UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,, 2023 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-05576File Number: 001-41845

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrantregistrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to submit such files.)files). Yes ☒ No ☐

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitiondefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuantpursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

As of May 8, 2023,7, 2024, there were 4,592,5785,995,065 shares of the Company’s common stock issued and 5,934,917 shares outstanding.

DOMINARI HOLDINGS INC.

Form 10-Q

For the Quarter Ended March 31, 2023FORM 10-Q

IndexFOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DOMINARI HOLDINGS INC.

Condensed Consolidated Balance Sheets

($ in thousands except share and per share amounts)

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Condensed Consolidated Statements of Operations

($ in thousands except share and per share amounts)

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity

($ in thousands except share and per share amounts)

(Unaudited)

For the Three Months Ended March 31, 2024 and 2023

For the Three Months Ended March 31, 2022

See accompanying notes to unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. The Company is in the process of winding down its historical pipeline of biotechnology assets held by Aikido Labs, LLC. In an effort to enhance shareholder value, in June of 2022, the Company formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”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)(“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. 

Additionally, AIkido Labs, LLCOn 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 (“Aikido Labs”Seller”), anothera 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 SEC.   Pursuant to the terms of the FPS Purchase Agreement, Dominari Financial 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 Financial.  The FPS Purchase Agreement provides for Dominari Financial’s acquisition of FPS’s Membership Interests in two closings, the Company, has historically explored opportunitiesfirst of which occurred on October 4, 2022 (the “Initial Closing”), at which Dominari Financial paid to the Seller $2.0 million in high growth industries.  To date, Aikido Labs has made equity investmentsconsideration for a transfer by the Seller to Dominari Financial 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 Anduril Industries, Inc, Databricks, Inc., Discord, Inc., Epic Games, Inc., Payward, Inc. dba Kraken, Space Exploration Technologies Corp. dba SpaceX, Tevva Motors Ltd., Thrasio, LLC, and Yanka Industries, Inc. dba Masterclass. Finally, the Company is in the process of winding down its historical pipeline of biotechnology assets consisting of patented technologies from leading universities and researchers, including prospective treatments for pancreatic cancer, acute myeloid leukemia, and acute lymphoblastic leukemia. 

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 stockaccordance with FINRA Rule 1017 (the “Reverse Stock Split”“Rule 1017 Application”).  The Reverse Stock Split, whichRule 1017 Application was approved by stockholders atFINRA on March 20, 2023. The second closing occurred on March 27, 2023. Dominari Financial paid to the Seller an annual stockholder meeting on May 20, 2022, was consummated pursuantadditional $1.4 million in consideration for a transfer by the Seller 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 these unaudited condensed consolidated financial statements have been retrospectively adjusted to reflect the effectDominari Financial of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting fromremaining 80% of the reverse stock split amounted to $0.03 million.Membership Interests. As a result of the ownership change, FPS was renamed Dominari Securities LLC.

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 unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 3. Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those previously disclosed in the 20222023 Annual Report other than those discussed below.Report.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), and in conformity with the rules and regulations of the SEC. In the opinion of management, these financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. The condensed consolidated balance sheet atas of March 31, 2024, condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023, condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2022, was2024 or for any future interim period. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited annual financial statements butstatements; however, it does not containinclude all of the footnote disclosures from the annualinformation and notes required by U.S. GAAP for complete financial statements. Accordingly, theseThe accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Reportannual report on Form 10-K for the year ended December 31, 2022.2023.

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 unaudited condensed 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.

Results for interim periods are not necessarily indicative of results to be expected for a full year or any future period.

Use of Estimates

The accompanying unaudited condensed 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 unaudited condensed 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.

Deposits with clearing broker

Deposits with Dominari Securities’ clearing broker consisted of approximately $3.4$14.1 million held in money market funds and liquid insured deposits and a $0.1 million good faith deposit maintained by the Company with its clearing broker. These amounts are recorded as deposits with clearing broker within the unaudited condensed consolidated balance sheet as of March 31, 2023.2024.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 unaudited condensed 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 108 - Leases).

Revenue

The Company recognizes revenue under ASC 606 - Revenue from Contracts with Customers (“ASC 606”). Revenue is 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.

The following provides detailed information on the recognition of the Company’s revenue from contracts with customers:

Long-term equity investments

The Company accounts for long-term equity investments under Accounting Standards Codification (“ASC”) 321 “Investments—Equity Securities” (“ASC 321”). In accordance with ASC 321, equity securities with readily determinable fair values are accounted for at fair value based on quoted market prices. Equity securities without readily determinable fair values are accounted for either at fair value or using the measurement alternative. Under the measurement alternative, the equity investments are measured at cost, less any impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the Company. 

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 unaudited condensed 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 evaluatingadopted ASU 2022-03 on January 1, 2024. There was no material impact to the impact of the amendments on the Company’s unaudited condensed consolidated financial statements and whether it will early adoptfrom the amendments inimplementation of ASU 2022-03. 2022-03.

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 evaluatingadopted ASU 2023-01 on January 1, 2024. There was no material impact to the provisions of the amendments and the impact on its futureCompany’s unaudited condensed consolidated financial statements and whether it will early adoptfrom the amendments inimplementation of 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 thethese unaudited condensed consolidated financial statements.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4. FPS AcquisitionMarketable Securities

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 FINRA and an investment adviser registered with the SEC (the “FPS Acquisition”). 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 was renamed and will operate as Dominari Securities, 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 (the “Second Closing”) occurred on March 27, 2023. Dominari paid to the Seller an additional approximate $1.6 million consideration for a transfer by the Seller to Dominari of the remaining 80% of the Membership Interests. 

Consideration Transferred

The FPS Acquisition was accounted for a business combination under ASC 805.

Under the terms of the FPS Purchase Agreement and subsequent Amendments and Side Letters, 100% of the membership interest was acquired for cash consideration of approximately $3.4 million, which reflected the fair value of net assets acquired, plus a $1 purchase price. At March 31, 2023, Dominari had not finalized the purchase accounting related to the fair value of assets acquired in the FPS Acquisition. Pursuant to the Initial Closing and Second Closing, Dominari had wired a total of approximately $3.6 million in cash to the Seller. The purchase price allocation identified net assets of approximately $3.4 million, resulting in a receivable due from the Seller for approximately $0.2 million. The receivable is not included within the consideration transferred as part of the FPS Acquisition but is included within prepaid expenses and other assets within the unaudited condensed consolidated balance sheet as of March 31, 2023.

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 unaudited condensed consolidated statement of operations.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair Value of Net Assets Acquired

The Company is in the process of finalizing the purchase price allocation as of March 31, 2023. The following table summarizes the fair values of the assets acquired and liabilities assumed of FPS at the date of acquisition:

Dominari Securities reported a net loss of approximately $0.7 million for the period ended March 31, 2023. Revenue for the period ended March 31, 2023, was not material. The net loss was a result of professional service costs incurred of approximately $0.6 million, which included transaction costs of approximately $0.3 million. The approximate $0.6 million of professional service costs is included in the general and administrative expenses in the unaudited condensed consolidated statement of operations.

Proforma disclosures were omitted for this acquisition as it does not have a significant impact on the Company’s financial results.

Note 5. Investments in Marketable Securities

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three months ended March 31, 20232024 and 2022,2023, which are recorded as a component of gains and (losses) on marketable securities on the unaudited condensed consolidated statements of operations, are as follows ($ in thousands):

Note 5. Long-Term Equity Investments

The Company holds interests in several privately held and publicly traded companies as long-term investments. The following table presents the Company’s long-term investments as of March 31, 2024, and December 31, 2023 ($ in thousands):

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6. Short-term investments

The following table presents the Company’s short-term investments as of March 31, 2023, and December 31, 2022 ($ in thousands):

There was no change in the fair value of the short-term investments for the three months ended March 31, 2023.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

Note 7. Long-Term Investments

The following table presents the Company’s other investments as of March 31, 2023, and December 31, 2022 ($ in thousands):

There was no change in the value of the long-term investments for the three months ended March 31, 2023.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Kerna Health Inc

On September 15, 2021, the Company entered into a securities purchase agreement (the “Kerna Securities Purchase Agreement”) with Kerna Health Inc., (“Kerna”). Under the Kerna Securities Purchase Agreement, the Company agreed to purchase 1,333,334 shares of common stock of Kerna for $1.0 million. Kerna, a private company, raised capital during the fourth quarter of 2021, increasing its share price value to $2.85 per share. Therefore, the Company recorded a $2.8 million unrealized gain on this investment during the fourth quarter of 2021. The investment in Kerna was valued at $3.8 million as of December 31, 2021. In May 2022, the Company purchased additional 400,000 shares of common stock of Kerna Health Inc, (“Kerna”) for approximately $1.1 million. The investment in Kerna was valued at $4.9 million as of March 31, 2023.

Investment in Kaya Holding Corp. (a.k.a Kaya Now Inc.)

On September 29, 2021, the Company entered into a securities purchase agreement (the “Kaya Securities Purchase Agreement”) with Kaya Holding Corp., (“Kaya”). Under the Kaya Securities Purchase Agreement, the Company agreed to purchase 8,325,000 shares of common stock of Kaya for approximately $0.7 million. Kaya, a private company, raised capital during the fourth quarter of 2021, increasing its share price value to $0.20 per share. Therefore, the Company recorded approximately $1.0 million in unrealized gain on this investment during the fourth quarter of 2021. The investment in Kaya was valued at approximately $1.7 million as of December 31, 2021. On March 2, 2022, the Company purchased additional 3,375,000 shares of common stock of Kaya Now Inc., aka Kaya Holding Corp., (“Kaya”) for approximately $0.6 million.

On July 21, 2022, in consideration for extending the maturity date of the Kaya Now Promissory Note (See Note 8 – Notes Receivable) to February 1, 2023, Kaya agreed to issue to the Company 1,000,000 shares at $0.2 per share of common stock.

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 approximately $3.1 million in the fourth quarter of 2022. The impairment charge represents an unrealized impairment loss of approximately $2.5 million in stock, $0.5 million related to the promissory note (see Note 8 – Notes Receivable), and $50,000 in Kaya warrants (see Note 9 – Fair Value of Financial Assets and Liabilities). The investment in Kaya was valued at $0 as of March 31, 2023.

Investment in Tevva Motors Ltd.

On September 22, 2021, the Company entered into a securities purchase agreement (the “Tevva Motors Subscription Agreement”) with Big Sky Opportunities Fund, LLC, who handled the offering for Tevva Motors. Under the Tevva Motors Subscription Agreement, the Company agreed to purchase 29,004 interests of Tevva Motors for approximately $1.0 million. Subsequently, on September 30, 2021, the Company entered into a second securities purchase agreement with Big Sky Opportunities Fund, LLC to purchase an additional 29,004 interests of Tevva Motors for approximately $1.0 million. The investment in Tevva was valued at approximately $2.0 million as of December 31, 2021. Tevva Motors (“Tevva”), a private company, raised capital during the first quarter of 2022, increasing its share price value to $58.0 per share. Subsequent to the first quarter raise, Tevva had an additional fund raise in the second quarter at a lower valuation of $48.16 per share. Therefore, the Company recorded a first quarter of 2022 unrealized gain of approximately $1.4 million offset by a second quarter of 2022 unrealized loss of approximately $0.6 million. The investment in Tevva was valued at approximately $2.8 million as of as of March 31, 2023.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in ASP Isotopes Inc.SpaceX

On November 18, 2021, theThe Company entered into a securities purchase agreement (the “ASP Securities Purchase Agreement”) with ASP Isotopes Inc., (“ASP Isotopes”). Under the ASP Securities Purchase Agreement, the Company agreed to purchase 500,000 shares of common stock of ASP Isotopes for $1.0 million. Theredeemed its entire investment in ASP Isotopes was valued at approximately $1.0 million asthe portfolio company during April 2024 in exchange for return of December 31, 2021. In August 2022, the Company purchased additional 100,000 sharescost basis of common stock of ASP Isotopes Inc. (“ASP”) for $0.3$3.5 million. In November 2022, the Company transferred all 600,000 shares of ASP Isotopes common stock, approximately $1.4 million, inclusive of a $0.1 million unrealized gain, to the marketable securities account.

Investment in AerocarveUS CorporationUnusual Machines

On November 22, 2021, the Company entered into a securities purchase agreement (the “AerocarveUS Securities Purchase Agreement”) with AerocarveUS Corporation, (“AerocarveUS”). Under the AerocarveUS Securities Purchase Agreement, the Company agreed to purchase 250,000 sharesUnusual Machines, Inc, an emerging leader in first-person view (FPV) drone technology, closed its initial public offering of common stock on February 14, 2024 at a public offering price of AerocarveUS for $1.0 million. The investment in AerocarveUS was valued at approximately $1.0 million as of December 31, 2021. The investment in AerocarveUS Corporation was valued at $1.0 million as$4 per share and the shares began trading on the NYSE American under the ticker symbol “UMAC”. As of March 31, 2023.

Investment in Qxpress

On January 27, 2022,2024 the Company entered into a securities purchase agreement (the “Qxpress Securities Purchase Agreement”) with Qxpress. Under the Qxpress Securities Purchase Agreement, the Company agreed to purchase 46,780 shares of common stock of Qxpress for $1.0 million. Thevalued its investment in Qxpress was valued at $1.0 million as of March 31, 2023.

Unusual Machines based on UMAC’s market price.

Investment in Masterclass (a.k.a. Yanka Industries Inc.)

In March of 2022, the Company entered into a securities purchase agreement (the “Masterclass Securities Purchase Agreement”) with Masterclass. Under the Masterclass Securities Purchase Agreement, the Company agreed to purchase 4,841 shares of common stock of Masterclass for approximately $0.2 million. Although there was also a private fund raise in the second quarter, the per share amount approximated the fair value of the Company’s investment in Masterclass, resulting in no unrealized gain or loss. The investment in Masterclass was valued at approximately $0.2 million as of March 31, 2023.

Investment in Kraken (a.k.a. Payward, Inc.)

In March of 2022, the Company entered into a securities purchase agreement (the “Kraken Securities Purchase Agreement”) with Kraken. Under the Kraken Securities Purchase Agreement, the Company agreed to purchase a total of 8,409 shares of common stock of Kraken for approximately $0.5 million. In August 2022, the Company entered into a common stock transfer agreement with a private seller to purchase 3,723 shares of Kraken for approximately $0.1 million. The investment in Kraken was valued at approximately $0.6 million as of March 31, 2023.

Investment in Epic Games, Inc.

On March 22, 2022, the Company entered into a securities purchase agreement (the “Epic Games Securities Purchase Agreement”) with Epic Games. Under the Epic Games Securities Purchase Agreement, the Company agreed to purchase an aggregate of 901 shares of common stock of Epic Games for a total $1.5 million. In April 2022, the Company invested an additional $2 million for the purchase of additional shares of common stock of Epic Games. Although there was also a fund raise in April, the per share amount approximated the fair value of the Company’s investment in Epic Games, resulting in no unrealized gain or loss. The investment in Epic Games was valued at $3.5 million as of March 31, 2023.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Tesspay Inc.

On March 23, 2022, the Company entered into a securities purchase agreement (the “Tesspay Securities Purchase Agreement”) with Tesspay. Under the Tesspay Securities Purchase Agreement, the Company agreed to purchase 1,000,000 shares of common stock of Tesspay for approximately $0.2 million. The Company also invested an additional $1.0 million for pre-IPO. Tesspay, a private company, raised capital during the first quarter of 2022, increasing its share price value to $0.25 per share. Therefore, the Company recorded $10,000 in unrealized gain on this investment during the first quarter of 2022. Subsequent to the first quarter of 2022 raise, Tesspay had an additional fund raise in the fourth quarter of 2022 at $0.50 per share, resulting in an additional unrealized gain of approximately $1.3 million. The investment in Tesspay was valued at approximately $2.5 million as of March 31, 2023.

Investment in SpaceX (a.k.a. Space Exploration Technologies Corp.)

On March 30, 2022, the Company entered into a securities purchase agreement (the “SpaceX Securities Purchase Agreement”) with SpaceX, under which the company agreed to purchase shares of common stock of SpaceX for $1.5 million. In April 2022, the Company invested an additional $2.0 million for the purchase of additional shares of common stock of SpaceX. The Company identified a private fund raise on January 3, 2023. Given the proximity to the December 31, 2022 valuation date, the value of the fund raise was used as a proxy for the fair valuation of the Company’s investment in SpaceX as of December 31, 2022. The per share price of SpaceX’s recent fund raise resulted in an unrealized gain of approximately $0.6 million. The investment in SpaceX was valued at approximately $3.7 million as of March 31, 2023.

Investment in Databricks, Inc.

On March 25, 2022, the Company entered into a securities purchase agreement (the “Databricks Securities Purchase Agreement”) with Databricks. Under the Databricks Securities Purchase Agreement, the Company agreed to purchase an aggregate of 3,830 shares of common stock of Databricks for a total $1.2 million. The investment in Databricks was valued at $1.2 million as of March 31, 2023.

Investment in Discord Inc.

In May 2022, the Company entered into a securities purchase agreement (the “Discord Securities Purchase Agreement”) with privately-held company Discord, Inc., a social communications platform provider that is particularly popular with gamers, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Discord Securities Purchase Agreement, the Company agreed to purchase a total of 618 shares of common stock of Discord for approximately $0.5 million. The investment in Discord was valued at $0.5 million as of March 31, 2023.

Investment in Thrasio Holdings, Inc.

In April 2022, the Company entered into a securities purchase agreement (the “Thrasio Securities Purchase Agreement”) with privately-held company Thrasio, LLC, an aggregator of private brands of top Amazon businesses and direct-to-consumer brands, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Thrasio Securities Purchase Agreement, the Company agreed to purchase a total of 20,000 shares of common stock of Thrasio for $0.3 million. The investment in Thrasio was valued at $0.3 million as of March 31, 2023.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Investment in Automation Anywhere, Inc.

In April 2022, the Company entered into a securities purchase agreement (the “Automation Anywhere Securities Purchase Agreement”) with privately-held company Automation Anywhere, Inc., a provider of business automation solutions, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Automation Anywhere Securities Purchase Agreement, the Company agreed to purchase a total of 18,490 shares of common stock of Automation Anywhere for approximately $0.5 million. The investment in Automation Anywhere was valued at $0.5 million as of March 31, 2023.

Investment in Anduril Industries, Inc.

In April 2022, the Company entered into a securities purchase agreement (the “Anduril Securities Purchase Agreement”) with privately-held company Anduril Industries, Inc., a defense products company, as one of the Company’s pursuits of potentially high growth interests with near term monetization events. Under the Anduril Securities Purchase Agreement, the Company agreed to purchase a total of 14,880 shares of common stock of Anduril for approximately $0.5 million. The investment in Anduril was valued at $0.5 million as of March 31, 2023.

Note 8.6. Notes Receivable

The following table presents the Company’s notes receivable as of March 31, 2024 and December 31, 2023 ($ in thousands):

March 31, 2024

December 31, 2023

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 is approximately $1.8 million as of March 31, 2023. The Company recorded principal repayment of $0.25approximately $0.3 million, and interest income of approximately $0.04 million$63,000 and an unrealized gain on the note of approximately $60,000 on the Convergent Convertible Note as offor the three months ended March 31, 2023.2024.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Raefan Industries LLC Investment

The Company recorded an interest income receivablea realized loss as a result of directly writing off approximately $0.5$1.0 million onof principal, which the Raefan Industries Promissory Note as ofCompany deemed uncollectible during the three months ended March 31, 20232024.

American Innovative Robotics, LLC Investment

The Company recorded interest income of approximately $22,000, and an unrealized loss on the note of approximately $1,000 on the Robotics Promissory Note for the three months ended March 31, 2023.2024.

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 March 31, 2023.

The Company received and recorded interest income related to the Kaya Now Promissory Note of approximately $10,000 for the three months ended March 31, 2023.

Note 9.7. 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.

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the Company’s assets and liabilities that are measured at fair value as of March 31, 2023,2024, and December 31, 20222023 ($ in thousands):

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):

DOMINARI HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NoteNotes Receivable at fair value

As of March 31, 2023,2024, the fair value of the notes receivable was measured taking into consideration cost of the investment,basis, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No material change was noted in the fair value of the notes receivable during the three months ended March 31, 2023.2024.

Note 10.8. 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 will rentrents a portion of the twenty-second floor at 725 Fifth Avenue, New York, New York (the “22^nd Floor Premises”). The Company plans to usecurrently 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 willis 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’sDominari Financial’s Lease”) with Trump Tower Commercial LLC, a New York limited liability company. Under Dominari’sDominari Financial’s Lease, Dominari will rentFinancial rents a portion of a floor at 725 Fifth Avenue, New York, New York (the “Premises”). Dominari plans to useFinancial currently uses the Premises to run its day-to-day operations. The initial term of Dominari’sDominari Financial’s Lease is seven (7) years commencing on the date that possession of the Premises is delivered to Dominari.Dominari Financial. Under Dominari’sDominari Financial’s Lease, Dominari willFinancial is required to pay monthly rent equal to $49,368. Effective for the sixth and seventh years of Dominari’sDominari Financial’s Lease, the rent shall increase to $51,868 per month. The Company has takentook possession of the Premises in February 2023.

The tables below represent the Company’s lease assets and liabilities as of March 31, 2023:2024: