Dominari Holdings Inc. 10-K

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this item. 26 Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated financial statements and supplementary data required by this Item 8 follow. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firms (PCAOB ID Number 688 ) F-2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 F-4 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholder’s Equity for the Years Ended December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Dominari Holdings Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Dominari Holdings Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Valuation of Long-term Investments As of December 31, 2023, the Company had $24.15 million of investments in companies without readily determinable fair values. The Company typically measures these investments at cost less any impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment. We identified the valuation of these investments as a critical audit matter because of the significant judgement management uses to estimate the investment value. This is a challenging audit area due to the subjectivity in assessing whether observable price changes have occurred for investments that are identical or similar to the investment the Company holds, and in assessing whether an investment is impaired. The following are the primary procedures we performed to address this critical audit matter. We obtained an understanding of management’s process for accounting for their investments that do not have readily determinable fair values. We considered the appropriateness of the Company’s application of accounting policy by obtaining and reviewing the Company’s analysis and confirming its compliance with accounting principles generally accepted in the United States. We tested the mathematical accuracy of the Company’s carrying value calculations. We evaluated the accounting conclusions reached by the Company as to whether any observable transactions had occurred that were identical or similar in nature through reading the Company’s available financial and other information regarding the investee and through public searches for corroborating or contradictory information. Further, we evaluated the appropriateness of the Company’s impairment conclusions considering this internal and external information. For certain investments, we utilized our internal valuation group specialists to assess the appropriateness of the valuation methodologies and recompute the valuations derived. We also evaluated the adequacy of the Company’s disclosures in the notes to the consolidated financial statements in relation to this matter. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 2022 . New York, NY April 1, 2024 F- 2 DOMINARI HOLDINGS INC. Consolidated Balance Sheets ($ in thousands except share and per share amounts) December 31, December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 2,833 $ 33,174 Marketable securities 13,547 7,130 Deposits with clearing broker 7,687 - Prepaid expenses and other assets 898 564 Prepaid acquisition cost - 301 Short-term investments at fair value - 13 Notes receivable, at fair value - current portion 3,177 7,474 Investment in Fieldpoint Securities - 2,000 Total current assets 28,142 50,656 Property and equipment, net 344 - Notes receivable, at fair value - non-current portion 1,129 1,100 Investments 24,150 23,103 Right-of-use assets 3,335 919 Security deposit 458 458 Total assets $ 57,558 $ 76,236 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 1,036 $ 447 Accrued salaries and benefits 51 1,260 Accrued commissions 77 - Lease liability - current 421 82 Other current liability 22 - Total current liabilities 1,607 1,789 Lease liability 3,028 680 Total liabilities 4,635 2,469 Stockholders’ equity Preferred stock, $ 0.0001 par value, 50,000,000 authorized Series D: 5,000,000 shares designated; 3,825 shares issued and outstanding at December 31, 2023 and 2022; liquidation value of $ 0.0001 per share - - Series D-1: 5,000,000 shares designated; 834 shares issued and outstanding at December 31, 2023 and 2022; liquidation value of $ 0.0001 per share - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 5,995,065 and 5,485,096 shares issued at December 31, 2023 and 2022, respectively; 5,934,917 and 5,017,079 shares outstanding at December 31, 2023 and 2022, respectively - - Additional paid-in capital 262,187 262,970 Treasury stock, at cost, 60,148 and 468,017 shares at December 30, 2023 and December 31, 2022, respectively ( 501 ) ( 3,322 ) Accumulated deficit ( 208,763 ) ( 185,881 ) Total stockholders’ equity 52,923 73,767 Total liabilities and stockholders’ equity $ 57,558 $ 76,236 See accompanying notes to consolidated financial statements. F- 3 DOMINARI HOLDINGS INC. Consolidated Statements of Operations ($ in thousands except share and per share amounts) Years Ended December 31, 2023 2022 Revenues $ 2,039 $ - Operating costs and expenses General and administrative $ 23,838 $ 11,683 Research and development 3 830 Research and development - license acquired ( 6 ) 1,833 Total operating expenses 23,835 14,346 Loss from operations ( 21,796 ) ( 14,346 ) Other income (expenses) Other income 36 64 Interest income 716 687 Gain (loss) on marketable securities 630 ( 5,952 ) Unrealized loss on note receivable ( 3,248 ) - Change in fair value of investments 780 ( 2,560 ) Total other expenses ( 1,086 ) ( 7,761 ) Net loss $ ( 22,882 ) $ ( 22,107 ) Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock - ( 4,109 ) Net Loss Attributable to Common Shareholders $ ( 22,882 ) $ ( 26,216 ) Net loss per share, basic and diluted Basic and Diluted $ ( 4.38 ) $ ( 4.91 ) Weighted average number of shares outstanding, basic and diluted Basic and Diluted 5,229,477 5,334,075 See accompanying notes to consolidated financial statements. F- 4 DOMINARI HOLDINGS INC. Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity ($ in thousands except share and per share amounts) Redeemable Convertible Preferred Stock Additional Total Series O Series P Preferred Stock Common 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 - $ - - $ - 4,659 $ - 5,275,329 $ - $ 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 - - - - - - - - - 468,017 ( 3,058 ) - ( 3,058 ) Stock-based compensation - - - - - - 238,244 - 1,472 - - - 1,472 Cancellation of common stock related to investment in CBM - - - - - - ( 22,812 ) - - - - - - Fractional shares adjusted for reverse split - - - - - - ( 5,665 ) - ( 26 ) - - - ( 26 ) Net loss - - - - - - - - - - - ( 22,107 ) ( 22,107 ) Balance at December 31, 2022 - $ - - $ - 4,659 $ - 5,485,096 $ - $ 262,970 468,017 $ ( 3,322 ) $ ( 185,881 ) $ 73,767 Stock-based compensation - - - - - - 1,179,468 - 2,977 - - - 2,977 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 - - - - - - - - - - - ( 22,882 ) ( 22,882 ) Balance at December 31, 2023 - $ - - $ - 4,659 $ - 5,995,065 $ - $ 262,187 60,148 $ ( 501 ) $ ( 208,763 ) $ 52,923 See accompanying notes to consolidated financial statements. F- 5 DOMINARI HOLDINGS INC. Consolidated Statements of Cash Flows ($ in thousands) Years Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 22,882 ) $ ( 22,107 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of right-of-use assets 359 ( 188 ) Depreciation 83 - Change in fair value of short-term investment 13 2,621 Change in fair value of long-term investment ( 793 ) ( 61 ) Research and development-acquired license, expensed - 1,833 Stock-based compensation 2,977 1,472 Realized loss on marketable securities 1,180 1,405 Unrealized (gain) loss on marketable securities ( 1,049 ) 4,867 Unrealized loss on note receivable 3,248 - Realized gain on receiving shares in exchange of note receivable extension ( 36 ) Changes in operating assets and liabilities: Prepaid expenses and other assets ( 406 ) ( 215 ) Prepaid acquisition cost 301 ( 301 ) Clearing broker deposits ( 4,137 ) - Accounts payable and accrued expenses 376 66 Accrued salaries and benefits ( 1,209 ) 580 Accrued commissions 52 - Lease liabilities ( 88 ) 31 Other current liabilities ( 99 ) - Notes receivable, at fair value – net interest accrued ( 122 ) ( 600 ) Net cash used in operating activities ( 22,232 ) ( 10,597 ) Cash flows from investing activities Purchase of membership interest in FPS - ( 2,000 ) Purchase of marketable securities ( 34,125 ) ( 26,798 ) Sale of marketable securities 27,574 28,658 Proceeds from sale of digital currencies - 93 Purchase of fixed assets ( 427 ) - Acquisition of FPS, net of cash acquired and receivable owed from FPS ( 1,112 ) - Return of deposit (funding of deposit) into a managed account, net - 3,898 Collection of principal on note receivable 1,102 - Funds to employee forgivable loan ( 107 ) - Purchase of research and development licenses - ( 1,833 ) 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 ( 7,170 ) ( 14,598 ) 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 ) ( 3,058 ) Net cash used in financing activities ( 939 ) ( 7,193 ) Net decrease in cash and cash equivalents and restricted cash ( 30,341 ) ( 32,388 ) Cash and cash equivalents, beginning of period 33,174 65,562 Cash and cash equivalents, end of period $ 2,833 $ 33,174 Cash paid for interest and taxes $ 686 $ - Non-cash investing and financing activities Receiving shares in exchange of note receivable extension $ 179 $ - Note receivable principal and interest receivable reduced due to receiving shares $ 143 Transfer from short-term investment to marketable securities $ - $ 1,497 Reclassify from convertible note receivable to notes receivable at fair value $ - $ 2,147 Transfer from long-term investment to marketable securities $ - $ 1,439 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 consolidated financial statements. F- 6 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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. On September 9, 2022, Dominari 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 the Financial Industry Regulatory Authority (“FINRA”) and an investment adviser registered with the Securities and Exchange Commission (“SEC”). Pursuant to the terms of the FPS Purchase Agreement, Dominari purchased from the Seller 100 % of the membership interests in FPS (the “Membership Interests”). FPS’s registered broker-dealer and investment adviser businesses will be operated as a wholly owned subsidiary of Dominari. 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 $ 2.0 million in consideration for a transfer by the Seller to Dominari 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 occurred on March 27, 2023. Dominari paid to the Seller an additional $ 1.4 million in consideration for a transfer by the Seller to Dominari of the remaining 80 % of the Membership Interests. 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 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 . 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 consolidated financial statements. F- 7 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note 3. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for financial information. 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 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. Use of Estimates The accompanying 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 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. Segments Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The CODM reviews financial information for the purposes of making operating decisions, allocating resources, and evaluating financial performance of the business of the reportable operating segments, based on discrete financial information. The Company’s chief executive officer is the CODM. The measures of segment profitability that are most relied upon by the CODM are gross revenues and net loss. Concentration of Cash The Company maintains cash balances at four financial institutions in checking accounts. From time to time, the Company’s cash account balances exceed the balances as covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances. As of December 31, 2023 and 2022, the Company had no cash equivalents. Marketable Securities Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years . Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. F- 8 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Research and Development Research and development costs, including acquired in-process research and development expenses for which there is no alternative future use, are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Accounting for Warrants The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Stock-based Compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one- to five-year period. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term. Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices. Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term. Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. The Company accounts for forfeitures as they occur. Fair Value Option - Short-term Note and Convertible Note The guidance in ASC 825, Financial Instruments , provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. The Company has elected to measure the purchases of its notes using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the consolidated statements of operations. Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the consolidated statements of operations. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Pursuant to this guidance, assets and liabilities are measured at fair value based, in part, on general economic and stock market conditions and those characteristics specific to the underlying investments. The carrying value is adjusted to estimated fair value at the end of each quarter, required to be reported separately in our consolidated balance sheets from those instruments using another accounting method. F- 9 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Deposits with clearing broker Deposits with Dominari Securities’ clearing broker consisted of approximately $ 6.7 million held in money market funds and liquid insured deposits maintained by the Company with its clearing broker as of December 31, 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 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 11 - 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 (see Note 15 - Revenue ). 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 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 Consolidated Balance Sheet. Treasury Stock Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity. F- 10 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Income Taxes The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary difference resulting from matters that have been recognized in the Company’s consolidated financial statement or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities measured at the enacted tax rates in effect for the year in which these items are expected to reverse. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. If applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general and administrative expense in the statement of operations. 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 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 . F- 11 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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 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 occurred on March 27, 2023. Dominari Financial paid to the Seller an additional approximate $ 1.4 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. 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 consolidated statement of operations. F- 12 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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 years ended December 31, 2023 and 2022, which are recorded as a component of gains and (losses) on marketable securities on the consolidated statements of operations, are as follows ($ in thousands): Years Ended December 31, 2023 2022 Realized loss $ ( 1,180 ) $ ( 1,405 ) Unrealized gain (loss) 1,049 ( 4,867 ) Dividend income 762 320 Total $ 630 $ ( 5,952 ) Note 6. Short-term investments The following table presents the Company’s short-term investments as of December 31, 2023 and 2022 ($ in thousands): December 31, 2023 December 31, 2022 Investment in Vicinity Motor Corp. - 13 Total - 13 The change in the fair value of the short-term investments for the year ended December 31, 2023, is summarized as follows: ($ in thousands): Beginning balance $ 13 Change in fair value of short-term investment ( 13 ) Ending balance $ - F- 13 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Investment in Vicinity Motor Corp. On October 25, 2021, the Company entered into a warrant agreement with Vicinity Motor Corp. (“Vicinity”) that entitles the Company to purchase up to 246,399 shares of Vicinity common stock at $ 5.10 per share. The warrant expires on October 25, 2024. The fair value was determined using a Black-Scholes simulation. The Company recorded the fair value of the Vicinity warrant of approximately $0 and $ 13 ,000 in the consolidated balance sheet as of December 31, 2023 and 2022, respectively, reflecting the benefit received as part of its purchase of Vicinity common stock through its brokerage account. Gains or losses associated with changes in the fair value of investments in Vicinity warrants are recognized as change in fair value of investment on the consolidated statements of operations. During the year ended December 31, 2023, the Company recorded approximately $ 13 ,000 of change in fair value of investment for this investment. The following table provides quantitative information regarding Level 3 fair value measurement inputs at their measurement dates: December 31, 2023 December 31, 2022 Option term (in years) 0.8 1.8 Volatility 67.2 % 76.90 % Risk-free interest rate 5.43 % 4.47 % Expected dividends 0.00 % 0.00 % Stock price $ - $ 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 December 31, 2023 and 2022 ($ in thousands): Cost Basis December 31, 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 2,679 2,500 Investment in SpaceX* 3,500 4,867 3,674 Investment in Databricks* 1,200 842 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 $ 24,150 $ 23,103 The change in the value of the long-term investments for the year ended December 31, 2023, is summarized as follows: ($ in thousands): * Investments made in these companies are through a Special Purpose Vehicle (“SPV”). The SPV is the holder of the actual stock. The Company does not hold these stock certificates directly. ** Investments made in these companies are through both an SPV and direct investments. Beginning balance $ 23,103 Purchase of investments 75 Receiving shares in exchange of note receivable extension 179 Change in fair value of long-term investments 793 Ending balance $ 24,150 F- 14 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note 8. Notes Receivable The following table presents the Company’s notes receivable as of December 31, 2023 and 2022 ($ in thousands): December 31, 2023 Maturity Date Stated Interest Rate Principal Amount Interest Receivable Fair Value Notes receivable, at fair value Convergent convertible note - current 12/2/2024 8 % $ 1,006 $ 58 $ 1,064 Raefan Industries LLC Investment 12/31/2024 8 % $ 1,363 $ 751 $ 2,114 American Innovative Robotics Investment 04/01/2027 8 % $ 1,106 $ 22 $ 1,129 Notes receivable, at fair value - current portion $ 3,177 Notes receivable, at fair value - non-current portion $ 1,129 December 31, 2022 Maturity Date Stated Interest Rate Principal Amount Interest Receivable Fair Value Short-term convertible notes receivable Convergent Investment 01/29/2023 8 % $ 2,000 $ 307 $ 2,307 Short-term notes receivable Raefan Industries LLC Investment 6/30/2023 8 % $ 4,730 $ 437 $ 5,167 Total $ 7,474 Long-term notes receivable American Innovative Robotics Investment 04/01/2027 8 % $ 1,100 $ - $ 1,100 F- 15 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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 $ 1.0 and $ 2.0 million as of December 31, 2023 and 2022, respectively. The Company recorded an interest income receivable of approximately $ 13 ,000 and $ 0.2 million on the Convergent Convertible Note as of December 31, 2023 and 2022, respectively. The Company recorded principal repayment of $ 1.0 million and $ 0 , interest receivable repayment of approximately $ 0.3 million and $ 0 , and an unrealized gain on the note of approximately $ 6,000 and $ 0 on the Convergent Convertible Note for the years ended December 31, 2023 and 2022, respectively. Raefan Industries LLC Investment On December 6, 2021, the Company purchased an 8 % promissory note (“Raefan Industries Promissory Note”) issued by Raefan Industries, LLC (“Raefan Industries”) in the principal amount of approximately $ 2.0 million pursuant to a Note Purchase Agreement with Raefan Industries. On December 6, 2022, the Company, Raefan Industries and Mr. Jeffrey Cooper entered into a Consolidated, Amended and Restated Promissory Note agreement (the “Raefan Amended Note Agreement”). On October 20, 2023, in consideration for extending the maturity date of the Raefan Amended Note (See Note 8 – Notes Receivable ) to December 31, 2024, Raefan Industries agreed and had delivered to the Company 357,143 shares of TessPay at $ 0.5 per share of common stock. The Company reduced approximately $ 0.1 million of principal and interest receivable balance of Raefan Amended Note and recorded an income of approximately $ 35,000 for receiving TessPay shares. The Company recorded an interest income receivable of approximately $ 0.4 million and $ 26,000 on the Amended Note as of December 31, 2023 and 2022 and an unrealized loss on the note of approximately $ 3.3 million and $ 0 for the years ended December 31, 2023 and 2022, respectively. American Innovative Robotics, LLC Investment The Company recorded interest income of approximately $ 89,000 and $ 67,000 , and an unrealized gain on the note of approximately $ 6,000 and $ 0 on the Robotics Promissory Note for the year ended December 31, 2023 and 2022, respectively. F- 16 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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 December 31, 2023 and 2022. The Company received and recorded interest income related to the Kaya Now Promissory Note of approximately $ 10,000 for the year ended December 31, 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. F- 17 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements The following table presents the Company’s assets and liabilities that are measured at fair value as of December 31, 2023 and 2022 ($ in thousands): Fair value measured as of December 31, 2023 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2023 (Level 1) (Level 2) (Level 3) Assets Marketable securities: Equities $ 13,547 $ 13,547 $ - $ - Total marketable securities $ 13,547 $ 13,547 $ - $ - Short-term investment $ - $ - $ - $ - Notes receivable at fair value, current portion $ 3,177 $ - $ - $ 3,177 Notes receivable at fair value, non-current portion $ 1,129 $ - $ - $ 1,129 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 F- 18 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements 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, 2021 $ 419 Change in fair value of investment ( 406 ) Short-term investment at December 31, 2022 $ 13 Change in fair value of investment ( 13 ) Short-term investment at December 31, 2023 $ - Notes receivable at fair value, current portion at December 31, 2021 $ 6,984 Accrued interest receivable 600 Reclassify from convertible note receivable to notes receivable at fair value 2,147 Purchase of notes receivable 500 Change in fair value of short-term investment ( 1,858 ) Conversion of note receivable to marketable securities ( 899 ) Notes receivable at fair value, current portion at December 31, 2022 $ 7,474 Collection of principal outstanding ( 1,000 ) Unrealized loss on note receivable ( 3,254 ) Principle reduced due to receiving shares ( 143 ) Accrued interest receivable 100 Notes receivable at fair value, current portion at December 31, 2023 $ 3,177 Notes receivable at fair value, non-current portion at December 31, 2021 $ - Purchase of notes receivable 1,100 Notes receivable at fair value, non-current portion at December 31, 2022 $ 1,100 Unrealized gain on note receivable 6 Accrued interest receivable 23 Notes receivable at fair value, non-current portion at December 31, 2023 $ 1,129 F- 19 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note Receivable at fair value As of December 31, 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. Note 10. Property and Equipment Property and equipment, net, consists of the following as of December 31, 2023 and 2022: Estimated Useful Lives December 31, 2023 December 31, 2022 Leasehold improvements Shorter of the remaining lease term or estimated useful life $ 50 $ - Machinery, equipment and computer software 1 to 15 years 169 - Furniture and fixtures 3 to 5 years 208 - Total $ 427 $ - Less: Accumulated depreciation and amortization ( 83 ) - Total property and equipment, net $ 344 $ - Depreciation expense was $ 83 ,000 and $0 during the years ended December 31, 2023 and 2022, respectively. Note 11. 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 “22 nd Floor Premises”). The Company currently uses the 22 nd 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 22 nd 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 February 1, 2023. 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. F- 20 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements The tables below represent the Company’s lease assets and liabilities as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Assets: Operating lease right-of-use-assets $ 3,335 $ 919 Liabilities: Current Operating 421 82 Long-term Operating 3,028 680 $ 3,449 $ 762 The following tables summarize quantitative information about the Company’s operating leases, under the adoption of ASC 842: December 31, 2023 December 31, 2022 Weighted-average remaining lease term – operating leases (in years) 6.5 7.1 Weighted-average discount rate – operating leases 10.0 % 10.0 % During the years ended December 31, 2023 and 2022, the Company recorded approximately $ 0.8 million and 0.1 million of lease expense to current period operations. Year Ended Year Ended December 31, 2023 December 31, 2022 Operating leases Operating lease cost $ 668 $ 73 Operating lease expense 668 73 Short-term lease rent expense 105 67 Net rent expense $ 773 $ 140 Supplemental cash flow information related to leases were as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Operating cash flows - operating leases $ 396 $ 231 Right-of-use assets obtained in exchange for operating lease liabilities $ 2,780 $ 960 As of December 31, 2023, future minimum payments during the next five years and thereafter are as follows: Operating Leases $ 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 4,728 Less present value discount ( 1,279 ) Operating lease liabilities $ 3,449 F- 21 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note 12. 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 years ended December 31, 2023, and 2022 are as follows: As of December 31, 2023 2022 Convertible preferred stock 34 34 Warrants to purchase common stock 444,796 444,796 Restricted stock awards 136,309 - Options to purchase common stock 420,168 54,722 Total 1,001,307 499,552 Note 13. Redeemable Convertible Preferred Stock Series O and Series P Redeemable Convertible Preferred Stock On February 24, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in concurrent registered direct offerings (the “Offerings”), (i) 11,000 shares of the Company’s Series O Redeemable Convertible Preferred Stock, par value $ 0.001 per share (the “Series O Preferred Stock”), and (ii) 11,000 shares of the Company’s Series P Redeemable Convertible Preferred Stock, par value $ 0.001 per share (the “Series P Preferred Stock” and together with the Series O Preferred Stock, the “Preferred Stock”), in each case, at an offering price of $ 952.38 per share, representing a 5 % original issue discount to the stated value of $ 1,000 per share of Preferred Stock, for gross proceeds of each Offering of $ 10,476,180 , or approximately $ 21.0 million in the aggregate for the Offerings, before the deduction of the placement agent’s fee and offering expenses. The shares of Series O Preferred Stock will have a stated value of $ 1,000 per share and will be convertible, at a conversion price of $ 1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The shares of Series P Preferred Stock will have a stated value of $ 1,000 per share and will be convertible, at a conversion price of $ 1.00 per share, into 11,000,000 shares of common stock (subject in certain circumstances to adjustments). The Series O Preferred Stock and the Series P Preferred Stock are being offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-238172) (the “Registration Statement”) filed under the Securities Act of 1933, as amended (the “Securities Act”). The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the Offerings occurred on March 2, 2022. In connection with this transaction, the Company received net proceeds of $ 21.0 million, which was deposited in an escrow account. In connection with the Offerings, the Company has entered into an engagement agreement (the “Engagement Agreement Agreement”) with H.C Wainwright & Company, LLC, as placement agent (“HCW”), pursuant to which the Company agreed to pay HCW an aggregate cash fee equal to 8 % of the aggregate gross proceeds raised in the offerings and issue HCW common stock purchase warrants to purchase up to 103,528 shares of common stock in the aggregate at an exercise price of $ 21.25 . The warrants were recorded as a component of stockholders’ equity in accordance with ASC 815. F- 22 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Redemption Rights After (i) the earlier of (1) the receipt of stockholder approval and (2) the date that is 90 days following the Original Issue Date (the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock) and (ii) before the date that is 120 days after the Original Issue Date (the “ Redemption Period ”), each Holder shall have the right to cause the Company to redeem all or part of such Holder’s shares of Preferred Stock at a price per share equal to 105 % of the Stated Value. As a result, the Preferred Stock were recorded separately from stockholders’ equity because they are redeemable upon the occurrence of redemption events that are considered not solely within the Company’s control. During the second quarter of 2022, the Company redeemed for cash at a price equal to 105 % of the $ 1,000 stated value per share all of its 11,000 outstanding shares of Series O Preferred Stock and its 11,000 Series P Preferred Stock. The total redemption amount was $ 23.1 million. As a result, all shares of the Series O Preferred Stock and Series P Preferred Stock have been retired and are no longer outstanding. During the year ended December 31, 2023 and 2022, the Company recognized approximately $ 0 and $ 4.1 million in deemed dividends related to the Preferred Stock in the consolidated statements of operations and the consolidated statements of changes in redeemable preferred stock and stockholders’ equity, respectively. Note 14. 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. 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 year ended December 31, 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. During the year ended December 31, 2022, the Company repurchased 468,017 shares at a cost of approximately $ 3.1 million or $ 6.53 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. Preferred Stock Series D Convertible Preferred Stock In connection with the acquisition of North South’s patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock (“Series D Preferred Stock”) to the stockholders of North South. Each share of Series D Preferred Stock has a stated value of $ 0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the conversion limitations described below. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. As of December 31, 2023 and 2022, 5,000,000 Series D Preferred Stock was designated; 3,825 and 3,825 shares remained issued and outstanding. F- 23 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Series D-1 Convertible Preferred Stock The Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $ 0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation. The conversion ratio of the Series D-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company’s Series D-1 Preferred Stock on a one-for-one basis. As of December 31, 2023 and 2022, 5,000,000 Series D-1 Preferred Stock was designated; 834 and 834 shares remained issued and outstanding. Warrants A summary of warrant activity for years ended December 31, 2023 and 2022 is presented below: Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2021 341,268 $ 31.68 - 3.87 Issued 103,528 21.25 - 4.15 Outstanding as of December 31, 2022 444,796 $ 29.25 - 3.20 Outstanding as of December 31, 2023 444,796 $ 29.25 - 2.20 Confirmation of Mutual Understanding - In March 2022, pursuant to a Confirmation of Mutual Understanding (the “Confirmation”), all parties to the Confirmation acknowledged and confirmed a scrivener’s error set forth in warrants to purchase shares of the Company’s common stock (the “Warrants”) dated March 10, 2020, April 15, 2020 and March 2, 2021. Pursuant to the Confirmation, all parties, which were involved in the original execution of the warrants, agreed that clause (v) of the definition of Fundamental Transaction in Section 3(d) of the Warrants, is as follows: “ the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50 % of the voting power of the Company’s outstanding equity securities, including with respect to the election of directors (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) ”. F- 24 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Restricted Stock Awards 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 consolidated balance sheet. See Restricted Stock roll-forward below. December 19, 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 1,287,129 shares of the Company’s common stock. Upon issuance, the shares were fully vested and nonforfeitable with a total fair value of approximately $ 2.6 million. Pursuant to the Grant Agreement, the Company withheld 657,079 of the shares granted to satisfy Soo Yu’s tax obligation of approximately $ 1.3 million and recorded as income taxes withheld within the consolidated balance sheet. See Restricted Stock roll-forward below. December 19, 2023, pursuant to the Company’s 2022 Equity Incentive Plan, the Company executed a Grant Agreement, through which Joshua Shipley was granted 33,003 shares of the Company’s common stock. Upon issuance, the shares were fully vested and nonforfeitable with a total fair value of approximately $ 67,000 . Pursuant to the Grant Agreement, the Company withheld 13,300 of the shares granted to satisfy Soo Yu’s tax obligation of approximately $ 27,000 and recorded as income taxes withheld within the consolidated balance sheet. See Restricted Stock roll-forward below. During the year ended December 31, 2023, the Company also issued an aggregate of 136,309 shares of the Company’s common stock to members of the Company’s Board of Directors and an employee for services rendered. During the year ended December 31, 2022, the Company issued an aggregate of 238,244 shares of the Company’s common stock to members of the Company’s Board of Directors and an employee for services rendered. A summary of restricted stock awards activity for the years ended December 31, 2023 and 2022, is presented below: Number of Restricted Stock Awards Weighted Average Grant Day Fair Value Nonvested at December 31, 2021 - $ - Granted 238,244 6.13 Vested ( 230,176 ) 6.14 Nonvested at December 31, 2022 8,068 $ 5.90 Granted 1,315,777 $ 2.27 Vested ( 1,187,536 ) 2.30 Nonvested at December 31, 2023 136,309 $ 2.26 Stock-based compensation associated with the amortization of restricted stock awards expense was approximately $ 2.7 million and $ 1.4 million for the years ended December 31, 2023, and 2022, respectively. All stock compensation was recorded as a component of general and administrative expenses. As of December 31, 2023, there is approximately $ 0.2 million unrecognized stock-based compensation expense related to restricted stock awards. F- 25 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Stock Options A summary of option activity under the Company’s stock option plan for year ended December 31, 2023 and 2022 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, 2021 28,203 $ 548.35 $ - 8.2 Employee options granted 170,587 5.95 - 0.3 Employee options forfeited ( 167,381 ) 41.90 - - Employee options expired ( 216 ) 73.70 - - Outstanding as of December 31, 2022 31,193 $ 302.97 $ - 7.9 Employee options granted 395,714 3.42 - 9.4 Employee options forfeited ( 5,882 ) 5.95 - - Employee options expired ( 857 ) $ 9,719.07 - - Outstanding as of December 31, 2023 420,168 $ 5.80 $ - 9.3 Options vested and exercisable 84,929 $ 15.16 $ - 8.8 Stock-based compensation associated with the amortization of stock option expense was approximately $ 0.2 million and $ 13,000 for the years ended December 31, 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 $ 0.5 million. Note 15. Revenue The following table presents our total revenues disaggregated by revenue type for the years ended December 31, 2023, and 2022 (in thousands): Years Ended December 31, 2023 2022 Underwriting $ 594 $ - Commissions 1,096 - Advisory fees 209 - Other 140 - Total $ 2,039 $ - Note 16. Commitments and Contingencies Legal Proceedings In March 2024, the Company received a notice of petition of a filed action seeking relief related to the March 2024 affiliates of new registered representatives. This notice was filed against the Company’s subsidiary Dominari Securities. The Company does not agree with the claim of the plaintiff and will defend itself accordingly. While the Company intends to defend itself vigorously from this claim, it is unable to predict the outcome of such legal proceeding. Any potential loss as a result of this legal proceeding cannot be reasonably estimated. As a result, the Company has not recorded a loss contingency for the aforementioned claim. 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 as described above and ordinary routine litigation incidental to the business, the Company is not aware of any material, active or pending legal proceedings brought against it. F- 26 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note 17. Income Taxes The income tax provision consists of the following ($ in thousands): For the years ended December 31, 2023 2022 Federal Current $ - $ - Deferred ( 3,820 ) ( 3,618 ) Increase in valuation allowance 3,820 3,618 State and local Current Deferred ( 3,012 ) ( 4,825 ) Increase in valuation allowance 3,012 4,825 Income Tax Provision (Benefit) $ - $ - The following is a reconciliation of the U.S. federal statutory rate to the effective income tax rates for the years ended December 31, 2023 and 2022: For the years ended December 31, 2023 2022 U.S. Statutory Federal Rate 21.00 % 21.00 % State Taxes, Net of Federal Tax Benefit 15.36 % 13.58 % Other Permanent Differences ( 0.54 )% ( 0.11 )% State rate change in effect ( 4.18 )% 2.95 % AMT credit benefit - % - % Decrease due to true up of State NOL ( 0.11 )% 0.69 % Decrease due to change in Federal NOL and other true ups ( 1.67 )% 0.04 % Change in Valuation Allowance ( 29.85 )% ( 38.15 )% Income Tax Benefit 0.00 % 0.00 % As of December 31, 2023 and 2022, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands): As of December 31, 2023 2022 Deferred tax assets: Net-operating loss carryforward $ 33,124 $ 26,241 Stock based compensation 9,754 8,358 Patents & Licenses 8,061 9,898 Transaction Costs 209 23 Research & Development 1,937 2,207 Operating lease liability 1,202 272 Investment portfolio and other 2,879 2,445 Total Deferred Tax assets 57,166 49,443 Valuation allowance ( 55,946 ) ( 49,115 ) Deferred Tax Asset, Net of Allowance $ 1,220 $ 328 Deferred tax liability: Depreciation ( 57 ) - Right of use asset ( 1,163 ) ( 328 ) F- 27 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the Company’s history of cumulative net losses, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has determined that, based on objective positive and negative evidence currently available, it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, the Company has provided a full valuation allowance for the deferred tax assets as of December 31, 2023 and 2022. As of December 31, 2023, the change in valuation allowance is approximately $ 6.8 million. As of December 31, 2023, the Company has approximately $ 40.7 million federal net operating loss carryovers (“NOLs”), which expire from 2033 through 2037, and $ 68.5 million of federal NOLs which will never expire. The Company has approximately $ 152.3 million of state and city NOLs, which expire from 2035 through 2043. As of December 31, 2023, the Company also had federal research and development tax credit carryforwards of $ 0.2 million which may be available to offset future income tax liabilities and begin to expire in 2042. Utilization of the U.S. NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 % over a three-year period. If the Company experiences an ownership change, as defined by Section 382, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization. The Company determined an ownership change occurred on September 10, 2013, and any NOLs generated prior to this date are therefore limited by Section 382. Any carryforwards that will expire prior to utilization due to this limitation were removed from deferred tax assets, with a corresponding reduction of the valuation allowance. The Company has not yet determined if any additional ownership changes occurred after September 10, 2013. Any past or future ownership changes may limit the Company’s ability to utilize remaining tax attributes. Due to the existence of the valuation allowance, limitations created by the 2013 ownership change and any potential future ownership changes will not impact the Company’s effective tax rate. As of December 31, 2023 and 2022, no liability for unrecognized tax benefit was required to be reported. The Company’s policy is to record interest and penalties related to income taxes outside of its income tax provision and classify as interest and penalties in general and administrative expense in the statement of operations. As of December 31, 2023 or 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statement of operations. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. The Company files U.S. federal and state income tax returns (New York, New York City, Virginia, and Texas). As of December 31, 2023, the statute of limitations for assessment by the Internal Revenue Service and state tax authorities remains open for all years since 2020. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state authorities to the extent utilized in a future period. There are no audits pending in any of the above-mentioned jurisdictions during 2023 and 2022. The Company believes that its income tax positions would be sustained upon an audit and does not anticipate any adjustments that would result in material changes to its consolidated financial position. In December, 2023, the FASB issued 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Public business entities must apply the ASU’s guidance to annual periods beginning after December 15, 2024. The Company may choose to early adopt any new or revised accounting standards whenever such early adoptions is permitted. The Company has chosen not to early adopt this standard. Note 18. 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 December 31, 2023, Dominari Securities had net capital of approximately $ 4.9 million, which was approximately $ 4.7 million in excess of required minimum net capital of $ 0.2 million. Note 19. 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 $ 1.0 million during the years ending December 31, 2023, and 2022, respectively. These fees were included in general and administrative expenses in the consolidated statements of operations. F- 28 DOMINARI HOLDINGS INC. (Formerly AIkido Pharma, Inc.) Notes to Consolidated Financial Statements Note 20. 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. Year Ended December 31, 2023 Dominari Financial Legacy AIkido Pharma Consolidated Revenue 2,039 - 2,039 Operating Costs General and administrative 15,750 8,088 23,839 Research and development - ( 3 ) ( 3 ) Loss from operations ( 13,711 ) ( 8,085 ) ( 21,797 ) Other (expenses) income Other income - 36 36 Interest income 229 487 716 Gain on marketable securities - 630 630 Unrealized loss on note receivable - ( 3,248 ) ( 3,248 ) Change in fair value of investments - 780 780 Total other (expenses) income 229 ( 1,315 ) ( 1,086 ) Net loss ( 13,482 ) ( 9,400 ) ( 22,882 ) Year Ended December 31, 2022 Dominari Financial Legacy AIkido Pharma Consolidated Revenue - - - Operating Costs General and administrative 157 11,526 11,683 Research and development - 2,663 2,663 Loss from operations ( 157 ) ( 14,189 ) ( 14,346 ) Other (expenses) income Other income - 64 64 Interest income - 687 687 Gain on marketable securities - ( 5,952 ) ( 5,952 ) Unrealized loss on note receivable - - - Change in fair value of investments - ( 2,560 ) ( 2,560 ) Total other (expenses) income - ( 7,761 ) ( 7,761 ) Net loss ( 157 ) ( 21,950 ) ( 22,107 ) Note 21. Subsequent Events Litigation In March 2024 the Company received a notice of petition of a filed action seeking relief related to the March 2024 affiliates of new registered representatives. This notice was filed against the Company’s subsidiary Dominari Securities LLC. The Company does not agree with the claim of the plaintiff and will defend itself accordingly. At this time the Company has no reasonable basis to assess or record any potential income statement impact related to this petition. See Note 16 Commitment and Contingencies for further information. F- 29 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE New independent registered public accounting firm On July 5, 2022, the Company engaged Marcum LLP (“Marcum”), as the Company’s new independent registered public accounting firm. The decision to engage Marcum was approved by the Company’s Audit Committee. During the fiscal year ending December 31, 2021, and through July 5, 2022, the Company had not consulted Marcum regarding (i) application of accounting principles to any specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company’s consolidated financial statements, or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv)) or a reportable event (as defined in Item 304(a)(1)(v)). During the fiscal year ending December 31, 2020, Marcum acted as the Company’s independent registered public accounting firm.