UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20202021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-05576

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

As of November 12, 2020,10, 2021, there were 34,920,21989,681,146 shares of the Company’s common stock issued and outstanding.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Form 10-Q

For the Quarter Ended September 30, 20202021

Index

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Condensed Consolidated Balance Sheets

($ in thousands except share and per share amounts)

(Unaudited)

See accompanying notes to condensed consolidated financial statementsstatements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Condensed Consolidated Statements of Operations

($ in thousands except share and per share amounts)

(Unaudited)

See accompanying notes to condensed consolidated financial statements
statements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Condensed Consolidated Statements of Changes in Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Three Months Ended September 30, 20202021

For the Three Months Ended September 30, 20192021

See accompanying notes to condensed consolidated financial statementsstatements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Condensed Consolidated Statements of Changes in Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Nine Months Ended September 30, 2021

For the Nine Months Ended September 30, 2020

For the Nine Months Ended September 30, 2019

See accompanying notes to condensed consolidated financial statementsstatements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statementsstatements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

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” and “We”), formerly known as Spherix Incorporated, (the “Company”), was initially formed in 1967 and is currently1967. Since 2017, the Company  has operated as a biotechnology company with a diverse portfolio of small-molecule anti-canceranticancer and antiviral therapeutics in development. The Company’s platformpipeline consists of patented technology from leading universities and researchers and we areresearchers. The Company is currently in the process of developing anits innovative therapeutic drug platformpipeline through strong partnerships with world-renownedworld renowned educational institutions, including the University of Texas at Austin, the University of Maryland, Baltimore and Wake Forest University. The Company’s diverse pipeline ofoncology therapeutics includes therapiesinclude prospective treatments for pancreatic cancer, acute myeloid leukemia (“AML”)(AML) and acute lymphoblastic leukemia (“ALL”)(ALL). The Company is also developing a broad-spectrum antiviral platform, that may potentially inhibit replication ofin which the lead compounds have activity in cell-based assays against multiple viruses including Influenza virus, SARS-CoV (coronavirus), MERS-CoV, Ebolavirus and Marburg virus.

The Company previously focused its efforts on owning, developing, acquiringvirus, SARS-CoV, MERS-CoV, and monetizing intellectual property assets. Since May 2016,SARS-CoV-2, the Company has received limited funds from its intellectual property monetization. In addition to its patent monetization efforts, since the fourth quartercause of 2017, the Company has been transitioning to focus its efforts as a technology and biotechnology development company. These efforts have focused on biotechnology research and blockchain technology research. The Company’s investment in biotechnology research development includes: (i) an investment in Hoth Therapeutics, Inc. (“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema, (ii) an investment in DatChat, Inc. (“DatChat”), a privately held personal privacy platform focused on encrypted communication, internet security and digital rights management, and (iii) the acquisition of assets of CBM BioPharma, Inc. (“CBM”), a pharmaceutical company focusing on the development of cancer treatments.

During the nine months ended September 30, 2020, the Company raised over $2.0 million of proceeds (see Note 8), therefore, a payment of $1.0 million was due to CBM pursuant to that certain Asset Purchase Agreement, dated as of May 15, 2019, by and between the Company and CBM, as amended (the “CBM Purchase Agreement”). The Company recorded this payment to CBM as a component of research and development license acquired during the nine months ended September 30, 2020 in the condensed consolidated statements of operations.COVID-19.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As a result of the Company’s biotechnology research and development and associated investments and acquisitions, the Company’sits business portfolio now focuses on the treatment of three different cancers including pancreatic cancer, AML and ALL.multiple types of viral infections. The Company’s AML and ALL compounds, developed at Wake Forest University, are targeted therapeutics designed to overcome multiple resistance mechanisms observed with the current standard of care. DHA-dFdC, the Company’s pancreatic drug candidate, DHA-dFdC, developed at and licensed from the University of Texas at Austin, (“UTA”), is a new compound that the Companyit 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), has documented efficacy againsttargets pancreatic tumors in a clinically relevant transgenic mouse model and has demonstrated activities against other cancers, including leukemia, lung and melanoma. DHA-dFdC is being developed for oral administration in a solid lipid nanoparticle carrier matrix, which has also been licensed from UTA, and is intended to be a second-line treatment for advanced pancreatic cancer. The Company’s license with UTA (the “License”) is a royalty-bearing exclusive license that, unless terminated earlier, continues until the last date of expiration or termination of the patent rights granted under the License (the “Patent Rights”). With regard to DHA-dFdC, the Patent Rights include several filed U.S. patent applications (a “U.S. Patent Application”) and an application filed under the Patent Cooperation Treaty (“PCT”) that is currently being prosecuted to secure rights in foreign countries. From these applications, one patent, U.S. Patent No. 10,463,684 (the “684 Patent”), contains items covering the compound DHA-dFdC. Assuming all maintenance fees are timely paid, the 684 Patent is expected to expire on October 27, 2035. The Company’s license with UTA also covers a non-provisional U.S. Patent Application filed with respect to the lipid nanoparticle carrier matrix for the drug, which was filed on June 6, 2019. In June of 2020, at the request of the Company, UTA filed both a U.S. non-provisional utility patent application as well as a PCT application relating to the lipid nanoparticle carrier matrix. Patent prosecution on all pending patent applications is currently underway. The Company is currently engaged in third party Chemistry, Manufacturing and Controls (“CMC”) activities related to DHA-dFdC. Manufacturing activities thus far have confirmed the critical chemical steps required for the manufacturing and scalability of the process. In tandem, the Company is developing the solid lipid nanoparticle delivery system and is currently optimizing the manufacturing process for size and consistency of the particles. The Company expects these activities, as well as the development of the final formulation to comprise most of the CMC activities through the end of the year. Optimization of the formulation will require in vitro studies as well as some preliminary animal studies. During the first half of 2021, optimization of the formulation and biological studies, including animal toxicology testing and pharmacology testing, are scheduled to occur. To the extent costs are incurred relating to governmental regulations, including under the FDA and environmental regulations, those costs will be borne by our Contract Manufacturing Organizations and Contract Research Organizations and will be passed on to the Company as part of their fees. FDA approval will eventually be required to begin administering DHA-dFdC to patients as part of any clinical trials. The animal studies performed next year will be a necessary prerequisite to filing an Investigational New Drug Application (“IND”) with the FDA. The Company’s development activities in the first half of 2021 will also include preparing the IND for submission to the FDA. The Company’s formulation is a new chemotherapy oral dosage form “repurposing” the chemotherapeutic agent gemcitabine, enabling it to be developed for use in patients following a special regulatory pathway codified in Section 505(b)(2) of the FDA rules. Section 505(b)(2) was enacted to enable sponsors to seek New Drug Application (“NDA”) approval for novel repurposed drugs without the need for such sponsors to undertake certain time consuming and expensive safety studies. Proceeding under this regulatory pathway, we hope to be able to rely upon all of the publicly available safety and toxicology data with respect to gemcitabine in our FDA submissions. We believe that this path will dramatically reduce the required clinical development efforts, costs and risks as compared to what would be required of us if we were required to conduct the entire scope of trials required for new chemical entities that are not eligible to be reviewed pursuant to the Section 505(b)(2) regulatory pathway. We estimate that by using the Section 505(b)(2) regulatory pathway, the clinical development process may be several years shorter than is required for a new chemical entity, and the FDA approval process may be six to nine months shorter than the typical eighteen month period, which we believe may result in lower development costs and shorter development time. As of the date hereof, we have not submitted an IND or an NDA to the FDA. During the first half of 2021, we hope to schedule and attend the first of a series of meetings with the FDA to review the requirements for submission and activation of an IND with respect to the DHA/dFdC formulated in SLNs for second-line treatment of advanced pancreatic cancer. At that meeting, we will present to the FDA our proposed clinical trial plan for the treatment of advanced pancreatic cancer. As part the meeting, as is standard, the FDA will provide us with general guidance with respect to specific animal studies, dosing schedules and suggested human safety studies before we commence clinical trials in patients. In addition, the Company is constantly seeking to grow its pipeline to treat unmet medical needs in oncology.

In addition, the Company owns an exclusive world-wide license to patented technology from the University of Maryland, Baltimore (“UMB”). The Company’s license is for a broad-spectrum antiviral drug platform. The licensed technology is a broadly acting pan-viral inhibitory compound with efficacy against multiple viral pathogens. The technology works to inhibit replication of multiple viruses including Influenza virus, SARS-CoV (coronavirus), MERS-CoV, Ebolavirus and Marburg virus. The Company’s license covers two U.S. Nonprovisional Applications, which were consolidated and timely filed as a PCT application on June 5, 2020, commencing patent prosecution. Any patents issued from this application are expected to expire 20 years later, on June 5, 2040, unless the term is extended by the patent office. Publication of the results of the work to which the Company is licensed is expected later this year. Currently, the Company and UMB are collaborating to identify chemical structures that are as effective as, or more effective than, the lead compounds covered in the PCT application. The UMB inventors are Drs. Matthew Frieman, Alexander MacKerell and Stuart Watson.cancers. The Company has also executed a Sponsored Research Agreement with UMB to support the development of the technology.technology under the direction of these inventors at UMB. 

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Nasdaq Stock Market Deficiency Notice

On September 24, 2020, the Company received a staff deficiency notice from Nasdaq informing the Company that its common stock failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). Nasdaq’s letter advised the Company that, based upon the closing bid price during the period from August 12, 2020 to September 23, 2020, the Company no longer met this test.

Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has been provided with a compliance period of 180 calendar days, or until March 23, 2021, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to March 23, 2021.

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:through managing current cash on hand from the Company’s past debt and equity offerings.

During the first quarter of 2021, the Company consummated a public offering of 53,905,927 shares of common stock (including the underwriter overallotment). The Company received net proceeds of approximately $78.0 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. Based upon projected cash flow requirements, the Company has funded its operations from proceeds from the sale of equity and debt securities, including pre-funded warrants. The Company will require significant additional capital to make the investments it needs to execute its longer-term business plan. The Company’s ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if it were successful, future equity issuances would result in dilution to its existing stockholders and future debt securities may contain covenants that limit the Company’s operations or ability to enter into certain transactions.

The Company’s currentadequate cash is sufficient to fund its operations for at least the next 12 months; however, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, grants or other arrangements to develop and seek regulatory approvals for the Company’s existing and new product candidates. If such funding is not available, or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative infrastructure may be curtailed.

Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for drug candidates, the specific impact is not readily determinable as oftwelve months from the date of the issuance of these consolidated financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

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 subsidiaries.wholly-owned subsidiaries, Nuta Technology Corp. (“Nuta”), Spherix Portfolio Acquisition II, Inc. (“SPAII”), Guidance IP, LLC (“Guidance”), Directional IP, LLC (“Directional”), Spherix Management Services, LLC (“SMS”), Spherix Delaware Merger Sub Inc. (“Merger Sub”), Spherix Merger Subsidiary, Inc (“SMSI”) and NNPT, LLC (“NNPT”). All materialsignificant intercompany balances and transactions have been eliminated. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.eliminated in consolidation.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 September 30, 2020,2021, condensed consolidated statements of operations for the three and nine months ended September 30, 20202021 and 2019,2020, condensed consolidated statementstatements of stockholders’ equity for the three and nine months ended September 30, 20202021 and 2019,2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 20202021 and 20192020 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 nine months ended September 30, 20202021 are not necessarily indicative of results to be expected for the year ending December 31, 20202021 or for any future interim period. The condensed consolidated balance sheet at December 31, 20192020 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, 20192020 and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on February 3, 2020.March 25, 2021.

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 including the carrying amount of its investments, 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 February 3, 2020.March 25, 2021.

Fair Value Option - Convertible Note

The guidance in ASC 825, Net Income Loss per ShareFinancial Instruments, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our condensed consolidated balance sheets from those instruments using another accounting method.

Deposits

Basic loss per share is computed by dividing

In April 2021, the net income or loss applicableCompany deposited $5 million with a fund to common shares byidentify opportunities to expand the weighted average number of common shares outstanding during the period. Net loss attributable to common stockholders includes the effectCompany’s core business strategies in Asia. The cash are held in bank accounts on behalf of the deemed capital contribution on extinguishmentCompany until the fund manager identifies investments. During the nine and three months ended September 30, 2021, the Company incurred advisory fees of preferred stockapproximately $0.6 million and $56,000, respectively, and the deemed dividend related to the immediate accretionbalance held in cash in this fund was $4.4 million as of beneficial conversion feature of convertible preferred stock. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would be anti-dilutive.September 30, 2021.

Recently Adopted Accounting Standards

In August 2018,December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13,No. 2019-12, “Fair Value MeasurementIncome Taxes (Topic 740): Simplifying the Accounting for Income Taxes (Topic 820)“ASU 2019-12”), - Disclosure Framework - Changeswhich is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meantgeneral principles in Topic 740 and also clarifies and amends existing guidance to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early2020, with early adoption is permitted upon issuance of the update.permitted. The Company adopted this ASU onNo. 2019-12 effective January 1, 20202021, and the adoption of this ASU did not have a material impact on its consolidated financial statements or related disclosures.statements.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4. License agreement with Silo Pharma Inc.

(Unaudited)

Effective January 5, 2021, the Company entered into an exclusive patent license agreement (the “License Agreement”) with Silo Pharma Inc., a Delaware corporation and Silo Pharma Inc., a Florida corporation, and their affiliates/subsidiaries (collectively, “Silo Pharma”). On April 12, 2021, the Company entered into an amendment to the License Agreement (“Amendment”). The Amendment amended a portion of the license fees included in the original License Agreement and exchange 500 shares of the Company’s Series M Convertible Preferred Stock to an aggregate of 625,000 restricted shares of the Company’s common stock, par value $0.001 per share, effective as of January 5, 2021. The Company paid a one-time nonrefundable cash payment of $0.5 million to Silo Pharma. The Company shall also pay Silo Pharma a running royalty equal to 2% of “net sales” (as such term is defined in the License Agreement). Running royalties are amounts paid to the licensor over time based on the revenue earned by the licensee from sales of products that embody the licensed IP, if any.

Note 4.5. Investments in Marketable Securities

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended September 30, 20202021 and 2019,2020, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of operations (excluding a $70,000 distribution to CBM shareholders during the nine months ended September 30, 2020), are as follows ($ in thousands):

Note 5. Investment6. Short-term investment - investment in Hoth Therapeutics, Inc.

The following summarizes the Company investment in Hoth as of September 30, 2020:2021:

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 7. Short-term investment - investment in DatChat, Inc.

DatChat, Inc. (“DatChat”) is a communications software company that gives users the ability to communicate with privacy and protection.

On May 6, 2020,August 17, 2021, DatChat closed its initial public offering (the “IPO”) at an initial offering price to the public of $4.15 per share under the ticker DATS. The Company records this investment at fair value and records any change in fair value in the statements of operations (see Note 9).

On September 22, 2021, the Company entered into thata certain Stock Transfer Agreement, by and between the Company and a purchaser, and sold 400,000167,084 shares of HothDatChat common stock for net proceeds of approximately $0.5$0.9 million.

The following summarizes the Company investment in DatChat as of September 30, 2021:

Note 8. Other Investments

The Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for the below investments pursuant to ASU 2016-01.

Investment in Kerna Health Inc

On February 23, 2020,September 15, 2021, the BoardCompany entered into a securities purchase agreement (the “Kerna Securities Purchase Agreement”) with Kerna Health Inc., (“Kerna”). Under the Kerna Securities Purchase Agreement, the Company agreed to purchase 1,333,334 shares of Directors approved a distribution to the Company’s stockholders of up to 70,000 Hoth Shares held by the Company. Accordingly, each of the Company’s stockholders received one (1) share of Hoth common stock of Kerna for every five hundred (500)$1.0 million.

Investment in Kaya Holding Corp

On September 29, 2021, the Company entered into a securities purchase agreement (the “Kaya Securities Purchase Agreement”) with Kaya Holding Corp., (“Kaya”). Under the Kaya Securities Purchase Agreement, the Company agreed to purchase 8,325,000 shares of Company common stock held as of 5 p.m. Eastern TimeKaya for approximately $0.7 million.

Investment in Tevva Motors

On September 22, 2021, the Company entered into a securities purchase agreement (the “Tevva Motors Subscription Agreement”) with Big Sky Opportunities Fund, LLC, who handled the offering for Tevva Motors. Under the Tevva Motors Subscription Agreement, the Company agreed to purchase 29,004 Interests of Tevva Motors for approximately $1.0 million. Subsequently, on AprilSeptember 30, 2020,2021, the dividend record date. The Company did not distribute fractional sharesentered into a second securities purchase agreement with Big Sky Opportunities Fund, LLC to purchase an additional 29,004 Interests of HothTevva Motors for approximately $1.0 million.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Slinger Bag Inc

On August 6, 2021, the Company entered into a securities purchase agreement (the “Slinger Bag Securities Purchase Agreement”) with Slinger Bag Inc., (“Slinger Bag”). Under the Slinger Bag Securities Purchase Agreement, the Company agreed to pay $1.4 million to Slinger Bag for the issuance of a convertible promissory note in the principal amount of $1.4 million and a common stock and any fractional shares were rounded down to the nearest whole share. The final distribution amount of Hoth Shares is 69,815.purchase warrant.

Note 6.9. Fair Value of Financial Assets and Liabilities

Financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The Company uses three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company's market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 20202021 and December 31, 20192020 ($ in thousands):

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 3 Valuation Techniques

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis ($ in thousands):

Convergent Investment

On January 29, 2021, the Company purchased an 8% convertible promissory note (“Convertible Note”) issued by Convergent Therapeutics, Inc. (“Convergent”) in the principal amount of $2 million pursuant to a Note Purchase Agreement with Convergent. The Company paid a purchase price for the Convertible Note of $2 million. The Company will receive interest on the Convertible Note at the rate of 8% per annum payable upon conversion or maturity of the Convertible Note. The Convertible Note shall mature on January 29, 2023.

The Company has elected to measure the purchase of the Convertible Note from Convergent 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 condensed consolidated statements of operations.

The Convertible Note is disclosed as a noncurrent Convertible Note investment in the condensed consolidated balance sheets. As of September 30, 2021, the fair value of the Convertible Note was measured at $2.0 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. 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. No change in fair value was recorded during the nine months ended September 30, 2021.

Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the condensed consolidated statements of operations. The Company recorded an interest income receivable of approximately $107,000 on the Convertible Note as of September 30, 2021.

Note 7.10. Net Loss per Share

Basic loss per common share is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at September 30, 20202021 and 20192020 are as follows:

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 8.11. Stockholders’ Equity and Convertible Preferred Stock

Public Offering

Preferred Stock

Effective March 23, 2020,On February 19, 2021, the Company declared a dividend of one right (“Right”consummated the public offering pursuant to an amended and restated underwriting agreement (the “Underwriting Agreement”) for each of the Company’s issued and outstanding shares of common stock. Each Right entitles a holder of record,with H.C. Wainwright & Co., LLC, as of the close of business on March 30, 2020, to purchase from the Company one one-thousandth of a share of the Company’s Series L preferred stock at a price of $5.00, subject to certain adjustments and subjectrepresentative to the terms of that certain Rights Agreement, dated as of March 23, 2020, by and between the Company and VStock Transfer, LLC, as rights agentunderwriters named therein (the “Rights Agreement”“Underwriter”). The purpose of the Rights Agreement is to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets (collectively, “Tax Benefits”) to reduce potential future federal income tax obligations would become subject to limitations by reason of the Company experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over a rolling three-year period. The Rights Agreement is designed to reduce the likelihood that the Company will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a shareholder of 4.99% or more of Common Stock and (ii) discouraging any existing 4.99% shareholder from acquiring any additional shares of the Company’s stock. On March 24, 2020, the Company filed a Certificate of Designation of Series L Preferred Stock with the Secretary of State of the State of Delaware to designate a new Series L preferred stock of the Company. As of September 30, 2020, no Rights have been exercised.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Common Stock

On March 3, 2020, the Company entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers,, pursuant to which the Company agreed to issue and sell to the purchasers 3,245,745Underwriter in an underwritten public offering (the “Offering”) an aggregate of 46,875,000 shares (the “Shares”) of common stock, $0.0001 par value per share, of the Company’s common stock,Company (the “Common Stock”). The Company received gross proceeds of approximately $75 million before deducting underwriting discounts and commoncommissions and estimated offering expenses payable by the Company. On February 23, 2021, the Underwriter partially exercised its over-allotment option and purchased an additional 7,030,927 Shares, resulting in aggregate proceeds of approximately $86.2 million, before deducting underwriting discounts and commissions and other expenses. The total net proceeds received from these two offerings were approximately $78.0 million.

In connection with the Offering, the Company issued the Underwriter warrants (“Common(the “Underwriter’s Warrants”) to purchase up to 7,142,8584,312,473 shares of common stock at a price of $1.05 per share of common stock and Common Warrant. The Company also offered 3,897,113 pre-funded warrants (“Pre-Funded Warrants”) to purchase shares of common stock with a purchase price of $1.0499 each Pre-Funded Warrant. The exercise price of each Pre-Funded Warrant was $0.0001 per share and each Common Warrant was $1.05 per share.

This offering resulted in gross proceeds of approximately $7.5 million before deducting the placement agent’s fee and related offering expenses of $1.0 million.

On March 9, 2020, the Company entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 2,090,909 sharesStock, or 8% of the Company’s common stock at an offering priceShares sold in the Offering. The Underwriter’s Warrants will be exercisable for a period of $2.75 per share.

The Company also issued placement agent warrants to the placement agent (the “Placement Agent Warrant”) to purchase 167,273 shares of common stock withfive years from February 19, 2021 at an exercise price of $3.4375$2.00 per share.share, subject to adjustment.

The Company has determined that the Placement Agent Warrant should be accounted as a component of stockholders’ equity. On the issuance date, the Company estimated the aggregate fair value of Placement Agent Warrant at $0.2 million using the Black-Scholes option pricing model using the following primary assumptions: fair value of common stock underlying the warrants is $1.83, expected life of 5 years, volatility rate of 122.29%, risk-free interest rate of 0.63% and expected dividend rate of 0%.

On April 14, 2020, the Company, entered into that certain Securities Purchase Agreement, by and among the Company and certain purchasers, pursuant to which the Company agreed to issue and sell 14,000,000 shares of the Company’s common stock at an offering price of $1.00 per share.

The registered offering resulted in gross proceeds to the Company of $14.0 million, before deducting the placement agent’s fee and other related offering expenses.

AIKIDO PHARMA INC.

(Formerly SPHERIX INCORPORATED)

Notes to Condensed Consolidated Financial Statements