Dominari Holdings Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. All references to “we,” “us,” “our” and the “Company” refer to Dominari Holdings Inc., a Delaware corporation and its consolidated subsidiaries unless the context requires otherwise. Cautionary Note Regarding Forward-Looking Statements 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. 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 statements. Overview 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 “us.” 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. On October 13, 2023, the Company entered into two separate Limited Liability Company Agreements with Dominari Manager LLC (“Manager”) and Dominari IMLLC (“Investment Manager”) which are both wholly owned subsidiaries and whose operations are included within the unaudited condensed consolidated financial statements of Dominari. Manager was named as the manager of Dominari Master SPV LLC (the “Master SPV”), a limited liability company formed by the Company in 2022, and is responsible for the day-to-day operations of the Master SPV. Investment Manager was named the investment manager of Master SPV and is responsible for providing investment advice and decisions on behalf of the Master SPV. Beginning in March 2024, the Manager established various series of funds (the “Series”) of the Master SPV for the purpose of making investments in companies identified by the Investment Manager with proceeds generated by the sale of non-voting interests in such Series by the Master SPV to investors, in which the Company may, from time to time as it deems appropriate, also invest in such series alongside third-party investors. 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. 26 On June 17, 2025, the Company entered into two Limited Liability Agreements with American Ventures Management LLC (“AV Manager”) and American Ventures IM LLC (“AV Investment Manager”) and was assigned ninety percent (90%) Membership Interest in each, which are both ninety percent (90%) majority owned subsidiaries of the Company and whose operations are included within the unaudited condensed consolidated financial statements of Dominari Holdings Inc. AV Manager was named as the manager of American Ventures LLC (the “AV Master SPV”), a series limited liability company formed by AV Manager and owned by the investors of each fund series, and is responsible for the day-to-day operations of the AV Master SPV. AV Investment Manager was named the investment manager of the AV Master SPV and is responsible for providing investment advice and decisions on behalf of the AV Master SPV. AV Manager and AV Investment Manager are the managing members of AV Master SPV and may not be removed without their respective consent. The other members of AV Master SPV are the passive investing members of each series of funds (the “AV Series”) established under the AV Master SPV. The AV Manager established various AV Series of the AV Master SPV for the purpose of making investments in companies identified by the AV Investment Manager with proceeds generated by the sale of non-voting interests in such AV Series by the AV Master SPV to investors, in which the Company may, from time to time as it deems appropriate, also invest in such series alongside third-party investors. Critical Accounting Estimates We prepare our unaudited condensed consolidated financial statements in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. In addition to our critical accounting estimates as compared to the critical accounting estimates discussed in the Company’s Annual Report on Form 10- K, the Company considers the valuation of its warrants as a critical accounting estimate included in the September 30, 2025 unaudited condensed consolidated financial statements as follows: Warrant Investments Warrant fair values are primarily determined using a Black Scholes option pricing model, which include the underlying stock price, warrant strike price, expected remaining term, volatility, and risk-free rate as the primary inputs to the model. Increases or decreases in any of these inputs could result in a material change in fair value. Additionally, for warrants that have periods of contractual trading restrictions, marketability discounts were considered in determining fair value. ● The underlying stock price is equal to the closing price of the underlying stock as of the measurement date. ● The expected remaining term is equal to the time to expiration of the warrant investment. ● Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant investment price. ● The risk-free interest rates are derived from the U.S. Treasury yield curve. The risk-free interest rates are calculated based on a weighted average of the risk-free interest rates that correspond closest to the expected remaining term of the warrant investment. ● Marketability discounts are applied for warrants that have sales restrictions (or lock up periods). These discounts are calculated using a combination of the Finnerty Model and the Asian Put Model using a term equal to the period of such restriction. Refer to Note 3 of the Company’s Annual Report on Form 10-K for a discussion of our significant accounting policies. 27 Recently Issued Accounting Pronouncements See Note 3 to the unaudited condensed consolidated financial statements for a discussion of recent accounting standards. Results of Operations Three months ended September 30, 2025, compared to the three months ended September 30, 2024 During the three months ended September 30, 2025 and 2024, we recognized approximately $50.8 million and $4.0 million in revenue from operations, respectively. The increase in 2025 was primarily driven by the increase in commissions of $7.7 million and underwriting revenue of $30.8 million earned by Dominari Securities and Dominari Manager LLC (“Manager”) along with $8.7 million earned in carried interest for the three months ended September 30, 2025. During the three months ended September 30, 2025, we recorded net income of approximately $126.1 million and during the three months ended September 30, 2024, we incurred a net loss of approximately $4.2 million. The change in net income from operations was primarily driven by increases in revenue and other income (see discussion below on marketable securities and long-term equity investments), and was offset by increases in general and administrative costs and expenses, specifically increases in commissions expense and stock-based compensation expense. During the three months ended September 30, 2025, other income was approximately $127.7 million and the Company recorded an other expense of $1.0 million, for the comparable period in 2024. The activity described above for the three months ended September 30, 2025 and 2024, is primarily a result of the Company’s continued increase in activities related to 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: i. Marketable securities - We recognized net gains of approximately $159.1 on marketable securities during the quarter primarily driven by an unrealized gain of $156.4 million from the investment in American Bitcoin Corp. (“ABTC”) along with gains recorded on investments in Skyline Builders Group Holdings Ltd. and JFB Construction Holdings. In September 2025, ABTC became publicly listed on the Nasdaq (Ticker: ABTC) and accordingly, the ABTC investment was reclassified from long term equity investments to marketable securities. ii. Long-term equity investments – During the three months ended September 30, 2025, we recognized a reduction of $32.0 million in our long-term equity investments reflecting the reclassification of the American Bitcoin Corp investment to marketable securities which was valued at $32.0 million at June 30, 2025. Nine months ended September 30, 2025, compared to the nine months ended September 30, 2024 During the nine months ended September 30, 2025, and 2024, we recognized approximately $93.0 million and $ 11.6 million in revenue from operations, respectively. The increase was primarily driven by the increase in commission revenues of $11.3 million and underwriting revenue of $51.5 million earned by Dominari Securities and Dominari Manager LLC (“Manager”) along with $19.2 million earned in carried interest for the nine months ended September 30, 2025. During the nine months ended September 30, 2025, and 2024, we recorded net income of $111.2 million and a net loss of approximately $15.8 million respectively. The change in net income was primarily driven by increases in revenues of $81.4 million and other income of $164.8 million offset by an increase in stock-based compensation expense of $53.7 million, and commission expenses of $60.4 million as compared to the comparable period in 2024. During the nine months ended September 30, 2025 and 2024, other income (expenses) were approximately $164.8 million and ($7.0 million), respectively (see discussion below on marketable securities and long-term equity investments). 28 The activity described above for the nine months ended September 30, 2025 and 2024, is primarily a result of the Company’s continued increase in activities related to the financial services industry, along with macroeconomic uncertainty and volatility impacting marketable securities. Specifically: i. Marketable securities - We recognized gains of approximately $163.1 million on marketable securities, which includes $156.4 million gain from the Company’s investment in ABTC (see discussion above) for the nine months ended September 30, 2025. This represents an increase of approximately $162.3 million over the nine months ended September 30, 2024. ii. Notes receivable - We recognized $0.2 million unrealized gain over the nine months ended September 30, 2025, versus $2.0 million loss during the nine months ended September 30, 2024, on notes receivable. Liquidity and Capital Resources We continue to incur ongoing administrative and other expenses, including public company expenses. While we continue to implement our business strategy, we intend to finance our activities through: ● managing current cash and cash equivalents on hand from our past debt and equity offerings; ● managing current marketable securities and other investments on hand ; ● seeking additional funds raised through the sale of additional securities in the future; and ● seeking additional liquidity through credit facilities or other debt arrangements. Our ultimate success is dependent on our ability to generate sufficient cash flow to meet our obligations on a timely basis. Our business may require significant amounts of capital to sustain operations that we need to execute our longer-term business plan to support our transition into the financial services industry. Our working capital amounted to approximately $198.8 million as of September 30, 2025. Included in working capital is $156.4 million related to American Bitcoin shares that is subject to a lock-up period until March 1, 2026. as well as another $1.2 million of warrants for purchasing shares in publicly traded that are subject to lock-up periods that will end in November 2025 and an additional $4.0 million of warrants for purchasing shares in publicly traded companies with lock-up periods that will end by March 1, 2026. We believe our cash and cash equivalents and marketable securities, together with the anticipated cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months. In the event that cash flow from operations is not sufficient to fund our operations, as expected, or if our plans or assumptions change, including if inflation begins to have a greater impact on our business or if we decide to move forward with any activities that require more outlays of cash than originally planned, we may need to raise additional capital sooner than expected. We may raise this additional capital by obtaining additional debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly traded company or from continuing operations. 29 Our ability to obtain capital to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets, and other factors, many of which are beyond our control. Specifically, as a result of recent volatility and weakness in the public markets, due to, among other factors, uncertainty in the global economy and financial markets, it may be much more difficult to raise additional capital, if and when it is needed, unless the public markets become less volatile and stronger at such time that we seek to raise additional capital. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to stockholders. The following table summarizes our net cash flows from operating, investing and financing activities for the periods indicated (in thousands): As of September 30, 2025 2024 Cash provided by (used in) Operating activities $ (4,031 ) $ (11,902 ) Investing activities 945 12,472 Financing activities 4,380 - Net increase in cash $ 1,294 $ 570 Cash Flows from Operating Activities For the nine months ended September 30, 2025 we used $4.0 million in operations as compared to cash flow use of $11.9 million for the nine months ended September 30, 2024. The cash provided by operating activities for the nine months ended September 30, 2025, is primarily attributable to increases in receivable from clearing brokers of $11.6 million, increase in accrued commissions of $2.7 million , increase in stock based comp of $53.7 million, changes in operating assets and liabilities of approximately $6.2 million, net realized and unrealized gain on marketable securities of approximately $4.8 million, offset by a change in prepaid expenses and other assets of approximately $0.2 million, and net income of approximately $111.2 million. The cash used in operating activities for the nine months ended September 30, 2024, is primarily attributable to a net loss of approximately $15.7 million, approximately $3.4 million of unrealized gain on marketable securities, increase in clearing broker deposits of $6.5 million, partially offset by approximately $3.8 million of realized gain on marketable securities, the change in carrying value of long term investments of approximately $6.4 million, and changes in operating assets and liabilities of $5.7 million. Cash Flows from Investing Activities For the nine months ended September 30, 2025 and 2024, net cash provided by investing activities was approximately $0.9 million and $12.5 million, respectively. The cash provided by investing activities for the nine months ended September 30, 2025, sales of marketable securities of $15.9 million, collection of principal on notes receivable of $1.1 million, sales of long term investments $0.5 million and collection of principal from employee loans of $0.3 million, and was partially offset by purchases of marketable securities of approximately $16.8 million. The cash provided by investing activities for the nine months ended September 30, 2024, primarily resulted from our sale of marketable securities of approximately $14.8 million and long term investments of approximately $ 3.5 million and collections of principal on notes receivable of $0.8 million, and was partially offset by funds loaned to employees of $2.4 million and purchases of marketable securities of approximately $4.0 million. Cash Flows from Financing Activities For the nine months ended September 30, 2025, cash provided by financing activities was approximately $4.4 million, primarily driven by fund raising related to issuance of common stock of $13.5 million and issuance of common stock for warrants exercised of $4.6 million, partially offset by payment of dividends of $11.9 million. During the three months ended September 30, 2025, the Company distributed approximately $1.8 million to holders of non-controlling interests. For the nine months ended September 30, 2024, there are no cash flows from financing activities. 30 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not Applicable.