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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-08 · 81 added, 93 removed, 100 unchanged (64% of the section changed)

34 unchanged sentences

Dominari Holdings Inc.

(“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

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 “us.”

Dominari Financial Inc.

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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.

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.

Critical Accounting Estimates

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Results of Operations

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.

Three months ended September 30, 2024, compared

to the three months ended September 30, 2023

During the three months ended September 30, 2024

and 2023, we recognized approximately $4.0 million and $1.0 million 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 September 30, 2024 and 2023, we incurred a loss from operations of approximately $3.2 million and $3.1 million, respectively.

During the three months ended September 30, 2024

and 2023, other expenses was approximately $1.0 million and $0.4 million, respectively.

The activity described above for the three months

ended September 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 carrying value

of long-term equity investments.

Specifically:

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.

Marketable securities - we recognized a realized gain of approximately $0.4 million for the three months ended September 30, 2024.

We also recognized an unrealized loss of approximately $0.4 million and dividend income of $78,000 for the three months ended September 30, 2024.The increase of approximately $1.2 million in realized gains over the three months ended September 30, 2023, was driven by both market improvement and an increase in sale activity resulting in more realized gains.

Notes receivable - we recognized $0.4 million realized and unrealized loss over the three months ended September 30, 2024, versus no gain or loss during the three months ended September 30, 2023 on notes receivable.

Long-term equity investments - changes over the three months ended September 30, 2024 and 2023 are a function of observable market transactions which resulted in a decrease of approximately $1.0 million on the adjusted carrying value of the investments for the three months ended September 30, 2024, which is an increase of approximately $0.5 million from the three months ended September 30, 2023.

Nine months ended September 30, 2024, compared

to the nine months ended September 30, 2023

During the nine months ended September 30, 2024,

we recognized approximately $11.6 million and $1.0 million in revenue from operations, respectively, primarily driven by the commissions

and underwriting revenue earned by Dominari Securities and Manager.

During the nine months ended September 30, 2024 and 2023, we incurred

a loss from operations of approximately $8.7 million and $16.0 million, respectively.

During the nine months ended September 30, 2024

and 2023, other expenses was approximately $7.0 million and $17,000, respectively.

The activity described above for the nine months

ended September 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 carrying 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.

Marketable securities - we recognized a realized gain of approximately $3.8 million for the nine months ended September 30, 2024.

We recognized an unrealized loss of $3.4 million and dividend income of $0.4 million for the nine months ended September 30, 2024.

The increase of approximately $5.0 million in realized gains over the nine months ended September 2023 was driven by both market improvement and an increase in sale activity resulting in more realized gains.

Notes receivable - the changes over the nine months ended September 30, 2024 and 2023 which resulted in an increase in net realized and unrealized loss of approximately $1.9 million on the adjusted fair value of our notes receivable during the nine months ended September 30, 2024.

This was largely driven by the adjustment to the fair value from the direct write off of the note receivable from Raefan Industries LLC.

Long-term equity investments -the changes over the nine months ended September 30, 2024 and 2023 are a function of observable market transactions which resulted in a decrease of approximately $6.4 million on the adjusted carrying value of the investments for the nine months ended September 30, 2024 and approximately $6.0 million greater than that of the nine months ended September 30, 2023.

Liquidity and Capital Resources

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other expenses, including public company expenses.

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.

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.

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 $24.9 million as of June 30, 2024.

Our working capital amounted to approximately $22.3 million as of September 30, 2024.

We believe our cash and cash equivalents and marketable

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Cash Flows from Operating Activities

For the six months ended June 30, 2024 and

For the nine months ended September 30, 2024 and

2023, net cash used in operations was approximately $11.9 million and $17.5 million, respectively.

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.

The cash used in operating activities

for the nine months ended September 30, 2024, is primarily attributable to a net loss of approximately $15.8 million, $3.8 million realized

gain on marketable securities and changes in operating assets and liabilities of $5.7 million, of which $6.5 million is clearing broker

deposits, partially offset by approximately $6.4 million of change in carrying value of long-term equity investment, $3.4 million unrealized

loss on marketable securities and $2 million unrealized and realized loss on note receivable.

The cash used in operating activities for

the nine months ended September 30, 2023, is primarily attributable to a net loss of approximately $16 million, approximately $1.2 million

of realized loss on marketable securities and changes in operating assets and liabilities of $4.4 million, partially offset by $1.4 million

stock-based compensation expense and approximately $0.9 million in unrealized gain on marketable securities.

Cash Flows from Investing Activities

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

For the nine months ended September 30, 2024 and

2023, net cash provided by (used in) investing activities was approximately $12.5 million and $(10.4) million, respectively.

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

provided by investing activities for the nine months ended September 30, 2024, primarily resulted from our sales of marketable securities

of approximately $14.8 million and the sale of a short-term investments of $3.5 million, partially offset by purchase of marketable securities

of $4.0 million and funds to employee loans of $2.4 million.

The cash used in investing activities for the nine months ended September

30, 2023, primarily resulted from our purchase of marketable securities of approximately $34.1 million and the acquisition of FPS of approximately

$1.1 million, partially offset by our sale of marketable securities approximately of $24.6 million.

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Cash Flows from Financing Activities

For the six months ended June 30, 2024, there

is no cash flows from financing activities.

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.

For the nine months ended September 30, 2024,

there are no cash flows from financing activities.

For the nine months ended September 30, 2023, cash used in financing activities was

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

Quantitative and Qualitative Disclosures

About Market Risk.

Not Applicable.

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