Dominari Holdings Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data required by this Item 8 follow. Index to Financial Statements Page Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2020 and 2019 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2020 and 2019 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of AIkido Pharma Inc. Opinion on the Financial Statements We 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. Basis for Opinion 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. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 2013. New York, NY March 25, 2021 F- 2 AIKIDO PHARMA INC. Consolidated Balance Sheets ($ in thousands except per share amounts) December 31, December 31, 2020 2019 ASSETS Current assets Cash $ 2,715 $ 91 Marketable securities 24,801 857 Prepaid expenses and other assets 215 181 Total current assets 27,731 1,129 Investments 2,764 10,153 $ 30,495 $ 11,282 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 567 $ 68 Accrued salaries and benefits 310 682 Total current liabilities 877 750 Total liabilities 877 750 Stockholders’ equity Preferred stock, $.0001 par value, 50,000,000 Authorized Series D: 5,000,000 shares designated; 4,725 shares issued and outstanding at December 31, 2020 and 2019; liquidation value of $0.0001 per share - - Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at December 31, 2020 and 2019; liquidation value of $0.0001 per share - - Common stock, $0.0001 par value, 100,000,000 shares authorized; 34,920,222 and 4,825,552 shares issued at December 31, 2020 and 2019, respectively; 34,920,219 and 4,825,549 shares outstanding at December 31, 2020 and 2019, respectively 3 - Additional paid-in-capital 186,482 155,062 Treasury stock, at cost, 3 shares at December 31, 2020 and 2019 (264 ) (264 ) Accumulated deficit (156,603 ) (144,266 ) Total stockholders’ equity 29,618 10,532 Total liabilities and stockholders’ equity $ 30,495 $ 11,282 The accompanying notes are an integral part of these consolidated financial statements. F- 3 AIKIDO PHARMA INC. Consolidated Statements of Operations ($ in thousands) Years Ended December 31, 2020 2019 Revenues $ - $ 9 Operating costs and expenses General and administrative $ 4,057 $ 3,172 Research and development 1,020 10 Research and development - license acquired 1,469 2,512 Total operating expenses 6,546 5,694 Loss from operations (6,546 ) (5,685 ) Other income (expenses) Other income 19 - Gains on marketable securities 1,001 14 Change in fair value of investment (6,811 ) 1,406 Change in fair value of warrant liabilities - 82 Total other (expenses) income (5,791 ) 1,502 Net loss $ (12,337 ) $ (4,183 ) Net loss per share, basic and diluted Basic and Diluted $ (0.44 ) $ (1.67 ) Weighted average number of shares outstanding, basic and diluted Basic and Diluted 28,074,116 2,511,566 The accompanying notes are an integral part of these consolidated financial statements. F- 4 AIKIDO PHARMA INC. Consolidated Statements of Changes in Stockholders’ Equity ($ in thousands) 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, 2018 2,010,025 $ - 5,559 $ - $ 152,445 3 $ (264 ) $ (140,083 ) $ 12,098 Issuance of common stock and prefunded common stock warrants, net of offering cost 221,000 - - - 787 - - - 787 Issuance of common stock, net of offering cost / At-the-market offering 532,070 - - - 1,047 - - - 1,047 Issuance of common stock for research and development - license acquired 1,939,058 - - - 2,152 - - - 2,152 Exercise of prefunded common stock warrants 201,961 - - - - - - - - Warrant exercise 33,333 - - - - - - - - Exchange of common shares for prefunded warrants (115,269 ) - - - - - - - - Distribution of Hoth common stock - - - - (1,698 ) - - - (1,698 ) Fractional shares adjusted for reverse split 3,371 - - - - - - - - Stock-based compensation - - - - 329 - - - 329 Net loss - - - - - - - (4,183 ) (4,183 ) Balance at December 31, 2019 4,825,549 $ - 5,559 $ - $ 155,062 3 $ (264 ) $ (144,266 ) $ 10,532 Issuance of common stock, common warrants and prefunded warrants, net of offering cost (net of offering costs of $941) 3,245,745 - - - 6,559 - - - 6,559 Issuance of common stock, net of offering cost (net of offering costs of $1,905) 16,090,909 2 - - 17,843 - - - 17,845 Common warrant and prefunded warrant exercise 10,758,016 1 - - 7,203 - - - 7,204 Distribution of Hoth common stock - - - - (269 ) - - - (269 ) Stock-based compensation - - - - 84 - - - 84 Net loss - - - - - - - (12,337 ) (12,337 ) Balance at December 31, 2020 34,920,219 $ 3 5,559 $ - $ 186,482 3 $ (264 ) $ (156,603 ) $ 29,618 The accompanying notes are an integral part of these consolidated financial statements. F- 5 AIKIDO PHARMA INC. Consolidated Statements of Cash Flows ($ in thousands) Years Ended December 31, 2020 2019 Cash flows from operating activities Net loss $ (12,337 ) $ (4,183 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of investment 6,811 (1,406 ) Change in fair value of warrant liabilities - (82 ) Research and development-acquired license, expensed 1,469 2,512 Stock-based compensation 84 329 Realized (gain) loss on marketable securities (509 ) 172 Unrealized loss (gain) on marketable securities 218 (145 ) Changes in assets and liabilities: Prepaid expenses and other assets (34 ) 7 Accounts payable and accrued expenses 499 (64 ) Accrued salaries and benefits (372 ) (50 ) Payable to DatChat 150 (107 ) Net cash used in operating activities (4,021 ) (3,017 ) Cash flows from investing activities Purchase of marketable securities (98,827 ) (8,461 ) Sale of marketable securities 74,873 10,277 Sale of Hoth common shares 460 - Purchase of investments at fair value - (200 ) Purchase of research and development licenses (1,469 ) (360 ) Net cash (used in) provided by investing activities (24,963 ) 1,256 Cash flows from financing activities Proceeds from issuance common stock, common warrants and prefunded warrants, net of offering cost 6,559 - Proceeds from issuance common stock, net of offering cost 17,845 787 Proceeds from issuance common stock/ At-the-market offering - 1,154 Offering costs from the issuance of common stock / At-the-market offering - (106 ) Proceeds from exercise of warrants 7,204 - Net cash provided by financing activities 31,608 1,835 Net increase in cash 2,624 74 Cash, beginning of period 91 17 Cash, end of period $ 2,715 $ 91 Non-cash investing and financing activities Distribution of Hoth common stock $ 269 $ 1,698 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Note 1. Organization and Description of Business Organization and Description of Business 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 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), 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. Reverse Stock Split On 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 (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the Company’s Board of Directors under authority granted by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders held on April 15, 2019, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on May 9, 2019 (the “Certificate of Amendment”). 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. Note 2. Liquidity 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; and ● increasing revenue from its patent portfolios, license fees and new business ventures. F- 7 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 the Company. Therefore, the Company has adequate cash to fund its operations for at least the next twelve months. Management 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. Note 3. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Nuta Technology Corp. (“Nuta”), Spherix Portfolio Acquisition II, Inc. (“SPAII”), Guidance IP, LLC (“Guidance”), Directional IP, LLC (“Directional”), Spherix Management Services, LLC (“SMS”), Spherix Delaware Merger Sub Inc. (“Merger Sub”), Spherix Merger Subsidiary, Inc (“SMSI”) and NNPT, LLC (“NNPT”). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“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 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 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. Segments The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. Concentration of 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. There were no cash equivalents as of December 31, 2020 and 2019. Marketable Securities Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of corporate bonds and highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. Research and Development Research 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. F- 8 Accounting for Warrants The 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). Stock-based Compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one- to five-year period. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term. Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices. Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term. Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. The Company accounts for forfeitures as they occur. Income Taxes The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “ Income Taxes ” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary difference resulting from matters that have been recognized in the Company’s financial statement or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities measured at the enacted tax rates in effect for the year in which these items are expected to reverse. Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. F- 9 Recently Adopted Accounting Standards In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, “ Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company adopted this ASU on January 1, 2020 and the adoption of this ASU did not have a material impact on its consolidated financial statements or related disclosures. 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. 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 permitted. 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. Note 4. Investments in Marketable Securities The 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 December 31, 2020 2019 Realized gain (loss) $ 509 $ (172 ) Unrealized gain (loss) (218 ) 145 Dividend income 636 38 Interest income 4 4 $ 931 $ 14 F- 10 Note 5. Investment in Hoth Therapeutics, Inc. Hoth 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. On February 20, 2019, Hoth closed its initial public offering (the “IPO”) at an initial offering price to the public of $5.60 per share. The Company records this investment at fair value and records any change in fair value in the statements of operations (see Note 8). On October 2, 2019, the Board of Directors approved a distribution to the Company’s stockholders of 100,000 Hoth Shares held by the Company. Accordingly, each of the Company’s stockholders received one (1) share of Hoth common stock for every twenty-nine (29) shares of Company common stock held as of 5 p.m. Eastern Time on October 21, 2019, 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 whole share. On 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 whole share. 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. On 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. The following summarizes the Company investment in Hoth: Security Name Shares Owned as of December 31, 2020 Fair value per Share as of December 31, 2020 Fair value as of December 31, 2020 (in thousands) HOTH 1,166,415 $ 2.37 $ 2,764 Security Name Shares Owned as of December 31, 2019 Fair value per Share as of December 31, 2019 Fair value as of December 31, 2019 (in thousands) HOTH 1,636,230 $ 6.19 $ 10,128 The 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. F- 11 Note 6. Investment in Others In May 2019, the Company purchased (a) a senior convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share, (b) a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d) a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, (e) a contingent option to put 200,000 shares of DatChat common stock and (f) 50,000 shares of common stock of CBM which represents a 20% interest in CBM. The Company allocated all the fair value of this investment to CBM. As a result of the nominal purchase price allocated to DatChat, the Company reviewed its existing holdings in DatChat and reduced its existing carrying amount from $1.0 million to $0. The Company recorded its initial investment in DatChat on adjusted cost method measurement alternative in accordance with ASU 2016-01. On 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. During the year ended 2020, the Company wrote-off its investment of $25,000 in The BitDaily. The balance of Company’s other investments was $0 and $25,000 as of December 31, 2020 and 2019, respectively. Note 7. CBM Asset Acquisition On 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. On 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”). 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. 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. The issuance 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. F- 12 On March 9, 2020, the Company raised over $2.0 million of proceeds (see Note 10), therefore a payment of $1.0 million was due to CBM under the CBM Purchase Agreement. The Company recorded this Cash Consideration as a component of research and development license acquired during the year ended December 31, 2020 the consolidated statements of operations. Note 8. Fair Value of Financial Assets and Liabilities Financial instruments, including cash, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 - quoted prices in active markets for identical assets or liabilities Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The following table presents the Company’s assets and liabilities that are measured at fair value at December 31, 2020 and 2019 ($ in thousands): Fair value measured at December 31, 2020 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2020 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual and exchange traded funds $ 24,801 $ 24,801 $ - $ - Investments in Hoth $ 2,764 $ 2,764 $ - $ - Fair value measured at December 31, 2019 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2019 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual and exchange traded funds $ 857 $ 857 $ - $ - Investments in Hoth $ 10,128 $ 10,128 $ - $ - While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. F- 13 Note 9. Net Earnings (Loss) per Share Applicable to Common Stockholders Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December 31, 2020 and 2019 are as follows: As of December 31, 2020 2019 Convertible preferred stock 688 688 Warrants to purchase common stock 1,656,354 285,273 Options to purchase common stock 384,304 88,950 Total 2,041,346 374,911 Note 10. Stockholders’ Equity and Convertible Preferred Stock Common Stock On 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. This 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. On 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. The 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. The Company has determined that the Placement Agent Warrant should be accounted as a component of stockholders’ equity. On the 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%. On 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. The 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. At The Market Offering Agreement On August 9, 2019, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright, shares of the Company’s common stock having an aggregate offering price of up to $1.2 million (the “Shares”). The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. During the year ended December 31, 2019, the Company sold a total of 532,070 shares of common stock under the ATM for aggregate total gross proceeds of approximately $1.2 million at an average selling price of $2.17 per share, resulting in net proceeds of approximately $1.1 million after deducting commissions and other transaction costs. F- 14 Registered Common Stock and Warrant Financing On May 29, 2019, the Company entered into a Securities Purchase Agreement (the “Common Stock Purchase Agreement”) for the sale by the Company of 221,000 shares of the Company’s common stock, at a purchase price of $2.60 per share, and pre-funded common stock purchase warrants to purchase up to 86,692 shares of common stock at a purchase price of $2.5999 per Warrant, which represents the per share purchase price, less a $0.0001 per share exercise price for each of the warrants (“Penny Warrants”). The Company sold the shares and warrants for net proceeds of approximately $0.8 million which transaction closed on May 31, 2019. Common Stock Warrant Exchange On June 6, 2019, the Company entered into an amendment to the Common Stock Purchase Agreement, pursuant to which the Purchaser surrendered an aggregate of 115,269 shares to the Company and the Company issued 115,269 Penny Warrants to the Purchaser in order to limit the Purchaser’s beneficial ownership. The exchange of 115,269 Penny Warrants do not meet the definition of a derivative under ASC 815 because their fair value at issuance is equal to the fair value of the shares underlying the warrant. As such, they have the characteristics of a prepaid forward sale of equity. Since the shares underlying the Penny Warrants are issuable for little or no consideration, they are considered outstanding in the context of earnings per share, as discussed in ASC 260-10-45-13. 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” basis. 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. 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” basis. 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. As of December 31, 2020 and 2019, 5,000,000 Series D-1 Preferred Stock designated; 834 shares remained issued and outstanding. F- 15 Warrants A summary of warrant activity for year ended December 31, 2020 and 2019 is presented below: Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2018 294,072 $ 38.15 $ - 1.92 Issued 301,960 - 506,273 - Exercised (235,294 ) - 394,940 - Expired (8,799 ) 476.66 - - Outstanding as of December 31, 2019 351,939 $ 19.96 $ 111,332 0.94 Issued 12,327,244 0.77 - 0.17 Exercised (10,758,016 ) 0.67 - - Expired (198,147 ) - - - Outstanding as of December 31, 2020 1,723,020 $ 3.07 57,333 1.11 On May 29, 2019, the Company entered into the Master Service Agreement (“MSA”) with a consultant, World Wide Holdings, LLC (“Consultant”). In consideration for services provided by Consultant, the Company paid to Consultant three warrants (the “Consultant Warrants”), with each warrant immediately exercisable for 33,333 shares of common stock with a $0.01 strike price. The Company issued each of the three warrants on June 28, July 28 and August 27, 2019, respectively. The Company recorded $0.3 million in stock-based compensation during the year ended December 31, 2019 related to this arrangement. On July 12, 2019, the Company issued 33,333 shares of common stock upon exercise of one Consultant Warrant which resulted in gross proceeds of approximately $333. Stock Options 2014 Plan and Option Grants On 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. At 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. The fair value of options granted in 2020 and 2019 was estimated using the following assumptions: For the Years Ended December 31, 2020 2019 Exercise price $0.64 - Term (years) 9.98 - Expected stock price volatility 124.0% - Risk-free rate of interest 0.37% - F- 16 A summary of option activity under the Company’s stock option plan for year ended December 31, 2020 and 2019 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, 2018 124,381 $ 209.22 $ - 4.8 Employee options expired (35,121 ) 302.29 - - Non-employee options expired (310 ) 571.71 - - Outstanding as of December 31, 2019 88,950 $ 172.39 $ - 5.7 Employee options granted 300,000 0.64 69,000 10.0 Employee options expired (4,646 ) - - - Outstanding as of December 31, 2020 384,304 $ 40.15 $ 69,000 8.9 Options vested and exercisable 234,304 $ 65.45 $ 34,500 8.2 Stock-based compensation associated with the amortization of stock option expense was $84,000 and $8,000 for the years ended December 31, 2020 and 2019, 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 $77,000 and will be recorded through June 2021. Note 11. Commitments and Contingencies Legal Proceedings In the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us. Risks and Uncertainties – COVID-19 Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for drug candidates, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. F- 17 Note 12. Income Taxes The income tax provision consists of the following ($ in thousands): For the years ended December 31, 2020 2019 Federal Current $ (85 ) $ - Deferred (1,821 ) 3,862 Increase in valuation allowance 1,821 (3,862 ) State and local Current Deferred (3,739 ) (12,115 ) Increase in valuation allowance 3,739 12,115 Income Tax Provision (Benefit) $ (85 ) $ - The 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 December 31, 2020 2019 U.S. Statutory Federal Rate 21 % 21 % State Taxes, Net of Federal Tax Benefit % 13.62 % Other Permanent Differences 0.04 % 0.01 % State rate change in effect 40.36 % 216.40 % AMT credit benefit 0.68 % % Decrease due to true up of State NOL (10.36 )% (19.10 )% Decrease due to change in Federal NOL and other true ups (6.34 )% (34.64 )% Change in Valuation Allowance (44.7 )% (197.29 )% Income Tax Benefit 0.68 % - % At 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, 2020 2019 Deferred tax assets: Net-operating loss carryforward $ 19,000 $ 15,443 Stock based compensation 8,290 8,104 Patent portfolio and other 14,917 15,004 Total Deferred Tax assets 42,207 38,551 Valuation allowance (40,670 ) (35,084 ) Deferred Tax Asset, Net of Allowance $ 1,537 $ 3,467 Deferred tax liability: Fair value adjustment of investment (1,537 ) (3,467 ) - - F- 18 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 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. 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. 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. On 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. On 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. As 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. 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. No study has 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, 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 next year. The Company files U.S. 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, 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. F- 19 Note 13. Subsequent Events Silo License Agreement Effective 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”). As 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 sales” (as such term is defined in the License Agreement). Convergent Investment On 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 Convergent. 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. Public Offering On 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. On February 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. In 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. F- 20 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.