sports Technologies Inc (also known as Slinger Bag) as a result of conversion of principal and accrued interest on the Slinger Bag Convertible Note. All the 558,659 shares of common stock of Connexa Sports received were transferred to marketable securities account.

 

As of September 30, 2022, the fair value of the Slinger Bag Convertible Note was measured at $0.

 

Nano Innovations Inc Investment

 

As of September 30, 2022, the fair value of the Nano Convertible Note was measured at approximately $0.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

The Company believes that the fair value of the warrant of Nano is immaterial.

 

Kaya Now Investment

 

On July 21, 2022, the Company and Kaya executed an amendment of the Kaya Now Promissory Note (“Amendment”) such that the Kaya Now Promissory Note shall mature on February 1, 2023. In consideration of the Amendment, Kaya has agreed to issue to the Company 1,000,000 additional shares at 20 cents per share of Kaya’s common stock. Under the amendment, interest on the Note during the extended term shall be paid on October 1, 2022 and January 1, 2023 at the rate of 8% per annum.

 

As of September 30, 2022, the fair value of the Kaya Now Promissory Note was measured at $0.5 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

The Company believes that the fair value of the warrant of Kaya is immaterial.

 

American Innovative Robotics Investment

 

As of September 30, 2022, the fair value of the Robotics Promissory Note was measured at $1.1 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the nine months ended September 30, 2022.

 

18

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9. Net Loss per Share Attributable to Common Stockholders

 

Basic loss per common share is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at September 30, 2022 and 2021 are as follows:

 

   As of September 30, 
   2022   2021 
Convertible preferred stock   34    40 
Warrants to purchase common stock   444,796    341,268 
Options to purchase common stock   54,722    28,203 
Total   499,552    369,511 

 

Note 10. Redeemable Convertible Preferred Stock

 

Series O and Series P Redeemable Convertible Preferred Stock

 

On February 24, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in concurrent registered direct offerings (the “Offerings”), (i) 11,000 shares of the Company’s Series O Redeemable Convertible Preferred Stock, par value $0.001 per share (the “Series O Preferred Stock”), and (ii) 11,000 shares of the Company’s Series P Redeemable Convertible Preferred Stock, par value $0.001 per share (the “Series P Preferred Stock” and together with the Series O Preferred Stock, the “Preferred Stock”), in each case, at an offering price of $952.38 per share, representing a 5% original issue discount to the stated value of $1,000 per share of Preferred Stock, for gross proceeds of each Offering of $10,476,180, or approximately $21.0 million in the aggregate for the Offerings, before the deduction of the placement agent’s fee and offering expenses. The shares of Series O Preferred Stock will have a stated value of $1,000 per share and will be convertible, at a conversion price of $1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The shares of Series P Preferred Stock will have a stated value of $1,000 per share and will be convertible, at a conversion price of $1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The Series O Preferred Stock and the Series P Preferred Stock are being offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-238172) (the “Registration Statement”) filed under the Securities Act of 1933, as amended (the “Securities Act”). The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the Offerings occurred on March 2, 2022. In connection with this transaction, the Company received net proceeds of $21.0 million, which was deposited in an escrow account.

 

In connection with the Offerings, the Company has entered into an engagement agreement (the “Engagement Agreement Agreement”) with H.C Wainwright & Company, LLC, as placement agent (“HCW”), pursuant to which the Company agreed to pay HCW an aggregate cash fee equal to 8% of the aggregate gross proceeds raised in the offerings and issue HCW common stock purchase warrants to purchase up to 1,760,000 shares of common stock in the aggregate at an exercise price of $1.25. The warrants were recorded as a component of stockholders’ equity in accordance with FASB Accounting Standards Codification (“ASC”) 815.

 

Redemption Rights

 

After (i) the earlier of (1) the receipt of stockholder approval and (2) the date that is 90 days following the Original Issue Date (the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock) and (ii) before the date that is 120 days after the Original Issue Date (the “Redemption Period”), each Holder shall have the right to cause the Company to redeem all or part of such Holder’s shares of Preferred Stock at a price per share equal to 105% of the Stated Value.

 

As a result, the Preferred Stock were recorded separately from stockholders’ equity because they are redeemable upon the occurrence of redemption events that are considered not solely within the Company’s control.

 

19

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

During the second quarter of 2022, the Company redeemed for cash at a price equal to 105% of the $1,000 stated value per share all of its 11,000 outstanding shares of Series O Preferred Stock and its 11,000 Series P Preferred Stock. The total redemption amount was $23.1 million. As a result, all shares of the Series O Preferred Stock and Series P Preferred Stock have been retired and are no longer outstanding.

 

During the nine months ended September 30, 2022, the Company recognized approximately $4.1 in deemed dividends related to the Preferred Stock in the condensed consolidated statements of operations and the unaudited condensed consolidated statements of changes in redeemable preferred stock and stockholders’ equity.

 

Note 11. Stockholders’ Equity

 

Common Stock

 

One June 5, 2020, CBM Biopharma, Inc. (“CBM”) approved a distribution to its stockholders of 1,939,058 the Company’s common shares. The Company, as one of CBM’s shareholder, received 387,812 shares of its common stock. The Company cancelled 22,812 shares received on January 1, 2022.


During the nine months ended September 30, 2022, the Company issued an aggregate of 238,244 shares of the Company’s common stock to members of the Company’s Board and an employee for services rendered.

 

Treasury Stock

 

On January 21, 2022, the Company’s board of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to which the Company authorized the Repurchase Program in an amount of up to three million dollars. During the nine months ended September 30, 2022, the Company repurchased 344,982 shares at a cost of approximately $2.2 million or $6.48 per share through marketable securities account under the Share Buyback Program. The Company records treasury stock using the cost method.

 

Warrants

 

A summary of warrant activity for the nine months ended September 30, 2022, is presented below:

 

   Warrants   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted Average
Remaining Contractual
Life
(in years)		 
Outstanding as of December 31, 2021   341,268   $31.68    
     -
    3.87 
Issued   103,528    21.25    
-
    4.40 
Outstanding as of September 30, 2022   444,796   $29.25    
-
    3.45 

 

20

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Restricted Stock Awards

 

A summary of restricted stock awards activity for the nine months ended September 30, 2022, is presented below:

 

   Number of Restricted
Stock Awards		   Weighted Average
Grant Day Fair Value		 
Nonvested at December 31, 2021   
-
   $
-
 
Granted   238,244    6.13 
Vested   (230,176)   6.15 
Nonvested at September 30, 2022   8,068   $5.64 

 

As of September 30, 2022, approximately $24,000 of unrecognized stock-based compensation expense was related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards was approximately 0.25 years at September 30, 2022.

 

Stock Options

 

A summary of stock option activity for the nine months ended September 30, 2022 is presented below:

 

   Number of Shares   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted Average
Remaining Contractual
Life (in years)		 
Outstanding as of December 31, 2021   28,203   $548.35   $
-
    8.2 
Employee options granted   170,587    5.95    184,234    1.7 
Employee options forfeited   (143,852)   47.78    152,470    
-
 
Employee options expired   (216)   73.70    
-
    
-
 
Outstanding as of September 30, 2022   54,722   $175.26   $31,764    8.8 
Options vested and exercisable   25,311   $372.00   $
-
    7.9 

 

Stock-based compensation associated with the amortization of stock option expense was approximately $40,000 and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively. All stock compensation was recorded as a component of general and administrative expenses.

 

Estimated future stock-based compensation expense relating to unvested stock options is approximately $0.1 million.

 

Note 12. Commitments and Contingencies

 

Legal Proceedings

 

In the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us.

 

21

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Risks and Uncertainties - COVID-19

 

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for drug candidates, the specific impact is not readily determinable as of the date of these consolidated financial statements. The COVID-19 pandemic has slowed down some drug development efforts and has slowed the acquisition of new drugs. However, the impact of the pandemic and ensuing lockdowns are easing. The process of drug development and further acquisitions is now continuing. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Leases

 

On December 1, 2021, the Company entered into a Lease Agreement (the “Company’s Lease”) with Trump Tower Commercial LLC, a New York limited liability company. Under the Company’s Lease, the Company will rent a portion of the twenty-second floor at 725 Fifth Avenue, New York, New York (the “22nd Floor Premises”). The Company plans to use the 22nd Floor Premises to run its day-to-day operations. The initial term of the Company’s Lease is seven (7) years commencing on July 11, 2022 (“Commencement Date). Under the Company’s Lease, the Company will pay monthly rent, commencing on January 11, 2023, equal to twelve-thousand, eight hundred and seventy-four dollars. Effective for the sixth and seventh years of the Company’s Lease, the rent shall increase to thirteen-thousand, five hundred and two dollars per month. The Company took possession of the Lease on the Commencement Date.

 

The tables below represent the Company’s lease assets and liabilities as of September 30, 2022:

 

   September 30,
2022		 
Assets:    
Operating lease right-of-use-assets  $708 
                      
Liabilities:     
Current     
Operating   42 
Long-term     
Operating   701 
   $743 

 

22

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The following tables summarize quantitative information about the Company’s operating leases, under the adoption of ASC Topic 842, Leases:

 

   September 30,
2022		 
Weighted-average remaining lease term – operating leases (in years)   7.3 
Weighted-average discount rate – operating leases   10.0%

 

During the nine months ended September 30, 2022, the Company recorded approximately $71,000 as lease expense to current period operations.

 

   Three Months
Ended September 30,
2022		 
Operating leases    
Operating lease cost  $       35 
Variable lease cost   
-
 
Operating lease expense   35 
Short-term lease rent expense   36 
Net rent expense  $71 

 

Supplemental cash flow information related to leases were as follows:

 

   Three Months
Ended
September 30,
2022		 
Operating cash flows - operating leases  $
-
 
Right-of-use assets obtained in exchange for operating lease liabilities  $731 

 

As of September 30, 2022, future minimum payments during the next five years and thereafter are as follows:

 

   Operating
Leases		 
Remaining Period Ended December 31, 2022  $
-
 
Year Ended December 31, 2023   154 
Year Ended December 31, 2024   154 
Year Ended December 31, 2025   142 
Year Ended December 31, 2026   142 
Thereafter   479 
Total   1,071 
Less present value discount   (328)
Operating lease liabilities  $743 

 

23

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 13. License agreements

 

On April 13, 2020, the Company entered into a License Agreement (the “License Agreement”) with University of Maryland (“UM”) pursuant to which UM granted the Company an exclusive, worldwide, royalty bearing license to certain intellectual property to, among other things, discover, develop, make, have made, use and sell certain licensed products and sell, use and practice certain licensed services with respect to cancer.

 

During the nine months ended September 30, 2022, the Company paid approximately $0.5 million of additional license fees to UM.

 

Note 14. Subsequent events

 

Dominari’s Lease of Office Space at Trump Tower New York

 

On September 23, 2022, Dominari entered into a Lease Agreement (“Dominari’s Lease”) with Trump Tower Commercial LLC, a New York limited liability company. Under Dominari’s Lease, Dominari will rent a portion of a floor at 725 Fifth Avenue, New York, New York (the “Premises”). Dominari plans to use the Premises to run its day-to-day operations. The initial term of Dominari’s Lease is seven (7) years commencing on the date that possession of the Premises is delivered to Dominari. Under Dominari’s Lease, Dominari will pay rent equal to forty-nine thousand three hundred and sixty-eight dollars per month. Effective for the sixth and seventh years of Dominari’s Lease, the rent shall increase to fifty-one thousand eight hundred and sixty-eight dollars per month. The Company anticipates that it will take possession of Dominari’s Lease in 2023.

 

24

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements. All references to “we,” “us,” “our” and the “Company” refer to Aikido Pharma Inc., a Delaware corporation and its consolidated subsidiaries unless the context requires otherwise.

 

Overview

 

Since 2017, we have operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics in development. Over the past year, in an effort to enhance shareholder value, we have shifted our primary focus away from biotechnology to a new line of business in the fintech and financial services industries.  In furtherance of this new focus, in June of this year we formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”), with the purpose of making strategic acquisitions across the fintech and financial services industries.  Additionally, AIkido Labs, LLC (“Aikido Labs”), another wholly owned subsidiary, has and will continue to explore other opportunities in high growth industries.  To date, Aikido Labs has acquired equity positions in Anduril Industries, Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva Motors Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass.  Finally, we will continue to foster and develop our historical pipeline of biotechnology assets consisting of patented technology from leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia and acute lymphoblastic leukemia.  We are also developing a broad-spectrum antiviral platform, in which the lead compounds have activity in cell-based assays against multiple viruses including Influenza virus, Ebolavirus and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

 

25

 

 

On September 9, 2022, Dominari entered into a membership interest purchase agreement (the “FPS Purchase Agreement”) with Fieldpoint Private Bank & Trust (“Seller”), a Connecticut bank, for the purchase of its wholly owned subsidiary, Fieldpoint Private Securities, LLC, a Connecticut limited liability company (“FPS”) and broker-dealer registered with the Financial Industry Regulatory Authority (“FINRA”).   Pursuant to the terms of the FPS Purchase Agreement, Dominari will purchase from the Seller 100% of the membership interests in  of FPS (the “Membership Interests”) and, as a result thereof, will, thereafter, operate FPS’s registered broker-dealer business as a wholly owned subsidiary.  The FPS Purchase Agreement provides for Dominari’s acquisition of FPS’s Membership Interests in two closings, the first of  which occurred on October 4, 2022 (the “Initial Closing”), at which Dominari paid to the Seller $2,000,000 in consideration for a transfer by the Seller to Dominari of 20% of the Membership Interests.   Following the Initial Closing, FPS filed a continuing membership application requesting approval for a change of ownership, control, or business operations with FINRA in accordance with FINRA Rule 1017 (the “Rule 1017 Application”).  Upon FINRA’s approval of the Rule 1017 Application, the second closing will occur (the “Second Closing”), at which Dominari will pay to the Seller an additional $1.00 in consideration for a transfer by the Seller to Dominari of the remaining 80% of the Membership Interests.  The Second Closing is subject to FINRA’s final approval under FINRA Rule 1017 as well as other customary closing conditions, including the accuracy of the representations and warranties of the applicable parties under the FPS Purchase Agreement and compliance therewith.  Additionally, on October 17, 2022, we entered into an Amended and Restated Services Agreement with Kyle Wool, pursuant to which he has agreed to serve as Dominari’s Chief Executive Officer, upon the termination of his existing relationship with another registered broker-dealer and lead our transition to a fintech and financial services company.

 

Our anticipated diversified financial platform may be affected by a variety of factors including the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession, Russia’s invasion of Ukraine, and rising energy prices. These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods. These developments and the impact on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted, our results of operations, financial position, and cash flows may be materially adversely affected.

 

Critical Accounting Policies

 

Our critical accounting policies are disclosed in our annual report on Form 10K for the year ended December 31, 2021 and there have been no material changes to such policy or estimates during the nine months ended September 30, 2022.

 

26

 

 

Critical Accounting Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

 

● it requires assumptions to be made that were uncertain at the time the estimate was made, and
   
● changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition.

 

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material.

 

See Note 2 to our unaudited condensed consolidated financial statements for a discussion of our significant accounting policies.

 

Recently Issued Accounting Pronouncements

 

See Note 3 to the unaudited condensed consolidated financial statements for a discussion of recent accounting standards.

 

Results of Operations

 

We had little or no revenue for the past two years.

 

Three months ended September 30, 2022 compared to three months ended September 30, 2021

 

During the three months ended September 30, 2022, we incurred a loss from operations of approximately $5.1 million, as compared to a loss of approximately $1.8 million for the comparable period of the prior year. The approximate $3.3 million increase in loss year-over-year was primarily attributable to (i) an approximate $2.8 million increase in general and administrative expenses from approximately $1.7 million, during the three months ended September 2021, to approximately $4.5 million, for the same period in 2022, and (ii) an approximate $0.5 million increase in research and development expenses from approximately $0.1 million, during the three months ending September 30, 2021, to approximately $0.6 million, for the same period in 2022. The increase in (i) was a result of approximately $1.4 million in expenses related to fully-vested restricted stock grants issued to the members of the board of directors and executive officers and additional contractual and discretionary bonus expense of approximately $0.6 million. We also incurred approximately $1.0 million in legal and accounting advisory fees related to our transition into a financial services business. The increase in (ii) was primarily due to an additional payment under our license agreement with the University of Maryland (“UM”) pursuant to which the UM granted us an exclusive, worldwide, royalty bearing license to certain intellectual property to, among other things, discover, develop, make, have made, use and sell certain licensed products and sell, use and practice certain licensed services with respect to the treatment of cancer.

 

During the three months ended September 30, 2022, other expense was approximately $1.1 million as compared to other income of approximately $1.7 million for the comparable prior year period. The activity for the three months ended September 30, 2022, as compared to the same period in the prior year, is a result of an overall volatility in equity valuations due to macroeconomic uncertainty (i.e. inflation, global tensions in the Ukraine, etc.) impacting the change in fair value of investments and unrealized losses on marketable securities. Specifically, we recognized $0.3 million in change of fair value of investments for the three months ended September 30, 2022, which is reflective of volatility in equity valuations, as stated above. For the three months ended September 30, 2021, change in fair value of investments increased to $4.4 million primarily as a result of our investment in DatChat, Inc. (“DatChat”) which increased to $4.4 million following DatChat’s initial public offering during July 2021. Unrealized losses on marketable securities for the three months ended September 30, 2022, were $1.6 million, as compared to $3.0 million for the same period during the prior year, which was a result of continued volatility in equity-based exchange traded funds.  

 

27

 

 

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

 

During the nine months ended September 30, 2022, we incurred a loss from operations of approximately $11.2 million, as compared to approximately $6.9 million during the comparable prior year period. The approximate $4.3 million increase in loss was primarily attributable to (i) an approximate $3.3 million increase in general and administrative expenses from approximately $5.2 million, during the nine months ended September 30, 2021, to approximately $8.5 million, during the same period in 2022, (ii) an approximate $1.6 million increase in research and development expenses from approximately $0.5 million, during the nine months ended September 30, 2021, to approximately $2.1 million, during the same period in 2022, and (iii) an approximate decrease of $0.6 million in research and development – license acquired from approximately $1.1 million, during the nine months ended September 30, 2021, to approximately $0.5 million, during the same period in 2022, The increase in (i) was a result of approximately $1.4 million in expenses related to fully-vested restricted stock grants issued to the members of the board of directors and executive officers and additional contractual and discretionary bonus expense of approximately $0.6 million. We also incurred approximately $1.0 million in legal and accounting advisory fees related to our transition into a financial services business. The increase in (ii) was primarily due to an approximate $1.6 million increase in expense related to our continued development of a broad-spectrum antiviral platform, in which the lead compounds have activity in cell-based assays against multiple viruses including the Influenza virus, Ebolavirus and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19. The decrease in (iii) was primarily attributable to an approximate $0.6 million decrease related to a one-time expense for restricted stock units issued in the prior year in relation to use of the license.

 

During the nine months ended September 30, 2022, other expense was approximately $3.6 million as compared to other income of approximately $1.5 million for the comparable prior year period. The activity for the nine months ended September 30, 2022, as compared to the same period in the prior year, is a result of overall volatility in equity valuations due to macroeconomic uncertainty (i.e. inflation, global tensions in the Ukraine, etc.) impacting the change in fair value of investments and unrealized losses on marketable securities. Specifically, we recognized $0.1 million in change of fair value of investments for the nine months ended September 30, 2022, which is reflective of volatility in equity valuations, as stated above. For the nine months ended September 30, 2021, change in fair value of investments increased to $3.8 million primarily as a result of our investment in DatChat which increased to $4.4 million following DatChat’s initial public offering during July 2021. Unrealized losses on marketable securities for the nine months ended September 30, 2022, were $4.3 million, as compared to $2.6 million for the same period during the prior year, which was a result of continued volatility in equity-based exchange traded funds.  

Liquidity and Capital Resources

 

We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While we continue to implement our business strategy, we intend to finance our activities through:

 

● managing current cash and cash equivalents on hand from our past debt and equity offerings;
   
● monetizing current and future strategic long-term investments;
   
● seeking additional funds raised through the sale of additional securities in the future;
   
● seeking additional liquidity through credit facilities or other debt arrangements; and
   
● increasing revenue from its patent portfolios, license fees and new business ventures.

 

28

 

 

Our ultimate success is dependent on our ability to obtain additional financing, monetize our long-term investments, and generate sufficient cash flow to meet our obligations on a timely basis. Our business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business plan to transition to a fintech and financial services business . Our working was approximately $54.2 million at September 30, 2022. We may need to obtain additional debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly-traded company or operations. If we attempt to obtain additional debt or equity financing, we cannot assume that such financing will be available to the Company on favorable terms, or at all. As a result of recent volatility and weakness in the public markets, due to, among other factors, uncertainty in the global economy and financial markets, it may be much more difficult to raise additional capital, if and when, it is needed, unless the public markets become less volatile and stronger at such time that we seek to raise additional capital. There are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way. 

 

Cash Flows from Operating Activities - For the nine months ended September 30, 2022 and 2021, net cash used in operations was approximately $8.7 million and $4.6 million, respectively. The cash used in operating activities for the nine months ended September 30, 2022 primarily resulted from a net loss of $14.9 million and change in fair value of long-term investment of $1.6 million and is partially offset by change in fair value of short-term investment of $1.5 million and unrealized loss on marketable securities of $3.9 million. The cash used in operating activities for the nine months ended September 30, 2021 primarily resulted from a net loss of $5.4 million and change in fair value of investment of $3.8 million, and partially offset by $4.3 million unrealized loss on marketable securities and $1.1 million research and development expense related with license acquired.

 

Cash Flows from Investing Activities - For the nine months ended September 30, 2022 and 2021, net cash used in investing activities was approximately $16.0 million and $70.3 million, respectively. The cash used in investing activities for the nine months ended September 30, 2022 primarily resulted from our purchase of marketable securities of $27.5 million, purchase of promissory notes of $1.6 million and purchase of investments of $15.0 million, partially offset by our sale of marketable securities of $28.5 million since we invest excess cash into marketable securities until additional cash is needed. The cash used in investing activities for the nine months ended September 30, 2021 primarily resulted from our purchase of marketable securities of $90.5 million, funds to deposit accounts of $4.4 million (net of fee), purchase of investments at fair value of $4.1 million and purchase of convertible note of $2.0 million, partially offset by our sale of marketable securities of $30.4 million since we invest excess cash into marketable securities until additional cash is needed.

 

Cash Flows from Financing Activities - Cash used in financing activities for the nine months ended September 30, 2022 was $6.4 million, which reflects the cost for redemption of Series O and Series P Redeemable Convertible Preferred Stock of $22.0 million and cost for purchase of treasury stock of $2.2 million, partially offset by net proceeds of $17.9 million from investors in exchange of issuance of issuance of Series O and Series P Redeemable Convertible Preferred Stock. Cash provided by financing activities for the nine months ended September 30, 2021 was $78.1 million, which reflects the net proceeds of $78.0 million from investors in exchange of issuance of common stock and warrants and net proceeds of $84,000 from the exercise of common warrants.

 

Off-balance sheet arrangements.

 

None.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting companies.

 

29

 

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

With respect to the quarter ended September 30, 2022, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures were not effective as of September 30, 2022 due to the material weaknesses in our internal controls over financial reporting. We have a lack of segregation of duties, and a lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected. The Company is working to change internal controls to address material weaknesses and adding additional employees as part of a plan to discuss with FINRA.

 

Changes in Internal Control over Financial Reporting:

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2022 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

30

 

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

In the past, in the ordinary course of business, we actively pursued legal remedies to enforce our intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us.

 

Item 1A. Risk Factors

 

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable.

 

Item 5. Other Information.

 

None.

 

31

 

 

Item 6. Exhibits

 

31.1   Certification of Principal Executive Officer of AIkido Pharma Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Principal Financial Officer of AIkido Pharma Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Principal Executive Officer and Principal Financial Officer of AIkido Pharma Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

32

 

 

Signatures

 

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Aikido Pharma Inc.
  (Registrant)
     
Date: November 10, 2022 By: /s/ Anthony Hayes
    Anthony Hayes
    Chief Executive Officer
    (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

33

 

 

 

 

0.01 1.14 1.17 3.59 4702556 5272446 5283182 5344989 false --12-31 Q3 0000012239 5485096 0000012239 2022-01-01 2022-09-30 0000012239 2022-11-09 0000012239 2022-09-30 0000012239 2021-12-31 0000012239 us-gaap:SeriesDPreferredStockMember 2022-09-30 0000012239 us-gaap:SeriesDPreferredStockMember 2021-12-31 0000012239 aiki:SeriesD1PreferredStockMember 2022-09-30 0000012239 aiki:SeriesD1PreferredStockMember 2021-12-31 0000012239 2022-07-01 2022-09-30 0000012239 2021-07-01 2021-09-30 0000012239 2021-01-01 2021-09-30 0000012239 us-gaap:CommonStockMember 2022-06-30 0000012239 us-gaap:PreferredStockMember 2022-06-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0000012239 us-gaap:TreasuryStockMember 2022-06-30 0000012239 us-gaap:RetainedEarningsMember 2022-06-30 0000012239 2022-06-30 0000012239 us-gaap:TreasuryStockMember 2022-07-01 2022-09-30 0000012239 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0000012239 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0000012239 us-gaap:CommonStockMember 2022-09-30 0000012239 us-gaap:PreferredStockMember 2022-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0000012239 us-gaap:TreasuryStockMember 2022-09-30 0000012239 us-gaap:RetainedEarningsMember 2022-09-30 0000012239 us-gaap:CommonStockMember 2021-06-30 0000012239 us-gaap:PreferredStockMember 2021-06-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0000012239 us-gaap:TreasuryStockMember 2021-06-30 0000012239 us-gaap:RetainedEarningsMember 2021-06-30 0000012239 2021-06-30 0000012239 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0000012239 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0000012239 us-gaap:CommonStockMember 2021-09-30 0000012239 us-gaap:PreferredStockMember 2021-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0000012239 us-gaap:TreasuryStockMember 2021-09-30 0000012239 us-gaap:RetainedEarningsMember 2021-09-30 0000012239 2021-09-30 0000012239 aiki:SeriesORedeemableConvertiblePreferredStockMember 2021-12-31 0000012239 aiki:SeriesPRedeemableConvertiblePreferredStockMember 2021-12-31 0000012239 us-gaap:CommonStockMember 2021-12-31 0000012239 us-gaap:PreferredStockMember 2021-12-31 0000012239 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0000012239 us-gaap:TreasuryStockMember 2021-12-31 0000012239 us-gaap:RetainedEarningsMember 2021-12-31 0000012239 aiki:SeriesPRedeemableConvertiblePreferredStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:CommonStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:PreferredStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:TreasuryStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:RetainedEarningsMember 2022-01-01 2022-09-30 0000012239 aiki:SeriesORedeemableConvertiblePreferredStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-09-30 0000012239 us-gaap:CommonStockMember 2020-12-31 0000012239 us-gaap:PreferredStockMember 2020-12-31 0000012239 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0000012239 us-gaap:TreasuryStockMember 2020-12-31 0000012239 us-gaap:RetainedEarningsMember 2020-12-31 0000012239 2020-12-31 0000012239 us-gaap:PreferredStockMember 2021-01-01 2021-09-30 0000012239 us-gaap:RetainedEarningsMember 2021-01-01 2021-09-30 0000012239 us-gaap:CommonStockMember 2021-01-01 2021-09-30 0000012239 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-09-30 0000012239 us-gaap:TreasuryStockMember 2021-01-01 2021-09-30 0000012239 2022-09-01 2022-09-09 0000012239 aiki:InvestmentInHothTherapeuticsIncMember 2022-03-11 0000012239 aiki:InvestmentInHothTherapeuticsIncMember 2022-03-11 2022-03-11 0000012239 aiki:InvestmentInHothTherapeuticsIncMember 2022-08-17 0000012239 aiki:InvestmentInDatChatIncMember 2022-02-14 0000012239 aiki:InvestmentInDatChatIncMember 2022-02-14 2022-02-14 0000012239 aiki:VicinityMotorCorpMember 2021-10-01 2021-10-25 0000012239 aiki:VicinityMotorCorpMember 2021-10-25 0000012239 aiki:VicinityMotorCorpMember 2022-01-01 2022-09-30 0000012239 aiki:VicinityMotorCorpMember 2021-01-01 2021-12-31 0000012239 aiki:VicinityMotorCorpMember 2022-09-30 0000012239 aiki:HothTherapeuticsIncMember 2022-09-30 0000012239 aiki:HothTherapeuticsIncMember 2021-12-31 0000012239 aiki:DatChatMember 2022-09-30 0000012239 aiki:DatChatMember 2021-12-31 0000012239 aiki:VicinityMotorCorpMember 2022-09-30 0000012239 aiki:VicinityMotorCorpMember 2021-12-31 0000012239 aiki:HothTherapeuticsIncMember 2022-09-30 0000012239 aiki:HothTherapeuticsIncMember 2021-12-31 0000012239 aiki:VicinityMotorCorpMember 2021-12-31 0000012239 aiki:InvestmentInKernaHealthIncMember 2022-05-01 2022-05-31 0000012239 aiki:InvestmentInKernaHealthIncMember 2022-05-31 0000012239 aiki:InvestmentInKernaHealthIncMember 2022-09-30 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2022-03-01 2022-03-02 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2022-03-02 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2022-07-21 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2022-01-01 2022-09-30 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2022-09-30 0000012239 aiki:InvestmentInTevvaMotorsMember 2022-03-31 0000012239 aiki:InvestmentInTevvaMotorsMember 2022-01-01 2022-09-30 0000012239 aiki:InvestmentInTevvaMotorsMember 2022-09-30 0000012239 aiki:InvestmentInASPIsotopesMember 2022-08-01 2022-08-31 0000012239 aiki:InvestmentInASPIsotopesMember 2022-08-31 0000012239 aiki:InvestmentInASPIsotopesMember 2022-09-30 0000012239 aiki:InvestmentInAerocarveUSCorporationMember 2022-09-30 0000012239 aiki:InvestmentInQxpressMember 2022-01-20 2022-01-27 0000012239 aiki:InvestmentInQxpressMember 2022-01-27 0000012239 aiki:InvestmentInQxpressMember 2022-09-30 0000012239 aiki:InvestmentInMasterclassMember 2022-03-01 2022-03-31 0000012239 aiki:InvestmentInMasterclassMember 2022-03-31 0000012239 aiki:InvestmentInMasterclassMember 2022-09-30 0000012239 aiki:InvestmentInKrakenMember 2022-03-01 2022-03-31 0000012239 aiki:InvestmentInKrakenMember 2022-03-31 0000012239 aiki:InvestmentInKrakenMember 2022-08-01 2022-08-31 0000012239 aiki:InvestmentInKrakenMember 2022-08-31 0000012239 aiki:InvestmentInKrakenMember 2022-09-30 0000012239 aiki:InvestmentInEpicGamesMember 2022-03-15 2022-03-22 0000012239 aiki:InvestmentInEpicGamesMember 2022-03-22 0000012239 2022-04-30 0000012239 aiki:InvestmentInEpicGamesMember 2022-09-30 0000012239 aiki:InvestmentInTesspayMember 2022-03-16 2022-03-23 0000012239 aiki:InvestmentInTesspayMember 2022-03-23 0000012239 aiki:InvestmentInTesspayMember 2022-09-30 0000012239 aiki:InvestmentInTesspayMember 2022-01-01 2022-09-30 0000012239 aiki:SpaceXSecuritiesPurchaseAgreementMember 2022-03-01 2022-03-30 0000012239 aiki:InvestmentInSpaceXMember 2022-09-30 0000012239 aiki:InvestmentInDatabricksMember 2022-03-18 2022-03-25 0000012239 aiki:InvestmentInDatabricksMember 2022-03-25 0000012239 aiki:InvestmentInDatabricksMember 2022-09-30 0000012239 aiki:InvestmentInDiscordIncMember 2022-05-01 2022-05-31 0000012239 aiki:InvestmentInDiscordIncMember 2022-05-31 0000012239 aiki:InvestmentInDiscordIncMember 2022-09-30 0000012239 aiki:InvestmentInThrasioLLCMember 2022-04-01 2022-04-30 0000012239 aiki:InvestmentInThrasioLLCMember 2022-04-30 0000012239 aiki:InvestmentInThrasioLLCMember 2022-09-30 0000012239 aiki:InvestmentInAutomationAnywhereIncMember 2022-04-01 2022-04-30 0000012239 aiki:InvestmentInAutomationAnywhereIncMember 2022-04-30 0000012239 aiki:InvestmentInAutomationAnywhereIncMember 2022-09-30 0000012239 aiki:InvestmentInAndurilIndustriesIncMember 2022-04-01 2022-04-30 0000012239 aiki:InvestmentInAndurilIndustriesIncMember 2022-04-30 0000012239 aiki:InvestmentInAndurilIndustriesIncMember 2022-09-30 0000012239 aiki:InvestmentInKernaHealthIncMember 2021-12-31 0000012239 aiki:InvestmentInKayaHoldingCorpMember 2021-12-31 0000012239 aiki:InvestmentInTevvaMotorsMember 2021-12-31 0000012239 aiki:InvestmentInASPIsotopesMember 2021-12-31 0000012239 aiki:InvestmentInAerocarveUSCorporationMember 2021-12-31 0000012239 aiki:InvestmentInQxpressMember 2021-12-31 0000012239 aiki:InvestmentInMasterclassMember 2021-12-31 0000012239 aiki:InvestmentInKrakenMember 2021-12-31 0000012239 aiki:InvestmentInEpicGamesMember 2021-12-31 0000012239 aiki:InvestmentInTesspayMember 2021-12-31 0000012239 aiki:InvestmentInSpaceXMember 2021-12-31 0000012239 aiki:InvestmentInDatabricksMember 2021-12-31 0000012239 aiki:InvestmentInDiscordMember 2022-09-30 0000012239 aiki:InvestmentInDiscordMember 2021-12-31 0000012239 aiki:InvestmentInThrasioMember 2022-09-30 0000012239 aiki:InvestmentInThrasioMember 2021-12-31 0000012239 aiki:InvestmentInAutomationAnywhere476Member 2022-09-30 0000012239 aiki:InvestmentInAutomationAnywhere476Member 2021-12-31 0000012239 aiki:InvestmentInAndurilMember 2022-09-30 0000012239 aiki:InvestmentInAndurilMember 2021-12-31 0000012239 aiki:MrJeffreyCooperMember 2022-09-30 0000012239 aiki:RaefanIndustriesLLCMember 2022-09-30 0000012239 aiki:SlingerBagIncMember 2022-09-30 0000012239 2022-06-17 0000012239 aiki:NanoConvertibleNoteMember aiki:NanoInnovationsIncMember 2022-09-30 0000012239 aiki:KayaNowPromissoryNoteMember 2022-04-01 2022-04-05 0000012239 aiki:KayaNowPromissoryNoteMember 2022-04-05 0000012239 aiki:KayaNowPromissoryNoteMember 2022-07-21 0000012239 aiki:KayaNowPromissoryNoteMember 2022-09-30 0000012239 aiki:RoboticsPromissoryNoteMember 2022-03-20 2022-04-02 0000012239 aiki:RoboticsPromissoryNoteMember 2022-04-02 0000012239 aiki:RoboticsPromissoryNoteMember 2022-09-30 0000012239 aiki:NanoInnovationsIncMember 2022-09-30 0000012239 aiki:ConvergentInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:ConvergentInvestmentMember 2022-09-30 0000012239 aiki:NanoInnovationsIncInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:NanoInnovationsIncInvestmentMember 2022-09-30 0000012239 aiki:MrJeffreyCooperInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:MrJeffreyCooperInvestmentMember 2022-09-30 0000012239 aiki:RaefanIndustriesLLCInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:RaefanIndustriesLLCInvestmentMember 2022-09-30 0000012239 aiki:KayaNowInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:KayaNowInvestmentMember 2022-09-30 0000012239 aiki:AmericanInnovativeRoboticsInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:AmericanInnovativeRoboticsInvestmentMember 2022-09-30 0000012239 aiki:MrJeffreyCooperInvestmentMember 2022-09-30 0000012239 aiki:RaefanIndustriesLLCMember 2022-09-30 0000012239 aiki:SlingerBagIncInvestmentMember 2022-06-17 0000012239 aiki:ConnexaSportsTechnologiesIncMember 2022-06-17 0000012239 aiki:SlingerBagIncInvestmentMember 2022-09-30 0000012239 aiki:NanoInnovationsIncMember 2022-09-30 0000012239 2022-07-01 2022-07-21 0000012239 aiki:KayaNowInvestmentMember 2022-01-01 2022-09-30 0000012239 aiki:AmericanInnovativeRoboticsInvestmentMember 2022-01-01 2022-09-30 0000012239 us-gaap:FairValueInputsLevel1Member 2022-09-30 0000012239 us-gaap:FairValueInputsLevel2Member 2022-09-30 0000012239 us-gaap:FairValueInputsLevel3Member 2022-09-30 0000012239 us-gaap:FairValueInputsLevel1Member 2021-12-31 0000012239 us-gaap:FairValueInputsLevel2Member 2021-12-31 0000012239 us-gaap:FairValueInputsLevel3Member 2021-12-31 0000012239 us-gaap:ConvertibleDebtSecuritiesMember 2022-01-01 2022-09-30 0000012239 us-gaap:ConvertibleDebtSecuritiesMember 2021-01-01 2021-09-30 0000012239 us-gaap:WarrantMember 2022-01-01 2022-09-30 0000012239 us-gaap:WarrantMember 2021-01-01 2021-09-30 0000012239 us-gaap:EmployeeStockMember 2022-01-01 2022-09-30 0000012239 us-gaap:EmployeeStockMember 2021-01-01 2021-09-30 0000012239 aiki:SeriesORedeemableConvertiblePreferredStockMember 2022-02-24 0000012239 aiki:SeriesPRedeemableConvertiblePreferredStockMember 2022-02-24 0000012239 aiki:SeriesOPreferredStockMember 2022-02-01 2022-02-24 0000012239 aiki:SeriesOPreferredStockMember 2022-02-24 0000012239 us-gaap:PreferredStockMember 2022-02-24 0000012239 us-gaap:PreferredStockMember 2022-02-01 2022-02-24 0000012239 aiki:SeriesPPreferredStockMember 2022-02-24 0000012239 aiki:SeriesPPreferredStockMember 2022-02-01 2022-02-24 0000012239 2022-02-24 0000012239 2022-01-01 2022-06-30 0000012239 aiki:CBMBiopharmaIncMember 2020-06-01 2020-06-05 0000012239 aiki:CBMBiopharmaIncMember 2022-09-30 0000012239 aiki:CBMBiopharmaIncMember 2020-06-05 0000012239 2022-01-01 0000012239 us-gaap:WarrantMember 2021-12-31 0000012239 us-gaap:WarrantMember 2022-01-01 2022-09-30 0000012239 us-gaap:WarrantMember 2022-09-30 0000012239 2021-12-01 2021-12-01 0000012239 2022-09-01 2022-09-23 xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure
Alkido Pharma (NASDAQ:AIKI)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more Alkido Pharma Charts.
Alkido Pharma (NASDAQ:AIKI)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more Alkido Pharma Charts.