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.
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 September 30, 2021, condensed consolidated
statements of operations for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statements of stockholders’
equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the
nine months ended September 30, 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 and nine months ended September 30, 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, 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
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.
Deposits
In
April 2021, the Company deposited $5 million with a fund to identify opportunities to expand the Company’s core business strategies
in Asia. The cash are held in bank accounts on behalf of the Company until the fund manager identifies investments. During the nine and
three months ended September 30, 2021, the Company incurred advisory fees of approximately $0.6 million and $56,000, respectively, and
the balance held in cash in this fund was $4.4 million as of September 30, 2021.
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 exchange 500 shares of the Company’s Series
M Convertible Preferred Stock to an aggregate of 625,000 restricted shares of the Company’s common stock, par value $0.001 per
share, effective as of January 5, 2021. The Company paid a one-time nonrefundable cash payment of $0.5 million to Silo Pharma. The Company
shall also pay Silo Pharma a running royalty equal to 2% of “net sales” (as such term is defined in the License Agreement).
Running royalties are amounts paid to the licensor over time based on the revenue earned by the licensee from sales of products that
embody the licensed IP, if any.
Note
5. Investments in Marketable Securities
The
realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended
September 30, 2021 and 2020, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements
of operations (excluding a $70,000 distribution to CBM shareholders during the nine months ended September 30, 2020), are as follows
($ in thousands):
|
|
For
the Three Months Ended
September 30,
|
|
|
For
the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Realized
gain (loss)
|
|
$
|
(583
|
)
|
|
$
|
(447
|
)
|
|
$
|
501
|
|
|
$
|
97
|
|
Unrealized
loss
|
|
|
(2,901
|
)
|
|
|
(166
|
)
|
|
|
(4,296
|
)
|
|
|
(781
|
)
|
Dividend
income
|
|
|
451
|
|
|
|
180
|
|
|
|
1,221
|
|
|
|
439
|
|
Interest
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
$
|
(3,033
|
)
|
|
$
|
(433
|
)
|
|
$
|
(2,574
|
)
|
|
$
|
(241
|
)
|
Note
6. Short-term investment - investment in Hoth Therapeutics, Inc.
The
following summarizes the Company investment in Hoth as of September 30, 2021:
Security
Name
|
|
Shares
Owned
as of
September 30,
2021
|
|
|
Fair
value
per Share
as of
September 30,
2021
|
|
|
Fair
value
as of
September 30,
2021
(in thousands)
|
|
HOTH
|
|
|
1,166,415
|
|
|
$
|
1.19
|
|
|
$
|
1,388
|
|
AIKIDO
PHARMA INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
7. Short-term investment - investment in DatChat, Inc.
DatChat,
Inc. (“DatChat”) is a communications software company that gives users the ability to communicate with privacy and protection.
On
August 17, 2021, DatChat closed its initial public offering (the “IPO”) at an initial offering price to the public of
$4.15 per share under the ticker DATS. The Company records this investment at fair value and records any change in fair value in the
statements of operations (see Note 9).
On
September 22, 2021, the Company entered into a certain Stock Transfer Agreement, by and between the Company and a purchaser, and sold
167,084 shares of DatChat common stock for net proceeds of approximately $0.9 million.
The
following summarizes the Company investment in DatChat as of September 30, 2021:
Security
Name
|
|
Shares
Owned
as of
September 30,
2021
|
|
|
Fair
value
per Share
as of
September 30,
2021
|
|
|
Fair
value
as of
September 30,
2021
(in thousands)
|
|
DATS
|
|
|
357,916
|
|
|
$
|
13.65
|
|
|
$
|
4,886
|
|
Note
8. Other Investments
The
Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for the below investments pursuant
to ASU 2016-01.
Investment
in Kerna Health Inc
On
September 15, 2021, the Company entered into a securities purchase agreement (the “Kerna Securities Purchase Agreement”)
with Kerna Health Inc., (“Kerna”). Under the Kerna Securities Purchase Agreement, the Company agreed to purchase 1,333,334
shares of common stock of Kerna for $1.0 million.
Investment
in Kaya Holding Corp
On
September 29, 2021, the Company entered into a securities purchase agreement (the “Kaya Securities Purchase Agreement”) with
Kaya Holding Corp., (“Kaya”). Under the Kaya Securities Purchase Agreement, the Company agreed to purchase 8,325,000 shares
of common stock of Kaya for approximately $0.7 million.
Investment in Tevva Motors
On
September 22, 2021, the Company entered into a securities purchase agreement (the “Tevva Motors Subscription Agreement”)
with Big Sky Opportunities Fund, LLC, who handled the offering for Tevva Motors. Under the Tevva Motors Subscription Agreement, the Company
agreed to purchase 29,004 Interests of Tevva Motors for approximately $1.0 million. Subsequently, on September 30, 2021, the Company
entered into a second securities purchase agreement with Big Sky Opportunities Fund, LLC to purchase an additional 29,004 Interests of
Tevva Motors for approximately $1.0 million.
AIKIDO
PHARMA INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Investment
in Slinger Bag Inc
On
August 6, 2021, the Company entered into a securities purchase agreement (the “Slinger Bag Securities Purchase Agreement”)
with Slinger Bag Inc., (“Slinger Bag”). Under the Slinger Bag Securities Purchase Agreement, the Company agreed to pay $1.4
million to Slinger Bag for the issuance of a convertible promissory note in the principal amount of $1.4 million and a common stock purchase
warrant.
Note
9. Fair Value of Financial Assets and Liabilities
Financial
instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes
approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and
liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.
The
Company uses three levels of inputs that may be used to measure fair value:
Level
1 - quoted prices in active markets for identical assets or liabilities
Level
2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
Observable inputs are based on market data obtained
from independent sources, while unobservable inputs are based on the Company's market assumptions. Unobservable inputs require significant
management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of
the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input
that is significant to the fair value measurement. Such determination requires significant management judgment.
The
following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2021 and December
31, 2020 ($ in thousands):
|
|
Fair
value measured at September 30, 2021
|
|
|
|
Total
at
September 30,
|
|
|
Quoted
prices in
active
markets
|
|
|
Significant
other
observable
inputs
|
|
|
Significant
unobservable
inputs
|
|
|
|
2021
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities
|
|
$
|
60,589
|
|
|
$
|
60,589
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual
fund securities
|
|
$
|
16,896
|
|
|
$
|
16,896
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Unit
Investments Trust
|
|
$
|
481
|
|
|
$
|
481
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Special
purpose acquisition corps
|
|
$
|
2,559
|
|
|
$
|
2,559
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
80,525
|
|
|
$
|
80,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Short-term
investment
|
|
$
|
6,274
|
|
|
$
|
6,274
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Convertible
note receivable
|
|
$
|
2,107
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,107
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities
|
|
$
|
24,274
|
|
|
$
|
24,274
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual
fund securities
|
|
$
|
527
|
|
|
$
|
527
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total marketable securities
|
|
$
|
24,801
|
|
|
$
|
24,801
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investments
|
|
$
|
2,764
|
|
|
$
|
2,764
|
|
|
$
|
-
|
|
|
$
|
-
|
|
AIKIDO
PHARMA INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Level
3 Valuation Techniques
The
following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured
at fair value on a recurring basis ($ in thousands):
|
|
Fair
Value of Level 3
investment
|
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
Beginning
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Purchase
of convertible note
|
|
|
2,000
|
|
|
|
-
|
|
Accrued
interest receivable
|
|
|
107
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
2,107
|
|
|
$
|
-
|
|
Convergent
Investment
On
January 29, 2021, the Company purchased an 8% convertible promissory note (“Convertible Note”) issued by Convergent Therapeutics,
Inc. (“Convergent”) in the principal amount of $2 million pursuant to a Note Purchase Agreement with Convergent. The Company
paid a purchase price for the Convertible Note of $2 million. The Company will receive interest on the Convertible Note at the rate of
8% per annum payable upon conversion or maturity of the Convertible Note. The Convertible Note shall mature on January 29, 2023.
The
Company has elected to measure the purchase of the Convertible Note from Convergent using the fair value option at each reporting date.
Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract
and derivative due to change in the fair value will be reflected in interest income and other, net in the condensed consolidated statements
of operations.
The
Convertible Note is disclosed as a noncurrent Convertible Note investment in the condensed consolidated balance sheets. As of September
30, 2021, the fair value of the Convertible Note was measured at $2.0 million, taking into consideration cost of the investment, market
participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. The value at which
the Company’s Convertible Note is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into
account general economic and stock market conditions and those characteristics specific to the underlying investments. No change in fair
value was recorded during the nine months ended September 30, 2021.
Interest
accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the condensed consolidated statements
of operations. The Company recorded an interest income receivable of approximately $107,000 on the Convertible Note as of September 30,
2021.
Note
10. Net Loss per Share
Basic
loss per common share is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares
of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except
that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised
or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation
of diluted loss per share at September 30, 2021 and 2020 are as follows:
|
|
As
of As of September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Convertible
preferred stock
|
|
|
688
|
|
|
|
688
|
|
Warrants
to purchase common stock
|
|
|
5,801,701
|
|
|
|
734,501
|
|
Options
to purchase common stock
|
|
|
479,654
|
|
|
|
84,304
|
|
Total
|
|
|
6,282,043
|
|
|
|
819,493
|
|
AIKIDO
PHARMA INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
11. 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% 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 nine months ended September 30, 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
|
|
|
|
-
|
|
|
|
4.39
|
|
Exercised
|
|
|
(80,000
|
)
|
|
|
1.05
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(153,789
|
)
|
|
|
19.67
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(3
|
)
|
|
|
16.15
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
as of September 30, 2021
|
|
|
5,801,701
|
|
|
$
|
1.86
|
|
|
|
53,999
|
|
|
|
4.12
|
|
Stock
Options
A
summary of stock option activity for the nine months ended September 30, 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
|
|
|
|
-
|
|
|
|
9.3
|
|
Employee
options expired
|
|
|
(4,650
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
as of September 30, 2021
|
|
|
479,654
|
|
|
$
|
32.35
|
|
|
$
|
54,000
|
|
|
|
8.5
|
|
Options
vested and exercisable
|
|
|
479,654
|
|
|
$
|
32.35
|
|
|
$
|
54,000
|
|
|
|
8.5
|
|
AIKIDO
PHARMA INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Stock-based
compensation associated with the amortization of stock option expense was approximately $6,000 and $0 for the three months ended September
30, 2021 and 2020, respectively. Stock-based compensation associated with the amortization of stock option expense was approximately
$0.2 million and $0 for the nine months ended September 30, 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 $0.
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 nine months ended September 30, 2021 related to this arrangement.
On
July 31, 2021, the Company issued each of six directors 25,000 shares of the Company’s common stock pursuant to the Company’s
2020 Equity Incentive Plan. These shares have a total fair value of approximately $0.1 million. These restricted stock awards vested
immediately.
Note
12. Commitments and Contingencies
Legal
Proceedings
In
the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights
and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material,
active or pending legal proceedings against us.
Risks
and Uncertainties – COVID-19
Management
continues to valuate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for drug candidates,
the specific impact is not readily determinable as of the date of these consolidated financial statements. The COVID-19 pandemic has
slowed down some drug development efforts and has slowed the acquisition of new drugs. However, the impact of the pandemic and ensuing
lockdowns are easing. The process of drug development and further acquisitions is now continuing. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Note
13. Subsequent Events
The
Company evaluated events that have occurred after the balance sheet date through the date the condensed consolidated 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 condensed consolidated financial statements.