UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2022

☐ 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, 11^th 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 November 9, 2022, there were 5,485,096 shares of the Company’s common stock issued and outstanding.

AIKIDO PHARMA INC.

Form 10-Q

For the Quarter Ended September 30, 2022

Index

		Page No.

Part I. Financial Information

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)	2

	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)	6

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II. Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

Signatures		33

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AIKIDO PHARMA INC.

Condensed Consolidated Balance Sheets

($ in thousands except share and per share amounts)

	September 30,			December 31,
	2022			2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	34,496		$	65,562
Marketable securities		8,032			11,427
Prepaid expenses and other assets		693			442
Short-term investments at fair value		33			2,273
Notes receivable at fair value		8,645			6,984
Deposits		4,193			4,201
Total current assets		56,092			90,889

Convertible note receivable at fair value		-			2,147
Notes receivable at fair value		1,100			-
Investments		26,089			9,465
Right-of-use assets		708
Security deposit		458			155
Total assets	$	84,447		$	102,656

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	518		$	381
Accrued salaries and benefits		1,339			680
Lease liability - current		42			-
Total current liabilities		1,899			1,061

Lease liability		701			-
Total liabilities		2,600			1,061

Stockholders’ equity
Preferred stock, $.0001 par value, 50,000,000 Authorized
Series D: 5,000,000 shares designated; 3,825 shares issued and outstanding at September 30, 2022 and December 31, 2021; liquidation value of $0.0001 per share		-			-
Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at September 30, 2022 and December 31, 2021; liquidation value of $0.0001 per share		-			-
Common stock, $0.0001 par value, 100,000,000 shares authorized; 5,485,096 and 5,275,329 shares issued at September 30, 2022 and December 31, 2021, respectively; 5,140,114 and 5,275,329 shares outstanding at September 30, 2022 and December 31, 2021, respectively		-			-
Additional paid-in capital		262,973			265,633
Treasury stock, at cost, 344,982 and 0 shares at September 30, 2022 and December 31, 2021, respectively		(2,501	)		(264	)
Accumulated deficit		(178,625	)		(163,774	)
Total stockholders’ equity		81,847			101,595
Total liabilities and stockholders’ equity	$	84,447		$	102,656

See accompanying notes to unaudited condensed consolidated financial statements.

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Operations

($ in thousands except share and per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating costs and expenses
General and administrative	$	4,515		$	1,676		$	8,564		$	5,231
Research and development		61			100			2,113			497
Research and development - license acquired		525			3			525			1,128
Total operating expenses		5,101			1,779			11,202			6,856
Loss from operations		(5,101	)		(1,779	)		(11,202	)		(6,856	)

Other (expenses) income
Other income		-			-			64			135
Interest income		187			40			586			107
Loss on marketable securities		(1,654	)		(3,033	)		(4,390	)		(2,574	)
Change in fair value of investments		329			4,725			91			3,827
Total other (expenses) income		(1,138	)		1,732			(3,649	)		1,495
Net loss	$	(6,239	)	$	(47	)	$	(14,851	)	$	(5,361	)
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock		-			-			(4,109	)		-
Net Loss Attributable to Common Shareholders	$	(6,239	)	$	(47	)	$	(18,960	)	$	(5,361	)

Net loss per share, basic and diluted
Basic and Diluted	$	(1.17	)	$	(0.01	)	$	(3.59	)	$	(1.14	)

Weighted average number of shares outstanding, basic and diluted
Basic and Diluted		5,344,989			5,272,446			5,283,182			4,702,556

See accompanying notes to unaudited condensed consolidated financial statements.

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Three Months Ended September 30, 2022

	Redeemable Convertible Preferred Stock																Additional										Total
	Series O				Series P				Common Stock				Preferred Stock				Paid-in		Treasury Stock					Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance at June 30, 2022		-	$	-		-	$	-		5,246,852	$	-		4,659	$	-	$	261,603		242,902	$	(1,750	)	$	(172,386	)	$	87,467
Purchase of treasury stock		-		-		-		-		-		-		-		-		-		102,080		(751	)					(751	)
Stock-based compensation		-		-		-		-		238,244		-		-		-		1,370		-		-			-			1,370
Net loss		-		-		-		-		-		-		-		-		-		-		-			(6,239	)		(6,239	)
Balance at September 30, 2022		-	$	-		-	$	-		5,485,096	$	-		4,659	$	-	$	262,973		344,982	$	(2,501	)	$	(178,625	)	$	81,847

For the Three Months Ended September 30, 2021

	Common Stock				Preferred Stock				Additional Paid-in		Treasury Stock					Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance at June 30, 2021		5,266,500	$	-		5,559	$	-	$	265,264		-	$	(264	)	$	(161,917	)	$	103,083
Stock-based compensation		8,823		-		-		-		139		-		-			-			139
Net loss		-		-		-		-		-		-		-			(47	)		(47	)
Balance at September 30, 2021		5,275,323	$	-		5,559	$	-	$	265,403		-	$	(264	)	$	(161,964	)	$	103,175

See accompanying notes to unaudited condensed consolidated financial statements.

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Nine Months Ended September 30, 2022

	Redeemable Convertible Preferred Stock																					Additional											Total
	Series O						Series P						Common Stock					Preferred Stock				Paid-in			Treasury Stock					Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount		Shares		Amount		Capital			Shares		Amount			Deficit			Equity
Balance at December 31, 2021		-		$	-			-		$	-			5,275,329		$	-		4,659	$	-	$	265,633			-	$	(264	)	$	(163,774	)	$	101,595
Issuance of Series O redeemable convertible preferred stock for cash		11,000			11,000									-			-		-		-		-			-		-			-			-
Issuance of Series P redeemable convertible preferred stock for cash								11,000			11,000			-			-		-		-		-			-		-			-			-
Cost on issuance of Series O and Series P Redeemable Convertible Preferred Stock		-			(1,504	)		-			(1,505	)		-			-		-		-		-			-		-			-			-
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock		-			1,504			-			1,505			-			-		-		-		(4,109	)		-		-			-			(4,109	)
Redemption of Series O Redeemable Convertible Preferred Stock		(11,000	)		(11,000	)		-			-			-			-		-		-		-			-		-			-			-
Redemption of Series P Redeemable Convertible Preferred Stock		-			-			(11,000	)		(11,000	)		-			-		-		-		-			-		-			-			-
Purchase of treasury stock		-			-			-			-			-			-		-		-		-			344,982		(2,237	)		-			(2,237	)
Stock-based compensation		-			-			-			-			238,244			-		-		-		1,475			-		-			-			1,475
Cancellation of common stock related to investment in CBM		-			-			-			-			(22,812	)		-		-		-		-			-		-			-			-
Fractional shares adjusted for reverse split		-			-			-			-			(5,665	)		-		-		-		(26	)		-		-			-			(26	)
Net loss		-			-			-			-			-			-		-		-		-			-		-			(14,851	)		(14,851	)
Balance at September 30, 2022		-		$	-			-		$	-			5,485,096		$	-		4,659	$	-	$	262,973			344,982	$	(2,501	)	$	(178,625	)	$	81,847

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Nine Months Ended September 30, 2021

	Common Stock				Preferred Stock				Additional Paid-in		Treasury Stock					Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance at December 31, 2020		2,054,096	$	-		5,559	$	-	$	186,485		-	$	(264	)	$	(156,603	)	$	29,618
Issuance of common stock and warrants (net of offering costs of $8,260)		3,170,935		-		-		-		77,989		-		-			-			77,989
Exercise of warrants		4,705		-		-		-		84		-		-			-			84
Issuance of common stock for research and development license acquired		36,764		-		-		-		531		-		-			-			531
Stock-based compensation		8,823		-		-		-		314		-		-			-			314
Net loss		-		-		-		-		-		-		-			(5,361	)		(5,361	)
Balance at September 30, 2021		5,275,323	$	-		5,559	$	-	$	265,403		-	$	(264	)	$	(161,964	)	$	103,175

See accompanying notes to unaudited condensed consolidated financial statements.

AIKIDO PHARMA INC.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(14,851	)	$	(5,361	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of right-of-use assets		23
Change in fair value of short-term investment		1,517			(3,827	)
Change in fair value of long-term investment		(1,608	)		-
Research and development-acquired license, expensed		525			1,128
Stock-based compensation		1,475			314
Realized loss (gain) on marketable securities		712			(501	)
Unrealized loss on marketable securities		3,889			4,296
Realized gain on sale of digital currencies		-			-
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(344	)		(429	)
Accounts payable and accrued expenses		137			5
Accrued salaries and benefits		659			(73	)
Lease liabilities		12
Interest receivable on convertible note		(586	)		(107	)
Deposits		(295	)		-
Net cash used in operating activities		(8,735	)		(4,555	)

Cash flows from investing activities
Purchase of marketable securities		(27,479	)		(90,541	)
Sale of marketable securities		28,503			30,439
Proceeds from sale of digital currencies		93			-
Proceeds from sale of DatChat common shares		-			900
Proceeds from promissory note receivable interest received		65			-
Funds to deposit accounts, net		-			(4,420	)
Purchase of short-term and long-term investments		(15,016	)		(4,066	)
Purchase of research and development licenses		(525	)		(597	)
Purchase of short-term and long-term promissory notes		(1,600	)		-
Purchase of convertible note		-			(2,000	)
Net cash used in investing activities		(15,959	)		(70,285	)

Cash flows from financing activities
Proceeds from issuance of common stock and warrants, net of offering cost		-			77,989
Proceeds from issuance of Series O and Series P Redeemable Convertible Preferred Stock, net of discount and offering cost		17,891			-
Proceeds from exercise of warrants		-			84
Payment for fractional shares		(26	)		-
Redemption of Series O and Series P Redeemable Convertible Preferred Stock		(22,000	)		-
Purchase of treasury stock		(2,237	)		-
Net cash (used in) provided by financing activities		(6,372	)		78,073

Net (decrease) increase in cash and cash equivalents and restricted cash		(31,066	)		3,233
Cash and cash equivalents, beginning of period		65,562			2,715

Cash and cash equivalents, end of period	$	34,496		$	5,948

Non-cash investing and financing activities
Transfer from short-term investment to marketable securities	$	1,497		$	-
Reclassify from convertible note receivable to notes receivable at fair value	$	2,147		$	-
Promissory convertible note receivable conversion into common shares	$	899		$	-
Unpaid investment	$	-		$	1,000

See accompanying notes to unaudited 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”), 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. Over the past year, in an effort to enhance shareholder value, the Company has shifted its primary focus away from biotechnology to a new line of business in the fintech and financial services industries. In furtherance of this new focus, in June of this year the Company formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”), with the purpose of making strategic acquisitions across the fintech and financial services industries. Additionally, AIkido Labs, LLC (“Aikido Labs”), another wholly owned subsidiary of the Company, has and will continue to explore other opportunities in high growth industries. To date, Aikido Labs has acquired equity positions in Anduril Industries, Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva Motors Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass. Please see Notes 6, 7 and 8 below for a further discussion of the Company’s investments. Finally, the Company will continue to foster and develop its historical pipeline of biotechnology assets consisting of patented technology from leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia and acute lymphoblastic leukemia. 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.

On September 9, 2022, Dominari entered into a membership interest purchase agreement (the “FPS Purchase Agreement”) with Fieldpoint Private Bank & Trust (“Seller”), a Connecticut bank, for the purchase of its wholly owned subsidiary, Fieldpoint Private Securities, LLC, a Connecticut limited liability company (“FPS”) and broker-dealer registered with the Financial Industry Regulatory Authority (“FINRA”). Pursuant to the terms of the FPS Purchase Agreement, Dominari will purchase from the Seller 100% of the membership interests in of FPS (the “Membership Interests”) and, as a result thereof, will, thereafter, operate FPS’s registered broker-dealer business as a wholly owned subsidiary of the Company. The FPS Purchase Agreement provides for Dominari’s acquisition of FPS’s Membership Interests in two closings, the first of which occurred on October 4, 2022 (the “Initial Closing”), at which Dominari paid to the Seller $2,000,000 in consideration for a transfer by the Seller to Dominari of 20% of the Membership Interests. Following the Initial Closing, FPS filed a continuing membership application requesting approval for a change of ownership, control, or business operations with FINRA in accordance with FINRA Rule 1017 (the “Rule 1017 Application”). Upon FINRA’s approval of the Rule 1017 Application, the second closing will occur (the “Second Closing”), at which Dominari will pay to the Seller an additional $1.00 in consideration for a transfer by the Seller to Dominari of the remaining 80% of the Membership Interests. The Second Closing is subject to FINRA’s final approval under FINRA Rule 1017 as well as other customary closing conditions, including the accuracy of the representations and warranties of the applicable parties under the FPS Purchase Agreement and compliance therewith. Additionally, on October 17, 2022, the Company entered into an Amended and Restated Services Agreement with Kyle Wool, pursuant to which he has agreed to serve as Dominari’s Chief Executive Officer, upon the termination of his existing relationship with another registered broker-dealer and lead the Company’s transition to a fintech and financial services company.

Reverse Stock Split

On June 7, 2022, the Company effected a seventeen-for-one (17-for-1) reverse stock split of its class of common stock (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on June 2, 2022. The Reverse Stock Split was effective on June 7, 2022. All references to common stock, convertible preferred stock, warrants to purchase common stock, options to purchase common stock, restricted stock units, restricted stock awards, share data, per share data and related information contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $26 thousand.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 equity offerings.

Based upon projected cash flow requirements, the Company has adequate cash to fund its operations for at least the next twelve months from the date of the issuance of these unaudited consolidated financial statements.

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, AIkido Labs and Dominari. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of September 30, 2022, condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022.

Use of Estimates

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

Significant Accounting Policies

Aside from the policies described below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s annual report on Form 10-K, which was filed with the SEC on March 28, 2022.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Leases

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. See Note 12 – Commitment and Contingencies.

Treasury Stock

Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if currently adopted, would have an effect on the Company’s unaudited condensed consolidated financial statements.

Note 4. Investments in Marketable Securities

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended September 30, 2022 and 2021, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of operations, are as follows ($ in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Realized (loss) gain	$	(144	)	$	(583	)	$	(712	)	$	501
Unrealized loss		(1,589	)		(2,901	)		(3,889	)		(4,296	)
Dividend income		79			451			211			1,221
Total	$	(1,654	)	$	(3,033	)	$	(4,390	)	$	(2,574	)

Note 5. Short-term investments

The following table presents the Company’s short-term investments at September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022		December 31, 2021
Investment in Hoth Therapeutics, Inc.		-		770
Investment in DatChat, Inc.		-		1,084
Investment in Vicinity Motor Corp.		33		419
Total		33		2,273

The change in the fair value of the short-term investments for the nine months ended September 30, 2022 is summarized as follows: ($ in thousands):

Beginning balance	$	2,273
Transfer to marketable securities		(1,497	)
Change in fair value of investment		(1,517	)
Realized gain recognized through sale of marketable securities		774
Ending balance	$	33

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Hoth Therapeutics, Inc.

On March 11, 2022, 1,130,701 shares of Hoth common stock were transferred to the marketable securities account and were sold for net proceeds of approximately $0.9 million.

On August 17, 2022, 35,714 shares of Hoth common stock were transferred to marketable securities account.

The following summarizes the Company investment in Hoth as of September 30, 2022 and December 31, 2021:

Security Name

Shares
Owned as of
September 30,
2022

Fair value
per Share
as of
September 30,
2022

Fair value as of
September 30,
2022
(in thousands)

HOTH

Security Name		Shares Owned as of December 31, 2021				Fair value per Share as of December 31, 2021				Fair value as of December 31, 2021 (in thousands)
HOTH			1,166,415			$	0.66			$	770

Investment in DatChat, Inc.

On February 14, 2022, 357,916 shares (valued at $2.21 per share) of DatChat common stock were transferred to the marketable securities account and were sold for net proceeds of approximately $0.8 million.

Investment in Vicinity Motor Corp.

On October 25, 2021, the Company entered into a warrant agreement with Vicinity Motor Corp. (“Vicinity”) that entitles the Company to purchase up to 246,399 shares of Vicinity common stock at $5.10 per share. The warrant expires on October 25, 2024. The fair value was determined using a Black-Scholes simulation. The Company recorded the fair value of the Vicinity warrant of approximately $33,000 and $0.4 million in the consolidated balance sheet as of September 30, 2022 and December 31, 2021, respectively, reflecting the benefit received as part of its purchase of Vicinity common shares through its brokerage account. The initial investment in Vicinity was measured at approximately $0.6 million. Gains or losses associated with changes in the fair value of investments in Vicinity warrants are recognized as Change in fair value of investment on the consolidated statements of operations. During the nine months ended September 30, 2022, the Company recorded approximately $0.4 million of change in fair value of investment for this investment.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

	September 30, 2022			December 31, 2021
Option term (in years)		2.1	%		2.8
Volatility		88.25	%		95.52	%
Risk-free interest rate		4.22	%		0.97	%
Expected dividends		0.00	%		0.00	%
Stock price	$	1.01		$	3.50

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6. Long-Term Investments

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.

For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.

The following table presents the Company’s other investments at September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022		December 31, 2021
Investment in Kerna Health Inc	$	4,940	$	3,800
Investment in Kaya Now		2,540		1,665
Investment in Tevva Motors		3,364		2,000
Investment in ASP Isotopes		1,300		1,000
Investment in AerocarveUS Corporation		1,000		1,000
Investment in Qxpress		1,000		-
Investment in Masterclass		170		-
Investment in Kraken		597		-
Investment in Epic Games		3,500		-
Investment in Tesspay		1,250		-
Investment in SpaceX		3,500		-
Investment in Databricks		1,200		-
Investment in Discord		476		-
Investment in Thrasio		300		-
Investment in Automation Anywhere		476		-
Investment in Anduril		476		-
Total	$	26,089	$	9,465

The change in the value of the long-term investments for the nine months ended September 30, 2022 is summarized as follows: ($ in thousands):

Beginning balance	$	9,465
Purchase of investments		15,016
Change in fair value of long-term investments		1,608
Ending balance	$	26,089

Investment in Kerna Health Inc

In May 2022, the Company purchased additional 400,000 shares of common stock of Kerna Health Inc, (“Kerna”) for approximately $1.1 million. The investment in Kerna was valued at $4.9 million as of September 30, 2022.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Kaya Now Inc (aka Kaya Holding Corp)

On March 2, 2022, the Company purchased additional 3,375,000 shares of common stock of Kaya Now Inc., aka Kaya Holding Corp., (“Kaya”) for approximately $0.6 million.

On July 21, 2022, in consideration for extending the maturity date of the Kaya Now Promissory Note (See Note 7 – Notes Receivable) to February 1, 2023, Kaya agreed to issue to the Company 1,000,000 shares at $0.2 per share of common stock.

The Company recorded approximate $0.2 million in unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Kaya was valued at approximately $2.5 million as of September 30, 2022.

Investment in Tevva Motors

Tevva Motors (“Tevva”), a private company, raised capital during the first quarter of 2022, increasing its share price value to $58.0 per share. Therefore, the Company recorded a $1.4 million unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Tevva was valued at approximately $3.4 million as of September 30, 2022.

Investment in ASP Isotopes

In August 2022, the Company purchased additional 100,000 shares of common stock of ASP Isotopes Inc. (“ASP”) for $0.3 million. The investment in ASP was valued at $1.3 million as of September 30, 2022.

Investment in AerocarveUS Corporation

The investment in AerocarveUS Corporation was valued at $1.0 million as of September 30, 2022.

Investment in Qxpress

On January 27, 2022, the Company entered into a securities purchase agreement (the “Qxpress Securities Purchase Agreement”) with Qxpress. Under the Qxpress Securities Purchase Agreement, the Company agreed to purchase 46,780 shares of common stock of Qxpress for $1.0 million. The investment in Qxpress was valued at $1.0 million as of September 30, 2022.

Investment in Masterclass

In March of 2022, the Company entered into a securities purchase agreement (the “Masterclass Securities Purchase Agreement”) with Masterclass. Under the Masterclass Securities Purchase Agreement, the Company agreed to purchase 4,841 shares of common stock of Masterclass for approximately $0.2 million. The investment in Masterclass was valued at approximately $0.2 million as of September 30, 2022.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Kraken

In March of 2022, the Company entered into a securities purchase agreement (the “Kraken Securities Purchase Agreement”) with Kraken. Under the Kraken Securities Purchase Agreement, the Company agreed to purchase a total of 8,409 shares of common stock of Kraken for approximately $0.5 million. In August 2022, the Company entered into a common stock transfer agreement with a private seller to purchase 3,723 shares of Kraken for approximately $0.1 million. The investment in Kraken was valued at approximately $0.6 million as of September 30, 2022.

Investment in Epic Games

On March 22, 2022, the Company entered into a securities purchase agreement (the “Epic Games Securities Purchase Agreement”) with Epic Games. Under the Epic Games Securities Purchase Agreement, the Company agreed to purchase an aggregate of 901 shares of common stock of Epic Games for a total $1.5 million. In April 2022, the Company invested an additional $2 million for the purchase of additional shares of common stock of Epic Games. The investment in Epic Games was valued at $3.5 million as of September 30, 2022.

Investment in Tesspay

On March 23, 2022, the Company entered into a securities purchase agreement (the “Tesspay Securities Purchase Agreement”) with Tesspay. Under the Tesspay Securities Purchase Agreement, the Company agreed to purchase 1,000,000 shares of common stock of Tesspay for approximately $0.2 million. The Company also invested an additional $1.0 million for pre-IPO. Tesspay, a private company, raised capital during the first quarter of 2022, increasing its share price value to $0.25 per share. Therefore, the Company recorded $10,000 in unrealized gain on this investment during the nine months ended September 30, 2022. The investment in Tesspay was valued at approximately $1.3 million as of September 30, 2022.

Investment in SpaceX

On March 30, 2022, the Company entered into a securities purchase agreement (the “SpaceX Securities Purchase Agreement”) with SpaceX, under which the company agreed to purchase shares of common stock of SpaceX for $1.5 million. In April 2022, the Company invested an additional $2 million for the purchase of additional shares of common stock of SpaceX. The investment in SpaceX was valued at $3.5 million as of September 30, 2022.

Investment in Databricks

On March 25, 2022, the Company entered into a securities purchase agreement (the “Databricks Securities Purchase Agreement”) with Databricks. Under the Databricks Securities Purchase Agreement, the Company agreed to purchase an aggregate of 3,830 shares of common stock of Databricks for a total $1.2 million. The investment in Databricks was valued at $1.2 million as of September 30, 2022.

Investment in Discord, Inc.

In May 2022, the Company entered into a securities purchase agreement (the “Discord Securities Purchase Agreement”) with privately-held company Discord, Inc., a social communications platform provider that is particularly popular with gamers, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Discord Securities Purchase Agreement, the Company agreed to purchase a total of 618 shares of common stock of Discord for approximately $0.5 million. The investment in Discord was valued at $0.5 million as of September 30, 2022.

Investment in Thrasio, LLC

In April 2022, the Company entered into a securities purchase agreement (the “Thrasio Securities Purchase Agreement”) with privately-held company Thrasio, LLC, an aggregator of private brands of top Amazon businesses and direct-to-consumer brands, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Thrasio Securities Purchase Agreement, the Company agreed to purchase a total of 20,000 shares of common stock of Thrasio for $0.3 million. The investment in Thrasio was valued at $0.3 million as of September 30, 2022.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Automation Anywhere, Inc.

In April 2022, the Company entered into a securities purchase agreement (the “Automation Anywhere Securities Purchase Agreement”) with privately-held company Automation Anywhere, Inc., a provider of business automation solutions, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Automation Anywhere Securities Purchase Agreement, the Company agreed to purchase a total of 18,490 shares of common stock of Automation Anywhere for approximately $0.5 million. The investment in Automation Anywhere was valued at $0.5 million as of September 30, 2022.

Investment in Anduril Industries, Inc.

In April 2022, the Company entered into a securities purchase agreement (the “Anduril Securities Purchase Agreement”) with privately-held company Anduril Industries, Inc., a defense products company, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Anduril Securities Purchase Agreement, the Company agreed to purchase a total of 14,880 shares of common stock of Anduril for approximately $0.5 million. The investment in Anduril was valued at $0.5 million as of September 30, 2022.

Note 7. Notes Receivable

The following table presents the Company’s notes receivable at September 30, 2022 ($ in thousands):

	Maturity Date	Stated Interest Rate			Principal Amount		Interest Receivable		Fair Value
Shor-term convertible notes receivable
Convergent Investment	01/29/2023		8	%	$	2,000	$	267	$	2,267
Nano Innovations Inc Investment	12/26/2022		10	%	$	750	$	57	$	807

Short-term notes receivable
Mr. Jeffrey Cooper Investment	03/11/2023		8	%	$	2,780	$	214	$	2,994
Raefan Industries LLC Investment	12/06/2022		8	%	$	1,950	$	127	$	2,077
Kaya Now Investment	02/01/2023		8	%	$	500	$	-	$	500
Total									$	8,645

Long-term notes receivable
American Innovative Robotics Investment	04/01/2027		8	%	$	1,100	$	-	$	1,100

Convergent Investment

The Company recorded an interest income receivable of approximately $0.3 million on the Convergent Convertible Note as of September 30, 2022.

Mr. Jeffrey Cooper Investment

Raefan Group LLC promissory note was satisfied and replaced with a personal note issued to Mr. Jeffrey Cooper, of Raefan Industries. The Company recorded an interest income receivable of approximately $0.2 million on the Mr. Jeffrey Cooper Promissory Note as of September 30, 2022.

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Raefan Industries LLC Investment

The Company recorded an interest income receivable of approximately $0.1 million on the Raefan Industries Promissory Note as of September 30, 2022.

Slinger Bag Inc Investment

The Company recorded an interest income receivable of approximately $63,000 on the Slinger Bag Convertible Note as of June 17, 2022. On June 17, 2022, the Company received 558,659 shares of common stock of Connexa Sports Technologies Inc (also known as Slinger Bag) as a result of conversion of principal and accrued interest on the Slinger Bag Convertible Note. All the 558,659 shares of common stock of Connexa Sports received were transferred to marketable securities account.

Nano Innovations Inc Investment

The Company recorded an interest income receivable of approximately $57,000 on the Nano Convertible Note as of September 30, 2022.

Kaya Now Investment

On April 5, 2022, the Company purchased an 8% promissory note (“Kaya Now Promissory Note”) issued by Kaya Now Inc (“Kaya”) in the principal amount of $0.5 million pursuant to a Note Purchase Agreement with Kaya Now. The Company paid a purchase price for the Kaya Now Promissory Note of $0.5 million. The Company will receive interest on the Kaya Now Promissory Note at the rate of 8% per annum payable upon conversion or maturity of the Kaya Now Promissory Note. The Kaya Now Promissory Note shall mature on February 1, 2023.

On July 21, 2022, the Company and Kaya executed an amendment of the Kaya Now Promissory Note (“Amendment”) such that the Kaya Now Promissory Note shall mature on February 1, 2023. In consideration of the Amendment, Kaya has agreed to issue to the Company 1,000,000 additional shares at $0.2 per share of Kaya’s common stock. Under the amendment, interest on the Note during the extended term shall be paid on October 1, 2022 and January 1, 2023 at the rate of 8% per annum.

The Company recorded an interest income of approximately $20,000 on the Kaya Now Promissory Note as of September 30, 2022.

American Innovative Robotics Investment

On April 1, 2022, the Company purchased an 8% promissory note (“Robotics Promissory Note”) issued by American Innovative Robotics, LLC (“Robotics”) in the principal amount of $1.1 million pursuant to a Note Purchase Agreement with Robotics. The Company paid a purchase price for the Robotics Promissory Note of $1.1 million. The Company will receive interest on the Robotics Promissory Note at the rate of 8% per annum payable every three months starting from July 1, 2022. The Robotics Promissory Note shall mature on April 1, 2027.

The Company recorded an interest income of approximately $45,000 on the Robotics Promissory Note as of September 30, 2022.

Note 8. Fair Value of Financial Assets and Liabilities

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

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

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

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

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

The following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2022 and December 31, 2021 ($ in thousands):

	Fair value measured at September 30, 2022
	Total at September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2022		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities:
Equities	$	8,032	$	8,032	$	-	$	-
Total marketable securities	$	8,032	$	8,032	$	-	$	-
Short-term investment	$	33	$	-	$	-	$	33
Short-term notes receivable at fair value	$	8,645	$	-	$	-	$	8,645
Long-term notes receivable at fair value	$	1,100	$	-	$	-	$	1,100

	Fair value measured at December 31, 2021
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities:
Equities	$	11,427	$	11,427	$	-	$	-
Total marketable securities	$	11,427	$	11,427	$	-	$	-
Short-term investment	$	2,273	$	1,854	$	-	$	419
Notes receivable at fair value	$	6,984	$	-	$	-	$	6,984
Convertible note receivable	$	2,147	$	-	$	-	$	2,147

AIKIDO PHARMA INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 3 Measurement

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

Short-term notes receivable at fair value at December 31, 2021	$	6,984
Accrued interest receivable		522
Reclassify from convertible note receivable to notes receivable at fair value		2,147
Purchase of notes receivable		500
Change in fair value of note receivable		(608	)
Conversion of note receivable to marketable securities		(899	)
Short-term notes receivable at fair value at September 30, 2022	$	8,645

Long-term notes receivable at fair value at December 31, 2021

SEC Form 10-Q filed by AIkido Pharma Inc.