What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-25 compared with 2020-02-03 · 439 added, 751 removed, 300 unchanged (80% of the section changed)

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to Financial Statements Page

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018

Consolidated Statements of Changes in Stockholders’

of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2020 and 2019

Statements of Operations for the Years Ended December 31, 2020 and 2019

Statements of Changes in Stockholders’

Equity for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018

Notes to the Consolidated Financial Statements

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Statements of Cash Flows for the Years Ended December 31, 2020 and 2019

to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of

on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Spherix Incorporated and Subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related

consolidated statements of operations, stockholders’

equity and cash flows for each of the two years in the period ended

December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019

and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019,

in conformity with accounting principles generally accepted in the United States of America.

Paragraph –

Going Concern

The accompanying financial statements have

been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has historically

incurred losses from operations and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions

raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to

these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

have audited the accompanying consolidated balance sheets of AIkido Pharma Inc.

(the “Company”) as

of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’

equity and cash flows for

each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years

in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matters are matters arising from the current

period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

have served as the Company’s auditor since 2013.

INCORPORATED AND SUBSIDIARIES

Balance Sheets

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Current assets

Cash and cash equivalents

Marketable securities

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Total current assets

Property and equipment, net

LIABILITIES AND STOCKHOLDERS’

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Accrued salaries and benefits

Warrant liabilities

Payable to DatChat

Total current liabilities

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Stockholders’

4,725 shares issued and outstanding at December 31, 2019 and 2018;

Preferred stock, $.0001 par value, 50,000,000 Authorized

5,000,000 shares designated;

4,725 shares issued and

outstanding at December 31, 2020 and 2019;

liquidation value of $0.0001 per share

834 shares issued and outstanding at December 31, 2019 and 2018;

5,000,000 shares designated;

834 shares issued and

outstanding at December 31, 2020 and 2019;

liquidation value of $0.0001 per share

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accompanying notes are an integral part of these consolidated financial statements.

INCORPORATED AND SUBSIDIARIES

Statements of Operations

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Operating costs and expenses

Amortization of patent portfolio

Selling, general and administrative

General and administrative

Research and development

Impairment of intangible assets

Research and development - license acquired

Total operating expenses

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Other income (expenses)

Other income (expenses), net

Gains on marketable securities

Change in fair value of investment

Change in fair value of warrant liabilities

Total other income

Net (loss) income

Net (loss) income per share attributable to common stockholders, basic and diluted

Weighted average number of common shares outstanding

Total other (expenses) income

Net loss per share, basic and diluted

Basic and Diluted

Weighted average number of shares outstanding, basic and diluted

Basic and Diluted

accompanying notes are an integral part of these consolidated financial statements.

INCORPORATED AND SUBSIDIARIES

Statements of Changes in Stockholders’

in thousands)

Preferred Stock

Treasury Stock

Total Stockholders’

Balance at January 1, 2018

Issuance common stock in equity raise, net of offering cost

Stockholders’

at December 31, 2018

Issuance of common stock

and prefunded common stock warrants, net of offering cost

Issuance of common stock,

net of offering cost / At-the-market offering

Issuance of common stock

for research and development - license acquired

Exercise of prefunded

common stock warrants

Warrant exercise

Exchange of common shares

for prefunded warrants

Distribution of Hoth

Fractional shares adjusted

for reverse split

Stock-based compensation

Cumulative effect of the changes related to adoption of ASC 606

Balance at December

Issuance of common stock and prefunded common stock warrants, net of offering cost

Issuance of common stock, net of offering cost / At-the-market offering

Issuance of common stock for research and development - license acquired

Exercise of prefunded common stock warrants

of common stock, common warrants and prefunded warrants, net of offering cost (net of offering costs of $941)

of common stock, net of offering cost (net of offering costs of $1,905)

Common warrant and prefunded

warrant exercise

Exchange of common shares for prefunded warrants

Distribution of Hoth common stock

Fractional shares adjusted for reverse split

Distribution of Hoth

Stock-based compensation

Balance at December 31, 2019

at December 31, 2020

accompanying notes are an integral part of these consolidated financial statements.

INCORPORATED AND SUBSIDIARIES

Statements of Cash Flows

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Cash flows from operating activities

Net (loss) income

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of patent portfolio

Change in fair value of investment

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Stock-based compensation

Depreciation expense

Realized loss on marketable securities

Realized (gain) loss on marketable securities

Unrealized loss (gain) on marketable securities

Impairment of intangible assets

Changes in assets and liabilities:

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Payable to DatChat

Accrued lease liabilities

Net cash used in operating activities

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Sale of marketable securities

Sale of Hoth common shares

Purchase of investments at fair value

Release of deposit

Purchase of research and development licenses

Purchase of property and equipment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Proceeds from issuance common stock, common warrants and prefunded warrants, net of offering cost

Proceeds from issuance common stock, net of offering cost

Proceeds from issuance common stock/ At-the-market offering

Offering costs fro the issuance of common stock / At-the-market offering

Offering costs from the issuance of common stock / At-the-market offering

Proceeds from exercise of warrants

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Net increase in cash

Cash, beginning of period

Cash, end of period

Non-cash investing and financing activities

Investment in DatChat

Investment in Mellow Scooters

Distribution of Hoth common stock

accompanying notes are an integral part of these consolidated financial statements.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Organization and Description of Business

and Description of Business

Incorporated (the “Company”) is technology development company committed to the fostering of innovative ideas.

Company was incorporated in 1967 in the State of Delaware as a scientific research company, and for much of its history pursued

drug development including through Phase III clinical studies which were discontinued.

Company was formerly focused on commercializing and monetizing patents by acquiring IP from patent holders in order to maximize

the value of the patent holdings by conducting and managing a licensing campaign, or through the settlement and litigation of

March 2016, the Company has received limited funds from its intellectual property monetization.

In addition to its patent monetization

efforts, since the fourth quarter of 2017, the Company has been transitioning to focus its efforts as a technology and biotechnology

development company.

These efforts have focused on biotechnology research and blockchain technology research.

The Company’s

biotechnology research development includes investments in:

(i) Hoth Therapeutics Inc.

(“Hoth”), a development stage

biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis,

also known as eczema, (ii) DatChat, Inc.

(“DatChat”), a privately held personal privacy platform focused on encrypted

communication, internet security and digital rights management, and (iii) the acquisition of assets of CBM BioPharma, Inc.

(“CBM”),

a pharmaceutical company focusing on the development of cancer treatments.

a result of the Company’s biotechnology research development and associated investments and acquisitions, our business portfolio

now focuses on the treatment of three different cancers, including pancreatic cancer, acute myeloid leukemia (AML) and acute lymphoblastic

leukemia (ALL).

Our AML and ALL compounds, developed at the Wake Forest University, are next generation targeted therapeutics

designed to overcome multiple resistance mechanisms observed with the current standard of care.

DHA-dFdC, our pancreatic drug

developed at the University of Texas at Austin, is a new compound poised to become the next generation of chemotherapy treatment

for advanced pancreatic cancer.

DHA-dFdC overcomes tumor cell resistance to current chemotherapeutic drugs and is well tolerated

in preclinical toxicity tests.

Preclinical studies have also indicated that DHA-dFdC inhibits pancreatic cancer cell growth (up

to 100,000-fold more potent that gemcitabine, a current standard therapy), has documented efficacy against pancreatic tumors in

a clinically relevant transgenic mouse model and has demonstrated activities against other cancers, including leukemia, lung and

In addition, we are constantly seeking to grow our pipe to treat unmet medical needs in oncology.

AIkido Pharma Inc., 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.

The Company’s pipeline consists of patented technology from

leading universities and researchers.

The Company is currently in the process of developing its innovative therapeutic drug pipeline through

strong partnerships with world renowned educational institutions, including the University of Texas at Austin, the University of Maryland,

Baltimore and Wake Forest University.

The Company’s oncology therapeutics include prospective treatments for pancreatic cancer,

acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL).

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.

As a result of the Company’s biotechnology

research and development and associated investments and acquisitions, its business portfolio now focuses on the treatment of three different

cancers and multiple types of viral infections.

The Company’s pancreatic drug candidate, DHA-dFdC, developed at and licensed from

the University of Texas at Austin, is a new compound that it hopes will become the next generation of chemotherapy treatment for advanced

pancreatic cancer.

DHA-dFdC overcomes tumor cell resistance to current chemotherapeutic drugs and is well tolerated in preclinical toxicity

Preclinical studies have also indicated that DHA-dFdC inhibits pancreatic cancer cell growth (up to 100,000-fold more potent that

gemcitabine, a current standard therapy), targets pancreatic tumors and has demonstrated activities against other cancers, including leukemia,

lung and melanoma.

The Company’s AML and ALL compound, developed at the Wake Forest University, is a targeted therapeutic designed

to overcome multiple resistance mechanisms observed with the current standard of care.

The Company’s broad-spectrum antiviral platform

was developed at the University of Maryland Baltimore (“UMB”), which granted the Company an exclusive worldwide Master License

Agreement (MLA”) to technology covered by three separate patent applications.

The licensed technology comprises broadly acting pan-viral

inhibitory compounds targeting multiple viral pathogens.

The technology was invented by UMB scientists Drs.

Matthew Frieman, Alexander

MacKerell and Stuart Watson.

The Company has also executed a Sponsored Research Agreement with UMB to support the development of the technology

under the direction of these inventors at UMB.

May 10, 2019, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of one-for-4.25

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2019 (the “Certificate of Amendment”).

The Reverse Stock Split was effective on May 10, 2019 (the “Effective

Date”).

Unless the context otherwise requires, all references in this report to shares of the Company’s common

stock, including prices per share of its common stock, reflect the Reverse Stock Split.

Fractional shares were not

issued, and the final number of shares were rounded up to the next whole share.

Asset Acquisition

October 10, 2018, the Company entered into that certain Agreement and Plan of Merger, dated as of October 10, 2018, by and among

the Company, Spherix Delaware Merger Sub Inc., a Delaware corporation, Scott Wilfong, as the CBM stockholder

representative, and CBM, a Delaware corporation and a pharmaceutical company focused on the development of cancer treatments,

pursuant to which all shares of capital stock of CBM were be converted into the right to receive an aggregate of 15,000,000 shares

of the Company’s common stock, with CBM continuing as the surviving corporation in the merger.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

15, 2019, the Company restructured the terms of the CBM merger and chose to proceed with purchasing substantially all of the assets,

properties and rights (the “Acquisition”) of CBM.

On December 5, 2019, the Company completed the Acquisition of CBM,

pursuant to that certain Asset Purchase Agreement, dated as of May 15, 2019, by and between the Company and CBM, as amended by

that certain Amendment No.

1 to Asset Purchase Agreement, dated as of May 30, 2019, and Amendment No.

2 to Asset Purchase Agreement,

dated as of December 5, 2019 (collectively, the “CBM Purchase Agreement”).

As consideration for the Acquisition,

the Company agreed to pay to CBM consideration consisting of (i) $1,000,000 in cash (the “Cash Consideration”) and

(ii) an aggregate of 1,939,058 shares (the “Stock Consideration”) of the Company’s common stock valued at a

price per share of $3.61.

The Cash Consideration will become payable to CBM upon the consummation by the Company of the first

sale of the Company’s common stock or any other equity or equity-linked financing of the Company to investors in or more

transactions, after the date of the CBM Purchase Agreement, for which the Company receives aggregate gross proceeds of greater

than $2,000,000 (a “Qualified Financing”).

Upon the consummation of the Qualified

Financing, the Company shall retain the first $2,000,000 of the gross proceeds from the Qualified Financing and CBM shall receive

100% of the gross proceeds of such Qualified Financing received by the Company in excess of $2,000,000 as well as the gross proceeds

of any subsequent equity financings by the Company until the Cash Consideration amount is satisfied in full.

Additionally, at

closing, 7% or 135,734 shares of common stock of the Stock Consideration was deposited with VStock (the “Escrow Shares”),

the Company’s transfer agent, to be held in escrow for six months post-closing to satisfy certain indemnification obligations

pursuant to the terms and conditions of the CBM Purchase Agreement, and 93% or 1,803,324 shares of the Stock Consideration was

issued and delivered to CBM.

December 5, 2019, the Company recorded the issuance of Stock Consideration at fair value, based upon the closing stock price per

share of $1.11 as of December 5, 2019.

The issuance of Escrow Shares is considered probable as of December 31, 2019.

Consideration was not considered probable as of December 31, 2019 as such consideration is payable on a Qualified Financing.

acquisition of CBM’s intellectual property had not received regulatory approval, the $2.5 million purchase price paid for

CBM was immediately expensed in the Company’s statement of operations as research and development –

intellectual property

Going Concern and Financial Condition

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

current cash and cash equivalents on hand from the Company’s past debt and equity offerings,

additional funds raised through the sale of additional securities in the future,

additional liquidity through credit facilities or other debt arrangements, and

revenue from its patent portfolios, license fees and new business ventures.

Company’s ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow

to meet its obligations on a timely basis.

The Company’s business will require significant amounts of capital

to sustain operations and make the investments it needs to execute its longer-term business plan to support new technologies

and help advance innovation.

Absent generation of sufficient revenue from the execution of the Company’s long-term

business plan, the Company will need to obtain additional debt or equity financing, especially if the Company experiences downturns

in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense

levels resulting from being a publicly-traded company or operations.

If the Company attempts to obtain additional debt

or equity financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at

Company plans to pursue its plans regarding research and development which will require resources beyond those currently available,

including third party capital.

During this time, the Company does not expect to generate revenue as there is substantial doubt

about the Company’s ability to continue as a going concern within one year from the date of this filing.

The consolidated

financial statements have been prepared assuming that the Company will continue as a going concern, and do not include any

adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification

of liabilities that may result from the outcome of this uncertainty.

Unless the context otherwise requires, all references in this report to shares of the Company’s common stock,

including prices per share of its common stock, reflect the Reverse Stock Split.

Fractional shares were not issued, and the final

number of shares were rounded up to the next whole share.

and Financial Condition

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 our business strategy, it intends to finance our activities through:

managing current cash on hand from our past debt and equity offerings;

seeking additional funds

raised through the sale of additional securities in the future;

seeking additional liquidity

through credit facilities or other debt arrangements;

increasing revenue from

its patent portfolios, license fees and new business ventures.

During the first quarter of 2021, the Company consummated a

public offering of 53,905,927 shares of common stock (including the underwriter overallotment).

The Company received net proceeds

of approximately $78.2 million after deducting underwriting discounts and commissions and estimated offering expenses payable by

Therefore, the Company has adequate cash to fund its operations for at least the next twelve months.

is currently evaluating 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 financial statements.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

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The Company’s significant estimates and

assumptions include stock-based compensation, the valuation of derivative liabilities, the valuation of investments and the valuation

assumptions include stock-based compensation, the valuation of investments and the valuation

allowance related to the Company’s deferred tax assets.

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factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein.

Concentration

Company maintains cash balances at two financial institutions in checking accounts and money market accounts.

considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

The Company maintains cash balances at two financial

institutions in checking accounts and money market accounts.

The Company considers all highly liquid investments with original maturities

of three months or less when purchased to be cash equivalents.

The Company has not experienced any losses in such accounts.

no cash equivalents as of December 31, 2020 and 2019.

securities are classified as trading and are carried at fair value.

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bonds and highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices.

Company accounts for its investment in Hoth at fair value (based upon the closing price on the Nasdaq Capital Market).

In connection

with the consummation of the initial public offering of Hoth, the Company entered into a lock-up agreement until February

Therefore, the Company considers its investment in Hoth to be long term.

and Development –

Intellectual Property Acquired

Company concluded that its acquisition of CBM, completed on December 5, 2019, should be accounted for as an asset acquisition

rather than a business combination under Accounting Standards Codification (ASC) 805, Business Combinations.

The acquisition of

CBM was accounted for as an asset acquisition because substantially all the fair value of the assets being acquired are concentrated

in a group of similar assets.

Furthermore, the acquired assets did not have outputs or employees.

The assets acquired by the Company

included a license, other associated intellectual property, documentation and records, and related materials.

Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders’

Company recognizes revenue under ASC 606, Revenue from Contracts with Customers .

The core principle of the new revenue

standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount

that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following

five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services

in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition

of a “distinct”

good or service (or bundle of goods or services) if both of the following criteria are met:

customer can benefit from the good or service either on its own or together with other resources that are readily available

to the customer (i.e., the good or service is capable of being distinct).

entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the

contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods

or services is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised

goods or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable

amounts, or both.

When determining the transaction price, an entity must consider the effects of all of the following:

consideration

estimates of variable consideration

existence of a significant financing component in the contract

consideration

Consideration

payable to a customer

consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount

of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently

transaction price is allocated to each performance obligation on a relative standalone selling price basis.

transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point

in time or over time as appropriate.

of December 31, 2019 and 2018, there were no contract assets or liabilities associated with the Company’s settlement and

licensing agreements.

During the year ended December 31, 2019 and 2018, the Company only generated $9,000 and $28,000 of revenue,

respectively.

and Development

and development costs, including acquired in-process research and development expenses for which there is no alternative future

use, are expensed as incurred.

Advance payments for goods and services that will be used in future research and development activities

are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance

with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”).

The Company classifies as equity

any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement

or settlement in its own shares (physical settlement or net-share settlement).

The Company classifies as assets or

liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an

event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement

or settlement in shares (physical settlement or net-share settlement).

In addition, Under ASC 815, registered common stock warrants

that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement

are accounted for as derivative liabilities.

The Company classifies these derivative warrant liabilities on the consolidated

balance sheet as a current liability.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such

instruments met the criteria for liability classification.

Accordingly, the Company classified the warrants as a liability at

their fair value and adjusts the instruments to fair value at each reporting period.

This liability is subject to re-measurement

at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change

in the fair value of warrant liabilities”

in the consolidated statements of operations.

The fair value of the warrants has

been estimated using a Black-Scholes valuation model.

The Company classifies as equity any contracts

that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement

in its own shares (physical settlement or net-share settlement).

Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award.

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market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant.

options generally vest over a one- to five-year period.

These options

generally vest over a one- to five-year period.

Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used

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in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by Accounting Standards Update

(“ASU”) 2016-09.

Ultimately, the actual expenses recognized over the vesting period will be for those shares that

Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a

significant history of forfeitures.

Company accounts for forfeitures as they occur.

Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “

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of all available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Issued Accounting Standards

Adopted Accounting Standards

August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, “

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financial statements or related disclosures.

December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standards Board (“FASB”)

issued ASU No.

2019-12, “

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

(“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance

to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the impact of this standard

on its consolidated financial statements and related disclosures.

Adopted Accounting Standards

May 2014, the FASB issued ASU No.

2014-09, “

Revenue from Contracts with Customers (Topic 606)”

(ASU 2014-09)

as modified by ASU No.

2015-14, “

Revenue from Contracts with Customers (Topic 606):

Deferral of the Effective Date,”

ASU 2016-08, “

Revenue from Contracts with Customers (Topic 606):

Principal versus Agent Considerations (Reporting

Revenue Gross versus Net),”

2016-10, “

Revenue from Contracts with Customers (Topic 606):

Performance Obligations and Licensing ,”

2016-12, “

Revenue from Contracts with Customers (Topic

Narrow-Scope Improvements and Practical Expedients .”

The revenue recognition principle in ASU 2014-09 is that

an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration

to which the entity expects to be entitled in exchange for those goods or services.

In addition, new and enhanced disclosures

will be required.

Companies may adopt the new standard either using the full retrospective approach, a modified retrospective

approach with practical expedients, or a cumulative effect upon adoption approach.

The Company adopted the new standard effective

January 1, 2018, using the modified retrospective approach.

The Company has determined that its licenses represent functional

intellectual property under Topic 606.

Therefore, revenue is recognized at the point in time when the customer has the right to

use the intellectual property rather than over the license period.

Accordingly, the Company’s deferred revenue related to

its licenses was eliminated and accumulated deficit as of January 1, 2018 was decreased by approximately $3.2 million so that

the Company will not recognize revenue on earnings statements in the future as to its license.

Absent the adoption of ASC 606,

the Company would have recorded approximately $1.0 million of deferred revenue for the year ended December 31, 2018.

January 2016, the FASB issued ASU No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities .

2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income;

the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment

to identify impairment;

eliminates the requirement for public business entities to disclose the methods and significant assumptions

used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance

requires public business entities to use the exit price notion when measuring the fair value of financial instruments for

disclosure purposes;

requires an entity to present separately in other comprehensive income the portion of the total change in

the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure

the liability at fair value in accordance with the fair value option for financial instruments;

requires separate presentation

of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the

accompanying notes to the financial statements;

and clarifies that an entity should evaluate the need for a valuation allowance

on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within

those fiscal years.

The Company adopted the provisions of ASU 2016-01 on January 1, 2018.

The adoption of this update did not

impact the Company’s consolidated financial statements and related disclosures.

February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , which supersedes FASB ASC Topic 840, Leases (Topic

840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases

based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will

determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term

of the lease, respectively.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with

a term of greater than twelve months regardless of classification.

Leases with a term of twelve months or less will be accounted

for similar to existing guidance for operating leases.

The standard is effective for annual and interim periods beginning after

December 15, 2018, with early adoption permitted upon issuance.

The Company does not have any long-term leases, therefore the

adoption of this standard on January 1, 2019 did not have a material impact on the Company’s consolidated financial

position and results of operations.

May 2017, the Financial Accounting Standards Board (the FASB) issued ASU 2017-09, Compensation-Stock Compensation (Topic 718):

Scope of Modification Accounting , (ASU 2017-09).

ASU 2017-09 provides clarity and reduces both (1) diversity in practice and

(2) cost and complexity when applying the guidance in Topic 718, to a change to the terms or conditions of a share-based payment

The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date.

ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

The Company adopted

ASU 2017-09 on January 1, 2018.

The adoption of this ASU did not have a material impact on the Company’s financial position

or results of operations.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

In July 2017, the FASB issued ASU 2017-11,

Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815):

Accounting for Certain Financial Instruments with Down Round Features;

Replacement of the Indefinite Deferral for Mandatorily

Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with

a Scope Exception , (ASU 2017-11).

Part I of this update addresses the complexity of accounting for certain financial instruments

with down round features.

Down round features are features of certain equity-linked instruments (or embedded features) that result

in the strike price being reduced on the basis of the pricing of future equity offerings.

Current accounting guidance creates cost

and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features

that require fair value measurement of the entire instrument or conversion option.

Part II of this update addresses

the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content

in the FASB Accounting Standards Codification.

This pending content is the result of the indefinite deferral of accounting requirements

about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling

The amendments in Part II of this update do not have an accounting effect.

This ASU is effective for fiscal years, and

interim periods within those years, beginning after December 15, 2018.

The Company adopted ASU 2017-11 on January 1, 2019 and the

adoption did not have an impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock

Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”).

ASU 2018-07 simplifies

several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic

718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees.

ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim

periods within that fiscal year.

The Company adopted ASU 2018-07 on January 1, 2019 and the adoption did not have an impact on

the Company’s consolidated financial statements.

Simplifying the Accounting for Income Taxes (“ASU 2019-12”),

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to

the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance

is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption

The Company adopted ASU No.

2019-12 effective January 1, 2021, and the adoption did not have a material impact on its

consolidated financial statements.

Investments in Marketable Securities

realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the year ended

December 31, 2019 and 2018, which are recorded as a component of other (expenses) income on the consolidated statements of

operations, are as follows ($ in thousands):

realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the year ended December

31, 2020 and 2019, which are recorded as a component of other (expenses) income on the consolidated statements of operations (excluding

a $70,000 distribution to CBM shareholders during the year ended December 31, 2020), are as follows ($ in thousands):

For the Years Ended

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Investment in Hoth Therapeutics, Inc.

is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications

such as atopic dermatitis, also known as eczema.

Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences,

(“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for

the treatment of eczema.

is a clinical stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications

such as atopic dermatitis, also known as eczema, skin toxicities associated with cancer therapy, chronic wounds, psoriasis, asthma,

acne, and pneumonia.

February 20, 2019, Hoth closed its initial public offering (the “IPO”) at an initial offering price to the public

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did not distribute fractional shares of Hoth common stock, and any fractional shares were rounded down to the nearest whole share.

February 23, 2020, the Board of Directors approved a distribution to the Company’s stockholders of up to 70,000 Hoth Shares

held by the Company.

Accordingly, each of the Company’s stockholders received one (1) share of Hoth common stock for every

five hundred (500) shares of Company common stock held as of 5 p.m.

Eastern Time on April 30, 2020, the dividend record date.

The Company did not distribute fractional shares of Hoth common stock, and any fractional shares were rounded down to the nearest

The final distribution amount of Hoth Shares is 69,815.

The fair value of this distribution is approximately $0.3

million on the dividend record date.

May 6, 2020, the Company entered into that certain Stock Transfer Agreement, by and between the Company and a purchaser, and sold

400,000 shares of Hoth common stock for net proceeds of approximately $0.5 million.

following summarizes the Company investment in Hoth:

Security Name

Shares Owned as of December 31,

Fair value per Share as of December 31,

Fair value as of December 31,

per Share as of

(in thousands)

fair value of Hoth common shares as of December 31, 2019 was based on the closing price of $6.19 reported on The NASDAQ Capital

Market as of December 31, 2019.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Security Name

per Share as of

(in thousands)

fair value of Hoth common shares as of December 31, 2020 and 2019 was based on the closing price of $2.37 and $6.19, respectively,

reported on The NASDAQ Capital Market as of December 31, 2020 and 2019.

Investment in Others

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in accordance with ASU 2016-01.

December 5, 2019, in connection with the acquisition of the assets of CBM, the Company wrote-off its investment to research

and development expense as the original purchase of 50,000 CBM shares was a component of the transaction contemplated with

balance of Company’s other investments is $25,000 as of December 31, 2019.

Such investments were recorded on adjusted cost

method measurement alternative in accordance with ASU 2016-01.

December 5, 2019, in connection with the acquisition of the assets of CBM, the Company wrote-off its investment to research and

development expense as the original purchase of 50,000 CBM shares was a component of the transaction contemplated with CBM.

the year ended 2020, the Company wrote-off its investment of $25,000 in The BitDaily.

balance of Company’s other investments was $0 and $25,000 as of December 31, 2020 and 2019, respectively.

CBM Asset Acquisition

October 10, 2018, the Company entered into that certain Agreement and Plan of Merger, dated as of October 10, 2018, by and among

the Company, Spherix Delaware Merger Sub Inc., a Delaware corporation, Scott Wilfong, as the CBM stockholder representative, and

CBM, a Delaware corporation and a pharmaceutical company focused on the development of cancer treatments, pursuant to which all

shares of capital stock of CBM were be converted into the right to receive an aggregate of 15,000,000 shares of the Company’s

common stock, with CBM continuing as the surviving corporation in the merger.

May 15, 2019, the Company restructured the terms of the CBM merger and chose to proceed with purchasing substantially all of the

assets, properties and rights (the “Acquisition”) of CBM.

On December 5, 2019, the Company completed the Acquisition

of CBM, pursuant to that certain Asset Purchase Agreement, dated as of May 15, 2019, by and between the Company and CBM, as amended

by that certain Amendment No.

1 to Asset Purchase Agreement, dated as of May 30, 2019, and Amendment No.

2 to Asset Purchase Agreement,

dated as of December 5, 2019 (collectively, the “CBM Purchase Agreement”).

As consideration for the Acquisition, the

Company agreed to pay to CBM consideration consisting of (i) $1,000,000 in cash (the “Cash Consideration”) and (ii)

an aggregate of 1,939,058 shares (the “Stock Consideration”) of the Company’s common stock valued at a price

per share of $3.61.

The Cash Consideration will become payable to CBM upon the consummation by the Company of the first sale of

the Company’s common stock or any other equity or equity-linked financing of the Company to investors in or more transactions,

after the date of the CBM Purchase Agreement, for which the Company receives aggregate gross proceeds of greater than $2,000,000

(a “Qualified Financing”).

the consummation of the Qualified Financing, the Company shall retain the first $2,000,000 of the gross proceeds from the Qualified

Financing and CBM shall receive 100% of the gross proceeds of such Qualified Financing received by the Company in excess of $2,000,000

as well as the gross proceeds of any subsequent equity financings by the Company until the Cash Consideration amount is satisfied

Additionally, at closing, 7% or 135,734 shares of common stock of the Stock Consideration was deposited with VStock (the

“Escrow Shares”), the Company’s transfer agent, to be held in escrow for six months post-closing to satisfy

certain indemnification obligations pursuant to the terms and conditions of the CBM Purchase Agreement, and 93% or 1,803,324 shares

of the Stock Consideration was issued and delivered to CBM.

On December 5, 2019, the Company recorded the

issuance of Stock Consideration at fair value, based upon the closing stock price per share of $1.11 as of December 5, 2019.

of Escrow Shares was considered probable as of December 31, 2019.

The Cash Consideration was not considered probable as of December 31,

2019 as such consideration is payable on a Qualified Financing.

Because acquisition of CBM’s intellectual property had not received

regulatory approval, the $2.5 million purchase price paid for CBM was immediately expensed in the Company’s statement of operations

as research and development –

intellectual property acquired.

On March 9, 2020, the Company raised over $2.0 million of proceeds (see Note 10), therefore a payment of $1.0 million was due

to CBM under the CBM Purchase Agreement.

The Company recorded this Cash Consideration as a component of research and development

license acquired during the year ended December 31, 2020 the consolidated statements of operations.

Fair Value of Financial Assets and Liabilities

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.

Financial instruments, including cash, 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.

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

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Fair value measured at December 31, 2020

Total at December 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

Quoted prices in

active markets

Significant other

observable inputs

unobservable inputs

Marketable securities - mutual and exchange traded funds

1 unchanged sentence

Fair value measured at December 31, 2019

Total at December 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

Quoted prices in

active markets

Significant other

observable inputs

unobservable inputs

Marketable securities - mutual and exchange traded funds

Investments in Hoth

Fair value of warrant liabilities

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

2 Valuation Techniques

fair values of Level 2 marketable securities are determined using one or more quoted prices in markets that are not active or

for which all significant inputs are observable, either directly or indirectly.

3 Valuation Techniques

3 Valuation Techniques –

following table sets 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:

Fair Value of Level 3 investment

Beginning balance

Transfer of Hoth From Level 3 to Level 1 upon IPO

Change in fair value of Hoth

Ending balance

the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different

1 unchanged sentence

of fair value at the reporting date.

decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument by instrument basis

and applied to an entire instrument.

The net gains or losses, if any, on an investment for which the fair value option has been

elected, are recognized as change in fair value of investment in the Consolidated Statements of Operations.

summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the

Company’s valuation in Hoth that are categorized within Level 3 of the fair value hierarchy at the date of issuance and

as of December 31, 2018 is as follows:

Date of valuation

December 31, 2018

Risk-free interest rate

Expected volatility

Contractual life (in years)

investment in Hoth as of December 31, 2018 was valued using the PWERM (Probability Weighted Expected Return Method).

method, an analysis of future values of a company is performed for several likely scenarios.

These scenarios included both a high

and low range of values that were provided to Hoth by their investment bankers.

The price per share was $6.50 and $5.50, respectively.

The value is then discounted to the present using a risk-adjusted discount rate of 15%.

The present values of the common stock

under each scenario are then weighted based on the probability of each scenario occurring to determine the value of the investment.

A 10% probability was placed on the high end and a 90% probability was placed on the low end.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

3 Valuation Techniques –

3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that

the determination of fair value requires significant judgment or estimation.

Changes in fair value measurements categorized within

Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result

in a significantly lower fair value measurement.

Changes in the values of the warrant liabilities are recorded in “change

in fair value of warrant liabilities”

in the Company’s consolidated statements of operations.

Series A and Series B warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded

at their respective fair value at each subsequent balance sheet date.

This model incorporates transaction details such as the

Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility.

The warrants require, at the

option of the holder, a net-cash settlement following certain fundamental transactions at the Company or require the issuance

of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted

for as derivative liabilities.

summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the

Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and

as of December 31, 2019 and 2018 is as follows:

Date of valuation

December 31, 2019

December 31, 2018

Contractual life (in years)

Expected volatility

Risk-free interest rate

risk-free interest rate was based on rates established by the Federal Reserve.

The general expected volatility is based on standard

deviation of the Company’s underlying stock price’s daily logarithmic returns.

The expected life of the warrants was

determined by the expiration date of the warrants.

The expected dividend yield was based upon the fact that the Company has not

historically paid dividends on its common stock and does not expect to pay dividends on its common stock in the future.

following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that

are measured at fair value on a recurring basis for the year ended December 31, 2019 and 2018 ($ in thousands):

Fair Value of Level 3

financial liabilities

Beginning balance

Fair value adjustment of warrant liabilities

Ending balance

Net Earnings (Loss) per Share Applicable to Common Stockholders

loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common

shares outstanding during the period.

Net income (loss) attributable to common stockholders includes the effect of the deemed

capital contribution on extinguishment of preferred stock and the deemed dividend related to the immediate accretion of beneficial

conversion feature of convertible preferred stock.

Diluted earnings per share is computed using the weighted average number of

common shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the

incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of

the Company’s convertible preferred stock and warrants.

Diluted loss per share excludes the shares issuable upon the conversion

of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would

be anti-dilutive.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

following table summarizes the earnings (loss) per share calculation (in thousands, except per share amount):

For the Years Ended

Basic earnings per share

Net (loss) income

Net (loss) income available to common stockholders

Weighted average number of common shares outstanding,

Earnings per basic share:

Net (loss) income

Net (loss) income available to common stockholders

Dilutive earnings per share

Net income (loss)

Net (loss) income available to common stockholders

Weighted average basic shares outstanding,

Weighted average effect of dilutive securities

Convertible preferred stock

Weighted average diluted shares outstanding

Earnings per diluted share:

Net (loss) income

Net (loss) income available to common stockholders

that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share

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Options to purchase common stock

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Stockholders’

Equity and Convertible Preferred Stock

March 3, 2020, the Company entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers,

pursuant to which the Company agreed to issue and sell to the purchasers 3,245,745 shares of the Company’s common stock,

and common warrants (“Common Warrants”) to purchase up to 7,142,858 shares of common stock at a price of $1.05 per

share of common stock and Common Warrant.

The Company also offered 3,897,113 pre-funded warrants (“Pre-Funded Warrants”)

to purchase shares of common stock with a purchase price of $1.0499 each Pre-Funded Warrant.

The exercise price of each Pre-Funded

Warrant was $0.0001 per share.

offering resulted in gross proceeds of approximately $7.5 million before deducting the placement agent’s fee and related

offering expenses of $1.0 million.

March 9, 2020, the Company entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers,

pursuant to which the Company agreed to issue and sell, in a registered direct offering, 2,090,909 shares of the Company’s

common stock at an offering price of $2.75 per share.

This offering resulted in gross proceeds to the Company of $5.8 million,

before deducting the placement agent’s fee and other related offering expenses.

Company also issued placement agent warrants to the placement agent (the “Placement Agent Warrant”) to purchase 167,273

shares of common stock with an exercise price of $3.4375 per share.

Company has determined that the Placement Agent Warrant should be accounted as a component of stockholders’

issuance date, the Company estimated the aggregate fair value of Placement Agent Warrant at $0.2 million using the Black-Scholes

option pricing model using the following primary assumptions:

fair value of common stock underlying the warrants is $1.83, expected

life of 5 years, volatility rate of 122.29%, risk-free interest rate of 0.63% and expected dividend rate of 0%.

April 14, 2020, the Company, entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers,

pursuant to which the Company agreed to issue and sell 14,000,000 shares of the Company’s common stock at an offering price

of $1.00 per share.

The registered offering resulted in gross proceeds to the Company of $14.0 million, before deducting the placement

agent’s fee and other related offering expenses.

Company also issued placement agent warrants to the placement agent (the “Placement Agent Warrant”) to purchase 1,120,000

shares of common stock with an exercise price of $1.25 per share.

The Market Offering Agreement

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& Co., LLC, as agent (“H.C.

Wainwright”), pursuant to which the Company may offer and sell, from time to time through

Wainwright”), pursuant to which the Company may offer and sell, from time to time

Wainwright, shares of the Company’s common stock having an aggregate offering price of up to $1.2 million (the

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in the context of earnings per share, as discussed in ASC 260-10-45-13.

March 19, 2018, the Company closed a public offering of common stock for gross proceeds of approximately $3.0 million.

was a shelf takedown off of the Company’s registration statement on Form S-3 (File No.

333-222488) and was conducted pursuant

to a placement agency agreement (the “Agreement”) between the Company and Laidlaw & Company (UK) Ltd., the sole

placement agent, on a best-efforts basis with respect to the offering (the “Placement Agent”), that was entered into

on March 14, 2018.

The Company sold 522,876 shares of its common stock in the offering at a purchase price of $5.74 per share.

Company had designated separate series of its capital stock as of December 31, 2019 and December 31, 2018 as summarized below:

Number of Shares Issued

and Outstanding as of

Conversion Ratio

Series “A”

Series “C”

Series “D”

Series “D-1”

Series “F-1”

Series “H”

Series “I”

Series “J”

Series “K”

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

D Convertible Preferred Stock

connection with the acquisition of North South’s patent portfolio in September 2013, the Company issued 1,379,685 shares

of its Series D Convertible Preferred Stock (“Series D Preferred Stock”) to the stockholders of North South.

share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into ten-nineteenths of a share of

Common Stock.

Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D Preferred

Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the

greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted”

Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and

shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred Stock

are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate

Preferred Stock

Series D Convertible Preferred Stock

In connection with the acquisition of North South’s

patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock (“Series D Preferred

Stock”) to the stockholders of North South.

Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is

convertible into ten-nineteenths of a share of Common Stock.

Upon the liquidation, dissolution or winding up of the Company’s business,

each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential

amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on

an “as converted”

Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its

stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred

Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate

of Designation and the conversion limitations described below.

The conversion ratio of the Series D Preferred Stock is subject

to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

of December 31, 2019 and 2018, 4,725 shares of Series D Preferred Stock remained issued and outstanding.

D-1 Convertible Preferred Stock

Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November

Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into ten-nineteenths

of a share of Common Stock.

Upon the liquidation, dissolution or winding up of the Company’s business, each holder

of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential

amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common

Stock on an “as converted”

Each holder of Series D-1 Preferred Stock shall be entitled to vote on

all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to the number of

shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial

ownership limitations set forth in the governing Certificate of Designation.

The conversion ratio of the Series D Preferred Stock is subject to adjustment

in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

As of December 31, 2020 and 2019, 5,000,000

Series D Preferred Stock designated;

4,725 shares remained issued and outstanding.

Series D-1 Convertible Preferred Stock

The Company’s Series D-1 Convertible Preferred

Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013.

Each share of Series D-1 Preferred Stock has a

stated value of $0.0001 per share and is convertible into ten-nineteenths of a share of Common Stock.

Upon the liquidation, dissolution

or winding up of the Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share

of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the

holder would receive as a holder of Common Stock on an “as converted”

Each holder of Series D-1 Preferred Stock shall

be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to

the number of shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account

the beneficial ownership limitations set forth in the governing Certificate of Designation.

The conversion ratio of the Series D-1 Preferred

Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization

transactions.

The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the

holders of the Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares

for shares of the Company’s Series D-1 Preferred Stock on a one-for-one basis.

of December 31, 2019 and 2018, 834 shares of Series D-1 Preferred Stock remained issued and outstanding.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company’s

outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company’s Series

D-1 Preferred Stock on a one-for-one basis.

As of December 31, 2020 and 2019, 5,000,000

Series D-1 Preferred Stock designated;

834 shares remained issued and outstanding.

summary of warrant activity for year ended December 31, 2020 and 2019 is presented below:

Weighted Average Exercise Price

Total Intrinsic Value

Weighted Average Remaining Contractual Life

Outstanding as of December 31, 2018

Outstanding as of December 31, 2019

(10,758,016 )

Outstanding as of December 31, 2020

May 29, 2019, the Company entered into the Master Service Agreement (“MSA”) with a consultant, World Wide Holdings,

7 unchanged sentences

of approximately $333.

December 31, 2019, there were 123 shares available for grant under the 2012 Equity Incentive Plan.

December 31, 2019, there were 24,840 fully vested options outstanding and 9,835 shares available for grant under the Spherix Incorporated

2013 Equity Incentive Plan.

Plan and Option Grants

December 31, 2019, there were 64,110 options outstanding and 38,058 shares available for grant under the Spherix Incorporated

November 17, 2020, the Board approved to amend 2014 Equity Incentive Plan to increase the number of shares of common stock authorized

to be issued pursuant to the 2014 Plan from 243,344 to 5,000,000 shares.

December 31, 2020, there were 359,464 options outstanding and 4,640,536 shares available for grant under the AIkido Pharma Inc.

2014 Equity Incentive Plan.

fair value of options granted in 2020 and 2019 was estimated using the following assumptions:

the Years Ended

For the Years Ended December 31,

Exercise price

$1.04 - $1.50

Expected stock price volatility

131.8% - 132.2%

Risk-free rate of interest

2.65% - 2.80%

SPHERIX INCORPORATED AND SUBSIDIARIES

to Consolidated Financial Statements

summary of option activity under the Company’s stock option plan for year ended December 31, 2020 and 2019 is presented

Number of Shares

Weighted Average Exercise Price

Total Intrinsic Value

Weighted Average Remaining Contractual Life (in years)

Outstanding as of December 31, 2018

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Outstanding as of December 31, 2019

Employee options granted

Employee options expired

Outstanding as of December 31, 2020

Options vested and exercisable

1 unchanged sentence

2020 and 2019, respectively.

future stock-based compensation expense relating to unvested stock options is zero.

2018 approximately 19,861 shares with a fair value of approximately $106,000 was granted.

These restricted stock awards vested

of December 31, 2019 and 2018, the Company did not have unrecognized stock-based compensation expense related to restricted stock

All stock compensation was recorded as a component of general and administrative expenses.

future stock-based compensation expense relating to unvested stock options is approximately $77,000 and will be recorded

through June 2021.

Commitments and Contingencies

the ordinary course of business, the Company actively pursues legal remedies to enforce its intellectual property rights and to

stop unauthorized use of use technology.

From time to time, the Company may be involved in various claims and counterclaims and

legal actions arising in the ordinary course of business.

There were no pending material claims or legal matters as of the date

of this report.

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

The income tax provision consists of the following ($ in thousands):

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.

and Uncertainties –

is currently evaluating 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 financial statements.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

income tax provision consists of the following ($ in thousands):

For the years ended

Decrease in valuation allowance

Increase in valuation allowance

State and local

Decrease in valuation allowance

Change in valuation Allowance

Increase in valuation allowance

Income Tax Provision (Benefit)

The following is a reconciliation of the U.S.

federal statutory

rate to the effective income tax rates for the years ended December 31, 2019 and 2018:

following is a reconciliation of the U.S.

federal statutory rate to the effective income tax rates for the years ended December

31, 2020 and 2019:

For the years ended

Statutory Federal Rate

Federal tax rate change

State Taxes, Net of Federal Tax Benefit

1 unchanged sentence

State rate change in effect

Fair Value of Warrants

AMT credit benefit

Decrease due to true up of State NOL

1 unchanged sentence

Change in Valuation Allowance

Income Tax Provision (Benefit)

At December 31, 2019 and 2018, the Company’s deferred

tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands):

Income Tax Benefit

December 31, 2020 and 2019, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences

attributable to the following ($ in thousands):

As of December 31,

8 unchanged sentences

Fair value adjustment of investment

SPHERIX INCORPORATED AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

In assessing the realization of deferred

tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the

period in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities,

projected future taxable income and taxing strategies in making this assessment.

The Company has determined that, based on objective

evidence currently available, it is more likely than not, the deferred tax assets will not be realized in future periods.

the Company has provided a full allowance for the deferred tax assets at December 31, 2019 and 2018.

As of December 31, 2019,

the change in valuation allowance is approximately $8.253 million.

Under the Act, corporations are no longer

subject to the Alternative Minimum Tax (AMT), effective for taxable years beginning after Dec.

However, where a corporation

has an AMT credit from a prior taxable year, the corporation will continue to carry the credit forward and may use a portion of

it as a refundable credit in any taxable year beginning after 2017 but before 2022.

Generally, 50 percent of the corporation’s

AMT Credit carried forward to one of these years will be claimable and refundable for that year.

In tax years beginning in 2021,

however, the entire remaining carryforward generally will be refundable.

The Company has an AMT credit carryforward of $40,842

as of December, 31, 2019.

The Company will request the following refunds for the tax years ended December 31, 2020 through December

Tax Year Ended:

AMT Credit Refund

December 31, 2020

December 31, 2021

As of December 31, 2019, the Company has

approximately $41 million federal and $20 million of city net operating loss carryovers (“NOLs”), which expire from

2022 through 2037, and $14 million of federal and city NOLs with indefinite utilization.

The Company has approximately $35 million

of state NOLs, which expire from 2022 through 2039.

The NOL carryover may be subject to limitation under Internal

Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations.

been performed since the last known ownership change of September 10, 2013.

As required by the provisions of ASC 740,

the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority

would more likely than not sustain the position following an audit.

For tax positions meeting the more likely than not threshold,

the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood

of being realized upon ultimate settlement with the relevant tax authority.

Differences between tax positions taken or expected

to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized

benefits.”

A liability is recognized (or amount of NOL or amount of tax refundable is reduced) for an unrecognized tax benefit

because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not

recognized as a result of applying the provisions of ASC 740.

If applicable, interest costs and penalties

related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general

and administrative expense in the statement of operations.

As of December 31, 2019 and 2018, no liability for unrecognized tax

benefit was required to be reported.

No interest or penalties were recorded during the years ended December 31, 2019 and 2018.

The Company does not expect any significant changes in its unrecognized tax benefits in the next year.

assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or

all of the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation

of future taxable income during the period in which those temporary differences become deductible.

Management considers the scheduled

reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Company has determined that, based on objective evidence currently available, it is more likely than not, the deferred tax assets

will not be realized in future periods.

Accordingly, the Company has provided a full allowance for the deferred tax assets at

December 31, 2020 and 2019.

As of December 31, 2020, the change in valuation allowance is approximately $5.56 million.

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, makes any Alternative Minimum Tax Credit carry forward fully refundable in tax years beginning

on or after January 1, 2018.

The Company filed Form 1139 in 2020 and received a cash refund for its $85k AMT credit carry forward

before December 31, 2020.

December 27, 2020 the Consolidated Appropriations Act, 2021 (“CAA”) was signed into law.

The CAA includes the COVID-related

Tax Relief Act of 2020 (“COVID TRA”).

The Company is continuing to assess the effect of the CAA and does not believe

it will result in a material impact to the Company’s income tax provision.

of December 31, 2020, the Company has approximately $41 million federal net operating loss carryovers (“NOLs”), which

expire from 2033 through 2037, and $22 million of federal NOLs with indefinite utilization.

The Company has approximately $85

million of state and city NOLs, which expire from 2024 through 2040.

NOL carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership

change as determined under the regulations.

No study has been performed since the last known ownership change of September 10,

required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining

that the relevant tax authority would more likely than not sustain the position following an audit.

For tax positions meeting

the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that

has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the

interpretation are referred to as “unrecognized benefits.”

A liability is recognized (or amount of NOL or amount of

tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation

to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified

as interest and penalties in general and administrative expense in the statement of operations.

As of December 31, 2020 and 2019,

no liability for unrecognized tax benefit was required to be reported.

No interest or penalties were recorded during the years

ended December 31, 2020 and 2019.

The Company does not expect any significant changes in its unrecognized tax benefits in the

The Company files U.S.

and state income tax returns.

federal and state income tax returns.

As of December 31, 2020, the Company’s U.S.

and state tax returns (Delaware, New York, New

York City, Pennsylvania, Virginia, and Texas) remain subject to examination by tax authorities beginning with the tax return filed

for the year ended December 31, 2016, however, there were no audits pending in any of the above-mentioned jurisdictions during

The Company believes that its income tax positions would be sustained upon an audit and does not anticipate any adjustments

that would result in material changes to its consolidated financial position.

state tax returns (Delaware, New York, New York City, Pennsylvania, Virginia, and Texas) remain subject to examination by tax

authorities beginning with the tax return filed for the year ended December 31, 2017, however, there were no audits pending in

any of the above-mentioned jurisdictions during 2020 and 2019.

The Company believes that its income tax positions would be sustained

upon an audit and does not anticipate any adjustments that would result in material changes to its consolidated financial position.

Subsequent Events

Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are

Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would

have required adjustment or disclosure in the consolidated financial statements other than disclosed.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

License Agreement

January 5, 2021, the Company entered into an exclusive patent license agreement (the “License Agreement”) with Silo

Pharma Inc., a Delaware corporation and Silo Pharma Inc., a Florida corporation, and their affiliates/subsidiaries (collectively,

“Silo Pharma”).

consideration for the license of the Licensed Patents, the Company will issue and deliver to Silo Pharma 500 shares of the Company’s

Series M Convertible Preferred Stock.

The Company paid a one-time nonrefundable cash payment of five-hundred thousand US Dollars

($500,000.00) to Silo Pharma.

The Company shall also pay Silo Pharma a running royalty equal to two percent (2%) of “net

(as such term is defined in the License Agreement).

January 29, 2021, the Company purchased an 8% convertible promissory note (“Convertible Note”) issued by Convergent

Therapeutics, Inc.

(“Convergent”) with a principal amount of $2 million pursuant to a Note Purchase Agreement with

The Company paid a purchase price for the Convertible Note of $2 million.

The Company will receive interest on the

Convertible Note at the rate of 8% per annum payable upon conversion or maturity of the Convertible Note.

The Convertible Note shall mature on January 29, 2023.

February 19, 2021, the Company consummated the public offering pursuant to an amended and restated underwriting agreement (the

“Underwriting Agreement”) with H.C.

Wainwright & Co., LLC, as representative to the underwriters named therein

(the “Underwriter”), pursuant to which the Company agreed to issue and sell to the Underwriter in an underwritten

public offering (the “Offering”) an aggregate of 46,875,000 shares (the “Shares”) of common stock, $0.0001

par value per share, of the Company (the “Common Stock”).

The Company received gross proceeds of approximately $75

million before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

23, 2021, the Underwriter partially exercised its over-allotment option and purchased an additional 7,030,927 Shares, resulting

in aggregate proceeds of approximately $86.2 million., before deducting underwriting discounts and commissions and other expenses.

connection with the Offering, the Company issued the Underwriter warrants (the “Underwriter’s Warrants”) to

purchase up to 4,312,475 shares of Common Stock, or 8% of the Shares sold in the Offering.

The Underwriter’s Warrants will

be exercisable for a period of five years from February 19, 2021 at an exercise price of $2.00 per share, subject to adjustment.

CHANGES IN AND

DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data