Business Context and Reporting Period
This Form 8-K is filed by AIKIDO PHARMA INC. (not Dominari Holdings Inc.) for the reporting period of January 5, 2021. The filing details the entry into a material definitive agreement and the issuance of unregistered equity securities.
Key Financial Metrics and Transaction Details
- Cash Payment: The Company paid a one-time nonrefundable cash payment of $500,000 to Silo Pharma Inc.
- Equity Issuance: The Company issued 500 shares of Series M Convertible Preferred Stock to Silo Pharma as consideration.
- Future Obligations: The Company agreed to pay a running royalty of 2% of "net sales" related to the licensed patents.
- Contingent Costs: If Silo Pharma exercises its option to license University of Maryland (UMB) patent rights, the Company may be required to pay consideration not exceeding 110% of the fee Silo Pharma pays to UMB.
- Liquidity and Debt: The filing text does not provide clear values for total revenue, profit, cash flow, margins, or existing debt levels.
Material Changes and Agreements
Effective January 5, 2021, the Company entered into an exclusive, worldwide, sublicensable, royalty-bearing patent license agreement with Silo Pharma. The agreement covers the use of psilocybin in the treatment of cancer and associated symptoms (e.g., pain, nausea, depression, neuroinflammation). Silo Pharma retains responsibility for filing, prosecuting, and maintaining the patents.
Additionally, on January 8, 2021, the Company filed a Certificate of Designation for the Series M Convertible Preferred Stock. This stock carries no annual dividend but grants holders significant voting power (20,000 votes per share) regarding potential reverse stock splits.
Terms of Series M Convertible Preferred Stock
- Conversion Trigger: Convertible upon stockholder approval of a reverse stock split or by December 31, 2021, whichever is earlier.
- Conversion Price: $0.80 per share of Series M Preferred Stock.
- Liquidation Preference: Holders are entitled to receive the original issue price prior to any distribution to Common Stock holders.
Outlook, Risks, and Contingencies
Management Commentary: The agreement includes a contingent right for the Company to negotiate a nonexclusive sublicense to UMB patent rights regarding central nervous system homing peptides, provided Silo Pharma exercises its option with UMB by January 15, 2021.
Risks and Termination:
- Silo Pharma may terminate the agreement with 30 days' notice if the Company fails to pay amounts due or challenges the validity of the patents.
- The Company may terminate the agreement at any time without cause by providing 30 days' notice and paying all amounts due.
- Either party may terminate for material breaches uncured within 60 days.
Investor Verification Checklist
- Verify the Company's current cash position to assess the impact of the $500,000 payment and future royalty obligations.
- Confirm whether Silo Pharma exercised its option to license UMB patent rights by the January 15, 2021 deadline.
- Review the status of the Company's Common Stock and any pending proposals for a reverse stock split, which would trigger the conversion of Series M Preferred Stock.
- Examine the specific definitions of "net sales" in the agreement to understand the scope of the 2% royalty obligation.
- Check for any subsequent filings regarding the prosecution status of the licensed psilocybin patents.