UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark one)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly
period ended September 30, 2023
☐ 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 001-41845
DOMINARI HOLDINGS INC. |
(Exact name of registrant as specified in its charter) |
Delaware | | 52-0849320 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
725 5th Avenue, 22nd Floor, New York, NY 10022 |
(Address of Principal Executive Offices, including zip code) |
(212) 393-4540 |
(Registrant’s telephone number, including area code) |
Not
Applicable |
(Former
name, former address and former fiscal year, if changed since last report) |
Indicate by check
mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted 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.
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
Non-accelerated Filer | ☒ | Smaller Reporting Company | ☒ |
Emerging growth company | ☐ | | |
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered
pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.0001 par value | | DOMH | | The Nasdaq Capital Market LLC |
As of November
6, 2023, there were 5,345,312 shares of the Company’s common stock issued and outstanding.
DOMINARI HOLDINGS
INC.
Form 10-Q
For the Quarter
Ended September 30, 2023
Index
PART I - FINANCIAL
INFORMATION
Item 1. Financial Statements
DOMINARI HOLDINGS
INC.
Condensed Consolidated
Balance Sheets
($ in thousands
except share and per share amounts)
(Unaudited)
| |
September 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 4,388 | | |
$ | 33,174 | |
Marketable securities | |
| 16,274 | | |
| 7,130 | |
Deposits with clearing broker | |
| 7,172 | | |
| - | |
Prepaid expenses and other assets | |
| 715 | | |
| 564 | |
Prepaid acquisition cost | |
| - | | |
| 301 | |
Short-term investments at fair value | |
| 1 | | |
| 13 | |
Notes receivable, at fair value - current portion | |
| 6,336 | | |
| 7,474 | |
Investment in Fieldpoint Securities | |
| - | | |
| 2,000 | |
Total current assets | |
| 34,886 | | |
| 50,656 | |
| |
| | | |
| | |
Property and equipment, net | |
| 361 | | |
| - | |
Notes receivable, at fair value - non-current portion | |
| 1,372 | | |
| 1,100 | |
Employee forgivable loan receivable | |
| 7 | | |
| - | |
Investments | |
| 22,696 | | |
| 23,103 | |
Right-of-use assets | |
| 3,426 | | |
| 919 | |
Security deposit | |
| 458 | | |
| 458 | |
Total assets | |
$ | 63,206 | | |
$ | 76,236 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 315 | | |
$ | 447 | |
Accrued salaries and benefits | |
| 632 | | |
| 1,260 | |
Accrued commissions | |
| 177 | | |
| - | |
Lease liability - current | |
| 411 | | |
| 82 | |
Other current liability | |
| 187 | | |
| - | |
Total current liabilities | |
| 1,722 | | |
| 1,789 | |
| |
| | | |
| | |
Lease liability | |
| 3,137 | | |
| 680 | |
Total liabilities | |
| 4,859 | | |
| 2,469 | |
| |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock, $.0001 par value, 50,000,000 authorized | |
| | | |
| | |
Series D: 5,000,000 shares designated; 3,825 shares issued and outstanding at September 30, 2023 and December 31, 2022; liquidation value of $0.0001 per share | |
| - | | |
| - | |
Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at September 30, 2023 and December 31, 2022; liquidation value of $0.0001 per share | |
| - | | |
| - | |
Common stock, $0.0001 par value, 100,000,000 shares authorized; 5,345,312 and 5,485,096 shares issued at September 30, 2023 and December 31, 2022, respectively; 5,285,164 and 5,017,079 shares outstanding at September 30, 2023 and December 31, 2022, respectively | |
| - | | |
| - | |
Additional paid-in capital | |
| 260,695 | | |
| 262,970 | |
Treasury stock, at cost, 60,148 and 468,017 shares at September 30, 2023 and December 31, 2022, respectively | |
| (501 | ) | |
| (3,322 | ) |
Accumulated deficit | |
| (201,847 | ) | |
| (185,881 | ) |
Total stockholders’ equity | |
| 58,347 | | |
| 73,767 | |
Total liabilities and stockholders’ equity | |
$ | 63,206 | | |
$ | 76,236 | |
See accompanying
notes to unaudited condensed consolidated financial statements.
DOMINARI HOLDINGS
INC.
Condensed Consolidated
Statements of Operations
($ in thousands
except share and per share amounts)
(Unaudited)
| |
Three Months Ended
September 30, | | |
Nine Months Ended
September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenues | |
$ | 963 | | |
$ | - | | |
$ | 1,034 | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Operating costs and expenses | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
$ | 4,067 | | |
$ | 4,515 | | |
$ | 16,980 | | |
$ | 8,564 | |
Research and development | |
| - | | |
| 61 | | |
| 3 | | |
| 2,113 | |
Research and development - license acquired | |
| | | |
| 525 | | |
| - | | |
| 525 | |
Total operating expenses | |
| 4,067 | | |
| 5,101 | | |
| 16,983 | | |
| 11,202 | |
Loss from operations | |
| (3,104 | ) | |
| (5,101 | ) | |
| (15,949 | ) | |
| (11,202 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
Other income | |
| - | | |
| - | | |
| - | | |
| 64 | |
Interest income | |
| 208 | | |
| 187 | | |
| 505 | | |
| 586 | |
(Loss) gain on marketable securities | |
| (150 | ) | |
| (1,654 | ) | |
| 185 | | |
| (4,390 | ) |
Unrealized loss on note receivable | |
| - | | |
| - | | |
| (212 | ) | |
| - | |
Change in fair value of investments | |
| (495 | ) | |
| 329 | | |
| (495 | ) | |
| 91 | |
Total other (expenses) income | |
| (437 | ) | |
| (1,138 | ) | |
| (17 | ) | |
| (3,649 | ) |
Net loss | |
$ | (3,541 | ) | |
$ | (6,239 | ) | |
$ | (15,966 | ) | |
$ | (14,851 | ) |
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock | |
| - | | |
| - | | |
| - | | |
| (4,109 | ) |
Net Loss Attributable to Common Shareholders | |
$ | (3,541 | ) | |
$ | (6,239 | ) | |
$ | (15,966 | ) | |
$ | (18,960 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share, basic and diluted | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted | |
$ | (0.66 | ) | |
$ | (1.17 | ) | |
$ | (3.09 | ) | |
$ | (3.59 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares outstanding, basic and diluted | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted | |
| 5,345,312 | | |
| 5,344,989 | | |
| 5,159,501 | | |
| 5,283,182 | |
See accompanying
notes to unaudited condensed consolidated financial statements.
DOMINARI HOLDINGS
INC.
Condensed Consolidated
Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity
($ in thousands
except share and per share amounts)
(Unaudited)
For the Three
Months Ended September 30, 2023 and 2022
| |
Preferred Stock | | |
Common Stock | | |
Additional
Paid-in | | |
Treasury Stock | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Deficit | | |
Equity | |
Balance at June 30, 2023 | |
| 4,659 | | |
$ | - | | |
| 5,345,312 | | |
$ | - | | |
$ | 260,585 | | |
| 60,148 | | |
$ | (501 | ) | |
$ | (198,306 | ) | |
$ | 61,778 | |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 110 | | |
| - | | |
| - | | |
| - | | |
| 110 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,541 | ) | |
| (3,541 | ) |
Balance at September 30, 2023 | |
| 4,659 | | |
$ | - | | |
| 5,345,312 | | |
$ | - | | |
$ | 260,695 | | |
| 60,148 | | |
$ | (501 | ) | |
$ | (201,847 | ) | |
$ | 58,347 | |
| |
Series O | | |
Series P | | |
Common Stock | | |
Preferred Stock | | |
Additional
Paid-in | | |
Treasury Stock | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Deficit | | |
Equity | |
Balance at June 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,246,852 | | |
$ | - | | |
| 4,659 | | |
$ | - | | |
$ | 261,603 | | |
| 242,902 | | |
$ | (1,750 | ) | |
$ | (172,386 | ) | |
$ | 87,467 | |
Purchase of treasury stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 102,080 | | |
| (751 | ) | |
| | | |
| (751 | ) |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 238,244 | | |
| - | | |
| - | | |
| - | | |
| 1,370 | | |
| - | | |
| - | | |
| - | | |
| 1,370 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,239 | ) | |
| (6,239 | ) |
Balance at September 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,485,096 | | |
$ | - | | |
| 4,659 | | |
$ | - | | |
$ | 262,973 | | |
| 344,982 | | |
$ | (2,501 | ) | |
$ | (178,625 | ) | |
$ | 81,847 | |
For the Nine Months Ended
September 30, 2023 and 2022
| |
Preferred Stock | | |
Common Stock | | |
Additional
Paid-in | | |
Treasury Stock | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Deficit | | |
Equity | |
Balance at December 31, 2022 | |
| 4,659 | | |
$ | - | | |
| 5,485,096 | | |
$ | - | | |
$ | 262,970 | | |
| 468,017 | | |
$ | (3,322 | ) | |
$ | (185,881 | ) | |
$ | 73,767 | |
Stock-based compensation | |
| - | | |
| - | | |
| 529,715 | | |
| - | | |
| 1,485 | | |
| - | | |
| - | | |
| - | | |
| 1,485 | |
Cancellation of common stock | |
| - | | |
| - | | |
| (25,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Purchase of treasury stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 236,630 | | |
| (939 | ) | |
| - | | |
| (939 | ) |
Retirement of treasury stock | |
| - | | |
| - | | |
| (644,499 | ) | |
| - | | |
| (3,760 | ) | |
| (644,499 | ) | |
| 3,760 | | |
| - | | |
| - | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (15,966 | ) | |
| (15,966 | ) |
Balance at September 30, 2023 | |
| 4,659 | | |
$ | - | | |
| 5,345,312 | | |
$ | - | | |
$ | 260,695 | | |
| 60,148 | | |
$ | (501 | ) | |
$ | (201,847 | ) | |
$ | 58,347 | |
| |
Redeemable Convertible Preferred Stock | | |
| | |
| | |
Additional | | |
| | |
| | |
Total | |
| |
Series O | | |
Series P | | |
Common Stock | | |
Preferred Stock | | |
Paid-in | | |
Treasury Stock | | |
Accumulated | | |
Stockholders | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Deficit | | |
Equity | |
Balance at December 31, 2021 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,275,329 | | |
$ | - | | |
| 4,659 | | |
$ | - | | |
$ | 265,633 | | |
| - | | |
$ | (264 | ) | |
$ | (163,774 | ) | |
$ | 101,595 | |
Issuance of Series O redeemable convertible preferred stock for cash | |
| 11,000 | | |
| 11,000 | | |
| | | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Issuance of Series P redeemable convertible preferred stock for cash | |
| | | |
| | | |
| 11,000 | | |
| 11,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Cost on issuance of Series O and Series P Redeemable Convertible Preferred Stock | |
| - | | |
| (1,504 | ) | |
| - | | |
| (1,505 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock | |
| - | | |
| 1,504 | | |
| - | | |
| 1,505 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,109 | ) | |
| - | | |
| - | | |
| - | | |
| (4,109 | ) |
Redemption of Series O Redeemable Convertible Preferred Stock | |
| (11,000 | ) | |
| (11,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Redemption of Series P Redeemable Convertible Preferred Stock | |
| - | | |
| - | | |
| (11,000 | ) | |
| (11,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Purchase of treasury stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 344,982 | | |
| (2,237 | ) | |
| - | | |
| (2,237 | ) |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 238,244 | | |
| - | | |
| - | | |
| - | | |
| 1,475 | | |
| - | | |
| - | | |
| - | | |
| 1,475 | |
Cancellation of common stock related to investment in CBM | |
| - | | |
| - | | |
| - | | |
| - | | |
| (22,812 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Fractional shares adjusted for reverse split | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,665 | ) | |
| - | | |
| - | | |
| - | | |
| (26 | ) | |
| - | | |
| - | | |
| - | | |
| (26 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,851 | ) | |
| (14,851 | ) |
Balance at September 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,485,096 | | |
$ | - | | |
| 4,659 | | |
$ | - | | |
$ | 262,973 | | |
| 344,982 | | |
$ | (2,501 | ) | |
$ | (178,625 | ) | |
$ | 81,847 | |
See accompanying
notes to unaudited condensed consolidated financial statements.
DOMINARI HOLDINGS
INC.
Condensed Consolidated
Statements of Cash Flows
($ in thousands)
(Unaudited)
| |
Nine Months Ended
September 30, | |
| |
2023 | | |
2022 | |
Cash flows from operating activities | |
| | |
| |
Net loss | |
$ | (15,966 | ) | |
$ | (14,851 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Amortization of right-of-use assets | |
| 268 | | |
| 23 | |
Depreciation | |
| 57 | | |
| - | |
Change in fair value of short-term investment | |
| 12 | | |
| 1,517 | |
Change in fair value of long-term investment | |
| 482 | | |
| (1,608 | ) |
Research and development-acquired license, expensed | |
| - | | |
| 525 | |
Stock-based compensation | |
| 1,485 | | |
| 1,475 | |
Realized loss on marketable securities | |
| 1,249 | | |
| 712 | |
Unrealized (gain) loss on marketable securities | |
| (897 | ) | |
| 3,889 | |
Unrealized loss on note receivable | |
| 212 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other assets | |
| (229 | ) | |
| (344 | ) |
Prepaid acquisition cost | |
| 301 | | |
| - | |
Clearing broker deposits | |
| (3,622 | ) | |
| - | |
Accounts payable and accrued expenses | |
| (345 | ) | |
| 137 | |
Accrued salaries and benefits | |
| (628 | ) | |
| 659 | |
Accrued commissions | |
| 152 | | |
| - | |
Lease liabilities | |
| 11 | | |
| 12 | |
Other current liabilities | |
| 66 | | |
| - | |
Notes receivable, at fair value – net interest accrued | |
| (96 | ) | |
| (521 | ) |
Deposit | |
| - | | |
| (295 | ) |
Net cash used in operating activities | |
| (17,488 | ) | |
| (8,670 | ) |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Purchase of marketable securities | |
| (34,068 | ) | |
| (27,479 | ) |
Sale of marketable securities | |
| 24,572 | | |
| 28,503 | |
Proceeds from sale of digital currencies | |
| - | | |
| 93 | |
Purchase of fixed assets | |
| (419 | ) | |
| - | |
Acquisition of FPS, net of cash acquired and receivable owed from FPS | |
| (1,112 | ) | |
| - | |
Collection of principal on note receivable | |
| 850 | | |
| - | |
Funds to employee forgivable loan | |
| (107 | ) | |
| - | |
Purchase of research and development licenses | |
| | | |
| (525 | ) |
Purchase of short-term and long-term investments | |
| (75 | ) | |
| (15,016 | ) |
Purchase of short-term and long-term promissory notes | |
| - | | |
| (1,600 | ) |
Net cash used in investing activities | |
| (10,359 | ) | |
| (16,024 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from issuance of Series O and Series P Redeemable Convertible Preferred Stock, net of discount and offering cost | |
| - | | |
| 17,891 | |
Payment for fractional shares | |
| - | | |
| (26 | ) |
Redemption of Series O and Series P Redeemable Convertible Preferred Stock | |
| - | | |
| (22,000 | ) |
Purchase of treasury stock | |
| (939 | ) | |
| (2,237 | ) |
Net cash used in financing activities | |
| (939 | ) | |
| (6,372 | ) |
| |
| | | |
| | |
Net decrease in cash and cash equivalents and restricted cash | |
| (28,786 | ) | |
| (31,066 | ) |
Cash and cash equivalents, beginning of period | |
| 33,174 | | |
| 65,562 | |
| |
| | | |
| | |
Cash and cash equivalents, end of period | |
$ | 4,388 | | |
$ | 34,496 | |
| |
| | | |
| | |
Non-cash investing and financing activities | |
| | | |
| | |
Transfer from short-term investment to marketable securities | |
$ | - | | |
$ | 1,497 | |
Reclassify from convertible note receivable to notes receivable at fair value | |
$ | - | | |
$ | 2,147 | |
Promissory convertible note receivable conversion into common shares | |
$ | - | | |
$ | 899 | |
| |
| | | |
| | |
On March 27, 2023, the Company acquired all assets and liabilities of FPS as disclosed in Note 4: | |
| | | |
| | |
Net assets acquired, net of cash acquired and receivable owed from FPS | |
$ | 3,112 | | |
| | |
Less - Deposit previously transferred in October 2022 to FPS | |
$ | (2,000 | ) | |
| | |
Net cash paid | |
$ | 1,112 | | |
| | |
See accompanying
notes to unaudited condensed consolidated financial statements.
DOMINARI HOLDINGS
INC.
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 1. Organization
and Description of Business and Recent Developments
Organization
and Description of Business
Dominari Holdings
Inc. (the “Company”), formerly AIkido Pharma, Inc., was founded in 1967 as Spherix Incorporated. Since 2017, the Company
has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics and their related
patent technology. In an effort to enhance shareholder value, in June of 2022, the Company formed a wholly owned financial services subsidiary,
Dominari Financial Inc. (“Dominari Financial”), with the intent of shifting the Company’s primary operating focus away
from biotechnology to the fintech and financial services industries. Through Dominari Financial, the Company acquired Dominari Securities
LLC (“Dominari Securities”), an introducing broker-dealer, registered with the Financial Industry Regulatory Authority (“FINRA”)
and an investment adviser registered with the Securities and Exchange Commission (“SEC”). Dominari Securities provides investment
advisory services and annuity and insurance products of certain insurance carriers as an insurance agency through independent and affiliated
brokers.
Related to the shift described above, AIkido Labs, LLC (“Aikido
Labs”), a wholly owned subsidiary of the Company, is in the process of winding down its historical pipeline of biotechnology assets.
Aikido Labs has historically explored opportunities in high growth industries and has equity holdings including Anduril Industries, Inc,
Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva Motors
Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass.
Note 2. Liquidity
and Capital Resources
The Company continues
to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related)
revenue. While the Company continues to implement its business strategy, it intends to finance its activities through managing current
cash on hand from the Company’s past equity offerings.
Based upon projected
cash flow requirements, the Company has adequate cash and cash equivalents and marketable securities to fund its operations for at least
the next twelve months from the date of the issuance of these unaudited condensed consolidated financial statements.
Note 3. Summary
of Significant Accounting Policies
There have been
no material changes in the Company’s significant accounting policies from those previously disclosed in the 2022 Annual Report.
Basis of Presentation
and Principles of Consolidation
The accompanying
unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles
(“U.S. GAAP”), and in conformity with the rules and regulations of the SEC. In the opinion of management, these financial
statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of
the interim periods presented. The condensed consolidated balance sheet as of September 30, 2023,
condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022, condensed consolidated
statements of stockholders’ equity for the three and nine months ended September 30, 2023 and 2022, and the condensed consolidated
statements of cash flows for the nine months ended September 30, 2023 and 2022 are unaudited, but include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented. The results for the three and nine months ended September 30, 2023 are not necessarily
indicative of results to be expected for the year ending December 31, 2023 or for any future interim period. The condensed consolidated
balance sheet at December 31, 2022 has been derived from audited financial statements; however, it does not include all of the information
and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual
report on Form 10-K for the year ended December 31, 2022.
The Company’s
policy is to consolidate all entities that it controls by ownership of a majority of the membership interest or outstanding voting stock.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries,
Aikido Labs, Dominari Financial, and Dominari Securities. All significant intercompany balances and transactions have been eliminated
in consolidation.
Results for interim
periods are not necessarily indicative of results to be expected for a full year or any future period.
Use of Estimates
The accompanying
unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. This requires management to make
estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the
period. The Company’s significant estimates and assumptions include stock-based compensation, the valuation of investments, the
valuation of notes receivable and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s
estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably
possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from
those estimates and assumptions.
Deposits with
clearing broker
Deposits with Dominari
Securities’ clearing broker consisted of approximately $7.2 million held in money market funds and liquid insured deposits maintained
by the Company with its clearing broker as of September 30, 2023.
Leases
The Company accounts
for its leases under ASC 842, Leases (“ASC 842”). Under this guidance, arrangements meeting the definition
of a lease are classified as operating or financing leases and are recorded on the unaudited condensed consolidated balance sheet as
both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit
in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each
period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization
of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability
and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded
when incurred (see Note 10 - Leases).
Revenue
The Company recognizes
revenues under ASC 606 - Revenue from Contracts with Customers (“ASC 606”). Revenues are
recognized when control of the promised goods or performance obligations for services is transferred to the Company’s customers,
in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.
The following provides
detailed information on the recognition of the Company’s revenues from contracts with customers:
|
● |
Underwriting
services include underwriting and placement agent services in both the equity and debt capital markets, including private equity
placements, initial public offerings, follow-on offerings, and underwriting and distributing public and private debt. Underwriting
and placement agent revenues are recognized at a point in time on trade-date, as the client obtains the control and benefit of the
underwriting offering at that point. Costs associated with underwriting transactions are deferred until the related revenue is recognized
or the engagement is otherwise concluded and are recorded on a gross basis within the general and administrative line item in the
unaudited condensed consolidated statements of operations as the Company is acting as a principal in the arrangement. Any expenses
reimbursed by the Company’s clients are recognized as other income. |
| ● | Commissions
are earned by executing, transactions for clients primarily in equity, equity-related, and
debt products. Commission revenues associated with trade execution are recognized at a point
in time on trade-date. Commissions revenues are generally paid on settlement date and the
Company records receivables to account for timing between trade-date and payment on settlement
date. |
| ● | Account
advisory fees are earned in connection with investment advisory services. Account advisory
fees are recognized over time using the time elapsed method as the Company determined that
the customer simultaneously receives and consumes the benefits of investment advisory services
as they are provided. Account advisory fees are generally paid in advance of a specified
service period (e.g. quarterly) and are initially deferred within in our Condensed Consolidated
Balance Sheet. |
Long-term investments
Effective January
1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 and ASU 2019-04 concerning
recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting
policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable
fair values.
For equity investments
that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to
adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a
similar investment with the same issuer or upon an impairment.
Recently adopted
accounting standards
In October 2021,
the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts
with Customers (“ASU 2021-08”). This update amends Topic 805 to add contract assets and contract liabilities
to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity
(acquirer) recognize and measure contract assets and contract liabilities in accordance with ASC 606. The Company adopted ASU
2021-08 on January 1, 2023. There was no material impact to the Company’s unaudited condensed consolidated financial statements
from the implementation of ASU 2021-08.
Effect of new
accounting pronouncements not yet adopted
In June 2022, the
FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,
to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity
security and, therefore, is not considered in measuring the fair value of the equity security. ASU 2022-03 also clarifies
that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account. The amendments in ASU 2022-03 may
be early adopted and are effective on a prospective basis for fiscal years beginning after December 15, 2023, and interim periods within
those fiscal years. The Company is currently evaluating the impact of the amendments on the Company’s consolidated financial statements
and whether it will early adopt the amendments in ASU 2022-03.
In March 2023,
the FASB issued ASU 2023-01, Leases, to require entities to classify and account for leases with related parties on
the basis of legally enforceable terms and conditions of the arrangement. The amendments are effective in periods beginning after December
15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the provisions of the amendments and
the impact on its future consolidated financial statements and whether it will early adopt the amendments in ASU 2023-01.
Effect of new
accounting pronouncements to be adopted in future periods
The Company reviewed
all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant
impact on these unaudited condensed consolidated financial statements.
Note 4. FPS
Acquisition
On September 9, 2022, Dominari Financial entered into a membership
interest purchase agreement, as amended and restated on March 27, 2023 (the “FPS Purchase Agreement”) with Fieldpoint Private
Bank & Trust (“Seller”), a Connecticut bank, for the purchase of its wholly owned subsidiary, Fieldpoint Private Securities,
LLC, a Connecticut limited liability company (“FPS”), that is a broker-dealer registered with FINRA and an investment adviser
registered with the SEC (the “FPS Acquisition”). Pursuant to the terms of the FPS Purchase Agreement, Dominari Financial
purchased from the Seller 100% of the membership interests in FPS (the “FPS Membership Interests”). FPS’s registered
broker-dealer and investment adviser businesses were renamed and will operate as Dominari Securities, a wholly owned subsidiary of Dominari
Financial. The FPS Purchase Agreement provided for Dominari Financial’s acquisition of FPS’s Membership Interests in
two closings, the first of which occurred on October 4, 2022 (the “Initial Closing”), at which Dominari Financial paid
to the Seller $2.0 million in consideration for a transfer by the Seller to Dominari Financial of 20% of the FPS Membership
Interests. Following the Initial Closing, FPS filed a continuing membership application requesting approval for a change of ownership,
control, or business operations with FINRA in accordance with FINRA Rule 1017 (the “Rule 1017 Application”). The Rule
1017 Application was approved by FINRA on March 20, 2023. The second closing (the “Second Closing”) occurred on March 27,
2023. Dominari Financial paid to the Seller an additional approximate $1.6 million consideration for a transfer by the Seller to
Dominari Financial of the remaining 80% of the FPS Membership Interests.
Consideration
Transferred
The FPS Acquisition
was accounted for as a business combination under ASC 805.
Under the terms of the FPS Purchase Agreement and subsequent amendments
and side letters to the agreement 100% of the FPS Membership Interests were acquired for cash consideration of approximately $3.4 million,
which reflected the fair value of net assets acquired, plus a $1 purchase price. At March 31, 2023, Dominari Financial had not finalized
the purchase accounting related to the fair value of assets acquired in the FPS Acquisition. Pursuant to the Initial Closing and Second
Closing, Dominari Financial had wired a total of approximately $3.6 million in cash to the Seller. The purchase price allocation identified
net assets of approximately $3.4 million, resulting in a receivable due from the Seller for approximately $0.2 million. The receivable
is not included within the consideration transferred as part of the FPS Acquisition but is included within prepaid expenses and other
assets within the unaudited condensed consolidated balance sheet as of March 31, 2023.
Under the acquisition
method of accounting, the assets acquired, and liabilities assumed of FPS were recorded as of the acquisition date, at their respective
fair values, and consolidated with those of the Company. Acquisition-related costs are not included as a component of consideration transferred
but are expensed in the periods in which costs are incurred. The Company incurred approximately $0.3 million of transaction costs associated
with the FPS Acquisition. The transaction costs are included in general and administrative expenses in the unaudited condensed consolidated
statement of operations.
Fair Value of
Net Assets Acquired
The following table
summarizes the fair values of the assets acquired and liabilities assumed of FPS at the date of acquisition ($ in thousands):
| |
March 27, | |
| |
2023 | |
| |
(Unaudited) | |
ASSETS | |
| |
Cash
and cash equivalents | |
$ | 92 | |
Deposits
with Clearing Broker-Dealer | |
| 3,550 | |
Other receivables | |
| 53 | |
Prepaid
and other current assets | |
| 89 | |
Total
assets acquired | |
| 3,784 | |
| |
| | |
Liabilities | |
| | |
Accrued expenses | |
$ | 273 | |
Accrued commissions | |
| 25 | |
Wealth
management liabilities | |
| 62 | |
Total
liabilities assumed | |
| 360 | |
| |
| | |
Total
net assets of FPS Acquisition | |
| 3,424 | |
Note 5. Investments
in Marketable Securities
The realized gain
or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended September
30, 2023 and 2022, which are recorded as a component of gains and (losses) on marketable securities on the unaudited condensed consolidated
statements of operations, are as follows ($ in thousands):
| |
Three Months Ended
September 30, | | |
Nine Months Ended
September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Realized loss | |
$ | (762 | ) | |
$ | (144 | ) | |
$ | (1,249 | ) | |
$ | (712 | ) |
Unrealized gain (loss) | |
| 382 | | |
| (1,589 | ) | |
| 897 | | |
| (3,889 | ) |
Dividend income | |
| 230 | | |
| 79 | | |
| 537 | | |
| 211 | |
Total | |
$ | (150 | ) | |
$ | (1,654 | ) | |
$ | 185 | | |
$ | (4,390 | ) |
Note 6. Short-term
investments
The following table
presents the Company’s short-term investments as of September 30, 2023, and December 31, 2022 ($ in thousands):
| |
September 30,
2023 | | |
December 31,
2022 | |
Investment
in Vicinity Motor Corp. | |
| 1 | | |
| 13 | |
Total | |
| 1 | | |
| 13 | |
There was approximately
$12,000 reduction in the fair value of the short-term investments for the nine months ended September 30, 2023.
The following table
provides quantitative information regarding Level 3 fair value measurement inputs at their measurement dates:
| |
September 30,
2023 | | |
December 31,
2022 | |
Option term (in
years) | |
| 1.1 | | |
| 1.8 | |
Volatility | |
| 67.2 | % | |
| 76.90 | % |
Risk-free interest rate | |
| 5.43 | % | |
| 4.47 | % |
Expected dividends | |
| 0.00 | % | |
| 0.00 | % |
Stock price | |
$ | 0.95 | | |
$ | 0.96 | |
Note 7. Long-Term
Investments
The Company holds
interests in several privately held companies as long-term investments that the Company perceives as potential IPO candidates. The following
table presents the Company’s long-term investments as of September 30, 2023, and December 31, 2022 ($ in thousands):
| |
Cost Basis | | |
September 30,
2023 | | |
December 31,
2022 | |
Investment in Kerna Health Inc | |
$ | 2,140 | | |
$ | 4,940 | | |
$ | 4,940 | |
Investment in Kaya Now | |
| 1,500 | | |
| - | | |
| - | |
Investment in Tevva Motors | |
| 1,972 | | |
| 2,794 | | |
| 2,794 | |
Investment in ASP Isotopes | |
| 1,300 | | |
| - | | |
| - | |
Investment in Unusual Machines | |
| 1,075 | | |
| 1,033 | | |
| 1,000 | |
Investment in Qxpress | |
| 1,000 | | |
| 1,000 | | |
| 1,000 | |
Investment in Masterclass | |
| 170 | | |
| 170 | | |
| 170 | |
Investment in Kraken | |
| 597 | | |
| 597 | | |
| 597 | |
Investment in Epic Games | |
| 3,500 | | |
| 3,500 | | |
| 3,500 | |
Investment in Tesspay | |
| 1,240 | | |
| 2,500 | | |
| 2,500 | |
Investment in SpaceX | |
| 3,500 | | |
| 3,674 | | |
| 3,674 | |
Investment in Databricks | |
| 1,200 | | |
| 760 | | |
| 1,200 | |
Investment in Discord | |
| 476 | | |
| 476 | | |
| 476 | |
Investment in Thrasio | |
| 300 | | |
| 300 | | |
| 300 | |
Investment in Automation Anywhere | |
| 476 | | |
| 476 | | |
| 476 | |
Investment in Anduril | |
| 476 | | |
| 476 | | |
| 476 | |
Total | |
$ | 20,922 | | |
$ | 22,696 | | |
$ | 23,103 | |
Investment
in Unusual Machines, Inc.
On November 22, 2021, the Company entered into an agreement (the “AerocarveUS
Agreement”) with AerocarveUS Corporation, (“AerocarveUS”). Under the AerocarveUS Agreement, the Company agreed to purchase 250,000 shares
of common stock of AerocarveUS for $1.0 million. AerocarveUS changed its name to “Unusual Machines, Inc.” on July 5,
2022. In March of 2023, the Company was issued an additional 64,377 shares at no cost. In June 2023, the Company purchased an additional 150,000 shares
of common stock for approximately $0.08 million. On July 10, 2023, Unusual Machines, Inc. effected a reverse stock split pursuant to which
each two shares of common stock of the Corporation issued and outstanding was combined and reclassified into one share of common stock
of the Corporation. The investment in Unusual Machines, Inc. was valued at approximately $1.0 million as of September 30, 2023.
Note 8. Notes
Receivable
The following table
presents the Company’s notes receivable as of September 30, 2023 ($ in thousands):
| |
Maturity Date | |
Stated Interest Rate | | |
Principal Amount | | |
Interest Receivable | | |
Fair Value | |
Notes receivable, at fair value | |
| |
| | | |
| | | |
| | | |
| | |
Convergent convertible note - current | |
01/29/2023 | |
| 8 | % | |
$ | 1,000 | | |
$ | 125 | | |
$ | 1,125 | |
Convergent convertible note - non-current | |
01/29/2023 | |
| 8 | % | |
$ | 250 | | |
$ | - | | |
$ | 250 | |
Raefan Industries LLC Investment | |
12/31/2023 | |
| 8 | % | |
$ | 4,493 | | |
$ | 717 | | |
$ | 5,210 | |
American Innovative Robotics Investment | |
04/01/2027 | |
| 8 | % | |
$ | 1,100 | | |
$ | 22 | | |
$ | 1,122 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Notes receivable, at fair value - current portion | |
| |
| | | |
| | | |
| | | |
$ | 6,336 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Notes receivable, at fair value - non-current portion | |
| |
| | | |
| | | |
| | | |
$ | 1,372 | |
Convergent
Therapeutics, Inc. Investment
The Company’s 8%
convertible promissory note (“Convergent Convertible Note”) issued by Convergent Therapeutics, Inc. (“Convergent”)
in the principal amount of approximately $1.8 million pursuant to a Note Purchase Agreement matured on January 29, 2023. Upon
maturity, Convergent entered into a contractual repayment schedule with the Company. Pursuant to the schedule, Convergent will make a
total of eight payments in the amount of $250 thousand and accrued interest, every three months until fully satisfied.
The principal balance
of the Convergent Convertible Note was approximately $1.3 million as of September 30, 2023. The Company recorded principal repayment
of $0.8 million and interest income of approximately $0.2 million on the Convergent Convertible Note for the nine months ended September
30, 2023.
Raefan Industries
LLC Investment
The Company recorded
an interest income receivable of approximately $0.7 million on the Raefan Industries Promissory Note as of September 30, 2023 and
an unrealized loss on the note of approximately $0.2 million.
American
Innovative Robotics, LLC Investment
The Company recorded
interest income of approximately $67,000 on the Robotics Promissory Note for the nine months ended September 30, 2023.
Kaya Now
Inc. Investment
During the fourth
quarter of 2022, the Company identified indicators of impairment for the Kaya investment as a result of adverse changes in Kaya’s
business operations, including liquidity concerns. As a result, the Company recorded an impairment charge of $0.5 million in the
fourth quarter of 2022. The impairment charge represents an impairment loss of the total investment held as a promissory note resulting
in a $0 balance for the Kaya Now Promissory Note as of September 30, 2023.
The Company received
and recorded interest income related to the Kaya Now Promissory Note of approximately $10,000 for the nine months ended September 30,
2023.
Note 9. Fair
Value of Financial Assets and Liabilities
Financial instruments,
including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates
fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities
based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company
maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.
The Company uses
three levels of inputs that may be used to measure fair value:
Level
1 - quoted prices in active markets for identical assets or liabilities
Level
2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
Observable inputs
are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions.
Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability
may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified
using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management
judgment.
The following table
presents the Company’s assets and liabilities that are measured at fair value as of September 30, 2023, and December 31, 2022 ($
in thousands):
| |
Fair value measured as of September 30, 2023 | |
| |
Total at September 30, | | |
Quoted prices in active markets | | |
Significant other observable inputs | | |
Significant unobservable inputs | |
| |
2023 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets | |
| | |
| | |
| | |
| |
Marketable securities: | |
| | |
| | |
| | |
| |
Equities | |
$ | 16,274 | | |
$ | 16,274 | | |
$ | - | | |
$ | - | |
Total marketable securities | |
$ | 16,274 | | |
$ | 16,274 | | |
$ | - | | |
$ | - | |
Short-term investment | |
$ | 1 | | |
$ | - | | |
$ | - | | |
$ | 1 | |
Notes receivable at fair value, current portion | |
$ | 6,336 | | |
$ | - | | |
$ | - | | |
$ | 6,336 | |
Notes receivable at fair value, non-current portion | |
$ | 1,372 | | |
$ | - | | |
$ | - | | |
$ | 1,372 | |
| |
Fair
value measured as of December 31, 2022 | |
| |
Total at
December 31, | | |
Quoted
prices in active markets | | |
Significant
other observable inputs | | |
Significant
unobservable inputs | |
| |
2022 | | |
(Level
1) | | |
(Level
2) | | |
(Level
3) | |
Assets | |
| | |
| | |
| | |
| |
Marketable securities: | |
| | |
| | |
| | |
| |
Equities | |
$ | 7,130 | | |
$ | 7,130 | | |
$ | - | | |
$ | - | |
Total
marketable securities | |
$ | 7,130 | | |
$ | 7,130 | | |
$ | - | | |
$ | - | |
Short-term
investment | |
$ | 13 | | |
$ | - | | |
$ | - | | |
$ | 13 | |
Notes
receivable at fair value, current portion | |
$ | 7,474 | | |
$ | - | | |
$ | - | | |
$ | 7,474 | |
Notes
receivable at fair value, non-current portion | |
$ | 1,100 | | |
$ | - | | |
$ | - | | |
$ | 1,100 | |
Level 3 Measurement
The following table
sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value
on a recurring basis ($ in thousands):
Short-term investment at December 31, 2022 | |
$ | 13 | |
Change in fair value of investment | |
| (12 | ) |
Short-term investment at September 30, 2023 | |
$ | 1 | |
| |
| | |
Notes receivable at fair value, current portion at December 31, 2022 | |
$ | 7,474 | |
Collection of principal outstanding | |
| (750 | ) |
Note receivable, Convergent Therapeutics, non-current portion | |
| (250 | ) |
Unrealized loss on note receivable | |
| (212 | ) |
Accrued interest receivable | |
| 74 | |
Notes receivable at fair value, current portion at September 30, 2023 | |
$ | 6,336 | |
| |
| | |
Notes receivable at fair value, non-current portion at December 31, 2022 | |
$ | 1,100 | |
Note receivable, Convergent Therapeutics, non-current portion | |
| 250 | |
Accrued interest receivable | |
| 22 | |
Notes receivable at fair value, non-current portion at September 30, 2023 | |
$ | 1,372 | |
Note Receivable
at fair value
As of September
30, 2023, the fair value of the notes receivable was measured taking into consideration cost of the investment, market participant inputs,
market conditions, liquidity, operating results and other qualitative and quantitative factors. No material change was noted in the fair
value of the notes receivable during the three months ended September 30, 2023.
Note 10. Leases
On December 1,
2021, the Company entered into a Lease Agreement (the “Company’s Lease”) with Trump Tower Commercial LLC, a New York
limited liability company. Under the Company’s Lease, the Company rents a portion of the twenty-second floor at 725 Fifth Avenue,
New York, New York (the “22nd Floor Premises”). The Company currently uses the 22nd Floor
Premises to run its day-to-day operations. The initial term of the Company’s Lease is seven (7) years commencing on July 11, 2022
(“Commencement Date). Under the Company’s Lease, the Company is required to pay monthly rent, commencing on January 11, 2023,
equal to $12,874. Effective for the sixth and seventh years of the Company’s Lease, the rent shall increase to $13,502. The Company
took possession of the 22nd Floor Premises on the Commencement Date.
On September 23,
2022, Dominari Financial entered into a Lease Agreement (“Dominari Financial’s Lease”) with Trump Tower Commercial
LLC, a New York limited liability company. Under Dominari Financial’s Lease, Dominari Financial rents a portion of a floor at 725
Fifth Avenue, New York, New York (the “Premises”). Dominari Financial currently uses the Premises to run its day-to-day operations.
The initial term of Dominari Financial’s Lease is seven (7) years commencing on the date that possession of the Premises is delivered
to Dominari Financial. Under Dominari Financial’s Lease, Dominari Financial is required to pay monthly rent equal to $49,368. Effective
for the sixth and seventh years of Dominari Financial’s Lease, the rent shall increase to $51,868 per month. The Company took
possession of the Premises in February 2023.
The tables below
represent the Company’s lease assets and liabilities as of September 30, 2023:
| |
September 30,
2023 | |
Assets: | |
| |
Operating
lease right-of-use-assets | |
$ | 3,426 | |
| |
| | |
Liabilities: | |
| | |
Current | |
| | |
Operating | |
| 411 | |
Long-term | |
| | |
Operating | |
| 3,137 | |
| |
$ | 3,548 | |
The following tables
summarize quantitative information about the Company’s operating leases, under the adoption of ASC 842:
| |
September 30,
2023 | |
Weighted-average
remaining lease term – operating leases (in years) | |
| 6.7 | |
Weighted-average discount
rate – operating leases | |
| 10.0 | % |
During the nine
months ended September 30, 2023, the Company recorded approximately $0.6 million of lease expense to current period operations.
| |
Three Months
Ended | | |
Nine Months
Ended | |
| |
September 30,
2023 | | |
September 30,
2023 | |
Operating leases | |
| | |
| |
Operating
lease cost | |
$ | 179 | | |
$ | 490 | |
Operating lease expense | |
| 179 | | |
| 490 | |
Short-term
lease rent expense | |
| 33 | | |
| 96 | |
Net rent
expense | |
$ | 212 | | |
$ | 586 | |
Supplemental cash
flow information related to leases were as follows:
| |
Nine Months
Ended | |
| |
September 30,
2023 | |
Operating cash
flows - operating leases | |
$ | 209 | |
Right-of-use assets obtained
in exchange for operating lease liabilities | |
$ | 2,780 | |
As of September
30, 2023, future minimum payments during the next five years and thereafter are as follows:
| |
Operating | |
| |
Leases | |
Remaining Period
Ended December 31, 2023 | |
$ | 188 | |
Year Ended December 31, 2024 | |
| 747 | |
Year Ended December 31, 2025 | |
| 685 | |
Year Ended December 31, 2026 | |
| 685 | |
Year Ended December 31, 2027 | |
| 685 | |
Year Ended December 31, 2028 | |
| 766 | |
Thereafter | |
| 1,160 | |
Total | |
| 4,916 | |
Less
present value discount | |
| (1,368 | ) |
Operating
lease liabilities | |
$ | 3,548 | |
Note 11. Net
Loss per Share
Basic loss per
share of common stock is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares
of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except
that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised
or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation
of diluted loss per share for the nine months ended September 30, 2023, and 2022 are as follows:
| |
As of September 30, | |
| |
2023 | | |
2022 | |
Convertible preferred stock | |
| 34 | | |
| 34 | |
Warrants to purchase common stock | |
| 444,796 | | |
| 444,796 | |
Restricted stock awards | |
| 96,309 | | |
| - | |
Options to purchase common stock | |
| 134,454 | | |
| 198,574 | |
Total | |
| 675,593 | | |
| 643,404 | |
Note 12. Stockholders’
Equity and Convertible Preferred Stock
Common Stock
On March 6, 2023,
the Company cancelled 644,499 shares of common stock as a result of retirement of 644,499 shares of treasury stock.
On March 20, 2023,
the Company cancelled 25,000 shares of common stock owned by an executive.
June 27, 2023,
pursuant to Soo Yu’s employment agreement and the Company’s 2022 Equity Incentive Plan, the Company executed a Grant Agreement,
through which Soo Yu was granted 1,033,591 shares of the Company’s common stock. Upon issuance, the shares were fully vested and
nonforfeitable with a total fair value of approximately $2.7 million. Pursuant to the Grant Agreement, the Company withheld 503,876
of the shares granted to satisfy Soo Yu’s tax obligation of approximately $1.3 million and recorded as income taxes withheld within
the unaudited condensed consolidated balance sheet. See Restricted Stock roll-forward below.
Treasury
Stock
On January 21,
2022, the Company’s board of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to
which the Company authorized the Share Buyback Program in an amount of up to three million dollars. During the nine months
ended September 30, 2023, the Company repurchased 236,630 shares at a cost of approximately $0.9 million or $3.97 per share
through marketable securities account under the Share Buyback Program. The Company records treasury stock using the cost method.
On March 6, 2023,
the Company retired 644,499 shares of treasury stock with original cost of approximately $3.8 million.
Warrants
A summary of warrant
activity for the nine months ended September 30, 2023, is presented below:
| |
Warrants | | |
Weighted
Average
Exercise
Price | | |
Total
Intrinsic
Value | | |
Weighted
Average
Remaining
Contractual
Life (in years) | |
Outstanding as of December 31, 2022 | |
| 444,796 | | |
$ | 29.25 | | |
| - | | |
| 3.20 | |
Outstanding as of September 30, 2023 | |
| 444,796 | | |
$ | 29.25 | | |
| - | | |
| 2.45 | |
Restricted
Stock Awards
A summary of restricted
stock awards activity for the nine months ended September 30, 2023, is presented below:
| |
Number of Restricted Stock Awards | | |
Weighted Average Grant Day Fair Value | |
Nonvested at December 31, 2022 | |
| 8,068 | | |
$ | 5.90 | |
Granted | |
| 626,024 | | |
$ | 2.67 | |
Vested | |
| (537,783 | ) | |
| 2.63 | |
Nonvested at September 30, 2023 | |
| 96,309 | | |
$ | 3.18 | |
Stock-based compensation
associated with the amortization of restricted stock awards expense was approximately $93,000 and $1.4 million for the nine months ended
September 30, 2023, and 2022, respectively. All stock compensation was recorded as a component of general and administrative expenses.
As of September
30, 2023, there is approximately $0.2 million unrecognized stock-based compensation expense related to restricted stock awards.
Stock Options
A summary of option
activity under the Company’s stock option plan for the nine months ended September 30, 2023, is presented below:
| |
Number of Shares | | |
Weighted
Average
Exercise
Price | | |
Total
Intrinsic
Value | | |
Weighted Average Remaining Contractual Life (in years) | |
Outstanding as of December 31, 2022 | |
| 31,193 | | |
$ | 302.97 | | |
$ | - | | |
| 7.9 | |
Employee options granted | |
| 110,000 | | |
| 3.21 | | |
| - | | |
| 9.9 | |
Employee options forfeited | |
| (5,882 | ) | |
| 5.95 | | |
| - | | |
| - | |
Employee options expired | |
| (857 | ) | |
$ | 9,719.07 | | |
| - | | |
| - | |
Outstanding as of September 30, 2023 | |
| 134,454 | | |
$ | 10.70 | | |
$ | - | | |
| 9.4 | |
Options vested and exercisable | |
| 24,454 | | |
$ | 44.43 | | |
$ | - | | |
| 7.1 | |
Stock-based compensation
associated with the amortization of stock option expense was approximately $26,000 and $40,000 for the nine months ended September 30,
2023, and 2022, respectively. All stock compensation was recorded as a component of general and administrative expenses.
Estimated future
stock-based compensation expense relating to unvested stock options is approximately $0.7 million.
Note 13. Revenue
The following table
presents our total revenues disaggregated by revenue type for the three and nine months ended September 30, 2023 and 2022 (in thousands):
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Underwriting | |
$ | 318 | | |
$ | - | | |
$ | 361 | | |
$ | - | |
Commissions | |
| 525 | | |
| - | | |
| 539 | | |
| - | |
Advisory fees | |
| 72 | | |
| - | | |
| 72 | | |
| - | |
Other | |
| 48 | | |
| - | | |
$ | 62 | | |
| - | |
Total | |
$ | 963 | | |
$ | - | | |
$ | 1,034 | | |
$ | - | |
Note 14. Commitments
and Contingencies
Legal Proceedings
In the past, in
the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights and to stop
unauthorized use of the Company’s technology. Other than ordinary routine litigation incidental to the business, the Company is
not aware of any material, active or pending legal proceedings brought against it.
Note 15. Regulatory
Dominari Securities,
the Company’s broker-dealer subsidiary, is registered with the SEC as an introducing broker-dealer and is a member of FINRA. The
Company’s broker-dealer subsidiary is subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum
net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such,
the subsidiary is subject to the minimum net capital requirements promulgated by the SEC and has elected to calculate minimum capital
requirements using the basic method permitted by Rule 15c3-1. As of September 30, 2023, Dominari Securities had net capital of approximately
$6.2 million, which was approximately $6.1 million in excess of required minimum net capital of $0.1 million.
Note 16. Related
Party Transaction
In 2021, the Company
engaged the services of Revere Securities, LLC (“Revere”) to strategically manage and build the Company’s investment
processes. Kyle Wool, Board Member, was previously a member of the board of directors of Revere. The Company incurred fees of approximately
$75,000 and $0.8 million during the nine months ending September 30, 2023, and 2022, respectively. These fees were included in general
and administrative expenses in the unaudited condensed consolidated statements of operations.
Note 17. Segment
Reporting
The Company operates
in two reportable business segments: (1) Dominari Financial and (2) Legacy AIkido. The Dominari Financial reportable business
segment represents the Company’s broker-dealer business, which is composed of mostly underwriting and transactional service activities.
The Legacy AIkido reportable business segment includes Aikido Labs, which manages the investments holdings of the legacy entity. Prior
to the FPS Acquisition, the Company operated as a single operating segment comprised of Legacy AIkido.
The chief operating
decision-maker (“CODM”) has access to and regularly reviews internal financial reporting for each business and uses that
information to make operational decisions and allocate resources. Accounting policies applied by the reportable segments are the same
as those used by the Company and described in the “Summary of Significant Accounting Policies.” While assets are primarily
held within the Legacy AIkido reportable business segment, total assets by segment is not disclosed as the CODM does not assess performance,
make strategic decisions, or allocate resources based on assets.
The measures of
segment profitability that are most relied upon by the CODM are gross revenues and net loss, as presented within the table below and
reconciled to the statement of operations.
| |
Three Months Ended
September 30, 2023 | |
| |
Dominari
Financial | | |
Legacy
AIkido | | |
Consolidated | |
Revenue | |
$ | 963 | | |
$ | - | | |
$ | 963 | |
Operating Costs | |
| | | |
| | | |
| | |
General and administrative | |
| 2,324 | | |
| 1,743 | | |
$ | 4,067 | |
Research and development | |
| - | | |
| - | | |
| - | |
Loss from operations | |
$ | (1,361 | ) | |
$ | (1,743 | ) | |
$ | (3,104 | ) |
| |
| | | |
| | | |
| | |
Other (expenses) income | |
| | | |
| | | |
| | |
Other income | |
| - | | |
| - | | |
| - | |
Interest income | |
| 91 | | |
| 117 | | |
| 208 | |
Loss on marketable securities | |
| - | | |
| (150 | ) | |
| (150 | ) |
Unrealized loss on note receivable | |
| - | | |
| - | | |
| - | |
Change in fair value of investments | |
| | | |
| (495 | ) | |
| (495 | ) |
Total other (expenses) income | |
$ | 91 | | |
$ | (528 | ) | |
$ | (437 | ) |
Net loss | |
$ | (1,270 | ) | |
$ | (2,271 | ) | |
$ | (3,541 | ) |
| |
Nine Months Ended
September 30, 2023 | |
| |
Dominari
Financial | | |
Legacy
AIkido | | |
Consolidated | |
Revenue | |
$ | 1,034 | | |
$ | - | | |
$ | 1,034 | |
Operating Costs | |
| | | |
| | | |
| | |
General and administrative | |
| 10,380 | | |
| 6,600 | | |
| 16,980 | |
Research and development | |
| | | |
| 3 | | |
| 3 | |
Loss from operations | |
$ | (9,346 | ) | |
$ | (6,603 | ) | |
$ | (15,949 | ) |
| |
| | | |
| | | |
| | |
Other (expenses) income | |
| | | |
| | | |
| | |
Other income | |
| - | | |
| - | | |
| - | |
Interest income | |
| 135 | | |
| 370 | | |
| 505 | |
Gain on marketable securities | |
| - | | |
| 185 | | |
| 185 | |
Unrealized loss on note receivable | |
| - | | |
| (212 | ) | |
| (212 | ) |
Change in fair value of investments | |
| - | | |
| (495 | ) | |
| (495 | ) |
Total other (expenses) income | |
$ | 135 | | |
$ | (152 | ) | |
$ | (17 | ) |
Net loss | |
$ | (9,211 | ) | |
$ | (6,755 | ) | |
$ | (15,966 | ) |
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
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-Q. All references to “we,”
“us,” “our” and the “Company” refer to Dominari Holdings Inc., a Delaware corporation and its consolidated
subsidiaries unless the context requires otherwise.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in
this Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future
operations, are forward-looking statements. When used in this Report, terminology such as “may,” “should,” “expect,”
“intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,”
“project,” “target,” “budget,” “forecast,” “could,” “continue,”
“plan,” or “potentially” or the negatives of these terms or variations of them or similar terminology, as they
relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management,
as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
Overview
Dominari Holdings
Inc. (the “Company”), formerly AIkido Pharma, Inc., was founded in 1967 as Spherix Incorporated. Since 2017, the Company
has operated as a biotechnology company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics and their related
patent technology. In an effort to enhance shareholder value, in June of 2022, the Company formed a wholly owned financial services subsidiary,
Dominari Financial Inc. (“Dominari Financial”), with the intent of shifting the Company’s primary operating focus away
from biotechnology to the fintech and financial services industries. Through Dominari Financial, the Company acquired Dominari Securities
LLC (Dominari Securities), an introducing broker-dealer, registered with the Financial Industry Regulatory Authority (“FINRA”)
and an investment adviser registered with the Securities and Exchange Commission (“SEC”). Dominari Securities provides investment
advisory services and annuity and insurance products of certain insurance carriers as an insurance agency through independent and affiliated
brokers.
Related to the shift described above, AIkido Labs, LLC (“Aikido
Labs”), another wholly owned subsidiary of the Company, is in the process of winding down its historical pipeline of biotechnology
assets. Aikido Labs has historically explored opportunities in high growth industries and has equity holdings including Anduril Industries,
Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva
Motors Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass.
Reverse Stock Split
On June 7, 2022,
the Company effected a seventeen-for-one (17-for-1) reverse stock split of its class of common stock (the “Reverse Stock Split”).
The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was consummated pursuant
to a Certificate of Amendment filed with the Secretary of State of Delaware on June 2, 2022. The Reverse Stock Split was effective on
June 7, 2022. All references to common stock, convertible preferred stock, warrants to purchase common stock, options to purchase common
stock, restricted stock units, restricted stock awards, share data, per share data and related information contained in the unaudited
condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all
periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $26,000.
Critical Accounting Policies
Our discussion
and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements.
We have identified the accounting policies that we believe require application of management’s most subjective judgments, often
requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Our actual results may differ substantially from these estimates under different assumptions or conditions. The following represent those
critical accounting policies that we believe most significantly impact the judgments and estimates used in the preparation of our unaudited
condensed consolidated financial statements.
Long-term investments
Effective January
1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 and ASU 2019-04 concerning
recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting
policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable
fair values.
For equity investments
that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to
adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a
similar investment with the same issuer or upon an impairment.
Refer to Note 3 of the Annual Report for a discussion of our significant
accounting policies.
Recently
Issued Accounting Pronouncements
See Note 3 to the
unaudited condensed consolidated financial statements for a discussion of recent accounting standards.
Results of Operations
Three Months
Ended September 30, 2023, compared to the Three Months Ended September 30, 2022
During the three months ended September 30, 2023, we recognized approximately
$1.0 million in revenue from operations, primarily driven by the commissions and underwriting revenue earned by Dominari Securities. During
the three months ended September 30, 2023, and 2022, we incurred a loss from operations of approximately $3.1 million and $5.1 million,
respectively. The decrease in loss from operations was primarily attributable to the following:
|
i. |
An
approximate $0.4 million decrease in general and administrative expenses. The Company incurred decreased compensation expenses of
approximately $0.2 million due to decreased stock-based compensation expenses. |
|
ii. |
An
approximate $0.6 million decrease in research and development expenses – attributable to the Company’s strategic business
decision to transition away from the biotechnology industry and into financial services. The result is a decrease in research and
development related expenses by almost 100%. |
During the three
months ended September 30, 2023 and 2022, other expenses was approximately $0.4 million and $1.1 million, respectively. The activity
for the three months ended September 30, 2023 and 2022, is primarily a result of overall volatility in investment valuations due to macroeconomic
uncertainty (i.e. inflation, global tensions in the Ukraine, etc.) impacting marketable securities and the change in fair value of short
and long-term investments. Specifically:
|
i. |
Marketable securities – we recognized a loss of approximately $0.2 million for the three months ended September 30, 2023. The decrease of approximately $1.5 million in losses over the prior period is a direct result of a decrease in unrealized losses of approximately $2.0 million and an increase in dividend income of approximately $0.2 million, offset by an increase in realized loss of approximately $0.6 million. The decreases were driven by both market improvement and decrease in sale activity resulting in fewer realized losses. |
|
ii. |
Short-term
and long-term investments –The changes over the three months ended September 30, 2023 and 2022 are a function of observable
market transactions which resulted in an increase in unrealized loss of approximately $0.8 million on the adjusted fair value of
the investments during the three months ended September 30, 2023. |
Nine Months
Ended September 30, 2023, compared to the Nine months ended September 30, 2022
During the nine months ended September 30, 2023, we recognized approximately
$1.0 million in revenue from operations, primarily driven by the underwriting revenue earned by Dominari Securities. During the nine months
ended September 30, 2023, and 2022, we incurred a loss from operations of approximately $16.0 million and $11.2 million, respectively.
The increase in loss in operations was primarily attributable to the following:
|
i. |
An
approximate $8.4 million increase in general and administrative expenses – driven by approximately $0.1 million and $1.2 million
of professional fees (legal, consulting, accounting, etc.) incurred to establish and operate Dominari Financial and Dominari Securities,
respectively. In addition, the Company also incurred increased compensation expenses of approximately $5.6 million due to growing
operations. |
|
ii. |
An
approximate $2.6 million decrease in research and development expenses – attributable to the Company’s strategic business
decision to transition away from the biotechnology industry and into financial services. The result is a decrease in research and
development related expenses by almost 100%. |
During the
nine months ended September 30, 2023 and 2022, other income (expenses) was approximately $17 thousand and $(3.6) million,
respectively. The activity for the nine months ended September 30, 2023 and 2022, is primarily a result of overall volatility in
investment valuations due to macroeconomic uncertainty (i.e. inflation, global tensions in the Ukraine, etc.) impacting marketable
securities and the change in fair value of short and long-term investments. Specifically:
|
i. |
Marketable securities – we recognized a gain of approximately $0.2 million for the nine months ended September 30, 2023. The decrease of approximately $4.6 million in losses over the prior period is a direct result of a decrease in unrealized losses of approximately $4.8 million and increase in dividend income of approximately $0.3 million, offset by an increase in realized loss of approximately $0.5 million. The decreases were driven by both market improvement and a decrease in sale activity resulting in fewer realized losses. |
|
ii. |
Short-term
and long-term investments –The changes over the nine months ended September 30, 2023 and 2022 are a function of observable
market transactions which resulted in an increase in unrealized loss of approximately $0.6 million on the adjusted fair value of
the investments during the nine months ended September 30, 2023. |
Liquidity and Capital Resources
We continue to
incur ongoing administrative and other expenses, including public company expenses. While we continue to implement our business strategy,
we intend to finance our activities through:
|
● |
managing
current cash and cash equivalents on hand from our past debt and equity offerings; |
|
● |
seeking
additional funds raised through the sale of additional securities in the future; and |
|
● |
seeking
additional liquidity through credit facilities or other debt arrangements. |
Our ultimate success
is dependent on our ability to generate sufficient cash flow to meet our obligations on a timely basis. Our business may require significant
amounts of capital to sustain operations that we need to execute our longer-term business plan to support our transition into the financial
services industry. Our working capital amounted to approximately $33.2 million as of September 30, 2023. We believe our cash and cash
equivalents and marketable securities, together with the anticipated cash flow from operations will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 12 months. In the event that cash flow from operations is not sufficient
to fund our operations, as expected, or if our plans or assumptions change, including if inflation begins to have a greater impact on
our business or if we decide to move forward with any activities that require more outlays of cash than originally planned, we may need
to raise additional capital sooner than expected. We may raise this additional capital by obtaining 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 from continuing operations.
Our ability to
obtain capital to implement our growth strategy over the longer term will depend on our future operating performance, financial condition
and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in
our industry, the global economy, the global financial markets, and other factors, many of which are beyond our control. Specifically,
as a result of recent volatility and weakness in the public markets, due to, among other factors, uncertainty in the global economy and
financial markets, it may be much more difficult to raise additional capital, if and when it is needed, unless the public markets become
less volatile and stronger at such time that we seek to raise additional capital. In addition, any additional debt service requirements
we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations
and financial condition, and the issuance of additional equity securities could result in significant dilution to stockholders.
Cash Flows from
Operating Activities
For the nine months
ended September 30, 2023 and 2022, net cash used in operations was approximately $17.5 million and $8.7 million, respectively. The cash
used in operating activities for the nine months ended September 30, 2023, is primarily attributable to a net loss of approximately $16.0
million, approximately $0.9 million of unrealized gain on marketable securities and changes in operating assets and liabilities of $4.4
million, partially offset by $1.5 million stock-based compensation expense and approximately $1.2 million in realized losses on marketable
securities. The cash used in operating activities for the nine months ended September 30, 2022 primarily resulted from a net loss of
$14.9 million and change in fair value of long-term investment of $1.6 million and is partially offset by change in fair value of short-term
investment of $1.5 million and unrealized loss on marketable securities of $3.9 million.
Cash Flows from
Investing Activities
For the nine months ended September 30, 2023 and 2022, net cash used
in investing activities was approximately $10.4 million and $16.0 million, respectively. The cash used in investing activities for the
nine months ended September 30, 2023, primarily resulted from our purchase of marketable securities of approximately $34.1 million and
the acquisition of FPS for approximately $1.1 million, partially offset by our sale of marketable securities of approximately $24.6 million.
The Company also collected approximately $0.5 million in principal related to its short-term notes. The cash used in investing activities
for the nine months ended September 30, 2022 primarily resulted from our purchase of marketable securities of $27.5 million, purchase
of promissory notes of $1.6 million and purchase of investments of $15.0 million, partially offset by our sale of marketable securities
of $28.5 million since we invest excess cash into marketable securities until additional cash is needed.
Cash Flows from
Financing Activities
For the nine months ended September 30, 2023, cash used in financing
activities was approximately $0.9 million, which reflects the cost for the purchase of treasury stock of approximately $0.9 million. Cash
used in financing activities for the nine months ended September 30, 2022 was $6.4 million, which reflects the cost for the redemption
of Series O and Series P Redeemable Convertible Preferred Stock of $22.0 million and the cost for purchase of treasury stock of $2.2 million,
partially offset by net proceeds of $17.9 million from investors in exchange of issuance of issuance of Series O and Series P Redeemable
Convertible Preferred Stock.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
Not required for
smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls
and Procedures
We maintain disclosure
controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed
or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure
that information required to be disclosed in the reports we file or submit under the Exchange Act are accumulated and communicated to
our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding
required disclosure.
During the quarter
ended September 30, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls and procedures were effective, as of the end of the period
covered by this report.
Changes in Internal Control Over
Financial Reporting
We have not made
any changes to our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during
the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Limitations
on Effectiveness of Controls
Our management
does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Part II. Other
Information
Item 1. Legal Proceedings
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.
Item 1A. Risk
Factors
As a “smaller reporting company” as defined by Item 10
of Regulation S-K, we are not required to provide information required by this Item. Our current risk factors are set forth in our Annual
Report on Form 10-K, which was filed with the SEC on March 30, 2023. Any of our previously disclosed risk factors could result in a significant
or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that
we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose
additional risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item 3. Defaults
Upon Senior Securities.
None.
Item 4. Mine
Safety Disclosures.
Not Applicable.
Item 5. Other
Information.
None.
Item 6. Exhibits
Signatures
Pursuant to the
requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
DOMINARI
HOLDINGS INC. |
|
|
|
Date:
November 6, 2023 |
By:
|
/s/
Anthony Hayes |
|
|
Anthony
Hayes |
|
|
Chief
Executive Officer |
|
|
(Principal
Executive Officer) |
Date:
November 6, 2023 |
By:
|
/s/
George Way |
|
|
George
Way |
|
|
Chief
Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
26
0.66
1.17
3.09
3.59
5159501
5283182
5344989
5345312
false
--12-31
Q3
0000012239
0000012239
2023-01-01
2023-09-30
0000012239
2023-11-06
0000012239
2023-09-30
0000012239
2022-12-31
0000012239
us-gaap:SeriesDPreferredStockMember
2023-09-30
0000012239
us-gaap:SeriesDPreferredStockMember
2022-12-31
0000012239
domh:SeriesD1PreferredStockMember
2023-09-30
0000012239
domh:SeriesD1PreferredStockMember
2022-12-31
0000012239
2023-07-01
2023-09-30
0000012239
2022-07-01
2022-09-30
0000012239
2022-01-01
2022-09-30
0000012239
us-gaap:PreferredStockMember
2023-06-30
0000012239
us-gaap:CommonStockMember
2023-06-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2023-06-30
0000012239
us-gaap:TreasuryStockCommonMember
2023-06-30
0000012239
us-gaap:RetainedEarningsMember
2023-06-30
0000012239
2023-06-30
0000012239
us-gaap:PreferredStockMember
2023-07-01
2023-09-30
0000012239
us-gaap:CommonStockMember
2023-07-01
2023-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2023-07-01
2023-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2023-07-01
2023-09-30
0000012239
us-gaap:RetainedEarningsMember
2023-07-01
2023-09-30
0000012239
us-gaap:PreferredStockMember
2023-09-30
0000012239
us-gaap:CommonStockMember
2023-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2023-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2023-09-30
0000012239
us-gaap:RetainedEarningsMember
2023-09-30
0000012239
us-gaap:CommonStockMember
2022-06-30
0000012239
us-gaap:PreferredStockMember
2022-06-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2022-06-30
0000012239
us-gaap:TreasuryStockCommonMember
2022-06-30
0000012239
us-gaap:RetainedEarningsMember
2022-06-30
0000012239
2022-06-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesORedeemableConvertiblePreferredStockMember
2022-07-01
2022-09-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesPRedeemableConvertiblePreferredStockMember
2022-07-01
2022-09-30
0000012239
us-gaap:CommonStockMember
2022-07-01
2022-09-30
0000012239
us-gaap:PreferredStockMember
2022-07-01
2022-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2022-07-01
2022-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2022-07-01
2022-09-30
0000012239
us-gaap:RetainedEarningsMember
2022-07-01
2022-09-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesORedeemableConvertiblePreferredStockMember
2022-09-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesPRedeemableConvertiblePreferredStockMember
2022-09-30
0000012239
us-gaap:CommonStockMember
2022-09-30
0000012239
us-gaap:PreferredStockMember
2022-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2022-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2022-09-30
0000012239
us-gaap:RetainedEarningsMember
2022-09-30
0000012239
2022-09-30
0000012239
us-gaap:PreferredStockMember
2022-12-31
0000012239
us-gaap:CommonStockMember
2022-12-31
0000012239
us-gaap:AdditionalPaidInCapitalMember
2022-12-31
0000012239
us-gaap:TreasuryStockCommonMember
2022-12-31
0000012239
us-gaap:RetainedEarningsMember
2022-12-31
0000012239
us-gaap:PreferredStockMember
2023-01-01
2023-09-30
0000012239
us-gaap:CommonStockMember
2023-01-01
2023-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2023-01-01
2023-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2023-01-01
2023-09-30
0000012239
us-gaap:RetainedEarningsMember
2023-01-01
2023-09-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesORedeemableConvertiblePreferredStockMember
2021-12-31
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesPRedeemableConvertiblePreferredStockMember
2021-12-31
0000012239
us-gaap:CommonStockMember
2021-12-31
0000012239
us-gaap:PreferredStockMember
2021-12-31
0000012239
us-gaap:AdditionalPaidInCapitalMember
2021-12-31
0000012239
us-gaap:TreasuryStockCommonMember
2021-12-31
0000012239
us-gaap:RetainedEarningsMember
2021-12-31
0000012239
2021-12-31
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesORedeemableConvertiblePreferredStockMember
2022-01-01
2022-09-30
0000012239
us-gaap:CommonStockMember
2022-01-01
2022-09-30
0000012239
us-gaap:PreferredStockMember
2022-01-01
2022-09-30
0000012239
us-gaap:AdditionalPaidInCapitalMember
2022-01-01
2022-09-30
0000012239
us-gaap:TreasuryStockCommonMember
2022-01-01
2022-09-30
0000012239
us-gaap:RetainedEarningsMember
2022-01-01
2022-09-30
0000012239
us-gaap:RedeemableConvertiblePreferredStockMember
domh:SeriesPRedeemableConvertiblePreferredStockMember
2022-01-01
2022-09-30
0000012239
domh:FPSPurchaseAgreementMember
2022-09-09
0000012239
domh:FPSPurchaseAgreementMember
2022-10-01
2022-10-04
0000012239
domh:FPSPurchaseAgreementMember
2022-10-04
0000012239
domh:FPSPurchaseAgreementMember
2023-01-01
2023-09-30
0000012239
domh:FPSPurchaseAgreementMember
2023-09-30
0000012239
us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember
2023-03-27
0000012239
us-gaap:ShortTermInvestmentsMember
2023-09-30
0000012239
domh:InvestmentInVicinityMotorCorpMember
2023-09-30
0000012239
domh:InvestmentInVicinityMotorCorpMember
2022-12-31
0000012239
domh:VicinityMotorCorpMember
2023-01-01
2023-09-30
0000012239
domh:VicinityMotorCorpMember
2022-01-01
2022-12-31
0000012239
domh:VicinityMotorCorpMember
2023-09-30
0000012239
domh:VicinityMotorCorpMember
2022-12-31
0000012239
domh:UnusualMachinesIncMember
us-gaap:CommonStockMember
2021-11-22
0000012239
domh:UnusualMachinesIncMember
us-gaap:CommonStockMember
2023-03-31
0000012239
domh:UnusualMachinesIncMember
2023-06-30
0000012239
domh:UnusualMachinesIncMember
2023-09-30
0000012239
domh:InvestmentInKernaHealthIncMember
2023-09-30
0000012239
domh:InvestmentInKernaHealthIncMember
2022-12-31
0000012239
domh:InvestmentInKayaNowMember
2023-09-30
0000012239
domh:InvestmentInKayaNowMember
2022-12-31
0000012239
domh:InvestmentInTevvaMotorsMember
2023-09-30
0000012239
domh:InvestmentInTevvaMotorsMember
2022-12-31
0000012239
domh:InvestmentInASPIsotopesMember
2023-09-30
0000012239
domh:InvestmentInASPIsotopesMember
2022-12-31
0000012239
domh:InvestmentInUnusualMachinesMember
2023-09-30
0000012239
domh:InvestmentInUnusualMachinesMember
2022-12-31
0000012239
domh:InvestmentInQxpressMember
2023-09-30
0000012239
domh:InvestmentInQxpressMember
2022-12-31
0000012239
domh:InvestmentInMasterclassMember
2023-09-30
0000012239
domh:InvestmentInMasterclassMember
2022-12-31
0000012239
domh:InvestmentInKrakenMember
2023-09-30
0000012239
domh:InvestmentInKrakenMember
2022-12-31
0000012239
domh:InvestmentInEpicGamesMember
2023-09-30
0000012239
domh:InvestmentInEpicGamesMember
2022-12-31
0000012239
domh:InvestmentInTesspayMember
2023-09-30
0000012239
domh:InvestmentInTesspayMember
2022-12-31
0000012239
domh:InvestmentInSpaceXMember
2023-09-30
0000012239
domh:InvestmentInSpaceXMember
2022-12-31
0000012239
domh:InvestmentInDatabricksMember
2023-09-30
0000012239
domh:InvestmentInDatabricksMember
2022-12-31
0000012239
domh:InvestmentInDiscordMember
2023-09-30
0000012239
domh:InvestmentInDiscordMember
2022-12-31
0000012239
domh:InvestmentInThrasioMember
2023-09-30
0000012239
domh:InvestmentInThrasioMember
2022-12-31
0000012239
domh:InvestmentInAutomationAnywhereMember
2023-09-30
0000012239
domh:InvestmentInAutomationAnywhereMember
2022-12-31
0000012239
domh:InvestmentInAndurilMember
2023-09-30
0000012239
domh:InvestmentInAndurilMember
2022-12-31
0000012239
domh:ConvergentTherapeuticsIncInvestmentMember
2023-01-01
2023-09-30
0000012239
domh:ConvergentTherapeuticsIncInvestmentMember
2023-09-30
0000012239
domh:ConvergentConvertibleNoteMember
2023-09-30
0000012239
domh:ConvergentConvertibleNoteMember
domh:ConvergentTherapeuticsIncInvestmentMember
2023-09-30
0000012239
domh:RaefanIndustriesLLCInvestmentMember
2023-09-30
0000012239
domh:RaefanIndustriesLLCInvestmentMember
2023-01-01
2023-09-30
0000012239
domh:AmericanInnovativeRoboticsLLCInvestmentMember
2023-01-01
2023-09-30
0000012239
domh:AmericanInnovativeRoboticsLLCInvestmentMember
2022-01-01
2022-12-31
0000012239
domh:KayaNowPromissoryNoteMember
2023-01-01
2023-09-30
0000012239
domh:ConvergentConvertibleNoteCurrentPortionMember
2023-01-01
2023-09-30
0000012239
domh:ConvergentConvertibleNoteCurrentPortionMember
2023-09-30
0000012239
domh:ConvergentConvertibleNoteNoncurrentPortionMember
2023-01-01
2023-09-30
0000012239
domh:ConvergentConvertibleNoteNoncurrentPortionMember
2023-09-30
0000012239
domh:AmericanInnovativeRoboticsInvestmentMember
2023-01-01
2023-09-30
0000012239
domh:AmericanInnovativeRoboticsInvestmentMember
2023-09-30
0000012239
domh:NotesReceivableAtFairvalueCurrentPortionMember
2023-09-30
0000012239
domh:NotesReceivableAtFairvalueNoncurrentPortionMember
2023-09-30
0000012239
us-gaap:FairValueInputsLevel1Member
2023-09-30
0000012239
us-gaap:FairValueInputsLevel2Member
2023-09-30
0000012239
us-gaap:FairValueInputsLevel3Member
2023-09-30
0000012239
us-gaap:FairValueInputsLevel1Member
2022-12-31
0000012239
us-gaap:FairValueInputsLevel2Member
2022-12-31
0000012239
us-gaap:FairValueInputsLevel3Member
2022-12-31
0000012239
us-gaap:FairValueInputsLevel3Member
2023-01-01
2023-09-30
0000012239
2023-01-11
2023-01-11
0000012239
2022-09-23
0000012239
2022-09-23
2022-09-23
0000012239
us-gaap:ConvertibleDebtSecuritiesMember
2023-01-01
2023-09-30
0000012239
us-gaap:ConvertibleDebtSecuritiesMember
2022-01-01
2022-09-30
0000012239
us-gaap:WarrantMember
2023-01-01
2023-09-30
0000012239
us-gaap:WarrantMember
2022-01-01
2022-09-30
0000012239
us-gaap:RestrictedStockMember
2023-01-01
2023-09-30
0000012239
us-gaap:RestrictedStockMember
2022-01-01
2022-09-30
0000012239
us-gaap:EmployeeStockMember
2023-01-01
2023-09-30
0000012239
us-gaap:EmployeeStockMember
2022-01-01
2022-09-30
0000012239
2023-03-06
0000012239
2023-03-20
0000012239
us-gaap:CommonStockMember
2023-06-01
2023-06-27
0000012239
2023-06-01
2023-06-27
0000012239
2022-01-21
0000012239
us-gaap:TreasuryStockPreferredMember
2023-09-30
0000012239
2023-03-01
2023-03-06
0000012239
us-gaap:OverAllotmentOptionMember
2023-01-01
2023-09-30
0000012239
us-gaap:OverAllotmentOptionMember
2022-01-01
2022-09-30
0000012239
us-gaap:WarrantMember
2022-12-31
0000012239
us-gaap:WarrantMember
2022-12-31
2022-12-31
0000012239
us-gaap:WarrantMember
2023-09-30
0000012239
us-gaap:WarrantMember
2023-09-30
2023-09-30
0000012239
domh:DominariSecuritiesMember
2023-09-30
0000012239
domh:DominariSecuritiesMember
2023-07-01
2023-09-30
0000012239
domh:LegacyAIkidoMember
2023-07-01
2023-09-30
0000012239
domh:ConsolidatedMember
2023-07-01
2023-09-30
0000012239
domh:DominariSecuritiesMember
2023-01-01
2023-09-30
0000012239
domh:LegacyAIkidoMember
2023-01-01
2023-09-30
0000012239
domh:ConsolidatedMember
2023-01-01
2023-09-30
xbrli:shares
iso4217:USD
iso4217:USD
xbrli:shares
xbrli:pure
In connection with the Quarterly Report of Dominari
Holdings Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the Securities
and Exchange Commission (the “Report”), I, Anthony Haynes, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
In connection with the Quarterly Report of Dominari
Holdings Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the Securities
and Exchange Commission (the “Report”), I, George Way, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that: