What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-10 · 135 added, 183 removed, 26 unchanged (92% of the section changed)

Management’s Discussion and

Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Forward-Looking Statements

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All references to “we,”

“us,” “our” and the “Company” refer to Aikido Pharma Inc., a Delaware corporation and its consolidated

“us,” “our” and the “Company” refer to Dominari Holdings Inc., a Delaware corporation and its consolidated

subsidiaries unless the context requires otherwise.

Since 2017, we have operated as a biotechnology

company with a diverse portfolio of small-molecule anticancer and antiviral therapeutics in development.

Over the past year, in an effort

to enhance shareholder value, we have shifted our primary focus away from biotechnology to a new line of business in the fintech and financial

services industries.

In furtherance of this new focus, in June of this year we formed a wholly owned financial services subsidiary,

Dominari Financial Inc.

(“Dominari”), with the purpose of making strategic acquisitions across the fintech and financial services

Additionally, AIkido Labs, LLC (“Aikido Labs”), another wholly owned subsidiary, has and will continue to

explore other opportunities in high growth industries.

To date, Aikido Labs has acquired equity positions in Anduril Industries,

Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc.

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”), with the intent of shifting the Company’s primary operating focus

away from biotechnology to the fintech and financial services industries.

Through Dominari, 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

Additionally,

AIkido Labs, LLC (“Aikido Labs”), another wholly owned subsidiary of the Company, has historically explored opportunities

in high growth industries.

To date, Aikido Labs has made equity investments in 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 SpaceX, Tevva Motors Ltd., Thrasio, LLC, and

Yanka Industries, Inc.

dba Masterclass.

Finally, we will continue to foster and develop our historical

pipeline of biotechnology assets consisting of patented technology from leading universities and researchers, including prospective treatments

for pancreatic cancer, acute myeloid leukemia and acute lymphoblastic leukemia.

We are also developing a broad-spectrum antiviral

platform, in which the lead compounds have activity in cell-based assays against multiple viruses including Influenza virus, Ebolavirus

and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

On September 9, 2022, Dominari entered into a

membership interest purchase agreement (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”) and broker-dealer registered with the Financial Industry Regulatory Authority (“FINRA”).

Pursuant to the terms of the FPS Purchase Agreement, Dominari will purchase from the Seller 100% of the membership interests in of

FPS (the “Membership Interests”) and, as a result thereof, will, thereafter, operate FPS’s registered broker-dealer

business as a wholly owned subsidiary.

The FPS Purchase Agreement provides for Dominari’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

paid to the Seller $2,000,000 in consideration for a transfer by the Seller to Dominari of 20% of the 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”).

approval of the Rule 1017 Application, the second closing will occur (the “Second Closing”), at which Dominari will pay to

the Seller an additional $1.00 in consideration for a transfer by the Seller to Dominari of the remaining 80% of the Membership Interests.

The Second Closing is subject to FINRA’s final approval under FINRA Rule 1017 as well as other customary closing conditions, including

the accuracy of the representations and warranties of the applicable parties under the FPS Purchase Agreement and compliance therewith.

Additionally, on October 17, 2022, we entered into an Amended and Restated Services Agreement with Kyle Wool, pursuant to which he has

agreed to serve as Dominari’s Chief Executive Officer, upon the termination of his existing relationship with another registered

broker-dealer and lead our transition to a fintech and financial services company.

Our anticipated

diversified financial platform may be affected by a variety of factors including the continuing impact of the COVID-19 pandemic, higher

inflation, the actions by the Federal Reserve to address inflation, the possibility of recession, Russia’s invasion of Ukraine, and rising

energy prices.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our

business in future periods.

These developments and the impact on the financial markets and the overall economy continue to be highly uncertain

and cannot be predicted.

If the financial markets and/or the overall economy continue to be impacted, our results of operations, financial

position, and cash flows may be materially adversely affected.

Finally, The Company is in the process of winding down its historical pipeline of biotechnology

assets consisting of patented technologies from leading universities and researchers, including prospective treatments for pancreatic

cancer, acute myeloid leukemia, and acute lymphoblastic leukemia.

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 critical accounting policies are disclosed

in our annual report on Form 10K for the year ended December 31, 2021 and there have been no material changes to such policy or estimates

during the nine months ended September 30, 2022.

Critical Accounting Estimates

The preparation of financial statements in accordance

with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that

affect the reported amounts and related disclosures in the financial statements.

Management considers an accounting estimate to be critical

it requires assumptions to be made that were uncertain at the time the estimate was made, and

changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition.

While we base our estimates and judgments on our

experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those

estimates and the differences could be material.

See Note 2 to our unaudited condensed consolidated

financial statements for a discussion of our significant 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.

There have been no significant changes to our critical accounting policies

and estimates since December 31, 2022.

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 all accounting policies.

Recently Issued Accounting Pronouncements

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Results of Operations

We had little or no revenue for the past two years.

Three months ended September 30, 2022 compared

to three months ended September 30, 2021

During the three months ended September 30, 2022,

we incurred a loss from operations of approximately $5.1 million, as compared to a loss of approximately $1.8 million for the comparable

period of the prior year.

The approximate $3.3 million increase in loss year-over-year was primarily attributable to (i) an approximate

$2.8 million increase in general and administrative expenses from approximately $1.7 million, during the three months ended September

2021, to approximately $4.5 million, for the same period in 2022, and (ii) an approximate $0.5 million increase in research and development

expenses from approximately $0.1 million, during the three months ending September 30, 2021, to approximately $0.6 million, for the same

period in 2022.

The increase in (i) was a result of approximately $1.4 million in expenses related to fully-vested restricted stock grants

issued to the members of the board of directors and executive officers and additional contractual and discretionary bonus expense of approximately

$0.6 million.

We also incurred approximately $1.0 million in legal and accounting advisory fees related to our transition into a financial

services business.

The increase in (ii) was primarily due to an additional payment under our license agreement with the University of

Maryland (“UM”) pursuant to which the UM granted us an exclusive, worldwide, royalty bearing license to certain intellectual

property to, among other things, discover, develop, make, have made, use and sell certain licensed products and sell, use and practice

certain licensed services with respect to the treatment of cancer.

During the three months ended September 30,

2022, other expense was approximately $1.1 million as compared to other income of approximately $1.7 million for the comparable prior

The activity for the three months ended September 30, 2022, as compared to the same period in the prior year, is a result

of an overall volatility in equity valuations due to macroeconomic uncertainty (i.e.

inflation, global tensions in the Ukraine, etc.)

impacting the change in fair value of investments and unrealized losses on marketable securities.

Specifically, we recognized $0.3 million

in change of fair value of investments for the three months ended September 30, 2022, which is reflective of volatility in equity valuations,

as stated above.

For the three months ended September 30, 2021, change in fair value of investments increased to $4.4 million primarily

as a result of our investment in DatChat, Inc.

(“DatChat”) which increased to $4.4 million following DatChat’s initial

public offering during July 2021.

Unrealized losses on marketable securities for the three months ended September 30, 2022, were $1.6

million, as compared to $3.0 million for the same period during the prior year, which was a result of continued volatility in equity-based

exchange traded funds.

Nine months ended September 30, 2022 compared

to nine months ended September 30, 2021

During the nine months ended September 30, 2022,

we incurred a loss from operations of approximately $11.2 million, as compared to approximately $6.9 million during the comparable prior

The approximate $4.3 million increase in loss was primarily attributable to (i) an approximate $3.3 million increase in general

and administrative expenses from approximately $5.2 million, during the nine months ended September 30, 2021, to approximately $8.5 million,

during the same period in 2022, (ii) an approximate $1.6 million increase in research and development expenses from approximately $0.5

million, during the nine months ended September 30, 2021, to approximately $2.1 million, during the same period in 2022, and (iii) an

approximate decrease of $0.6 million in research and development – license acquired from approximately $1.1 million, during the

nine months ended September 30, 2021, to approximately $0.5 million, during the same period in 2022, The increase in (i) was a result

of approximately $1.4 million in expenses related to fully-vested restricted stock grants issued to the members of the board of directors

and executive officers and additional contractual and discretionary bonus expense of approximately $0.6 million.

We also incurred approximately

$1.0 million in legal and accounting advisory fees related to our transition into a financial services business.

The increase in (ii)

was primarily due to an approximate $1.6 million increase in expense related to our continued development of a broad-spectrum antiviral

platform, in which the lead compounds have activity in cell-based assays against multiple viruses including the Influenza virus, Ebolavirus

and Marburg virus, SARS-CoV, MERS-CoV, and SARS-CoV-2, the cause of COVID-19.

The decrease in (iii) was primarily attributable to an approximate

$0.6 million decrease related to a one-time expense for restricted stock units issued in the prior year in relation to use of the license.

During the nine months ended September 30,

2022, other expense was approximately $3.6 million as compared to other income of approximately $1.5 million for the comparable prior

The activity for the nine months ended September 30, 2022, as compared to the same period in the prior year, is a result

of overall volatility in equity valuations due to macroeconomic uncertainty (i.e.

inflation, global tensions in the Ukraine, etc.) impacting

the change in fair value of investments and unrealized losses on marketable securities.

Specifically, we recognized $0.1 million in change

of fair value of investments for the nine months ended September 30, 2022, which is reflective of volatility in equity valuations, as

stated above.

For the nine months ended September 30, 2021, change in fair value of investments increased to $3.8 million primarily as

a result of our investment in DatChat which increased to $4.4 million following DatChat’s initial public offering during July 2021.

Unrealized losses on marketable securities for the nine months ended September 30, 2022, were $4.3 million, as compared to $2.6 million

for the same period during the prior year, which was a result of continued volatility in equity-based exchange traded funds.

Three Months Ended March 31, 2023, compared

to the Three Months Ended March 31, 2022

The Company did not recognize revenue from operations,

nor do we expect to recognize any revenue until our operational transition into the financial services industry is complete.

three months ended March 31, 2023, and 2022, we incurred a loss from operations of approximately $3.8 million and $3.8 million, respectively.

The consistent loss in operations year over year was primarily attributable to the following:

An approximate $2.0 million increase in general and administrative expenses – driven by approximately

$0.4 million and $0.7 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 $0.7 million

due to growing operations.

An approximate $2.0 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.

is a decrease in research and development related expenses by almost 100%.

During the three months ended March 31, 2023 and

2022, other income was approximately $0.07 million and $0.3 million, respectively.

The activity for the three months ended March 31, 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:

Marketable securities – we recognized a loss of approximately $0.07 million for the three months

ended March 31, 2023.

The decrease of approximately $0.4 million in losses over prior year is a direct result of a decrease in realized

and unrealized losses of approximately $0.2 million, offset by an increase in dividend income related of approximately $0.06 million.

The decreases were driven by both market improvement and decrease in sale activity resulting in fewer realized losses.

Short-term and long-term investments – we did not recognize a

change in the fair value of short-term and long-term for the three months ended March 31, 2023.

The change over the three months ended

March 31, 2022 is a function of observable market transactions which resulted in unrealized gains of approximately $0.5 on the adjusted

fair value of the investments during the three months ended March 31, 2022.

There were no observable market transactions or impairment

indicators identified during the three months ended March 31, 2023.

Liquidity and Capital Resources

We continue to incur ongoing administrative and

other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue.

While we continue to implement

our business strategy, we intend to finance our activities through:

other expenses, including public company expenses.

While we continue to implement our business strategy, we intend to finance our activities

managing current cash and cash equivalents on hand from our past debt and equity offerings;

monetizing current and future strategic long-term investments;

seeking additional funds raised through the sale of additional securities in the future;

seeking additional liquidity through credit facilities or other debt arrangements;

increasing revenue from its patent portfolios, license fees and new business ventures.

Our ultimate success is dependent on our ability

to obtain additional financing, monetize our long-term investments, and generate sufficient cash flow to meet our obligations on a timely

Our business will require significant amounts of capital to sustain operations and make the investments it needs to execute its

longer-term business plan to transition to a fintech and financial services business .

Our working was approximately $54.2 million at

September 30, 2022.

We may need to obtain additional debt or equity financing, especially if we experience downturns in our business that

are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly-traded

company or operations.

If we attempt to obtain additional debt or equity financing, we cannot assume that such financing will be available

to the Company on favorable terms, or at all.

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.

are no known trends, demands, commitments, or events that will result in or that are reasonably likely to result in our

liquidity increasing or decreasing in any material way.

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 $43.8 million as of March 31, 2023.

We may need to obtain additional debt or equity financing,

especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant

increases in expense levels resulting from being a publicly-traded company or from continuing operations.

If we attempt to obtain additional

debt or equity financing, we cannot assume that such financing will be available to the Company on favorable terms, or at all.

Cash Flows from Operating Activities

For the nine months ended September 30, 2022 and 2021, net cash used in operations was approximately $8.7 million and $4.6 million, respectively.

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.

The cash used in operating activities for the nine months

ended September 30, 2021 primarily resulted from a net loss of $5.4 million and change in fair value of investment of $3.8 million, and

partially offset by $4.3 million unrealized loss on marketable securities and $1.1 million research and development expense related with

license acquired.

Cash Flows from Investing Activities - For the

nine months ended September 30, 2022 and 2021, net cash used in investing activities was approximately $16.0 million and $70.3 million,

respectively.

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.

The cash used in investing activities for the nine months ended September 30, 2021 primarily resulted from our purchase

of marketable securities of $90.5 million, funds to deposit accounts of $4.4 million (net of fee), purchase of investments at fair value

of $4.1 million and purchase of convertible note of $2.0 million, partially offset by our sale of marketable securities of $30.4 million

since we invest excess cash into marketable securities until additional cash is needed.

Cash Flows from Financing Activities - Cash

used in financing activities for the nine months ended September 30, 2022 was $6.4 million, which reflects the cost for redemption of

Series O and Series P Redeemable Convertible Preferred Stock of $22.0 million and 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.

Cash provided by financing activities for the nine months ended September 30, 2021 was $78.1 million, which

reflects the net proceeds of $78.0 million from investors in exchange of issuance of common stock and warrants and net proceeds of $84,000

from the exercise of common warrants.

For the three months ended March 31, 2023 and

2022, net cash used in operations was approximately $4.0 million and $3.8 million, respectively.

The cash used in operating activities

for the three months ended March 31, 2023, is primarily attributable to a net loss of approximately $3.8 million and changes in operating

assets and liabilities of $0.5 million, partially offset by approximately $0.1 million in unrealized losses on marketable securities and

approximately $0.06 million of realized loss on marketable securities.

The cash used in operating activities for the three months ended

March 31, 2022 primarily resulted from a net loss of $3.5 million and change in fair value of long-term investment of $1.4 million, and

is partially offset by change in fair value of short-term investment of $0.9 million.

Cash Flows from Investing Activities

For the three months ended March 31, 2023 and

2022, net cash used in investing activities was approximately $18.7 million and $10.1 million, respectively.

The cash used in investing

activities for the three months ended March 31, 2023, primarily resulted from our purchase of marketable securities of approximately $17.5

million and the acquisition of FPS of approximately $1.1 million.

The Company also collected approximately $0.3 million in principal related

to its short-term notes.

The cash used in investing activities for the three months ended March 31, 2022, primarily resulted from our

purchase of marketable securities of $27.1 million and purchase of investments of $7.7 million.

The purchases of marketable securities

during the prior year was partially offset by our sale of marketable securities of $24.7 million since we invest excess cash into marketable

securities until additional cash is needed.

Cash Flows from Financing Activities

For the three months ended March 31, 2023, cash

used in financing activities was approximately $0.9 million, which reflects the cost for purchase of treasury stock of approximately $0.9

Cash provided by financing activities for the three months ended March 31, 2022, was approximately $19.0 million, which reflects

the net proceeds of approximately $19.0 million from investors in exchange for the issuance of Series O and Series P Redeemable Convertible

Preferred Stock.

Off-balance sheet arrangements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis