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 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. 24 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. There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Refer to Note 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, for a discussion of our significant accounting policies. 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 March 31, 2026, compared to the three months ended March 31, 2025 Three Months Ended March 31, 2026 2025 Revenues Underwriting services $ 32,949 $ 5,606 Carried interest 1,096 - Commissions 2,490 2,190 Interest income 308 39 Principal transactions (1,532 ) (910 ) Other revenue 494 315 Total revenue 35,805 7,240 Operating costs and expenses Compensation and benefits 68,159 15,457 Advisory fees 36 20,944 Legal fees 1,485 704 Professional and consulting fees 876 829 Other expenses 2,871 2,188 Total operating expenses 73,427 40,122 Loss from operations (37,622 ) (32,882 ) Other income (expenses) Other income 108 - Interest income 61 21 Loss on marketable securities, net (7,014 ) (168 ) Realized and unrealized gain loss on notes receivable, net - 221 Change in carrying value of investments - 320 Total other income (expenses) (6,845 ) 394 Net loss before income tax expense $ (44,467 ) $ (32,488 ) Provision for income taxes 12,868 - Net loss (57,335 ) (32,488 ) Less: Net income attributable to non-controlling interests 23 - Net loss attributable to common stockholders of Dominari Holdings Inc. $ (57,358 ) $ (32,488 ) 25 During the three months ended March 31, 2026, we recognized approximately $35.8 million in revenue from operations, an increase of approximately $28.6 million or 395% as compared to the three months ended March 31, 2025, primarily driven by the increase in our activities of Dominari Securities. The increase in revenue was primarily attributable to the following: i. Underwriting service revenue increased by $27.3 million or 488% from $5.6 million to $32.9 million in the three months ended March 31, 2026 as compared to the comparable period 2025, reflecting the impact of it increased efforts in both private placement and registered offering underwriting activities and deal flow. ii. Carried interest revenue totaled $1.1 million in first quarter of 2026 as compared to no such revenue in the first quarter of 2025 as a result of receiving variable consideration from investment management customers. iii. Commission revenues increased by $0.3 million, or 14% in the first three months of 2026 as compared to the same period in 2025, as a result of the increased customer trading activity. During the three months ended March 31, 2026, we recognized $73.4 million in operating costs and expenses representing an increase of $33.3 million or 83% as compared to the three months ended March 31, 2026. The increase in operating costs and expenses is primarily a result of the following: i. Compensation and benefits increased by $52.7 million or 341%for the three months ended March 31, 2026 as compared to the same period in 2025 primarily as a result of increased commissions expenses of approximately $17.1 million and increases in bonus expense of approximately $34.1 million (of which $18.2 million of stock based compensation is included). Increases in compensation and benefits costs were primarily incurred to compensate employees for generation of the significantly increased revenues. ii. The Company recorded $36 thousand of advisory fees in three months ending March 31, 2026, as compared to $20.9 million in the comparable period in 2025 primarily as a result of the issuance of approximately 2.55 million shares of common stock to certain advisors in February 2025. During the three months ended March 31, 2026, , other expense was approximately $(6.8) million as compared to other income of $394 thousand for the three months ended March 31, 2025. The 2026 other expense primarily is as a result of the loss on the sale of the Company’s ABTC stock for cash proceeds of approximately $32.5 million in January 2026 which was lower than the approximate December 31, 2025, book value of $39.4 million. During the three months ending March 31, 2025, the Company recorded a realized gain of approximately $0.2 million on a note that was satisfied during the period and an approximate $0.3 million increase in the carrying value of its long-term investments. During the three months ended March 31, 2026, the Company recorded income tax expense of $12.9 million as compared to $0 in comparable period in 2025 primarily as a result of the increased revenues, taxable gain on the sale of the Company’s ABTC stock in January 2026, and certain income tax limitations under Internal Revenue Code Sections 162(m) and 382 the tax impact of certain expenses related to compensation that are not allowable which limit available deductions for income tax purposes. Net loss of $57.3 million in the three months ended March 31, 2026, was $24.8 million or 76% higher than the $32.5 million loss reported in the comparable period of 2025. In the first three months of 2026, non-controlling interest of $23 thousand was recorded slightly increasing the net loss attributable to common stockholders’ of the Company. 26 Non-GAAP Comparison of Results for the Three Months Ended March 31, 2026, and March 31, 2025 To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the table below summarizes the additional non-GAAP financial measures of loss from operations, net income (loss) applicable to common stockholders’ of Dominari Holdings and earnings per share as adjusted from excluding non-cash stock-based compensation. Such noncash stock-based compensation represents charges included in compensation and benefits expense and advisory expense as reported on the Company’s consolidated statement of operations. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measure calculated in accordance with GAAP is shown in the table below ($ thousands): Three Months Ended Three Months Ended March 31, 2026 March 31, 2025 Loss from operations $ (37,622 ) $ (32,882 ) Non-cash stock-based compensation 19,279 28,626 Adjusted loss from operations $ (18,343 ) $ (4,256 ) Net loss attributable to common stockholders’ of Dominari Holdings $ (57,358 ) $ (32,488 ) Non-cash stock-based compensation 19,279 28,626 Adjusted net loss before income tax expense $ (38,079 ) $ (3,862 ) Adjustment to the provision for income taxes - 4,427 Adjusted net loss to common stockholders’ of Dominari Holdings (38,079 ) (8,289 ) Adjusted net loss per share, basic $ (2.11 ) $ (0.77 ) Weighted average number of shares outstanding, basic 18,068,269 10,775,219 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; ● 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 business plan to support our transition into the financial services industry. Our working capital amounted to approximately $21.9 million as of March 31, 2026. As of March 31, 2026, we had approximately $27.5 million of cash and cash equivalents, $6.9 million of marketable securities and $11.1 million of securities owned. Additionally, we had approximately $21.9 million in receivable from clearing brokers. All of such funds are available to fund our operations. 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. 27 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 March 31, 2026 2025 Cash provided by (used in) Operating activities $ (28,942 ) $ 1,235 Investing activities 32,123 (5,436 ) Financing activities (9,709 ) 6,437 Net increase (decrease) in cash $ (6,528 ) $ 2,236 Cash Flows from Operating Activities For the three months ended March 31, 2026, net cash (used in) operations was approximately $(28.9) million as compared to net cash provided by operations of $1.2 million for the three months ended March 31, 2025. The cash used in operating activities for the three months ending March 31, 2026, is primarily attributable to net loss of approximately $55.7 million, increases in receivable from clearing brokers of approximately $17.9 million and non-cash underwriting revenue of approximately $10.1 million, offset primarily by non-cash commission expense of approximately $7.6 million, increases in income taxes payable of approximately $12.9 million and stock-based compensation of approximately $19.3 million, and a realized gain on marketable securities of approximately $6.9 million. The cash provided by operating activities for the three months ended March 31, 2025, was primarily attributable to decreases in receivable from clearing brokers of $4.8 million, increase in accrued commissions of approximately $1.2 million, increase in stock based compensation of approximately $28.6 million, changes in operating assets and liabilities of approximately $3.7 million, realized loss on marketable securities of approximately $0.7 million, offset by a net loss of approximately $32.4 million. Cash Flows from Investing Activities For the three months ended March 31, 2026 and 2025, net cash provided by (used in) investing activities was approximately $32.1 million and $(5.4) million, respectively. The cash provided by investing activities for the three months ended March 31, 2026, primarily resulted from our sale of marketable securities of approximately $41.7 that included the sale of the Company’s ABTC shares for $32.4 million in net proceeds, partially offset by our purchase of marketable securities of approximately $10.0 million. The cash used in investing activities for the three months ended March 31, 2025, primarily resulted from our purchases of marketable securities of approximately $9.0 million, partially offset by sale of marketable securities of approximately $1.8 million and collection of principal on notes receivable of $1.1 million. Cash Flows from Financing Activities For the three months ended March 31, 2026 and 2025, net cash (used in) provided by financing activities was approximately $(9.7) million and $6.4 million, respectively. The cash used in financing activities for the three months ended March 31, 2026, was resulted from dividends paid of approximately $9.9 million and distributions to non-controlling interest of approximately $55 thousand, offset by the issuance of common stock for warrants exercised of approximately $0.3 million. The cash provided by financing activities for the three months ended March 31, 2025, was primarily driven by fund raising related to issuance of common stock of $13.5 million, partially offset by payment of dividends $(7.1) million. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable 28