Dominari Holdings Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements. All references to “we,” “us,” “our” and the “Company” refer to Aikido Pharma Inc., a Delaware corporation and its consolidated subsidiaries unless the context requires otherwise. Overview AIkido Pharma Inc. 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. We are currently in the process of developing our 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. Our oncology therapeutics include 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 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, our business portfolio now focuses on the treatment of three different cancers and multiple types of viral infections. Our pancreatic drug candidate, DHA-dFdC, developed at and licensed from the University of Texas at Austin, is a new compound that we hope 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. Our 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. Our 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. In addition, we are constantly seeking to grow our pipeline of treatments in oncology indications. For example, in January 2021, the Company invested in Convergent Therapeutics, Inc., which has exclusive rights to technology related to next-generation dual-action peptide receptor radionuclide therapy (“PRRT”) for prostate cancer covered by multiple issued U.S. and foreign patents. Convergent is currently conducting advanced human trials relating to prostate cancer treatments utilizing PRRT that targets the prostate-specific membrane antigen (“PSMA”) present on prostate cancer cells. The technology was developed under the direction of Dr. Neil Bander, Professor of Urologic Oncology at Weill Cornell Medicine. In addition, the Company was granted a license to four patent applications for the use of psilocybin in cancer indications. Additionally, on January 6, 2021 the Company announced that it entered into an exclusive patent license agreement with Silo Pharma Inc. (“Silo Pharma”) pursuant to which Silo Pharma granted the Company a worldwide exclusive, sublicensable, royalty-bearing license to certain Silo Pharma owned provisional patent applications directed to the use of psilocybin in cancer treatment, and any patents issuing therefrom, including all continuations, continuations-in-part, divisions, extensions, substitutions, reissues, re-examinations, and any applications and all patents issuing from any applications and patents that claim domestic benefit or foreign priority to the provisional patent applications. The license is for “Field of Use” (as defined in the exclusive patent license agreement) of “treatment of cancer and symptoms caused by cancer, including but not limited to pain, nausea, neuroinflammation, brain and neural dysfunction, depression, seizures, confusion, dizziness, numbness/tingling, dysfunction of the senses and all other symptoms that are caused by cancer of any type.” 14 Critical Accounting Policies Our critical accounting policies are disclosed in our annual report on Form 10K for the year ended December 31, 2020 and there have been no material changes to such policy or estimates during the nine months ended September 30, 2021. Recently Issued Accounting Pronouncements See Note 3 to the condensed consolidated financial statements for a discussion of recent accounting standards. Results of Operations Three months ended September 30, 2021 compared to three months ended September 30, 2020 During the three months ended September 30, 2021, we incurred a loss from operations of approximately $1.8 million, as compared to $1.0 million during the comparable prior year period. The increase in loss was primarily attributed to $0.9 million increase in in general and administrative expenses, partially offset by $91,000 million decrease research and development expense and $38,000 decrease in research and development expense related with license acquisition. During the three months ended September 30, 2021, other income was approximately $1.7 million as compared to other expense of approximately $1.1 million during the comparable prior year period. The net loss per share decreased from a decrease in net operating losses and a significant increase in the number of shares outstanding. The increase in other income was primarily attributed to a $5.3 million increase in the change in fair value of investment in DatChat and a decrease in the change in fair value of investment in Hoth, and partially offset by $2.6 million increase in loss on marketable securities. The Company experienced very little or no revenue in the last two years and we don’t expect any revenue until a biotechnology product is fully developed which may not occur for many years. Nine months ended September 30, 2021 compared to nine months ended September 30, 2020 During the nine months ended September 30, 2021, we incurred a loss from operations of approximately $6.9 million, as compared to a loss of $5.2 million during the comparable prior year period. The increase in loss was primarily attributed to $2.2 million increase in general and administrative expenses, and partially offset by $0.5 million decrease in research and development expense $26,000 decrease in research and development expense related to the license acquisition. During the nine months ended September 30, 2021, other income was approximately $1.5 million as compared to other expense of approximately $7.5 million during the comparable prior year period. The net loss per share decreased from a decrease in net operating losses and a significant increase in the number of shares outstanding. The increase in other income was primarily attributed to a $11.2 million increase in the change in fair value of investment in DatChat, decrease in the change in fair value of investment in Hoth, and partially offset by $2.4 million increase in loss on marketable securities. The Company experienced very little or no revenue in the last two years and we don’t expect any revenue until a biotechnology product is fully developed which may not occur for many years. 15 Liquidity and Capital Resources We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. We do not expect to incur revenue until any of our biotechnology products are fully developed. While we continue to implement our business strategy, we intend to finance our activities through managing current cash on hand from our past equity offerings. During the nine months 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 $78.0 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. Moving forward, the Company intends to manage its cash through an investment committee focused on asset preservation and reasonable risk allocation. Further, the Company intends to grow its drug platform through additional licensing efforts that are similar to those the Company has already entered into and disclosed. In addition, the Company is seeking partnerships with academic institutions and private enterprise to find, fund and advance new drug compounds that can be brought to commercialization. Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s consolidated financial position, results of its consolidated operations and/or search for drug candidates, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. On August 10, 2021, the Company received a staff deficiency notice from The Nasdaq Stock Market (“Nasdaq”) informing the Company that its common stock failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). Nasdaq’s letter advised the Company that, based upon the closing bid price during the period from June 28, 2021 to August 9, 2021, the Company no longer meets this test. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has been provided with a compliance period of 180 calendar days, or February 7, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to February 7, 2022. Cash Flows from Operating Activities - For the nine months ended September 30, 2021 and 2020, net cash used in operations was approximately $4.6 million and $3.6 million, respectively. The cash used in operating activities for the nine months ended September 30, 2021 primarily resulted from a net loss of $5.4 million and change in fair value of investment of $3.8 million, and partially offset by $4.3 million unrealized loss on marketable securities and $1.1 million research and development expense related with license acquired. The cash used in operating activities for the nine months ended September 30, 2020 primarily resulted from a net loss of $12.7 million, and partially offset by reduction in fair value of investment of $7.4 million and $1.2 million research and development expense related with license acquired. Cash Flows from Investing Activities - For the nine months ended September 30, 2021 and 2020, net cash used in investing activities was approximately $70.3 million and $27.2 million, respectively. The cash used in investing activities for the nine months ended September 30, 2021 primarily resulted from our purchase of marketable securities of $90.5 million, funds to deposit accounts of $4.4 million (net of fee), purchase of investments at fair value of $4.1 million and purchase of convertible note of $2.0 million, partially offset by our sale of marketable securities of $30.4 million since we invest excess cash into marketable securities until additional cash is needed. The cash used in investing activities for the nine months ended September 30, 2020 primarily resulted from our purchase of marketable securities of $98.5 million and research and development expense related with license acquired of $1.2 million, partially offset by our sale of marketable securities of $72.0 million since we invest excess cash into marketable securities until additional cash is needed. Cash Flows from Financing Activities - Cash provided by financing activities for the nine months ended September 30, 2021 was $78.1 million, which reflects the net proceeds of $78.0 million from investors in exchange of issuance of common stock and warrants and net proceeds of $84,000 from the exercise of common warrants. Cash provided by financing activities for the nine months ended September 30, 2020 was $31.6 million, which reflects the net proceeds of $6.6 million from investors in exchange of issuance of common stock, common warrants and prefunded warrants, net proceeds of $17.8 million from investors in exchange of issuance of common stock, and net proceeds of $7.2 million from the exercise of common warrants and prefunded warrants. 16 Off-balance sheet arrangements. None. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies.