Dominari Holdings Inc. quarterly report, Q3 FY2021

Filing identity and reporting period

The supplied filing is Aikido Pharma Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021—not a Dominari Holdings Inc. filing. Investors should verify the issuer before relying on this summary.

Business context and financial performance

Aikido described itself as a pre-revenue biotechnology company developing oncology and antiviral candidates and investing in other companies and securities. It reported very little or no revenue in recent years and said it did not expect product revenue until a biotechnology product is fully developed, potentially years away.

There was no meaningful revenue base from which to calculate margins. Results included substantial investment-related fair-value movements: the company recorded a $4.7 million gain on change in investment fair value in Q3 2021, while reporting a $3.0 million loss on marketable securities. For the nine-month period, those items were a $3.8 million gain and a $2.6 million loss, respectively.

Cash, liquidity, debt and cash flow

At September 30, 2021, cash and cash equivalents were $5.9 million, marketable securities $80.5 million, short-term investments $6.3 million, and deposits $4.4 million. Current assets were $97.8 million versus current liabilities of $1.8 million; total assets were $105.0 million and total liabilities $1.8 million. The filing reports no borrowings or debt; it held a $2.1 million convertible note receivable as an asset.

For the first nine months of 2021, operating cash use was $4.6 million, investing cash use was $70.3 million, and financing provided $78.1 million. Cash increased by $3.2 million to $5.9 million. Financing was primarily the February public offering, which generated approximately $78.0 million net; investing outflows included purchases of marketable securities and other investments.

Changes versus prior comparable periods

• Q3 operating loss widened by approximately $0.8 million, principally due to higher general and administrative costs; lower research and development costs partly offset the increase.
• Nine-month operating loss widened by approximately $1.7 million, mainly due to a $2.2 million increase in general and administrative expenses.
• Net loss improved in both comparisons, largely because investment-related other income was more favorable than in 2020. These valuation-sensitive gains and losses do not represent recurring operating revenue.
• Shares outstanding increased substantially following the 2021 offering: 89.7 million were outstanding at September 30, compared with 34.9 million at December 31, 2020. The company also issued warrants in the offering.

Outlook, risks and unusual items

• Management stated that existing resources were adequate to fund operations for at least twelve months from issuance of the financial statements. It planned to preserve and manage cash and pursue licensing, research partnerships and pipeline development.
• Nasdaq notified the company that its share price did not meet the $1.00 minimum bid requirement. The stated compliance deadline was February 7, 2022, requiring a closing bid of at least $1.00 for ten consecutive business days.
• Management said COVID-19 had slowed some drug development and acquisition efforts, although activity was resuming; the potential financial impact remained uncertain.
• Disclosure controls were reported ineffective as of September 30, 2021 due to material weaknesses, including insufficient segregation of duties and inadequate controls to ensure material transactions and developments were reflected in the financial statements.
• The filing disclosed no material active or pending legal proceedings and no off-balance-sheet arrangements. Aikido reported no material changes to previously disclosed risk factors.

Important facts for investors to verify

• Confirm that Aikido Pharma Inc., rather than Dominari Holdings Inc., is the intended issuer and that the September 30, 2021 reporting period is correct.
• Assess the composition, liquidity and valuation sensitivity of the $80.5 million marketable-securities portfolio and other investments, given their effect on reported earnings.
• Review the Nasdaq bid-price notice and subsequent compliance status, which are not updated by this filing.
• Evaluate dilution from the 2021 share issuance and outstanding warrants and options.
• Review the disclosed internal-control material weaknesses and any remediation or subsequent auditor assessments.
• Consider the company’s pre-revenue status, ongoing operating cash use, development timelines and dependence on financing and investment resources.