Dominari Holdings Inc. 10-Q

Item 1. Financial Statements AIKIDO PHARMA INC. Condensed Consolidated Balance Sheets ($ in thousands except share and per share amounts) June 30, December 31, 2022 2021 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 38,791 $ 65,562 Marketable securities 9,779 11,427 Prepaid expenses and other assets 196 442 Short-term investments at fair value 104 2,273 Notes receivable at fair value 8,500 6,984 Deposits 4,193 4,201 Total current assets 61,563 90,889 Convertible note receivable at fair value - 2,147 Notes receivable at fair value 1,100 - Investments 25,478 9,465 Security deposit 155 155 Total assets $ 88,296 $ 102,656 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 142 $ 381 Accrued salaries and benefits 687 680 Total current liabilities 829 1,061 Total liabilities 829 1,061 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 June 30, 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 June 30, 2022 and December 31, 2021; liquidation value of $ 0.0001 per share - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 5,246,852 and 5,275,329 shares issued at June 30, 2022 and December 31, 2021, respectively; 4,953,950 and 5,275,329 shares outstanding at June 30, 2022 and December 31, 2021, respectively - - Additional paid-in capital 261,603 265,633 Treasury stock, at cost, 242,902 and 0 shares at June 30, 2022 and December 31, 2021, respectively ( 1,750 ) ( 264 ) Accumulated deficit ( 172,386 ) ( 163,774 ) Total stockholders’ equity 87,467 101,595 Total liabilities and stockholders’ equity $ 88,296 $ 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Operating costs and expenses General and administrative $ 2,262 $ 2,343 $ 4,049 $ 3,555 Research and development 36 325 2,052 397 Research and development - license acquired - 91 - 1,125 Total operating expenses 2,298 2,759 6,101 5,077 Loss from operations ( 2,298 ) ( 2,759 ) ( 6,101 ) ( 5,077 ) Other income (expenses) Other income - - 64 135 Interest income 220 40 399 67 (Loss) gain on marketable securities ( 2,239 ) 1,798 ( 2,736 ) 459 Change in fair value of investment ( 760 ) ( 431 ) ( 238 ) ( 898 ) Total other income (expenses) ( 2,779 ) 1,407 ( 2,511 ) ( 237 ) Net loss $ ( 5,077 ) $ ( 1,352 ) $ ( 8,612 ) $ ( 5,314 ) Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock ( 1,100 ) - ( 4,109 ) - Net Loss Attributable to Common Shareholders $ ( 6,177 ) $ ( 1,352 ) $ ( 12,721 ) $ ( 5,314 ) Net loss per share, basic and diluted Basic and Diluted $ ( 1.18 ) $ ( 0.26 ) $ ( 2.42 ) $ ( 1.20 ) Weighted average number of shares outstanding, basic and diluted Basic and Diluted 5,251,023 5,270,293 5,251,766 4,412,889 See accompanying notes to condensed consolidated financial statements. 2 AIKIDO PHARMA INC. Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity ($ in thousands except share and per share amounts) (Unaudited) For the Three Months Ended June 30, 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 March 31, 2022 11,000 $ 11,000 11,000 $ 11,000 5,252,517 $ - 4,659 $ - $ 262,624 - $ ( 264 ) $ ( 167,309 ) $ 95,051 Redemption of Series O Redeemable Convertible Preferred Stock ( 11,000 ) ( 11,000 ) - - - - - - - - - - - Redemption of Series P Redeemable Convertible Preferred Stock - - ( 11,000 ) ( 11,000 ) - - - - - - - - - Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock - - - - - - - - ( 1,100 ) - - - ( 1,100 ) Repurchase of treasury stock - - - - - - - - - 242,902 ( 1,486 ) ( 1,486 ) Stock-based compensation - - - - - - - - 105 - - - 105 Fractional shares adjusted for reverse split - - - - ( 5,665 ) - - - ( 26 ) - - - ( 26 ) Net loss - - - - - - - - - - - ( 5,077 ) ( 5,077 ) Balance at June 30, 2022 - $ - - $ - 5,246,852 $ - 4,659 $ - $ 261,603 242,902 $ ( 1,750 ) $ ( 172,386 ) $ 87,467 For the Three Months Ended June 30, 2021 Common Stock Preferred Stock Additional Paid-in Treasury Stock Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Shares Amount Deficit Equity Balance at March 31, 2021 5,266,500 $ - 5,559 $ - $ 265,201 - $ ( 264 ) $ ( 160,565 ) $ 104,372 Stock-based compensation - - - - 63 - - - 63 Net loss - - - - - - - ( 1,352 ) ( 1,352 ) Balance at June 30, 2021 5,266,500 $ - 5,559 $ - $ 265,264 - $ ( 264 ) $ ( 161,917 ) $ 103,083 See accompanying notes to condensed consolidated financial statements. 3 For the Six Months Ended June 30, 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 - - - - 5,275,329 $ - 4,659 $ - $ 265,633 - $ ( 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 - - - - ( 4,109 ) - - - ( 4,109 ) Redemption of Series O Redeemable Convertible Preferred Stock ( 11,000 ) ( 11,000 ) - - - - - - - - - - - Redemption of Series P Redeemable Convertible Preferred Stock - - ( 11,000 ) ( 11,000 ) - - - - - - - - - Repurchase of treasury stock - - - - - - - - - 242,902 ( 1,486 ) - ( 1,486 ) Stock-based compensation - - - - - - - - 105 - - - 105 Cancellation of common stock related to investment in CBM - - - - ( 22,812 ) - - - - - - - - Fractional shares adjusted for reverse split - - - - ( 5,665 ) - - - ( 26 ) - - - ( 26 ) Net loss - - - - - - - - - - - ( 8,612 ) ( 8,612 ) Balance at June 30, 2022 - $ - - $ - 5,246,852 $ - 4,659 $ - $ 261,603 242,902 $ ( 1,750 ) $ ( 172,386 ) $ 87,467 For the Six Months Ended June 30, 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 2,054,096 $ - 5,559 $ - $ 186,485 - $ ( 264 ) $ ( 156,603 ) $ 29,618 Issuance of common stock and warrants (net of offering costs of $ 8,260 ) 3,170,935 - - - 77,989 - - - 77,989 Exercise of warrants 4,705 - - - 84 - - - 84 Issuance of common stock for research and development license acquired 36,764 - - - 531 - - - 531 Stock-based compensation - - - - 175 - - - 175 Net loss - - - - - - - ( 5,314 ) ( 5,314 ) Balance at June 30, 2021 5,266,500 $ - 5,559 $ - $ 265,264 - $ ( 264 ) $ ( 161,917 ) $ 103,083 See accompanying notes to condensed consolidated financial statements. 4 AIKIDO PHARMA INC. Condensed Consolidated Statements of Cash Flows ($ in thousands) (Unaudited) Six Months Ended June 30, 2022 2021 Cash flows from operating activities Net loss $ ( 8,612 ) $ ( 5,314 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of short-term investment 1,646 898 Change in fair value of long-term investment ( 1,408 ) - Research and development-acquired license, expensed - 1,125 Stock-based compensation 105 175 Realized loss (gain) on marketable securities 568 ( 1,084 ) Unrealized loss on marketable securities 2,299 1,395 Realized gain on sale of digital currencies - - Changes in operating assets and liabilities: Prepaid expenses and other assets 153 39 Accounts payable and accrued expenses ( 239 ) ( 248 ) Accrued salaries and benefits 7 423 Interest receivable on convertible note ( 399 ) ( 67 ) Deposits 8 - Net cash used in operating activities ( 5,872 ) ( 2,658 ) Cash flows from investing activities Purchase of marketable securities ( 27,460 ) ( 86,497 ) Sale of marketable securities 28,272 23,155 Proceeds from sale of digital currencies 93 - Proceeds from promissory note receivable interest received 22 - Funds to deposit accounts, net - ( 4,476 ) Purchase of short-term and long-term investments ( 14,605 ) - Purchase of research and development licenses - ( 594 ) Purchase of short-term and long-term promissory notes ( 1,600 ) - Purchase of convertible note - ( 2,000 ) Net cash used in investing activities ( 15,278 ) ( 70,412 ) 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 17,891 - Proceeds from exercise of warrants - 84 Payment for fractional shares ( 26 ) - Redemption of Series O and Series P Redeemable Convertible Preferred Stock ( 22,000 ) - Purchase of treasury stock ( 1,486 ) - Net cash (used in) provided by financing activities ( 5,621 ) 78,073 Net (decrease) increase in cash and cash equivalents and restricted cash ( 26,771 ) 5,003 Cash and cash equivalents, beginning of period 65,562 2,715 Cash and cash equivalents, end of period $ 38,791 $ 7,718 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 $ - Promissory convertible note receivable conversion into common shares $ 1,508 $ - See accompanying notes to condensed consolidated financial statements. 5 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. Reverse Stock Split On June 7, 2022, the Company effected a seventeen-for-one (17-for-1) reverse stock split of its class of common stock (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on June 2, 2022 (the “Certificate of Amendment”). The Reverse Stock Split was effective on June 7, 2022 (the “Effective Date”). All references to common stock, convertible preferred stock, warrants to purchase common stock, options to purchase common stock, restricted stock units, restricted stock awards, share data, per share data and related information contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $ 26 thousand. 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. 6 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2022, condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 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 and six months ended June 30, 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 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. Treasury Stock Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity. Recent accounting pronouncements Management does not believe that any recently issued, but not yet effective accounting pronouncements, if currently adopted, would have an effect on the Company’s condensed consolidated financial statements. 7 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 and six months ended June 30, 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Realized (loss) gain $ ( 344 ) $ 661 $ ( 568 ) $ 1,084 Unrealized (loss) gain ( 1,967 ) 653 ( 2,299 ) ( 1,395 ) Dividend income 72 484 131 770 $ ( 2,239 ) $ 1,798 $ ( 2,736 ) $ 459 Note 5. Short-term investments The following table presents the Company’s short-term investments at June 30, 2022 and December 31, 2021 ($ in thousands): June 30, 2022 December 31, 2021 Investment in Hoth Therapeutics, Inc. 15 770 Investment in DatChat, Inc. - 1,084 Investment in Vicinity Motor Corp. 89 419 Total 104 2,273 The change in the fair value of the short-term investments for the six months ended June 30, 2022 is summarized as follows: ($ in thousands): Beginning balance $ 2,273 Transfer to marketable securities ( 1,481 ) Change in fair value of investment ( 1,646 ) Realized gain recognized through sale of marketable securities 958 Ending balance $ 104 8 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2022 and December 31, 2021: Security Name Shares Owned as of June 30, 2022 Fair value per Share as of June 30, 2022 Fair value as of June 30, 2022 (in thousands) HOTH 35,714 $ 0.42 $ 15 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 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 $ 89,000 and $ 0.4 million in the consolidated balance sheet as of June 30, 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 the consolidated statements of operations. During the six months ended June 30, 2022, the Company recorded approximately $ 0.3 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: June 30, 2022 December 31, 2021 Option term (in years) 2.3 2.8 Volatility 97.47 % 95.52 % Risk-free interest rate 3.08 % 0.97 % Expected dividends 0.00 % 0.00 % Stock price $ 1.37 $ 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. 9 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2022 and December 31, 2021 ($ in thousands): June 30, 2022 December 31, 2021 Investment in Kerna Health Inc $ 4,940 $ 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 3,500 - Investment in Tesspay 1,250 - Investment in SpaceX 3,500 - Investment in Databricks 1,200 - Investment in Discord 476 - Investment in Thrasio 300 - Investment in Automation Anywhere 476 - Investment in Anduril 476 - Total $ 25,478 $ 9,465 The change in the value of the long-term investments for the six months ended June 30, 2022 is summarized as follows: ($ in thousands): Beginning balance $ 9,465 Purchase of investments 14,605 Change in fair value of long-term investments 1,408 Ending balance $ 25,478 Investment in Kerna Health Inc In May 2022, the Company purchased additional 400,000 shares of common stock of Kerna Health Inc, (“Kerna”) for approximately $ 1.1 million. The investment in Kerna was valued at $ 4.9 million as of June 30, 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 six months ended June 30, 2022. The investment in Kaya was valued at approximately $ 2.3 million as of June 30, 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 six months ended June 30, 2022. The investment in Tevva was valued at approximately $ 3.4 million as of June 30, 2022. Investment in ASP Isotopes The investment in ASP Isotopes Inc. was valued at $ 1.0 million as of June 30, 2022. 10 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Investment in AerocarveUS Corporation The investment in AerocarveUS Corporation was valued at $ 1.0 million as of June 30, 2022. 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 June 30, 2022. Investment in Masterclass In March of 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 June 30, 2022. Investment in Kraken In March of 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 June 30, 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. In April 2022, the Company invested an additional $ 2 M for the purchase of additional shares of common stock of Epic Games. The investment in Epic Games was valued at $ 3.5 million as of June 30, 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 six months ended June 30, 2022. The investment in Tesspay was valued at approximately $ 1.3 million as of June 30, 2022. Investment in SpaceX On March 30, 2022, the Company entered into a securities purchase agreement (the “SpaceX Securities Purchase Agreement”) with SpaceX, under which the company agreed to purchase shares of common stock of SpaceX for $1.5M. In April 2022, the Company invested an additional $2M for the purchase of additional shares of common stock of SpaceX. The investment in SpaceX was valued at $ 3.5 million as of June 30, 2022. 11 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2022. Investment in Discord, Inc. In May 2022, the Company entered into a securities purchase agreement (the “Discord Securities Purchase Agreement”) with privately-held company Discord, Inc., a social communications platform provider that is particularly popular with gamers, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Discord Securities Purchase Agreement, the Company agreed to purchase a total of 618 shares of common stock of Discord for approximately $ 0.5 million. The investment in Discord was valued at $ 0.5 million as of June 30, 2022. Investment in Thrasio, LLC In April 2022, the Company entered into a securities purchase agreement (the “Thrasio Securities Purchase Agreement”) with privately-held company Thrasio, LLC, an aggregator of private brands of top Amazon businesses and direct-to-consumer brands, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Thrasio Securities Purchase Agreement, the Company agreed to purchase a total of 20,000 shares of common stock of Thrasio for $ 0.3 million. The investment in Thrasio was valued at $ 0.3 million as of June 30, 2022. Investment in Automation Anywhere, Inc. In April 2022, the Company entered into a securities purchase agreement (the “Automation Anywhere Securities Purchase Agreement”) with privately-held company Automation Anywhere, Inc., a provider of business automation solutions, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Automation Anywhere Securities Purchase Agreement, the Company agreed to purchase a total of 18,490 shares of common stock of Automation Anywhere for approximately $ 0.5 million. The investment in Automation Anywhere was valued at $ 0.5 million as of June 30, 2022. Investment in Anduril Industries, Inc. In April 2022, the Company entered into a securities purchase agreement (the “Anduril Securities Purchase Agreement”) with privately-held company Anduril Industries, Inc., a defense products company, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Anduril Securities Purchase Agreement, the Company agreed to purchase a total of 14,880 shares of common stock of Anduril for approximately $ 0.5 million. The investment in Anduril was valued at $ 0.5 million as of June 30, 2022. Note 7. Notes Receivable The following table presents the Company’s notes receivable at June 30, 2022 ($ in thousands): Maturity Date Stated Interest Rate Principal Amount Interest Receivable Fair Value Shor-term convertible notes receivable Convergent Investment 01/29/2023 8 % $ 2,000 $ 227 $ 2,227 Nano Innovations Inc Investment 12/26/2022 10 % $ 750 $ 38 $ 787 Short-term notes receivable Mr. Jeffrey Cooper Investment 03/11/2023 8 % $ 2,780 $ 158 $ 2,038 Raefan Industries LLC Investment 12/06/2022 8 % $ 1,950 $ 88 $ 2,938 Kaya Now Investment 2/1/2023 8 % $ 500 $ 10 $ 510 Total $ 8,500 Long-term notes receivable American Innovative Robotics Investment 04/01/2027 8 % $ 1,100 $ - $ 1,100 12 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Convergent Investment The Company recorded an interest income receivable of approximately $ 0.2 million on the Convergent Convertible Note as of June 30, 2022. Mr. Jeffrey Cooper Investment Raefan Group LLC promissory note was satisfied and replaced with a personal note issued to Mr. Jeffrey Cooper, of Raefan Industries. The Company recorded an interest income receivable of approximately $ 0.2 million on the Mr. Jeffrey Cooper Promissory Note as of June 30, 2022. Raefan Industries LLC Investment The Company recorded an interest income receivable of approximately $ 88,000 on the Raefan Industries Promissory Note as of June 30, 2022. Slinger Bag Inc Investment The Company recorded an interest income receivable of approximately $ 63,000 on the Slinger Bag Convertible Note as of June 17, 2022. On June 17, 2022, the Company received 558,659 shares of common stock of Connexa Sports Technologies Inc (also known as Slinger Bag) as a result of conversion of principal and accrued interest on the Slinger Bag Convertible Note. All the 558,659 shares of common stock of Connexa Sports received were transferred to marketable securities account. Kaya Now Investment On April 5, 2022, the Company purchased an 8 % promissory note (“Kaya Now Promissory Note”) issued by Kaya Now Inc (“Kaya Now”) in the principal amount of $ 0.5 million pursuant to a Note Purchase Agreement with Kaya Now. The Company paid a purchase price for the Kaya Now Promissory Note of $ 0.5 million. The Company will receive interest on the Kaya Now Promissory Note at the rate of 8 % per annum payable upon conversion or maturity of the Kaya Now Promissory Note. The Kaya Now Promissory Note shall mature on February 1, 2023 . The Company recorded an interest income receivable of approximately $ 0.1 million on the Kaya Now Promissory Note as of June 30, 2022. American Innovative Robotics Investment On April 1, 2022, the Company purchased an 8 % promissory note (“Robotics Promissory Note”) issued by American Innovative Robotics, LLC (“Robotics”) in the principal amount of $ 1.1 million pursuant to a Note Purchase Agreement with Robotics. The Company paid a purchase price for the Robotics Promissory Note of $ 1.1 million. The Company will receive interest on the Robotics Promissory Note at the rate of 8 % per annum payable every three months starting from July 1, 2022. The Robotics Promissory Note shall mature on April 1, 2027 . The Company recorded an interest income receivable of approximately $ 20,000 on the Robotics Promissory Note as of June 30, 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. 13 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2022 and December 31, 2021 ($ in thousands): Fair value measured at June 30, 2022 Total at June 30, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2022 (Level 1) (Level 2) (Level 3) Assets Marketable securities: Equities $ 9,779 $ 9,779 $ - $ - Total marketable securities $ 9,779 $ 9,779 $ - $ - Short-term investment $ 104 $ 15 $ - $ 89 Short-term notes receivable at fair value $ 8,500 $ - $ - $ 8,500 Long-term notes receivable at fair value $ 1,100 $ - $ - $ 1,100 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 14 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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): Short-term notes receivable at fair value at December 31, 2021 $ 6,984 Accrued interest receivable 377 Reclassify from convertible note receivable to notes receivable at fair value 2,147 Purchase of notes receivable 500 Change in fair value of note receivable 280 Conversion of note receivable to marketable securities ( 1,788 ) Short-term notes receivable at fair value at June 30, 2022 $ 8,500 Long-term notes receivable at fair value at December 31, 2021 $ - Purchase of notes receivable 1,100 Long-term notes receivable at fair value at June 30, 2022 $ 1,100 Short-term investment at December 31, 2021 $ 419 Change in fair value of investment ( 330 ) Short-term investment at June 30, 2022 $ 89 Long term and 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 June 30, 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 six months ended June 30, 2022. Mr. Jeffrey Cooper Investment As of June 30, 2022, the fair value of the Mr. Jeffrey Cooper 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 six months ended June 30, 2022. Raefan Industries LLC Investment As of June 30, 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 six months ended June 30, 2022. Nano Innovations Inc Investment As of June 30, 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 six months ended June 30, 2022. The Company believes that the fair value of the warrant of Nano is immaterial. 15 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Kaya Now Investment As of June 30, 2022, the fair value of the Kaya Now Promissory Note was measured at $ 0.5 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 six months ended June 30, 2022. The Company believes that the fair value of the warrant of Kaya Now is immaterial. American Innovative Robotics Investment As of June 30, 2022, the fair value of the Slinger Bag Convertible Note was measured at $ 1.1 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 for principal was recorded during the six months ended June 30, 2022. 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 June 30, 2022 and 2021 are as follows: As of June 30, 2022 2021 Convertible preferred stock 34 40 Warrants to purchase common stock 444,796 341,268 Options to purchase common stock 27,980 25,255 Total 472,810 366,563 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 $ 21.0 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 received net proceeds of $ 21.0 million, which was deposited in an escrow account. 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. 16 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 second quarter of 2022, the Company redeemed for cash at a price equal to 105% of the $1,000 stated value per share all of its 11,000 outstanding shares of Series O Preferred Stock and its 11,000 Series P Preferred Stock. The total redemption amount was $ 23.1 million. As a result, all shares of the Series O Preferred Stock and Series P Preferred Stock have been retired and are no longer outstanding. During the six months ended June 30, 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. 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. Treasury Stock On January 21, 2022, the Company’s board of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to which the Company authorized the Repurchase Program in an amount of up to three million dollars. During the second quarter of 2022, the Company repurchased 242,902 shares at a cost of approximately $ 1.5 million or $ 6.12 per share through marketable securities account under the Share Buyback Program. The Company records treasury stock using the cost method. Warrants A summary of warrant activity for the six months ended June 30, 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 341,268 $ 31.68 - 3.87 Issued 103,528 21.25 - 4.90 Outstanding as of June 30, 2022 444,796 $ 29.25 - 3.95 17 AIKIDO PHARMA INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Stock Options A summary of stock option activity for the six months ended June 30, 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 28,196 $ 32.24 $ 230,258 8.2 Employee options granted 170,525 0.35 902,077 9.8 Outstanding as of June 30, 2022 198,721 $ 32.24 $ 1,017,002 9.5 Options vested and exercisable 27,980 $ 32.46 $ 114,925 7.8 Stock-based compensation associated with the amortization of stock option expense was approximately $ 0.1 million for the three months ended June 30, 2022 and 2021. Stock-based compensation associated with the amortization of stock option expense was approximately $ 0.1 million and $ 0.2 million for the six months ended June 30, 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 $ 0.8 million. 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 evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s 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 As of August 1, 2022 Anthony Hayes divested all shares of common stock that he owed in Revere Securities LLC. On July 22, 2022, Carlos Aldavero entered into an employment agreement with the Company (the “Employment Agreement”). The Employment Agreement provides for payment of an annual base salary of $ 450,000.00 to Mr. Aldavero, to be paid in equal semi-monthly or bi-weekly installments, a cash signing bonus of $ 213,000.00 , and an annual cash bonus in an amount determined by the Board in its discretion if the Company meets or exceeds criteria adopted by the Board. On July 21, 2022, the Company and Kaya Now Inc. executed an amendment of the Kaya Now Promissory Note (“Amendment”) such that the Kaya Now Promissory Note shall mature on February 1, 2023. In consideration of the Amendment, Kaya Now has agreed to issue to the Company 1,000,000 additional shares at 20 cents per share of Kaya Now’s common stock. Under the amendment, interest on the Note during the extended term shall be paid on October 1, 2022 and January 1, 2023 at the rate of 8% per annum. On August 10, 2022 we agreed to extend the term of our employment agreement with our chief executive officer, Anthony Hayes, for an additional five years, renewable thereafter for one year increments on 6 months notice. 18