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 Reports of Independent Registered Public Accounting Firms F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-7 Notes to the Consolidated Financial Statements F-8 F- 1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of AIkido Pharma, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of AIkido Pharma, Inc. (the “Company”) as of December 31, 2021, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and the consolidated results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 audit 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 audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that is communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of investments in privately-held companies Description of the Matter As of December 31, 2021, the Company had $9.5 million of investments in companies without readily determinable fair values. The Company typically measures these investments at cost less any impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment. We identified the valuation of these investments as a critical audit matter because of the significant judgement management uses to estimate the investment value. This is a challenging audit area due to the subjectivity in assessing whether observable price changes have occurred for investments that are identical or similar to the investment the Company holds, and in assessing whether an investment is impaired. How we Addressed the Matter in our Audit Addressing the matter involved obtaining an understanding of management’s process for accounting for their investments that do not have readily determinable fair values. We considered the appropriateness of the Company’s application of accounting policy by obtaining and reviewing the Company’s analysis and confirming its compliance with accounting principles generally accepted in the United States. We tested the mathematical accuracy of the Company’s carrying value calculations and considered whether or not any of the investments should be impaired. We evaluated the accounting conclusions reached by the Company as to whether any observable transactions had occurred that were identical or similar in nature through reading of the Company’s available financial and other information regarding the investee and through public searches for corroborating or contradictory information. Further, we evaluated the Company’s impairment conclusions considering this internal and external information. We also evaluated the adequacy of the Company’s disclosures in Note 7 in relation to this matter. /s/WithumSmith+Brown, PC We have served as the Company's auditor since 2021. New York, New York March 28, 2022 PCAOB ID Number 100 F- 2 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 sheet of AIkido Pharma Inc. (the “Company”) as of December 31, 2020, the related consolidated statement of operations, stockholders’ equity and cash flows for 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 the results of its operations and its cash flows for 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, 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 audit 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 audit 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 audit 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 until 2021. New York, NY March 25, 2021 PCAOB ID 688 F- 3 AIKIDO PHARMA INC. Consolidated Balance Sheets ($ in thousands except share and per share amounts) December 31, December 31, 2021 2020 ASSETS Current assets Cash $ 65,562 $ 2,715 Marketable securities 11,427 24,801 Prepaid expenses and other assets 442 215 Short-term investments at fair value 2,273 - Notes receivable at fair value 6,984 - Deposits 4,201 - Total current assets 90,889 27,731 Convertible note receivable at fair value 2,147 - Investments 9,465 2,764 Security deposit 155 - Total assets $ 102,656 $ 30,495 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 381 $ 567 Accrued salaries and benefits 680 310 Total current liabilities 1,061 877 Total liabilities 1,061 877 Commitments and contingencies Stockholders’ equity Preferred stock, $ .0001 par value, 50,000,000 Authorized Series D: 5,000,000 shares designated; 3,825 and 4,725 shares issued and outstanding at December 31, 2021 and 2020, respectively; liquidation value of $ 0.0001 per share - - Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at December 31, 2021 and 2020; liquidation value of $ 0.0001 per share - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 89,681,258 and 34,920,222 shares issued at December 31, 2021 and 2020, respectively; 89,681,255 and 34,920,219 shares outstanding at December 31, 2021 and 2020, respectively 9 3 Additional paid-in capital 265,624 186,482 Treasury stock, at cost, 3 shares at December 31, 2021 and 2020 ( 264 ) ( 264 ) Accumulated deficit ( 163,774 ) ( 156,603 ) Total stockholders’ equity 101,595 29,618 Total liabilities and stockholders’ equity $ 102,656 $ 30,495 See accompanying notes to consolidated financial statements. F- 4 AIKIDO PHARMA INC. Consolidated Statements of Operations ($ in thousands except share and per share amounts) Years Ended December 31, 2021 2020 Operating costs and expenses General and administrative $ 7,734 $ 4,057 Research and development 559 1,020 Research and development - license acquired 1,148 1,469 Total operating expenses 9,441 6,546 Loss from operations ( 9,441 ) ( 6,546 ) Other income (expenses) Other income 135 19 Interest income 252 - (Loss) gains on marketable securities ( 1,743 ) 1,001 Change in fair value of investment 3,626 ( 6,811 ) Total other income (expenses) 2,270 ( 5,791 ) Net loss $ ( 7,171 ) $ ( 12,337 ) Net loss per share, basic and diluted Basic and Diluted $ ( 0.09 ) $ ( 0.44 ) Weighted average number of shares outstanding, basic and diluted Basic and Diluted 82,398,369 28,074,116 See accompanying notes to consolidated financial statements. F- 5 AIKIDO PHARMA INC. Consolidated Statements of Changes in Stockholders’ Equity ($ in thousands except share and per share amounts) 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, 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 Issuance of common stock and warrants (net of offering costs of $ 8,031 ) 53,905,927 6 - - 78,213 - - - 78,219 Exercise of warrants 80,000 - - - 84 - - - 84 Issuance of common stock for research and development license acquired 625,000 - - - 531 - - - 531 Conversion of Series D Preferred stock 112 - ( 900 ) - - - - - - Stock-based compensation 150,000 - - - 314 - - - 314 Net loss - - - - - - - ( 7,171 ) ( 7,171 ) Balance at December 31, 2021 89,681,258 $ 9 4,659 $ - $ 265,624 3 $ ( 264 ) $ ( 163,774 ) $ 101,595 See accompanying notes to consolidated financial statements. F- 6 AIKIDO PHARMA INC. Consolidated Statements of Cash Flows ($ in thousands) Years Ended December 31, 2021 2020 Cash flows from operating activities Net loss $ ( 7,171 ) $ ( 12,337 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of investment ( 3,626 ) 6,811 Research and development-acquired license, expensed 1,148 1,469 Stock-based compensation 314 84 Realized loss (gain) on marketable securities 67 ( 509 ) Unrealized loss on marketable securities 3,115 218 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 227 ) ( 34 ) Accounts payable and accrued expenses ( 186 ) 499 Accrued salaries and benefits 370 ( 372 ) Interest receivable on convertible note ( 252 ) - Security deposit ( 155 ) - Payable to DatChat - 150 Net cash used in operating activities ( 6,603 ) ( 4,021 ) Cash flows from investing activities Purchase of marketable securities ( 93,432 ) ( 98,827 ) Sale of marketable securities 103,043 74,873 Proceeds from sale of Hoth common shares - 460 Proceeds from sale of DatChat common shares 900 - Funds to deposit accounts, net ( 4,201 ) - Purchase of short-term investments ( 5,666 ) - Purchase of research and development licenses ( 617 ) ( 1,469 ) Purchase of convertible note ( 2,000 ) - Purchase of short-term notes ( 6,880 ) - Net cash used in investing activities ( 8,853 ) ( 24,963 ) Cash flows from financing activities Proceeds from issuance of common stock and warrants, net of offering cost 78,219 6,559 Proceeds from issuance of common stock, net of offering cost - 17,845 Proceeds from exercise of warrants 84 7,204 Net cash provided by financing activities 78,303 31,608 Net increase in cash and cash equivalents 62,847 2,624 Cash and cash equivalents, beginning of period 2,715 91 Cash and cash equivalents, end of period $ 65,562 $ 2,715 Non-cash investing and financing activities Distribution of Hoth common stock $ - $ 269 See accompanying notes to consolidated financial statements. F- 7 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Note 1. Organization and Description of Business and Recent Developments 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’s innovative therapeutic drug pipeline is currently being advanced through strong collaborations with 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. Note 2. Liquidity and Capital Resources The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities through managing current cash on hand from the Company’s past debt and equity offerings. 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 $ 78.0 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. Based upon projected cash flow requirements, the Company has adequate cash to fund its operations for at least the next twelve months from the date of the issuance of these consolidated financial statements. 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 subsidiary, AIkido Labs LLC. All significant intercompany balances and transactions have been eliminated in consolidation. F- 8 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Use of Estimates The accompanying consolidated financial statements have been prepared in conformity with US GAAP. This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include stock-based compensation, the valuation of investments, the valuation of notes receivable 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, 2021 and 2020. Marketable Securities Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of 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. 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. F- 9 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements The Company accounts for forfeitures as they occur. Fair Value Option – Short-term Note and Convertible Note The guidance in ASC 825, Financial Instruments , provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our consolidated balance sheets from those instruments using another accounting method. Long-term investments Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values. For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment. Deposits In April 2021, the Company deposited $ 5 million with a fund to identify opportunities to expand the Company’s core business strategies in Asia. The cash are held in bank accounts on behalf of the Company until the fund manager identifies investments. During the year ended December 31, 2021, the Company incurred advisory fees and legal fee of approximately $ 0.8 million, and the balance held in cash in this fund was $ 4.2 million as of December 31, 2021. 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. 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. F- 10 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Note 4. License agreement with Silo Pharma Inc. 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”). On April 12, 2021, the Company entered into an amendment to the License Agreement (“Amendment”). The Amendment amended a portion of the license fees included in the original License Agreement and exchange 500 shares of the Company’s Series M Convertible Preferred Stock to an aggregate of 625,000 restricted shares of the Company’s common stock, par value $ 0.001 per share, effective as of January 5, 2021. The Company paid a one-time nonrefundable cash payment of $ 0.5 million to Silo Pharma. The Company shall also pay Silo Pharma a running royalty equal to 2 % of “net sales” (as such term is defined in the License Agreement). Running royalties are amounts paid to the licensor over time based on the revenue earned by the licensee from sales of products that embody the licensed IP, if any. Note 5. Investments in Marketable Securities The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the years ended December 31, 2021 and 2020, which are recorded as a component of gains and (losses) on marketable securities 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, 2021 2020 Realized gain (loss) $ ( 67 ) $ 509 Unrealized loss ( 3,115 ) ( 218 ) Dividend income 1,439 636 Interest income - 4 $ ( 1,743 ) $ 931 Note 6. Short-term investments The following table presents the Company’s short-term investments at December 31, 2021 and 2020 ($ in thousands): As of December 31, 2021 2020 Investment in Hoth Therapeutics, Inc. $ 770 $ - Investment in DatChat, Inc. 1,084 - Investment in Vicinity Motor Corp. 418 - Total $ 2,273 $ - Investment in Hoth Therapeutics, Inc. The following summarizes the Company investment in Hoth as of December 31, 2021 and 2020: Security Name Shares Owned as of December 31, 2021 Fair value per Share as of December 31, 2021 Fair value as of December 31, 2021 (in thousands) HOTH 1,166,415 $ 0.66 $ 770 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 The investment in HOTH as of December 31, 2020 is recorded in long term investments. See Note 7. F- 11 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Investment in DatChat, Inc. DatChat, Inc. (“DatChat”) is a communications software company that gives users the ability to communicate with privacy and protection. On August 17, 2021, DatChat closed its initial public offering (the “IPO”) at an initial offering price to the public of $ 4.15 per share under the ticker DATS. The Company records this investment at fair value and records any change in fair value in the statements of operations (see Note 9). On September 22, 2021, the Company entered into a certain Stock Transfer Agreement, by and between the Company and a purchaser, and sold 167,084 shares of DatChat common stock for net proceeds of approximately $ 0.9 million. The following summarizes the Company investment in DatChat as of December 31, 2021: Security Name Shares Owned as of December 31, 2021 Fair value per Share as of December 31, 2021 Fair value as of December 31, 2021 (in thousands) DATS 357,916 $ 3.03 $ 1,084 Investment in Vicinity Motor Corp. On October 25, 2021, the Company entered into a warrant agreement with Vicinity Motor Corp. (“Vicinity”) that entitles the Company to purchase up to 246,399 shares of Vicinity common stock at $ 5.10 per share. The warrant expires on October 25, 2024 . The fair value was determined using a Black-Scholes simulation. The Company recorded the fair value of the Vicinity warrant of approximately $ 0.4 million in the consolidated balance sheet as of December 31, 2021, reflecting the benefit received as part of its purchase of Vicinity common shares through its brokerage account. The initial investment in Vicinity was measured at approximately $ 0.6 million. Gains or losses associated with changes in the fair value of investments in Vicinity warrants are recognized as Change in fair value of investment on consolidated statements of operations (see Note 9). During the year ended December 31, 2021, the Company recorded approximately $ 0.4 million of change in fair value of investment for this investment. The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates: As of Octorber 25, 2021 As of December 31, 2021 Option term (in years) 3.0 2.8 Volatility 94.10 % 95.52 % Risk-free interest rate 0.76 % 0.97 % Expected dividends 0.00 % 0.00 % Stock price $ 4.11 $ 3.50 F- 12 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Note 7. Long-Term Investments The following table presents the Company’s other investments at December 31, 2021 and 2020 ($ in thousands): As of December 31, 2021 2020 Investment in Kerna Health Inc $ 3,800 $ - Investment in Kaya Holding Corp 1,665 - Investment in Tevva Motors 2,000 - Investment in ASP Isotopes 1,000 - Investment in AerocarveUS Corporation 1,000 - Investment in HOTH - 2,764 Total $ 9,465 $ 2,764 Investment in Kerna Health Inc On September 15, 2021, the Company entered into a securities purchase agreement (the “Kerna Securities Purchase Agreement”) with Kerna Health Inc., (“Kerna”). Under the Kerna Securities Purchase Agreement, the Company agreed to purchase 1,333,334 shares of common stock of Kerna for $ 1.0 million. Kerna, a private company, raised capital during the fourth quarter of 2021, increasing its share price value to $ 2.85 per share. Therefore, the Company recorded a $ 2.8 million unrealized gain on this investment during the fourth quarter of 2021. The investment in Kerna was valued at $ 3.8 million as of December 31, 2021. Investment in Kaya Holding Corp On September 29, 2021, the Company entered into a securities purchase agreement (the “Kaya Securities Purchase Agreement”) with Kaya Holding Corp., (“Kaya”). Under the Kaya Securities Purchase Agreement, the Company agreed to purchase 8,325,000 shares of common stock of Kaya for approximately $ 0.7 million. Kaya, a private company, raised capital during the fourth quarter of 2021, increasing its share price value to $ 0.20 per share. Therefore, the Company recorded approximate $ 1.0 million in unrealized gain on this investment during the fourth quarter of 2021. The investment in Kaya was valued at approximately $ 1.7 million as of December 31, 2021. Investment in Tevva Motors On September 22, 2021, the Company entered into a securities purchase agreement (the “Tevva Motors Subscription Agreement”) with Big Sky Opportunities Fund, LLC, who handled the offering for Tevva Motors. Under the Tevva Motors Subscription Agreement, the Company agreed to purchase 29,004 interests of Tevva Motors for approximately $ 1.0 million. Subsequently, on September 30, 2021, the Company entered into a second securities purchase agreement with Big Sky Opportunities Fund, LLC to purchase an additional 29,004 interests of Tevva Motors for approximately $ 1.0 million. The investment in Tevva was valued at approximately $ 2.0 million as of December 31, 2021. F- 13 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Investment in ASP Isotopes On November 18, 2021, the Company entered into a securities purchase agreement (the “ASP Securities Purchase Agreement”) with ASP Isotopes Inc., (“ASP Isotopes”). Under the ASP Securities Purchase Agreement, the Company agreed to purchase 500,000 shares of common stock of ASP Isotopes for $ 1.0 million. The investment in ASP Isotepes was valued at approximately $ 1.0 million as of December 31, 2021. Investment in AerocarveUS Corporation On November 22, 2021, the Company entered into a securities purchase agreement (the “AerocarveUS Securities Purchase Agreement”) with AerocarveUS Corporation, (“AerocarveUS”). Under the AerocarveUS Securities Purchase Agreement, the Company agreed to purchase 250,000 shares of common stock of AerocarveUS for $ 1.0 million. The investment in AerocarveUS was valued at approximately $ 1.0 million as of December 31, 2021. Note 8. Notes Receivable The following table presents the Company’s notes receivable at December 31, 2021 ($ in thousands): Maturity Date Stated Interest Rate Interest Receivable Fair Value Shor-term convertible notes receivable Slinger Bag Inc Investment 08/06/2022 8 % $ 45 $ 1,445 Nano Innovations Inc Investment 12/26/2022 10 % $ 1 $ 751 Short-term notes receivable Raefan Group LLC Investment 10/13/2022 8 % $ 48 $ 2,828 Raefan Industries LLC Investment 12/06/2022 8 % $ 11 $ 1,961 Long-term convertible note receivable Convergent Investment 01/29/2023 8 % $ 147 $ 2,147 Convergent Investment On January 29, 2021, the Company purchased an 8 % convertible promissory note (“Convergent Convertible Note”) issued by Convergent Therapeutics, Inc. (“Convergent”) in the principal amount of $ 2.0 million pursuant to a Note Purchase Agreement with Convergent. The Company paid a purchase price for the Convergent Convertible Note of $ 2 million. The Company will receive interest on the Convergent Convertible Note at the rate of 8 % per annum payable upon conversion or maturity of the Convergent Convertible Note. The Convergent Convertible Note shall mature on January 29, 2023 . The Company recorded an interest income receivable of approximately $ 0.1 million on the Convergent Convertible Note as of December 31, 2021. Raefan Group LLC Investment On October 13, 2021, the Company purchased an 8 % promissory note (“Raefan Group Promissory Note”) issued by Raefan Group, LLC (“Raefan Group”) in the principal amount of approximately $ 2.8 million pursuant to a Note Purchase Agreement with Raefan Group. The Company will receive interest on the Raefan Group Promissory Note at the rate of 8 % per annum payable upon conversion or maturity of the Raefan Group Promissory Note. The Raefan Group Promissory Note shall mature on October 13, 2022 . The Company recorded an interest income receivable of approximately $ 48,000 on the Raefan Group Promissory Note as of December 31, 2021. F- 14 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Raefan Industries LLC Investment On December 6, 2021, the Company purchased an 8 % promissory note (“Raefan Industries Promissory Note”) issued by Raefan Industries, LLC (“Raefan Industries”) in the principal amount of approximately $ 2.0 million pursuant to a Note Purchase Agreement with Raefan Industries. The Company paid a purchase price for the Raefan Industries Promissory Note of approximately $2.0 million. The Company will receive interest on the Raefan Industries Promissory Note at the rate of 8 % per annum payable upon conversion or maturity of the Raefan Industries Promissory Note. The Raefan Industries Promissory Note shall mature on December 6, 2022 . The Company recorded an interest income receivable of approximately $ 11,000 on the Raefan Industries Promissory Note as of December 31, 2021. Slinger Bag Inc Investment On August 6, 2021, the Company entered into a securities purchase agreement (the “Slinger Bag Securities Purchase Agreement”) with Slinger Bag Inc., (“Slinger Bag”). Under the Slinger Bag Securities Purchase Agreement, the Company purchased an 8 % convertible promissory note (“Slinger Bag Convertible Note”) in the principal amount of $ 1.4 million and a common stock purchase warrant to purchase up to 933,333 shares of common stock of Slinger Bag. The Company paid a purchase price of $ 1.4 million for the Slinger Bag Convertible Note and the common stock purchase warrant. The Company will receive interest on the Slinger Bag Convertible Note at the rate of 8 % per annum payable upon conversion or maturity of the Slinger Bag Convertible Note. The Slinger Bag Convertible Note shall mature on August 6, 2022 . The Company recorded an interest income receivable of approximately $ 45,000 on the Slinger Bag Convertible Note as of December 31, 2021. Nano Innovations Inc Investment On December 26, 2021, the Company entered into a securities purchase agreement (the “Nano Securities Purchase Agreement”) with Nano Innovations Inc., (“Nano”). Under the Nano Securities Purchase Agreement, the Company purchased a 10 % senior secured convertible promissory note (“Nano Convertible Note”) in the principal amount of $ 750,000 and warrants permitting the Company to purchase an amount of Nano’s common voting shares equal to 50 % of the number of common shares issuable upon the conversion of Nano Convertible Note. The Company paid a purchase price of $ 750,000 for the Nano Convertible Note and the common stock purchase warrants. The Company will receive interest on the Nano Convertible Note at the rate of 10 % per annum payable upon conversion or maturity of the Nano Convertible Note. The Nano Convertible Note shall mature on December 26, 2022. The Company recorded an interest income receivable of approximately $ 1,000 on the Nano Convertible Note as of December 31, 2021. F- 15 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Note 9. Fair Value of Financial Assets and Liabilities Financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 - quoted prices in active markets for identical assets or liabilities Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. The following table presents the Company’s assets and liabilities that are measured at fair value at December 31, 2021 and 2020 ($ in thousands): Fair value measured at December 31, 2021 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2021 (Level 1) (Level 2) (Level 3) Assets Marketable securities: Equities $ 11,427 $ 11,427 $ - $ - Total marketable securities $ 11,427 $ 11,427 $ - $ - Short-term investment $ 2,273 $ 1,854 $ - $ 418 Notes receivable at fair value $ 6,984 $ - $ - $ 6,984 Convertible note receivable at fair value $ 2,147 $ - $ - $ 2,147 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: Equities $ 24,274 $ 24,274 $ - $ - Mutual fund securities $ 527 $ 527 $ - $ - $ 24,801 $ 24,801 $ - $ - Investments $ 2,764 $ 2,764 $ - $ - F- 16 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Level 3 Measurement The 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 ($ in thousands): Fair Value of Level 3 short-term investment December 31, 2021 December 31, 2020 Beginning balance $ - $ - Change in fair value of investment 418 - Ending balance $ 418 $ - Fair Value of Level 3 Notes receivable at fair value December 31, 2021 December 31, 2020 Beginning balance $ - $ - Purchase of notes receivable 6,880 - Accrued interest receivable 105 - Ending balance $ 6,984 $ - Fair Value of Level 3 Convertible note receivable December 31, 2021 December 31, 2020 Beginning balance $ - $ - Purchase of notes receivable 2,000 - Accrued interest receivable 147 - Ending balance $ 2,147 $ - Short-term Note Receivable and Convertible Notes Receivable The Company has elected to measure the purchases of the notes using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the consolidated statements of operations. The value at which the Company’s convertible note is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market conditions and those characteristics specific to the underlying investments. Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the consolidated statements of operations. Convergent Investment As of December 31, 2021, the fair value of the Convergent Convertible Note was measured at $ 2.1 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. F- 17 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Raefan Group LLC Investment As of December 31, 2021, the fair value of the Raefan Group Promissory Note was measured at approximately $ 2.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. Raefan Industries LLC Investment As of December 31, 2021, the fair value of the Raefan Industries Promissory Note was measured at approximately $ 2.0 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. Slinger Bag Inc Investment As of December 31, 2021, the fair value of the Slinger Bag Convertible Note was measured at $ 1.4 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. The Company believes that the fair value of the warrant of Slinger Bag is immaterial. Nano Innovations Inc Investment As of December 31, 2021, the fair value of the Nano Convertible Note was measured at approximately $ 0.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021. The Company believes that the fair value of the warrant of Nano is immaterial. Note 10. Net Loss per Share Basic loss per common share is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December 31, 2021 and 2020 are as follows: As of December 31, 2021 2020 Convertible preferred stock 577 688 Warrants to purchase common stock 5,801,701 1,656,354 Options to purchase common stock 479,654 384,304 Total 6,281,932 2,041,346 F- 18 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Note 11. 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. 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. The total net proceeds received from these two offerings were approximately $ 78.2 million. In connection with the Offering, the Company issued the Underwriter warrants (the “Underwriter’s Warrants”) to purchase up to 4,312,473 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- 19 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements 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. On December 21, 2021, the Company issued 112 shares of common stock upon the conversion of 900 shares of Series D Convertible Preferred stock. As of December 31, 2021 and 2020, 5,000,000 Series D Preferred Stock designated; 3,825 and 4,725 shares remained issued and outstanding, respectively. 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, 2021 and 2020, 5,000,000 Series D-1 Preferred Stock designated; 834 shares remained issued and outstanding. Warrants A summary of warrant activity for year ended December 31, 2021 and 2020 is presented below: Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) 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 Issued 4,312,473 2.00 - 4.14 Exercised ( 80,000 ) 1.05 - - Expired ( 153,789 ) 19.67 - - Forfeited ( 3 ) 16.15 - - Outstanding as of December 31, 2021 5,801,701 $ 1.86 - 3.87 Confirmation of Mutual Understanding - In March 2022, pursuant to a Confirmation of Mutual Understanding (the “Confirmation”), all parties to the Confirmation acknowledged and confirmed a scrivener’s error set forth in warrants to purchase shares of the Company’s common stock (the “Warrants”) dated March 10, 2020, April 15, 2020 and March 2, 2021. Pursuant to the Confirmation, all parties, which were involved in the original execution of the warrants, agreed that clause (v) of the definition of Fundamental Transaction in Section 3(d) of the Warrants, is as follows: “ the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50 % of the voting power of the Company’s outstanding equity securities, including with respect to the election of directors (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) ”. F- 20 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements 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, 2021, there were 479,654 options outstanding and 4,520,346 shares available for grant under the AIkido Pharma Inc. 2014 Equity Incentive Plan. The fair value of options granted in 2021 and 2020 was estimated using the following assumptions: For the Years Ended December 31, 2021 2020 Exercise price $ 1.24 $ 0.64 Term (years) 10.00 10.00 Expected stock price volatility 124.1 % 124.0 % Risk-free rate of interest 0.45 % 0.37 % A summary of option activity under the Company’s stock option plan for year ended December 31, 2021 and 2020 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, 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 Employee options granted 100,000 1.24 - 9.1 Employee options expired ( 4,650 ) - - - Outstanding as of December 31, 2021 479,654 $ 32.35 $ - 8.2 Options vested and exercisable 479,654 $ 32.35 $ - 8.2 Stock-based compensation associated with the amortization of stock option expense was $ 0.2 million and $ 84,000 for the years ended December 31, 2021 and 2020, respectively. All stock compensation was recorded as a component of general and administrative expenses. Estimated future stock-based compensation expense relating to unvested stock options is approximately $ 0 . Restricted Stock Awards Pursuant to the patent license agreement effective January 5, 2021 with Silo Parma Inc., the Company issued and delivered to Silo Pharma 625,000 shares of the Company’s restricted stock as consideration for the license of the licensed patents. This restricted stock award vested immediately. The Company recorded approximately $ 0.5 million in research and development expense related with license acquired during the year ended December 31, 2021related to this arrangement. On July 31, 2021, the Company issued each of six directors 25,000 shares of the Company’s common stock pursuant to the Company’s 2014 Equity Incentive Plan. These shares have a total fair value of approximately $ 0.1 million. These restricted stock awards vested immediately. Note 12. Commitments and Contingencies Legal Proceedings In the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us. F- 21 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Risks and Uncertainties - COVID-19 Management continues to valuate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for drug candidates, the specific impact is not readily determinable as of the date of these consolidated financial statements. The COVID-19 pandemic has slowed down some drug development efforts and has slowed the acquisition of new drugs. However, the impact of the pandemic and ensuing lockdowns are easing. The process of drug development and further acquisitions is now continuing. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Note 13. Income Taxes The income tax provision consists of the following ($ in thousands): For the years ended December 31, 2021 2020 Federal Current $ - $ ( 85 ) Deferred ( 1,581 ) ( 1,821 ) Increase in valuation allowance 1,581 1,821 State and local Current Deferred 2,492 ( 3,739 ) Increase in valuation allowance ( 2,492 ) 3,739 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, 2021 and 2020: For the years ended December 31, 2021 2020 U.S. Statutory Federal Rate 21 % 21 % State Taxes, Net of Federal Tax Benefit % % Other Permanent Differences ( 0.87 )% 0.04 % State rate change in effect ( 5.65 )% 40.36 % AMT credit benefit % 0.68 % Decrease due to true up of State NOL ( 44.95 )% ( 10.36 )% Decrease due to change in Federal NOL and other true ups 12.96 % ( 6.34 )% Change in Valuation Allowance 17.51 % ( 44.7 )% Income Tax Benefit 0.00 % 0.68 % At December 31, 2021 and 2020, 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, 2021 2020 Deferred tax assets: Net-operating loss carryforward $ 20,161 $ 19,000 Stock based compensation 8,196 8,290 Patent portfolio and other 13,917 14,917 Total Deferred Tax assets 42,274 42,207 Valuation allowance ( 39,759 ) ( 40,670 ) Deferred Tax Asset, Net of Allowance $ 2,516 $ 1,537 Deferred tax liability: Fair value adjustment of investment $ ( 2,516 ) $ ( 1,537 ) F- 22 AIKIDO PHARMA INC. 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 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, 2021 and 2020. As of December 31, 2021, the change in valuation allowance is approximately $ 4.1 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, 2021, 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, 2021 and 2020, no liability for unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December 31, 2021 and 2020. 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, 2021, 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 2021 and 2020. 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. Note 14. Related Party Transaction In 2021, the Company engaged the services of Revere Securities, LLC (“Revere”) to strategically manage and build our investment processes. Kyle Wool, Board Member, is the president of Revere. The Company incurred fees of approximately $ 1.2 million during the year December 31, 2021. These fees were included in general and administrative expense in the consolidated statements of operations. Note 15. Subsequent Events Share Repurchase Program On January 21, 2022, the board of directors of AIkido Pharma Inc., a Delaware corporation (the “Company”), authorized a share repurchase program (the “Share Repurchase Program”), pursuant to which the Company may, from time to time, purchase shares of its outstanding stock for an aggregate purchase price not to exceed $ 3 million dollars. Share repurchases may be executed in open market transactions pursuant to a plan which will be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”) and in accordance with Rule 10b-18 of the Exchange Act. The authorization for the Share Repurchase Program may be terminated by the Company in its discretion at any time. F- 23 AIKIDO PHARMA INC. Notes to Consolidated Financial Statements Delisting Notice As previously disclosed, on August 10, 2021, AIkido Pharma Inc., a Delaware corporation, (the “Company”) received a written notice from the Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that its common stock, par value $ 0.0001 per share, 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). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was granted an initial 180-calendar day compliance period, or until 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 was required to meet or exceed $ 1.00 per share for at least 10 consecutive business days during the 180-calendar day compliance period. On February 8, 2022, the Company received a written notice from Nasdaq that its listed security had not regained compliance with the $ 1.00 minimum bid price per share requirement. The Company was granted an additional 180 calendar day period, or until August 8, 2022, to regain compliance. Public Offering On February 24, 2022 the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in concurrent registered direct offerings (the “Offerings”), (i) 11,000 shares of the Company’s Series O Redeemable Convertible Preferred Stock, par value $0.001 per share (the “Series O Preferred Stock”), and (ii) 11,000 shares of the Company’s Series P Redeemable Convertible Preferred Stock, par value $0.001 per share (the “Series P Preferred Stock” and together with the Series O Preferred Stock, the “Preferred Stock”), in each case, at an offering price of $952.38 per share, representing a 5% original issue discount to the stated value of $1,000 per share of Preferred Stock, for gross proceeds of each Offering of $10,476.180, or approximately $21.9 million in the aggregate for the Offerings, before the deduction of the placement agent’s fee and offering expenses. The shares of Series O Preferred Stock will have a stated value of $ 1,000 per share and will be convertible, at a conversion price of $ 1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The shares of Series P Preferred Stock will have a stated value of $ 1,000 per share and will be convertible, at a conversion price of $ 1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The Series O Preferred Stock and the Series P Preferred Stock are being offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-238172) (the “Registration Statement”) filed under the Securities Act of 1933, as amended (the “Securities Act”). The Company retained the investment banking firm of H.C. Wainwright & Co., LLC (“HCW”) to facilitate the Offerings. The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the Offerings occurred on March 2, 2022. F- 24 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.