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Form 10-Q AIkido Pharma Inc. For: Mar 31

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UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

 

FORM
10-Q

 

(Mark
one)

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

 

For
the quarterly period ended March 31, 2021

 

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

 

For
the transition period from ____________ to ____________

 

Commission
file number 000-05576

 

AIKIDO
PHARMA INC.
(Exact
name of registrant as specified in its charter)

 

Delaware   52-0849320
(State
or other jurisdiction of
incorporation or organization)
  (I.R.S.
Employer
Identification No.)

 

One
Rockefeller Plaza, 11th Floor, New York, NY 10020
(Address
of Principal Executive Offices, including zip code)

 

(703)
992-9325
(Registrant’s
telephone number, including area code)

 

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

 

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

 

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

 

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

 

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 ☒

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

 

Title
of each class
  Trading
Symbol(s)
  Name
of each exchange on which registered
Common
Stock, $0.0001 par value
  AIKI   The
Nasdaq Capital Market LLC

 

As
of May 7, 2021, there were 89,531,146 shares of the Company’s common stock issued and outstanding.

 

 

 

AIKIDO
PHARMA INC.

 

Form
10-Q

For
the Quarter Ended March 31, 2021

Index

 

 

 

PART
I – FINANCIAL INFORMATION

 

Item
1. Financial Statements

 

AIKIDO
PHARMA INC.

Condensed
Consolidated Balance Sheets

($
in thousands except share and per share amounts)
 

 

    March 31,     December 31,  
    2021     2020  
    (Unaudited)        
ASSETS            
Current assets            
Cash and cash equivalents   $ 7,981     $ 2,715  
Marketable securities     92,426       24,801  
Prepaid expenses and other assets     199       215  
Short-term investment     2,298        
Total current assets     102,904       27,731  
                 
Convertible note receivable     2,027        
Investments           2,764  
    $ 104,931     $ 30,495  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable and accrued expenses   $ 244     $ 567  
Accrued salaries and benefits     315       310  
Total current liabilities     559       877  
                 
Total liabilities     559       877  
                 
Commitments and contingencies                
                 
Stockholders’ equity                
Preferred stock, $.0001 par value, 50,000,000 Authorized                
Series D: 5,000,000 shares designated; 4,725 shares issued and outstanding at March 31, 2021 and December 31, 2020; liquidation value of $0.0001 per share            
Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at March 31, 2021 and December 31, 2020; liquidation value of $0.0001 per share            
Common stock, $0.0001 par value, 100,000,000 shares authorized; 89,531,149 and 34,920,222 shares issued at March 31, 2021 and December 31, 2020, respectively; 89,531,146 and 34,920,219 shares outstanding at March 31, 2021 and December 31, 2020, respectively     9       3  
Additional paid-in-capital     265,192       186,482  
Treasury stock, at cost, 3 shares at March 31, 2021 and December 31, 2020     (264 )     (264 )
Accumulated deficit     (160,565 )     (156,603 )
Total stockholders’ equity     104,372       29,618  
Total liabilities and stockholders’ equity   $ 104,931     $ 30,495  

 

See
accompanying notes to condensed consolidated financial statements

 

 

AIKIDO
PHARMA INC.

Condensed
Consolidated Statements of Operations

($
in thousands except share and per share amounts)

(Unaudited)

 

    Three Months Ended
March 31,
 
    2021     2020  
Operating costs and expenses            
General and administrative   $ 1,212     $ 1,303  
Research and development     72       85  
Research and development – license acquired     1,034       1,011  
Total operating expenses     2,318       2,399  
Loss from operations     (2,318 )     (2,399 )
                 
Other income (expenses)                
Other income     135        
Interest income     27        
Losses on marketable securities     (1,339 )     (863 )
Change in fair value of investment     (467 )     (5,071 )
Total other expenses     (1,644 )     (5,934 )
Net loss   $ (3,962 )   $ (8,333 )
                 
Net loss per share, basic and diluted                
Basic and Diluted   $ (0.07 )   $ (0.91 )
                 
Weighted average number of shares outstanding, basic and diluted                
Basic and Diluted     60,281,906       9,195,594  

 

See
accompanying notes to condensed consolidated financial statements

 

 

AIKIDO
PHARMA INC.

Condensed
Consolidated Statements of Changes in Stockholders’ Equity

($
in thousands except share and per share amounts)

(Unaudited)

 

For
the Three Months Ended March 31, 2021

 

    Common Stock     Preferred Stock     Additional
Paid-in
    Treasury Stock     Accumulated     Total Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Shares     Amount     Deficit     Equity  
Balance at December 31, 2020   34,920,219     $     3     5,559     $           –     $ 186,482        3     $ (264 )   $ (156,603 )   $ 29,618  
Issuance of common stock and warrants (net of offering costs of $8,260)     53,905,927       6                   77,983                         77,989  
Exercise of warrants     80,000                         84                         84  
Issuance of common stock for research and development license acquired     625,000                         531                         531  
Stock-based compensation                             112                         112  
Net loss                                               (3,962 )     (3,962 )
Balance at March 31, 2021     89,531,146     $ 9       5,559     $     $ 265,192       3     $ (264 )   $ (160,565 )   $ 104,372  

 

For
the Three Months Ended March 31, 2020

 

    Common Stock     Preferred Stock    

Additional
Paid-in

    Treasury Stock     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Shares     Amount     Deficit     Equity  
Balance at December 31, 2019     4,825,549     $        –       5,559     $     $ 155,062              3     $ (264 )   $ (144,266 )   $ 10,532  
Issuance of common stock, common warrants and prefunded warrants (net of offering costs of $958)     3,245,745       1                   6,541                         6,542  
Issuance of common stock (net of offering costs of $655)     2,090,909                         5,095                         5,095  
Common warrant and prefunded warrant exercise     10,695,706       1                   7,138                         7,139  
Net loss                                               (8,333 )     (8,333 )
Balance at March 31, 2020     20,857,909     $ 2       5,559     $     $ 173,836       3     $ (264 )   $ (152,599 )   $ 20,975  

  

See
accompanying notes to condensed consolidated financial statements

 

  

AIKIDO
PHARMA INC.

Condensed
Consolidated Statements of Cash Flows

($
in thousands)

(Unaudited) 

 

    Three Months Ended
March 31,
 
    2021     2020  
Cash flows from operating activities            
Net loss   $ (3,962 )   $ (8,333 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Change in fair value of investment     467       5,071  
Research and development-acquired license, expensed     1,034       1,011  
Stock-based compensation     112        
Realized (gain) loss on marketable securities     (424 )     44  
Unrealized loss on marketable securities     2,049       835  
Changes in assets and liabilities:                
Prepaid expenses and other assets     16       16  
Accounts payable and accrued expenses     (323 )     102  
Accrued salaries and benefits     5       (244 )
Interest receivable on convertible note     (27 )      
Payable to DatChat           50  
Net cash used in operating activities     (1,053 )     (1,448 )
                 
Cash flows from investing activities                
Purchase of marketable securities     (83,586 )     (20,378 )
Sale of marketable securities     14,335       4,215  
Purchase of research and development licenses     (503 )     (1,011 )
Purchase of convertible note     (2,000 )      
Net cash used in investing activities     (71,754 )     (17,174 )
                 
Cash flows from financing activities                
Proceeds from issuance common stock and warrants, net of offering cost     77,989       6,549  
Proceeds from issuance common stock, net of offering cost           5,095  
Proceeds from exercise of warrants     84       7,139  
Net cash provided by financing activities     78,073       18,783  
                 
Net increase in cash and cash equivalents     5,266       161  
Cash and cash equivalents, beginning of period     2,715       91  
                 
Cash and cash equivalents, end of period   $ 7,981     $ 252  
                 
Non-cash investing and financing activities                
Offering cost included in accrued expenses   $     $ 7  

 

See
accompanying notes to condensed consolidated financial statements

 

 

AIKIDO
PHARMA INC.

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

 

Note
1. Organization and Description of Business and Recent Developments

 

Organization
and Description of Business

 

AIkido
Pharma Inc.(the “Company” and “We”), formerly known as Spherix Incorporated, was initially formed in 1967. Since
2017, the Company has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics
in development. The Company’s pipeline consists of patented technology from leading universities and researchers. The Company is
currently in the process of developing its innovative therapeutic drug pipeline through strong partnerships with world renowned educational
institutions, including the University of Texas at Austin, the University of Maryland, Baltimore and Wake Forest University. The Company’s
oncology therapeutics include prospective treatments for pancreatic cancer, acute myeloid leukemia (AML) and acute lymphoblastic leukemia
(ALL). The Company is also developing a broad-spectrum antiviral platform, in which the lead compounds have activity in cell-based assays
against multiple viruses including Influenza virus, Ebolavirus and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

 

As a result of the Company’s biotechnology research
and development and associated investments and acquisitions, its business portfolio now focuses on the treatment of three different cancers
and multiple types of viral infections. The Company’s pancreatic drug candidate, DHA-dFdC, developed at and licensed from the University
of Texas at Austin, is a new compound that it hopes will become the next generation of chemotherapy treatment for advanced pancreatic
cancer. DHA-dFdC overcomes tumor cell resistance to current chemotherapeutic drugs and is well tolerated in preclinical toxicity tests.
Preclinical studies have also indicated that DHA-dFdC inhibits pancreatic cancer cell growth (up to 100,000-fold more potent that gemcitabine,
a current standard therapy), targets pancreatic tumors and has demonstrated activities against other cancers. The Company has also executed
a Sponsored Research Agreement with UMB to support the development of the technology under the direction of these inventors at UMB.

 

Note
2. Liquidity and Capital Resources

 

The
Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing
related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities through managing
current cash on hand from the Company’s past debt and equity offerings.

 

During
the first quarter of 2021, the Company consummated a public offering of 53,905,927 shares of common stock (including the underwriter
overallotment). The Company received net proceeds of approximately $78.0 million after deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company. Based upon projected cash flow requirements, the Company has adequate cash to
fund its operations for at least the next twelve months from the date of the issuance of these consolidated financial statements.

 

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

 

Note
3. Summary of Significant Accounting Policies

 

Basis
of Presentation and Principles of Consolidation

 

The
accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries,
Nuta Technology Corp. (“Nuta”), Spherix Portfolio Acquisition II, Inc. (“SPAII”), Guidance IP, LLC (“Guidance”),
Directional IP, LLC (“Directional”), Spherix Management Services, LLC (“SMS”), Spherix Delaware Merger Sub Inc.
(“Merger Sub”), Spherix Merger Subsidiary, Inc (“SMSI”) and NNPT, LLC (“NNPT”). All significant intercompany
balances and transactions have been eliminated in consolidation.

 

 

AIKIDO
PHARMA INC.

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

 

The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting
principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant
to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on
the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet
as of March 31, 2021, condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, condensed consolidated
statement of stockholders’ equity for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements
of cash flows for the three months ended March 31, 2021 and 2020 are unaudited, but include all adjustments, consisting only of normal
recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and
cash flows for the periods presented. The results for the three months ended March 31, 2021 are not necessarily indicative of results
to be expected for the year ending December 31, 2021 or for any future interim period. The condensed consolidated balance sheet at December
31, 2020 has been derived from audited financial statements; however, it does not include all of the information and notes required by
U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements for the year ended December 31, 2020 and notes thereto included in the Company’s
annual report on Form 10-K, which was filed with the SEC on March 25, 2021.

 

Use
of Estimates

 

The
accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP. This requires management to make
estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. The Company’s
significant estimates and assumptions include stock-based compensation, the valuation of investments and the valuation allowance related
to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including
those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect
on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

 

Significant
Accounting Policies

 

Other
than as described below, there have been no material changes in the Company’s significant accounting policies to those previously
disclosed in the Company’s annual report on Form 10-K, which was filed with the SEC on March 25, 2021.

 

Fair
Value Option – Convertible Note

 

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

 

Recently
Adopted Accounting Standards

 

In
December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, “Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes
(“ASU 2019-12”), which is intended to simplify various aspects related to
accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU No. 2019-12 effective January 1, 2021,
and the adoption did not have a material impact on its consolidated financial statements.

 

  

AIKIDO
PHARMA INC.

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

 

Note
4. License agreement with Silo Pharma Inc.

 

Effective
January 5, 2021, the Company entered into an exclusive patent license agreement (the “License Agreement”) with Silo Pharma
Inc., a Delaware corporation and Silo Pharma Inc., a Florida corporation, and their affiliates/subsidiaries (collectively, “Silo
Pharma”). On April 12, 2021, the Company entered into an amendment to the License Agreement (“Amendment”). The Amendment
amended a portion of the license fees included in the original License Agreement and converted 500 shares of the Company’s Series
M Convertible Preferred Stock into an aggregate of 625,000 restricted shares of the Company’s common stock, par value $0.001 per
share, effective as of January 5, 2021.

 

As
consideration for the license of the Licensed Patents, the Company issued and delivered to Silo Pharma 625,000 shares of the Company’s
restricted stock. The Company paid a one-time nonrefundable cash payment of $0.5 million to Silo Pharma. The Company shall also pay Silo
Pharma a running royalty equal 2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of “net sales” (as such term is defined in the License Agreement).

 

Note
5. Investments in Marketable Securities

 

The
realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three months ended March
31, 2021 and 2020, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of
operations, are as follows ($ in thousands):

 

    For the Three Months
Ended March 31,
 
    2021     2020  
Realized gain (loss)   $ 424     $ (44 )
Unrealized loss     (2,049 )     (835 )
Dividend income     286       13  
Interest income           4  
    $ (1,339 )   $ (863 )

 

Note
6. Investment in Hoth Therapeutics, Inc.

 

The
following summarizes the Company investment in Hoth as of March 31, 2021:

 

Security Name   Shares Owned as of
March 31,
2021
    Fair value per Share as of
March 31,
2021
    Fair value as of  March 31,
2021
(in thousands)
 
HOTH     1,166,415     $ 1.97     $ 2,298  

  

Note
7. Fair Value of Financial Assets and Liabilities

 

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

 

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

 

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

 

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

 

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

 

 

AIKIDO
PHARMA INC.

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

 

The
following table presents the Company’s assets and liabilities that are measured at fair value at March 31, 2021 and December 31,
2020 ($ in thousands): 

 

    Fair value measured at March 31, 2021  
    Total at March 31,     Quoted prices in active markets     Significant other observable inputs     Significant unobservable inputs  
    2021     (Level 1)     (Level 2)     (Level 3)  
Assets                        
Marketable securities   $ 92,426     $ 92,426     $         –     $  
Short-term investment   $ 2,298     $ 2,298     $     $  
Convertible note receivable   $ 2,027     $     $     $ 2,027  

  

    Fair value measured at December 31, 2020  
    Total at December 31,     Quoted prices in active markets     Significant other observable inputs     Significant unobservable inputs  
    2020     (Level 1)     (Level 2)     (Level 3)  
Assets                        
Marketable securities   $ 24,801     $ 24,801     $         –     $         –  
Investments   $ 2,764     $ 2,764     $     $  

 

Level
3 Valuation Techniques

 

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

 

    Fair Value of Level 3 investment  
    March 31,
2021
    December 31,
2020
 
Beginning balance   $     $     –  
Purchase of convertible note     2,000        
Accrued interest receivable     27        
Ending balance   $ 2,027     $  

 

Convergent
Investment
  

 

On
January 29, 2021, the Company purchased an 8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} convertible promissory note (“Convertible Note”) issued by Convergent Therapeutics,
Inc. (“Convergent”) with a principal amount of $2 million pursuant to a Note Purchase Agreement with Convergent. The Company
paid a purchase price for the Convertible Note of $2 million. The Company will receive interest on the Convertible Note at the rate of
8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum payable upon conversion or maturity of the Convertible Note. The Convertible Note shall mature on January 29, 2023.

 

The
Company has elected to measure the purchase of the Convertible Note from Convergent using the fair value option at each reporting
date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses
on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the condensed
consolidated statements of operations.

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Convertible Note is disclosed as
a noncurrent Convertible Note investment in the condensed consolidated balance sheets. As of March 31, 2021, the fair value of the Convertible
Note was measured at $2.0 million, taking into consideration cost of the investment, market participant inputs, market conditions,
liquidity, operating results and other qualitative and quantitative factors. The value at which the Company’s Convertible Note is
carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market
conditions and those characteristics specific to the underlying investments. No change in fair value was recorded during the three months
ended March 31, 2021.

 

Interest accrues on the unpaid principal balance
on a quarterly basis and is recognized in interest income in the condensed consolidated statements of operations. The Company recorded
an interest income receivable of approximately $27,000 on the Convertible Note as of March 31, 2021.

 

Note 8. Net Loss per Share

 

Securities that could potentially dilute loss
per share in the future that were not included in the computation of diluted loss per share at March 31, 2021 and 2020 are as follows:

 

    As of March 31,  
    2021     2020  
Convertible preferred stock     688       688  
Warrants to purchase common stock     5,801,701       796,811  
Options to purchase common stock     484,304       88,950  
Total     6,286,693       886,449  

 

Note 9. Stockholders’ Equity and Convertible
Preferred Stock

 

Public Offering

 

On February 19, 2021, the Company consummated
the public offering pursuant to an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright
& Co., LLC, as representative to the underwriters named therein (the “Underwriter”), pursuant to which the Company agreed
to issue and sell to the Underwriter in an underwritten public offering (the “Offering”) an aggregate of 46,875,000 shares
(the “Shares”) of common stock, $0.0001 par value per share, of the Company (the “Common Stock”). The Company
received gross proceeds of approximately $75 million before deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. On February 23, 2021, the Underwriter partially exercised its over-allotment option and purchased an additional
7,030,927 Shares, resulting in aggregate proceeds of approximately $86.2 million, before deducting underwriting discounts and commissions
and other expenses. The total net proceeds received from these two offerings were approximately $78.0 million.

 

In connection with the Offering, the Company issued
the Underwriter warrants (the “Underwriter’s Warrants”) to purchase up to 4,312,473 shares of Common Stock, or 8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of
the Shares sold in the Offering. The Underwriter’s Warrants will be exercisable for a period of five years from February 19, 2021
at an exercise price of $2.00 per share, subject to adjustment.

 

Warrants

 

A summary of warrant activity for the three months
ended March 31, 2021 is presented below:

 

    Warrants     Weighted Average Exercise Price     Total Intrinsic Value     Weighted Average Remaining Contractual Life
(in years)
Outstanding as of December 31, 2020     1,723,020     $ 3.07       57,333     1.11
Issued     4,312,473       2.00           4.89
Exercised     (80,000 )     1.05          
Expired     (87,123 )     34.72          
Forfeited     (3 )     16.15          
Outstanding as of March 31, 2021     5,868,367     $ 1.84       93,509     4.62

 

 

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Stock Options

 

A summary of stock option activity for the three
months ended March 31, 2021 is presented below:

 

    Number of Shares     Weighted Average Exercise Price     Total Intrinsic Value     Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2020     384,304     $ 40.15     $ 69,000     8.9
Employee options granted     100,000       1.24           9.8
Outstanding as of March 31, 2021     484,304     $ 32.12     $ 150,000     8.9
Options vested and exercisable     284,304     $ 54.15     $ 75,000     8.3

 

Stock-based compensation associated with the amortization
of stock option expense was approximately $0.1 million and $0 for the three months ended March 31, 2021 and 2020, respectively. All stock
compensation was recorded as a component of general and administrative expenses.

 

Estimated future stock-based compensation expense
relating to unvested stock options is approximately $70,000 and will be recorded through July 2021.

 

Restricted Stock Awards

  

Pursuant to the patent license agreement effective
January 5, 2021 with Silo Parma Inc., the Company issued and delivered to Silo Pharma 625,000 shares of the Company’s restricted
stock as consideration for the license of the licensed patents. This restricted stock award vested immediately. The Company recorded approximately
$0.5 million in research and development expense related with license acquired during the three months ended March 31, 2021 related to
this arrangement.

 

Note 10. Commitments and Contingencies

 

Legal Proceedings

 

In the past, in the ordinary course of business,
the Company actively pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of our technology.
Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against
us.

 

Risks and Uncertainties – COVID-19

 

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

 

Note 11. Subsequent Events

 

The Company evaluated events that have occurred
after the balance sheet date through the date the financial statements were issued. Based upon the evaluation and transactions, the Company
did not identify any other subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

 

 

Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

 

Forward-Looking Statements

 

You should read this discussion together with
the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion
contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could
cause our actual results to differ materially from those anticipated in these forward-looking statements. All references to “we,”
“us,” “our” and the “Company” refer to Aikido Pharma Inc., a Delaware corporation and its consolidated
subsidiaries unless the context requires otherwise.

 

Overview

 

AIkido Pharma Inc. was initially formed in 1967.
Since 2017, the Company has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics
in development. The Company’s pipeline consists of patented technology from leading universities and researchers. We are currently
in the process of developing our innovative therapeutic drug pipeline through strong partnerships with world renowned educational institutions,
including the University of Texas at Austin, the University of Maryland, Baltimore and Wake Forest University. Our oncology therapeutics
include treatments for pancreatic cancer, acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL). The Company is also developing
a broad-spectrum antiviral platform, in which the lead compounds have activity against multiple viruses including Influenza virus, Ebolavirus
and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

 

As a result of the Company’s biotechnology
research and development and associated investments and acquisitions, our business portfolio now focuses on the treatment of three different
cancers and multiple types of viral infections. Our pancreatic drug candidate, DHA-dFdC, developed at and licensed from the University
of Texas at Austin, is a new compound that we hope will become the next generation of chemotherapy treatment for advanced pancreatic cancer.
DHA-dFdC overcomes tumor cell resistance to current chemotherapeutic drugs and is well tolerated in preclinical toxicity tests. Preclinical
studies have also indicated that DHA-dFdC inhibits pancreatic cancer cell growth (up to 100,000-fold more potent that gemcitabine, a current
standard therapy), targets pancreatic tumors and has demonstrated activities against other cancers, including leukemia, lung and melanoma.
Our AML and ALL compound, developed at the Wake Forest University, is a targeted therapeutic designed to overcome multiple resistance
mechanisms observed with the current standard of care.

 

Our broad-spectrum antiviral platform was developed
at the University of Maryland Baltimore (“UMB”), which granted the Company an exclusive worldwide Master License Agreement
(MLA”) to technology covered by three separate patent applications. The licensed technology comprises broadly acting pan-viral inhibitory
compounds targeting multiple viral pathogens. The technology was invented by UMB scientists Drs. Matthew Frieman, Alexander MacKerell
and Stuart Watson. The Company has also executed a Sponsored Research Agreement with UMB to support the development of the technology
under the direction of these inventors at UMB.

 

In addition, we are constantly seeking to grow
our pipeline of treatments in oncology indications. For example, in January 2021, the Company invested in Convergent Therapeutics, Inc.,
which has exclusive rights to technology related to next-generation dual-action peptide receptor radionuclide therapy (“PRRT”)
for prostate cancer covered by multiple issued U.S. and foreign patents. Convergent is currently conducting advanced human trials relating
to prostate cancer treatments utilizing PRRT that targets the prostate-specific membrane antigen (“PSMA”) present on prostate
cancer cells. The technology was developed under the direction of Dr. Neil Bander, Professor of Urologic Oncology at Weill Cornell Medicine.
In addition, the Company was granted a license to four patent applications for the use of psilocybin in cancer indications.

 

Additionally, on January 6, 2021 the Company announced
that it entered into an exclusive patent license agreement with Silo Pharma Inc. (“Silo Pharma”) pursuant to which Silo Pharma
granted the Company a worldwide exclusive, sublicensable, royalty-bearing license to certain Silo Pharma owned provisional patent applications
directed to the use of psilocybin in cancer treatment, and any patents issuing therefrom, including all continuations, continuations-in-part,
divisions, extensions, substitutions, reissues, re-examinations, and any applications and all patents issuing from any applications and
patents that claim domestic benefit or foreign priority to the provisional patent applications. The license is for “Field of Use”
(as defined in the exclusive patent license agreement) of “treatment of cancer and symptoms caused by cancer, including but not
limited to pain, nausea, neuroinflammation, brain and neural dysfunction, depression, seizures, confusion, dizziness, numbness/tingling,
dysfunction of the senses and all other symptoms that are caused by cancer of any type.”

 

 

Critical Accounting Policies

 

Our critical accounting policies are disclosed
in our annual report on Form 10K for the year ended December 31, 2020 and there have been no material changes to such policy or estimates
during the three months ended March 31, 2021.

 

Recently Issued Accounting Pronouncements

 

See Note 3 to the condensed consolidated financial
statements for a discussion of recent accounting standards.

 

Results of Operations

 

Three months ended March 31, 2021 compared
to three months ended March 31, 2020

 

During the three months ended March 31, 2021,
we incurred a loss from operations of approximately $2.3 million, as compared to $2.4 million during the comparable prior year period.
The decrease in loss was primarily attributed to $13,000 decrease in research and development expense and $ $92,000 decrease in general
and administrative expenses, partially offset by $23,000 increase in research and development expense related with license acquisition.

 

During the three months ended March 31, 2021,
other expense was approximately $1.7 million as compared to approximately $5.9 million during the comparable prior year period. The net
loss per share went down from a decrease in net operating losses and a significant increase in the number of shares outstanding. The decrease
in other expense was primarily attributed to a $4.6 million lower loss in the change in fair value of investment in Hoth, and partially
offset by $0.5 million increase in losses on marketable securities.

 

The Company experienced very little or no revenue
in the last two years and we don’t expect any revenue until a biotechnology product is fully developed which may not occur for many
years.

 

Liquidity and Capital Resources

 

We continue to incur ongoing administrative and
other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. We do not expect to incur
revenue until any of our biotechnology products are fully developed. While we continue to implement our business strategy, we intend to
finance our activities through managing current cash on hand from our past equity offerings.

 

During the first quarter of 2021, the Company
consummated a public offering of 53,905,927 shares of common stock (including the underwriter overallotment). The Company received net
proceeds of approximately $78.0 million after deducting underwriting discounts and commissions and estimated offering expenses payable
by the Company. Therefore, the Company has adequate cash to fund its operations for at least the next twelve months.

 

Moving forward, the Company intends to manage
its cash through an investment committee focused on asset preservation and reasonable risk allocation. Further, the Company intends to
grow its drug platform through additional licensing efforts that are similar to those the Company has already entered into and disclosed.
In addition, the Company is seeking partnerships with academic institutions and private enterprise to find, fund and advance new drug
compounds that can be brought to commercialization.

 

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

 

 

Cash Flows from Operating Activities –
For the three months ended March 31, 2021 and 2020, net cash used in operations was approximately $1.1 million and $1.4 million, respectively.
The cash used in operating activities for the three months ended March 31, 2021 primarily resulted from a net loss of $4.0 million, and
partially offset by $2.0 million unrealized loss on marketable securities and $1.0 million research and development expense related with
license acquired. The cash used in operating activities for the three months ended March 31, 2020 primarily resulted from a net loss of
$8.3 million, and partially offset by reduction in fair value of investment of $5.1 million and $1.0 million research and development
expense related with license acquired.

 

Cash Flows from Investing Activities
For the three months ended March 31, 2021 and 2020, net cash used in investing activities was approximately $71.8 million and $17.2 million,
respectively. The cash used in investing activities for the three months ended March 31, 2021 primarily resulted from our purchase of
marketable securities of $83.6 million and purchase of convertible note of $2.0 million, partially offset by our sale of marketable securities
of $14.3 million since we invest excess cash into marketable securities until additional cash is needed. The cash used in investing activities
for the three months ended March 31, 2020 primarily resulted from our purchase of marketable securities of $20.4 million and research
and development expense related with license acquired of $1.0 million, partially offset by our purchase of marketable securities of $4.2
million since we invest excess cash into marketable securities.

 

Cash Flows from Financing Activities – Cash
provided by financing activities for the three months ended March 31, 2021 was $78.1 million, which reflects the net proceeds of $78.0
million from investors in exchange of issuance of common stock and warrants and net proceeds of $84,000 from the exercise of common warrants.
Cash provided by financing activities for the three months ended March 31, 2020 was $18.8 million, which reflects the net proceeds of
$6.5 from investors in exchange of issuance of common stock, common warrants and prefunded warrants, net proceeds of $5.1 from investors
in exchange of issuance of common stock, and net proceeds of $7.1 million from the exercise of common warrants and prefunded warrants.

 

Off-balance sheet arrangements.

 

None.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,”
as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms,
and that such information is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions
regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure
controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily
was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 

The design of any disclosure controls and procedures
also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.

 

With respect to the quarter ended March 31, 2021,
under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and
operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer has concluded that our disclosure
controls and procedures were not effective as of March 31, 2021 due to the material weaknesses in our internal controls over financial
reporting. We have a lack of segregation of duties, and a lack of controls in place to ensure that all material transactions and developments
impacting the financial statements are reflected.

 

Changes in Internal Control over Financial
Reporting:

 

There were no changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter
ended March 31, 2021 which have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

 

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

In the past, in the ordinary course of business,
we actively pursued legal remedies to enforce our intellectual property rights and to stop unauthorized use of our technology. Other than
ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us.

 

Item 1A. Risk Factors

 

There have been no material changes in our risk
factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in our Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2021.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 6. Exhibits

 

 

 

Signatures

 

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

 

  Aikido Pharma Inc.
  (Registrant)
     
Date: May 10, 2021 By: /s/ Anthony Hayes
    Anthony Hayes
    Chief Executive Officer
    (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)

 

15

Exhibit 31.1

 

Certification of Principal Executive and Financial
Officer

Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002

 

I, Anthony Hayes, certify that:

 

1. I have reviewed this report on Form 10-Q
of AIkido Pharma Inc.;

 

2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

 

  (a) Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in
the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  /s/ Anthony Hayes
  Anthony Hayes
  Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
   
  May 10, 2021

Exhibit 32.1

 

Certification of Principal Executive and Financial
Officer

Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002

 

I, Anthony Hayes, Chief Executive Officer of
AIkido Pharma Inc. (the “Company”), in compliance with Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that,
to the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021 (the “Report”)
filed with the Securities and Exchange Commission:

 

  Fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

 

  The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Anthony Hayes
  Anthony Hayes
  Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
   
  May 10, 2021

 

A signed copy of this written statement required
by Section 906 has been provided to AIkido Pharma Inc. and will be retained by AIkido Pharma Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.

 

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