Dominari (DOMH) - 2020 Q4 - Annual Report

Part I Business AIkido Pharma is a development-stage biotech firm building a therapeutic pipeline through university-licensed technology and strategic investments - The company operates as a biotechnology firm with a portfolio of small-molecule anticancer and antiviral therapeutics licensed from leading universities[13] - The core pipeline includes treatments for pancreatic cancer (DHA-dFdC), acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL), and a broad-spectrum antiviral platform targeting viruses like Influenza, Ebola, and various coronaviruses (including SARS-CoV-2)[13][14][15] - Strategic growth initiatives include an investment in Convergent Therapeutics for prostate cancer radionuclide therapy and a license from Silo Pharma for the use of psilocybin in cancer treatment[16][18] - The company has no manufacturing capabilities and will rely on third-party contract manufacturers that adhere to cGMP regulations[54] - The business is subject to extensive government regulation, primarily by the FDA, which involves a lengthy and complex process for drug approval, including preclinical testing and multi-phase clinical trials[55][56][57] Our Drugs in Development The company's development pipeline features three main candidates for pancreatic cancer, various viruses, and leukemia - DHA-dFdC (Pancreatic Cancer): A new compound licensed from the University of Texas at Austin; preclinical studies indicate it is up to 100,000-fold more potent than the standard therapy, gemcitabine, and overcomes tumor cell resistance[19][22] - Broad-Spectrum Antiviral Platform (Multiple Viruses): Licensed from the University of Maryland Baltimore, this platform targets the host SKI complex; lead compounds have shown activity against Influenza, Ebola, Marburg, SARS-CoV, MERS-CoV, and SARS-CoV-2 in early-stage tests[15][32] - KPC34 (AML & ALL): A conjugate molecule from Wake Forest University designed to treat acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL) by targeting both DNA synthesis and protein kinase C to overcome resistance; however, its main patent expires on August 11, 2021[39][44][47] Licenses The company holds several exclusive, royalty-bearing license agreements for its key drug candidates and technology platforms - The company holds an exclusive, worldwide license from the University of Texas for the DHA-dFdC drug candidate and related patents[48] - An exclusive license from Wake Forest University covers patents for the KPC34 drug candidate for AML and ALL[49] - A Master License Agreement with the University of Maryland Baltimore (UMB) grants exclusive rights to a broad-spectrum antiviral platform targeting the SKI complex[50] Risk Factors The early-stage biotech firm faces significant risks in operations, internal controls, product development, competition, and stock ownership - Business Risks: The company is an early-stage, pre-revenue biotechnology company with a limited operating history and a history of losses, making it difficult to evaluate its prospects[87][89][93] - Internal Controls: A material weakness in internal control over financial reporting was identified as of December 31, 2020, due to a lack of segregation of duties and controls over reflecting material transactions[96] - Development & Regulatory Risks: The company's drug candidates are in early development; the clinical trial process is lengthy, expensive, and has a high risk of failure, and the company relies on third parties to conduct these trials[105][110][117] - Competition: The company faces substantial competition from major pharmaceutical and biotechnology companies with significantly greater financial resources and expertise[121][123] - COVID-19 Impact: The pandemic has caused delays in technology development, including manufacturing of DHA-dFdC and research at UMB, and its full impact remains uncertain[102][103] - Stock Ownership Risks: The common stock is at risk of being delisted from The Nasdaq Capital Market if it fails to meet continued listing standards; the stock price is highly volatile and thinly traded[125][129][131] Unresolved Staff Comments As a smaller reporting company, AIkido Pharma Inc is not required to provide this information Properties The company leases office space in New York and Texas, which is considered sufficient for current needs - The company leases one office in New York, NY with a monthly payment of approximately $3,320[142] - It also leases space in Longview, Texas on a month-to-month basis for about $2,000 per month[142] Legal Proceedings The company is not aware of any material, active, or pending legal proceedings against it - There are no material, active, or pending legal proceedings against the company[143] Mine Safety Disclosures This item is not applicable to the company Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ, no dividends are paid, and equity compensation plan details are provided - The company's common stock trades on the NASDAQ Capital Market under the symbol "AIKI"[147] - No cash dividends were paid in 2020 or 2019, and the company does not anticipate paying any in the foreseeable future[147] Equity Compensation Plan Information as of December 31, 2020 | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holder | 384,304 | $40.15 | 4,650,494 | Selected Financial Data As a smaller reporting company, AIkido Pharma Inc is not required to provide this information Management's Discussion and Analysis of Financial Condition and Results of Operations The company is pre-revenue with growing operating losses, but a Q1 2021 financing ensures sufficient cash for future operations Comparison of Operations (in millions) | Metric | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Loss from Operations | $(6.5) | $(5.7) | | Other (Expense) Income | $(5.8) | $1.5 | | Net Loss | $(12.3) | $(4.2) | - The increase in loss from operations was mainly due to a $1.0 million increase in other R&D expense and a $0.9 million increase in G&A expenses[163] - The shift to 'Other expense' in 2020 was primarily driven by an $8.2 million decrease in the fair value of the company's investment in Hoth common stock[164] Cash Flow Summary (in millions) | Cash Flow Activity | FY 2020 | FY 2019 | | :--- | :--- | :--- | | From Operations | $(4.0) | $(3.0) | | From Investing | $(25.0) | $1.3 | | From Financing | $31.6 | $1.8 | - In Q1 2021, the company raised gross proceeds of approximately $86.2 million from a public offering, ensuring adequate cash to fund operations for at least the next twelve months[167][207] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, AIkido Pharma Inc is not required to provide this information Financial Statements and Supplemental Data This section presents audited financial statements for FY2020 and FY2019, showing a growing net loss but strengthened balance sheet Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $27,731 | $1,129 | | Total Assets | $30,495 | $11,282 | | Total Current Liabilities| $877 | $750 | | Total Stockholders' Equity | $29,618 | $10,532 | Consolidated Operations Data (in thousands) | Account | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Revenues | $0 | $9 | | Loss from Operations | $(6,546) | $(5,685) | | Net Loss | $(12,337) | $(4,183) | | Net Loss Per Share | $(0.44) | $(1.67) | - The company's investment in Hoth Therapeutics decreased in fair value from $10.1 million at year-end 2019 to $2.8 million at year-end 2020[233][234] - Subsequent to year-end, in Q1 2021, the company consummated a public offering with gross proceeds of approximately $86.2 million, entered into a license agreement with Silo Pharma, and invested $2 million in a convertible note from Convergent Therapeutics[291][293][294] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure Controls and Procedures Management concluded disclosure controls were not effective as of year-end 2020 due to identified material weaknesses - Management concluded that disclosure controls and procedures were not effective as of December 31, 2020[299] - Two material weaknesses were identified: (1) inadequate segregation of duties, and (2) lack of controls to ensure financial statements properly reflect material transactions and developments[305] - Management is in the process of determining how to implement changes to create an effective system of internal control[301][306] - As a smaller reporting company, the annual report does not contain an attestation report from the independent registered public accounting firm regarding internal control over financial reporting[309] Other Information None Part III Directors, Executive Officers and Corporate Governance This section details the company's leadership team, board structure, and corporate governance policies, including its Code of Ethics - The board consists of six directors: Robert J Vander Zanden (Chairman), Anthony Hayes (CEO), Tim S Ledwick, Gregory James Blattner, Paul LeMire, and Robert Dudley[316] - The company has a standing Audit Committee comprised of three independent directors, with Tim S Ledwick serving as the chair and designated audit committee financial expert[327] - The company has adopted a Code of Ethics, which is available on its website[326] Executive Compensation Executive and director compensation for FY2020 is detailed, including salaries, bonuses, and stock option grants Executive Compensation Summary for 2020 | Name and Principal Position | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Anthony Hayes, CEO | 395,341 | 700,000 | 26,910 | 1,122,251 | | Darrell Dotson, VP of Drug Development & General Counsel | 218,750 | 100,000 | - | 318,750 | - Non-employee directors received an annual cash retainer of $60,000 for 2020, with the Chairman receiving an additional $5,000[342] - In December 2020, each non-employee director was granted options to purchase 50,000 shares of Common Stock at an exercise price of $0.64[341] Security Ownership of Certain Beneficial Owners and Management, and Related Stockholders This section details the company's equity structure, with management owning less than 1% of common stock - As of March 25, 2021, there were 88,906,146 shares of Common Stock outstanding[346] - All directors and executive officers as a group (6 persons) beneficially own 225,380 shares, which is less than 1% of the outstanding common stock[347] - Chai Lifeline Inc is listed as the beneficial owner of 100% of the outstanding Series D-1 Preferred Stock[347] Certain Relationships and Related Transactions, and Director Independence A majority of the Board is independent, and the Board is responsible for approving all related person transactions - The Board has determined that Dr Vander Zanden, Mr Ledwick, and Mr Blattner are independent directors within the meaning of applicable NASDAQ rules[349] - The company has not adopted a written policy for related person transactions; the Board of Directors is responsible for their approval[350] Principal Accounting Fees and Services This section discloses fees paid to the independent auditor, Marcum LLP, for fiscal years 2020 and 2019 Auditor Fees Paid to Marcum LLP | Fee Category | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $163,770 | $227,630 | | Total | $163,770 | $227,630 | - The Audit Committee has a policy for pre-approving all audit and permissible non-audit services provided by the principal accountants[353] Part IV Exhibits, Financial Statements, Schedules This section lists all financial statements and exhibits filed with the annual report, referencing key corporate documents - This section provides a comprehensive list of all exhibits filed with the 10-K report, including various material contracts and corporate documents[357][358][359] Form 10-K Summary This item is not applicable