Business context and reporting period
This is Aikido Pharma Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022. The request metadata names Dominari Holdings Inc., but the filing itself identifies the registrant as Aikido Pharma Inc. (Nasdaq: AIKI); confirm the filing is the intended company.
Aikido describes itself as a preclinical biotechnology company developing oncology and broad-spectrum antiviral candidates through university collaborations. It also held a growing portfolio of private-company investments. The company reported little or no revenue in recent years and does not expect product revenue until a biotechnology product is fully developed, potentially years away.
Financial results and position
Amounts below are in U.S. dollars; financial-statement amounts are shown in millions unless otherwise noted.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | No clear value presented; management says revenue was very low or nil | No clear value presented | No clear value presented | No clear value presented |
| Operating expenses | $2.30 | $2.76 | $6.10 | $5.08 |
| Operating loss | $(2.30) | $(2.76) | $(6.10) | $(5.08) |
| Net loss | $(5.08) | $(1.35) | $(8.61) | $(5.31) |
| Net loss attributable to common shareholders | $(6.18) | $(1.35) | $(12.72) | $(5.31) |
| Basic and diluted loss per share | $(1.18) | $(0.26) | $(2.42) | $(1.20) |
- Q2 other expense was $2.78 million, versus $1.41 million of other income a year earlier, largely reflecting a $2.24 million loss on marketable securities. For the first half, other expense was $2.51 million, versus $0.24 million in 2021.
- At June 30, cash and cash equivalents were $38.79 million, marketable securities $9.78 million, and total assets $88.30 million. Current liabilities were $0.83 million; reported working capital was approximately $60.7 million. Total liabilities were $0.83 million. No borrowings or debt balance is identified in the presented balance sheet.
- First-half operating cash use was $5.87 million; investing cash use was $15.28 million; financing cash use was $5.62 million. Cash declined $26.77 million to $38.79 million. Financing included $22.0 million of preferred-stock redemptions, $1.49 million of treasury-stock purchases, and $17.89 million of net preferred-stock issuance proceeds.
- Private and other investments totaled $25.48 million at June 30, up from $9.47 million at year-end. Notes receivable included $8.50 million current and $1.10 million long-term, with fair values substantially measured using Level 3 inputs.
- Margins are not meaningful given the absence of reported revenue and continuing operating losses.
Material changes versus prior comparable periods
- First-half operating loss increased to $6.10 million from $5.08 million, principally reflecting higher general and administrative and research and development expenses; the prior-year period included $1.13 million of acquired-license R&D expense.
- First-half net loss rose to $8.61 million from $5.31 million. The results also reflected marketable-security losses of $2.74 million, compared with a $0.46 million gain in the 2021 first half.
- Cash fell from $65.56 million at December 31, 2021 to $38.79 million at June 30, 2022. The company made substantial investments in private companies and notes receivable during the period.
- The company issued Series O and Series P redeemable convertible preferred stock in March, then redeemed all 22,000 shares in Q2. It also repurchased 242,902 shares for approximately $1.49 million. A 17-for-1 reverse stock split took effect June 7, 2022; share and per-share figures were retrospectively adjusted.
Outlook, risks, contingencies and unusual items
- Going concern and liquidity: The notes say cash is adequate for at least 12 months from issuance of the statements, but MD&A says there is substantial doubt about the company’s ability to continue as a going concern within one year from the filing date and that additional third-party capital will ultimately be required. The company says it may seek securities financing, debt or credit facilities, and revenue from licensing or new ventures; availability and terms are uncertain.
- Development risk: Programs remain preclinical. The company had not submitted an IND or NDA for DHA-dFdC and described further manufacturing, formulation, animal testing, and regulatory work before clinical trials. COVID-19 had delayed some development and acquisition activity, although management said the impact was easing.
- Investment and valuation risk: The expanded portfolio includes private-company equity and notes, including investments valued using unobservable inputs. Management judgments, liquidity, and future financing or valuation events may affect recorded values and results.
- Controls: Management concluded disclosure controls were ineffective at June 30, 2022 because of material weaknesses, including inadequate segregation of duties and insufficient controls to ensure material transactions and developments are reflected in the financial statements. The company said it was working on remediation.
- Other items: The filing reports no material pending legal proceedings and no off-balance-sheet arrangements. Subsequent events include a July employment agreement providing a $450,000 annual base salary and $213,000 signing bonus, and a July amendment to the Kaya Now note providing additional shares to the company.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Aikido Pharma Inc., not Dominari Holdings Inc.
- Reconcile the filing’s conflicting liquidity statements: cash runway of at least 12 months versus substantial doubt about continuation as a going concern within one year.
- Check the cash-flow presentation against the MD&A: the cash-flow statement reports $5.62 million of financing cash use, while the MD&A describes financing cash use differently; the statement’s operating, investing, and financing totals reconcile to the reported $26.77 million cash decline.
- Assess the quality, liquidity, and valuation assumptions of the $25.48 million investment portfolio and Level 3 notes receivable.
- Review remediation of the disclosed internal-control material weaknesses, further financing needs, and potential dilution from outstanding warrants, options, or future capital raises.