Dominari Holdings Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; financial statements are unaudited. Dollar amounts below are in millions unless noted. The company is transitioning from biotechnology toward financial services: its Dominari Securities subsidiary provides broker-dealer, investment-advisory, and related services, while its legacy AIkido unit is winding down its biotechnology pipeline and manages investments.
Key financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.963 | $0 | $1.034 | $0 |
| Operating expenses | $4.067 | $5.101 | $16.983 | $11.202 |
| Operating loss | $(3.104) | $(5.101) | $(15.949) | $(11.202) |
| Net loss | $(3.541) | $(6.239) | $(15.966) | $(14.851) |
| Basic and diluted loss per share | $(0.66) | $(1.17) | $(3.09) | $(3.59) |
Q3 revenue comprised $0.318 million underwriting, $0.525 million commissions, $0.072 million advisory fees, and $0.048 million other revenue. Nine-month revenue was primarily underwriting and commissions. The filing does not report a margin measure; operating losses substantially exceeded revenue.
Balance sheet, liquidity, and cash flow
- At September 30, 2023, total assets were $63.206 million, versus $76.236 million at December 31, 2022. Cash and cash equivalents were $4.388 million (down from $33.174 million); marketable securities were $16.274 million (up from $7.130 million), and clearing-broker deposits were $7.172 million.
- Current assets were $34.886 million and current liabilities $1.722 million, for reported working capital of approximately $33.2 million. Total liabilities were $4.859 million, including $3.548 million of operating lease liabilities. The filing reports no conventional borrowings.
- For the first nine months, operating cash use was $17.488 million, investing cash use $10.359 million, and financing cash use $0.939 million. Cash decreased $28.786 million to $4.388 million. Investing activity included $34.068 million of marketable-security purchases and $24.572 million of sales.
- Stockholders’ equity was $58.347 million, down from $73.767 million at year-end, primarily reflecting the accumulated loss. The company repurchased approximately $0.939 million of shares during the nine-month period.
Changes and notable items
- Compared with Q3 2022, revenue began with the financial-services business, while operating loss narrowed by $1.997 million. Management attributed the improvement to lower general and administrative costs and the near-elimination of biotechnology R&D spending.
- For the nine-month comparison, operating loss increased by $4.747 million. General and administrative expense rose by $8.416 million, including higher compensation and professional costs associated with establishing and operating the financial-services business; lower R&D spending partly offset the increase. Net loss was $1.115 million higher, while prior-year results included $4.109 million of deemed preferred-stock dividends affecting loss attributable to common shareholders.
- Investment-related results improved year over year: marketable securities produced a $0.185 million gain for the nine months versus a $4.390 million loss in 2022. The company also recorded a $0.495 million loss from changes in investment fair values and a $0.212 million unrealized loss on a note receivable.
- The company completed its acquisition of Fieldpoint Private Securities, renamed Dominari Securities, on March 27, 2023. The acquisition brought the company’s financial-services operation under its ownership.
- In June 2023, an executive received 1,033,591 fully vested common shares with a stated fair value of approximately $2.7 million; 503,876 shares were withheld for approximately $1.3 million in taxes. The filing reports $1.485 million of stock-based compensation for the nine-month period.
Outlook, risks, and contingencies
No numerical revenue or earnings guidance is provided. Management says cash, cash equivalents, marketable securities, and anticipated operating cash flow are expected to fund operations for at least 12 months from issuance of the statements. It also cautions that additional capital may be needed if cash flows or plans change. Raising capital could be difficult amid volatile markets; debt could bring higher interest costs and shorter maturities, while equity financing could dilute shareholders.
- Liquidity remains a key consideration: the company reported ongoing expenses in excess of non-financing revenue and used $17.488 million in operating cash over nine months.
- Private investments and notes receivable involve valuation uncertainty. Notes receivable of $7.708 million and most long-term investments are Level 3 or otherwise depend on less readily observable valuation inputs; long-term investments totaled $22.696 million.
- Dominari Securities reported net capital of approximately $6.2 million, about $6.1 million above its $0.1 million regulatory minimum.
- Operating lease commitments totaled $4.916 million before discounting; the recorded lease liability was $3.548 million. The filing reports no material active or pending legal proceedings against the company, apart from routine litigation incidental to business.
- Management concluded disclosure controls and procedures were effective at September 30, 2023, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Dominari Securities can grow revenue enough to offset the company’s operating costs, and how quickly reported revenue develops from its early base.
- The assumptions, repayment status, and credit quality underlying Level 3 notes receivable and the carrying values of private-company investments.
- Cash runway and the extent to which marketable securities are available to fund operations, given the decline in cash and ongoing operating cash use.
- The full cost and potential dilution of executive share awards, options, warrants, and other equity compensation.
- Future lease obligations, regulatory capital requirements, and any changes in the company’s stated 12-month funding outlook.