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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 132 added, 96 removed, 61 unchanged (79% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

You should read this discussion together with

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report

on Form 10-Q (“Quarterly Report”) contains statements that the Company believes are “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, without limitation,

statements relating to expectations for future financial performance, business strategies or expectations for the Company’s business.

These statements are based on the beliefs and assumptions of the management of the Company.

Although the Company believes that its plans,

intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot provide assurance

that it will achieve or realize these plans, intentions or expectations.

These statements constitute projections, forecasts and forward-looking

statements, and are not guarantees of performance.

Such statements can be identified by the fact that they do not relate strictly to historical

or current facts.

When used in this Quarterly Report, words such as “anticipate,” “believe,” “can,”

“continue,” “could,” “estimate,” “expect,” “forecast,” “intend,”

“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”

“seek,” “should,” “strive,” “target,” “will,” “would” and similar

expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety

by this paragraph.

We undertake no obligation to revise or publicly release the results of any revision

to these forward-looking statements, except as required by law.

This Quarterly Report on Form 10-Q (“Quarterly

Report”) contains statements that the Company believes are “forward-looking statements” within the meaning of the Private

Securities Litigation Reform Act of 1995.

These forward-looking statements include, without limitation, statements relating to expectations

for future financial performance, business strategies or expectations for the Company’s business.

These statements are based on

the beliefs and assumptions of the management of the Company.

Although the Company believes that its plans, intentions and expectations

reflected in or suggested by these forward-looking statements are reasonable, it cannot provide assurance that it will achieve or realize

these plans, intentions or expectations.

These statements constitute projections, forecasts and forward-looking statements, and are not

guarantees of performance.

Such statements can be identified by the fact that they do not relate strictly to historical or current facts.

When used in this Quarterly Report, words such as “anticipate,” “believe,” “can,” “continue,”

“could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,”

“plan,” “possible,” “potential,” “predict,” “project,” “seek,”

“should,” “strive,” “target,” “will,” “would” and similar expressions may

identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

All subsequent

written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except

as required by law.

You should not place undue reliance on these forward-looking statements.

Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect,

the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking

Should one or more of a number of known and

unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, the Company’s actual results or performance

may be materially different from those expressed or implied by these forward-looking statements.

Dominari Holdings Inc.

(“Dominari”) is a holding company that, through its various subsidiaries, is engaged in wealth management, investment banking,

sales and trading and asset management.

In addition to capital investment, Dominari provides management support to the executive

teams of its subsidiaries, helping them to operate efficiently and reduce cost under a streamlined infrastructure.

Dominari and its

subsidiaries are collectively referred to herein as “Company,” “we,” “our” or “us.”

(“Dominari”) is a holding company that, through its various subsidiaries, is engaged in wealth management, investment

banking, sales and trading, asset management and insurance.

In addition to capital investment, Dominari provides management support to the

executive teams of its subsidiaries, helping them to operate efficiently and reduce cost under a streamlined infrastructure.

Dominari and its subsidiaries are collectively referred to herein as “Company,” “we,” “our” or

Dominari Financial Inc.

(“Dominari Financial”), a wholly-owned subsidiary of Dominari Holdings Inc., executes the Company’s growth strategy

in the financial services industry.

In addition to organic growth, Dominari Financial seeks partnership opportunities and acquisitions

of third-party financial assets such as registered investment advisors and businesses, broker dealers, asset management and fintech firms,

and insurance brokers.

Our first transaction in furtherance of our growth in the financial services industry, the acquisition of 100%

of a dually-registered broker dealer and investment advisor from Fieldpoint Private Bank & Trust (“Fieldpoint”), was consummated

on March 27, 2023.

The newly acquired dually registered broker-dealer and investment adviser was renamed Dominari Securities LLC (“Dominari

Securities”) and is a wholly-owned subsidiary of Dominari Financial.

The Company is in the

process of winding down its historical pipeline of biotechnology assets held by Aikido Labs, LLC.

These biotechnology assets consist of

patented technology from leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia,

SARS-CoV-2 and acute lymphoblastic leukemia.

(“Dominari Financial”),

a wholly-owned subsidiary of Dominari Holdings Inc., executes the Company’s growth strategy in the financial services industry.

In addition to organic growth, Dominari Financial seeks partnership opportunities and acquisitions of third-party financial assets such

as registered investment advisors and businesses, broker dealers, asset management and fintech firms, and insurance brokers.

transaction in furtherance of our growth in the financial services industry, the acquisition of 100% of a dually-registered broker dealer

and investment advisor from Fieldpoint Private Bank & Trust (“Fieldpoint”), was consummated on March 27, 2023.

acquired dually registered broker-dealer and investment adviser was renamed Dominari Securities LLC (“Dominari Securities”)

and is a wholly-owned subsidiary of Dominari Financial.

On May 21, 2024, Dominari Financial and Heritage Strategies LLC (“HS”)

entered into a Limited Liability Company Operating Agreement (the “JV Agreement”) of Dominari Financial Heritage Strategies

LLC (“DFHS”).

The JV Agreement governs the operation of DFHS, including the distributions to the members of DFHS upon the

offer, sale and renewal of various insurance products and services, including life insurance, private placement insurance, group medical

plans, qualified plans, business insurance, and family office and estate planning services.

Pursuant to the terms of the JV Agreement,

Dominari Financial and HS are the co-managing members (the “Co-Managing Members”), each with fifty percent (50%) ownership

interests in DFHS.

Revenues from the sale of the various insurance products and services after deducting general and administrative costs

are distributed to the Co-Managing Members as set forth in the JV Agreement.

The Company is in the process of winding down

its historical pipeline of biotechnology assets held by Aikido Labs, LLC.

These biotechnology assets consist of patented technology from

leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia, SARS-CoV-2 and acute

lymphoblastic leukemia.

Critical Accounting Estimates

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Our actual results could differ significantly from these estimates under different assumptions and conditions.

There have been no material changes to our critical accounting estimates

as compared to the critical accounting estimates discussed in the Form 10-K.

There have been no material changes to our critical

accounting estimates as compared to the critical accounting estimates discussed in the Form 10-K.

Refer to Note 3 of the Annual Report for a discussion

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Results of Operations

Three Months Ended March 31, 2024, compared

to the Three Months Ended March 31, 2024

During the three months ended March 31, 2024,

we recognized approximately $1.4 million in revenue from operations, primarily driven by the commissions and underwriting revenue earned

by Dominari Securities.

During the three months ended March 31, 2024 and 2023, we incurred a loss from operations of approximately $2.8

million and $3.8 million, respectively.

The decrease in loss from operations was primarily general

and administrative expenses related to the process of winding down the assets held by Aikido Labs, LLC and was offset by a calendar year

loss of $1.3 million from operations in the operations of Dominari Securities.

There is a $1.0 million decrease in net operating loss during the three months ended March 31, 2024 compared to same period in 2023, which was driven by $2.3 million decrease in general and administrative expenses for Aikido segment and was offset by $1.3 million loss from operations Dominari Financial segment during the three months ended March 31, 2024.

During the three months ended March 31, 2024 and

2023, other (expenses) income was approximately $(2.6) million and $72,000, respectively.

The activity for the three months ended March

31, 2024 and 2023, is primarily a result of overall volatility in investment valuations due to macroeconomic uncertainty (i.e.

global tensions in the Ukraine and etc.) impacting marketable securities and the change in fair value of long-term equity investments.

Three Months Ended June 30, 2024, compared

to the Three Months Ended June 30, 2023

During the three months ended June 30, 2024 and

2023, we recognized approximately $6.2 million and $71,000 in revenue from operations, respectively, primarily driven by the commissions

and underwriting revenue earned by Dominari Securities and Dominari Manager LLC (“Manager”).

During the three months ended

June 30, 2024 and 2023, we incurred a loss from operations of approximately $2.7 million and $9.0 million, respectively.

During the three months ended June 30, 2024 and

2023, other (expenses) income was approximately $(3.4) million and $0.3 million, respectively.

The activity described above for the three

months ended June 30, 2024 and 2023, is primarily a result of the Company’s entrance into the financial services industry,

overall volatility in investment valuations due to macroeconomic uncertainty impacting marketable securities and the change in fair

value of long-term equity investments.

Specifically:

Marketable securities – we recognized a gain of approximately $0.6 million for the three months ended March 31, 2024.

The increase of approximately $0.6 million in gains over the prior period is driven by both market improvement and an increase in sale activity resulting in more realized gains.

Notes receivable – the changes over the three months ended March 31, 2024 and 2023 are a function of observable market transactions which resulted in an increase in unrealized loss of approximately $0.9 million on the adjusted fair value of our notes receivable during the three months ended March 31, 2024.

Long-term equity investments –the changes over the three months ended March 31, 2024 and 2023

are a function of observable market transactions which resulted in an increase in unrealized loss of approximately $2.5 million on the

adjusted fair value of the investments during the three months ended March 31, 2024.

Marketable securities - we recognized a gain of approximately $0.1

million for the three months ended June 30, 2024.

The decrease of approximately $0.3 million in gains from the three months June 2023 is

driven by both market improvement and an increase in sale activity resulting in more realized gains.

Notes receivable - the changes

over the three months ended June 30, 2024 and 2023 are a function of observable market transactions which resulted in an increase in

unrealized loss of approximately $0.7 million on the adjusted fair value of our notes receivable during the three months ended June 30,

Long-term equity investments -the

changes over the three months ended June 30, 2024 and 2023 are a function of observable market transactions which resulted in an increase

in unrealized loss of approximately $3.0 million on the adjusted fair value of the investments during the three months ended June 30,

Six Months Ended June 30, 2024, compared to

the Six Months Ended June 30, 2023

During the six months ended June 30, 2024, we

recognized approximately $7.5 million and $71,000 in revenue from operations, respectively, primarily driven by the commissions and underwriting

revenue earned by Dominari Securities and Dominari Manager.

During the six months ended June 30, 2024 and 2023, we incurred a loss from

operations of approximately $5.5 million and $12.8 million, respectively.

During the six months ended June 30, 2024 and

2023, other (expenses) income was approximately $(6.0) million and $0.4 million, respectively.

The activity described above for the six

months ended June 30, 2024 and 2023, is primarily a result of the Company’s entrance into the financial services industry,

overall volatility in investment valuations due to macroeconomic uncertainty impacting marketable securities and the change in fair value of long-term equity investments.

Specifically:

Marketable securities - we recognized

a gain of approximately $0.7 million for the six months ended June 30, 2024.

The increase of approximately $0.3 million in gains over

the six months ended June 2023 is driven by both market improvement and an increase in sale activity resulting in more realized gains.

Notes receivable - the changes

over the six months ended June 30, 2024 and 2023 are a function of observable market transactions which resulted in an increase in

unrealized loss of approximately $1.7 million on the adjusted fair value of our notes receivable during the six months ended June 30,

Long-term equity investments -the changes over the six months ended

June 30, 2024 and 2023 are a function of observable market transactions which resulted in an increase in unrealized loss of

approximately $5.5 million on the adjusted fair value of the investments during the six months ended June 30, 2024.

Liquidity and Capital Resources

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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;

● seeking additional funds raised

through the sale of additional securities in the future;

● seeking additional liquidity

through credit facilities or other debt arrangements.

While we continue to impleme nt

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

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

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

additional liquidity through credit facilities or other debt arrangements.

Our ultimate success is dependent on our ability

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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 $23.8 million as of March 31, 2024.

Our working capital amounted to approximately $24.9 million as of June 30, 2024.

We believe our cash and cash equivalents and marketable

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Cash Flows from Operating Activities

For the three months ended March 31, 2024 and

For the six months ended June 30, 2024 and

2023, net cash used in operations was approximately $7.2 million and $13.9 million, respectively.

The cash used in operating activities

for the three months ended March 31, 2024, is primarily attributable to a net loss of approximately $5.4 million and changes in operating

assets and liabilities of $6.5 million, partially offset by approximately $2.5 million of change in fair value of long-term equity investment.

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 six months ended June 30, 2024, is primarily attributable to a net loss of approximately $11.6 million, $3.3

million realized gain on marketable securities and changes in operating assets and liabilities of $3.5 million, partially offset by

approximately $5.5 million of change in fair value of long-term equity investment, $2.9 million unrealized loss on marketable

securities and $1.7 million unrealized and realized loss on note receivable.

The cash used in operating activities for the six

months ended June 30, 2023, is primarily attributable to a net loss of approximately $12.4 million, approximately $0.5 million of

realized gain on marketable securities and changes in operating assets and liabilities of $4.6 million, partially offset by $2.7

million stock-based compensation expense and approximately $0.5 million in unrealized losses on marketable securities.

Cash Flows from Investing Activities

For the three months ended March 31, 2024 and

For the six months ended June 30, 2024 and 2023,

net cash provided by (used in) investing activities was approximately $10.2 million and $(14.7) million, respectively.

The cash used

in investing activities for the three months ended March 31, 2024, primarily resulted from our sales of marketable securities of approximately

$8.8 million, partially offset by funds to employee forgivable loan of $1.3 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, 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 provided

by investing activities for the six months ended June 30, 2024, primarily resulted from our sales of marketable securities of approximately

$11.6 million and the sale of a long-term investment of $3.5 million, partially offset by purchase of marketable securities of $4.0 million

and funds to employee forgivable loan of $1.3 million.

The cash used in investing activities for the six months ended June 30, 2023, primarily

resulted from our purchase of marketable securities of approximately $34.0 million and the acquisition of FPS of approximately $1.1

million, partially offset by our sale of marketable securities approximately of $20.5 million.

The Company also collected approximately

$0.5 million in principal related to its short-term notes.

Cash Flows from Financing Activities

For the three months ended March 31, 2024, there

For the six months ended June 30, 2024, there

is no cash flows from financing activities.

For the three months ended March 31, 2023, cash used in financing activities was approximately

For the six months ended June 30, 2023, cash used in financing activities was approximately

$0.9 million, which reflects the cost for purchase of treasury stock of approximately $0.9 million.

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