Dominari Holdings Inc. 10-Q

Item 1. Financial Statements AIKIDO PHARMA INC. Condensed Consolidated Balance Sheets ($ in thousands except share and per share amounts) March 31, December 31, 2022 2021 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 49,686 $ 65,562 Restricted cash 20,953 - Marketable securities 14,435 11,427 Prepaid expenses and other assets 348 442 Short-term investments at fair value 255 2,273 Notes receivable at fair value 9,310 6,984 Deposits 4,194 4,201 Total current assets 99,181 90,889 Convertible note receivable at fair value - 2,147 Investments 18,610 9,465 Security deposit 155 155 Total assets $ 117,946 $ 102,656 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 209 $ 381 Accrued salaries and benefits 686 680 Total current liabilities 895 1,061 Total liabilities 895 1,061 Commitments and contingencies Series O Redeemable Convertible Preferred Stock, $ 0.0001 par value; 11,000 and 0 shares issued and outstanding, at $ 1,000.00 per share at March 31, 2022 and December 31, 2021 11,000 - Series P Redeemable Convertible Preferred Stock, $ 0.0001 par value; 11,000 and 0 shares issued and outstanding, at $ 1,000.00 per share at March 31, 2022 and December 31, 2021 11,000 - Stockholders’ equity Preferred stock, $ .0001 par value, 50,000,000 Authorized Series D: 5,000,000 shares designated; 3,825 shares issued and outstanding at March 31, 2022 and December 31, 2021; liquidation value of $ 0.0001 per share - - Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at March 31, 2022 and December 31, 2021; liquidation value of $ 0.0001 per share - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 89,293,446 and 89,681,258 shares issued at March 31, 2022 and December 31, 2021, respectively; 89,293,443 and 89,681,255 shares outstanding at March 31, 2022 and December 31, 2021, respectively 9 9 Additional paid-in capital 262,615 265,624 Treasury stock, at cost, 3 shares at March 31, 2022 and December 31, 2021 ( 264 ) ( 264 ) Accumulated deficit ( 167,309 ) ( 163,774 ) Total stockholders’ equity 95,051 101,595 Total liabilities, redeemable convertible preferred stock and stockholders’ equity $ 117,946 $ 102,656 See accompanying notes to condensed consolidated financial statements. 1 AIKIDO PHARMA INC. Condensed Consolidated Statements of Operations ($ in thousands except share and per share amounts) (Unaudited) Three Months Ended March 31, 2022 2021 Operating costs and expenses General and administrative $ 1,787 $ 1,212 Research and development 2,016 72 Research and development - license acquired - 1,034 Total operating expenses 3,803 2,318 Loss from operations ( 3,803 ) ( 2,318 ) Other income (expenses) Other income 64 135 Interest income 179 27 Loss on marketable securities ( 497 ) ( 1,339 ) Change in fair value of investment 522 ( 467 ) Total other income (expenses) 268 ( 1,644 ) Net loss $ ( 3,535 ) $ ( 3,962 ) Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock ( 3,009 ) - Net Loss Attributable to Common Shareholders $ ( 6,544 ) $ ( 3,962 ) Net loss per share, basic and diluted Basic and Diluted $ ( 0.07 ) $ ( 0.07 ) Weighted average number of shares outstanding, basic and diluted Basic and Diluted 89,293,446 60,281,906 See accompanying notes to condensed consolidated financial statements. 2 AIKIDO PHARMA INC. Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity ($ in thousands except share and per share amounts) (Unaudited) For the Three Months Ended March 31, 2022 Redeemable Convertible Preferred Stock Additional Total Series O Series P Common Stock Preferred Stock Paid-in Treasury Stock Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Equity Balance at December 31, 2021 - $ - - $ - 89,681,258 $ 9 4,659 $ - $ 265,624 3 $ ( 264 ) $ ( 163,774 ) $ 101,595 Issuance of Series O redeemable convertible preferred stock for cash 11,000 11,000 - - - - - - - - Issuance of Series P redeemable convertible preferred stock for cash 11,000 11,000 - - - - - - - - Cost on issuance of Series O and Series P Redeemable Convertible Preferred Stock - ( 1,504 ) - ( 1,505 ) - - - - - - - - Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock - 1,504 - 1,505 - - - ( 3,009 ) - - - ( 3,009 ) Cancellation of common stock related to investment in CBM - - - - ( 387,812 ) - - - - - - - - Net loss - - - - - - - - - - - ( 3,535 ) ( 3,535 ) Balance at March 31, 2022 11,000 $ 11,000 11,000 $ 11,000 89,293,446 $ 9 4,659 $ - $ 262,615 3 $ ( 264 ) $ ( 167,309 ) $ 95,051 For the Three Months Ended March 31, 2021 Common Stock Preferred Stock Additional Paid-in Treasury Stock Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Shares Amount Deficit Equity Balance at December 31, 2020 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 $ 8,260 ) 53,905,927 6 - - 77,983 - - - 77,989 Exercise of warrants 80,000 - - - 84 - - - 84 Issuance of common stock for research and development license acquired 625,000 - - - 531 - - - 531 Stock-based compensation - - - - 112 - - - 112 Net loss - - - - - - - ( 3,962 ) ( 3,962 ) Balance at March 31, 2021 89,531,146 $ 9 5,559 $ - $ 265,192 3 $ ( 264 ) $ ( 160,565 ) $ 104,372 See accompanying notes to condensed consolidated financial statements. 3 AIKIDO PHARMA INC. Condensed Consolidated Statements of Cash Flows ($ in thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net loss $ ( 3,535 ) $ ( 3,962 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of short-term investment 886 467 Change in fair value of long-term investment ( 1,408 ) Research and development-acquired license, expensed - 1,034 Stock-based compensation - 112 Realized loss (gain) on marketable securities 224 ( 424 ) Unrealized loss on marketable securities 333 2,049 Realized gain on sale of digital currencies ( 64 ) - Changes in operating assets and liabilities: Prepaid expenses and other assets 66 16 Accounts payable and accrued expenses ( 172 ) ( 323 ) Accrued salaries and benefits 6 5 Interest receivable on convertible note ( 179 ) ( 27 ) Deposits 7 - Net cash used in operating activities ( 3,836 ) ( 1,053 ) Cash flows from investing activities Purchase of marketable securities ( 27,096 ) ( 83,586 ) Sale of marketable securities 24,662 14,335 Proceeds from sale of digital currencies 93 - Purchase of short-term and long-term investments ( 7,737 ) - Purchase of research and development licenses - ( 503 ) Purchase of convertible note - ( 2,000 ) Net cash used in investing activities ( 10,078 ) ( 71,754 ) Cash flows from financing activities Proceeds from issuance of common stock and warrants, net of offering cost - 77,989 Proceeds from issuance of Series O and Series P Redeemable Convertible Preferred Stock, net of discount and offering cost 18,991 - Proceeds from exercise of warrants - 84 Net cash provided by financing activities 18,991 78,073 Net increase in cash and cash equivalents and restricted cash 5,077 5,266 Cash and cash equivalents and restricted cash, beginning of period 65,562 2,715 Cash and cash equivalents and restricted cash, end of period $ 70,639 $ 7,981 Non-cash investing and financing activities Transfer from short-term investment to marketable securities $ 1,482 $ - Reclassify from convertible note receivable to notes receivable at fair value $ 2,147 $ - See accompanying notes to condensed consolidated financial statements. 4 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Organization and Description of Business and Recent Developments Organization and Description of Business AIkido Pharma Inc. (the “Company”), formerly known as Spherix Incorporated, was initially formed in 1967. Since 2017, the Company has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics in development. 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), accumulates preferentially in pancreatic tissue 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. 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. 5 Note 3. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiary, AIkido Labs LLC. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of March 31, 2022, condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022. Use of Estimates The accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP. This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include stock-based compensation, the valuation of investments, the valuation of convertible note and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions. Significant Accounting Policies Other than as described below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022. Redeemable Convertible Preferred Stock The convertible preferred stock was not unconditionally redeemable at the option of the holder thereof. However, the convertible preferred stock was contingently redeemable upon certain liquidation events. As redemption by the holders was not solely within the control of the Company, all of the outstanding convertible preferred stock was classified as temporary equity in the condensed consolidated balance sheets. Restricted Cash The following table provides a summary of the Company’s cash and restricted cash total as presented in the condensed consolidated statements of cash flows for the three months ended March 31, 2022 (in thousands): March 31, 2022 Cash $ 49,686 Restricted cash 20,953 Total cash and restricted cash $ 70,639 In accordance with the public offering of 11,000 shares of Series O Redeemable Convertible Preferred Stock and 11,000 shares of Series P Redeemable Convertible Preferred Stock, $ 21.0 million is held in escrow and disbursed to the Company only upon conversion of the Series O and Series P Preferred Stock. The proceeds are included within restricted cash on the accompanying consolidated balance sheets. See Note 10. Recent accounting pronouncements Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if currently adopted, would have an effect on the Company’s condensed consolidated financial statements. 6 Note 4. Investments in Marketable Securities The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three months ended March 31, 2022 and 2021, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of operations, are as follows ($ in thousands): Three Months Ended March 31, 2022 2021 Realized (loss) gain $ ( 224 ) $ 424 Unrealized loss ( 333 ) ( 2,049 ) Dividend income 60 286 $ ( 497 ) $ ( 1,339 ) Note 5. Short-term investments The following table presents the Company’s short-term investments at March 31, 2022 and December 31, 2021 ($ in thousands): March 31, 2022 December 31, 2021 Investment in Hoth Therapeutics, Inc. 24 770 Investment in DatChat, Inc. - 1,084 Investment in Vicinity Motor Corp. 231 419 Total 255 2,273 The change in the fair value of the short-term investments for the three months ended March 31, 2022 is summarized as follows: ($ in thousands): Beginning balance $ 2,273 Transfer to marketable securities ( 1,482 ) Change in fair value of investment ( 886 ) Realized gain recognized through sale of marketable securities 350 Ending balance $ 255 Investment in Hoth Therapeutics, Inc. On March 11, 2022, 1,130,701 shares of Hoth common stock were transferred to marketable securities account and were sold for net proceeds of approximately $ 0.9 million. The following summarizes the Company investment in Hoth as of March 31, 2022 and December 31, 2021: Security Name Shares Owned as of March 31, 2022 Fair value per Share as of March 31, 2022 Fair value as of March 31, 2022 (in thousands) HOTH 35,714 $ 0.69 $ 24 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 7 Investment in DatChat, Inc. On February 14, 2022, 357,916 shares (valued at $ 2.21 per share) of DatChat common stock were transferred to marketable securities account and were sold for net proceeds of approximately $ 0.8 million. Investment in Vicinity Motor Corp. On October 25, 2021, the Company entered into a warrant agreement with Vicinity Motor Corp. (“Vicinity”) that entitles the Company to purchase up to 246,399 shares of Vicinity common stock at $ 5.10 per share. The warrant expires on October 25, 2024 . The fair value was determined using a Black-Scholes simulation. The Company recorded the fair value of the Vicinity warrant of approximately $ 0.3 and $ 0.4 million in the consolidated balance sheet as of March 31, 2022 and December 31, 2021, respectively, reflecting the benefit received as part of its purchase of Vicinity common shares through its brokerage account. The initial investment in Vicinity was measured at approximately $ 0.6 million. Gains or losses associated with changes in the fair value of investments in Vicinity warrants are recognized as Change in fair value of investment on consolidated statements of operations. During the three months ended March 31, 2022, the Company recorded approximately $ 188,000 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: March 31, 2022 December 31, 2021 Option term (in years) 2.6 2.8 Volatility 93.90 % 95.52 % Risk-free interest rate 2.45 % 0.97 % Expected dividends 0.00 % 0.00 % Stock price $ 2.40 $ 3.50 Note 6. Long-Term Investments Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values. For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment. The following table presents the Company’s other investments at March 31, 2022 and December 31, 2021 ($ in thousands): March 31, 2022 December 31, 2021 Investment in Kerna Health Inc $ 3,800 $ 3,800 Investment in Kaya Holding Corp 2,340 1,665 Investment in Tevva Motors 3,364 2,000 Investment in ASP Isotopes 1,000 1,000 Investment in AerocarveUS Corporation 1,000 1,000 Investment in Qxpress 1,000 - Investment in Masterclass 170 - Investment in Kraken 486 - Investment in Epic Games 1,500 - Investment in Tesspay 1,250 - Investment in SpaceX 1,500 - Investment in Databricks 1,200 - Total $ 18,610 $ 9,465 8 The change in the value of the long-term investments for the three months ended March 31, 2022 is summarized as follows: ($ in thousands): Beginning balance $ 9,465 Purchase of investments 7,737 Adjustment to carrying value of investments 1,408 Ending balance $ 18,610 Investment in Kerna Health Inc The investment in Kerna Health Inc. was valued at $ 3.8 million as of March 31, 2022. Investment in Kaya Holding Corp On March 2, 2022, the Company purchased additional 3,375,000 shares of common stock of Kaya Holding Corp., (“Kaya”) for approximately $ 0.6 million. The Company recorded approximate $ 34,000 in unrealized gain on this investment during the three months ended March 31, 2022. The investment in Kaya was valued at approximately $ 2.3 million as of March 31, 2022. Investment in Tevva Motors Tevva Motors (“Tevva”), a private company, raised capital during the first quarter of 2022, increasing its share price value to $ 58.0 per share. Therefore, the Company recorded a $ 1.4 million unrealized gain on this investment during the three months ended March 31, 2022. The investment in Tevva was valued at approximately $ 3.4 million as of March 31, 2022. Investment in ASP Isotopes The investment in ASP Isotopes Inc. was valued at $ 1.0 million as of March 31, 2022. Investment in AerocarveUS Corporation The investment in AerocarveUS Corporation was valued at $ 1.0 million as of March 31, 2022. 9 Investment in Qxpress On January 27, 2022, the Company entered into a securities purchase agreement (the “Qxpress Securities Purchase Agreement”) with Qxpress. Under the Qxpress Securities Purchase Agreement, the Company agreed to purchase 46,780 shares of common stock of Qxpress for $ 1.0 million. The investment in Qxpress was valued at $ 1.0 million as of March 31, 2022. Investment in Masterclass On March 11, 2022, the Company entered into a securities purchase agreement (the “Masterclass Securities Purchase Agreement”) with Masterclass. Under the Masterclass Securities Purchase Agreement, the Company agreed to purchase 4,841 shares of common stock of Masterclass for approximately $ 0.2 million. The investment in Masterclass was valued at approximately $ 0.2 million as of March 31, 2022. Investment in Kraken On March 11, 2022, the Company entered into a securities purchase agreement (the “Kraken Securities Purchase Agreement”) with Kraken. Under the Kraken Securities Purchase Agreement, the Company agreed to purchase a total of 8,409 shares of common stock of Kraken for approximately $ 0.5 million. The investment in Kraken was valued at approximately $ 0.5 million as of March 31, 2022. Investment in Epic Games On March 22, 2022, the Company entered into a securities purchase agreement (the “Epic Games Securities Purchase Agreement”) with Epic Games. Under the Epic Games Securities Purchase Agreement, the Company agreed to purchase an aggregate of 901 shares of common stock of Epic Games for a total $ 1.5 million. The investment in Epic Games was valued at $ 1.5 million as of March 31, 2022. Investment in Tesspay On March 23, 2022, the Company entered into a securities purchase agreement (the “Tesspay Securities Purchase Agreement”) with Tesspay. Under the Tesspay Securities Purchase Agreement, the Company agreed to purchase 1,000,000 shares of common stock of Tesspay for approximately $ 0.2 million. The Company also invested an additional $ 1.0 million for pre-IPO. Tesspay, a private company, raised capital during the first quarter of 2022, increasing its share price value to $ 0.25 per share. Therefore, the Company recorded $ 10,000 in unrealized gain on this investment during the three months ended March 31, 2022. The investment in Tesspay was valued at approximately $ 1.3 million as of December 31, 2021. Investment in SpaceX On March 30, 2022, the Company entered into a securities purchase agreement (the “SpaceX Securities Purchase Agreement”) with SpaceX. Under the SpaceX Securities Purchase Agreement, the Company agreed to purchase a total of 100,000 shares of common stock of SpaceX for $ 1.5 million. The investment in SpaceX was valued at $ 1.5 million as of March 31, 2022. Investment in Databricks On March 25, 2022, the Company entered into a securities purchase agreement (the “Databricks Securities Purchase Agreement”) with Databricks. Under the Databricks Securities Purchase Agreement, the Company agreed to purchase an aggregate of 3,830 shares of common stock of Databricks for a total $ 1.2 million. The investment in Databricks was valued at $ 1.2 million as of March 31, 2022. 10 Note 7. Notes Receivable The following table presents the Company’s notes receivable at March 31, 2022 ($ in thousands): Maturity Date Stated Interest Rate Principal Amount Interest Receivable Fair Value Short-term convertible notes receivable Convergent Investment 01/29/2023 8 % $ 2,000 $ 187 $ 2,187 Slinger Bag Inc Investment 08/06/2022 8 % $ 1,400 $ 73 $ 1,473 Nano Innovations Inc Investment 12/26/2022 10 % $ 750 $ 20 $ 769 Short-term notes receivable Raefan Group LLC Investment 10/13/2022 8 % $ 2,780 $ 103 $ 2,882 Raefan Industries LLC Investment 12/06/2022 8 % $ 1,950 $ 49 $ 1,999 Total $ 9,310 Convergent Investment The Company recorded an interest income receivable of approximately $ 0.2 million on the Convergent Convertible Note as of March 31, 2022. Raefan Group LLC Investment The Company recorded an interest income receivable of approximately $ 0.1 million on the Raefan Group Promissory Note as of March 31, 2022. Raefan Industries LLC Investment The Company recorded an interest income receivable of approximately $ 49,000 on the Raefan Industries Promissory Note as of March 31, 2022. Slinger Bag Inc Investment The Company recorded an interest income receivable of approximately $ 73,000 on the Slinger Bag Convertible Note as of March 31, 2022. Nano Innovations Inc Investment The Company recorded an interest income receivable of approximately $ 20,000 on the Nano Convertible Note as of March 31, 2022. Note 8. Fair Value of Financial Assets and Liabilities Financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. 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) 11 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 March 31, 2022 and December 31, 2021 ($ in thousands): Fair value measured at March 31, 2022 Total at March 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2022 (Level 1) (Level 2) (Level 3) Assets Marketable securities: Equities $ 13,500 $ 13,500 $ - $ - Fixed Income $ 935 $ 935 Total marketable securities $ 14,435 $ 14,435 $ - $ - Short-term investment $ 255 $ 24 $ - $ 231 Notes receivable at fair value $ 9,310 $ - $ - $ 9,310 Fair value measured at December 31, 2021 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2021 (Level 1) (Level 2) (Level 3) Assets Marketable securities: Equities $ 11,427 $ 11,427 $ - $ - Total marketable securities $ 11,427 $ 11,427 $ - $ - Short-term investment $ 2,273 $ 1,854 $ - $ 419 Notes receivable at fair value $ 6,984 $ - $ - $ 6,984 Convertible note receivable $ 2,147 $ - $ - $ 2,147 Level 3 Measurement The following tables set forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis ($ in thousands): Notes receivable at fair value at December 31, 2021 $ 6,984 Accrued interest receivable at December 31, 2021 179 Reclassify from convertible note receivable to notes receivable at fair value 2,147 Notes receivable at fair value at March 31, 2022 $ 9,310 Short-term investment at December 31, 2021 $ 419 Change in fair value of investment ( 188 ) Short-term investment at March 31, 2022 $ 231 12 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 March 31, 2022, the fair value of the Convergent Convertible Note was measured at $ 2.2 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the three months ended March 31, 2022. Raefan Group LLC Investment As of March 31, 2022, the fair value of the Raefan Group Promissory Note was measured at approximately $ 2.9 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the three months ended March 31, 2022. Raefan Industries LLC Investment As of March 31, 2022, 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 for principal was recorded during the three months ended March 31, 2022. Slinger Bag Inc Investment As of March 31, 2022, the fair value of the Slinger Bag Convertible Note was measured at $ 1.5 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the three months ended March 31, 2022. The Company believes that the fair value of the warrant of Slinger Bag is immaterial. Nano Innovations Inc Investment As of March 31, 2022, the fair value of the Nano Convertible Note was measured at approximately $ 0.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value for principal was recorded during the three months ended March 31, 2022. The Company believes that the fair value of the warrant of Nano is immaterial. 13 Note 9. Net Loss per Share Attributable to Common Stockholders Basic loss per common share is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2022 and 2021 are as follows: As of March 31, 2022 2021 Convertible preferred stock 22,000,577 688 Warrants to purchase common stock 7,561,701 5,801,701 Options to purchase common stock 479,654 484,304 Total 30,041,932 6,286,693 Note 10. Redeemable Convertible Preferred Stock Series O and Series P Redeemable Convertible Preferred Stock On February 24, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in concurrent registered direct offerings (the “Offerings”), (i) 11,000 shares of the Company’s Series O Redeemable Convertible Preferred Stock, par value $ 0.001 per share (the “Series O Preferred Stock”), and (ii) 11,000 shares of the Company’s Series P Redeemable Convertible Preferred Stock, par value $ 0.001 per share (the “Series P Preferred Stock” and together with the Series O Preferred Stock, the “Preferred Stock”), in each case, at an offering price of $ 952.38 per share, representing a 5 % original issue discount to the stated value of $ 1,000 per share of Preferred Stock, for gross proceeds of each Offering of $10,476.180, or approximately $ 21.9 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 Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the Offerings occurred on March 2, 2022. In connection with this transaction, the Company placed $ 21.0 million in an escrow account which was recorded as restricted cash on the Condensed Consolidated Balance Sheets as of March 31, 2022. In connection with the Offerings, the Company has entered into an engagement agreement (the “Engagement Agreement Agreement”) with H.C Wainwright & Company, LLC, as placement agent (“HCW”), pursuant to which the Company agreed to pay HCW an aggregate cash fee equal to 8 % of the aggregate gross proceeds raised in the offerings and issue HCW common stock purchase warrants to purchase up to 1,760,000 shares of common stock in the aggregate at an exercise price of $ 1.25 . The warrants were recorded as a component of stockholders’ equity in accordance with FASB Accounting Standards Codification (“ASC”) 815. Redemption Rights After (i) the earlier of (1) the receipt of stockholder approval and (2) the date that is 90 days following the Original Issue Date (the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock) and (ii) before the date that is 120 days after the Original Issue Date (the “ Redemption Period ”), each Holder shall have the right to cause the Company to redeem all or part of such Holder’s shares of Preferred Stock at a price per share equal to 105 % of the Stated Value. As a result, the Preferred Stock were recorded separately from stockholders’ equity because they are redeemable upon the occurrence of redemption events that are considered not solely within the Company’s control. During the three months ended March 31, 2022, the Company recognized approximately $ 3.0 in deemed dividends related to the Preferred Stock in the condensed consolidated statements of operations and the condensed consolidated statements of changes in redeemable preferred stock and stockholders’ equity. 14 Note 11. Stockholders’ Equity Common Stock One June 5, 2020, CBM Biopharma, Inc. (“CBM”) approved a distribution to its stockholders of 1,939,058 the Company’s common shares. The Company, as one of CBM’s shareholder, received 387,812 shares of its common stock. The Company cancelled 387,812 shares received on January 1, 2022. Warrants A summary of warrant activity for the nine months ended March 31, 2022 is presented below: Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2021 5,801,701 $ 1.86 - 3.87 Issued 1,760,000 1.25 - 4.90 Outstanding as of March 31, 2022 7,561,701 $ 1.72 - 3.95 Stock Options A summary of stock option activity for the nine months ended March 31, 2022 is presented below: Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2021 479,654 $ 32.35 $ - 8.2 Outstanding as of March 31, 2022 479,654 $ 32.35 $ - 8.0 Options vested and exercisable 479,654 $ 32.35 $ - 8.0 Stock-based compensation associated with the amortization of stock option expense was approximately $ 0 and $ 0.1 million for the three months ended March 31, 2022 and 2021, respectively. All stock compensation was recorded as a component of general and administrative expenses. Estimated future stock-based compensation expense relating to unvested stock options is approximately $ 0 . 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. 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. Subsequent Events The Company evaluated events that have occurred after the balance sheet date through the date the condensed consolidated financial statements were issued. Based upon the evaluation and transactions, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements. 15