UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

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

For the transition period from ~~________________~~___________ to ~~________________~~___________

Commission File Number: 000-54872

SILO PHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware		27-3046338
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

560 Sylvan Avenue, Suite 3160,
Englewood Cliffs, New Jersey 07632

(Address of principal executive offices)

(718) 400-9031

(Registrant’s telephone number, including area code)

	Not applicable
	(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 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 registration 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
			Emerging growth company	☐

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 ☒

As of ~~November~~May 10, ~~2021, 98,671,970~~2022, 99,395,304 shares of common stock, par value $0.0001 per share, were outstanding.

SILO PHARMA, INC.

FORM 10-Q

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements		1
	Condensed Consolidated Balance Sheets as of ~~September 30, 2021 (unaudited)~~March 31, 2022 (Unaudited) and December 31, ~~2020~~2021		1
	Condensed Consolidated Statements of Operations for the ~~three~~Three Months Ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020 (unaudited)~~(Unaudited)		2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity ~~(Deficit)~~ for the ~~three~~Three Months Ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020 (unaudited)~~(Unaudited)		3
	Condensed Consolidated Statements of Cash Flows for the ~~nine months ended September 30, 2021~~Three Months Ended March 31, 2022 and ~~2020 (unaudited)~~2021(Unaudited)		4
	Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34	37
Item 4.	Controls and Procedures	34	37

PART II - OTHER INFORMATION
~~PART II - OTHER INFORMATION~~	35
Item 1.	Legal Proceedings	35	38
Item 1A.	Risk Factors	35	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35	38
Item 3.	Defaults Upon Senior Securities	35	38
Item 4.	Mine Safety Disclosures	35	38
Item 5.	Other Information	35	38
Item 6.	Exhibits	35	39

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,”�� “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

●

our ability to obtain additional funds for our operations;

●

our financial performance;

●

risks relating to the timing and costs of clinical trials and the timing and costs of other expenses;

●

risks related to market acceptance of products;

●

intellectual property risks;

●

the impact of government regulation and developments relating to our competitors or our industry;

●

our competitive position;

●

our industry environment;

●

our anticipated financial and operating results, including anticipated sources of revenues;

●

assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches;

●

our estimates of our expenses, losses, future revenue and capital requirements, including our needs for additional financing;

●

our ability to attract and retain qualified key management and technical personnel;

●

statements regarding our goals, intensions, plans and expectations, including the introduction of new products and markets; and

●

our cash needs and financing plans.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

PART I - FINANCIAL INFORMATION

~~Item~~ITEM 1. ~~Financial Statements.~~FINANCIAL STATEMENTS

SILO PHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,			March 31,				December 31,
	2021			2020			2022				2021
	(Unaudited)						(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,261,416		$	1,128,389		$	9,067,836			$	9,837,001
Equity investments		820,126			200			343,930				419,995
Notes receivable, net		-			23,500
Prepaid expenses and other current assets - current		220,590			241,091			206,451				145,324
Assets of discontinued operations		-			33,484

Total Current Assets		11,302,132			1,426,664			9,618,217				10,402,320

Note receivable - non-current		60,000			-
Note receivable - non-current, including interest receivable of $2,394								62,394				61,210
Prepaid expenses - non-current		28,118			-			35,199				26,659

Total Assets	$	11,390,250		$	1,426,664		$	9,715,810			$	10,490,189

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	211,286		$	127,069		$	153,601			$	417,937
Note payable - current portion		-			14,654
Accounts payable and accrued expenses - related party								2,206				-
Insurance payable								64,839				-
Deferred revenue - current portion		72,103			-			72,102				72,102

Total Current Liabilities		283,389			141,723			292,748				490,039

LONG TERM LIABILITIES:
Deferred revenue - long-term portion		955,909			-			919,859				937,884
Note payable - long-term portion		-			4,246

Total Long Term Liabilities		955,909			4,246			919,859				937,884

Total Liabilities		1,239,298			145,969			1,212,607				1,427,923

Commitment and Contingencies (see Note 9)
Commitment and Contingencies (see Note 8)										��

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized
Series B convertible preferred stock, $0.0001 par value, 2,000 shares designated; none shares issued and outstanding at September 30, 2021 and December 31, 2020 ($1,000 per share liquidation value)		-			-
Series C convertible preferred stock, $0.0001 par value, 4,280 shares designated; 227 and none shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ($1,000 per share liquidation value)		-			-

Common stock, $0.0001 par value, 500,000,000 shares authorized; 98,636,970 and 85,141,956 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		9,864			8,514
Series B convertible preferred stock, $0.0001 par value, 2,000 shares designated; no shares issued and outstanding at March 31, 2022 and December 31, 2021 ($1,000 per share liquidation value)								-				-
Series C convertible preferred stock, $0.0001 par value, 4,280 shares designated; 0 and 227 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively ($1,000 per share liquidation value)								-				-
Common stock, $0.0001 par value, 500,000,000 shares authorized; 99,395,304 and 98,636,970 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively								9,940				9,864
Additional paid-in capital		12,314,979			7,034,502			12,409,818				12,314,979
Deferred compensation								(49,906	)			-
Accumulated deficit		(2,173,891	)		(5,762,321	)		(3,866,649	)			(3,262,577	)

Total Stockholders’ Equity		10,150,952			1,280,695			8,503,203				9,062,266

Total Liabilities and Stockholders’ Equity	$	11,390,250		$	1,426,664		$	9,715,810			$	10,490,189

See accompanying condensed notes to unaudited consolidated financial statements.

SILO PHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(Unaudited)~~(UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						For the Three Months Ended
	2021			2020			2021			2020			March 31,
													2022			2021
LICENSE FEE REVENUES:	$	18,025		$	-		$	53,238		$	-		$	18,026		$	17,188

COST OF REVENUES		1,459			-			3,544			-			1,460			625

GROSS PROFIT		16,566			-			49,694			-			16,566			16,563

OPERATING EXPENSES:
Compensation expense		54,943			37,308			222,177			717,198			127,181			112,292
Professional fees		331,419			415,409			1,273,894			757,620			196,248			671,570
Research and development		70,514			-			217,962			-			170,279			48,602
Insurance expense		29,014			13,578			79,735			17,560			33,292			21,706
Bad debt expense (recovery)		(30,000	)		85,000			(83,500	)		84,000
Bad debt recovery														(20,000	)		(7,500	)
Selling, general and administrative expenses		24,618			7,598			141,353			33,764			36,825			71,029

Total operating expenses		480,508			558,893			1,851,621			1,610,142			543,825			917,699

OPERATING LOSS FROM CONTINUING OPERATIONS		(463,942	)		(558,893	)		(1,801,927	)		(1,610,142	)		(527,259	)		(901,136	)

OTHER INCOME (EXPENSE):
Interest income		-			2,818			-			8,788
Other income		-			-			-			3,000
Gain on forgiveness of PPP note payable		-			-			19,082			-
Interest expense		(483	)		(393	)		(2,872	)		(268,996	)
Interest expense - related party		-			-			-			(224	)
Loss on debt extinguishment		-			-			-			(198,000	)
Net realized gain on equity investments		6,655,120			-			6,655,120			-
Net unrealized gain on equity investments		300,876			-			369,626			-
Interest income (expense), net														415			(1,349	)
Other income from equity shares earned for services														85,733			-
Net unrealized gain (loss) on equity investments														(161,798	)		38,750

Total other income (expense)		6,955,513			2,425			7,040,956			(455,432	)		(75,650	)		37,401

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES		6,491,571			(556,468	)		5,239,029			(2,065,574	)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES														(602,909	)		(863,735	)

Provision for income taxes		(19,133	)		-			(19,133	)		-			-			-

INCOME (LOSS) FROM CONTINUING OPERATIONS		6,472,438			(556,468	)		5,219,896			(2,065,574	)
LOSS FROM CONTINUING OPERATIONS														(602,909	)		(863,735	)

DISCONTINUED OPERATIONS:
Gain from sale of assets of discontinued operations, net of tax		1,553			-			1,553			-
Loss from discontinued operations, net of tax		(88,872	)		(77,327	)		(229,022	)		(182,129	)		(1,163	)		(66,967	)

LOSS FROM DISCONTINUED OPERATIONS		(87,319	)		(77,327	)		(227,469	)		(182,129	)		(1,163	)		(66,967	)

NET INCOME (LOSS)		6,385,119			(633,795	)		4,992,427			(2,247,703	)
NET LOSS														(604,072	)		(930,702	)

Deemed dividend		-			-			(1,403,997	)		(69,000	)		-			(1,403,997	)

NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$	6,385,119		$	(633,795	)	$	3,588,430		$	(2,316,703	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS													$	(604,072	)	$	(2,334,699	)

NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	0.06		$	(0.01	)	$	0.04		$	(0.04	)
Diluted	$	0.06		$	(0.01	)	$	0.04		$	(0.04	)
NET LOSS PER COMMON SHARE:
Continuing operations - basic and diluted													$	(0.01	)	$	(0.03	)
Discontinued operations - basic and diluted													$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		98,636,970			84,416,681			93,594,877			59,512,252
Diluted		99,693,483			84,416,681			94,651,390			59,512,252
Basic and diluted														98,636,970			85,141,956

See accompanying condensed notes to unaudited consolidated financial statements.

SILO PHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

~~For the Nine Months Ended September 30,~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 ~~and 2020~~

~~(Unaudited)~~(UNAUDITED)

Series B Preferred
Stock Series C Preferred
Stock Common Stock Additional
Paid In Accumulated Total
Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)

Balance, December 31, 2020 - $ - - $ - 85,141,956 $ 8,514 $ 7,034,502 $ (5,762,321 ) $ 1,280,695

Series C preferred stock issued for cash, net of offering cost - - 4,276 - - - 3,794,102 - 3,794,102

Deemed dividend upon issuance of preferred stock - - - - - - 1,403,997 (1,403,997 ) -

Common stock warrants granted for services - - - - - - 83,728 - 83,728

Net loss - - - - - - - (930,702 ) (930,702 )

Balance, March 31, 2021 - $ - 4,276 $ - 85,141,956 $ 8,514 $ 12,316,329 $ (8,097,020 ) $ 4,227,823

Issuance of common stock for conversion of preferred stock - - (4,049 ) - 13,495,014 1,350 (1,350 ) - -

Net loss - - - - - - - (461,990 ) (461,990 )

Balance, June 30, 2021 - - 227 - 98,636,970 9,864 12,314,979 (8,559,010 ) 3,765,833

Net income - - - - - - - 6,385,119 6,385,119

Balance, September 30, 2021 - $ - 227 $ - 98,636,970 $ 9,864 $ 12,314,979 $ (2,173,891 ) $ 10,150,952

Series B Preferred
Stock Series C Preferred
Stock Common Stock Additional
Paid In Accumulated Total
Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)

Balance, December 31, 2019 115 $ - - $ - 23,604,207 $ 2,361 $ 2,630,551 $ (2,655,804 ) $ (22,892 )

Net loss - - - - - - - (238,877 ) (238,877 )

Balance, March 31, 2020 115 $ - - $ - 23,604,207 $ 2,361 $ 2,630,551 $ (2,894,681 ) $ (261,769 )

Common Stock issued for cash, net of offering cost - - - - 37,758,116 3,775 2,111,958 - 2,115,733

Common Stock issued for future services - - - - 8,586,184 859 686,036 - 686,895

Preferred Shares Exchanged for Common Stock (115 ) - - - 1,437,500 144 (144 ) - -

Common Stock issued in connection with employment agreement - - - - 7,630,949 763 609,713 - 610,476

Common Stock issued for Exchange of Notes - - - - 4,125,000 412 527,588 - 528,000

Deemed dividend on Preferred Stock Exchange - - - - - - 69,000 (69,000 ) -

Net loss - - - - - - - (1,375,031 ) (1,375,031 )

Balance, June 30, 2020 - - - - 83,141,956 8,314 6,634,702 (4,338,712 ) 2,304,304

Common Stock issued for conversion of Redeemable Series A Preferred stock - - - - 2,000,000 200 399,800 - 400,000

Net loss - - - - - - - (633,795 ) (633,795 )

Balance, September 30, 2020 - $ - - $ - 85,141,956 $ 8,514 $ 7,034,502 $ (4,972,507 ) $ 2,070,509

	Series B Preferred Stock				Series C Preferred Stock					Common Stock				Additional Paid In			Deferred			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Shares		Amount		Capital			Compensation			Deficit			Equity
Balance, December 31, 2021		-	$	-		227		$	-		98,636,970	$	9,864	$	12,314,979		$	-		$	(3,262,577	)	$	9,062,266

Stock options issued as stock based compensation		-		-		-			-		-		-		94,915			(49,906	)		-			45,009

Common stock issued for conversion of Series C preferred stock		-		-		(227	)		-		758,334		76		(76	)		-			-			-

Net loss		-		-		-			-		-		-		-			-			(604,072	)		(604,072	)

Balance, March 31, 2022		-	$	-		-		$	-		99,395,304	$	9,940	$	12,409,818		$	(49,906	)	$	(3,866,649	)	$	8,503,203

	Series B Preferred Stock				Series C Preferred Stock				Common Stock				Additional Paid In		Accumulated		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit		Deficit			Equity
Balance, December 31, 2020		-	$	-		-	$	-		85,141,956	$	8,514	$	7,034,502	$	-	$	(5,762,321	)	$	1,280,695

Series C preferred stock issued for cash, net of offering cost		-		-		4,276		-		-		-		3,794,102		-		-			3,794,102

Deemed dividend upon issuance of preferred stock		-		-		-		-		-		-		1,403,997		-		(1,403,997	)		-

Common stock warrants granted for services		-		-		-		-		-		-		83,728		-		-			83,728

Net loss		-		-		-		-		-		-		-		-		(930,702	)		(930,702	)

Balance, March 31, 2021		-	$	-		4,276	$	-		85,141,956	$	8,514	$	12,316,329	$	-	$	(8,097,020	)	$	4,227,823

See accompanying condensed notes to unaudited consolidated financial statements.

SILO PHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(Unaudited)~~(UNAUDITED)

For the Nine Months Ended
September 30,
2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,992,427 $ (2,247,703 )
Adjustments to reconcile net loss to net cash used in operating activities
Bad debt (recovery) expense (83,500 ) 90,000
Stock-based compensation 83,728 610,476
Amortization of debt discount to interest expense - 268,125
Amortization of prepaid stock-based expense 107,970 460,289
Inventory write-down - 19,879
Net realized gain on equity investments (6,655,120 ) -
Net unrealized gain on equity investments (369,626 ) -
Gain on forgiveness of PPP note payable and accrued interest (19,082 ) -
Loss from disposal of assets from discontinued operations (1,553 ) -
Loss from debt extinguishment - 198,000
Change in operating assets and liabilities:
Increase in prepaid expenses and other current assets - current (87,469 ) (68,045 )
Increase in prepaid expenses - non-current (28,118 ) (117,347 )
(Increase) decrease in assets of discontinued operations (24,963 ) 105,743
Increase in accounts payable and accrued expenses 84,399 59,910
Increase in deferred revenue 496,762 -

NET CASH USED IN OPERATING ACTIVITIES (1,504,145 ) (620,673 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equity investments 6,736,070 -
Collection on note receivable written off prior to 2019 7,500 -
Collection on note receivable 99,500 20,000

NET CASH PROVIDED BY INVESTING ACTIVITIES 6,843,070 20,000

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party - 35,000
Proceeds from note payable - 18,900
Repayment of note payable - related party - (35,000 )
Net proceeds from sale of common stock - 2,115,733
Net proceeds from sale of preferred stock 3,794,102 -
Repayment of advance from a related party (2,366 ) -
Advance from a related party 2,366 -

NET CASH PROVIDED BY FINANCING ACTIVITIES 3,794,102 2,134,633

NET INCREASE IN CASH AND CASH EQUIVALENTS: 9,133,027 1,533,960

CASH AND CASH EQUIVALENTS - beginning of period 1,128,389 111,752

CASH AND CASH EQUIVALENTS - end of period $ 10,261,416 $ 1,645,712

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ - $ 224
Income taxes $ - $ -

Non-cash investing and financing activities:
Common stock issued for prepaid services $ - $ 686,895
Common stock issued for Exchange of Notes $ - $ 528,000
Common stock issued for conversion of Redeemable Series A Preferred Stock $ - $ 400,000
Increase in equity investments recorded as deferred revenue pursuant to a patent license agreement $ 531,250 $ -
Note receivable issued in connection with asset purchase agreement $ 60,000 $ -

	For the Three Months Ended
	March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(604,072	)	$	(930,702	)
Adjustments to reconcile net loss to net cash used in operating activities
Bad debt recovery		(20,000	)		(7,500	)
Stock-based compensation		45,009			83,728
Amortization of prepaid stock-based expense		-			101,222
Net unrealized (gain) loss on equity investments		161,798			(38,750	)
Equity shares earned for services		(85,733	)		-
Change in operating assets and liabilities:
Prepaid expenses and other current assets		(69,667	)		(109,914	)
Assets of discontinued operations		-			(11,181	)
Interest receivable		(1,184	)		-
Accounts payable and accrued expenses		(262,130	)		110,967
Insurance payable		64,839			-
Deferred revenue		(18,025	)		482,812

NET CASH USED IN OPERATING ACTIVITIES		(789,165	)		(319,318	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Collection on note receivable written off prior to 2019		-			7,500
Collection on note receivable		20,000			23,500

NET CASH PROVIDED BY INVESTING ACTIVITIES		20,000			31,000

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock		-			3,794,102
Advance from a related party		-			2,366

NET CASH PROVIDED BY FINANCING ACTIVITIES		-			3,796,468

NET CHANGE IN CASH AND CASH EQUIVALENTS:		(769,165	)		3,508,150

CASH AND CASH EQUIVALENTS - beginning of the period		9,837,001			1,128,389

CASH AND CASH EQUIVALENTS - end of the period	$	9,067,836		$	4,636,539

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	-		$	224
Income taxes	$	-		$	-

Non-cash investing and financing activities:
Common stock issued for conversion of Series C preferred stock	$	76		$	-
Common stock warrants granted for services	$	-		$	83,728
Increase in equity investments recorded as deferred revenue pursuant to a patent license agreement	$	-		$	531,250

See accompanying condensed notes to unaudited consolidated financial statements.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

NOTE 1 – ORGANIZATION AND BUSINESS

Silo Pharma, Inc. (formerly Uppercut Brands, Inc.) (the “Company”) was incorporated in the State of New York on July 13, 2010, under the name Gold Swap, Inc. On January 24, 2013, the Company changed its state of incorporation from New York to Delaware.

The Company is a developmental stage biopharmaceutical company focused on merging traditional therapeutics with psychedelic research. The Company seeks to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. The Company is focused on merging traditional therapeutics with psychedelic research for people suffering from indications such as depression, post-traumatic stress disorder (“PTSD”), Alzheimer’s, Parkinson’s, and other rare neurological disorders. The Company’s mission is to identify assets to license and fund the research which the Company’s believes will be transformative to the well-being of patients and the health care industry. The Company was engaged in the development of a streetwear apparel brand, NFID (see below).

On October 4, 2013, the Company filed a Form N-54A and elected to become a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company previously elected to be treated for federal income tax purpose as a regulated investment company, (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended, (the “Code”). Through September 29, 2018, the Company met the definition of RIC in accordance with the guidance under Accounting Standards Codification (“ASC”) Topic 946 “Financial Services – Investment Companies”. On September 29, 2018, the Company filed Form N-54C, Notification of Withdrawal of Election to be Subject to Section 55 through 65 of the 1940 Act, as the Company changed the nature of its business so as to cease to be a business development company (See Note 2 – Basis of Presentation). Additionally, since 2017, the Company has been subject to income taxes at corporate tax rates.

On May 21, 2019, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to change its name from Point Capital, Inc. to Uppercut Brands, Inc. Thereafter, on September 24, 2020, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to change its name from Uppercut Brands, Inc. to Silo Pharma, Inc.

On April 8, 2020, the Company incorporated a new wholly-owned subsidiary, Silo Pharma Inc., in the State of Florida. The Company has also secured the domain name www.silopharma.com. The Company has been exploring opportunities to expand the Company’s business by seeking to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. In July 2020, through the Company’s newly formed subsidiary, the Company entered into a commercial evaluation license and option agreement with University of Maryland, Baltimore (“UMB”) (see Note 9)8) pursuant to which, among other things, UMB granted the Company an exclusive, option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license to with respect to certain technology. The option was extended and exercised on January 13, 2021. On February 12, 2021, the Company entered into a Master License Agreement with UMB (see Note 9)8). The Company plans to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand the Company’s business to focus on this new line of business.

On September 30, 2021, the Company entered into and closed on an Asset Purchase Agreement (the “Asset Purchase Agreement) with NFID, LLC, a Florida limited liability company (the “Buyer”), whereby the Buyer purchased from the Company certain assets, properties, and rights in connection with the Company’s NFID trademark name, logos, domain, and apparel clothing and accessories for a purchase price of $60,000 in the form of a promissory note amounting to $60,000. The promissory note bears 8% interest per annum and matures on October 1, 2023. Accordingly, the results of operations of this component, for all periods presented, are separately reported as “discontinued operations” on the condensed consolidated statements of operations (see Note 4).

On March 11, 2022, the Company stockholders approved granting discretionary authority to the Company’s Board of Directors to amend the Company’s Certificate of Incorporation to effect one or more consolidations of the Company’s issued and outstanding shares of common stock, pursuant to which the shares of common stock would be combined and reclassified into one share of common stock at a ratio within the range from 1-for-5 up to 1-for-50 (the “Reverse Stock Split”), provided that, (X) that the Company shall not effect Reverse Stock Splits that, in the aggregate, exceeds 1-for-50, and (Y) any Reverse Stock Split is completed no later than February 8, 2023. As of the date of this report, the Company had not effected a Reverse Stock Split.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of ~~presentation~~Presentation

Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring and non-recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the financial statements for the year ended December 31, ~~2020~~2021 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March ~~29, 2021.~~28, 2022.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

In accordance with, ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the NFID, LLC component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the results of operations of this component, for all periods, are separately reported as “discontinued operations” on the condensed consolidated statements of operations.

~~Going Concern~~Liquidity

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying ~~unaudited~~ condensed consolidated financial statements, the Company ~~had~~generated a net loss of $604,072 and used cash ~~used~~ in operations of ~~$1,504,145 for~~$789,165 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Additionally, the Company ~~had~~has an accumulated deficit of ~~$2,173,891~~$3,866,469 at ~~September 30, 2021 and has generated minimal revenues under its new business plan.~~ March 31, 2022. As of March 31, 2022, the Company had working capital of $9,325,469.

These ~~factors raise~~events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going ~~concern~~concern. The Company believes that the Company has sufficient cash to meet its obligations for a ~~period~~minimum of twelve months from the ~~issuance~~ date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional capital pursuant to debt or equity financings. The Company may seek to raise additional capital through additional debt and/or equity financings to fund its operations in the future; however, no assurance can be provided that the Company will be able to raise additional capital on favorable terms, or at all. If the Company is unable to raise additional capital or secure additional lending in the future to fund its business plan, the Company may need to curtail or cease its operations. On February 9, 2021, the Company entered into securities purchase agreements with certain institutional and accredited investors pursuant to which it sold an aggregate of 4,276 shares of its newly designated Series C Convertible Preferred Stock and warrants to purchase up to 14,253,323 shares of it ss common stock for gross proceeds of approximately $4,276,000, before deducting placement agent and other offering expenses. The closing of the offering occurred on February 12, 2021 (See Note 7). Additionally, the Company received proceeds from sale of its equity investments for $6,736,070 in September 2021 (see Note 3). These unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.filing.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from estimates. Significant estimates during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and year ended December 31, 2021 ~~and 2020~~ include the collectability of notes receivable, ~~the~~ valuation of ~~the Company’s~~ equity investments, estimates for obsolete and slow-moving inventory, estimates of the deemed dividend, valuation allowances for deferred tax assets, the fair value of warrants issued with debt and for services, and the fair value of shares issued for services and in settlements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 or by the Securities Investor Protection Corporation up to $250,000. To reduce its risk associated with the failure of such financial institutions, the Company evaluates, at least annually, the rating of the financial institutions in which it holds deposits. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had cash in excess of FDIC limits of approximately ~~$9.8 million,~~$8,600,000, and approximately ~~$880,000,~~$9,100,000, respectively.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

Notes Receivable

~~Notes Receivable~~

The Company recognizes an allowance for losses on notes receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current note receivable aging, and expected future write-offs, as well as an assessment of specific identifiable accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets - current of ~~$220,590~~$206,451 and ~~$241,091~~$145,324 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, consist primarily of costs paid for future services which will occur within a year. Prepaid expenses and other current assets – non-current of ~~$28,118~~$35,199 and $0$26,659 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, consist primarily of costs paid for license fees and future services which will occur after a year. Prepaid expenses may include prepayments in cash and equity instruments for consulting, business advisory, legal services, license fees, research and development fees, and insurance which are being amortized over the terms of their respective agreements.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

Equity Investments, at Fair Value

Realized gain or loss is recognized when an investment is disposed of and is computed as the difference between the Company’s carrying value and the net proceeds received from such disposition. Realized gains and losses on investment transactions are determined by specific identification. Net unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment. Net unrealized gains or losses for equity investments are recognized in operations as the difference between the carrying value at the beginning of the period and the fair value at the end of the period.

Equity Investments, at Cost

Equity investments, at cost are comprised mainly of non-marketable capital stock and stock warrants, are recorded at cost, as adjusted for other than temporary impairment write-downs and are evaluated for impairment periodically.

Revenue Recognition

The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.

The Company records interest and dividend income on an accrual basis to the extent that the Company expects to collect such amounts.

For the license and royalty income, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement. Payments received from the licensee that are related to future periods are recorded as deferred revenue to be recognized as revenues over the term of the related license agreement (see Note 9)8).

Product sales were recognized when the NFID products were shipped to the customer and title was transferred and were recorded net of any discounts or allowances which are separately reported as “discontinued operations” on the condensed consolidated statements of operations.

Cost of Revenues

The primary components of cost of revenues on license fees included the cost of the license fees. Payments made to the licensor that are related to future periods are recorded as prepaid expense to be amortized over the term of the related license agreement (see Note 9)8).

The primary components of cost of revenues on NFID apparel include the cost of the product, production costs, warehouse storage costs and shipping fees which are separately reported as “discontinued operations” on the condensed consolidated statements of operations.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

Stock-Based Compensation

~~Stock-based Compensation~~

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.

Income Taxes

Deferred income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) ASC 740-10, “Uncertainty in Income Taxes”. Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. The Company does not believe it has any uncertain tax positions as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 that would require either recognition or disclosure in the accompanying ~~unaudited~~ condensed consolidated financial statements.

The Company recognized income tax expense of ~~$19,133~~$0 and $24,876 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and year ended December 31, 2021, respectively.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

Research and ~~development~~Development

In accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ research and development costs were ~~$217,962~~$170,279 and ~~$0,~~$48,602, respectively. ~~During the three months ended September 30, 2021 and 2020, research and development costs were $70,514 and $0, respectively.~~

Net Income (Loss) per Common Share

Basic loss per share is computed by dividing net loss allocable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period using the as-if converted method. Potentially dilutive securities which included convertible preferred shares and stock options are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net losses. The following are the potentially dilutive shares for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

	March 31, 2022		March 31, 2021
Series C convertible preferred stock		—		14,253,333
Stock options		1,100,000		300,000
Warrants		17,353,987		17,353,987
		18,453,987		31,907,320

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

September 30,
2021 September 30,
2020
Series A convertible preferred stock - -
Series B convertible preferred stock - -
Series C convertible preferred stock 756,667 -
Stock options 300,000 300,000
Warrants 17,353,987 -

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and edging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470- 20, Debt with Conversion and Other Options, for convertible instruments. Under the amendments in ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate when applying the guidance in Topic 835, Interest. The amendments in ASU 2020-06 provide financial statement users with a simpler and more consistent starting point to perform analyses across entities. The amendments also improve the operability of the guidance and reduce, to a large extent, the complexities in the accounting for convertible instruments and the difficulties with the interpretation and application of the relevant guidance. To further improve the decision usefulness and relevance of the information being provided to users of financial statements, amendments in ASU 2020-06 increased information transparency by making the following amendments to the disclosure for convertible instruments:

	1.	Add a disclosure objective

	2.	Add information about events or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly changed

	3.	Add information on which party controls the conversion rights

	4.	Align disclosure requirements for contingently convertible instruments with disclosure requirements for other convertible instruments

	5.	Require that existing fair value disclosures in Topic 825, Financial Instruments, be provided at the individual convertible instrument level rather than in the aggregate.

~~The following is a reconciliation~~Additionally, for convertible debt instruments with substantial premiums accounted for as paid-in capital, amendments in ASU 2020-06 added disclosures about (1) the fair value amount and the level of fair value hierarchy of the ~~numerator~~entire instrument for public business entities and ~~denominator used in~~(2) the ~~basic and diluted earnings per share (“EPS”) calculations.~~premium amount recorded as paid-in capital.

Three months
ended
September 30,
2021 Three months
ended
September 30,
2020 Nine months
ended
September 30,
2021 Nine months
ended
September 30,
2020
Numerator:
Net income (loss) $ 6,385,119 $ (633,795 ) $ 3,588,430 $ (2,316,703 )
��
Denominator:
Weighted-average shares of common stock 98,636,970 84,416,681 93,594,877 59,512,252
Dilutive effect of convertible instruments 1,056,513 - 1,056,513 -
Diluted weighted-average of common stock 99,693,483 41,653,825 94,651,390 80,631,207

Net income (loss) per common share from:
Basic $ 0.06 $ (0.01 ) $ 0.04 $ (0.04 )
Diluted 0.06 (0.01 ) 0.04 (0.04 )

~~Leases~~

~~In February 2016, the FASB issued~~The amendments in ASU ~~2016-02, “Leases (Topic 842)”. ASU 2016-02 sets out the principles~~2020-06 are effective for ~~the recognition, measurement, presentation and disclosure of leases for both parties~~public business entities, excluding entities eligible to ~~a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases~~be smaller reporting companies as ~~either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase~~defined by the ~~lessee. This classification will determine whether lease expense~~SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is ~~recognized based on an effective interest method or on a straight-line basis over~~permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Entities should adopt the ~~term~~guidance as of the ~~lease. A lessee is also required~~beginning of its annual fiscal year and are allowed to ~~recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.~~

~~Leases with a term of 12 months or less will be accounted for similar to existing~~adopt the guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The pronouncement requiresthrough either a modified retrospective method of ~~adoption~~transition or a fully retrospective method of transition. In applying the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If an entity elects the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and ~~was effective on January 1, 2019, with early adoption permitted. For the Company’s administrative office lease, the Company analyzed if~~ it ~~would be required to record a lease liability and a right-of-use asset~~did not have material impact on its condensed consolidated balance sheets at fair value upon adoption of ASU 2016-02. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.financial statements.

~~New Accounting Pronouncements~~In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and did not have material impact on its condensed consolidated financial statements

~~Accounting standards~~Management does not believe that ~~have been~~any other recently issued, ~~or proposed by FASB that do~~but not ~~require adoption until a future date are not expected to~~yet effective accounting pronouncements, if adopted, would have a material ~~impact~~effect on the Company’s consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.statements.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

~~The Company follows~~FASB ASC 820 ~~“Fair~~- Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

~~ASC 820~~Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ~~Additionally,~~FASB ASC 820 requires disclosures about the ~~use~~fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on Mach 31, 2022. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques ~~that maximize~~based on whether the ~~use of~~inputs to those valuation techniques are observable or unobservable. Observable inputs ~~and minimize~~reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the ~~use of unobservable inputs. These inputs are prioritized below:~~

~~Level 1- Inputs are~~highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ~~available at~~(Level 1 measurement) and the ~~measurement date.~~lowest priority to unobservable inputs (Level 3 measurement).

	Level 1 -	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

	Level 2 -	Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

	Level 3 -	Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

Level 2- Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3- Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts reported in the ~~unaudited condensed~~ consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.

Equity ~~investments,~~Investments at ~~fair value~~Fair Value

The Company accounted for certain equity investments at fair value using level 1, level 2 and level 3 valuations. Assets and liabilities measured at fair value on a recurring basis are as follows at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~ 2021:

	At September 30, 2021 (Unaudited)						At December 31, 2020						At March 31, 2022						At December 31, 2021
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Equity investments, at fair value	$	820,126	$	—	$	—	$	—		—	$	—
Equity investments consisting of common stock, at fair value													$	343,930	$	—	$	—	$	419,995		—	$	—

The following table summarizes activity in the Company’s equity investments, at fair value for the periods presented:

	March 31, 2022			December 31, 2021
Balance, beginning of the year	$	419,995		$	—
Additions		85,733			531,250
Sales		—			(359,843	)
Unrealized (loss) gain		(161,798	)		248,588
Balance, end of the year	$	343,930		$	419,995

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

During the three months ended March 31, 2022, the Company received 77,939 shares of Home Bistro, Inc. common stock with grant date fair value of $85,733 or $1.10 per share, in exchange for entering into a lock up and leak out agreement which was recorded as other income from equity shares earned for services in the accompanying condensed consolidated statement of operations. The Company measures equity securities received for services at fair value on the date of receipt.

At March 31, 2022 and December 31, 2021, equity investments, at fair value consisted of common equity securities of two entities, Home Bistro, Inc. and Aikido Pharma, Inc. (see Note 8).

Equity investments are carried at fair value with unrealized gains or losses which is recorded as net unrealized gain (loss) on equity investments in the accompanying condensed consolidated statement of operations. Realized gains and losses are determined on a specific identification basis which is recorded as net realized gain (loss) on equity investments in the consolidated statement of operations. The Company reviews equity investments, at fair value for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.

~~At September 30, 2021, equity investments,~~Equity Investments at ~~fair value consisted of common equity securities of two entities, including AIkido Pharma, Inc. (see Note 9).~~Cost

~~Equity investments are carried~~At March 31, 2022 and December 31, 2021, the Company did not have non-marketable capital stock and stock warrants, recorded at fair value with unrealized gains or losses included in income (expense). Realized gains and losses are determined on a specific identification basis and are included in other income (expense). The Company reviews equity investments, at fair value for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. For the nine months ended September 30, 2021, we recorded a net realized gain on equity investments of $6,655,120 primarily attributed to a gain from the sale of the Company’s equity investment in DatChat, Inc. and Aikido Pharma, Inc.

cost.

~~The following are the Company’s equity investments, at fair value owned by levels within the fair value hierarchy at September 30, 2021:~~

Level 1 Level 2 Level 3 Total
Common Stock $ 820,126 $ — $ — $ 820,126
Total Investments $ 820,126 $ — $ — $ 820,126

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

~~The following table summarizes activity in the Company’s equity investments, at fair value for the periods presented:~~

September 30,
2021 December 31,
2020
Balance, beginning of period $ — $ —
Additions
531,250 —
Sales (80,750 ) —
Unrealized gain 369,626 —
Balance, end of period $ 820,126 $ —

~~At September 30, 2021and December 31, 2020, equity investments, at fair value consisted of the following components:~~

September 30,
2021

December 31,
2020

Equity investments, at original cost $ 450,500 $ —
Gross unrealized appreciation 369,626 —
Equity investments, at fair market value $ 820,126 $ —

~~Equity Investments, at Cost~~

At September 30, 2021 and December 31, 2020, equity investments, at cost of $0 and $200, respectively, comprised mainly of non-marketable capital stock and stock warrants, are recorded at cost, as adjusted for other than temporary impairment write-downs and are evaluated for impairment periodically.

NOTE 4 – DISPOSAL OF THE DISCONTINUED OPERATIONS OF THE NFID BUSINESS

On September 30, 2021, the Company entered into and closed on an Asset Purchase Agreement (see Note 1) with NFID, LLC, an unrelated party, a Florida limited liability company, whereby the Company sold certain assets, properties, and rights in connection with its NFID trademark name, logos, domain, and apparel clothing and accessories for a purchase price of $60,000 in the form of a promissory note amounting to $60,000. The promissory note bears 8% interest per annum and matures on October 1, 2023. Note receivable – non-current amounted to $60,000 as of September 30, 2021.

ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the results of operations of this component, for all periods, are separately reported as “discontinued operations” on the condensed consolidated statements of operations.

~~As of September 30, 2021 and December 31, 2020, assets of discontinued operations amounted $0 and $33,484, respectively, which primarily consisted of NFID inventory.~~

The following table set forth the selected financial data of the Company’s gain from sale of the NFID business ~~for the three and nine months ended~~on September 30, ~~2021.~~ 2021:

	September 30, 2021		September 30, 2021
Assets:
Current assets:
Inventory, net	$	58,447	$	58,447
Total assets	$	58,447	$	58,447

Liabilities:
Current liabilities:
Total liabilities	$	-	$	—

Carrying value of NFID business on date of sale	$	58,447
Total consideration		(60,000)
Net gain from sale of NFID business	$	1,553
Net asset of NFID business disposed			$	58,447
Consideration in the form of a note receivable				(60,000	)
Gain from sale of NFID business			$	(1,553	)

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

The summarized operating result of discontinued operations of the NFID Business included in the Company’s ~~unaudited~~ condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,						March 31,
	2021			2020			2021			2020			2022			2021
Product sales, net	$	39,236		$	16,285		$	119,541		$	18,795		$	—		$	30,246
Cost of sales		30,637			29,450			98,998			30,866			1,079			31,325
Gross profit (loss)		8,599			(13,165	)		20,543			(12,071	)		(1,079	)		(1,079	)
Total operating and other non-operating expenses		(97,471	)		(64,162	)		(249,565	)		(170,058	)		(84	)		(65,888	)
Gain from sale of NFID business		1,553			-			1,553			-

Loss from discontinued operations	$	(87,319	)	$	(77,327	)	$	(227,469	)	$	(182,129	)	$	(1,163	)	$	(66,967	)

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 5 – NOTES RECEIVABLE

As of March 31, 2022 and December 31, 2021, notes receivable, net, consisted of the following:

	March 31, 2022			December 31, 2021
Principal amounts of notes receivable	$	115,500		$	220,000
Additional notes receivable		—			60,000
Collections on notes receivables		(20,000	)		(164,500	)
Less: allowance for doubtful accounts		(35,500	)		(55,500	)
Total Notes receivable, net		60,000			60,000
Less: notes receivable, net – current portion		—			—
Notes receivable – non-current	$	60,000		$	60,000

On September 28, 2018, the Company and Blind Faith Concepts Holdings, Inc. (the “Seller”) executed a two-year promissory note receivable agreement with a principal balance of $200,000 of which $100,000 was funded to the Seller in September 2018 and the remaining $100,000 was funded in October 2018. The promissory note accrued interest at a rate of 6% per annum, and the Company was repaid in interest only payments on a quarterly basis, until the maturity date of September 27, 2020, at which time the full principal and any interest payments was due to the Company. At the time the promissory note receivable agreement was executed, the Company also executed a security interest and pledge agreement with the borrower pursuant to which the borrower pledged all of the assets of its company as security for the performance of the note obligations.

On November 2, 2018, the Company and Seller entered into a promissory note agreement (“Promissory Note Agreement”) with a principal balance of $50,000. Pursuant to the Promissory Note Agreement, the $50,000 note was a deposit and credit towards the acquisition of the assets of Lust for Life Group such as inventory, trademarks and logos. Pursuant to the Promissory Note Agreement, since the purchase did not close within 30 days from date of the Promissory Note, the note receivable became immediately due. Through the date of default, the outstanding principal balance accrued interest at an interest rate of 10% per annum payable on a monthly basis. Upon default, the interest rate increased to 18% per annum. As of December 31, 2018, the Company determined that this note receivable was doubtful and accordingly, recorded an allowance for doubtful account and bad debt expense of $50,000.

In December 2019, pursuant to claim purchase agreements (“Claim Purchase Agreements”), the Company sold its notes receivable and related interest receivable balances in the aggregate amount of $277,305 to an investor. Pursuant to the Claim Purchase Agreements, the investor agreed to pay the Company the purchase price of $277,305 on the earlier of the payment of six-monthly installments or upon the liquidation of settlement securities of the Seller pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended. The first installment was be made following entry and full effectuation of a court order approving the settlement of the claim which occurred on March 6, 2020 in the United States District Court for the District of Maryland Northern Division. Additionally, on January 6, 2020, the Company and the Seller entered into a settlement agreement related to notes receivable. In lieu of the Company seeking default and foreclosure against the Seller pursuant to the note agreements, the Company received 10,420 shares of the Seller’s convertible Series B Preferred Stock. Since the shares of Series B Preferred Stock have limited marketability, no value was placed on these shares. Between April 2020 and December 2020, the Company collected an aggregate of $30,000 on the notes receivable balance. During the year ended December 31, 2020, the Company recorded a total allowance for doubtful account and bad debt expense of $174,376 (consisting of the principal balance of $146,500 and interest receivable of $27,876) due to slow collection of the installment payments pursuant to the Claim Purchase Agreements.

During the years ended December 31, 2021, the Company recovered an aggregate of $7,500 bad debt previously written off during the periods between 2018 to 2020, recorded as bad debt recovery in the accompanying consolidated statement of operations.

During ~~the nine months ended September 30, 2021 and~~ the year ended December 31, ~~2020, the Company recorded $7,500 and $9,000 to bad debt recovery for cash payment received on an older note receivable that was previously written off prior to 2019. On March 10,~~ 2021, the Company ~~collected~~received $23,500 ~~related to this note receivable.~~of payment and recovered $141,000 of the of the $196,500 bad debt allowance. On June 7, 2021, the Company and the investor, entered into a settlement agreement whereby both parties agreed to settle the remaining balance of this note receivable which was previously written off in year 2020 for a total settlement amount of $196,000 to be paid as ~~follows i)~~follows; (i) an initial payment of $46,000 upon execution of the settlement agreement and ~~ii)~~(ii) $10,000 per month for fifteen months. ~~Between June 9, 2021~~During the three months ended March 31, 2022, $20,000 was collected under this settlement agreement and ~~September 7, 2021, the Company collected a total~~$35,500 remains collectible under this settlement agreement and such amount has been fully reserved as of ~~$76,000 and accordingly reduced the allowance for doubtful accounts against bad debt recovery for cash payment received.~~March 31, 2022.

On September 30, 2021, the Company executed a note receivable agreement with NFID, LLC in connection with an Asset Purchase Agreement (see Note 4). The promissory note bears 8% interest per annum and matures on October 1, 2023. ~~Note~~The outstanding principal and accrued interest shall be due and payable on maturity. As of December 31, 2021, this note receivable had outstanding principal receivable of $60,000 and accrued interest receivable of $1,210 for a total receivable balance of $61,210. As of March 31, 2022, this note receivable had outstanding principal receivable of $60,000 and accrued interest receivable of $2,394 for a total receivable balance of $62,394 which is reflected in the accompanying consolidated balance sheet as note receivable – ~~non-current amounted to $60,000 as of September 30, 2021.~~

non-current.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

~~As of September 30, 2021 and December 31, 2020, notes receivable, net, consisted of the following:~~

September 30,
2021 December 31,
2020

Principal amounts of notes receivable $ 280,000 $ 250,000
Collections on notes receivables (107,000 ) (30,000 )
Less: allowance for doubtful accounts (113,000 ) (196,500 )
Less: notes receivable, net – current portion — (23,500 )
Notes receivable – non-current $ 60,000 $ —

~~NOTE 6 -~~ ~~NOTE PAYABLE~~

~~Paycheck Protection Program Funding~~

On April 30, 2020, the Company received federal funding in the amount of $18,900 through the Paycheck Protection Program (the “PPP”). PPP funds had certain restrictions on use of the funding proceeds, and generally must be repaid within two years and accrued interest at a rate of 1% per annum. The PPP loan may, under circumstances, be forgiven. No payment was due by the Company during the nine months period beginning on the date of this note (“Deferral Period”). Commencing one month after the expiration of the Deferral Period, the Company was to pay the lender monthly payments of principal and interest, each in equal amount required to fully amortize by the maturity date. If a payment on this note was more than ten days late, the lender would charge a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. As of December 31, 2020, the principal balance of this note amounted to $18,900 and accrued interest of $174.

During the nine months ended September 30, 2021, the Company recognized $54 of interest expense. In April 2021, the Company was notified by the Small Business Administration that the principal and accrued interest under the PPP loan has been forgiven in full. Accordingly, the Company recorded the principal balance of $18,900 and accrued interest of $182 to gain on forgiveness of PPP note payable during the nine months ended September 30, 2021.

As of
September 30,
2021 As of
December 31,
2020

Principal amount $ - $ 18,900
Less: current portion - (14,654 )
Note payable - long term portion $ - $ 4,246

NOTE 76 – STOCKHOLDERS’ EQUITY

~~Preferred stock~~Shares Authorized

The Company has 505,000,000 shares authorized ~~the issuance~~which consist of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock, $0.0001 par value. The Company’s board of directors is authorized, at any time, and from time to time, to provide for the issuance of shares of preferred stock in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the preferred stock or any series thereof. stock.

Preferred Stock

In April 2013, the Company designated 1,000,000 shares of preferred stock ~~were designated~~ as Series A Convertible Preferred Stock and in November 2019, the Company designated 2,000 shares of preferred stock ~~were designated~~ as Series B Convertible Preferred Stock. As of March 31, 2022 and December 31, 2021, there were no shares of the Series A and Series B preferred stock issued and outstanding.

~~Certificate of Designation of~~ Series C Convertible Preferred Stock

On February 9, 2021, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Certificate of Designations”) with the Delaware Secretary of State, designating 4,280 shares of preferred stock as Series C Convertible ~~Preferred Stock.~~preferred stock.

●	Designation. The Company has designated 4,280 shares of preferred stock as Series C Convertible preferred stock. Each share of Series C Convertible Preferred Stock has a par value of $0.0001 per share and a stated value of $1,000 (the “Series C Stated Value”).

●

Dividends. Holders of Series C Convertible preferred stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock. No other dividends shall be paid on shares of the Series C Convertible preferred stock.

●

Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Convertible preferred stock shall be entitled to receive the same amount that a holder of common stock would receive if the Series C Convertible preferred stock were fully converted (disregarding any conversion limitations) which amounts shall be paid pari passu with all holders of common stock.

●

Voting Rights. Except as otherwise provided in the Certificate of Designations or as otherwise required by law, the Series C Convertible preferred stock shall have no voting rights. However, as long as any shares of Series C Convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series C Convertible preferred stock, (a) alter or change adversely the powers, preferences or rights given to the Series C Convertible preferred stock or alter or amend the Certificate of Designations, (b) amend its Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series C Convertible preferred stock, (c) increase the number of authorized shares of Series C Convertible preferred stock, or (d) enter into any agreement with respect to any of the foregoing.

●

Conversion. Each share of Series C Convertible preferred stock is convertible, at any time and from time to time after the issuance date, at the option of the holder, into such number of shares of common stock determined by dividing the Series C Stated Value by the Series C Conversion Price. “Series C Conversion Price” means $0.30, subject to adjustment in the event of stock split, stock dividends, subsequent right offerings and similar recapitalization transactions.

●

Forced Conversion. Notwithstanding anything herein to the contrary, after the date that the Company’s stockholder approval is obtained and deemed effective, the Company may deliver a written notice to all holders (the “Forced Conversion Notice Date”) to cause each holder to convert all or part of such holder’s Series C Convertible preferred stock pursuant to Section 6 (“Forced Conversion”), it being agreed that the “Conversion Date” shall be deemed to occur no later than the earlier of (i) two (2) trading days and (ii) the number of trading days comprising the standard settlement period following the Forced Conversion Notice Date; provided, however, a holder shall only be required to convert pursuant to a Forced Conversion to the extent that such conversion would not cause a holder to exceed its beneficial ownership limitation. On March 10, 2021, the Company obtained the stockholders’ approval forcing the conversion of all the Series C Convertible preferred stock. On April 12, 2021, the Company notified holders of its Series C Convertible preferred stock of its election to force the conversion to its Series C Convertible preferred stock into shares of the Company’s common stock (see below for additional conversions in 2022).

~~Designation~~. The Company has designated 4,280 shares of preferred stock as Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock has a par value of $0.0001 per share and a stated value of $1,000 (the “Series C Stated Value”).

~~Dividends~~. Holders of Series C Convertible Preferred Stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock. No other dividends shall be paid on shares of the Series C Convertible Preferred Stock.

●

Exercisability. A holder of Series C Convertible preferred stock may not convert any portion of the Series C Convertible preferred stock to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% (or, upon election by a holder prior to issuance, 9.99%) of the outstanding shares of the Company’s common stock after conversion, which beneficial ownership limitation may be increased by the holder up to, but not exceeding, 9.99%.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

~~Liquidation~~. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Convertible Preferred Stock shall be entitled to receive the same amount that a holder of common stock would receive if the Series C Convertible Preferred Stock were fully converted (disregarding any conversion limitations) which amounts shall be paid pari passu with all holders of common stock.

~~Voting Rights~~. Except as otherwise provided in the Certificate of Designations or as otherwise required by law, the Series C Convertible Preferred Stock shall have no voting rights. However, as long as any shares of Series C Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series C Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series C Convertible Preferred Stock or alter or amend the Certificate of Designations, (b) amend its Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series C Convertible Preferred Stock, (c) increase the number of authorized shares of Series C Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

~~Conversion~~. Each share of Series C Convertible Preferred Stock is convertible, at any time and from time to time after the issuance date, at the option of the holder, into such number of shares of common stock determined by dividing the Series C Stated Value by the Series C Conversion Price. “Series C Conversion Price” means $0.30, subject to adjustment in the event of stock split, stock dividends, subsequent right offerings and similar recapitalization transactions.

~~Forced Conversion~~. Notwithstanding anything herein to the contrary, after the date that the Company’s stockholder approval is obtained and deemed effective, the Company may deliver a written notice to all holders (the “Forced Conversion Notice Date”) to cause each holder to convert all or part of such holder’s Sereis C Convertible Preferred Stock pursuant to Section 6 (“Forced Conversion”), it being agreed that the “Conversion Date” shall be deemed to occur no later than the earlier of (i) two (2) trading days and (ii) the number of trading days comprising the standard settlement period following the Forced Conversion Notice Date; provided, however, a holder shall only be required to convert pursuant to a Forced Conversion to the extent that such conversion would not cause a holder to exceed its beneficial ownership limitation. On March 10, 2021, the Company obtained the stockholders’ approval forcing the conversion of all the Series C Convertible Preferred Stock. On April 12, 2021, the Company notified holders of its Series C Convertible Preferred Stock of its election to force the conversion to its Series C Convertible Preferred Stock into shares of the Company’s common stock (see below).

~~Exercisability~~. A holder of Series C Convertible Preferred Stock may not convert any portion of the Series C Convertible Preferred Stock to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% (or, upon election by a holder prior to issuance, 9.99%) of the outstanding shares of the Company’s common stock after conversion, which beneficial ownership limitation may be increased by the holder up to, but not exceeding, 9.99%.

Series C Convertible Preferred Stock Financing

On February 9, 2021 (the “Effectiveness Date”), the Company entered into securities purchase agreements (collectively, the “Series C Purchase Agreements”) with certain institutional and accredited investors for the sale of an aggregate of 4,276 shares of the Company’s Series C Convertible Preferred Stock and warrants (the “February Warrants”) to purchase up to 14,253,323 shares (the “February Warrant Shares”) of the Company’s common stock for gross proceeds of approximately $4,276,000, before deducting placement agent and other offering expenses of $481,898 which are offset against the proceeds in additional paid in capital. The offering closed on February 12, 2021. Accordingly, the Company recognized a total deemed dividend of $1,403,997 for the beneficial conversion feature in connection with the issuance of these Series C Convertible ~~Preferred Stock.~~preferred stock.

The February Warrants are exercisable for a period of five years from the date of issuance at an exercise price of $0.30 per share. If, after a period of 180 days after the date of issuance of the February Warrants, a registration statement covering the resale of the February Warrant Shares is not effective, the holders may exercise the February Warrants by means of a cashless exercise.

The Series C Convertible ~~Preferred Stock~~preferred stock and the February Warrants each contain a beneficial ownership limitation that restricts each of the investor’s ability to exercise the February Warrants and convert the Series C Convertible ~~Preferred Stock~~preferred stock such that the number of shares of the Company common stock held by each of them and their affiliates after such conversion or exercise does not exceed 4.99% (or, at the election of the Investor, 9.99%) of the Company’s then issued and outstanding shares of common stock.

The Series C Purchase Agreement also provides that until the 18 month anniversary of the Effectiveness Date, in the event of a subsequent financing (except for certain exempt issuances as provided in the Series C Purchase Agreement) by the Company, each investor will have the right to participate in such subsequent financing up to an amount equal to the investor’s proportionate share of the subsequent financing based on such investor’s participation in the offering on the same terms, conditions and price provided for in the subsequent financing up to an amount equal to 50% of the subsequent financing. In addition, pursuant to the Series C Purchase Agreement, the Company has agreed that neither it nor its subsidiaries will enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents to file any registration statement other than as contemplated pursuant to the Registration Rights Agreement (as defined below) for a period of 90 days from the Effectiveness Date. Furthermore, subject to certain exceptions, the Company is prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents involving a Variable Rate Transaction (as defined in the Series C Purchase Agreement).

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

In connection with the offering, the Company entered into separate registration rights agreements (“Registration Rights Agreements”) with the investors pursuant to which the Company agreed to undertake to file a registration statement (the “Registration Statement”) to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement) within ten calendar days following the Effectiveness Date. The Company agreed to use its best efforts to cause the Registration Statement covering the Registrable Securities to be declared effective no later than the 60^th calendar day following the Effectiveness Date, or in the event of a full review by the Securities and Exchange Commission, the 90^th calendar day following the Effectiveness Date, and to maintain the effectiveness of the Registration Statement until all of the Registrable Securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act of 1933, as amended. If the Company fails to file the Registration Statement or have it declared effective by the dates set forth above, amongst other things, the Company will be obligated to pay the investors damages in the amount of 1% of their subscription amount, per month, until such events are satisfied. The Registration Statement was filed and declared effective in April 2021.

In addition, pursuant to the terms of the offering, the Company issued Bradley Woods & Co, Ltd. and Katalyst Securities LLC warrants (the “Placement Agent Warrants”) to purchase up to an aggregate of 2,850,664 shares of common stock, or 10% of the shares of common stock issuable upon conversion of the Series C Preferred Stock and February Warrant Shares sold in the offering. The Placement Agent Warrants are exercisable for a period of five years from the closing date of the offering at an exercise price of $0.35 per share, subject to adjustment. The Placement Agent Warrants were valued at the grant date using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 0.50%, expected dividend yield of 0%, expected term of 5 years using the simplified method and expected volatility of ~~$169%~~169% based on comparable and calculated volatility. The aggregate grant date fair value of these Placement Agent Warrants amounted to approximately $1,106,000 and was recorded against the proceeds with no net effect on the consolidated financials.

The net proceeds of the offering are expected to be used for working capital purposes and to further execute on the Company’s existing business.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

Conversion of Series C Convertible Preferred Stock into Common Stock

On ~~April 12, 2021,~~March 31, 2022, the Company notified holders of its Series C Convertible ~~Preferred Stock~~preferred stock of its election to force the conversion to its Series C Convertible ~~Preferred Stock~~preferred stock into shares of the Company’s common stock pursuant to the Certificate of Designations unless such conversion would cause the holder to exceed its beneficial ownership limitation pursuant to the Certificate of Designations. On ~~April 14, 2021,~~March 31, 2022, the Company converted ~~4,049~~227 Series C Convertible ~~Preferred Stock~~preferred stock into ~~13,495,014~~758,334 shares of common stock. ~~Currently,~~As of March 31, 2022, there ~~are 227~~were no shares of ~~the Company’s~~ Series C Convertible ~~Preferred Stock which remain~~preferred stock issued and outstanding.

~~Common stock~~Stock Options

~~Increase in Authorized Shares~~

On March 10, 2021, the Company filed an amendment to its Certificate of Incorporation with the Secretary of State of Delaware to increase the authorized number of shares of common stock of the Company from 100,000,000 shares to 500,000,000 shares.

~~Stock options~~

On January 18, 2021, the Company’s board of directors (“~~Board of Directors” or “Board”~~Board”) ~~of the Company~~ approved the Silo Pharma, Inc. 2020 Omnibus Equity Incentive Plan (the ~~“Plan”~~“2020 Plan”) to incentivize employees, officers, directors and consultants of the Company and its affiliates. 8,500,000 shares of common stock are reserved and available for issuance under the 2020 Plan, , provided that certain exempt awards (as defined in the 2020 Plan), shall not count against such share limit. The 2020 Plan provides for the grant, from time to time, at the discretion of the ~~Company’s~~ Board or a committee thereof, of cash, stock options, including incentive stock options and nonqualified stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation units and other stock or cash-based awards. The 2020 Plan shall terminate on the tenth anniversary of the date of adoption by the ~~Board of Directors.~~Board. Subject to certain restrictions, the Board ~~of Directors~~ may amend or terminate the Plan at any time and for any reason. An amendment of the 2020 Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, rules or regulations. On March 10, 2021, the ~~stockholders of~~2020 Plan was approved by the ~~Company approved the Plan.~~stockholders.

On January 31, 2022, pursuant to an Employment Agreement (see Note 8), an aggregate of 800,000 incentive stock options were issued under the 2020 Plan, to Dr. Kou, exercisable at $0.20 per share and expires on January 31, 2032. The stock options vest as follows: (i) 300,000 stock options upon issuance; (ii) 250,000 vests on October 31, 2022 and; (iii) 250,000 vests on October 31, 2023. The 800,000 stock options had a fair value of $94,914 which were valued at the grant date using a Binomial Lattice option pricing model with the following assumptions: risk-free interest rate of 1.18%, expected dividend yield of 0%, expected term of 2 years using the simplified method and expected volatility of 117% based on historical volatility. The Company recorded the fair value of the unvested stock options, in the amount of $59,322, as deferred compensation which is being amortized over the vesting period. During the three months ended March 31, 2022, the Company amortized $9,416 of the deferred compensation which was recorded as compensation expenses in the accompanying condensed consolidated statement of operations. As of March 31, 2022, the deferred compensation had a balance of $49,906.

Stock option activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 are summarized as follows:

Number
of Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term
(Years) Aggregate
Intrinsic
Value
Balance Outstanding, December 31, 2020 300,000 $ 0.0001 3.5 74,970
Granted/issued — — — —
Forfeited — — — —
Balance Outstanding, September 30, 2021 300,000 $ 0.0001 2.79 $ 58,470
Exercisable, September 30, 2021 300,000 $ 0.0001 2.79 $ 58,470

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2021		300,000	$	0.0001		2.5	$	63,030
Granted pursuant to employment agreement (see Note 8)		800,000	$	0.2000		9.8	$	8,160
Forfeited		—		—		—		—
Balance Outstanding, March 31, 2022		1,100,000	$	0.1500		7.8	$	71,190
Exercisable, March 31, 2022		600,000	$	0.1000		6.1	$	66,090

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

Stock Warrants

Warrant activities for the three months ended March 31, 2022 are summarized as follows:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2021		17,353,987	$	0.31		4.1	$	—
Granted/Forfeited		—		—		—		—
Balance Outstanding, March 31, 2022		17,353,987	$	0.31		3.9	$	—
Exercisable, March 31, 2022		17,353,987	$	0.31		3.9	$	—

~~Warrant activities for the nine months ended September 30, 2021 are summarized as follows:~~

Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate
Intrinsic
Value
Balance Outstanding, December 31, 2020 — — — —
Granted 17,353,987 0.31 5.00 —
Forfeited — — — —
Balance Outstanding, September 30, 2021 17,353,987 $ 0.31 4.37 $ —
Exercisable, September 30, 2021 17,353,987 $ 0.31 4.37 $ —

On January 18, 2021, the Company granted warrants to purchase up to 250,000 shares of the Company’s common stock in exchange for legal services rendered. The warrants have a term of five years from the date of grant and are exercisable at an exercise price of $0.20 per share. The warrants were valued on the grant date at approximately $0.33 per warrant for a total of $83,728 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading price on the date of grant), volatility of 169%, expected term of five year, and a risk-free interest rate of 0.46%. During the ~~nine months~~year ended ~~September 30,~~December 31, 2021, the Company recorded stock-based compensation of $83,728.

On February 9, 2021, the Company entered into pursuant to securities purchase agreements with certain investors pursuant to which it sold warrants to purchase up to 14,253,323 shares of the Company’s common stock and 4,276 shares of the Company’s Series C Convertible ~~Preferred Stock.~~preferred stock. The February Warrants are exercisable for a period of five years from the date of issuance at an exercise price of $0.30 per share, subject to adjustment. If, after a period of 180 days after the date of issuance of the February Warrants, a registration statement covering the resale of the February Warrant Shares is not effective, the holders may exercise the February Warrants by means of a cashless exercise. In addition, pursuant to the terms of the offering, the Company issued the Placement Agent Warrants to purchase up to an aggregate of 2,850,664 shares of common stock to its placement agents, or 10% of the shares of common stock issuable upon conversion of the Series C ~~Preferred Stock~~preferred stock and February Warrant Shares sold in the offering. The Placement Agent Warrants are exercisable for a period of five years from the closing date of the offering at an exercise price of $0.35 per share, subject to adjustment (see Series C Convertible Preferred Stock Financing above). Such warrants issued to various investors and to the placement agents were recorded as additional paid in capital with an offsetting debit applied against additional paid in capital, thus these warrants have no further accounting effect within the equity section.

NOTE 87 – CONCENTRATIONS

Customer ~~concentration~~Concentration

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, one licensee accounted for 100% of total revenues related to the Company’s biopharmaceutical operation as compared to no licensees for the nine months ended September 30, 2020. For the nine months ended September 30, 2021 and 2020, no customer accounted for over 10% of total revenues from apparel sales included in discontinued operations.

~~Vendor concentrations~~For the three months ended March 31, 2022 and 2021, one licensee accounted for 100% total revenues from customer license fee.

Vendor Concentrations

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, one licensor accounted for 100% of the Company’s vendor license agreements (see below) related to the Company’s biopharmaceutical ~~operation as compared to no licensor for the nine months ended September 30, 2020.~~operation.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

NOTE 98 – COMMITMENTS AND CONTINGENCIES

Employment Agreement

Eric Weisblum

On April 17, 2020, the Company entered into an employment agreement (“Employment Agreement”) with ~~the Company’s Chief Executive Officer (“CEO”) pursuant~~Eric Weisblum to ~~which CEO will~~ serve as Chief Executive Officer and Chief Financial Officer of the Company. The term of the Employment Agreement will continue for a period of one year from the date of execution date thereof and automatically renews for successive one-year periods at the end of each term until either party delivers written notice of their intent not to review at least six months prior to the expiration of the then effective term. ~~Pursuant to the terms of the~~The Employment Agreement ~~the CEO was granted~~provided for a base salary of $120,000 and 7,630,949 of vested shares of the Company’s common stock in April ~~2020, and the CEO’s base salary was increased to $120,000.~~2020. In addition, ~~the CEO~~Mr. Weisblum shall be eligible to earn a bonus, subject to the sole discretion of the Company’s ~~Board. On January 18, 2021, the Company entered into an amendment (the “Amendment”) to the Employment Agreement, effective as~~Board of ~~January 1, 2021, pursuant to which the CEO’s base salary was increased from $120,000 per year to $180,000 per year.~~

Directors (“Board”). The Employment Agreement may be terminated by either the Company or ~~CEO~~Mr. Weisblum at any time and for any reason upon 60 days prior written notice. Upon termination of the Employment Agreement, ~~the CEO~~Mr. Weisblum shall be entitled to (i) any equity award that has vested prior to the termination date, (ii) reimbursement of expenses incurred on or prior to such termination date and (iii) such employee benefits to which ~~the CEO~~he may be entitled as of the termination date (collectively, the “Accrued Amounts”). ~~The Employment Agreement shall~~Mr. Weisblum employment may also ~~terminate upon CEO’s death or~~be terminated by the Company ~~may terminate the CEO’s employment upon his~~at any time, with cause, death or disability (as defined in the Employment Agreement). Upon the termination of the ~~CEO’s employment~~Employment Agreement for death or disability, ~~the CEO~~Mr. Weisblum shall be entitled to receive the Accrued Amounts. The Employment Agreement also contains covenants prohibiting ~~the CEO~~Mr. Weisblum from disclosing confidential information with respect to the Company.

~~Vendor License Agreements~~On January 18, 2021, the Company and Mr. Weisblum entered into the first amendment (the “Amendment”) to the Employment Agreement, effective as of January 1, 2021. Pursuant to the Amendment Mr. Weisblum’s base salary was increased from $120,000 per year to $180,000 per year and all the terms and provisions of the Employment Agreement shall remain in full force and effect.

Dr. James Kuo

On January 27, 2022, the Company and Dr. James Kuo entered into an employment agreement (“Kuo Employment Agreement”) for Dr. Kuo to serve as the Vice President of Research & Development. The Kuo Employment Agreement shall be effective as of the date of the agreement and shall automatically renew for a period of one year at every anniversary of the effective date, with the same terms and conditions, unless either party provides written notice of its intention not to extend the term of the Kuo Employment Agreement at least thirty days’ prior to the applicable renewal date. Dr. Kuo shall be paid an annual base salary of $30,000. For each twelve-month period of his employment, Dr. Kuo shall be entitled to a bonus whereby amount and terms shall be in the sole and absolute discretion of the Board of Directors (“Board”) and shall be payable at the Company’s sole option in stock or in cash. In addition, an aggregate of 800,000 incentive stock options were granted under the 2020 Plan to Dr. Kou, exercisable at $0.20 per share and expires on January 31, 2032. The stock options vest as follows: (i) 300,000 stock options upon issuance; (ii) 250,000 vests on October 31, 2022 and; (iii) 250,000 vests on October 31, 2023. The 800,000 stock options had a fair value of $94,914 which valued at grant date using Binomial Lattice option pricing model with the following assumptions: risk-free interest rate of 1.18%, expected dividend yield of 0%, expected term of 2 years using the simplified method and expected volatility of 117% based on calculated volatility. The Company recorded the fair value of the unvested stock options, in the amount of $59,322, as deferred compensation which is being amortized over the vesting period. During the three months ended March 31, 2022, the Company amortized $9,416 of the deferred compensation which was recorded as compensation expenses in the accompanying condensed consolidated statement of operations. As of March 31, 2022, the deferred compensation had a balance of $49,906 (see Note 6).

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

License Agreements between the Company and Vendors

University of Maryland, Baltimore - License Agreement for Development and Use of Central Nervous System-Homing Peptides

Commercial Evaluation License and Option Agreement with the University of Maryland, Baltimore ~~Maryland~~

Effective as of July 15, 2020, the Company, through ~~the Company’s~~its wholly-owned subsidiary, Silo Pharma, Inc. (see Note 1) and University of Maryland, Baltimore (“UMB”), ~~the Company~~ entered into a commercial evaluation license and option agreement ~~with UMB pursuant to which UMB has granted~~(“License Agreement”), granting the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology. ~~In addition, UMB~~The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license (“Exclusive Option”) to with respect to the subject technology. ~~This agreement originally was set to expire~~The License Agreement had a term of six months from ~~July 15, 2020 but was extended and~~the effective date however if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first. The Company exercised its Exclusive Option on January 13, 2021 and entered into a Master License Agreement on February 12, 2021. Both parties may terminate this agreement within thirty days by giving a written notice. In July 2020, the Company paid ~~the~~a license fee of $10,000 to UMB pursuant to ~~this agreement~~the License Agreement which was recorded in professional fees during the year ended December 31, 2020 since the Company could not conclude that such costs would be recoverable for this early-stage venture. ~~On February 12, 2021, the Company entered into the Master License Agreement with UMB.~~

On February 26, 2021, through the Company’s wholly-subsidiary, Silo Pharma, Inc., the Company entered into a commercial evaluation license and option agreement with UMB pursuant to which UMB has granted the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of joint-homing peptides for use in the investigation and treatment of arthritogenic processes. In addition, UMB granted the Company an exclusive, option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license to with respect to the subject technology. This agreement was to expire six months from February 26, 2021, unless sooner terminated. Both parties may terminate this agreement within thirty days by giving a written notice. On July 6, 2021, the Company entered into a First Amendment Agreement with UMB pursuant to which the term of the agreement was extended by 6 months such that the agreement shall terminate on February 25, 2022 unless earlier terminated pursuant to the terms thereof; however, if the Company exercises the option, the agreement will expire at the end of the negotiation period (as defined in the agreement) or upon execution of a master license agreement, whichever occurs first. Pursuant to the agreement, the Company paid the license fee of $10,000 to UMB in March 2021 pursuant to this agreement which was recorded in professional fees during the nine months ended September 30, 2021 since the Company could not conclude that such costs would be recoverable for this early-stage venture.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

Master License Agreement with the University of Maryland, Baltimore ~~Maryland~~

OnAs disclosed above, effective as of February 12, 2021, ~~(the “Master License Agreement Effective Date”),~~ the Company and University of Maryland, Baltimore (“UMB”), entered into the Master License Agreement ~~(the “Master~~(“Master License Agreement”) ~~with UMB pursuant to~~ which ~~UMB granted~~grants the Company an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual ~~property~~property: (i) to make, have made, use, sell, offer to sell, and import certain licensed products ~~and~~and: (ii) to use the invention titled, “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” and UMB’s confidential information to develop and perform certain licensed processes for the therapeutic treatment of neuroinflammatory disease.

Pursuant to the Master License Agreement, the Company shall pay UMB (i) a license fee (ii) certain event-based milestone payments, (iii) royalty payments depending on net revenues, and (iv) a tiered percentage of sublicense income. The Company shall pay to UMB a license fee of $75,000, payable as follows: (a) $25,000 shall be due within 30 days following the Master License Agreement Effective Date; and (b) $50,000 on or before the first anniversary of the Master License Agreement Effective Date. The license fee is non-refundable, and is not creditable against any other fee, royalty, or payment. The Company shall be responsible for payment of all patent expenses in connection with preparing, filing, prosecution and maintenance of patents or patent applications relating to the patent rights. The Company paid the $25,000 license fee on February 17, 2021 which was recorded in prepaid expenses to be amortized over the 15-year term. The Company recognized amortization expense of $3,125 during the nine months ended September 30, 2021. At September 30, 2021, prepaid expense and other current assets – current amounted $5,000 and prepaid expenses – non-current amounts $16,875 as reflected in the accompanying condensed consolidated balance sheets.

~~Additionally, the Company agreed to pay certain royalty payments as follows:~~

~~(i)~~

~~3% on sales of Licensed Products (as defined in the Master License Agreement) during the applicable calendar year for sales less than $50,000,000; and~~

~~(ii)~~

~~5% on sales of Licensed Products during the applicable calendar year for sales greater than $50,000,000; and~~

~~Furthermore, the Company agreed to pay UMB minimum royalty payments, as follows:~~

Payment Year
$ - Prior to First Commercial Sale
$ - Year of First Commercial Sale
$ 25,000 First calendar year following the First Commercial Sale
$ 25,000 Second calendar year following the First Commercial Sale
$ 100,000 Third calendar year following the First Commercial Sale

~~Furthermore, the Company agrees to pay milestone payments, as follows:~~

Payment Milestone
$ 50,000 Filing of an Investigational New Drug (or any foreign equivalent) for a Licensed Product
$ 100,000 Dosing of first patient in a Phase 1 Clinical Trial of a Licensed Product
$ 250,000 Dosing of first patient in a Phase 2 Clinical Trial of a Licensed Product
$ 500,000 Receipt of New Drug Application (“NDA”) (or foreign equivalent) approval for a Licensed Product
$ 1,000,000 Achievement of First Commercial Sale of Licensed Product

The Company shall pay to UMB a percentage of all sublicense income which is receivable by Company or Company affiliates as follows: (a) 25% of sublicense income which is receivable with respect to any sublicense that is executed before the filing of an NDA (or foreign equivalent) for the first licensed product; and (b) 15% of sublicense income which is receivable with respect to any sublicense that is executed after the filing of an NDA (or foreign equivalent) for the first licensed product.

The Master License Agreement will remain in effect on a Licensed Product-by-Licensed Product basis and country-by-country basis until the later of: (a) the last patent covered under the Master License Agreement expires, (b) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity, if applicable, or (c) 10 years after the first commercial sale of a Licensed Product in that country, unless earlier terminated in accordance with the provisions of the Master License Agreement. The term of the Master License Agreement shall expire 15 years after the Master License Agreement Effective Date in which (a) there were never any patent rights, (b) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity or (c) there was never a first commercial sale of a Licensed Product.

The Company may assign, sublicense, grant, or otherwise convey any rights or obligations under the Master License Agreement to a Company affiliate, without obtaining prior written consent from UMB provided that it meets the terms defined in the Master License Agreement. The Company may grant sublicenses of some or all of the rights granted by the Master License Agreement, provided that there is no uncured default or breach of any material term or condition under the Master License Agreement, by Company, at the time of the grant, and that the grant complies with the terms and conditions of the Master License Agreement. The Company shall be and shall remain responsible for the performance by each of the Company’s sublicensee. Any sublicense shall be consistent with and subject to the terms and conditions of the Master License Agreement and shall incorporate terms and conditions sufficient to enable Company to comply with the Master License Agreement. The Company or Company affiliates shall pay to UMB a percentage of all income received from its sublicensee as follows: (i) 25% of the Company’s sublicense income which is receivable with respect to any sublicense that is executed before the filing of an NDA (or foreign equivalent) for the first licensed product; and (b) 15% of the Company’s sublicense income which is receivable with respect to any sublicense that is executed after the filing of an NDA (or foreign equivalent) for the first licensed product.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

Pursuant to the Master License Agreement, the Company shall pay UMB; (i) a license fee, (ii) certain event-based milestone payments (see below for payment terms), (iii) royalty payments depending on net revenues (see below for payment terms), and (iv) a tiered percentage of sublicense income. The Company shall pay to UMB a license fee of $75,000, payable as follows: (a) $25,000 shall be due within 30 days following the effective date; and (b) $50,000 on or before the first anniversary of the effective date. The license fee is non-refundable and is not creditable against any other fee, royalty or payment. The Company shall be responsible for payment of all patent expenses in connection with preparing, filing, prosecution and maintenance of patents or patent applications relating to the patent rights. The Company paid $25,000 license fee on February 17, 2021 which was recorded as prepaid expense and is being amortized over the 15-year term. The Company recognized amortization expense of $4,375 in 2021. During the three months ended March 31, 2022, the Company recognized amortization expense of $1,250. At December 31, 2021, prepaid expense and other current assets – current amounted $5,000 and prepaid expense – non-current amounts $15,625. At March 31, 2022, prepaid expense and other current assets – current amounted $5,000 and prepaid expense – non-current amounts $14,375 as reflected in the accompanying condensed consolidated balance sheets.

Milestone Payment Terms:

Milestone	Payment
Filing of an Investigational New Drug (or any foreign equivalent) for a Licensed Product	$	50,000
Dosing of first patient in a Phase 1 Clinical Trial of a Licensed Product	$	100,000
Dosing of first patient in a Phase 2 Clinical Trial of a Licensed Product	$	250,000
Receipt of New Drug Application (“NDA”) (or foreign equivalent) approval for a Licensed Product	$	500,000
Achievement of First Commercial Sale of Licensed Product	$	1,000,000

Royalty Payments Terms:

	(i)	3% on sales of licensed products (as defined in the Master License Agreement) during the applicable calendar year for sales less than $50,000,000; and

	(ii)	5% on sales of licensed products during the applicable calendar year for sales greater than $50,000,000; and

	(iii)	a minimum annual royalty payments, as follows:

Years	Minimum Annual Royalty
Prior to First Commercial Sale	$	N/A
Year of First Commercial Sale	$	N/A
First calendar year following the First Commercial Sale	$	25,000
Second calendar year following the First Commercial Sale	$	25,000
Third calendar year following the First Commercial Sale	$	100,000

In April 2021, in connection with the Company’s Sublicense Agreement with Aikido Pharma Inc. (see ~~below)~~below - Patent License Agreement with Aikido Pharma Inc.), ~~in April 2021,~~ the Company paid ~~$12,500, or~~ 25% of its sublicense income to UMB, pursuant to the Master License ~~Agreement.~~Agreement, which amounted to $12,500. The Company recognized amortization expense of ~~$210 and $419 during~~$628 in 2021. During the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022, the Company recognized amortization expense of $210. At ~~September 30,~~December 31, 2021, prepaid expense and other current assets – current amounted $838 and prepaid expenses – non-current amounts ~~$11,243~~$11,034. At March 31, 2022, prepaid expense and other current assets – current amounted $838 and prepaid expenses – non-current amounts $10,824 as reflected in the accompanying condensed consolidated balance sheets.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

~~Customer~~University of Maryland, Baltimore - License ~~Agreements~~Agreement for Development and Use of Joint-Homing Peptides

Commercial Evaluation License and Option Agreement with the University of Maryland, Baltimore

Effective as of February 26, 2021, the Company, through its wholly-subsidiary, Silo Pharma, Inc., and University of Maryland, Baltimore (“UMB”), entered into a commercial evaluation license and option agreement (“License Agreement”), which granted the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of joint-homing peptides for use in the investigation and treatment of arthritogenic processes. The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license (“Exclusive Option”) to with respect to the subject technology. The License Agreement had a term of six months from the effective date. Both parties could have terminated the License Agreement within thirty days by giving a written notice.

On July 6, 2021, the Company entered into a First Amendment Agreement (“Amended License Agreement”) with UMB to extend the term of the original License Agreement by an additional six months such that the Amended License Agreement was effective until February 25, 2022 however, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first. The Company paid a license fee of $10,000 to UMB in March 2021 pursuant to the License Agreement which was recorded in professional fees during the year ended December 31, 2021, since the Company could not conclude that such costs would be recoverable for this early-stage venture.

On January 28, 2022, the Company and University of Maryland, Baltimore (“UMB”) entered into a second amendment to the commercial evaluation and license agreement dated February 26, 2021 (“Second Amendment”). The Second Amendment to extend the term of the original license agreement until December 31, 2022. However, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first.

License Agreements between the Company and Customer

Customer Patent License Agreement with ~~AIkido~~Aikido Pharma Inc.

On January 5, 2021, the Company ~~entered into a patent license agreement (the “Agreement”) with~~and its subsidiary Silo Pharma, Inc., a Florida corporation, ~~and wholly-owned subsidiary of the Company~~entered into a patent license agreement (“License Agreement”) (collectively, the “Licensor”) and ~~AIkido~~Aikido Pharma Inc. (“~~AIkido”~~Aikido” or the “Customer”), as amended on April 12, 2021, pursuant to which the Licensor granted ~~AIkido~~Aikido an exclusive, worldwide ~~(the “Territory”~~(“Territory”), sublicensable, royalty-bearing license to certain intellectual ~~property~~property: (i) to make, have made, use, provide, import, export, lease, distribute, sell, offer for sale, develop and advertise certain licensed products and (ii) to develop and perform certain licensed processes for the treatment of cancer and symptoms caused by cancer ~~(the “Field~~(“Field of Use”).

~~In addition, the~~The License Agreement also provided that, if the Licensor exercised the option granted to it pursuant to its commercial evaluation license and option agreement with UMB, effective as of July 15, 2020, it would grant ~~AIkido~~Aikido a non-exclusive sublicense ~~(the “Right”~~(“Right”) to certain UMB patent rights in the field of neuroinflammatory diseases occurring in patients diagnosed with cancer ~~(the “Field”~~(“Field”). Pursuant to the License Agreement, ~~AIkido~~Aikido agreed to pay the Licensor, among other things, (i) a one-time non-refundable cash payment of $500,000 and (ii) royalty payments equal to 2% of ~~Net Sales~~net sales (as defined in the License Agreement) in the Field of Use in the Territory. In addition, ~~AIkido~~Aikido agreed to issue the Licensor 500 shares of ~~its~~Aikido’s newly designated Series M Convertible Preferred Stock which were to be converted into an aggregate of 625,000 shares of the ~~AIkido’s~~Aikido’s common stock. On April 12, 2021, the Company entered into an amendment to the ~~Patent~~ License Agreement (“Amended License Agreement”) with ~~AIkido~~Aikido dated January 5, 2021 whereby Aikido issued an aggregate of 625,000 restricted shares of Aikido’s common stock instead of the 500 shares of the Series M Convertible Preferred Stock.

Pursuant to the License Agreement, the Company is required to prepare file, prosecute, and maintain the licensed patents. Unless earlier terminated, the term of the license to the licensed patents will continue until the expiration or abandonment of all issued patents and filed patent applications within the licensed patents. The Company may terminate the License Agreement upon 30 day written notice if ~~AIkido~~Aikido fails to pay any amounts due and payable to the Company or if ~~AIkido~~Aikido or any of its affiliates brings a patent challenge against the Company, assists others in bringing a legal or administrative challenge to the validity, scope, or enforceability of or opposes any of the licensed patents (“Patent Challenge”) against the Company (except as required under a court order or subpoena). ~~AIkido~~Aikido may terminate the Agreement at any time without cause, and without incurring any additional penalty, (i) by providing at least 30 days’ prior written notice and paying the Company all amounts due to it through such termination effective date. Either party may terminate the Agreement for material breaches that have failed to be cured within 60 days after receiving written notice. The Company collected the non-refundable cash payment of $500,000 on January 5, 2021 which was recorded inas deferred ~~revenues~~revenue to be recognized as revenues over the 15 year term of the License Agreement.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

With respect to a vote of ~~AIkido’s~~Aikido’s stockholders to approve a reverse split of its common stock no later than December 31, 2021 only (“Reverse Stock Split Vote”), each share of the Series M Convertible Preferred Stock shall be entitled to such number of votes equal to 20,000 shares of ~~AIkido’s~~Aikido’s common stock. In addition, each share of the Series M Convertible Preferred Stock shall be convertible, at any time after the earlier of (i) the date that the Reverse Stock Split Vote is approved by ~~AIkido’s~~Aikido’s stockholders and (ii) December 31, 2021, at the option of the holder, into such number of shares of ~~AIkido’s~~Aikido’s common stock determined by dividing the Stated Value by the Conversion Price. “Stated Value” means $1,000. “Conversion Price” means $0.80, subject to adjustment.

~~The~~Prior to the April 12, 2021 issuance of the common stock in lieu of the Series M Convertible Preferred Stock as discussed above, the Company valued the 500 Series M Convertible Preferred stock which was equivalent into ~~AIkido’s~~Aikido’s 625,000 shares of common stock at a fair value of $0.85 per common share or $531,250 based quoted trading price of ~~AIkido’s~~Aikido’s common stock on the date of grant. The Company recorded an equity investment of $531,250 (see Note 3) and deferred revenue of $531,250 to be recognized as revenues over the term of the license. Accordingly, the Company recorded a total deferred revenue of $1,031,250 ($500,000 cash received and $531,250 value of equity securities received) to be recognized as revenues over the 15-year term. The Company recognized ~~revenues~~revenue of ~~$17,188 and $51,562 during~~$68,750 in 2021. During the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022, the Company recognized revenue of $17,187. At ~~September 30,~~December 31, 2021, deferred revenue – current portion amounted $68,750 and deferred revenue – long-term portion amounted ~~$910,937~~$893,750. At March 31, 2022, deferred revenue – current portion amounted $68,750 and deferred revenue – long-term portion amounted $876,563 as reflected in the accompanying condensed consolidated balance sheets.

The Right shall be to the full extent permitted by and on terms and conditions required by UMB for a term consistent with the term of patent and technology licenses that UMB normally grants. In the event that the Company exercises its option and executes a license with UMB to the UMB patent rights within 40 days after the execution of such UMB license, for consideration to be agreed upon and paid by ~~AIkido,~~Aikido, which consideration shall in no event exceed 110% of any fee payable by the Company to UMB for the right to sublicense the UMB patent rights. The Company shall grant ~~AIkido~~Aikido a nonexclusive sublicense in the United States to the UMB patent rights in the Field, subject to the terms of any UMB license Licensor obtains, including any royalty obligations on sublicensees required under any such sublicense. The option was exercised on January 13, 2021. Accordingly, on April 6, 2021, the Company entered into the Sublicense Agreement with ~~AIkido~~Aikido pursuant to which it granted ~~AIkido~~Aikido a worldwide exclusive sublicense to its licensed patents under the Master License Agreement.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

Customer Sublicense Agreement with ~~AIkido~~Aikido Pharma Inc.

On April 6, 2021 (the “Sublicense Agreement Effective Date”), the Company entered into the Sublicense Agreement with ~~AIkido~~Aikido pursuant to which the Company granted ~~AIkido~~Aikido an exclusive worldwide sublicense to (i) make, have made, use, sell, offer to sell and import the Licensed Products (as defined below) and (ii) in connection therewith to (A) use an invention known as “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” which was sublicensed to the Company pursuant to the Master License Agreement and (B) practice certain patent rights (“Patent Rights”) for the therapeutic treatment of neuroinflammatory disease in cancer patients. “Licensed Products” means any product, service, or process, the development, making, use, offer for sale, sale, importation, or providing of which: (i) is covered by one or more claims of the Patent Rights; or (ii) contains, comprises, utilizes, incorporates, or is derived from the Invention or any technology disclosed in the Patent Rights.

Pursuant to the Sublicense Agreement, ~~AIkido~~Aikido agreed to pay usthe Company (i) an upfront license fee of $50,000, (ii) the same sales-based royalty payments that the Company is subject to under the Master License Agreement and (iii) total milestone payments of up to $1.9 million. The Sublicense Agreement shall continue on a Licensed Product-by-Licensed Product and country-by-country basis until the later of (i) the date of expiration of the last to expire claim of the Patent Rights covering such Licensed Product in such country, (ii) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity, if applicable and (iii) 10 years after the first commercial sale of a Licensed Product in that country, unless terminated earlier pursuant to the terms of the Sublicense Agreement. Furthermore, the Sublicense Agreement shall expire 15 years after the Sublicense Agreement Effective Date with respect to any country in which (i) there were never any Patent Rights, (ii) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity with respect to a Licensed Product and (ii) there was never a commercial sale of a Licensed Product, unless such agreement is earlier terminated pursuant to its terms. The Company collected the upfront license fee of $50,000 in April 2021. The Company recognized ~~revenues~~revenue of ~~$838 and $1,675 during~~$2,514 in 2021. During the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022, the Company recognized revenue of $838. At ~~September 30,~~December 31, 2021, deferred revenue – current portion amounted ~~$3,353~~$3,352 and deferred revenue – long-term portion amounted ~~$44,972~~$44,134. At March 31, 2022, deferred revenue – current portion amounted $3,352 and deferred revenue – long-term portion amounted $43,296 as reflected in the accompanying condensed consolidated balance sheets.

~~Sponsored Study and Research Agreements~~

~~Investigator-Sponsored Study Agreement with Maastricht University of the Netherlands~~

On November 1, 2020, the Company entered into an investigator-sponsored study agreement (the “Study Agreement”) with Maastricht University of the Netherlands. The research project is a clinical study to examine the effects of repeated low doses of psilocybin and lysergic acid diethylamide on cognitive and emotional dysfunctions in Parkinson’s disease and to understand its mechanism of action. The Study Agreement shall terminate on October 31, 2024, unless earlier terminated pursuant to the terms thereof. The Company shall pay a total fee of 433,885 Euros ($507,602 USD) exclusive of value added tax to be amortized over the four-year term and payment schedule as follows:

~~Payment~~
1	~~86,777 Euros ($101,520 USD)~~	~~Upon signing the Study Agreement and was paid in December 2020~~
2	~~86,777 Euros ($101,520 USD)~~	~~Obtained approval from ethical committee~~
3	~~86,777 Euros ($101,520 USD)~~	~~Data collection has commenced~~
4	~~130,166 Euros ($152,281 USD)~~	~~First half of the participants are tested~~
5	~~43,885 Euros ($50,760 USD)~~	~~Completion of data collection and delivery of final report~~

In December 2020, the Company paid the first payment of $101,520 which was recorded to prepaid expense and other current assets – current of which approximately $22,318 was amortized in fiscal 2020. In September 2021, the Company notified Maastricht University of Netherlands for an early termination of this agreement. Maastricht University of Netherlands has not reached the second phase which is to obtain approval from ethical committee. The Company has no further obligation after the termination. The Company recognized remaining amortization expense of $107 and $79,202 during the three and nine months ended September 30, 2021, respectively.

SILO PHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2021~~
MARCH 31, 2022
(UNAUDITED)

Sponsored Study and Research Agreements between the Company and Vendors

Investigator-Sponsored Study Agreement with ~~UMB~~University of Maryland, Baltimore

On January 5, 2021, the Company entered into an investigator-sponsored study agreement ~~(the “Sponsored~~(“Sponsored Study Agreement”) with the University of Maryland, Baltimore. The research project is a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of multiple sclerosis (“MS”). More specifically, the study is designed to evaluate (1) whether MS-1-displaying liposomes can effectively deliver dexamethasone to the CNS and (2) whether MS-1-displaying liposomes are superior to plain liposomes, also known as free drug, in inhibiting the relapses and progression of experimental autoimmune encephalomyelitis. Pursuant to the Sponsored Study Agreement, the research shall commence on March 1, 2021 and will continue until substantial completion, subject to renewal upon mutual written consent of the parties. The total cost under the Sponsored Study Agreement shall not exceed $81,474 which is payable in two equal installments of $40,737 upon execution of the Sponsored Study Agreement and $40,737 upon completion of the project with an estimated project timeline of nine months. The Company paid $40,737 on January 13, 2021 which was recorded in prepaid expense to be amortized over the nine-month period. Currently, the project has not been completed due to the delays cause by the Covid-19 pandemic. ~~The~~During the year ended December 31, 2021, the Company ~~recognized amortization~~fully amortized the prepaid expense of ~~$4,526 and $40,737 during the three and nine months ended September 30, 2021, respectively.~~$40,737.

Sponsored Research Agreement with The Regents of the University of California

On June 1, 2021 (the “Effective Date”), the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with The Regents of the University of California, on behalf of its San Francisco Campus (“UCSF”) pursuant to which UCSF shall conduct a study to examine psilocybin’s effect on inflammatory activity in humans to accelerate its implementation as a potential treatment for Parkinson’s Disease, chronic pain, and bipolar disorder. Pursuant to the Agreement, the Company shall pay UCSF a total fee of $342,850 to conduct the research over the two-year period. The Agreement shall be effective for a period of two years from the Effective Date, subject to renewal or earlier termination as set forth in the Sponsored Research Agreement. The Company paid the first payment of $40,000 pursuant to the payment schedule on the Sponsored Research Agreement on June 15, 2021, ~~and another~~second payment of $40,000 on September 9, 2021 and $20,570 on November 18, 2021, third payment of $60,570 on March 1, 2022, which were recorded to prepaid expense and other current assets – current to be amortized over the two-year period. ~~The~~In 2021, the Company ~~recognized amortization expense~~amortized $92,855 of ~~$42,856 and $49,999 during~~the prepaid expense. During the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022, the Company amortized $25,429 of the prepaid expense leaving a prepaid asset of $25,429 at March 31, 2022.

Sponsored Research Agreement with University of Maryland, Baltimore

On July 6, 2021, the Company and University of Maryland, Baltimore (“UMB”) entered into a sponsored research agreement ~~(the “July~~(“July 2021 Sponsored Research Agreement”) ~~with UMB~~ pursuant to which UMB shall evaluate the pharmacokinetics of dexamethasone delivered to arthritic rats via liposome. The research pursuant to the July 2021 Sponsored Research Agreement shall commence on September 1, 2021 and will continue until the substantial completion thereof, subject to renewal upon written consent of the parties. The July 2021 Sponsored Research Agreement may be terminated by either party upon 30 days’ prior written notice to the other party. In addition, if either party commits any material breach of or defaults with respect to any terms or conditions of the July 2021 Sponsored Research Agreement and fails to remedy such default or breach within 10 business days after written notice from the other party, the party giving notice may terminate the July 2021 Sponsored Research Agreement as of the date of receipt of such notice by the other party. If the Company terminates the July 2021 Sponsored Research Agreement for any reason other than an uncured material breach by UMB, the Company shall relinquish any and all rights it may have in the Results (as defined in the July 2021 Sponsored Research Agreement) to UMB. In addition, if the July 2021 Sponsored Research Agreement is terminated early, the Company, among other things, will pay all costs incurred and accrued by UMB as of the date of termination.

Pursuant to the terms of the July 2021 Sponsored Research Agreement, UMB granted the Company an option (the “Option”) to negotiate and obtain an exclusive license to any UMB Arising IP (as defined in the July 2021 Sponsored Research Agreement) and UMB’s rights in any Joint Arising IP (as defined in the July 2021 Sponsored Research Agreement) (collectively, the “UMB IP”). The Company may exercise the Option by giving UMB written notice within 60 days after it receives notice from UMB of the UMB IP. Pursuant to the July 2021 Sponsored Research Agreement, the Company shall pay UMB the fees below:

	Payment
1	$	92,095	Upon execution of the July 2021 Sponsored Research Agreement
2	$	92,095	Six months after the start of project work as outlined in the July 2021 Sponsored Research Agreement
3	$	92,095	Upon completion of the project work as outlined in the July 2021 Sponsored Research Agreement

The Company paid the first payment of $92,095 on September 1, 2021 which was recorded to prepaid expense and other current assets – current and was amortized during the year ended December 31, 2021. The Company paid the second payment of $50,000 on February 1, 2022 which was recorded as research and development expense in the accompanying condensed consolidated statement of operations.

SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

Sponsored Research Agreement with Columbia University

On October 1, 2021, the Company entered into a sponsored research agreement with Columbia University pursuant to which the Company has been granted an option to license certain assets currently under development, including Alzheimer’s disease. The term of the option will commence on the effective date of this agreement and will expire upon the earlier of (i) 90 days after the date of the Company’s receipt of a final research report for each specific research proposal as defined in the agreement or (ii) termination of the research. If the Company elects to exercise the option, both parties will commence negotiation of a license agreement and will execute a license agreement no later than 3 months after the dated of the exercise of the option. Columbia University and the Company will work towards developing a therapeutic treatment for patients suffering from Alzheimer’s disease to post-traumatic stress disorder. During a one-year period from the date of this agreement, the Company shall pay a total of $1,436,082 to Columbia University for the support of the research according to the payment schedule as follows: (i) 30% at signing, (ii) 30% at four and half months after the start of the project, (iii) 30% at nine months after the start of the project and, (iv)10% at completion of the project. The Company paid the first payment of $430,825 in November 2021 which was recorded to prepaid expense and other current assets – current to be amortized over the estimated project timeline of twelve months. ~~The~~In 2021, the Company ~~recognized amortization~~amortized $359,021 of the prepaid expense. During the three months ended March 31, 2022, the Company amortized the remaining prepaid expense of ~~$23,024 during~~$71,804. As of March 31, 2022 and December 31, 2021, prepaid expense related to the ~~three~~sponsored research agreement were $0 and ~~nine months ended September 30, 2021.~~$71,804, respectively.

~~SILO PHARMA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2021 (UNAUDITED)~~

Joint Venture Agreement with Zylö Therapeutics, Inc.

On April 22, 2021 ~~(the “JV~~ (“Effective Date”), the Company entered into a Joint Venture Agreement ~~(the “JV~~(“JV Agreement”) with Zylö Therapeutics, Inc. (“ZTI”) pursuant to which the parties agreed to form a joint venture entity, to be named Ketamine Joint Venture, LLC ~~(the “Joint~~(“Joint Venture”), to, among other things, focus on the clinical development of ketamine using ZTI’s Z-pod™ technology ~~(the “Venture”~~(“Venture”). Pursuant to the JV Agreement, the Company shall act as the manager ~~(the “Manager”~~(“Manager”) of the Joint Venture. The Joint Venture shall terminate if the development program does not meet certain specifications and milestones as set forth in the JV Agreement within 30 days of the date set forth in the JV Agreement. Notwithstanding the foregoing, the Manager may, in its sole discretion, terminate the Joint Venture at any time.

Pursuant to the terms of the JV Agreement, (A) the Company shall contribute (1) $225,000 and (2) its expertise and the expertise of its science advisory board and (B) ZTI shall contribute (1) certain rights to certain of its patented technology as set forth in the JV Agreement, (2) a license to the know-how and trade secrets with respect to its Z-pod™ technology for the loading and release of ketamine, (3) ketamine to be used for clinical purposes, (4) reasonable use of its facilities and permits and (5) its expertise and know-how. Pursuant to the JV Agreement, 51% of the interest in the Joint Venture shall initially be owned by the Company and 49% of the interest in the Joint Venture shall initially be owned by ZTI, subject to adjustment in the event of additional contributions by either party. Notwithstanding the foregoing, in no event shall either party own more than 60% of the interest in the Joint Venture. As of ~~September 30, 2021~~March 31, 2022 and as of the current date of this report, the joint venture entity has not been formed yet.

Furthermore, pursuant to the terms of the JV Agreement, ZTI shall grant the Joint Venture a sublicense pursuant to its license agreement (the “License Agreement”) with Albert Einstein College of Medicine dated November 27, 2017, in the event that the Company or a third party makes a request indicating that the patented technology (the “Patented Technology”) licensed to ZTI pursuant to the License Agreement is needed to advance the development of the Joint Venture or it is contemplated or determined that the Patented Technology will be sold. Furthermore, pursuant to the JV Agreement, ZTI granted the Company an exclusive option to enter into a separate joint venture for the clinical development of psilocybin using ZTI’s Z-pod™ technology on the same terms and conditions set forth in the JV Agreement, which option shall expire 24 months after the JV Effective Date.

Amended Service Agreement

On September 10, 2021 ~~(the “Effective~~(“Effective Date”), the Company entered into an Amendment Agreement ~~(the “Amended~~(“Amended Service Agreement”) to a certain service agreement dated on September 8, 2020 with the University of Texas ~~(the “University”~~(“University”) at Austin whereby the University will provide advisory service and assist the Company on identifying license and sponsored research opportunities for the Company. The Company shall pay the University $5,000 per quarter starting on the Effective Date. Any cost incurred will be reimbursed only after prior written consent by the Company. The term of the Amended Service Agreement is for 36 months unless earlier terminated by either party upon giving a written notice as defined in the agreement. ~~On October 13,~~In 2021, the Company paid ~~$5,000.~~$5,000 related to this agreement. During the three months ended March 31, 2022, the Company paid $5,000 related to this agreement.

NOTE 109 – SUBSEQUENT EVENTS

~~Sponsored Research Agreement with Columbia University~~

On ~~October 1, 2021,~~April 19, 2022, the Company entered into ~~a sponsored~~ research and development service agreement with ~~Columbia University pursuant~~a service provider. Pursuant to ~~which~~ the Company has been granted an option to license certain assets currently under development, including Alzheimer’s disease. The term of the option will commence on the effective date of this agreement and will expire upon the earlier of i) 90 days after the date of the Company’s receipt of a final research report for each specific research proposal as defined in the agreement or ii) termination of the research. If the Company elects to exercise the option, both parties will commence negotiation of a license agreement and will execute a license agreement no later than 3 months after the dated of the exercise of the option. Columbia University and the Company will work towards developing a therapeutic treatment for patients suffering from Alzheimer’s disease to post-traumatic stress disorder. During a one-year period from the date of thisservice agreement the Company shall pay a total of ~~$1,436,082 to Columbia University for~~$58,548 of which $29,274 shall be paid upon the ~~support~~close of the ~~research according to~~agreement and the ~~payment schedule as follows i) 30% at signing ii) 30% at four and half months after the start of the project iii) 30% at nine months after the start of the project and iv)10% at~~remaining $29,274 shall be paid upon completion of ~~the project. The Company paid the first payment of $430,825 in November 2021.~~services.

~~Item~~ITEM 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, ~~2020~~2021 included in the form 10-K filed with the SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.

Overview

We are a developmental stage biopharmaceutical company focused on merging traditional therapeutics with psychedelic research. We are committed to developing innovative solutions to address a variety of underserved conditions. In these uncertain times, the mental health of the nation and beyond is being put to the test. More than ever, creative new therapies are needed to address the health challenges of today. Combining our resources with world-class medical research partners, we hope to make significant advances in the medical and psychedelic space.

Rare Disease Therapeutics

We seek to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. We are focused on merging traditional therapeutics with psychedelic research for people suffering from indications such as depression, post-traumatic stress disorder (“PTSD”), Parkinson’s, and other rare neurological disorders. Our mission is to identify assets to license and fund the research which we believe will be transformative to the well-being of patients and the health care industry.

Psilocybin is considered a serotonergic hallucinogen and is an active ingredient in some species of mushrooms. Recent industry studies using psychedelics, such as psilocybin, have been promising, and we believe there is a large unmet need with many people suffering from depression, mental health issues and neurological disorders. While classified as a Schedule I substance under the Controlled Substances Act (“CSA”), there is an accumulating body of evidence that psilocybin may have beneficial effects on depression and other mental health conditions. Therefore, the U.S. Food and Drug Administration (“FDA”) and U.S. Drug Enforcement Agency (“DEA”) have permitted the use of psilocybin in clinical studies for the treatment of a range of psychiatric conditions.

The potential of psilocybin therapy in mental health conditions has been demonstrated in a number of academic-sponsored studies over the last decade. In these early studies, it was observed that psilocybin therapy provided rapid reductions in depression symptoms after a single high dose, with antidepressant effects lasting for up to at least six months for a number of patients. These studies assessed symptoms related to depression and anxiety through a number of widely used and validated scales. The data generated by these studies suggest that psilocybin is generally well-tolerated and has the potential to treat depression when administered with psychological support.

We have engaged in discussions with a number of world-renowned educational institutions and advisors regarding potential opportunities and have formed a scientific advisory board that is intended to help advise management regarding potential acquisition and development of products.

In addition, as more fully described below, we have entered into a license agreement with the University of Baltimore, Maryland, and have entered into a joint venture with Zylo Therapeutics, Inc., with respect to certain intellectual property and technology that may be used for targeted delivery of potential novel treatments. In addition, we have recently entered into a sponsored research agreement with Columbia University pursuant to which we have been granted an option to license certain patents and inventions relating to the treatment of Alzheimer’s disease and stress-induced affective disorders using Ketamine in combination with certain other compounds.

We plan to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand our business to focus on this new line of business.

License Agreements between the Company and a Vendor

Vendor License Agreement with the University of Baltimore, Maryland for CNS Homing Peptide

On February 12, 2021, we entered into a Master License Agreement (the “UMB License Agreement”) with the University of Maryland, Baltimore (“UMB”) pursuant to which UMB granted us an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, sell, offer to sell, and import certain licensed products and (ii) to use the invention titled, “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” (the “Invention”) and UMB’s confidential information to develop and perform certain licensed processes for the therapeutic treatment of neuroinflammatory disease. The term of the License Agreement shall commence on the UMB Effective Date and shall continue until the latest of (i) ten years from the date of First Commercial Sale (as defined in the Sublicense Agreement) of the Licensed Product in such country and (ii) the date of expiration of the last to expire claim of the Patent Rights (as defined in the UMB License Agreement) covering such Licensed Product in such country, or (iii) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity, if applicable, unless terminated earlier pursuant to the terms of the agreement. Pursuant to the UMB License Agreement, we agreed to pay UMB (i) a license fee of $75,000, (ii) certain event-based milestone payments, (iii) royalty payments, depending on net revenues, (iv) minimum royalty payments, and (v) a tiered percentage of sublicense income. The UMB License Agreement will remain in effect until the later of: (a) the last patent covered under the UMB License Agreement expires, (b) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity, if applicable, or (c) ten years after the first commercial sale of a licensed product in that country, unless earlier terminated in accordance with the provisions of the UMB License Agreement. The term of the UMB License Agreement shall expire 15 ~~year~~years after the effective date in which (a) there were never any patent rights, (b) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity or (c) there was never a first commercial sale of a licensed product.

As described below, the Company has entered into an investigator sponsored research agreement with UMB related to a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of Multiple Sclerosis.

Commercial Evaluation License and Option Agreement with UMB for Joint Homing Peptide

OnEffective as of February 26, 2021, the Company, through ~~the Company’s~~its wholly-subsidiary, Silo Pharma, Inc., ~~the Company~~and University of Maryland, Baltimore (“UMB”), entered into a commercial evaluation license and option agreement ~~with UMB related to joint-homing peptides for use in the investigation and treatment of arthritogenic processes. Pursuant to~~(“License Agreement”), which ~~UMB has~~ granted the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of joint-homing peptides for use in the investigation and treatment of arthritogenic processes. ~~In addition, UMB~~The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license (“Exclusive Option”) to with respect to the subject technology. ~~This option under this agreement expires February 25,2022, unless sooner terminated.~~The License Agreement had a term of six months from the effective date. Both parties ~~may terminate this agreement~~could have terminated the License Agreement within thirty days by giving a written notice. ~~Pursuant~~

On July 6, 2021, the Company entered into a First Amendment Agreement (“Amended License Agreement”) with UMB to extend the term of the original License Agreement by an additional six months such that the Amended License Agreement was effective until February 25, 2022 however, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first. The Company paid a license fee of $10,000 to UMB in March 2021 pursuant to the ~~agreement,~~License Agreement, which was expensed, since the Company ~~paid~~could not conclude that such costs would be recoverable for this early-stage venture.

On January 28, 2022, the Company and University of Maryland, Baltimore (“UMB”) entered into a second amendment to the commercial evaluation and license ~~fee~~agreement dated February 26, 2021 (“Second Amendment”). The Second Amendment to extend the term of the original license agreement until December 31, 2022. However, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the ~~low five-digit figures.~~License Agreement) or upon execution of a master license agreement, whichever occurs first.

Joint Venture Agreement with Zylö Therapeutics, Inc. for Z-pod™ Technology

On April 22, 2021, the Company entered into a Joint Venture Agreement with Zylö Therapeutics, Inc. (“ZTI”) pursuant to which the parties agreed to form a joint venture entity, to be named Ketamine Joint Venture, LLC, to, among other things, focus on the clinical development of ketamine using ZTI’s Z-pod™ technology. Pursuant to the Joint Venture Agreement, the Company shall act as the manager of the Joint Venture. The Venture shall terminate if the development program does not meet certain specifications and milestones as set forth in the Joint Venture Agreement within 30 days of the date set forth in the Joint Venture Agreement. Notwithstanding the foregoing, the Manager may, in its sole discretion, terminate the Venture at any time. ~~As of June 30, 2021 and as of the current date of this report, the joint venture entity has not been formed yet.~~

Pursuant to the terms of the Joint Venture Agreement, (A) the Company shall contribute (1) $225,000 and (2) its expertise and the expertise of its science advisory board and (B) ZTI shall contribute (1) certain rights to certain of its patented technology as set forth in the JV Agreement, (2) a license to the know-how and trade secrets with respect to its Z-pod™ technology for the loading and release of ketamine, (3) ketamine to be used for clinical purposes, (4) reasonable use of its facilities and permits and (5) its expertise and know-how. Pursuant to the Joint Venture Agreement, 51% of the interest in the Joint Venture shall initially be owned by the Company and 49% of the interest in the Joint Venture shall initially be owned by ZTI, subject to adjustment in the event of additional contributions by either party. Notwithstanding the foregoing, in no event shall either party own more than 60% of the interest in the Joint Venture. As of the current date of this report, the joint venture entity has not been formed yet.

Investigator-Sponsored Study Agreements between the Company and Vendors

Sponsored Research Agreement with Columbia University for the Study of Ketamine in Combination with Other Drugs for Treatment of Alzheimer’s and Depression Disorders

~~Effective as of~~On October 1, 2021, the Company entered into a sponsored research agreement with ~~The Trustees of~~ Columbia University ~~in the City of New York~~ (“Columbia”) pursuant to which Columbia shall conduct two different studies related to all uses of Ketamine or its metabolites in combination with Prucalopride, one of which is related to Alzheimer’s and the other of which is related to Depression, PTSD and Stress Projects. ~~Pursuant to the Columbia Agreement, the~~In addition, Company has ~~agreed~~been granted an option to ~~pay a total of approximately $1.4 million to Columbia for the support~~license certain assets currently under development, including Alzheimer’s disease. The term of the ~~research. Pursuant to~~option will commence on the Columbia Agreement, Columbia has granted the Company (i) an exclusive option to obtain and exclusive, compensation bearing worldwide license to the Background Patents and Inventions (as defined) in thew Field, and (ii) a non-exclusive, worldwide license to the Research Information in the Field. The option undereffective date of this agreement ~~expires~~and will expire upon the earlier of (i) ~~ninety (90)~~90 days after the date of the Company’s receipt of a final research report for each specific research proposal as defined in the agreement or (ii) termination of the ~~research, unless sooner terminated. Both~~research. If the Company elects to exercise the option, both parties ~~may terminate~~will commence negotiation of a license agreement and will execute a license agreement no later than 3 months after the dated of the exercise of the option. Columbia University and the Company will work towards developing a therapeutic treatment for patients suffering from Alzheimer’s disease to posttraumatic stress disorder. During a one-year period from the date of this ~~agreement within thirty days by giving a written notice. Pursuant to the~~ agreement, the Company shall pay a total of $1,436,082 to Columbia University for the support of the research according to the payment schedule as follows: (i) 30% at signing, (ii) 30% at four and half months after the start of the project, (iii) 30% at nine months after the start of the project and, (iv)10% at completion of the project. The Company paid the ~~license fee~~first payment of $430,825 in the low five-digit figures. The terms of the proposed license include (i) a one-time license fee in the mid five-digit figures, (ii) annual license maintenance fees, (iii) certain event-based milestone payments, (iv) royalty payments, depending on net revenues, (v) minimum royalty payments, and (vi) a percentage of sublicense income.November 2021.

Sponsored Research Agreement with University of Maryland, Baltimore for the Study of Targeted liposomal drug delivery for rheumatoid arthritis

On July 6, 2021, we entered into a sponsored research agreement (the “July 2021 Sponsored Research Agreement”) with UMB pursuant to which UMB shall evaluate the pharmacokinetics of dexamethasone delivered to arthritic rats via liposome. The research pursuant to the July 2021 Sponsored Research Agreement commenced on September 1, 2021 and will continue until the substantial completion thereof, subject to renewal upon written consent of the parties with a project timeline of twelve months. The July 2021 Sponsored Research Agreement may be terminated by either party upon 30 days’ prior written notice to the other party. In addition, if either party commits any material breach of or defaults with respect to any terms or conditions of the July 2021 Sponsored Research Agreement and fails to remedy such default or breach within 10 business days after written notice from the other party, the party giving notice may terminate the July 2021 Sponsored Research Agreement as of the date of receipt of such notice by the other party. If the Company terminates the July 2021 Sponsored Research Agreement for any reason other than an uncured material breach by UMB, we shall relinquish any and all rights it may have in the Results (as defined in the July 2021 Sponsored Research Agreement) to UMB. In addition, if the July 2021 Sponsored Research Agreement is terminated early, we, among other things, will pay all costs incurred and accrued by UMB as of the date of termination. Pursuant to the terms of the July 2021 Sponsored Research Agreement, UMB granted us an option (the “Option”) to negotiate and obtain an exclusive license to any UMB Arising IP (as defined in the July 2021 Sponsored Research Agreement) and UMB’s rights in any Joint Arising IP (as defined in the July 2021 Sponsored Research Agreement) (collectively, the “UMB IP”). We may exercise the Option by giving UMB written notice within 60 days after it receives notice from UMB of the UMB IP. We shall pay total fees of $276,285 as set forth in the July 2021 Sponsored Research Agreement.

The Company paid the first payment of $92,095 on September 1, 2021 and partial of the second payment of $50,000 on February 1, 2022.

Sponsored Research Agreement with The Regents of the University of California for the Effect of Psilocybin on Inflammation in the Blood

On June 1, 2021, the Company entered into a sponsored research agreement (“Sponsored Research Agreement”) with The Regents of the University of California, on behalf of its San Francisco Campus (“UCSF”) pursuant to which UCSF shall conduct a study to examine psilocybin’s effect on inflammatory activity in humans to accelerate its implementation as a potential treatment for Parkinson’s Disease, chronic pain, and bipolar disorder. The purpose of this is to show what effect psilocybin has on inflammation in the blood. The Company believe that this study will help support the UMB homing peptide study. Pursuant to the Agreement, we shall pay UCSF a total fee of $342,850 to conduct the research over the two-year period. The Agreement shall be effective for a period of two years from the effective date, subject to renewal or earlier termination as set forth in the Sponsored Research Agreement. The Company paid the first payment of $40,000 pursuant to the payment schedule on the Sponsored Research Agreement on June 15, 2021, second payment of $40,000 on September 9, 2021 and $20,570 on November 18, 2021 and third payment of $60,570 on March 1, 2022.

Investigator-Sponsored Study Agreement with UMB for CNS Homing Peptide

On January 5, 2021, we entered into an investigator-sponsored study agreement with UMB. The research project is a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of Multiple Sclerosis (“MS”). More specifically, the study is designed to evaluate (1) whether MS-1-displaying liposomes can effectively deliver dexamethasone to the central nervous system and (2) whether MS-1-displaying liposomes are superior to plain liposomes, also known as free drug, in inhibiting the relapses and progression of Experimental Autoimmune Encephalomyelitis. Pursuant to the agreement, the research commenced on March 1, 2021 and will continue until substantial completion, subject to renewal upon mutual written consent of the parties. The total cost under the S investigator-sponsored study agreement shall not exceed ~~$81,474.~~$81,474 which is payable in two equal installments of $40,737 upon execution of the Sponsored Study Agreement and $40,737 upon completion of the project with an estimated project timeline of nine months. The Company paid $40,737 on January 13, 2021. Currently, the project has not been completed due to the delays cause by the Covid-19 pandemic.

~~Investigator-Sponsored Study Agreement with Maastricht University of the Netherlands~~

On November 1, 2020, we entered into an investigator-sponsored study agreement with Maastricht University of the Netherlands. The research project is a clinical study to examine the effects of repeated low doses of psilocybin and lysergic acid diethylamide on cognitive and emotional dysfunctions in Parkinson’s disease and to understand its mechanism of action. The agreement shall terminate on October 31, 2024, unless earlier terminated pursuant to the terms thereof. We shall pay a total fee of 433,885 Euros ($507,602 USD) exclusive of value added tax based on a payment schedule set forth in the agreement. In September 2021, we notified Maastricht University of Netherlands for an early termination of this agreement. Maastricht University of Netherlands has not reached the second phase which is to obtain approval from ethical committee. We have no further obligation after the termination.

Other License Agreements between the Company and a Customer

Customer Patent License Agreement with ~~AIkido~~Aikido Pharma Inc.

On January 5, 2021, we entered into a Patent License Agreement (the ~~“AIkido~~“Aikido License Agreement”) with our wholly-owned subsidiary, Silo Pharma, Inc., and ~~AIkido~~Aikido Pharma Inc. (“~~AIkido”~~Aikido”) pursuant to which we granted ~~AIkido~~Aikido an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, provide, import, export, lease, distribute, sell, offer for sale, develop and advertise certain licensed products and (ii) to develop and perform certain licensed processes for the treatment of cancer and symptoms caused by cancer. The ~~AIkido~~Aikido License Agreement relates to the rights which we had obtained under the UMB Option Agreement. Pursuant to the ~~AIkido~~Aikido License Agreement, we agreed that if we exercised the UMB Option, we would grant ~~AIkido~~Aikido a non-exclusive sublicense to certain UMB patent rights in the field of neuroinflammatory diseases occurring in patients diagnosed with cancer. The UMB Option was exercised on January 13, 2021. Accordingly, on April 6, 2021, we entered into a sublicense agreement with ~~AIkido~~Aikido pursuant to which we granted ~~AIkido~~Aikido a worldwide exclusive sublicense to our licensed patents under the UMB License ~~Agreement. (See~~Agreement (see below “Sublicense with ~~AIkido~~Aikido Pharma Inc.”).

Customer Sublicense Agreement with ~~AIkido~~Aikido Pharma Inc.

On April 6, 2021 (“Effective Date”), we entered into a sublicense agreement (the “Sublicense Agreement”) with ~~AIkido~~Aikido pursuant to which we granted ~~AIkido~~Aikido an exclusive worldwide sublicense to (i) make, have made, use, sell, offer to sell and import the Licensed Products (as defined below) and (ii) in connection therewith to (A) use the Invention that was sublicensed to us pursuant to the UMB License Agreement and (B) practice certain patent rights as set forth in the Sublicense Agreement (the “Patent Rights”) for the therapeutic treatment of neuroinflammatory disease in cancer patients. “Licensed Products” means any product, service, or process, the development, making, use, offer for sale, sale, importation, or providing of which: (i) is covered by one or more claims of the Patent Rights; or (ii) contains, comprises, utilizes, incorporates, or is derived from the Invention or any technology disclosed in the Patent Rights. Pursuant to the Sublicense Agreement, ~~AIkido~~Aikido shall agree to pay the Company (i) an upfront license fee of $50,000, (ii) the same sales-based royalty payments that we are subject to under the UMB License Agreement and (iii) total milestone payments of up to $1.9 million. The Sublicense Agreement shall continue on a Licensed Product-by-Licensed Product and country-by-country basis until the later of (i) the date of expiration of the last to expire claim of the Patent Rights covering such Licensed Product in such country, (ii) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity, if applicable and (iii) 10 years after the first commercial sale of a Licensed Product in that country, unless terminated earlier pursuant to the terms of the Sublicense Agreement. Furthermore, the Sublicense Agreement shall expire 15 years after the Effective Date with respect to any country in which (i) there were never any Patent Rights, (ii) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity with respect to a Licensed Product and (ii) there was never a commercial sale of a Licensed Product, unless such agreement is earlier terminated pursuant to its terms. The Company collected the upfront license fee of $50,000 in April 2021.

~~Recent Developments~~COVID-19

On September 30, 2021, we entered into and closed on an Asset Purchase Agreement with NFID, LLC, a Florida limited liability company, whereby we sold certain assets, properties, and rights related to our NFID brand, consisting of trademarks related to the NFID brand, logos, domain, apparel and accessories for a purchase price of $60,000 in the form of a promissory note. The promissory note bears 8% interest per annum and matures on October 1, 2023. Accordingly, the results of operations of this component, for all periods presented, are separately reported as “discontinued operations” on the condensed consolidated statements of operations.

~~In September 2021, we received proceeds of $6,736,070 from the sale of our equity investments in DatChat, Inc. and Aikido Pharma, Inc.~~

~~Going Concern~~

Our unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited condensed consolidated financial statements, we had cash used in operations of $1,504,145 for the nine months ended September 30, 2021, respectively. Additionally, we had an accumulated deficit of $2,173,891 at September 30, 2021 and have generated minimal revenues under our new business plan. These factors raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional capital through debt and/or equity financings. We may seek to raise capital through additional debt and/or equity financings to fund our operations in the future. If we are unable to raise additional capital or secure additional lending in the near future to fund our business plan, we may need curtail or cease our operations. Our unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

~~COVID-19~~

The outbreak of the novel Coronavirus (COVID-19) evolved into a global pandemic. The Coronavirus has spread to many regions of the world. The extent to which the Coronavirus impacts the Company’s business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the Coronavirus and the actions to contain the Coronavirus or treat its impact, among others.

As a result of the continuing spread of the Coronavirus, certain aspects of the Company’s business operations may be delayed or subject to interruptions. Specifically, as a result of the shelter-in-place orders and other mandated local travel restrictions, among other things, the research and development activities of certain of the Company’s partners may be affected, which may result in delays to the Company’s clinical trials, and the Company can provide no assurance as to when such trials, if delayed, will resume at this time or the revised timeline to complete trials once resumed.

Furthermore, site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If the Coronavirus continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and the Company may be unable to conduct its clinical trials.

Infections and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay U.S. Food and Drug Administration review and/or approval with respect to the Company’s clinical trials. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of the Company’s clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company’s product candidates.

The spread of the Coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on the Company’s business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may negatively impact the Company’s ability to access capital on favorable terms, if at all. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the Coronavirus could materially and adversely affect the Company’s business and the value of its common stock.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s operations, and the Company will continue to monitor the situation closely.

~~Equity Investments~~

At September 30, 2021, equity investments, at fair value consisted of common equity securities of two entities, including Aikido. Equity investments are carried at fair value with unrealized gains or losses included in income (expense). Realized gains and losses are determined on a specific identification basis and are included in other income (expense). We review equity investments, at fair value for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.

At September 30, 2021and December 31, 2020, equity investments, at cost are comprised mainly of non-marketable capital stock and stock warrants, are recorded at cost, as adjusted for other than temporary impairment write-downs and are evaluated for impairment periodically.

Results of Operations

Comparison of Our Results of Operations for the Three Months Ended March 31, 2022 and ~~Nine months ended September 30,~~ 2021 ~~and 2020~~

~~Results of Operations~~

The following table summarizes the results of operations for the three months ~~ending September 30,~~ended March 31, 2022 and 2021 ~~and 2020~~ based primarily on the comparative ~~unaudited~~condensed consolidated financial statements, footnotes and related information for the periods identified, and should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report.

	For the Three Months						For the Nine months						For the Three Months Ended
	Ended September 30,						Ended September 30,						March 31,
	2021			2020			2021			2020			2022			2021
Revenues	$	18,025		$	-		$	53,238		$	-		$	18,026		$	17,188
Cost of sales		1,459			-			3,544			-			1,460			625
Gross profit		16,566			-			49,694			-			16,566			16,563
Operating expenses		480,508			558,893			1,851,621			1,610,142			543,825			917,699
Loss from operations		(463,942	)		(558,893	)		(1,801,927	)		(1,610,142	)
Operating loss from continuing operations														(527,259	)		(901,136	)
Other income (expense), net		6,955,513			2,425			7,040,956			(455,432	)		(75,650	)		37,401
Provision for income taxes		(19,133	)		-			(19,133	)		-
Loss from discontinued operations, net of tax		(87,319	)		(77,327	)		(227,469	)		(182,129	)		(1,163	)		(66,967	)
Net income (loss)	$	6,385,119		$	(633,795	)	$	4,992,427		$	(2,247,703	)
Net (loss)													$	(604,072	)	$	(930,702	)

~~Revenues:~~Revenues

During the ~~nine~~three months ended ~~September 30, 2021, we generated minimal revenues from operations. For the three~~March 31, 2022 and ~~nine months ended September 30,~~March 31, 2021, revenues consisted of revenues on licensing fees related to our biopharmaceutical operation of ~~$18,025~~$18,026 and ~~$53,238, respectively, as compared to $0 during the three and nine months ended September 30, 2020.~~$17,188, respectively. Such revenues are primarily related to the ~~AIkido~~Aikido License and Sublicense Agreement.

Cost of ~~Revenues:~~Revenues

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, cost of revenues on license fees related to our biopharmaceutical operation amounted to ~~$1,459~~$1,460 and ~~$3,544, respectively, as compared to $0 for the three and nine months ended September 30, 2020.~~$625, respectively. The primary components of cost of revenues on license fees include the cost of the license fees primarily related to the UMB License and Sublicense Agreement.

Operating Expenses

During the three months ended March 31, 2022 and March 31, 2021, total operating expenses consisted of the following:

	For the Three Months Ended
	March 31,
	2022			2021
Compensation expense	$	127,181		$	112,292
Professional fees		196,248			671,570
Research and development		170,279			48,602
Insurance expense		33,292			21,706
Bad debt recovery		(20,000	)		(7,500	)
Selling, general and administrative expenses		36,825			71,029
Total operating expenses	$	543,825		$	917,699

●	Compensation Expense:

	During the three months ended March 31, 2022 and March 31, 2021, compensation expense were $127,181 and $112,292, respectively, an increase of $14,889 or 13%. This increase was primarily attributable the hiring of a new employee February 2022.

●	Professional Fees:

	During the three months ended March 31, 2022 and March 31, 2021, professional fees were $196,248 and $671,570, respectively, a decrease of $475,322 or 71%. The decrease was primarily attributable to a decrease in stock-based consulting fees of $111,222 related to the issuance of shares to consultants, decrease in consulting fees of $104,084, a decrease in investor relation fees of $140,940 and a decrease of legal fees of $127,627 offset by increase in accounting fees of $8,551.

●	Research and Development:

	During the three months ended March 31, 2022 and March 31, 2021, research and development were $170,279 and $48,602, respectively, an increase of $121,677 or 250%. The increase was primarily attributable to research and development costs in connection with the investigator-sponsored study agreement with University of Columbia, UCSF and UMB.

●	Insurance Expense:

	During the three months ended March 31, 2022 and March 31, 2021, insurance expense were $33,292 and $21,706, respectively, an increase of $11,586 or 53%. This increase was a result of increase in the cost of renewal of D&O insurance policy.

●	Bad Debt Recovery:

	During the three months ended March 31, 2022 and March 31, 2021, bad debt recovery were $20,000 and $7,500, respectively, an increase of $12,500 or 167%. We recorded bad debt recovery from the collection of a previously written off note receivable deemed uncollectible.

●

Selling, General and Administrative Expenses:

During the three months ended March 31, 2022 and March 31, 2021, selling, general and administrative expenses were $36,825 and $71,029, respectively, a decrease of $34,204 or 48%. The decrease was primarily attributable to a decrease in filing fees of $12,196, a decrease in patent expense of $17,230 and a decrease in proxy meeting expense of $19,863, offset by an increase in transfer agent fees of $12,847.

Operating ~~Expenses:~~Loss from Continuing Operations

~~For the three and nine months ended September 30, 2021 and 2020, total operating expenses consisted of the following:~~

For the Three Months For the Nine months
Ended September 30, Ended September 30,
2021 2020 2021 2020
Compensation expense $ 54,943 $ 37,308 $ 222,177 $ 717,198
Professional fees 331,419 415,409 1,273,894 757,620
Research and development 70,514 - 217,962 -
Insurance expense 29,014 13,578 79,735 17,560
Bad debt recovery (30,000 ) 85,000 (83,500 ) 84,000
Selling, general and administrative expenses 24,618 7,598 141,353 76,088

Total operating expenses $ 480,508 $ 558,893 $ 1,851,621 $ 1,610,142

●

~~Compensation expense~~:

~~For~~During the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, compensation expense increased by $17,635, or 47%, as compared to the three months ended September 30, 2020. This increase was primarily attributable to the increase of our Chief Executive Officer’s compensation and related benefits expense of $16,135.

For the nine months ended September 30, 2021, compensation expense decreased by $495,021, or 69%, as compared to the nine months ended September 30, 2020. This decrease was primarily attributable to a decrease in stock-based compensation related to the issuance of stock to our chief executive officer for his employment agreement of $610,475 in 2020 offset by an increase of our Chief Executive Officer’s compensation and related benefits expense of $49,454, increase in compensation expense for directors of $4,500 and bonuses paid to our Chief Executive Officer and directors of an aggregate amount of $61,500.

●

~~Professional fees~~:

For the three months ended September 30, 2021, professional fees decreased by $83,990 or 20%, as compared to the three months ended September 30, 2020. The decrease was primarily attributable to a decrease in stock-based consulting fees of $242,983 related to the issuance of shares to consultants for business advisory and strategic planning services and decrease legal fees of $42,187 offset by increase in other consulting fees of $139,678 for general business advisory and strategic planning services, increase in accounting fees of $6,002 and an increase in investor relation fees of $55,500.

For the nine months ended September 30, 2021, professional fees increased by $516,274 or 68%, as compared to the nine months ended September 30, 2020. The increase was primarily attributable to an increase in stock-based legal fees of $83,728, an increase legal fees of $75,311, an increase investor relation fees of $226,795, and an increase in other consulting fees of $467,012, increase in accounting fees of $15,746 offset by decrease in stock-based consulting fees of $352,318 related to the issuance of shares to consultants for business advisory and strategic planning services.

●

~~Research and development:~~

For the three months ended September 30, 2021 and 2020, the Company incurred $70,514 and $0, respectively, in research and development costs in connection with the Investigator-sponsored Study Agreement with Maastricht University, UCSF, and UMB.

For the nine months ended September 30, 2021 and 2020, the Company incurred $217,962 and $0, respectively, in research and development costs in connection with the Investigator-sponsored Study Agreement with Maastricht University, UCSF, and UMB.

●

~~Insurance expense~~:

For the three months ended September 30, 2021, insurance expense increased by $15,436, or an increase of 114%, as compared to $13,578 for the three months ended September 30, 2020. This increase was a result of increase in the cost of renewal of certain insurance policies.

For the nine months ended September 30, 2021, insurance expense increased by $62,175, or an increase of 354%, as compared to $17,560 for the nine months ended September 30, 2020. This increase was a result of increase in the cost of renewal of certain insurance policies.

●

~~Bad debt recovery:~~

For the three months ended September 30, 2021 and 2020, we recorded bad debt recovery (expense) of $30,000 and $(85,000), respectively. We recorded bad debt recovery from the collection of a previously written off note receivable deemed uncollectible.

For the nine months ended September 30, 2021 and 2020, we recorded bad debt recovery (expense) of $83,500 and ($84,000), respectively. We recorded bad debt recovery from the collection of a previously written off notes receivable deemed uncollectible.

●

~~Selling, general and administrative expenses~~:

Selling, general and administrative expenses consist of advertising and promotion, patent related expenses, transfer agent fees, custodian fees, bank service charges, travel, and other fees and expenses. For the three months ended September 30, 2021, general and administrative expenses increased by $17,020, or 224%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, general and administrative expenses increased by $107,589, or 319%, as compared to the nine months ended September 30, 2020. The increase in selling, general and administrative expenses was primarily attributed to an increase in patent related expenses, EDGAR filing fees, annual board meeting expenses, public company fees, and other expenses related to our new business operations.

~~Loss from Continuing Operations:~~

~~For the three months ended September 30, 2021 and 2020,~~operating loss from continuing operations amounted to ~~$463,942~~$527,259 and ~~$558,893,~~$901,136, respectively, a decrease of ~~$94,951,~~$373,877 or 17%. The decrease was primarily a result of the changes in operating expenses discussed above. For the nine months ended September 30, 2021 and 2020, loss from continuing operations amounted to $1,801,927 and $1,610,142, respectively, an increase of $191,785, or 12%41%. The increase was primarily a result of the changes in operating expenses discussed above.

Other Income (Expenses) ~~Income:~~, net

~~For~~During the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, other ~~income~~(expense), net amounted to ~~$6,955,513 as compared~~$(75,650) and other income, net amounted to $37,401, respectively, an increase in other (expense), net of $(113,051) or 302%. The increase in other (expense), net was primarily due to an increase in net unrealized (loss) on equity investment of $(200,548), increase in net interest income of $1,764 resulting from the interest on note receivable and increase in other income of ~~$2,425~~$85,733 resulting from the grant date fair value of Home Bistro, Inc common stock received in exchange for entering into a lock up agreement with Home Bistro, Inc.

Loss from Discontinued Operations

During the three months ended ~~September 30, 2020, an increase of $6,953,088.For the nine months ended September 30,~~March 31, 2022 and March 31, 2021, ~~other income~~loss from discontinued operations amounted to ~~$7,040,956 as compared to other expenses~~$1,163 and $66,967, respectively, a decrease of ~~$455,432 for the nine months ended September 30, 2020, an increase of $7,496,388.~~

●

~~Interest income:~~

For the three and nine months ended September 30, 2020, we earned interest income of $2,818 and $8,788, respectively, primarily resulting from interest earned on notes receivable as compared to $0 for both periods in 2021.$65,804 or 98%. The decrease was ~~attributable~~primarily due to a sale of the ~~decrease~~Company’s NFID business in ~~income-earning notes receivable as a result of an allowance established in 2020, ceasing accrual of interest and collections on some principal amounts of notes receivables.~~September 2021.

●

~~Gain on forgiveness of PPP note payable:~~

For the three and nine months ended September 30, 2021, we recorded gain on forgiveness of PPP note payable of $0 and $19,082, respectively. The increase was attributable to the forgiveness of the principal and accrued interest under the PPP loan by the Small Business Administration.Preferred Stock Dividend

●

~~Interest expense:~~

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, we incurred interest expense of $483 and $2,872, respectively, primarily related to our PPP loan. During the three and nine months ended September 30, 2020, we incurred interest expense of $393 and $268,996, respectively, primarily related to the increase in borrowings under convertible debt agreements which included amortization of debt discount to interest expense of $268,125.

●

~~Net change in unrealized gain on investments~~:

During the three and nine months ended September 30, 2021, we recorded an unrealized gain on equity investments of $300,876 and $369,626, respectively, attributable to our analysis of the fair value of our investments in Aikido and Home Bistro, Inc. as compareddividends amounted to $0 ~~for the three~~ and ~~nine months ended September 30, 2020.~~

●

~~Net change in realized gain on investments~~:

~~During the three and nine months ended September 30,~~$1,403,997 respectively, a decrease of $1,403,997 or 100%. In 2021, we recorded a realized gain on equity investments of $6,655,120, attributable to the sale of our investments in Aikido and DatChat, Inc. as compared to $0 for the three and nine months ended September 30, 2020.

●

~~Loss on debt extinguishment~~:

During the three and nine months ended September 30, 2020, we recorded loss on debt extinguishment of $198,000 due to the exchange of the convertible notes into common stock pursuant to Exchange Agreements. We did not have such loss during the 2021 period.

~~Loss from Discontinued Operations:~~

~~On September 30, 2021, we entered into an Asset Purchase Agreement with NFID, LLC, a Florida limited liability company, whereby the Buyer purchased from~~ the Company ~~certain assets, properties, and rights~~recorded $1,403,997 of deemed dividends resulting the beneficial conversion feature in connection with the ~~Company’s NFID trademark name, logos, domain, and apparel clothing and accessories for a purchase price~~issuance of $60,000 in the form of a promissory note amounting to $60,000. The promissory note bears 8% interest per annum and matures on October 1, 2023. Accordingly, the results of operations of this component, for all periods, are separately reported as “discontinued operations” on the condensed consolidated statements of operationsSeries C Convertible Preferred Stock.

~~The following table set forth the selected financial data of the Company’s gain from sale of the NFID business for the three and nine months ended September 30, 2021.~~

September 30,
2021
Assets:
Current assets:
Inventory, net $ 58,447
Total assets $ 58,447

Liabilities:
Current liabilities:
Total liabilities $ -

Carrying value of NFID business on date of sale $ 58,447
Total consideration (60,000 )
Net gain from sale of NFID business $ 1,553

The summarized operating result of discontinued operations of the NFID Business included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 is as follows:

For the Three
Months Ended For the Nine
Months Ended
September 30, September 30,
2021 2020 2021 2020
Product sales, net $ 39,236 $ 16,285 $ 119,541 $ 18,795
Cost of sales 30,637 29,450 98,998 30,866
Gross profit (loss) 8,599 (13,165 ) 20,543 (12,071 )
Total operating and other non-operating expenses (97,471 ) (64,162 ) (249,565 ) (170,058 )
Gain from sale of NFID business 1,553 - 1,553 -

Loss from discontinued operations $ (87,319 ) $ (77,327 ) $ (227,469 ) $ (182,129 )

Net ~~Income (Loss)~~Loss Available to Common ~~Stockholders:~~Stockholders

~~For~~During the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and 2020,~~ net ~~income (loss)~~loss available to common stockholders amounted to ~~$6,385,119 or $0.06 per common share (basic and diluted), and ($633,795),~~$604,072 or $(0.01) per common share (basic and diluted), ~~respectively, an increase of $7,018,914,~~and $2,334,699 or 1,107%. For the nine months ended September 30, 2021 and 2020, net income (loss) available to common stockholders amounted to $3,588,430 or $0.04 per common share (basic and diluted), and $2,316,703, or $(0.04)$(0.03) per common share (basic and diluted), respectively, an ~~increase~~decrease of ~~$5,905,133,~~$1,730,627 or ~~254%~~74%. The ~~increase~~decrease was primarily a result of the ~~changes~~decrease in operating expenses, and offset by other ~~income,~~income(expense), net discussed above.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital of ~~$11,018,743~~$9,325,469 and ~~$10,261,416~~$9,067,836 in cash and cash equivalents as of ~~September 30, 2021,~~March 31, 2022 and working capital of ~~$1,284,941~~$9,912,281 and ~~$1,128,389~~$9,837,001 in cash and cash equivalents as of December 31, ~~2020.~~2021

	September 30, 2021			December 31, 2020			Working Capital Change			Percentage Change			March 31, 2022			December 31, 2021			Working Capital Change			Percentage Change
Working capital:
Total current assets	$	11,302,132		$	1,426,664		$	9,875,468			692	%	$	9,618,217		$	10,402,320		$	(784,103	)		8	%
Total current liabilities		(283,389	)		(141,723	)		(141,666	)		100	%		(292,748	)		(490,039	)		197,291			40	%
Working capital:	$	11,018,743		$	1,284,941		$	9,733,802			757	%	$	9,325,469		$	9,912,281		$	(586,812	)		6	%

The ~~increase~~decrease in working capital of ~~$9,733,802~~$586,812 was primarily attributable to ~~an increase~~a decrease in current assets of $784,103 primarily due to decrease in cash of ~~$9,133,027, an increase in equity investments of $819,926, offset by decreases in notes receivable of $23,500, prepaid~~approximately $769,000 and ~~other current assets - current of $20,501,~~a decrease ~~in inventory as reflected as assets of discontinued operations of $33,484 and an increase~~ in current liabilities of ~~$141,666 primarily from increases in accounts payable and deferred revenue.~~$197,291.

On February 9, 2021, we entered into Securities Purchase Agreements with certain institutional and accredited investors for the sale of an aggregate of 4,276 shares of our Series C Convertible Preferred Stock and warrants to purchase up to 14,253,323 shares of our common stock in a private placement for gross proceeds of approximately $4,276,000, before deducting placement agent and other offering expenses of $484,898.Cash Flows

~~Cash Flows~~

A summary of cash flow activities is summarized as follows:

Nine months Ended
September 30,

2021 2020
Cash used in operating activities $ (1,504,145 ) $ (620,673 )
Cash provided by investing activities 6,843,070 20,000
Cash provided by financing activities 3,794,102 2,134,633
Net increase in cash $ 9,133,027 $ 1,533,960

	Three Months Ended March 31,
	2022			2021
Net cash used in operating activities	$	(789,165	)	$	(319,318	)
Net cash provided by investing activities		20,000			31,000
Net cash provided by financing activities		—			3,796,468
Net change in cash	$	(769,165	)	$	3,508,150

Net Cash Used in Operating ~~Activities:~~Activities

Net cash ~~flow used in operating activities was $1,504,145 for the nine months ended September 30, 2021 as compared to $620,673 for the nine months ended September 30, 2020, an increase of $875,972.~~

~~Net cash flow~~ used in operating activities for the ~~nine~~three months ended September 30, 2020 primarily reflected a net income of $4,992,427 adjusted for the add-back of non-cash items such as total stock-based compensation of $191,698, bad debt recovery of $83,500, changes in operating assetMarch 31, 2022 and ~~liabilities primarily consisting of~~March 31, 2021 were $789,165 and $319,318, respectively, an increase ~~in assets~~ of discontinued operations of $24,963, increase in total prepaid expenses and other current assets (current and non-current) of $115,587, an increase in accounts payable and accrued expenses of $84,399, and an increase in total deferred revenue of $496,762 offset by net unrealized gain on equity investments of $369,626, net realized gain on equity investments of $6,655,120, loss from disposal of assets of discontinued operations of $1,553 and gain on forgiveness of note payable and accrued interest of $19,082.$469,847 or 147%.

●

Net cash used in operating activities for the three months ended March 31, 2022 primarily reflected a net loss of $604,072 adjusted for the add-back of non-cash items such as bad debt recovery of $20,000, stock-based compensation of $45,009, net unrealized loss on equity investments of $161,798, non-cash income from equity investment of $85,733 and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $69,667, an increase of interest receivable of $1,184, an increase in insurance payable of $64,839 offset by a decrease in accounts payable and accrued expenses of $262,130 and decrease in deferred revenue of $18,025.

●

Net cash used in operating activities for the three months ended March 31, 2021 primarily reflected a net loss of $930,702 adjusted for the add-back of non-cash items such bad debt recovery of $7,500, net unrealized gain on equity investments of $38,750, stock-based compensation of $83,728, amortization of prepaid stock-based compensation of $101,222 and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $109,914, an increase in assets of discontinued operations of $11,181, an increase in accounts payable and accrued expenses of $110,967 and an increase in deferred revenue of $482,812.

Net cash flow used in operating activities for the nine months ended September 30, 2020 primarily reflected a net loss of $2,247,703 adjusted for the add-back of non-cash items such as amortization of debt discount of $268,125, bad debt of $90,000, total stock-based compensation of $1,070,765, loss from debt extinguishment of $198,000, inventory write-down of $19,879, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets current portion of $68,045 and non-current portion of $117,347, an increase in accounts payable and accrued expenses of $59,910 and a decrease in asset of discontinued operations of $105,743.

Net Cash Provided by Investing Activities

Net cash ~~flow~~ provided by investing activities ~~was $6,843,070~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~which primarily consisted~~were $20,000 and $31,000, respectively, a decrease of proceeds from sale of our equity investments in Aikido and DatChat, Inc. for $6,736,070 and collection on notes receivable of $7,500 and $99,500, as compared to $20,000 for the nine months ended September 30, 2020 which consisted of proceeds from collection on a note receivable.$11,000 or 35%.

●

Net cash provided by investing activities for the three months ended March 31, 2022 was $20,000 from proceeds from notes receivable collection.

●

Net cash provided by investing activities for the three months ended March 31, 2021 was $31,000 which consisted of proceeds from collection of previously written off notes receivable of $7,500 and proceeds from notes receivable collection of $23,500.

Net Cash Provided by Financing Activities

Net cash provided by financing activities ~~was $3,794,102~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~as compared to $2,134,633 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we received net proceeds from sale~~were $0 and $3,796,468, respectively, an increase of our Series C Convertible Preferred Stock of $3,794,102 and advance from a related party of $2,366 offset by repayment of advance of $2,366. During the nine months ended September 30, 2020, we received net proceeds from sale of common stock of $2,115,733, related party loans of $35,000, issuance of note payable of $18,900 offset by repayment on notes payable- related party of $35,000. $3,769,468 or 100%.

●

Net cash provided by financing activities for the three months ended March 31, 2021 was $3,796,468 which consisted of net proceeds from sale of preferred stock of $3,794,102, proceeds from a related party advance of $2,366.

Cash Requirements

~~We believe~~The Company believes that ~~our existing available~~current cash and cash equivalents balance as of March 31, 2022 of $9,067,836 will ~~not be enough to enable us~~provide sufficient cash required to meet ~~the working capital requirements~~our obligations for ~~at least 12~~a minimum of twelve months from the date of this report. Our primary uses of cash have been for salaries, fees paid to third parties for professional services, and general and administrative expenses. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:filing.

	●	~~An increase in working capital requirements to finance our current business;~~

	●	~~An increase in research and development fees related to our biopharmaceutical operations;~~

	●	~~Addition of administrative and other personnel as the business grows; and~~

	●	~~The cost of being a public company.~~

Since we believe that our existing available cash will not enable us to meet our working capital requirements for at least 12 months from the date of this report, we will need to raise additional funds. If we are unable to raise capital, we may be required to reduce the scope of our product development and marketing activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you will lose all of your investment.

Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional funds through debt and/or equity financings. We will seek to raise capital through additional debt and/or equity financings to fund operations, for product development and for marketing in the future. If we are unable to raise capital or secure lending in the near future, management expects that we may need to curtail or cease our operations.

Until such time as we generate substantial product revenue to offset operational expenses, we expect to finance our cash needs through a combination of public and private equity offerings and debt financing. We may be unable to raise capital or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition. We have no agreements or arrangements to raise capital.

We currently have no material commitments for any capital expenditures.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2021, we did not have any off-balance sheet arrangements (as defined in the rules and regulations of the SEC) or any commitments or contractual obligations.~~

~~Critical Accounting Policies~~

~~Basis of Presentation~~

~~The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, (“U.S. GAAP”).~~

~~Cash and Cash Equivalents~~

~~We consider all highly liquid instruments purchased with an original maturity of three months or less and money market accounts to be cash equivalents.~~

~~Equity Investments, at fair value~~

Equity investments are carried at fair value with unrealized gains or losses included in income (expense). Realized gains and losses are determined on a specific identification basis and are included in other income (expense). We review equity investments, at fair value for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.

~~Equity Investments, at Cost~~

~~Fair Value of Financial Instruments and Fair Value Measurements~~

We use the guidance of Accounting Standards Codification (“ASC”) Topic 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

~~Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.~~

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.Liquidity

~~The carrying amounts reported~~As reflected in the ~~balance sheets for~~accompanying condensed consolidated financial statements, the Company generated a net loss of $604,072 and used cash ~~prepaid expenses and other current assets, and accounts payable and accrued expenses approximate their fair market value based on~~in operations of $789,165 during the ~~short-term maturity~~three months ended March 31, 2022. Additionally, the Company has an accumulated deficit of ~~these instruments.~~$3,866,469 at March 31, 2022. As of March 31, 2022, the Company had working capital of $9,325,469.

These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

Revenue Recognition

~~We apply~~The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.

~~We record~~The Company records interest and dividend income on an accrual basis to the extent that ~~we expect~~the Company expects to collect such amounts.

For the license and royalty income, revenue is recognized when ~~we satisfy~~the Company satisfies the performance obligation based on the related license agreement. Payments received from the licensee that are related to future periods are recorded as deferred revenue to be recognized as revenues over the term of the related license agreement.

~~Stock-based~~Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation ~~–Stock~~– Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. ~~We have~~The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.

Fair Value of Financial Instruments and Fair Value Measurements

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on Mach 31, 2022. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

	Level 1 -	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

	Level 2 -	Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

	Level 3 -	Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

~~Income Taxes~~

~~Deferred income tax assets~~The Company analyzes all financial instruments with features of both liabilities and ~~liabilities arise from temporary differences between~~equity under the FASB’s accounting standard for such instruments. Under this standard, financial ~~statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax~~ assets and liabilities are classified asin their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.

Leases

The Company accounts for its leases using the method prescribed by ASC 842 – Lease Accounting. The Company assess whether the contract is, or ~~non-current, depending upon~~contains, a lease at the ~~classification~~inception of a contract which is based on (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtain the right to substantially all the economic benefit from the use of the asset ~~or liabilities~~throughout the period, and (iii) whether the Company has the right to ~~which they relate. Deferred tax~~direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities ~~not related~~for short-term leases that have a term of 12 months or less.

Operating and financing lease ROU assets represents the right to anuse the leased asset ~~or liability~~for the lease term. Operating and financing lease liabilities are ~~classified as current or non-current depending~~recognized based on the ~~periods~~present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in ~~which~~determining the ~~temporary differences~~present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the consolidated statements of operations.

New Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and edging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470- 20, Debt with Conversion and Other Options, for convertible instruments. Under the amendments in ASU 2020-06, the embedded conversion features no longer are ~~expected~~separated from the host contract for convertible instruments with conversion features that are not required to ~~reverse. Valuation allowances are established when necessary to reduce deferred tax assets~~be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the ~~amount expected~~coupon interest rate when applying the guidance in Topic 835, Interest. The amendments in ASU 2020-06 provide financial statement users with a simpler and more consistent starting point to ~~be realized.~~perform analyses across entities. The amendments also improve the operability of the guidance and reduce, to a large extent, the complexities in the accounting for convertible instruments and the difficulties with the interpretation and application of the relevant guidance. To further improve the decision usefulness and relevance of the information being provided to users of financial statements, amendments in ASU 2020-06 increased information transparency by making the following amendments to the disclosure for convertible instruments:

1.	Add a disclosure objective

2.	Add information about events or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly changed

3.	Add information on which party controls the conversion rights

4.	Align disclosure requirements for contingently convertible instruments with disclosure requirements for other convertible instruments

5.	Require that existing fair value disclosures in Topic 825, Financial Instruments, be provided at the individual convertible instrument level rather than in the aggregate.

~~We follow~~Additionally, for convertible debt instruments with substantial premiums accounted for as paid-in capital, amendments in ASU 2020-06 added disclosures about (1) the ~~provisions~~fair value amount and the level of ~~Financial Accounting Standards Board ASC 740-10, “Uncertainty~~fair value hierarchy of the entire instrument for public business entities and (2) the premium amount recorded as paid-in capital.

The amendments in ~~Income Taxes”. Certain recognition thresholds must~~ASU 2020-06 are effective for public business entities, excluding entities eligible to be ~~met before~~smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of its annual fiscal year and are allowed to adopt the guidance through either a ~~tax position is~~modified retrospective method of transition or a fully retrospective method of transition. In applying the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If an entity elects the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and did not have material impact on its condensed consolidated financial statements. ~~An entity may only recognize~~

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or ~~continue to recognize tax positions that meet a “more-likely-than-not” threshold. We do~~exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and did not have material impact on its condensed consolidated financial statements

Management does not believe wethat any other recently issued, but not yet effective accounting pronouncements, if adopted, would have ~~any uncertain tax positions as of September 30, 2021 that would require either recognition or disclosure in~~a material effect on the ~~accompanying~~Company’s consolidated financial statements.

~~Item~~ITEM 3. ~~Quantitative and Qualitative Disclosures about Market Risk.~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

~~Item~~ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and ~~Procedures.~~Procedures

~~(a)~~

~~Disclosure Controls and Procedures~~

We ~~are required to~~ maintain ~~“disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and 15d-15(e), promulgated by the SEC pursuant to the Exchange Act. Disclosure~~disclosure controls and procedures ~~include controls and procedures~~that are designed to ensure that material information required to be disclosed in ~~the~~our periodic reports ~~we file~~filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our ~~principal~~chief executive officer and ~~principal~~chief financial officer as appropriate, to allow timely decisions regarding required disclosure. ~~In designing~~We carried out an evaluation, under the supervision and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our management, with the participation of our management, including the principal executive officer and the principal financial officer ~~evaluated~~(principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this ~~Quarterly Report on Form 10-Q.~~report. Based on this evaluation, ~~our principal executive officer~~because of the Company’s limited resources and ~~principal financial officer~~limited number of employees, management concluded that ~~as of September 30, 2021,~~ our disclosure controls and procedures were not effective ~~because~~as of ~~a material weakness in our internal controls over financial reporting.~~ Mach 31, 2022.

The ineffectiveness of our ~~disclosure controls and procedures were not effective because of the material weaknesses set forth below.~~

~~The ineffectiveness of our disclosure controls and procedures~~internal control over financial reporting was due to the following material ~~weaknesses:~~weaknesses which we identified in our internal control over financial reporting:

	●	We lack segregation of duties within accounting functions duties as a result of our limited financial resources to support hiring of personnel.

	●	~~The lack of multiples levels of management review on complex business, accounting and financial reporting issues.~~

	●	We have not implemented adequate system and manual controls.

~~While we used the services of third-party accountant who~~A material weakness is a ~~certified public accountant to provide accounting and financial reporting services to us, we lack both an adequate number~~deficiency or a combination of ~~personnel with requisite expertise~~control deficiencies in the key functional areas of finance and accounting and an adequate number of personnel to properly implement control procedures. In addition, while we have independent directors, we do not have an audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. These factors represent material weaknesses in our internal controls over financial reporting. Although we believe the possibility of errors in our financial statements is remote and expect to continue to use a third-party accountant to address shortfalls in staffing and to assist us with accounting and financial reporting responsibilities in an effort to mitigate the lack of segregation of duties, until such time as we expand our staff with qualified personnel, we expect to continue to report material weaknesses in our internal control over financial ~~reporting.~~

reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

~~(b)~~

Changes in Internal Control ~~over~~Over Financial ~~Reporting.~~Reporting

There ~~were~~have been no changes in our internal control over financial reporting that occurred during the ~~quarter ended September 30, 2021~~period covered by this Quarterly Report that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

~~OTHER INFORMATION~~

~~Item~~ITEM 1. ~~Legal Proceedings.~~LEGAL PROCEEDINGS

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

~~Item~~ITEM 1A. ~~Risk Factors.~~RISK FACTORS

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as filed with the SEC on March ~~29, 2021~~28, 2022 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

~~Item~~ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~On March 31, 2022, the Company notified holders of its Series C Convertible preferred stock of its election to force the conversion to its Series C Convertible preferred stock into shares of the Company’s common stock pursuant to the Certificate of Designations unless such conversion would cause the holder to exceed its beneficial ownership limitation pursuant to the Certificate of Designations. On March 31, 2022, the Company converted 227 Series C Convertible preferred stock into 758,334 shares of common stock. The shares were issued pursuant to the exemption provided by Section 3(a)(9) and/or Rule 144 of the Securities Act of 1933, as amended. We did not receive any proceeds from the issuance of these shares.

~~Item~~ITEM 3. ~~Defaults Upon Senior Securities.~~DEFAULTS UPON SENIOR SECURITIES

None.

~~Item~~ITEM 4. ~~Mine Safety Disclosures.~~MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~ITEM 5. ~~Other Information.~~OTHER INFORMATION

None.

~~Item~~ITEM 6. ~~Exhibits.~~EXHIBITS

Exhibit No.		Description of Exhibits
31.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance ~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document~~Document.
101.SCH		Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

+	Indicates a management contract or any compensatory plan, contract or arrangement.

#	Portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SILO PHARMA, INC.

Dated: ~~November 10, 2021~~May 13, 2022	By:	/s/ Eric Weisblum
	Name:	Eric Weisblum
	Title:	Chairman, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

iso4217:USD xbrli:shares

	Series B Preferred Stock					Series C Preferred Stock					Common Stock				Additional Paid In			Accumulated			Total Stockholders’
	Shares			Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Equity (Deficit)

Balance, December 31, 2020		-		$	-		-		$	-		85,141,956	$	8,514	$	7,034,502		$	(5,762,321	)	$	1,280,695

Series C preferred stock issued for cash, net of offering cost		-			-		4,276			-		-		-		3,794,102			-			3,794,102

Deemed dividend upon issuance of preferred stock		-			-		-			-		-		-		1,403,997			(1,403,997	)		-

Common stock warrants granted for services		-			-		-			-		-		-		83,728			-			83,728

Net loss		-			-		-			-		-		-		-			(930,702	)		(930,702	)

Balance, March 31, 2021		-		$	-		4,276		$	-		85,141,956	$	8,514	$	12,316,329		$	(8,097,020	)	$	4,227,823

Issuance of common stock for conversion of preferred stock		-			-		(4,049	)		-		13,495,014		1,350		(1,350	)		-			-

Net loss		-			-		-			-		-		-		-			(461,990	)		(461,990	)

Balance, June 30, 2021		-			-		227			-		98,636,970		9,864		12,314,979			(8,559,010	)		3,765,833

Net income		-			-		-			-		-		-		-			6,385,119			6,385,119

Balance, September 30, 2021		-		$	-		227		$	-		98,636,970	$	9,864	$	12,314,979		$	(2,173,891	)	$	10,150,952

	Series B Preferred Stock					Series C Preferred Stock					Common Stock				Additional Paid In			Accumulated			Total Stockholders’
	Shares			Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Equity (Deficit)

Balance, December 31, 2019		115		$	-		-		$	-		23,604,207	$	2,361	$	2,630,551		$	(2,655,804	)	$	(22,892	)

Net loss		-			-		-			-		-		-		-			(238,877	)		(238,877	)

Balance, March 31, 2020		115		$	-		-		$	-		23,604,207	$	2,361	$	2,630,551		$	(2,894,681	)	$	(261,769	)

Common Stock issued for cash, net of offering cost		-			-		-			-		37,758,116		3,775		2,111,958			-			2,115,733

Common Stock issued for future services		-			-		-			-		8,586,184		859		686,036			-			686,895

Preferred Shares Exchanged for Common Stock		(115	)		-		-			-		1,437,500		144		(144	)		-			-

Common Stock issued in connection with employment agreement		-			-		-			-		7,630,949		763		609,713			-			610,476

Common Stock issued for Exchange of Notes		-			-		-			-		4,125,000		412		527,588			-			528,000

Deemed dividend on Preferred Stock Exchange		-			-		-			-		-		-		69,000			(69,000	)		-

Net loss		-			-		-			-		-		-		-			(1,375,031	)		(1,375,031	)

Balance, June 30, 2020		-			-		-			-		83,141,956		8,314		6,634,702			(4,338,712	)		2,304,304

Common Stock issued for conversion of Redeemable Series A Preferred stock		-			-		-			-		2,000,000		200		399,800			-			400,000

Net loss		-			-		-			-		-		-		-			(633,795	)		(633,795	)

Balance, September 30, 2020		-		$	-		-		$	-		85,141,956	$	8,514	$	7,034,502		$	(4,972,507	)	$	2,070,509

	September 30, 2021		September 30, 2020
Series A convertible preferred stock		-		-
Series B convertible preferred stock		-		-
Series C convertible preferred stock		756,667		-
Stock options		300,000		300,000
Warrants		17,353,987		-

	Three months ended September 30, 2021		Three months ended September 30, 2020			Nine months ended September 30, 2021		Nine months ended September 30, 2020
Numerator:
Net income (loss)	$	6,385,119	$	(633,795	)	$	3,588,430	$	(2,316,703	)
									��
Denominator:
Weighted-average shares of common stock		98,636,970		84,416,681			93,594,877		59,512,252
Dilutive effect of convertible instruments		1,056,513		-			1,056,513		-
Diluted weighted-average of common stock		99,693,483		41,653,825			94,651,390		80,631,207

Net income (loss) per common share from:
Basic	$	0.06	$	(0.01	)	$	0.04	$	(0.04	)
Diluted		0.06		(0.01	)		0.04		(0.04	)

	September 30, 2021			December 31, 2020
Balance, beginning of period	$	—		$	—
Additions		531,250			—
Sales		(80,750	)		—
Unrealized gain		369,626			—
Balance, end of period	$	820,126		$	—

	September 30, 2021		December 31, 2020
Equity investments, at original cost	$	450,500	$	—
Gross unrealized appreciation		369,626		—
Equity investments, at fair market value	$	820,126	$	—

	As of September 30, 2021		As of December 31, 2020

Principal amount	$	-	$	18,900
Less: current portion		-		(14,654	)
Note payable - long term portion	$	-	$	4,246

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2020		300,000	$	0.0001		3.5		74,970
Granted/issued		—		—		—		—
Forfeited		—		—		—		—
Balance Outstanding, September 30, 2021		300,000	$	0.0001		2.79	$	58,470
Exercisable, September 30, 2021		300,000	$	0.0001		2.79	$	58,470

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2020		—		—		—		—
Granted		17,353,987		0.31		5.00		—
Forfeited		—		—		—		—
Balance Outstanding, September 30, 2021		17,353,987	$	0.31		4.37	$	—
Exercisable, September 30, 2021		17,353,987	$	0.31		4.37	$	—

Payment		Year
$	-	Prior to First Commercial Sale
$	-	Year of First Commercial Sale
$	25,000	First calendar year following the First Commercial Sale
$	25,000	Second calendar year following the First Commercial Sale
$	100,000	Third calendar year following the First Commercial Sale

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Product sales, net	$	39,236		$	16,285		$	119,541		$	18,795
Cost of sales		30,637			29,450			98,998			30,866
Gross profit (loss)		8,599			(13,165	)		20,543			(12,071	)
Total operating and other non-operating expenses		(97,471	)		(64,162	)		(249,565	)		(170,058	)
Gain from sale of NFID business		1,553			-			1,553			-

Loss from discontinued operations	$	(87,319	)	$	(77,327	)	$	(227,469	)	$	(182,129	)

	Nine months Ended September 30,
	2021			2020
Cash used in operating activities	$	(1,504,145	)	$	(620,673	)
Cash provided by investing activities		6,843,070			20,000
Cash provided by financing activities		3,794,102			2,134,633
Net increase in cash	$	9,133,027		$	1,533,960