UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

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

For the fiscal year ended December 31, 20192020

☐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

SPHERIX INCORPORATEDAIKIDO PHARMA INC.

(Exact name of Registrant as specified in its Charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter ended June 30, 2019: $5,730,2482020: $28,614,668 based upon the closing sale price of our common stock of $2.50$0.82 on that date. Common stock held by each officer and director and by each person known to own in excess of 5% of outstanding shares of our common stock has been excluded in that such persons may be deemed to be affiliates. The determination of affiliate status inis not necessarily a conclusive determination for other purposes.

There were 4,825,54988,906,146 shares of the Registrant’s common stock outstanding as of January 30, 2020.March 25, 2021.

TABLE OF CONTENTS

PART I

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward looking statements”statements�� within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward looking statements are often identified by the words “will,” “may,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects” and words of similar import. Such words and expressions are intended to identify such forward-looking statements, but are not intended to constitute the exclusive means of identifying such statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors, including those described in “Risk Factors” below that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

All references in this Annual Report on Form 10-K to “we,” “us,” “our” and the “Company” refer to Spherix Incorporated,AIkido Pharma Inc., a Delaware corporation, and its consolidated subsidiaries unless the context requires otherwise.

Item 1.  BUSINESS.Overview

General

Spherix IncorporatedAIkido Pharma Inc. was initially formed in 1967 and is currently1967. Since 2017, the Company has operated as a biotechnology company seeking to developwith a diverse portfolio of small-molecule anti-cancer therapeutics.anticancer and antiviral therapeutics in development. The Company recently purchased the rights toCompany’s pipeline consists of patented technology from leading universities and researchers and weresearchers. We are currently in the process of developing our innovative therapeutic drugsdrug pipeline through strong partnerships with world renowned educational institutions, including Thethe University of Texas at Austin, the University of Maryland, Baltimore and Wake Forest University. Our diverse pipeline ofoncology therapeutics includes therapiesinclude treatments for pancreatic cancer, acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL).

Prior to The Company is also developing a broad-spectrum antiviral platform, in which the closing on December 5, 2019lead compounds have activity against multiple viruses including Influenza virus, Ebolavirus and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of the acquisition of assets and rights from CBM BioPharma, Inc., a Delaware corporation (“CBM”), and since July 2013, the Company focused its efforts on owning, developing, acquiring and monetizing intellectual property assets. Since March 2016, the Company has received limited funds from its intellectual property monetization. In addition to its patent monetization efforts, since the fourth quarter of 2017, the Company has been transitioning to focus its efforts as a technology and biotechnology development company. These efforts have focused on biotechnology research and blockchain technology research. The Company’s biotechnology research development includes investments in: (i) Hoth Therapeutics Inc. (“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema, and (ii) DatChat, Inc. (“DatChat”), a privately held personal privacy platform focused on encrypted communication, internet security and digital rights management.COVID-19.

As a result of the Company’s biotechnology research and development and associated investments and acquisitions, our business portfolio now focuses on the treatment of three different cancers includingand multiple types of viral infections. Our pancreatic cancer, acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL). Our AML and ALL compounds,drug candidate, DHA-dFdC, developed at the Wake Forest University, are next generation targeted therapeutics designed to overcome multiple resistance mechanisms observed with the current standard of care. DHA-dFdC, our pancreatic drug developed atand licensed from the University of Texas at Austin, is a new compound whichthat we hope towill become the next generation of chemotherapy treatment for advanced pancreatic cancer. The Company believes that 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), has documented efficacy againsttargets pancreatic tumors in a clinically relevant transgenic mouse model and has demonstrated activities against other cancers, including leukemia, lung and melanoma. Our AML and ALL compound, developed at the Wake Forest University, is a targeted therapeutic designed to overcome multiple resistance mechanisms observed with the current standard of care.

Our broad-spectrum antiviral platform was developed at the University of Maryland Baltimore (“UMB”), which granted the Company an exclusive worldwide Master License Agreement (MLA”) to technology covered by three separate patent applications. The licensed technology comprises broadly acting pan-viral inhibitory compounds targeting multiple viral pathogens. The technology was invented by UMB scientists Drs. Matthew Frieman, Alexander MacKerell and Stuart Watson. 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.

In addition, we are constantly seeking to grow our pipeline of treatments in oncology indications. For example, in January 2021, the Company invested in Convergent Therapeutics, Inc., which has exclusive rights to technology related to next-generation dual-action peptide receptor radionuclide therapy (“PRRT”) for prostate cancer covered by multiple issued U.S. and foreign patents. Convergent is currently conducting advanced human trials relating to prostate cancer treatments utilizing PRRT that targets the prostate-specific membrane antigen (“PSMA”) present on prostate cancer cells. The technology was developed under the direction of Dr. Neil Bander, Professor of Urologic Oncology at Weill Cornell Medicine. In addition, the Company was granted a license to four patent applications for the use of psilocybin in cancer indications.

Additionally, on January 6, 2021 the Company announced that it entered into an exclusive patent license agreement with Silo Pharma Inc. (“Silo Pharma”) pursuant to which Silo Pharma granted the Company a worldwide exclusive, sublicensable, royalty-bearing license to certain Silo Pharma owned provisional patent applications directed to the use of psilocybin in cancer treatment, and any patents issuing therefrom, including all continuations, continuations-in-part, divisions, extensions, substitutions, reissues, re-examinations, and any applications and all patents issuing from any applications and patents that claim domestic benefit or foreign priority to the provisional patent applications. The license is for “Field of Use” (as defined in the exclusive patent license agreement) of “treatment of cancer and symptoms caused by cancer, including but not limited to pain, nausea, neuroinflammation, brain and neural dysfunction, depression, seizures, confusion, dizziness, numbness/tingling, dysfunction of the senses and all other symptoms that are caused by cancer of any type.”

Our Drugs in Development

DHA-dFdC from the University of Texas at Austin

DHA-dFdC (4-(N)-Docosahexaenoyl 2´, 2´-Difluorodeoxycytidine) is patented technology licensed to the Company from the University of Texas at Austin. DHA-dFdC is a new compound we believe may become the next generation of second-line 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, referenced in subsection DHA-dFdC Published Data below, have also indicated that DHA-dFdC inhibits pancreatic cancer cell growth (up to 100,000-fold more potent that gemcitabine, a current standard therapy; for example, the IC₅₀ value of DHA-dFdC is more than 100,000-fold smaller than gemcitabine), targets pancreatic tumors and has demonstrated activities against other cancer cell lines, including leukemia, lung and melanoma.

CBM BioPharma, Inc. TransactionBackground*

On October 10, 2018,According to the Company entered into that certain Agreement and PlanHirshberg Foundation for Pancreatic Research, pancreatic cancer has the highest mortality rate of Merger, dated asall major cancers. It is currently the 3rd leading cause of October 10, 2018, by and among the Company, Spherix Delaware Merger Sub Inc., a Delaware corporation, Scott Wilfong, as the CBM stockholder representative, and CBM, pursuant to which all shares of capital stock of CBM would be converted into the right to receive an aggregate of 15,000,000 shares of the Company’s common stock, with CBM continuing as the surviving corporationcancer-related death in the merger.

On May 15, 2019,United States after lung and colon cancer. In January 2020, the Company restructuredHirschberg Foundation estimated that 60,430 Americans will be diagnosed with pancreatic cancer, and more than 48,220 will die from the terms ofdisease. For all stages combined, the CBM merger and chose to proceed with purchasing substantially all of the assets, properties and rights (the “Acquisition”) of CBM. On December 5, 2019, the Company completed the Acquisition of CBM, pursuant to that certain Asset Purchase Agreement, dated as of May 15, 2019, by and between the Company and CBM, as amended by that certain Amendment No. 1 to Asset Purchase Agreement, dated as of May 30, 2019, and Amendment No. 2 to Asset Purchase Agreement, dated as of December 5, 2019 (collectively, the “CBM Purchase Agreement”)5-year relative survival rate is 10%. As considerationEven for the Acquisition,small percentage of people diagnosed with local disease, the Company agreed to pay to CBM consideration consisting5-year survival is only 39%. The majority of (i) $1,000,000 in cash (the “Cash Consideration”) and (ii) an aggregate of 1,939,058 shares (the “Stock Consideration”) of the Company’s common stock valuedpatients are diagnosed at a price per share of $3.61. The Cash Consideration will become payable to CBM upon the consummation by the Company of the first sale of the Company’s common stock or any other equity or equity-linked financing of the Company to investors in or more transactions, after the date of the CBM Purchase Agreement,distant stage, for which the Company receives aggregate gross proceeds of greater than $2,000,000 (a “Qualified Financing”)5-year survival is 3%. Upon the consummation

Pancreatic cancer is one of the Qualified Financing, the Company will retain the first $2,000,000few cancers for which survival has not improved substantially over nearly 40 years. Treatment options for pancreatic cancer include surgery, radiation therapy and chemotherapy, which extend survival or relieve symptoms, but seldom produce a cure. Surgical removal of the gross proceeds fromtumor is possible in less than 20% of patients diagnosed with pancreatic cancer because detection is often in late stages and has spread beyond the Qualified Financing and CBM will receive 100% of the gross proceeds of such Qualified Financing received by the Company in excess of $2,000,000 as well as the gross proceeds of any subsequent equity financings by the Company until the Cash Consideration amount is satisfied in full. Additionally, at closing, 7% or 135,734 shares of common stock of the Stock Consideration was deposited with VStock, the Company’s transfer agent, to be held in escrow for six months post-closing to satisfy certain indemnification obligations pursuant to the terms and conditions of the CBM Purchase Agreement, and 93% or 1,803,324 shares of the Stock Consideration was issued and delivered to CBM.

Among the assets that Spherix acquired from CBM in the Acquisition are two drug candidates for the treatment of two cancers, acute myeloid leukemia (“AML”) and pancreatic cancer.

KPC34

Developed at the Wake Forest School of Medicine, CBM’s AML drug candidate (“KPC34”) is designed to bypass the resistant mechanisms in AML cancer cells. In preclinical studies in mice, KPC34 has shown to be a superior treatment to gemcitabine, thepancreas. The current state of the art chemotherapy treatment for AML and has served to double the mean survival time of mice versus the current standard of care treatments. KPC34 has also been shown to be more effectiveis gemcitabine, Folfirinox cocktail or gemcitabine in AML relapse cases in mice, notably increasing the lifespan of mice treatedcombination with the drug.

KPC34 is able to be orally administered, which may be critical for patients that are unable to tolerate repeated cycles of chemotherapy. Because of the low AML patient population, FDA orphan drug status will be sought for KPC34.

License Agreement with Wake Forest University

On April 17, 2018, CBM entered into a license agreement (the “WF Agreement”) with Wake Forest University Health Sciences (“WF”). The WF Agreement granted to CBM an exclusive, royalty-bearing license to WF’s and The University of North Carolina at Chapel Hill’s patents relating to the KPC34 drug candidate (the “WF Patent Rights”). The WF Agreement also granted to CBM the right to sublicense.

CBM paid WF an upfront license fee of $10,000 and will owe an additional $10,000 per year to WF beginning on the third anniversary of the WF Agreement. In addition, CBM is obligated to pay to WF a single-digit royalty fee and certain other milestone and other payments upon sales milestones. The aggregate milestone payments under the WF Agreement are up to $1,400,000. In addition, as consideration for entering into the WF Agreement, CBM issued WF 5,000 shares of common stock to WF, which equaled 2% of CBM’s issued and outstanding capital stock at the effective date of the WF Agreement.Abraxane.

The term of the WF Agreement continues until the expiration of the last of the WF Patent Rights to expire or the expiration of market exclusivity via orphan drug status or new chemical entity status (or their non-U.S. equivalents), or until the WF Agreement is earlier terminated. CBM may terminate the WF Agreement upon 90 days’ prior written notice. Either party may terminate the WF Agreement upon a breach of the WF Agreement that has not been cured in 90 days. Additionally, the WF Agreement will automatically terminate in the event CBM becomes insolvent, makes an assignment for the benefit of creditors, or if a petition for bankruptcy is filed.

On November 13, 2019, WF, the Company and CBM entered into an assignment of agreement, whereby CBM assigned all of its rights, title and interest to, and obligations under the WF Agreement to the Company.

DHA-dFdC

Developed at the University of Texas at Austin CBM’s pancreatic cancerhas identified a new drug, candidate (“DHA-dFdC”)DHA-dFdC, that has shown positive results in preclinical studies (see publications listed below), inhibiting pancreatic tumor growth in clinically relevant transgenic mouse models. Pancreatic cancer is a deadly disease that affects millions of people around the world.In preclinical studies, DHA-dFdC has:

DHA-dFdC has been shown to be well tolerated in preclinical toxicity tests, has demonstrated activities against other cancers (e.g. leukemia, lung, melanoma) and

DHA-dFdC Technology Summary

DHA-dFdC is a conjugate molecule containing gemcitabine linked to a fatty acid called docosahexaenoic acid (DHA). The chemical structure is shown in the following diagram:

The DHA structure is illustrated above the dashed line in the graphic above and the gemcitabine structure is illustrated below the dashed line. The DHA-dFdC published data indicates that DHA-dFdC was more effective than gemcitabine alone in killing cancer cells in vitro and in vivo in a certain mouse model. In addition, conjugation of gemcitabine with fatty acids other than DHA did not increase effectiveness over gemcitabine.

In collaboration with our contract manufacturing organization, Parimer Scientific, we are currently optimizing the manufacturing procedure for DHA-dFdC. We have now successfully replicated the synthesis as reported in the literature with satisfactory yield and purity. We are currently optimizing the procedure to ensure batch-to-batch consistency. We plan to begin formulation development in the second quarter of 2021, which will require limited animal testing to determine proper dosage. We expect to have manufactured 20,000 mg of purified DHA-dFdC during the second quarter of 2021 to use for such purposes. We plan to engage a contract research organization for the purpose of such animal testing during the second quarter of 2021. Our goal is to have acceptable intravenous and oral formulations developed in the fourth quarter of 2021.

DHA-dFdC Published Data

The science behind DHA-dFdC has been published in the following peer-reviewed scientific journals:

Portions of the published data also indicate the following:

DHA-dFdC Patent Coverage

DHA-dFdC is covered by one issued patent on the drug itself and there is one application relating to the oral formulation, as listed in the following table:

Pursuant to the Patent License Agreement withbetween the Company and the University of Texas, as amended, the patents listed above have been exclusively licensed to the Company for commercial development worldwide, in all fields, along with all future patent applications that are entitled to claim priority from the listed patents, and all patents that issue from such applications (See also the Licenses section below).

Broad Spectrum Antiviral Platform from University of Maryland, Baltimore

Scientists at AustinUMB have discovered that the SKI complex present in all mammalian cells, including human cells, is a broad-spectrum, host-directed, antiviral drug target. Using computer modeling technology and database screening, the scientists identified binding pockets on the SKI complex structure and designed compounds predicted to bind to the pockets. Tests of the designed compounds identified several chemical structures that had antiviral activity against influenza A virus along with the filoviruses Ebola and Marburg and two further coronaviruses, SARS-CoV and SARS-CoV-2, the cause of COVID-19. The tests are currently at an early stage and there is no guarantee that the aintiviral platform will be effective on human cells. In conjunction with the MLA, the Company has also executed a Sponsored Research Agreement SRA with UMB to support the development of the technology, which is currently ongoing at UMB under the direction of the inventors. Under the MLA and SRA, to meet the first two milestones of the MLA the Company shall make periodic payments for the support of the research outlined in the SRA totaling $3.1M over a period of two years. The research under the SRA will entail initial development and optimization of the most effective compounds and will be performed by the scientists who invented the licensed technology.

Background

At the end of 2019, cases of pneumonia of unknown etiology were identified in China. In the first week of January 2020, a novel coronavirus was identified as the cause and was found to be spreading between people. Throughout 2020, the virus spread around the world with over 28 million cases by September 2020. Among many things that the SARS-CoV-2 (severe acute respiratory syndrome coronavirus-2) outbreak has demonstrated is the immense need for both specific and broadly acting antiviral therapeutics to treat known viruses and those yet to emerge in the human population.

Viral infection can have a major burden on human health. Influenza has historically caused numerous large epidemics and pandemics such as 1918 Spanish flu and swine flu. Ebola has caused sporadic outbreaks since the 1970s, but in recent years these have been growing in scale. The 2014 West Africa Ebola outbreak saw over 28,000 people contract the disease causing over 11,000 deaths. Coronaviruses have always posed a threat of mass spread because of their respiratory transmission. In 2002 to 2003, the emergence of SARS-CoV infected over 8,000 people, killing around 10% in nine months, while MERS-CoV-has sporadically spread since 2012, causing around 2,500 infections with a case fatality rate of around 35%.

The year 2020 has seen the rapid emergence of the novel coronavirus, SARS-CoV-2, the cause of COVID-19, which rapidly spread after its identification in Wuhan, China, caused a pandemic, and has infected almost 110 million people and killed over 2.4 million people worldwide, with almost 490,000 deaths in the United States.

Scientists at UMB, including Drs. Matthew Frieman, Alexander MacKerell and Stuart Watson have demonstrated that the SKI complex is a broad-spectrum antiviral target and designed compounds using in silico drug design that target the SKI complex and inhibit replication of several virus types, influenza A virus along with the filoviruses Ebola and Marburg and two further coronaviruses, SARS-CoV and SARS-CoV-2.

UMB has filed three separate patent applications on the resulting antiviral compounds and has granted the Company an exclusive worldwide license to the technology. UMB recently filed the following PCT application claiming priority to the first two of the three applications:

KPC34 from Wake Forest University

Our small molecule treatment for AML and ALL, developed at the Wake Forest University and called KPC34, is a next generation targeted therapeutic designed to overcome multiple resistance mechanisms observed with the current standard of care.

Background

AML is an uncommon cancer, making up about 1% of cancers. In 2020, an estimated 19,940 people of all ages (11,090 males and 8,850 females) in the United States were be diagnosed with AML. It is the second most common type of leukemia diagnosed in adults and children, but most cases occur in adults. AML makes up 32% of all adult leukemia cases. AML can be diagnosed at any age, but it is uncommon in people younger than 45. The average age of diagnosis is age 68. An estimated 11,180 deaths (6,470 men and boys and 4,710 women and girls) from AML occurred in 2020. (https://www.cancer.net/cancer-types/leukemia-acute-myeloid-aml/statistics). ALL is also a rare disease, making up only half of 1% of cancers diagnosed in the United States. In 2020, an estimated 6,150 people of all ages (3,470 males and 2,680 females) in the United States were diagnosed with ALL. Most cases occur in children. In people under age 20, ALL is the most common type of leukemia, accounting for 74% of all leukemia diagnosed in this age group. Children younger than 5 have the highest risk of ALL. After a child grows into adulthood, the general risk of ALL rises again after age 50. About 4 out of every 10 people diagnosed with ALL are adults. An estimated 1,520 deaths (860 men and boys and 660 women and girls) from ALL will occur this year. (https://www.cancer.net/cancer-types/leukemia-acute-lymphocytic-all/statistics).

KPC34 Technology Summary

KPC34, a conjugate molecule made of a gemcitabine molecule linked to a phospholipid, has the following structure:

In the illustration above, to the left of the dashed line is the phospholipid portion and to the right of the dashed line is gemcitabine.

Gemcitabine is a chemotherapy drug used to treat a wide array of cancers, including breast cancer, ovarian cancer, non-small cell lung cancer, pancreatic cancer and bladder cancer. The drug interferes with DNA and its function of the phospholipid to which the gemcitabine is linked in KPC34, is to inhibit protein kinase C-type enzymes, which are involved in multiple signaling pathways in leukemia.

The strategy behind targeting both DNA synthesis and protein kinase C with one molecule is to double-target different mechanisms of action in leukemia cells and greatly reduce the possibility of development of resistance to the drug.

KPC34 is intended to treat the relatively small population of patients with AML and ALL. Because of the low patient population, FDA orphan drug status can be sought, which provides expedited review and seven years of exclusivity from approval of the new drug application.

Preliminary data from preclinical studies at Wake Forest on the drug includes the following results:

The technology licensed is much broader than KPC34 represents, and includes both anticancer and antiviral conjugates, and could include a much broader range of indications, but we have no such drug candidates in development other than KPC34.

KPC34 Patent Coverage

The KPC34 license includes five issued patents, but only one of them covers KPC34. The patent is US7309696, entitled “Compositions and methods for targeting cancer cells.” It expires on August 11, 2021. All five of the licensed patents will expire by late 2022.

Licenses

On April 12, 2018, CBM entered into a patent license agreement (the “UT Agreement”) with the University of Texas at Austin on behalf of the Board of Regents of the University of Texas System. The UT Agreement granted to CBM an exclusive, royalty-bearing license to certain patent applications related to nucleobase analogue derivatives and their applications, and specifically to the DHA-dFdC drug candidate (the “UT Patent Rights”). The UT Agreement also granted to CBM the right to sublicense.

candidate. On November 13, 2019, the University of Texas at Austin, the Company and CBM entered into an assignment of agreement, whereby CBM assigned all of its rights, title and interest to, and obligations under the UT Agreement to the Company.

H.C. Wainwright & Co., LLC AtOn April 17, 2018, CBM entered into a license agreement (the “WF Agreement”) with Wake Forest University Health Sciences (“WF”). The Market OfferingWF Agreement granted to CBM an exclusive, royalty-bearing license to WF’s and The University of North Carolina at Chapel Hill’s patents relating to the KPC34 drug candidate. On November 13, 2019, WF, the Company and CBM entered into an assignment of agreement, whereby CBM assigned all of its rights, title and interest to, and obligations under the WF Agreement to the Company.

On August 9, 2019,April 13, 2020, the Company executed a Master License Agreement (the “UMB License Agreement”) with UMB, pursuant to which UMB agreed to license inventions collectively known as “Broad Spectrum Antiviral Compounds Which Target the SKI Complex” (the “Inventions”) to the Company. The Inventions, which are covered by three patent applications on file with the United States Patent and Trademark Office, are currently in the pre-clinical stage and seek to inhibit replication of multiple viruses, including the Influenza virus, SARS-CoV, MERS-CoV, Ebolavirus and Marburg virus. In addition, the Company entered into that certain At The Market Offeringa Sponsored Research Agreement dated aswith UMB to support the development of August 9, 2019, by and betweenvarious technologies. Pursuant to the UMB License Agreement, UMB grants to the Company the ability to utilize the licensed products (“Licensed Products”) and H.C. Wainwright & Co., LLC, as agentpatents associated with the Inventions, subject to certain limitations described in the UMB License Agreement. All improvements to the Inventions are solely owned by the party improving the Inventions, unless jointly made, in which case both parties jointly own the improvements; however, the Company grants to UMB the royalty-free license to practice the Company’s improvements. The Company has agreed to deliver to UMB a commercialization plan setting forth the Company’s plan for research and development required to develop the Licensed Products and the Company’s overall commercialization strategy by December 31, 2022.

On August 7, 2020, the Company entered into a fixed price agreement (the “Fixed Price Agreement”) with the University of Kentucky Research Foundation (“H.C. Wainwright”) (the “ATM Agreement”UKRF”), pursuant to which the Company may offer and sell, from timereceived an option to time through H.C. Wainwright, sharesnegotiate an exclusive license with the UKRF for certain of its patents related to G4-1 for solid tumor treatment in exchange for $67,000. The research shall involve testing of the Company’s common stock, havingdrug G4-1 and its ability to increase the duration of survival of mice injected with tumor cells relative to an aggregate offering price of up to $1.2 million (the “HCW Shares”).FDA approved drug. The offer and sale of the HCW Shares is made pursuant to a shelf registration statement on Form S-3 and the related prospectus (File No. 333-222488). Pursuant to the ATM Agreement, H.C. Wainwright may sell the HCW Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act, including sales made by means of ordinary brokers’ transactions, including on The NASDAQ Capital Market, at market prices or as otherwise agreed with H.C. Wainwright. H.C. Wainwright will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the HCW Shares from time to time, based upon instructions from the Company, including any price or size limits or other customary parameters or conditions the Company may impose.

The Company is not obligated to make any sales of the HCW Shares under the ATM Agreement. The offering of HCW Shares pursuant to the ATM Agreement will terminate upon the earliest of (a) the sale of all of the HCW Sharespatents subject to the ATM Agreement, (b) the termination of the ATM Agreement by H.C. Wainwright or the Company, as permitted therein, or (c) August 9, 2022. The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of HCW Shares and have agreed to provide H.C. Wainwright with customary indemnification and contribution rights. The Company will also reimburse H.C. Wainwright for certain specified expenses in connection with entering into the ATM Agreement. As of the date hereof, the Company has sold a total of 532,070 shares of common stock for aggregate gross proceeds of $1.2 million at an average selling price of $2.17 per share, resulting in net proceeds of $1.1 million after deducting commissions and other transaction costs.

DatChat Securities Purchase Agreement

On March 12, 2018, the Company entered into that certain Agreement and Plan of Merger, dated as of March 12, 2018, by and among the Company, Spherix Merger Subsidiary Inc., a Nevada corporation, Darin Myman, as the representative of the stockholders of the Company, and DatChat, as amended by that certain First Amendment to Agreement and Plan of Merger, dated as of May 3, 2018 (collectively, the “Merger Agreement”). DatChat developed a secure messaging application that utilizes blockchain technology. After further negotiations, the Company determinedoption do not to pursue a merger with DatChat and on August 8, 2018, entered into that certain Securities Purchase Agreement, dated as of August 8, 2018, by and between the Company and DatChat (the “DatChat Purchase Agreement”), pursuant to which the Company and DatChat agreed to terminate the Merger Agreement and release and discharge and hold harmless each of the other parties with respect to the transaction contemplated by the Merger Agreement.

Pursuant to a share purchase agreement, dated as of May 15, 2019, the Company purchased (i) 50,000 shares of common stock of CBM and (ii) certain securities and uncertificated rights of DatChat from an existing shareholder of CBM and DatChat for an aggregate purchase price of $350,000. The investment represents a 20% interest in CBM, and the securities and rights of DatChat that were purchased from the existing shareholder of CBM include: (a) a senior convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share (b) a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d) a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, and (e) a contingent option to put 200,000 shares of DatChat common stock, subject to certain terms and conditions. The transaction closed on May 22, 2019.expire until 2035.

Acquisition of shares of Hoth Therapeutics, Inc.

On June 30, 2017, the Company entered into that certain Securities Purchase Agreement, dated as of June 30, 2017, by and between the Company and Hoth (the “Hoth Purchase Agreement”), for the purchase of an aggregate of 1,700,000 shares of common stock, par value $0.0001 per share, of Hoth, for a purchase price of $675,000. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa Platform, a proprietary, patented, drug compound platform developed at the University of Cincinnati. Hoth intends to develop BioLexa’s applications in the aesthetic dermatology field to help treat and reduce post-procedure infections, accelerate healing and improve clinical outcomes for patients undergoing procedures. Hoth will be implementing FDA testing procedures for BioLexa. In addition to the Purchase Agreement, the Company and Hoth entered into a Registration Rights Agreement, pursuant to which Hoth is obligated to register for resale on a registration statement on Form S-1 under the Securities Act, all of the shares. Further, the Company, Hoth and Hoth’s existing shareholders have entered into a Shareholders Agreement, pursuant to which Spherix shall have a right to appoint one director to the board of directors of Hoth for so long as the Company holds at least 10% of the issued and outstanding common stock of Hoth.

On February 14, 2019, the Company purchased an aggregate of 35,714 shares of the common stock of Hoth in connection with Hoth’s initial public offering, which was consummated on February 20, 2019, at a purchase price of $5.60 per share, for an aggregate purchase price of $200,000. Hoth’s common stock commenced trading on The NASDAQ Capital Market, on February 15, 2019 under the ticker symbol “HOTH”. The Company entered into a lock-up agreement with Hoth pursuant to which the Company has agreed not to sell any shares of Hoth common stock or common stock equivalents until February 20, 2022, which is the 36 month anniversary of the consummation of Hoth’s initial public offering, (the “Spherix Securities”) provided, however (i) Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an aggregate of 10% of the initially issued Spherix Securities, provided further that the recipients of the Spherix Securities shall not be permitted to resell such Spherix Securities until six months after the date of the Initial Public Offering, (ii) beginning 12 months after the date of Hoth’s initial public offering, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an additional 10% of the initially issued Spherix Securities, (iii) beginning 24 months after the date of Hoth’s initial public offering, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an additional 10% of the initially issued Spherix Securities and (iv) beginning 36 months after the date of the Hoth initial public offering, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, the Spherix Securities without any restrictions.

On October 2, 2019, the Board of Directors of the Company (the “Board of Directors”) approved a distribution to the Company’s stockholders of approximately 100,000 shares of Hoth held by the Company. Accordingly, each of the Company’s stockholders received one (1) share of Hoth common stock for every twenty-nine (29) shares of Company common stock held as of 5 p.m. Eastern Time on October 21, 2019, the dividend record date. The Company did not distribute fractional shares of Hoth common stock, and any fractional shares were rounded down to the nearest whole share.

Mellow Scooters Investment

On November 23, 2018, the Company entered into that certain Security Purchase Agreement, dated as of November 23, 2018, by and between the Company and Mellow Scooters, LLC (“Mellow Scooters”), a leading-edge company that enables anyone to own and operate a personal fleet of electric scooters and dockless bicycles to generate revenue. Mellow Scooters agreed to sell 250 units to the Company, representing 25% of its issued and outstanding limited liability company membership interests for a subscription price of $106,000. The $106,000 consisted of (a) a cash payment of $30,000, (b) the forgiveness of prior advances made to Mellow Scooters by the Company, and (c) an obligation of the Company to pay certain specific future expenses of Mellow Scooters (amounts in clauses (b) and (c) not to exceed a maximum of $76,000 in the aggregate).

TheBit Daily LLC Investment

On March 23, 2018, the Company purchased 8.0% of the issued and outstanding limited liability company membership interests of TheBit Daily LLC, a development stage media and education platform focused on the blockchain and cryptocurrency space, for a subscription price of $25,000.

Our principal executive offices are located at One Rockefeller Plaza, 11^th Floor, New York, New York 10020, our telephone number is (703) 992-9325, and our Internet website addresswww.spherix.com.Commercialization

Our common stock tradesbusiness success with our drug portfolio depends not only on the NASDAQ Capital Market undersuccessful development and approval of the symbol “SPEX”.

Available Information

Our principal Internet addressproducts but also on the commercialization. At present, our plan anticipates us making the investments necessary to build an in-house marketing and sales capability for the U.S. market for our drug pipeline, or to partner with a larger drug development company to commercialize our drugs as they move through the FDA approval process. As our drug compounds make their way through clinical development in the U.S., we intend to approach pharmaceutical and biotechnology companies outside the U.S. to negotiate and enter into strategic partnerships that will enable development and commercialization of our platform outside the U.S., where we believe the market opportunity is www.spherix.com.larger than that of the U.S. albeit far more complex to reach. We make available free of charge on www.spherix.com our annual, quarterly and current reports, and amendmentshave no operations outside the U.S., nor are we planning to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.have any non-U.S. operations.

CompetitionManufacturing and Supply

The biopharmaceutical industryWe do not have any manufacturing capabilities and therefore we will have to engage a third party to assist in manufacturing. Such manufacturing will need to be done in accordance with good manufacturing practice requirements (“cGMP”) regulations, to formulate and manufacture our product candidates. A list of third party manufacturers is characterized by rapidly advancing technologies, strong emphasis on proprietary products and significant competition. CBM faces potential competition from many sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and government agencies and public and private research institutions. Any product candidates that CBM successfully develops and commercializes will compete with any existing therapies and new therapies that may become available in the future.currently being developed.

Intellectual Property and Patent RightsGovernment Regulation

Our success depends, in part, on our ability to obtain, maintain, and enforce patents and other proprietary protections of our commercially important technologies and product candidates, to operate without infringing the proprietary rights of others, and to maintain trade secrets or other proprietary know-how, bothGovernmental authorities in the U.S. and other countries. We were assigned licenses that CBM hadcountries extensively regulate the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of pharmaceutical products such as those being developed by us. In the U.S., the FDA regulates such products under the FDCA and implements related regulations. Failure to comply with Wake Forest University Health Sciences (“Wake Forest”)applicable FDA requirements, both before and The Universityafter approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of Texas at Austin (“UTA”) that include rights to eight patents and patent applications as follows:production or distribution, injunctions and/or criminal prosecution.

U.S. Food and Drug Administration Regulation

United States Drug Development

In the United States, the FDA regulates drugs, medical devices and combinations of drugs and devices, or combination products, under the FDCA and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, requests for voluntary product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

Once a pharmaceutical product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. An IND sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some pre-clinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or non-compliance, and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial. Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal Representative and must monitor the clinical trial until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the results of completed clinical trials on a government-sponsored database, such as ClinicalTrials.gov in the United States, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from other studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a significant risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the study. The clinical trial sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

NDA and FDA Review Process

The results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee, and the sponsor of an approved NDA is also subject to an annual program user fee; although a waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. The FDA typically makes a decision on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA for filing means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive review. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s goal to complete its substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification and may go through multiple review cycles.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data.

There is no assurance that the FDA will ultimately approve a product for marketing in the United States, and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require Phase 4 clinical trials to further assess drug safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may also place other conditions on approvals, including the requirement for a risk evaluation and mitigation strategy (“REMS”), to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

Reimbursement

Potential sales of any of our product candidates, if approved, will depend, at least in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly limiting coverage and/or reducing reimbursements for medical products and services. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our future revenues and results of operations. Decreases in third-party reimbursement or a decision by a third-party payor to not cover a product candidate, if approved, or any future approved products could reduce physician usage of our products, and have a material adverse effect on our sales, results of operations and financial condition.

In the United States, the Medicare Part D program provides a voluntary outpatient drug benefit to Medicare beneficiaries for certain products. We do not know whether our product candidates, if approved, will be eligible for coverage under Medicare Part D, but individual Medicare Part D plans offer coverage subject to various factors such as those described above. Furthermore, private payors often follow Medicare coverage policies and payment limitations in setting their own coverage policies.

Healthcare Laws and Regulations

Sales of our product candidates, if approved, or any other future product candidate will be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our ability to operate include the following:

Also, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.

Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.

Employees

As of December 31, 2019,2020, we have threefour full-time employees and one part-time employee, none of which are represented by a labor union or covered by a collective bargaining agreement.

Government Regulation

The Company has transitioned to a highly regulated industry that is subject to significant federal, state, local and foreign regulation. The Company’s present and future business has been, and will continue to be, subject to a variety of laws including, the Federal Food, Drug, and Cosmetic Act, or FDC Act, and the Public Health Service Act, among others.

Government authorities in the United States, at the federal, state and local levels, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and the implementing regulations promulgated thereunder. The failure to comply with requirements under the FDCA and other applicable laws at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.

An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:

Orphan Drug Act in the United States

The Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases and conditions affecting fewer than 200,000 persons in the U.S. at the time of application for orphan drug designation. Orphan drug designation must be requested before submitting a BLA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the holder of the approval is entitled to a seven-year exclusive marketing period in the U.S. for that product except in very limited circumstances. For example, a drug that the FDA considers to be clinically superior to, or different from, another approved orphan drug, even though for the same indication, may also obtain approval in the U.S. during the seven-year exclusive marketing period. In addition, holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug.

Orphan Designation and Exclusivity in the European Union

Products authorized as “orphan medicinal products” in the EU are entitled to certain exclusivity benefits. In accordance with Article 3 of Regulation (EC) No. 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan medicinal products, a medicinal product may be designated as an orphan medicinal product if: (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the incentives derived from orphan medicinal product status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition.

An application for orphan drug designation must be submitted before the application for marketing authorization. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

Products authorized in the EU as orphan medicinal products are entitled to 10 years of market exclusivity. The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product during the 10-year period of market exclusivity for the same therapeutic indication at any time if:

Healthcare Reform in the United States

In the United States and some non-United States jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, affect our ability to profitably sell any product candidates for which we obtain marketing approval.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. For example, in the United States, in March 2010, the Patient Protection and Affordable Care Act (the “ACA”), was passed, which substantially changed the way healthcare is financed by both the government and private insurers. Among the ACA’s provisions of importance to our business are the following:

There have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the current administration to repeal or replace certain aspects of the ACA and we expect such challenges and amendments to continue. For example, the Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, the Executive Office of the President of the United States signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the 2.3% excise tax imposed on manufacturers and importers for certain sales of medical devices, the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, and the annual fee imposed on certain health insurance providers based on market share.

In addition, other legislative changes have been proposed and adopted in the U.S. since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2018, will remain in effect through 2027 unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Further, recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to bring transparency to product pricing and reduce the cost of products and services under government healthcare programs. Additionally, individual states in the U.S. have also become increasingly active in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. Moreover, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what products to purchase and which suppliers will be included in their healthcare programs.

Regulation in the European Union

In the European Union (the “EU”), for example, there is a centralized approval procedure that authorizes marketing of a product in all countries of the EU, which includes most major countries in Europe. If this procedure is not used, approval in one country of the EU can be used to obtain approval in another country of the EU under two simplified application processes, the mutual recognition procedure or the decentralized procedure, both of which rely on the principle of mutual recognition. After receiving regulatory approval through any of the European registration procedures, pricing and reimbursement approvals are also required in most countries.

Other Regulations

We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances and biological materials. We may incur significant costs to comply with such laws and regulations now or in the future.

Risks Related to Our Business

Because we have a limited operating history to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by an early-stage company.

Since we have a limited operating history in our current business of technology and biotechnology development, it will make it difficult for investors and securities analysts to evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties we face as an early stage company with a limited operating history. Investors should evaluate an investment in our securities in light of the uncertainties encountered by early stage companies in an intensely competitive industry. There can be no assurance that our efforts will be successful or that we will be able to become profitable.

Our cancer treatment business is pre-revenue, pre-development and subject to the risks of an early stage biotechnology company.

Since the Company’s primary focus for the foreseeable future will likely be our cancer treatment business, shareholders should understand that we are primarily an early stage biotechnology company with no history of revenue-generating operations, and our only assets consist of our proprietary drug and the know-how of our officers. Therefore we are subject to all the risks and uncertainties inherent in a new business, in particular new businesses engaged in the early detection of certain cancers. DHA-dFdC is in its early stages of development, and we still must establish and implement many important functions necessary to commercialize the biotechnology.

Accordingly, you should consider the Company’s prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in their pre-revenue and pre-development generating stages, particularly those in the biotechnology field. Shareholders should carefully consider the risks and uncertainties that a business with no operating history will face. In particular, shareholders should consider that there is a significant risk that we will not be able to:

Any of the foregoing risks may adversely affect the Company and result in the failure of our business. In addition, we expect to encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. At some point, we will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be able to reach such achievements, which would have a material adverse effect on our Company.

We continue to incur operating losses and may not achieve profitability.

Our lossWe have experienced losses from operations for the years ended December 31, 2019 and 2018 was $5.7 million and $6.9 million, respectively. Our net loss for the year ended December 31, 2019 was $4.2 million andsince our net income for the year ended December 31, 2018 was $2.0 million. Our accumulated deficit was $144.3 million at December 31, 2019. We recognized $9,000 and $28,000 in revenue in 2019 and 2018, respectively.inception. Our ability to become profitable depends upon our ability to generate revenue from biotechnology products. We do not know when, or if, we will generate any revenue from such biotechnology products. Even though our revenue may increase, we expect to incur significant additional losses while we grow and expand our business. We cannot predict if and when we will achieve profitability. Our failure to achieve and sustain profitability could negatively impact the market price of our common stock.

We expect to need additional capital to fund our growing operations and if we are unable to obtain sufficient capital, we may be forced to limit the scope of our operations.

We expect that for our business to grow we will need additional working capital.  If adequate additional debt and/or equity financing is not available on reasonable terms or at all, we may not be able to continue to expand our business or pay our outstanding obligations, and we will have to modify our business plans accordingly.  These factors would have a material adverse effect on our future operating results and our financial condition. 

If we reach a point where we are unable to raise needed additional funds to continue as a going concern, we will be forced to cease our activities and dissolve the Company.  In such an event, we will need to satisfy various creditors and other claimants, severance, lease termination and other dissolution-related obligations and we may not have sufficient funds to pay to our stockholders.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud. Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act of 2002 requires management to evaluate and assess the effectiveness of our internal control over financial reporting. In order to continue to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls over financial reporting, we could be subject to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. We cannot assure you that in the future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that our internal control over financial reporting is effective. If we fail to fully comply with the requirements of the Sarbanes-Oxley Act, our business may be harmed and our stock price may decline.

Our assessment, testing and evaluation of the design and operating effectiveness of our internal control over financial reporting resulted in our conclusion that, as of December 31, 2019,2020, our internal control over financial reporting was not effective, due to our lack of segregation of duties, and lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected. We can provide no assurance as to conclusions of management with respect to the effectiveness of our internal control over financial reporting in the future.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Due to our net losses, negative cash flow and negative working capital, in their report on our audited financial statements for the years ended December 31, 2019 and 2018, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. 

We may seek to internally develop additional new inventions and intellectual property, which would take time and be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.

Part of our business may include the internal development of new inventions or intellectual property that we will seek to monetize. For example, in December 2019, we acquired substantially all of the assets of CBM, including the acquisition of certain licensing rights with respect to patents and other intellectual property related to pioneering drug compounds that were developed at the University of Wake Forest and the University of Texas at Austin, in the areas of acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL),AML, ALL, acral lentiginous melanoma and pancreatic cancer (collectively, the “University Developments”). Should we choose to assist in the development of the University Developments and/or internally develop any other inventions or intellectual property, such aspect of our business will require significant capital and will take time to achieve. Such activities may also distract our management team from its present business initiatives, which could have a material and adverse effect on our business. There is also the risk that our initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of our investments in time and resources in such activities.

Our ability to raise additional capital may be adversely affected by certain of our agreements.

Our ability to raise additional capital for use in our operating activities may be adversely impacted by the terms of a securities purchase agreement, dated as of July 15, 2015 (the “Securities Purchase Agreement”), between us and the investors who purchased securities in our July 2015 offering of our common stock and warrants for the purchase of our common stock. The Securities Purchase Agreement provides that, until the warrants issued thereunder are no longer outstanding, we will not effect or enter into a variable rate transaction, which includes issuances of securities whose prices or conversion prices may vary with the trading prices of or quotations for the shares of our common Stock at any time after the initial issuance of such securities, as well as the entry into agreements where our stock would be issued at a future-determined price. These warrants may remain outstanding as late as January 22, 2021, when the warrants expire in accordance with their terms. These restrictions may have an adverse impact on our ability to raise additional capital, or to use our cash to make certain payments that we are contractually obligated to make.

We may also identify targets with patent or other intellectual property assets that cost more than we are prepared to spend with our own capital resources.  We may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of any patent assets or, if consummated, proves to be unprofitable for us.  Acquisitions involving issuance of our securities could be dilutive to existing stockholders and could be at prices lower than those prices reflected in the trading markets.  These higher costs could adversely affect our operating results and, if we incur losses, the value of our securities will decline.  The integration of acquired assets may place a significant burden on management and our internal resources.  The diversion of management attention and any difficulties encountered in the integration process could harm our business.

As we are targeting technology companies in the development stage, their patents and technologies are in the early stages of adoption.  Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at which our licensees or others adopt our patents and technologies in their products and services.  As a result, there can be no assurance as to whether technologies we acquire or develop will have value that can be realized through licensing or other activities.

We are exploring and evaluating strategic alternatives and there can be no assurance that we will be successful in identifying, or completing any strategic alternative or that any such strategic alternative will yield additional value for shareholders.

Our management and Board of Directors (“Board of Directors”) has commenced a review of strategic alternatives which could result in, among other things, a sale, a merger, consolidation or business combination, asset divestiture, partnering or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure you that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our shareholders than that reflected in the current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms.

We may be unsuccessful at integrating future acquisitions.risk for delay in technology development and other economic repercussions as a result of the COVID-19 pandemic.

If we find appropriate opportunities in the future, weWe may acquire businesses to strategically increase the number of patents in our portfolio and pursue monetization. For example, in December 2019, we acquired substantially allbe at risk as a result of the assetscurrent COVID-19 pandemic. Risks that could affect our business include the duration and scope of CBM, including the acquisition of certain licensing rights with respect to patents and other intellectual property related to pioneering drug compounds that were developed at the University of Wake ForestCOVID-19 pandemic and the Universityimpact on the demand for our products; actions by governments, businesses and individuals taken in response to the pandemic; the length of Texas at Austin, intime of the areasCOVID-19 pandemic and the possibility of acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL), acral lentiginous melanomaits reoccurrence; the timing required to develop effective treatments and pancreatic cancer. There can be no guarantee that we will be able to successfully integrate the business or assets of CBM into the Company.

As we acquire businesses or substantial stakes in certain businesses, the process of integration may produce unforeseen operating difficulties and expenditures, fail to result in expected synergies or other benefits and absorb significant attention of our management that would otherwise be available for the ongoing development of our business. In addition,a vaccine in the event of any future acquisitions, we may record a portionoutbreaks; the eventual impact of the assetspandemic and actions taken in response to the pandemic on global and regional economies; and the pace of recovery when the COVID-19 pandemic subsides.

New York, where our U.S. operations are based, has been significantly affected by COVID-19, which led to measures taken by the New York government trying to contain the spread of COVID-19, such as shelter in place, closure of schools and travel restrictions. Additional travel and other restrictions may be put in place to further control the outbreak in U.S. Accordingly, our operation and business have been and will continue to be adversely affected as the results of the COVID-19 pandemic. Additionally, for our pipeline products, DHA-dFdC was delayed due to COVID-19 because our manufacturer was recruited by the U.S. and South Carolina governments to manufacture hand sanitizer for use in hospitals. For that reason, our manufacturing activities did not begin in earnest until the beginning of the third quarter of 2020. Once manufacturing began, shipping delays due to the pandemic further slowed progress. Despite these delays, we acquirehave now successfully replicated the synthesis as goodwill, other indefinite-lived intangible assets or finite-lived intangible assets.reported in the literature with satisfactory yield and purity and are currently optimizing the procedure to ensure batch-to-batch consistency. We doexpect to have manufactured 20,000 mg of purified DHA-dFdC during the second quarter of 2021 to use for formulation development. For the UMB compounds discussed, UMB was closed at the beginning of the pandemic and the researchers were unable to further their studies. UMB has since reopened and the researchers have commenced working on the compounds again.

The extent to which COVID-19 negatively impacts our business is highly uncertain and cannot be accurately predicted. We believe that the coronavirus outbreak and the measures taken to control it may have a significant negative impact on not amortize goodwill and indefinite-lived intangible assets,only our business, but rather review them for impairmenteconomic activities globally. The magnitude of this negative effect on an annual basis or whenever events or changesthe continuity of our business operations in circumstances indicate that their carrying value may not be recoverable. The recoverability of goodwill and indefinite-lived intangible assets is dependent onthe U.S. remains uncertain. These uncertainties impede our ability to generate sufficient future earningsconduct our daily operations and cash flows. Changes in estimates, circumstances or conditions, resulting from both internalcould materially and external factors, could have a significant impact on our fair valuation determination, which could then have a material adverse effect onadversely affect our business, financial condition and results of operations. We cannot guarantee that we will be able to identify suitable acquisition opportunities, consummate any pending or future acquisitions or that we will realize any anticipated benefits from any such acquisitions.

Our pre-acquisition stockholders have a reduced ownershipoperations, and voting interest after the acquisition of CBM’s assets and exercise less influence over our management and policies than they did prior to the acquisition.

Our pre-acquisition stockholders had the right to vote in the election of our Board of Directors on other matters affecting us. Asas a result of the CBM Purchase Agreement, because of the issuance of shares of common stock to the CBM shareholders, our pre-acquisition stockholders hold a percentage ownership of the Company that is much smaller than the pre-acquisition stockholder’s previous percentage ownership. Because of this, our pre-acquisition stockholders have less influence over the management and policies of the Company than they now have after the consummation of the acquisition of CBM’s assets.

Any failure to maintain or protect our patent assets or other intellectual property rights could significantly impair our return on investment from such assets and harm our brand, our business and our operating results.

Our ability to operate our new line of business and compete in the intellectual property market largely depends on the superiority, uniqueness and value of our acquired patent assets and other intellectual property.  To protect our proprietary rights, we will rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions.  No assurances can be given that any of the measures we undertake to protect and maintain our assets will have any measure of success.

We are required to spend significant time and resources to maintain the effectiveness of our assets by paying maintenance fees and making filings with the USPTO.  We may acquire patent assets, including patent applications, which require us to spend resources to prosecute the applications with the USPTO prior to issuance of patents.  Further, there is a material risk that patent related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or invalidity claims) will be asserted or prosecuted against us, and such assertions or prosecutions could materially and adversely affect our business. 

Despite our efforts to protect our intellectual property rights, any of the following or similar occurrences may reduce the value of our intellectual property:

Moreover, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business or enforce our patents against infringers in foreign countries. If we fail to maintain, defend or prosecute our patent assets properly, the value of those assets would be reduced or eliminated,stock price and our business would be harmed.

We may be unable to issue securities under our shelf registration statement, which may have an adverse effect on our liquidity.

We have filed a shelf registration statement on Form S-3 with the SEC.  The registration statement, which has been declared effective, was filed in reliance on Instruction I.B.6. of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.  At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6. may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6. Whether we sell securities under the registration statement will depend on a number of factors, including availability of our existing S-3 under the 1/3 limitation calculations set forth in Instruction I.B.6 of Form S-3, the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.  Furthermore, Instruction I.B.6. of Form S-3 requires that the issuer have at least one class of common equity securities listed and registered on a national securities exchange. If we are not able to maintain compliance with applicable NASDAQ rules, we will no longer be able to rely upon that Instruction. If we cannot sell securities under our shelf registration, we may be required to utilizecreate more costly and time-consuming means of accessing the capital markets, which could materially adversely affect our liquidity and cash position.volatility.

Risks Related to the Product Development, Regulatory Approval, Manufacturing and Commercialization

We are early in our development efforts and currently have no clinical-stage product candidates. If we are unable to clinically develop and ultimately commercialize DHA-dFdC, antiviral compounds or other product candidates, or experience significant delays in doing so, our business will be materially harmed.

We are early in our development efforts and have no clinical-stage product candidates as of the date of this prospectus. WeFor example, we have the exclusive U.S. rights to develop DHA-dFdC for the treatment of cancer in the licensed field. We are presently planning on filing an IND for DHA-dFdC, and we hope to begin human testing for this indication in 2021,2022, although no assurance can be given that we will be able to achieve this goal. We also have rights to assist in the development of various antiviral compounds with UMB,

Therefore, our ability to generate product or royalty revenues, which we do not expect will occur for several years, if ever, will depend heavily on our ability to develop and eventually commercialize our product candidate. The positive development of our product candidate will depend on several factors, including the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to clinically develop and commercialize DHA-dFdC as a therapy for cancer and at least one of the UMB lead compounds as an antiviral therapy, which would materially harm our business.

If we are unable to convince physicians as to the benefits of DHA-dFdC as a therapy for cancer, if and when it is approved, we may incur delays or additional expense in our attempt to establish market acceptance.

Use of DHA-dFdC as a cancer therapy will require physicians to be informed regarding the intended benefits of the product for a new indication. The time and cost of such an educational process may be substantial. Inability to carry out this physician education process may adversely affect market acceptance of DHA-dFdC as a therapy for cancer. We may be unable to timely educate physicians in sufficient numbers regarding our intended application of DHA-dFdC to achieve our marketing plans or to achieve product acceptance. Any delay in physician education or acceptance may materially delay or reduce demand for our product candidate. In addition, we may expend significant funds toward physician education before any acceptance or demand for DHA-dFdC as a therapy for cancer is created, if at all.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidate.

The risk of failure for product candidates in clinical development is high. It is impossible to predict when our sole product candidate,candidates, including DHA-dFdC forand any of the treatment of cancer,lead UMB compounds, will prove effective and safe in humans or will receive regulatory approval for the treatment of any disease, the indication for which is licensed to us. Before obtaining marketing approval from regulatory authorities for the sale of DHA-dFdC as a cancer therapy or one or more of the lead UMB compounds as antiviral therapy, we must conduct one or more clinical trials to demonstrate the safety and efficacy of oureach product candidate in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. Moreover, the outcome of early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidate, including:

If we are required to conduct additional clinical trials or other testing of our product candidate beyond those that we currently contemplate, if we are unable to complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know which, if any, of our clinical trials will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the right to commercialize our product candidate or allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidate and may harm our business and results of operations.

If we experience delays or difficulties in the enrollment of patients in any future clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be ablerely on third parties to initiate or continue future clinical trials for DHA-dFdC or our present or future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the U.S. Food and Drug Administration (“FDA”) or similar regulatory authorities outside the United States. In addition, some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidate, and patients who would otherwise be eligible for our future clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

Patient enrollment is affected by other factors including:

Our inability to enroll a sufficient number of patients for any future clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays inconduct our clinical trials may result in increased development costs for our product candidate, which would cause the value of our companyand to decline and otherwise materially and adversely affect our company.

assist us with pre-clinical development. If serious adverse or unacceptable side effects are identified during the development of our product candidate, we may need to abandon or limit such development, which would adversely affect our company.

If clinical testing of our product candidates results in undesirable side effects or demonstrates characteristics that are unexpected, we may need to abandon such development or limit such development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in early stage testing for treating cancer have later been found to cause side effects that prevented further development of the compound.

For the foreseeable future, we expect to expend our limited resources primarily to pursue a particular product candidate, leaving us unable to capitalize on other product candidates or indications that may be more profitable or for which there is a greater likelihood of clinical and commercial development.

Because we have limited financial and managerial resources, we will focus for the foreseeable future primarily on the clinical development of DHA-dFdC for the treatment of prostate cancer. As a result, we may forego or be unable to pursue opportunities with other product candidates or for indications other than those we intend to pursue that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on research and development programs related to DHA-dFdC for the treatment of cancer may not yield any commercially viable therapies. Because of this concentration of our efforts, our business will be particularly subject to significant risk of failure of our one current product candidate.

We expect to rely on collaborations withthese third parties for key aspects of our business. If we are unable to secure or maintain any of these collaborations, or if these collaborations do not achieve their goals, our business would be adversely affected.

We presently have very limited capabilities for drug development and do not yet have any capability for manufacturing, sales, marketingperform as contractually required or distribution. Accordingly, we expect to enter into collaborations with other companies that we believe can provide such capabilities. These collaborations may also provide us with important funding for our development programs.

There is a risk thatexpected, we may not be able to maintain our current collaboration or to enter into additional collaborations on acceptable terms or at all, which would leave us unable to progress our business plan. We will face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to maintain or reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of our product candidate, reduce or delay its development program, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

Moreover, even if we are able to maintain and/or enter into such collaborations, such collaborations may pose a number of risks, including the following:

Our business could be materially harmed if any of the foregoing or similar risks comes to pass with respect to our key collaborations.

Even if any of our product candidates receive marketing approval for any indication, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.or commercialize our products.

Even if DHA-dFdCWe do not have the ability to independently conduct our pre-clinical and clinical trials for the treatment of cancer receives marketing approval for any indication, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payorsour product candidates, and others in the medical community. For example, current cancer treatmentswe must rely on third parties, such as chemotherapy, immunotherapyCROs, medical institutions, clinical investigators and radiation therapy are well established incontract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations, meet expected deadlines or need to be replaced, or if the medical community,quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and doctors may continue to rely on these treatments. If our product candidate does not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of DHA-dFdC for the treatment of cancer, if approved for commercial sale, will depend on a number of factors, including:

If we are unable to establish sales, marketing and distribution capabilities, we may not be able to obtain regulatory approval for, or successfully commercialize, our product candidateproducts on a timely basis, if at all. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control. The occurrence of any of the foregoing may adversely affect our business, operating results and when it is approved.prospects.

We currently do not have a sales or marketing infrastructure. To achieve any level of commercial success for any product for which we have obtained marketing approval, we will need to establish a sales and marketing organization or outsource sales and marketing functions to third parties, and achieve the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to clinically develop and commercialize DHA-dFdC as a therapy for cancer, which would materially harm our business.

In addition, given our current limited financial resources, we are currently focusing our efforts on one key cancer indication, namely prostate cancer. We are thus faced with the risk that DHA-dFdC could be ineffective in addressing this particular cancer indication, and if our efforts to demonstrate the efficacy of DHA-dFdC in prostate cancer are not positive, we may lack the resources to expand our efforts into other cancer indications.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidate and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of cancer. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs, and we may be unable to effectively compete with these companies for these or other reasons.

Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.

Our ability to commercialize any product candidate also will depend in part on the extent to which coverage and adequate reimbursement for our product candidate will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to commercialize any product candidate for which we obtain marketing approval.

In addition, there may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA. Moreover, eligibility for reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of DHA-dFdC in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannot defend ourselves against claims that our product candidate or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

We currently do not have product liability insurance coverage, which leaves us exposed to any product-related liabilities that we may incur. We may be unable to obtain insurance on reasonable terms or at all. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

If we fail to comply with healthcare regulations, we could face substantial enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected.

We could be subject to healthcare fraud and abuse laws and patient privacy laws of both the federal government and the states in which we conduct our business. The laws include:

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.reasons.-

Members of our management team lack experience in the pharmaceutical field.

Members of our management team lack experience in the pharmaceutical field. This lack of experience may impair our ability to commercialize our pharmaceutical products and attain profitability. We will need to hire or engage managerial personnel with relevant experience in the pharmaceutical field; however, there can be no assurance that such personnel will be available to us or, that once engaged, will be retained by us. Failure to establish and maintain an effective management team with experience in the pharmaceutical field and commercialization of pharmaceuticals products would have a material adverse effect on our business and results of operations.

The marketing approval process of the FDA is lengthy, time consuming and inherently unpredictable, and if were ultimately are unable to obtain marketing approval for the product candidates we intend to develop, our business will be substantially harmed.

None of the product candidates we intend to develop have gained marketing approval in the U.S. and we cannot guarantee that we will ever have marketable products. Our business is substantially dependent on our ability to complete the development of, obtain marketing approval for, and successfully commercialize our product candidates in a timely manner. We cannot commercialize our product candidates in the United States without first obtaining approval from the FDA to market each product candidate. Our product candidates could fail to receive marketing approval for many reasons.

In addition, the process of seeking regulatory clearance or approval to market the product candidates we intend to develop is expensive and time consuming and, notwithstanding the effort and expense incurred, clearance or approval is never guaranteed. If we are not successful in obtaining timely clearance or approval of our product candidates from the FDA, we may never be able to generate significant revenue and may be forced to cease operations. The FDA process is costly, lengthy and uncertain. Any FDA application filed by the Company will have to be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the product for its intended use.

Obtaining clearances or approvals from the FDA and from the regulatory agencies in other countries is an expensive and time consuming process and is uncertain as to outcome. The FDA and other agencies could ask us to supplement our submissions, collect non-clinical data, conduct additional clinical trials or engage in other time-consuming actions, or it could simply deny our applications. In addition, even if we obtain an FDA approval or pre-market approvals in other countries, the approval could be revoked or other restrictions imposed if post-market data demonstrates safety issues or lack of effectiveness. We cannot predict with certainty how, or when, the FDA will act. If we are unable to obtain the necessary regulatory approvals, our financial condition and cash flow may be adversely affected, and our ability to grow domestically and internationally may be limited. Additionally, even if cleared or approved, the Company’s products may not be approved for the specific indications that are most necessary or desirable for successful commercialization or profitability.

Modifications to our products may require new FDA approvals.

Once a particular product receives FDA approval or clearance, expanded uses or uses in new indications of our products may require additional human clinical trials and new regulatory approvals or clearances, including additional IND and FDA submissions and premarket approvals before we can begin clinical development, and/or prior to marketing and sales. If the FDA requires new clearances or approvals for a particular use or indication, we may be required to conduct additional clinical studies, which would require additional expenditures and harm our operating results. If the products are already being used for these new indications, we may also be subject to significant enforcement actions. Conducting clinical trials and obtaining clearances and approvals can be a time consuming process, and delays in obtaining required future clearances or approvals could adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

Additional delays to the completion of clinical studies may result from modifications being made to the protocol during the clinical trial, if such modifications are warranted and/or required by the occurrences in the given trial.

Each modification to the protocol during a clinical trial has to be submitted to the FDA. This could result in the delay or halt of a clinical trial while the modification is evaluated. In addition, depending on the quantity and nature of the changes made, the FDA could take the position that the data generated by the clinical trial is not poolable because the same protocol was not used throughout the trial. This might require the enrollment of additional subjects, which could result in the extension of the clinical trial and the FDA delaying clearance or approval of a product. Any such delay could have a material adverse effect on our business and results of operations.

There can be no assurance that the data generated from our clinical trials using modified protocols will be acceptable to FDA.

There can be no assurance that the data generated using modified protocols will be acceptable to the FDA or that if future modifications during the trial are necessary, that any such modifications will be acceptable to the FDA. If the FDA believes that its prior approval is required for a particular modification, it can delay or halt a clinical trial while it evaluates additional information regarding the change.

Serious injury or death resulting from a failure of one of our drug candidates during current or future clinical trials could also result in the FDA delaying our clinical trials or denying or delaying clearance or approval of a product.

Even though an adverse event may not be the result of the failure of our drug candidate, the FDA or an Internal Review Board (“IRB”) could delay or halt a clinical trial for an indefinite period of time while an adverse event is reviewed, and likely would do so in the event of multiple such events.

Any delay or termination of our current or future clinical trials as a result of the risks summarized above, including delays in obtaining or maintaining required approvals from IRBs, delays in patient enrollment, the failure of patients to continue to participate in a clinical trial, and delays or termination of clinical trials as a result of protocol modifications or adverse events during the trials, may cause an increase in costs and delays in the filing of any product submissions with the FDA, delay the approval and commercialization of our products or result in the failure of the clinical trial, which could adversely affect our business, operating results and prospects.

The future results of our current or future clinical trials may not support our product candidate claims or may result in the discovery of unexpected adverse side effects.

Even if our clinical trials are completed as planned, we cannot be certain that their results will support our drug candidate claims or that the FDA or foreign authorities will agree with our conclusions regarding them. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and preclinical studies. The clinical trial process may fail to demonstrate that our drug candidates are safe and effective for the proposed indicated uses. If the FDA concludes that the clinical trials for DHA-dFdC, or any other product for which we might seek clearance, has failed to demonstrate safety and effectiveness, we would not receive FDA clearance to market that product in the United States for the indications sought.

In addition, such an outcome could cause us to abandon the product candidate and might delay development of others. Any delay or termination of our clinical trials will delay the filing of any product submissions with the FDA and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain for such product candidates.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our product candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In the United States, the Medicare Modernization Act (“MMA”) changed the way Medicare covers and pays for pharmaceutical products. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for our product candidates and could seriously harm our business.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “Health Care Reform Law”) is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law remains subject to legislative efforts to repeal, modify or delay the implementation of the law. However, if the Health Care Reform Law is repealed or modified, or if implementation of certain aspects of the Health Care Reform Law are delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce or eliminate our profitability.

Upon commercialization of our products, we may be dependent on third parties to market, distribute and sell our products.

Our ability to receive revenues may be dependent upon the sales and marketing efforts of any future co-marketing partners and third-party distributors. At this time, we have not entered into an agreement with any commercialization partner and only plan to do so after the successful completion of Phase 1 clinical trials and prior to commercialization. If we fail to reach an agreement with any commercialization partner, or upon reaching such an agreement that partner fails to sell a large volume of our products, it may have a negative impact on our business, financial condition and results of operations.

Adverse events involving our products may lead the FDA to delay or deny clearance for our products or result in product recalls that could harm our reputation, business and financial results.

Once a product receives FDA clearance or approval, the agency has the authority to require the recall of commercialized products in the event of adverse side effects, material deficiencies or defects in design or manufacture. The authority to require a recall must be based on an FDA finding that there is a reasonable probability that the product would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of adverse side effects, impurities or other product contamination, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within ten working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

Risks Related to Ownership of Our Common Stock

We face evolving regulation of corporate governance and public disclosure that may result in additional expenses and continuing uncertainty.

As a public company, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, or SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.  Our management and other personnel devote a substantial amount of time towards maintaining compliance with these requirements. These rules, regulations and standards are subject to varying interpretations, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.  This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.  We intend to invest the resources necessary to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.  If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us, which could be costly and time-consuming, and our reputation and business may be harmed.

Our common stock may be delisted from The NASDAQNasdaq Capital Market if we fail to comply with continued listing standards.

Our common stock is currently traded on The NASDAQNasdaq Capital Market under the symbol “SPEX”“AIKI”. If we fail to meet any of the continued listing standards of The NASDAQNasdaq Capital Market, our common stock could be delisted from The NASDAQNasdaq Capital Market. These continued listing standards include specifically enumerated criteria, such as:

There can be no assurance that we will be able to maintain compliance and remain in compliance in the future. In particular, our share price may continue to decline for a number of reasons, including many that are beyond our control. See “Our share price may be volatile and there may not be an active trading market for our common stock”.

If we fail to comply with NASDAQ’sNasdaq’s continued listing standards, we may be delisted and our common stock will trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board or OTCQX market, and then only if one or more registered broker-dealer market makers comply with quotation requirements. In addition, delisting of our common stock could depress our stock price, substantially limit liquidity of our common stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of our common stock would likely result in our common stock becoming a “penny stock” under the Exchange Act.

Our share price may be volatile and there may not be an active trading market for our common stock.

There can be no assurance that the market price of our common stock will not decline below its present market price or that there will be an active trading market for our common stock. The market prices of technology or technology related companies have been and are likely to continue to be highly volatile. Fluctuations in our operating results and general market conditions for technology or technology related stocks could have a significant impact on the volatility of our common stock price. We have experienced significant volatility in the price of our common stock. From January 1, 20192020 through December 31, 2019,2020, the share price of our common stock (on a split-adjusted basis) ranged from a high of $3.92$3.22 to a low of $1.05.$0.49. The reason for the volatility in our stock is not well understood and may continue. Factors that may have contributed to such volatility include, but are not limited to:

We could fail in future financing efforts or be delisted from The NASDAQ Capital Market if we fail to receive stockholder approval when needed.

We are required under the NASDAQ rules to obtain stockholder approval for any issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding before the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to be a “public offering” by NASDAQ. Funding of our operations and acquisitions of assets may require issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding, but we might not be successful in obtaining the required stockholder approval for such an issuance. If we are unable to obtain financing due to stockholder approval difficulties, such failure may have a material adverse effect on our ability to continue operations.

Our shares of common stock are thinly traded and, as a result, stockholders may be unable to sell at or near ask prices, or at all, if they need to sell shares to raise money or otherwise desire to liquidate their shares.

Our common stock has been “thinly-traded” meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. Our trading volumes are further adversely affected by the 1-for-19 reverse stock split that was effective as of March 4, 2016. In addition, we believe that due to the limited number of shares of our common stock outstanding, an options market has not been established for our common stock, limiting the ability of market participants to hedge or otherwise undertake trading strategies available for larger companies with broader shareholder bases which prevents institutions and others from acquiring or trading in our securities. Consequently, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.

Because of the Shareholder Rights Plan and “anti-takeover” provisions in our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and Delaware General Corporation Law, a third party may be discouraged from making a takeover offer that could be beneficial to our stockholders.

Effective as of January 24, 2013, we adopted a shareholder rights plan which was amended and restated as of June 9, 2017. The effect of this rights plan and of certain provisions of our Amended and Restated Certificate of Incorporation, By-Laws,Amended and Restated Bylaws and the anti-takeover provisions of the Delaware General Corporation Law (the “DGCL”), could delay or prevent a third party from acquiring us or replacing members of our Board of Directors, or make more costly any attempt to acquire control of the Company, even if the acquisition or the Board designees would be beneficial to our stockholders. These factors could also reduce the price that certain investors might be willing to pay for shares of the common stock and result in the market price being lower than it would be without these provisions.

Dividends on our common stock are not likely.

During the last five years, we have not paid cash dividends on our common stock, and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Investors must look solely to the potential for appreciation in the market price of the shares of our common stock to obtain a return on their investment.

It may be difficult to predict our financial performance because our quarterly operating results may fluctuate.

We currently do not have any revenues and our operating results and valuations of certain assets and liabilities may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our results of operations as an indication of our future performance. Our results of operations may fall below the expectations of market analysts and our own forecasts. If this happens, the market price of our common stock may fall significantly. The factors that may affect our quarterly operating results include the following:

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel and the continued contributions of our executive officers, each of whom may be difficult to replace. In particular, Anthony Hayes, our Chief Executive Officer, is important to the management of our business and operations and the development of our strategic direction. The loss of the services of any such individual and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

As a smaller reporting company, we are not required to provide the information required by this item.

Our main office is located in New York, New York where we lease one office with a monthly payment of approximately $3,200.$3,320. We also lease space in Longview, Texas, on a month to month basis, for approximately $2,000 per month, and in Williamsburg, Virginia, on a month to month basis, for approximately $500 per month. We believe that the New York Texas and VirginiaTexas facilities are sufficient to meet our needs. We leased office space in Bethesda, Maryland under a lease with monthly payments of $15,107 that expired on March 31, 2018, which we did not renew.

In the past, in the ordinary course of business, we actively pursued legal remedies to enforce our 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.

Not applicable.

PART II

Our common stock is traded on the NASDAQ Capital Market under the symbol “SPEX”“AIKI”. No dividends were paid in 20192020 or 20182019 and we do not currently anticipate paying any cash dividends on our capital stock in the foreseeable future.

On January 30, 2020,March 24, 2021, the closing price of our common stock, as reported by the NASDAQ Capital Market, was $1.14.$1.29. As of January 30, 2020,March 24, 2021, we had approximately 123122 holders of record of our common stockstock.

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 31, 20192020 (on a split-adjusted basis).

As a smaller reporting company, we are not required to provide this information.

Forward-Looking Statements

You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-K. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Overview

Spherix IncorporatedAIkido Pharma Inc. (the “Company”), was initially formed in 1967 and is currently a biotechnology company seeking to developwith a diverse portfolio of small-molecule anti-cancer therapeutics.therapeutics in development. The Company recently purchased the rights toCompany’s platform consists of patented technology from leading universities and researchers and we are currently in the process of developing an innovative therapeutic drugsdrug platform through strong partnerships with world renownedworld-renowned educational institutions, including Thethe University of Texas at Austin, the University of Maryland, Baltimore and Wake Forest University. Our diverse pipeline of therapeutics includes therapies for pancreatic cancer, acute myeloid leukemia (AML)(“AML”) and acute lymphoblastic leukemia (ALL)(“ALL”). The Company is also developing a broad-spectrum antiviral platform that may potentially inhibit replication of multiple viruses including Influenza virus, SARS-CoV (coronavirus), MERS-CoV, Ebolavirus and Marburg virus.

Prior to the closing on December 5, 2019 of the acquisition of the assets and rights of CBM BioPharma, Inc. and since July 2013, theThe Company previously focused its efforts on owning, developing, acquiring and monetizing intellectual property assets. Since MarchMay 2016, the Company has received limited funds from its intellectual property monetization. In addition to its patent monetization efforts, since the fourth quarter of 2017, the Company has been transitioning to focus its efforts as a technology and biotechnology development company. These efforts have focused on biotechnology research and blockchain technology research. The Company’s investment in biotechnology research development includes investments in:includes: (i) an investment in Hoth Therapeutics, Inc. (“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema, and (ii) an investment in DatChat, Inc. (“DatChat”), a privately held personal privacy platform focused on encrypted communication, internet security and digital rights management.management, and (iii) the acquisition of assets of CBM BioPharma, Inc. (“CBM”), a pharmaceutical company focusing on the development of cancer treatments.

As a result of the Company’s biotechnology research development and associated investments and acquisitions, our business portfolio now focuses on the treatment of three different cancers, including pancreatic cancer, acute myeloid leukemia (AML)AML and acute lymphoblastic leukemia (ALL).ALL. Our AML and ALL compounds, developed at the Wake Forest University, are next generation targeted therapeutics designed to overcome multiple resistance mechanisms observed with the current standard of care. DHA-dFdC, our pancreatic drug candidate developed at the University of Texas at Austin (“UTA”), is a new compound whichthat we hope towill become the next generation of chemotherapy treatment for advanced pancreatic cancer. The Company believes that 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), has documented efficacy against pancreatic tumors in a clinically relevant transgenic mouse model and has demonstrated activities against other cancers, including leukemia, lung and melanoma. DHA-dFdC is being developed by certain third parties for oral administration in a solid lipid nanoparticle carrier matrix, which has also been licensed from UTA, and is intended to be a second-line treatment for advanced pancreatic cancer. The Company has entered into agreements with a number of third parties to assist in optimizing the manufacturing process of the active ingredient, formulate the dosage form and do other tests, like drug stability, pre-clinical animal studies, and assistance with potential FDA clearance. The Company’s license with UTA (the “License”) is a royalty-bearing exclusive license that, unless terminated earlier, continues until the last date of expiration or termination of the patent rights granted under the License (the “Patent Rights”). With regard to DHA-dFdC, the Patent Rights include several filed U.S. patent applications (a “U.S. Patent Application”) and an application filed under the Patent Cooperation Treaty (“PCT”) that is currently being prosecuted to secure rights in foreign countries. From these applications, one patent, U.S. Patent No. 10,463,684 (the “684 Patent”), contains items covering the compound DHA-dFdC. Assuming all maintenance fees are timely paid, the 684 Patent is expected to expire on October 27, 2035. The Company’s license with UTA also covers a non-provisional U.S. Patent Application filed with respect to the lipid nanoparticle carrier matrix for the drug, which was filed on June 6, 2019. In June of 2020, at the request of the Company, UTA filed both a U.S. non-provisional utility patent application as well as a PCT application relating to the lipid nanoparticle carrier matrix. Patent prosecution on all pending patent applications is currently underway. The Company is currently engaged in Chemistry, Manufacturing and Controls (“CMC”) activities related to DHA-dFdC. Manufacturing activities thus far have confirmed the critical chemical steps required for the manufacturing and scalability of the process. In collaboration with our contract manufacturing organization, Parimer Scientific, we are currently optimizing the manufacturing procedure for DHA-dFdC. Our manufacturing activities were initially delayed several months due to COVID-19 because Parimer was recruited by the U.S. and South Carolina governments to manufacture hand sanitizer for use in hospitals. For that reason, our manufacturing activities did not begin in earnest until the beginning of the third quarter of 2020. Once manufacturing began, shipping delays due to the pandemic further slowed progress. Despite these delays, we have now successfully replicated the synthesis as reported in the literature with satisfactory yield and purity and are currently optimizing the procedure to ensure batch-to-batch consistency. In tandem, the Company is developing the solid lipid nanoparticle delivery system and is currently optimizing the manufacturing process for size and consistency of the particles. We plan to begin formulation development in the second quarter of 2021, which will require limited animal testing to determine proper dosage. We expect to have manufactured 20,000 mg of purified DHA-dFdC during the second quarter of 2021 to use for such purposes. We plan to engage a contract research organization for the purpose of such animal testing during the second quarter of 2021. Our goal is to have acceptable intravenous and oral formulations developed in the fourth quarter of 2021. The Company expects these activities, as well as the development of the final formulation to comprise most of the CMC activities through the end of the year. Optimization of the formulation will require in vitro studies as well as some preliminary animal studies. During the second half of 2021 and into 2022, optimization of the formulation and biological studies, including animal toxicology testing and pharmacology testing, are scheduled to occur. To the extent costs are incurred relating to governmental regulations, including under the FDA and environmental regulations, those costs will be borne by our Contract Manufacturing Organizations and Contract Research Organizations and will be passed on to the Company as part of their fees. FDA approval will eventually be required to begin administering DHA-dFdC to patients as part of any clinical trials. The animal studies performed next year will be a necessary prerequisite to filing an Investigational New Drug Application (“IND”) with the FDA. The Company’s development activities in the first half of 2021 will also include preparing the IND for submission to the FDA. The Company’s formulation is a new chemotherapy oral dosage form “repurposing” the chemotherapeutic agent gemcitabine, enabling it to be developed for use in patients following a special regulatory pathway codified in Section 505(b)(2) of the FDA rules. Section 505(b)(2) was enacted to enable sponsors to seek New Drug Application (“NDA”) approval for novel repurposed drugs without the need for such sponsors to undertake certain time consuming and expensive safety studies. Proceeding under this regulatory pathway, we hope to be able to rely upon all of the publicly available safety and toxicology data with respect to gemcitabine in our FDA submissions. We believe that this path will dramatically reduce the required clinical development efforts, costs and risks as compared to what would be required of us if we were required to conduct the entire scope of trials required for new chemical entities that are not eligible to be reviewed pursuant to the Section 505(b)(2) regulatory pathway. We estimate that by using the Section 505(b)(2) regulatory pathway, the clinical development process may be several years shorter than is required for a new chemical entity, and the FDA approval process may be six to nine months shorter than the typical eighteen-month period, which we believe may result in lower development costs and shorter development time. As of the date hereof, we have not submitted an IND or an NDA to the FDA. During the latter half of 2021, we hope to schedule and attend the first of a series of meetings with the FDA to review the requirements for submission and activation of an IND with respect to the DHA/dFdC formulated in SLNs for second-line treatment of advanced pancreatic cancer. At that meeting, we will present to the FDA our proposed clinical trial plan for the treatment of advanced pancreatic cancer. As part the meeting, as is standard, the FDA will provide us with general guidance with respect to specific animal studies, dosing schedules and suggested human safety studies before we commence clinical trials in patients. In addition, we are constantly seeking to grow our pipeline to treat unmet medical needs in oncology.

In addition, the Company owns an exclusive world-wide license to patented technology from the University of Maryland Baltimore (“UMB”). Our license is for a broad-spectrum antiviral drug platform. The licensed technology is a broadly acting pan-viral inhibitory compound with efficacy against multiple viral pathogens. The technology works to inhibit replication of multiple viruses including Influenza virus, SARS-CoV (coronavirus), MERS-CoV, Ebolavirus and Marburg virus. The technology is covered by two patent applications already on file with the United States Patent and Trademark Office. The Company’s license covers two U.S. Nonprovisional Applications, which were consolidated and timely filed as a PCT application on June 5, 2020, commencing patent prosecution. Any patents issued from this application are expected to expire 20 years later, on June 5, 2040, unless the term is extended by the patent office. Publication of the results of the work to which the Company is licensed is expected later this year. Currently, the Company and UMB are collaborating to identify chemical structures that are as effective as, or more effective than, the lead compounds covered in the PCT application. The UMB inventors are Drs. Matthew Frieman, Alexander MacKerell and Stuart Watson. The Company has also executed a Sponsored Research Agreement with UMB to support the development of the technology.

Critical Accounting Policies

Our critical accounting policies are disclosed in Note 3 to the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

See Note 3 to the consolidated financial statements for a discussion of recent accounting standards and pronouncements.standards.

Results of Operations

Fiscal Year Ended December 31, 20192020 Compared to Fiscal Year Ended December 31, 20182019

The Company experienced very little or no revenue in the last two years and we don’t expect any revenue until a biotechnology product is fully developed which may not occur for many years.

For the year ended December 31, 20192020 and 2018,2019, we incurred a loss from operations of $5.7$6.5 million and $6.9$5.7 million, respectively. The decreaseincrease in net loss in the 2019 period was primarily attributed to $1.4$1.0 million decreaseincrease in amortization of patent portfolio, $2.2other research and development expense, and $0.9 million decreaseincrease in impairment of intangible assets, $0.2 million decrease in selling, general and administrative expense, andexpenses, partially offset by $2.5$1.0 million increasedecrease in research and development expense relatedincurred in connection with the license acquisition.acquired.

For the year ended December 31, 2020 and 2019, and 2018, other expense (income)(expense) income was approximately $1.5$(5.8) million and $8.6$1.5 million, respectively. The decrease ofincrease in other incomeexpense was primarily attributed to a $6.8$8.2 million decrease in change in fair value of investments and a $0.7 millioninvestment in Hoth, due to the decrease in the fair value of warrant liabilities, and partially offset by $0.3 million decrease in other expenses. DuringHoth’s common stock price for the year ended December 31, 2019, we recorded a loss of $0.92020, and partially offset by $1.0 million related to our investmentincrease in DatChat and a $2.4 million unrealized lossgains on our investment in Hoth as the closing stock price Hoth increased from a cost basis of $5.42 to $6.19 as of December 31, 2019.marketable securities.

Liquidity and Capital Resources

We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While we continue to implement our business strategy, we intend to finance our activities through:

Our ultimate success is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet our obligations on a timely basis.  Our business will require significant amountsDuring the first quarter of capital to sustain operations and make the investments it needs to execute its longer-term business plan to support new technologies and help advance innovation. Our working capital amounted to approximately $0.4 million at December 31, 2019. We will need to obtain additional debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly-traded company or operations.  If we attempt to obtain additional debt or equity financing, we cannot assume that such financing will be available to2021, the Company on favorable terms, orconsummated a public offering of 53,905,927 shares of common stock (including the underwriter overallotment). The Company received gross proceeds of approximately $86.2 million before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. Therefore, the Company has adequate cash to fund its operations for at all.least the next twelve months.

The Company plans to pursue its plans regarding researchManagement is currently evaluating the impact of the COVID-19 pandemic on the industry and development of our two pre-clinical products which will require resources beyond those currently, ultimately requiring third party capital. During this time,has concluded that while it is reasonably possible that the Company does not expect to generate revenue and there is substantial doubt aboutvirus could have a negative effect on the Company’s ability to continuefinancial position, results of its operations and/or search for drug candidates, the specific impact is not readily determinable as a going concern within one year fromof the date of this filing.these financial statements. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that maymight result from the outcome of this uncertainty.

Cash Flows from Operating Activities - For the year ended December 31, 20192020 and 2018,2019, net cash used in operations was $4.0 million and $3.0 million, respectively. The cash used in operating activities for the year ended December 31, 2020 primarily resulted from a net loss of $12.3 million, and $2.7partially offset by reduction in fair value of investment of $6.8 million respectively.and $1.5 million research and development expense related with license acquired. The cash used in operating activities for the year ended December 31, 2019 primarily resulted from a net loss of $4.2 million, reduced by $1.4 million change in fair value of our investment, $0.1 million unrealized loss on marketable securities and $0.2 million change in assets and liabilities, and partially offset by $2.5 million research and development expense related with license acquisition. The cash used in operating activities for the year ended December 31, 2018 primarily resulted from a $8.2 million change in fair value of our investment in Hoth and $0.7 million change in fair value of warrant liabilities, and partially offset by a net income of $1.7 million, impairment of goodwill and intangible assets of $2.2 million and amortization of patent portfolio expenses of $1.4 million. 

Cash Flows from Investing Activities - For the year ended December 31, 20192020, net cash used in investing activities was approximately $25.0 million as compared to net cash provided by investing activities wasof approximately $1.3 million as compared to net cash used in investing activities of approximately $0.2 million for the year ended December 31, 2018.2019. The cash used in investing activities for the year ended December 31, 2020 primarily resulted from our purchase of marketable securities of $98.8 million and research and development expense related with license acquired of $1.5 million, partially offset by our sale of marketable securities of $74.9 million since we invest excess cash into marketable securities until additional cash is needed. The cash provided by investing activities for the year ended December 31, 2019 of $10.3 million primarily resulted from our sale of marketable securities, partially offset by our purchase of marketable securities of $8.5 million. The

Cash Flows from Financing Activities – For the year ended December 31, 2020, cash used in investingprovided by financing activities primarily resulted from our purchase of marketable securities for the year ended December 31, 20182020 was $31.6 million, which reflects the net proceeds of $14.3$6.6 million purchasefrom investors in exchange of investment at fair valueissuance of $0.9common stock, common warrants and prefunded warrants, net proceeds of $17.8 million from investors in exchange of issuance of common stock, and was partially offset by our salenet proceeds of marketable securities$7.2 million from the exercise of $15.1 million.

Cash Flows from Financing Activities –For the year ended December 31, 2019common warrants and 2018, net cash provided by financing activities was $1.8 million and $2.7 million, respectively.prefunded warrants. Cash provided by financing activities for the year ended December 31, 2019 was $1.8 million, which reflects the net proceeds of $0.8 million from investors in exchange of issuance of common stock and prefunded common stock warrants, and net proceeds of $1.0 million from the issuance of common stock as part of our ATM offering. Net cash provided by financing activities for the year ended December 31, 2018 was approximately $2.7 million, which related to the sale of 522,876 shares of its common stock.

The Company’s ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely basis. The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business plan. The Company’s working capital amounted to approximately $0.4 million at December 31, 2019. Absent generation of sufficient revenue from the execution of the Company’s long-term business plan, the Company will need to obtain additional debt or equity financing if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or operations. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

We have filed a shelf registration statement on Form S-3 with the SEC. The registration statement, which has been declared effective, was filed in reliance on Instruction I.B.6 of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6. Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.

In connection with the consummation of the IPO of Hoth, the Company entered into a lock-up agreement with Hoth pursuant to which the Company has agreed not to sell any shares of Hoth common stock or Spherix Securities until February 20, 2022, which is the 36 month anniversary of the consummation of Hoth’s IPO, provided, however (i) Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an aggregate of 10% of the initially issued Spherix Securities, provided further that the recipients of the Spherix Securities shall not be permitted to resell such Spherix Securities until six months after the date of the IPO, (ii) beginning 12 months after the date of Hoth’s IPO, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an additional 10% of the initially issued Spherix Securities, (iii) beginning 24 months after the date of Hoth’s IPO, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, up to an additional 10% of the initially issued Spherix Securities and (iv) beginning 36 months after the date of the Hoth IPO, Spherix may offer, sell, contract to sell, hypothecate, pledge, dividend or distribute to its shareholders or otherwise dispose of, directly or indirectly, the Spherix Securities without any restrictions. 

Contractual obligations

None.

As a smaller reporting company, we are not required to provide the information required by this item.

Financial statements and supplementary data required by this Item 8 follow.

Index to Financial Statements Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Spherix IncorporatedAIkido Pharma Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Spherix Incorporated and SubsidiariesAIkido Pharma Inc. (the “Company”) as of December 31, 20192020 and 2018,2019, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2019,2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019,2020, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has historically incurred losses from operations and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Marcumllp

Marcumllp

We have served as the Company’s auditor since 2013.

New York, NY

January 31, 2020March 25, 2021

SPHERIX INCORPORATED AND SUBSIDIARIESAIKIDO PHARMA INC.

Consolidated Balance Sheets

($ in thousands except per share amounts)