Dominari Holdings Inc 10-Q for FY2023 Q1
Dominari Holdings Inc. (DOMH)
About this 10-Q
Dominari Holdings Inc filed this 10-Q on May 11, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $3.76M
- compared with a net loss of $3.54M a year earlier
- Diluted EPS
- -$0.71
- compared with -$1.25 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
For
the quarterly period ended
For the transition period from ____________ to ____________
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
As of May 8, 2023, there were
DOMINARI HOLDINGS INC.
Form 10-Q
For the Quarter Ended March 31, 2023
Index
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DOMINARI HOLDINGS INC.
Condensed Consolidated Balance Sheets
($ in thousands except share and per share amounts)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Clearing broker deposits | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Prepaid acquisition cost | ||||||||
| Short-term investments at fair value | ||||||||
| Notes receivable, at fair value - current portion | ||||||||
| Investment in Fieldpoint Securities | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Notes receivable, at fair value - non-current portion | ||||||||
| Investments | ||||||||
| Right-of-use assets | ||||||||
| Security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued salaries and benefits | ||||||||
| Accrued Commissions | ||||||||
| Lease liability - current | ||||||||
| Other Current liability | ||||||||
| Total current liabilities | ||||||||
| Lease liability | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Series D: | ||||||||
| Series D-1: | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost, | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
DOMINARI HOLDINGS INC.
Condensed Consolidated Statements of Operations
($ in thousands except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating costs and expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expenses) income | ||||||||
| Other income | ||||||||
| Interest income | ||||||||
| Loss on marketable securities | ( | ) | ( | ) | ||||
| Change in fair value of investments | ||||||||
| Total other (expenses) income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock | ( | ) | ||||||
| Net Loss Attributable to Common Shareholders | $ | ( | ) | $ | ( | ) | ||
| Net loss per share, basic and diluted | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Weighted average number of shares outstanding, basic and diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
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, 2023
| Preferred Stock | Common Stock | Additional Paid-in | Treasury Stock | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Cancellation of common stock | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Purchase of treasury stock | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Retirement of treasury stock | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
For the Three Months Ended March 31, 2022
| Redeemable Convertible Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Series O | Series P | Preferred Stock | Common Stock | Paid-in | Treasury Stock | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series O redeemable convertible preferred stock for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series P redeemable convertible preferred stock for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cost on issuance of Series O and Series P Redeemable Convertible Preferred Stock | - | ( |
) | - | ( |
) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Deemed dividends related to Series O and Series P Redeemable Convertible Preferred Stock | - | - | - | - | ( |
) | - | ( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Cancellation of common stock related to investment in CBM | - | - | - | ( |
) | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
DOMINARI HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of right-of-use assets | ||||||||
| Depreciation | ||||||||
| Change in fair value of short-term investment | - | |||||||
| Change in fair value of long-term investment | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Realized loss on marketable securities | ||||||||
| Unrealized loss on marketable securities | ||||||||
| Realized gain on sale of digital currencies | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Prepaid acquisition cost | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accrued salaries and benefits | ( | ) | ||||||
| Lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Notes receivable, at fair value – net interest accrued | ( | ) | ( | ) | ||||
| Deposit | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Sale of marketable securities | ||||||||
| Proceeds from sale of digital currencies | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Acquisition of FPS, net of cash acquired and receivable owed from FPS | ( | ) | - | |||||
| Collection of principal on note receivable | - | |||||||
| Purchase of short-term and long-term investments | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of Series O and Series P Redeemable Convertible Preferred Stock, net of discount and offering cost | ||||||||
| Purchase of treasury stock | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Transfer from short-term investment to marketable securities | $ | $ | ||||||
| Reclassify from convertible note receivable to notes receivable at fair value | $ | $ | ||||||
| On March 27, 2023, the Company acquired all assets and liabilities of FPS as disclosed in Note 4: | ||||||||
| Net assets acquired, net of cash acquired and receivable owed from FPS | $ | |||||||
| Less - Deposit previously transferred in October 2022 to FPS | $ | ( | ) | |||||
| Net cash paid | $ | |||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
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. In an effort to enhance shareholder value, in June of 2022, the Company formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”), with the intent of shifting the Company’s primary operating focus away from biotechnology to the fintech and financial services industries. Through Dominari, the Company acquired Dominari Securities LLC (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, LLC (“Aikido Labs”), another wholly owned subsidiary of the Company, has historically explored opportunities in high growth industries. To date, Aikido Labs has made equity investments 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 stock (the “Reverse
Stock Split”). The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was
consummated pursuant 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 effect of the Reverse
Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $
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 to fund its operations for at least the next twelve months from the date of the issuance of these unaudited condensed consolidated financial statements.
5
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 2022 Annual Report other than those discussed below.
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 balance sheet at December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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, and Dominari Securities. All significant intercompany balances and transactions have been eliminated in consolidation.
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 clearing broker consisted of approximately
$
6
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 10 - Leases).
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 evaluating the impact of the amendments on the Company’s consolidated financial statements and whether it will early adopt the amendments in ASU 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 evaluating the provisions of the amendments and the impact on its future consolidated financial statements and whether it will early adopt the amendments in 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 the unaudited condensed consolidated financial statements.
7
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4. FPS Acquisition
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
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,
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 $
8
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:
| March 27, | ||||
| 2023 | ||||
| (Unaudited) | ||||
| ASSETS | ||||
| Cash and cash equivalents | $ | |||
| Deposits with Clearing Broker-Dealer | ||||
| Other receivables | ||||
| Prepaid and other current assets | ||||
| Total assets acquired | ||||
| Liabilities | ||||
| Accrued expenses | $ | |||
| Accrued commissions | ||||
| Wealth management liabilities | ||||
| Total liabilities assumed | ||||
| Total net assets of FPS Acquisition | ||||
Dominari
Securities reported a net loss of approximately $
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, 2023 and 2022, 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):
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Realized (loss) gain | $ | ( | ) | $ | ( | ) | ||
| Unrealized loss | ( | ) | ( | ) | ||||
| Dividend income | ||||||||
| Total | $ | ( | ) | $ | ( | ) | ||
9
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):
| March 31, 2023 | December 31, 2022 | |||||||
| Investment in Vicinity Motor Corp. | ||||||||
| Total | ||||||||
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:
| March 31, 2023 | December 31, 2022 | |||||||
| Option term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividends | % | % | ||||||
| Stock price | $ | $ | ||||||
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):
| March 31, 2023 | December 31, 2022 | |||||||
| Investment in Kerna Health Inc | $ | $ | ||||||
| Investment in Kaya Now | ||||||||
| Investment in Tevva Motors | ||||||||
| Investment in ASP Isotopes | ||||||||
| Investment in AerocarveUS Corporation | ||||||||
| Investment in Qxpress | ||||||||
| Investment in Masterclass | ||||||||
| Investment in Kraken | ||||||||
| Investment in Epic Games | ||||||||
| Investment in Tesspay | ||||||||
| Investment in SpaceX | ||||||||
| Investment in Databricks | ||||||||
| Investment in Discord | ||||||||
| Investment in Thrasio | ||||||||
| Investment in Automation Anywhere | ||||||||
| Investment in Anduril | ||||||||
| Total | $ | $ | ||||||
There was no change in the value of the long-term investments for the three months ended March 31, 2023.
10
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
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
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
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 $
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
11
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Investment in ASP Isotopes Inc.
On November 18, 2021, the 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
Investment in AerocarveUS Corporation
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
Investment in Qxpress
On January 27, 2022, 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
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
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
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
12
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
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 $
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
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
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
13
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
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
Note 8. Notes Receivable
The following table presents the Company’s notes receivable as of March 31, 2023 ($ in thousands):
| Maturity Date | Stated Interest Rate | Principal Amount | Interest Receivable | Fair Value | ||||||||||||||||
| Notes receivable, at fair value | ||||||||||||||||||||
| Convergent convertible note, current portion | $ | $ | $ | |||||||||||||||||
| Convergent convertible note, non-current portion | $ | $ | $ | |||||||||||||||||
| Raefan Industries LLC Investment | $ | $ | $ | |||||||||||||||||
| American Innovative Robotics Investment | $ | $ | $ | |||||||||||||||||
| Notes receivable, at fair value - current portion | $ | |||||||||||||||||||
| Notes receivable, at fair value - non-current portion | $ | |||||||||||||||||||
Convergent Therapeutics, Inc. Investment
The Company’s
The principal balance of the Convergent Convertible
Note is approximately $
14
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Raefan Industries LLC Investment
The Company recorded an interest income receivable
of approximately $
American Innovative Robotics, LLC Investment
The Company recorded interest income of approximately
$
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 $
The Company received and recorded interest income
related to the Kaya Now Promissory Note of approximately $
Note 9. 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.
15
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, and December 31, 2022 ($ in thousands):
| Fair value measured as of March 31, 2023 | ||||||||||||||||
| Total at March 31, | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||
| 2023 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities: | ||||||||||||||||
| Equities | $ | $ | $ | $ | ||||||||||||
| Total marketable securities | $ | $ | $ | $ | ||||||||||||
| Short-term investment | $ | $ | $ | $ | ||||||||||||
| Notes receivable, at fair value - current portion | $ | $ | $ | $ | ||||||||||||
| Notes receivable, at fair value - non-current portion | $ | $ | $ | $ | ||||||||||||
| Fair value measured as of December 31, 2022 | ||||||||||||||||
| Total at December 31, | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities: | ||||||||||||||||
| Equities | $ | $ | $ | $ | ||||||||||||
| Total marketable securities | $ | $ | $ | $ | ||||||||||||
| Short-term investment | $ | $ | $ | $ | ||||||||||||
| Notes receivable, at fair value - current portion | $ | $ | $ | $ | ||||||||||||
| Notes receivable, at fair value - non-current portion | $ | $ | $ | $ | ||||||||||||
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):
| Short-term investment at December 31, 2022 | $ | |||
| Short-term investment at March 31, 2023 | $ | |||
| Notes receivable, at fair value - current portion, at December 31, 2022 | $ | |||
| Collection of principal outstanding | ( | ) | ||
| Accrued interest receivable, net | ||||
| Note receivable, Convergent Convertible Note, non-current portion | ( | ) | ||
| Notes receivable, at fair value - current portion at March 31, 2023 | $ | |||
| Notes receivable, at fair value - non-current portion, at December 31, 2022 | $ | |||
| Note receivable, Convergent Convertible Note, non-current portion | ||||
| Notes receivable, at fair value - non-current portion, value at March 31, 2023 | $ |
16
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note Receivable at fair value
As of March 31, 2023, the fair value of the notes receivable was measured taking into consideration cost of the investment, 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.
Note 10. 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 rent a portion of the twenty-second floor at 725 Fifth Avenue, New York, New York (the “22nd Floor
Premises”). The Company plans to use the 22nd Floor Premises to run its day-to-day operations.
On September 23, 2022, Dominari entered into a
Lease Agreement (“Dominari’s Lease”) with Trump Tower Commercial LLC, a New York limited liability company. Under Dominari’s
Lease, Dominari will rent a portion of a floor at 725 Fifth Avenue, New York, New York (the “Premises”). Dominari plans to
use the Premises to run its day-to-day operations. The initial term of Dominari’s Lease is seven (7) years commencing on the date
that possession of the Premises is delivered to Dominari. Under Dominari’s Lease, Dominari will pay monthly rent equal to $
The tables below represent the Company’s lease assets and liabilities as of March 31, 2023:
| March 31, 2023 | ||||
| Assets: | ||||
| Operating lease right-of-use-assets | $ | |||
| Liabilities: | ||||
| Current | ||||
| Operating | ||||
| Long-term | ||||
| Operating | ||||
| $ | ||||
The following tables summarize quantitative information about the Company’s operating leases, under the adoption of ASC 842:
March 31, 2023 | ||||
| Weighted-average remaining lease term – operating leases (in years) | ||||
| Weighted-average discount rate – operating leases | % | |||
17
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the three months ended March 31, 2023,
the Company recorded approximately $
| Three Months Ended | ||||
| March 31, 2023 | ||||
| Operating leases | ||||
| Operating lease cost | $ | | ||
| Operating lease expense | ||||
| Short-term lease rent expense | ||||
| Net rent expense | $ | |||
Supplemental cash flow information related to leases were as follows:
| Three Months Ended | ||||
| March 31, 2023 | ||||
| Operating cash flows - operating leases | $ | |||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | |||
As of March 31, 2023, future minimum payments
during the next
| Operating | ||||
| Leases | ||||
| Remaining Period Ended December 31, 2023 | $ | |||
| Year Ended December 31, 2024 | ||||
| Year Ended December 31, 2025 | ||||
| Year Ended December 31, 2026 | ||||
| Year Ended December 31, 2027 | ||||
| Year Ended December 31, 2028 | ||||
| Thereafter | ||||
| Total | ||||
| Less present value discount | ( | ) | ||
| Operating lease liabilities | $ | |||
Note 11. Net Loss per Share
Basic loss per share of common stock is computed by dividing the net loss allocable to common stockholders by the weighted-average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the three months ended March 31, 2023, and 2022 are as follows:
| As of March 31, | ||||||||
| 2023 | 2022 | |||||||
| Convertible preferred stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Options to purchase common stock | ||||||||
| Total | ||||||||
18
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 12. Stockholders’ Equity and Convertible Preferred Stock
Common Stock
On March 6, 2023, the Company cancelled
On March 20, 2023, the Company cancelled
Treasury Stock
On January 21, 2022, the Company’s board
of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to which the Company authorized the
Share Buyback Program in an amount of up to
On March 6, 2023, the Company retired
Warrants
A summary of warrant activity for the three months ended March 31, 2023, is presented below:
| Warrants | Weighted Average Exercise Price | Total Intrinsic Value | Weighted Average Remaining Contractual Life (in years) | |||||||||||||
| Outstanding as of December 31, 2022 | $ | | ||||||||||||||
| Outstanding as of March 31, 2023 | $ | |||||||||||||||
19
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Restricted Stock Awards
A summary of restricted stock awards activity for the three months ended March 31, 2023, is presented below:
| Number of Restricted Stock Awards | Weighted Average Grant Day Fair Value | |||||||
| Nonvested at December 31, 2022 | $ | |||||||
| Vested | ( | ) | ||||||
| Nonvested at December 31, 2022 | $ | |||||||
As of March 31, 2023, there is no unrecognized stock-based compensation expense related to restricted stock awards.
Stock Options
A summary of option activity under the Company’s stock option plan for the three months ended March 31, 2023 is presented below:
| Number of Shares | Weighted Average Exercise Price | Total Intrinsic Value | Weighted Average Remaining Contractual Life (in years) | |||||||||||||
| Outstanding as of December 31, 2022 | $ | $ | | |||||||||||||
| Outstanding as of March 31, 2023 | $ | $ | ||||||||||||||
| Options vested and exercisable | $ | $ | ||||||||||||||
Stock-based compensation associated with the amortization
of stock option expense was approximately $
Estimated future stock-based compensation expense
relating to unvested stock options is approximately $
Note 13. Commitments and Contingencies
Legal Proceedings
In the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of the Company’s technology. Other than ordinary routine litigation incidental to the business, the Company is not aware of any material, active or pending legal proceedings brought against it.
20
DOMINARI HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 14. Regulatory
Dominari Securities, the Company’s broker-dealer
subsidiary, is registered with the SEC as an introducing broker-dealer and is a member of FINRA. The Company’s broker-dealer subsidiary
is subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio
of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. As such, the subsidiary is subject to the minimum
net capital requirements promulgated by the SEC and has elected to calculate minimum capital requirements using the basic method permitted
by Rule 15c3-1. As of March 31, 2023, Dominari Securities had net capital of approximately $
Note 15. Related Party Transaction
In 2021, the Company engaged the services of Revere
Securities, LLC (“Revere”) to strategically manage and build the Company’s investment processes. Kyle Wool, Board Member,
is the president of Revere. The Company incurred fees of approximately $
Note 16. Subsequent Events
Soo Yu Employment Agreement
On April
3, 2023, Dominari Securities, the Company’s broker-dealer subsidiary, entered into an employment
agreement (the Agreement), as amended on April 19, 2023, with Soo Yu. Ms. Yu is currently a member of the Company’s board of directors.
Pursuant to the Agreement, which is for a term of
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements. 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.
Overview
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. In an effort to enhance shareholder value, in June of 2022, the Company formed a wholly owned financial services subsidiary, Dominari Financial Inc. (“Dominari”), with the intent of shifting the Company’s primary operating focus away from biotechnology to the fintech and financial services industries. Through Dominari, the Company acquired Dominari Securities LLC (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, LLC (“Aikido Labs”), another wholly owned subsidiary of the Company, has historically explored opportunities in high growth industries. To date, Aikido Labs has made equity investments 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 stock (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 20, 2022, was consummated pursuant 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 the unaudited condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $26,000.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements. We have identified the accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. There have been no significant changes to our critical accounting policies and estimates since December 31, 2022. The following represent those critical accounting policies that we believe most significantly impact the judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements.
Long-term investments
Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 and ASU 2019-04 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.
For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.
Refer to Note 3 of the Annual Report for a discussion of all accounting policies.
Recently Issued Accounting Pronouncements
See Note 3 to the unaudited condensed consolidated financial statements for a discussion of recent accounting standards.
22
Results of Operations
Three Months Ended March 31, 2023, compared to the Three Months Ended March 31, 2022
The Company did not recognize revenue from operations, nor do we expect to recognize any revenue until our operational transition into the financial services industry is complete. During the three months ended March 31, 2023, and 2022, we incurred a loss from operations of approximately $3.8 million and $3.8 million, respectively. The consistent loss in operations year over year was primarily attributable to the following:
| i. | An approximate $2.0 million increase in general and administrative expenses – driven by approximately $0.4 million and $0.7 million of professional fees (legal, consulting, accounting, etc.) incurred to establish and operate Dominari Financial and Dominari Securities, respectively. In addition, the Company also incurred increased compensation expenses of approximately $0.7 million due to growing operations. |
| ii. | An approximate $2.0 million decrease in research and development expenses – attributable to the Company’s strategic business decision to transition away from the biotechnology industry and into financial services. The result is a decrease in research and development related expenses by almost 100%. |
During the three months ended March 31, 2023 and 2022, other income was approximately $0.07 million and $0.3 million, respectively. The activity for the three months ended March 31, 2023 and 2022, is primarily a result of overall volatility in investment valuations due to macroeconomic uncertainty (i.e. inflation, global tensions in the Ukraine, etc.) impacting marketable securities and the change in fair value of short and long-term investments. Specifically:
| i. | Marketable securities – we recognized a loss of approximately $0.07 million for the three months ended March 31, 2023. The decrease of approximately $0.4 million in losses over prior year is a direct result of a decrease in realized and unrealized losses of approximately $0.2 million, offset by an increase in dividend income related of approximately $0.06 million. The decreases were driven by both market improvement and decrease in sale activity resulting in fewer realized losses. |
| ii. | Short-term and long-term investments – we did not recognize a change in the fair value of short-term and long-term for the three months ended March 31, 2023. The change over the three months ended March 31, 2022 is a function of observable market transactions which resulted in unrealized gains of approximately $0.5 on the adjusted fair value of the investments during the three months ended March 31, 2022. There were no observable market transactions or impairment indicators identified during the three months ended March 31, 2023. |
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; |
| ● | seeking additional liquidity through credit facilities or other debt arrangements; and |
23
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 $43.8 million as of March 31, 2023. We may need to obtain 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. If we attempt to obtain additional debt or equity financing, we cannot assume that such financing will be available to the Company on favorable terms, or at all.
Cash Flows from Operating Activities
For the three months ended March 31, 2023 and 2022, net cash used in operations was approximately $4.0 million and $3.8 million, respectively. The cash used in operating activities for the three months ended March 31, 2023, is primarily attributable to a net loss of approximately $3.8 million and changes in operating assets and liabilities of $0.5 million, partially offset by approximately $0.1 million in unrealized losses on marketable securities and approximately $0.06 million of realized loss on marketable securities. The cash used in operating activities for the three months ended March 31, 2022 primarily resulted from a net loss of $3.5 million and change in fair value of long-term investment of $1.4 million, and is partially offset by change in fair value of short-term investment of $0.9 million.
Cash Flows from Investing Activities
For the three months ended March 31, 2023 and 2022, net cash used in investing activities was approximately $18.7 million and $10.1 million, respectively. The cash used in investing activities for the three months ended March 31, 2023, primarily resulted from our purchase of marketable securities of approximately $17.5 million and the acquisition of FPS of approximately $1.1 million. The Company also collected approximately $0.3 million in principal related to its short-term notes. The cash used in investing activities for the three months ended March 31, 2022, primarily resulted from our purchase of marketable securities of $27.1 million and purchase of investments of $7.7 million. The purchases of marketable securities during the prior year was partially offset by our sale of marketable securities of $24.7 million since we invest excess cash into marketable securities until additional cash is needed.
Cash Flows from Financing Activities
For the three months ended March 31, 2023, cash used in financing activities was approximately $0.9 million, which reflects the cost for purchase of treasury stock of approximately $0.9 million. Cash provided by financing activities for the three months ended March 31, 2022, was approximately $19.0 million, which reflects the net proceeds of approximately $19.0 million from investors in exchange for the issuance of Series O and Series P Redeemable Convertible Preferred Stock.
Off-balance sheet arrangements.
None.
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
During the quarter ended March 31, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
We have not made any changes to our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
25
Part II. Other Information
Item 1. Legal Proceedings
In the past, in the ordinary course of business, we actively pursued legal remedies to enforce our intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q and in the other periodic and current reports and other documents we file with the Securities and Exchange Commission, including but not limited to our annual report on Form 10-K for the fiscal year ended December 31, 2022, before deciding to invest in our common stock. If any of the following risks materialize, our business, financial condition, results of operation and future prospects will likely be materially and adversely affected. In that event, the market price of our common stock could decline and you could lose all or part of your investment. This list is not exhaustive and the order of presentation does not reflect management’s determination of priority or likelihood.
BUSINESS RISKS
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud. Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act of 2002 requires management to evaluate and assess the effectiveness of our internal control over financial reporting. In order to continue to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls over financial reporting, we could be subject to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. We cannot assure you that in the future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that our internal control over financial reporting is effective. If we fail to fully comply with the requirements of the Sarbanes-Oxley Act, our business may be harmed and our stock price may decline. While our assessment, testing and evaluation of the design and operating effectiveness of our internal control over financial reporting resulted in our conclusion that, as of December 31, 2022, our internal control over financial reporting was not effective, due to our lack of segregation of duties, and lack of controls in place to ensure that all material transactions and developments impacting the consolidated financial statements are reflected, our assessment, testing and evaluation of the design and operating effectiveness of our internal control over financial reporting, as of March 31, 2023, resulted, in our conclusion, that, as of that date, our internal control over financial reporting were effective. We can provide no assurance as to conclusions of management with respect to the effectiveness of our internal control over financial reporting in the future.
26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| 10.1* | ||
| 10.2* | Amendment to Employment Agreement, made and entered into as of April 19, 2023, by and between Dominari Securities LLC and Soo Yu | |
| 31.1** | Certification of Principal Executive Officer and Principal Financial Officer of Dominari Holdings Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer of Dominari Holdings Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith |
| ** | Furnished, not filed |
27
Signatures
Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DOMINARI HOLDINGS INC. | ||
Date: May 10, 2023 |
By: | /s/ Anthony Hayes |
| Anthony Hayes | ||
| Chief Executive Officer | ||
| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
28
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered effective as of April 3, 2023 (the “Effective Date”), by and between DOMINARI SECURITIES LLC, a Connecticut limited liability company with offices at 725 Fifth Avenue, New York, NY 10022 (the “Company”), and Soo Yu, an individual residing at 25 Rady LN, East Quogue, NY 11942 (the “Employee”), under the following circumstances:
RECITALS
WHEREAS, the Company is registered as a broker-dealer under applicable federal and state laws, and is a member firm of the Financial Industry Regulatory Authority, Inc. (“FINRA”) (CRD no. 18975);
WHEREAS, the Company’s current membership agreement with FINRA permits it to engage in various types of securities business;
WHEREAS, the Employee is a person who is registered with FINRA (CRD no. 5846575);
WHEREAS, the Company wishes secure the services of the Employee upon the terms and conditions hereinafter set forth;
WHEREAS, the Employee desires to render services to the Company upon the terms and conditions hereinafter set forth; and
WHEREAS, the Company and the Employee desire for this Agreement to constitute and embody their full and complete understanding and agreement with respect to the Employee’s employment by the Company and supersede, as of the Effective Date, all prior understandings and agreements, whether oral or written, between them with respect to such employment
AGREEMENT
NOW THEREFORE, the Employee and the Company mutually agree as follows:
1. Employment
The Company hereby employs the Employee, and the Employee hereby accepts employment as such, subject to the terms and conditions set forth in this Agreement.
2. Duties and Place of Employment
The Employee shall serve both as the (i) Special Projects Manager of the Company, with such duties, responsibilities, and authority as are commensurate and consistent with her position, and such other duties, responsibilities and authority as may be, from time to time, reasonably assigned to her by the President of the Company, and (ii) as a registered representative and shall perform the broker services reflected in Section 5 (the “Broker Services”). The Employee shall report directly to the President of the Company. During the Term (as defined in Section 3), the Employee shall devote her full business time and efforts to the performance of her duties hereunder. Notwithstanding the foregoing, the expenditure of reasonable amounts of time by the Employee for the making of passive personal investments, and charitable and professional activities shall be allowed, provided such activities do not materially interfere with the services required to be rendered to the Company hereunder and do not violate the confidentiality provisions set forth in Exhibit A. The Employee shall be permitted to perform her services for the Company from her home residence or such other location as mutually agreed to by the parties.
3. Term of Employment
The term of this Agreement shall be for one (1) year (the “Term”). After the end of the Term, the Company shall determine, in its discretion, whether to extend the term for an additional period of time. In the event that the Term is not extended, the continued services of the Employee for the Company shall be limited to the Broker Services. If the Employee continues to be employed by the Company after the Term, such employment will be at-will, meaning that either the Employee or the Company may terminate the Employee’s employment at any time and for any lawful reason, with or without cause or notice.
Additionally, with respect to Compensation payable pursuant to Section 7 below, in all events the Company shall pay Employee the Compensation relating to all amounts earned through her last day of work; and if termination is by the Employee for Good Reason or by the Company without Cause, the Company shall pay to Employee the Compensation based on the level achieved by the Employee in the table in Section 7 (without change notwithstanding anything else) through her last day of work or the date any Clients terminate their relationship with the Company.
Finally, if the Agreement is terminated for Good Reason by the Employee or without Cause by the Company, the Company shall upon termination immediately pay to the Employee any Production Payment earned and due and not yet paid. For avoidance of doubt, and notwithstanding anything to the contrary contained herein, the Company’s Clawback Rights shall not apply (and shall have no effect) where Employee terminates her employment for Good Reason or the Company terminates her employment without Cause.
4. Actions of the Company
Promptly after the Effective Date, the Company shall:
A. File a Form U-4 and fingerprint card for the Employee with all regulatory agencies required to associate the Employee with the Company;
B. Request, receive, and review civil, financial, criminal and employment background checks on the Employee;
C. Review the Company’s current Form BD (Uniform Application for Broker-Dealer Registration form) and make any necessary amendments or changes to reflect the registration of the Employee with the Company; and
D. Provide the Employee with a copy of the Company’s current Written Supervisory Policies and Procedures manual (the “Procedures”) and any other policies applicable to Employee’s employment.
5. Functions and Activities of the Employee re Broker Services
A. Permitted Activities. Subject to the supervision of one or more of the Company’s general securities principals, and subject to the maintenance of all licenses required for her securities activities, the Employee may conduct all securities business permitted to be conducted from time to time by a registered representative licensed with FINRA that the Company is then authorized to conduct under its Membership Agreement with FINRA and which the Company advises Employee in writing (“Securities Business”). Without prior notice to and written approval from the Company, the Employee may not engage in any Securities Business other than pursuant to this Agreement and shall not be employed by or provide services to any other broker-dealer entity.
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B. Outside Business Activities and Private Securities Transactions. Although the Employee is required to conduct all Securities Business exclusively through the Company, the Employee may engage in another trade or business provided such trade or business activity is disclosed in writing, in advance, to the Company pursuant to FINRA Rule 3270 and is approved (not to be unreasonably withheld, conditioned or delayed) in writing by the Company in accordance with the Procedures. The Company may terminate this Agreement on written notice to the Employee in the event the Employee shall conduct an undisclosed and unapproved outside business activity; provided in this regard the expenditure of reasonable amounts of time by the Employee for the making of passive personal investments, and charitable and professional activities (but not in a capacity of managing securities or endowments for any charitable or other organization) shall not violate the foregoing.
Under no circumstances shall the Employee or any entity owned or controlled by the Employee engage in any business or other activity that may constitute a “private securities transaction” (within the meaning of FINRA Rule 3280) without the prior written consent of the Company.
The Employee shall have no authority to bind or obligate the Company by any statement, promise, representation, agreement or contract of any kind, or to waive the Company’s rights, or to incur any liability or expense on behalf of the Company.
C. Clients & Engagements. The parties understand and agree to the following respecting any engagement or potential engagement, placement or investor, or prospective client introduced to the Company by the Employee or her team (each a “Client”). The Employee shall submit all potential engagements, transactions, investments and investors to the Company for its review and determination as to whether or not the engagement, transaction, investment or investor will be accepted by it. The Company’s approval of any potential engagement, transaction, investment or investor shall not be unreasonably withheld, conditioned or delayed. If the Company determines not to accept such Client, then the Employee may refer the Client to any other broker-dealer or other firm in her sole discretion, provided, that the Employee may receive no compensation with respect to such referral.
D. State Registrations. The Employee shall engage in securities activities only in those states where the Employee is registered or where an exemption applies. As reasonably requested by the Employee, or as reasonably deemed appropriate by the Company’s compliance department, the Company will facilitate licensure of the Employee in additional states at the Company’s cost and the Company shall ensure that it is appropriately licensed for the Employee to engage in transactions.
E. Expense Reimbursement. The Employee shall be entitled to reimbursement by the Company for her reasonable expenses attendant upon the operation, or arising from the conduct, of, or relating to, her Broker Services in accordance with the Company’s expense reimbursement policies applicable to brokers generally, including but not limited to SEC, FINRA and state registration fees attributable to the licensure of the Employee as a representative of the Company.
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F. Compliance And Other Matters. The Employee agrees to the following:
(i) Employee Representations: The Employee represents and warrant she is not a party to or the subject of any current, pending or to her actual knowledge threatened:
| ● | Court litigation or arbitration; |
| ● | Regulatory proceeding, investigation or order (whether formal or informal) of any state, federal or self-regulatory body or panel, or in a judicial forum; |
| ● | Undisclosed event that is reportable on Section 14, Disclosure Questions, of Form U-4; and/or |
| ● | Written customer complaint that has not been disclosed to the Company. |
(ii) Reportable events: The Employee will promptly notify the Company’s Chief Compliance Officer (“CCO”) in the event the Employee shall have become to her actual knowledge the subject of:
| ● | any formal or informal inquiry, investigation or order by any state or federal court or state or federal regulator or any self-regulatory body or panel; |
| ● | if the Employee is put on notice of any complaint, dispute, violation or other legal action whether oral or in writing and concerning the Employee that would be reportable by her on her Form U-4 or otherwise to securities regulators; |
| ● | if the Employee’s registration or license to sell or deal in securities is denied, suspended, revoked, limited or otherwise adversely affected; |
| ● | if the Employee is enjoined, temporarily or otherwise, from selling or dealing in securities; |
| ● | if the Employee is summoned, arraigned, arrested, charged or indicted for any criminal offense other than traffic summons or tickets that charge violations of a non-criminal nature; |
| ● | if the Employee is involved in bankruptcy proceedings individually as debtor or she is an owner or director of a company that is or becomes a debtor; or |
| ● | if the Employee is or becomes subject to a federal, state or other tax lien. |
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(iii) Advertising: The Employee must submit all advertising and sales literature, including Internet websites, advertising or postings, to the Company for its approval prior to publication or distribution which approval shall not be unreasonably withheld, conditioned or delayed. The Employee understands that the item may be submitted to FINRA’s Advertising Department for review and approval. The Employee also understands that seminar materials, mass and social media scripts including, but not limited to outlines, agendas, and PowerPoint presentations must be approved by the Company prior to use which approval shall not be unreasonably withheld, conditioned or delayed.
(iv) Client Communications: The Employee must send and receive all email and text communications with respect to Company business through a Company-approved and archived email or text address. Personal email accounts or texts may not be used for any Company business or for any business purposes that may at a future date involve such business.
(v) Social Media: The Employee may not use blogs, chat rooms, instant messaging, bulletin boards, social networking websites (such as Facebook, Linked-In, etc.), online video or video sharing websites (such as YouTube) for Company business purposes without first obtaining approval from the Company.
(vi) Insider Trading: The Employee understands that it is unlawful under federal and state securities laws for any person to trade and/or recommend trading in securities on the basis of material and nonpublic, or “inside,” information. Misuse of material and nonpublic, or “inside,” information constitutes fraud, a term broadly defined under the securities laws. Misuse of “inside” information includes purchasing or selling securities on the basis of such information for the account of the firm, an employee, a customer or anyone else, providing such information to anyone or using it as a basis for recommending, by way of a research report or otherwise, the purchase or sale of a security. The Employee understands that persons guilty of misusing “inside” information are subject to civil and criminal penalties (including imprisonment), SEC and state administrative actions, as well as discipline by various securities self-regulatory organizations.
(vii) Compliance with Laws & Regulations: The Employee will comply in all material respects with all applicable federal, state and local laws and the rules and regulations of the SEC, FINRA and any other applicable and similar regulatory or self-regulatory organization. The Employee will also carefully read the Procedures and will adhere to them and any subsequent changes or amendments thereto of which the Employee is notified in writing by the Company. The Employee acknowledges that if any disputes arise between the Company and the Employee concerning the Employee’s compliance with any applicable statutes, rules or regulations of the SEC, FINRA, and any other applicable regulatory body, the good faith decision of the Company with respect thereto shall be conclusive.
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(viii) Jurisdictional Limitations: The Employee agrees to transact Securities Business only in such states and foreign jurisdictions in which both the Company and the Employee are duly licensed or exempt from licensure, or, in the case of foreign jurisdictions, it has been determined by the Company that no such licensing is required based on the circumstances of the Securities-Business and the role of the Company and the Employee.
(ix) Supervision: The Employee will accept any supervision by the Company personnel (including managers and principals) as is reasonably deemed necessary for the Company to assure compliance with applicable federal, state and local laws, rules, regulations and ordinances, as well as the rules and regulations of the SEC, FINRA, any other applicable similar regulatory organization and the Procedures.
(x) Dual Licensure: The Employee will refrain from being licensed with or sharing office space with another broker-dealer or investment adviser, or having any agreement with another broker-dealer, adviser or their representatives, without the express written consent of the Company, which consent shall not be unreasonably conditioned, withheld or delayed.
(xi) Regulatory Filings: The Employee will maintain a current and up-to-date Form U4 by providing timely, written notice to the Company of any necessary changes.
(xii) Training: The Employee will fulfill both the regulatory element and firm element portion for continuing education within the time periods required by FINRA rules and other applicable regulations. If at any time the Employee should be deemed inactive for failure to complete continuing education, the Employee will not be entitled to any commissions during the inactive period; provided, that any commissions not paid to the Employee during such inactive periods shall be paid to the Employee promptly after the Employee’s continuing education requirement is satisfied. The Employee will not act as a registered representative in any capacity until such time as the continuing education requirement has been satisfied.
(xiii) Additional Information: Subject to the requirements of applicable law, the Employee will provide the Company, upon request, information regarding any subject which reasonably relates to the Employee’s or any other person’s compliance with applicable securities laws, regulations or rules or the compliance or supervisory policies and procedures of the Company or its affiliates, and to provide the Company, upon request, with copies of all records in the Employee’s possession with respect thereto.
(xiv) Scope of Licensure: The Employee will offer for sale and sell only those securities that the Employee is licensed or registered to offer. The Employee will not apply for or obtain any new licenses or registrations, or discontinue any existing licenses or registrations, without prior approval of the Company, which approval shall not be unreasonably withheld, conditioned or delayed.
(xv) Borrowing: The Employee will not borrow money or securities from anyone who, to the Employee’s knowledge, is a customer or client of the Company or any of its affiliates
(xvi) Additional Materials: The Employee will execute and deliver such additional instruments and documents and take such actions, including providing to the Company or any of its affiliates written or oral statements, as may be reasonably required in order to carry out the objectives of this Agreement and the Company’s supervisory responsibilities pursuant to applicable law or Company Policies.
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(xvii) No Conflict: The Employee represents and warrants that the performance by the Employee of her obligations hereunder shall not, in any way, conflict with or constitute a breach or violation of any document, instrument or agreement to which the Employee is a party or by which the Employee or the Employee’s business or assets are bound.
(xviii) No Violation: The Employee does not have any contractual obligations to the Employee’s former employer that would be violated by the provisions of this Agreement. The Employee will not misappropriate any legally enforceable trade secrets of the Employee’s former employer, including its broker-dealer or investment adviser.
6. Conditional Engagement: The Employee’s strict compliance with the terms and provisions of this Agreement is a condition to the Employee’s continued engagement with the Company and/or its affiliates.
7. Compensation
A. During the Term, the Company shall pay the Employee as compensation for her services hereunder the sum of $150,000 per annum (the “Base Salary”), less such deductions as shall be required to be withheld by applicable law and regulations. The Base Salary shall be paid through the end of the Term or the end of any extension term unless Employee is terminated for Cause or resigned without Good Reason. If the Term is not renewed in accordance with Section 3, payments of the Base Salary shall cease at the end of the then current Term. The Base Salary shall be paid to Employee in accordance with the Company’s payroll schedule as its exists from time to time.
B. In the event that the Company directly or indirectly enters into any relationship pursuant to which the Company provides any services to, or with respect to, any person or entity (“Client” or “Person”) introduced to the Company by the Employee or her team, the Company shall pay the Employee compensation in addition to the Base Salary (“Compensation”) based on a percentage of the gross revenue generated by the Employee determined in accordance with the following trailing twelve-month formula:
| T-12 Gross Revenue ($) | Grid | |||
| 1 to 999,999 | 50% | |||
| 1,000,000 to 1,999,999 | 55% | |||
| 2,000,000 and up | 60% |
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C. In addition to the foregoing, the amount of Compensation payable to the Employee shall be subject to such additional terms as determined in accordance with written uniform criteria applied to all similarly situated employees of the Company. Any Compensation shall be payable to the Employee on a monthly basis on or about the 15th day following the end of each calendar month in which the underlying Gross Revenue was generated by the Employee. The Parties agrees that the Employee will commence employment at the $2,000,000 level based upon her prior 12-month production with her prior employer, which level may only be adjusted on or after the twelve months following the Effective Date. The Employee, with respect to payment of all Compensation, agrees that she is only entitled to be paid such Compensation when the Company has received payment of the same. The Company’s liability in this regard shall be limited solely to the proceeds of the Company’s sales commission or concession receivable or other compensation received by the Company, including any soft dollars. For accounting purposes, all Compensation will be booked on the Company’s records as gross commissions with payments to the Employee reflected as commission expenses. The Company will consider such earnings reportable on the Form W-2 of the Employee, regardless of the handling of such funds.
D. Notwithstanding and in addition to the foregoing and contingent on the Employee meeting each or any of the production hurdles set forth below, the Company shall pay the Employee in three substantially equal payments of $2,666,666 (collectively, the “Payments”) based on an aggregate amount of eight million dollars ($8,000,000) (“the Production Payment”) payable to the Employee on the following terms:
(i) Payment One – contingent upon the Employee completing all required registrations and providing binding commitments and opening accounts for Clients with assets under management or account value of at least $50,000,000, then Payment One shall be deemed earned by Employee and due and owing from Company to Employee;
(ii) Payment Two - contingent upon the Employee providing binding commitments and opening accounts for Clients with assets under management or account value of at least $150,000,000 in the aggregate, then Payment Two shall be deemed earned by Employee and due and owing from Company to Employee; and
(iii) Payment Three - contingent upon the Employee providing binding commitments and opening accounts for Clients with assets under management or account value of at least $560,000,000 in the aggregate then Payment Three shall be deemed earned by Employee and due and owing from Company to Employee.
Each Payment shall be made when the threshold in sub-section (i), (ii) or (iii) are met, and there is no obligation to meet all three thresholds to receive any Payment. In addition, and for avoidance of doubt, the account values are inclusive of prior account values (for example the $150,000,000 for Payment Two may and will include the $50,000,000 in assets counted for Payment One). Each of the Payments described in this section shall be paid to the Employee as soon as administratively feasible after the date on which the conditions for a given Payment are met but no later than 30 days, and provided that Company is in full compliance with its net capital and other regulatory requirements at that time, fifty percent (50%) in cash and fifty percent (50%) in shares of its parent company, Dominari Holdings, Inc., the number of such shares to be determined based on the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on such market for the day of payment, as reported in The Wall Street Journal or such other source as the Company deems reliable; provided, that the Company’s failure to be in compliance with its net capital requirements shall not relieve the Company of its obligations hereunder. To the extent that the Company is not so in compliance then the Company shall use its best efforts to cure any failure through such means as reasonably available including reducing expenses or raising capital. Once cured, the Company shall have 30 days to pay the applicable Payment(s).
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E. Notwithstanding anything contained herein to the contrary, each of the Payments made to the Employee shall be subject to an obligation to make repayment to the Company (“Clawback Rights”) during the period of time in which the Employee is performing services for the Company as follows.
(i) Each of the Payments shall be subject to Clawback Rights on a pro rata basis during the seven (7) year period after such Payment is made (the “Clawback Period”) but only if the Company terminates Employee’s employment with Cause or if Employee resigns her employment without Good Reason during any such Clawback Period.
(ii) The portion of a Payment which shall be subject to the Clawback Rights shall be determined by multiplying the relevant Payment by a fraction, the numerator of which is the number of full months remaining in the Clawback Period and the denominator of which is eighty-four (84). For example, if Payment One ($2,666,666) is paid on June 1, 2023, the Clawback Period shall end on May 31, 2030. If the Employee is terminated by the Company without Cause or resigns for Good Reason on December 15, 2025, the amount subject to the Company’s Clawback Rights would be $1,714,285.29 (54/84 x $2,666,666. The amount subject to the Company’s Clawback Rights, if any, shall be paid by the Employee entirely in cash.
(iii) The calculation of the amount subject to the Company’s Clawback Rights shall be determined by the Company in good faith and in accordance with all applicable laws, rules, and regulations. Upon the Company notifying the Employee in writing of the amount of a Payment subject to the Company’s Clawback Rights, the Employee agrees to repay such amount to the Company within ten (10) business days after the date of such notice. Notwithstanding the foregoing, if the Employee disputes such calculation, then the parties shall meet within ten (10) days to review the calculation in good faith. Upon resolution of the dispute, the Employee will have five (5) business days to make the repayment. If such repayment is not made in a timely manner, the Company shall have the right to seek arbitration under FINRA rules to obtain the repayment amount. Notwithstanding the foregoing, the Company shall have the right, subject to the requirements of applicable law, to withhold from any amounts due and owing to the Employee the amount of owed to the Company pursuant to its Clawback Rights which are not paid by the Employee in accordance herewith.
(iv) For purposes of this Agreement, the term “Good Reason” shall mean that the Employee has resigned due to: (i) a material diminution of duties inconsistent with Employee’s title, authority, duties, and responsibilities (including, without limitation, a change in the chain of reporting) prior to such diminution; (ii) any material breach by the Company of its obligations (including, without limitation, its compensation obligations) under this Agreement; (iii) reducing Employee’s title following the date her employment begins hereunder; (iv) reducing the Base Salary (except for a reduction which affects all employees of the Company comparably), or (v) relocating Employee’s principal place of business outside of New York, NY or preventing her from working remotely, or (vi) otherwise materially and adversely affecting the working conditions of Employee in a manner that disproportionately adversely affects Employee as compared to all other Company employee; provided that the Employee has given written notice to the Company of such acts or omissions, and the Company has failed to cure such acts or omissions within thirty (30) days of receipt of such notice, if curable and Employee must then terminate her employment within sixty (60) days following the expiration of such cure period for the termination to be on account of Good Reason.
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(v) For purposes of this Agreement, the term “Cause” shall mean any material breach of this Agreement by Employee or material, gross, and willful misconduct on the part of the Employee in connection with her employment duties hereunder, in all cases that is not cured within fourteen (14) days after receipt of notice thereof from the Company (to the extent such breach is capable of being cured), or the Employee’s conviction of or entering of a guilty plea or a plea of no contest with respect to a felony or any crime involving fraud, larceny, or embezzlement resulting in material harm to the Company by the Employee.
F. Employee shall be eligible to participate in all group insurance, employee benefits and other compensation programs on the same basis as other similarly-situated employees of the Company.
Except as set forth herein, the Company is not obligated to provide any compensation, benefits or any other remuneration to the Employee. Further, should a Person other than the Company fail to meet any obligations, fiscal or otherwise, to the Employee, the Company shall have no responsibility or liability with regard to such failure, nor shall the Employee have any right or recourse to seek compensation from the Company in this regard.
G. In addition to the other amounts payable hereunder, the parties agree that the Employee shall be entitled to a bonus for calendar year 2023 with regard to her achievements in the role of Special Projects Manager, as determined in the sole discretion of the Company’s Board.
The terms of this Section 7 shall survive the termination of this Agreement.
8. Qualification to Act
A. The Company. The Company hereby represents and warrants that it is a member firm in good standing with FINRA, qualified to engage in the types of businesses described herein, and that its membership agreement contains no limitations or restrictions that would prevent the Employee from engaging in the activities contemplated by this Agreement. The Company hereby further represents and warrants that the disclosures contained in its Form BD are accurate and complete. The expulsion or suspension of the Company from FINRA shall automatically terminate this Agreement on the effective date of such expulsion or suspension; provided that all rights of the Employee accrued under this Agreement prior to such date shall continue to exist until satisfied by the Company to the extent permitted by applicable law.
B. Employee. The Employee hereby represents and warrants that she is qualified to serve as a registered representative of a FINRA member firm and is or will be upon the effective date of this Agreement in good standing with FINRA. Except as otherwise provided for herein, it is agreed that the expulsion or suspension of the Employee from FINRA, or any restriction on the authority of the Employee to act as an associated person of a FINRA member firm, shall automatically terminate this Agreement on the effective date of such expulsion, supervision or restriction.
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9. Authority of the Company
Subject to the terms of this Agreement, the Company shall have full authority to take such action as it deems reasonably advisable in respect of all matters pertaining to the conduct of its business and reserves at all times the right to reject any proposed Client relationship with any Person solicited by the Employee; provided, that such rejection is reasonable and in good faith.
10. Restrictive Covenants
The Employee agrees to be subject to the terms of the Confidentiality and Non-Solicit Agreement attached hereto as EXHIBIT A, which terms shall survive termination of this Agreement.
11. Indemnification
A. The Employee shall indemnify and hold harmless the Company and its respective employees, agents and representatives (each, a “Company Indemnified Person”), against and in respect of all liabilities and obligations of, or claims against, the Company or the Employee (“Damages”), their employees, agents and representatives, resulting from a final judgment, settlement, cost or defense arising from or concerning the Employee’s violation of federal or state securities law or common law standards as to fraud arising out of intentional wrongdoing or gross negligence by Employee in the course of activities performed on behalf of the Company securities business under this Agreement and including any and all types of transactions in securities, asset sales, consulting services or any other activities. The Employee agrees to make each Company Indemnified Person whole for any loss, cost or liability, including reasonable attorneys’ fees and costs, all as determined in a final judgment of a court of competent jurisdiction. Any such indemnification shall be reduced by the amount of any insurance carried by the Company or its affiliates. The Company shall have the obligation to submit any such matters which it deems material to the insurance carrier.
B. The Company shall indemnify and hold harmless the Employee against and in respect of all Damages resulting from a final judgment, settlement, cost or defense arising from or concerning the Employee’s services or Broker Services, except to the extent that such Damages arise out of or relate to the Employee’s intentional wrongdoing or gross negligence. The Company agrees to make the Employee whole for any loss, cost or liability, including reasonable attorneys’ fees and costs, all as determined in a final judgment of a court of competent jurisdiction.
C. The Company and the Employee each acknowledge that each party to this Agreement is relying upon the representations and warranties of the other party to this Agreement. In recognition of such reliance, each party hereby indemnifies, holds harmless and agrees to make the other party whole from any claim or liability arising from any inaccurate representation or warranty contained in this Agreement, whether resulting from a judgment or settlement, and for the cost of defense, as determined in a final judgment of a court of competent jurisdiction.
D. No party hereto shall be entitled to indemnification from any other party hereto for any loss arising out of or relating to the willful misconduct, gross negligence or bad faith of the party seeking indemnification hereunder as determined in a final judgment of a court of competent jurisdiction.
E. The rights granted by this Section 11 shall survive any termination of this Agreement.
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12. Amendment
Except as expressly set forth herein, this Agreement may be amended only by a writing executed by the parties hereto.
13. Termination
Subject to the other provisions hereof, this Agreement may be terminated by either party, at any time. Such termination shall not, however, affect any liabilities or obligations incurred or arising from Client engagements entered into under this Agreement prior to such termination and which exist following termination, including the applicable provisions regarding Clawback Rights and Compensation which shall survive any expiration or termination of this Agreement with respect to such engagements.
14. Notices
A. All notices, consents and waivers under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by e-mail, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service, in each case to the appropriate address, facsimile number or e-mail address set forth below.
B. All communications to the Company should be sent to the principal office of the Company:
Electronic Mail:
Any communication to the Employee shall be duly given if sent to the address specified below:
25 Rady Lane
East Quogue, NY 11942
<soo_yu@yahoo.com
With a copy to
Scott A. Mautner
Harrington Ocko & Monk, LLP
smautner@homlegal.com
81 Main Street, Suite 215
White Plains, NY 10601
15. Governing Law and Headings
This Agreement shall be governed by the laws of the State of New York, without giving effect to the conflict of laws or choice of law principles otherwise applicable therein. Section numbers and headings provided herein are for convenience only and do not constitute a part of the terms hereof.
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16. Severability
The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of a provision contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and so that such provisions or part reformed shall be valid, legal and enforceable to the maximum extent possible.
17. Entire Agreement
This Agreement, together with the attachments and schedules attached hereto, represents the entire agreement of the parties hereto with respect to the subject matter specified herein. No other agreements, covenants, representations or warranties, express or implied, oral or written, have been made by any party to any other party concerning the subject matter hereof. This Agreement shall be construed as if drafted jointly by all of the parties, and no presumption, burden of proof or rule of construction shall be applied that favors or disfavors any party by virtue of the authorship of any provision of this Agreement.
18. Counterparts
This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute a single instrument. If any signature is delivered by facsimile transmission or by transmittal of an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.
19. No Third-Party Beneficiaries
Nothing in this Agreement, express or implied, is intended to confer on any Person not a party to this Agreement any right or remedy under or by reason of this Agreement, nor shall this Agreement confer any such third party right or remedy.
20. Waivers
The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege conferred in this Agreement, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provisions, whether or not similar.
21. Assignment
No party hereto may assign this Agreement or any of its obligations hereunder without the prior written consent of the other parties hereto, and any attempted assignment in violation of the foregoing shall be null and void and of no force or effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto their respective heirs, successors and permitted assigns.
22. Remedies
The remedies of each party hereunder shall be cumulative and concurrent, and may be pursued singularly, successively, or together, in such party’s discretion. Should any party breach this Agreement, such breaching party shall be responsible for all reasonable out-of-pocket fees and expenses incurred by the non-breaching party in enforcing its rights hereunder against such breaching party, including, without limitation, reasonable out-of-pocket fees and expenses of financial advisors, attorneys, accountants and other professionals.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date first set forth above.
| DOMINARI SECURITIES LLC | ||
| By: | /s/ Scott Noah | |
| Scott Noah, President | ||
| /s/ Soo Yu | ||
| Soo Yu | ||
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EXHIBIT A
CONFIDENTIALITY AND NON-SOLICIT COVENANTS
1. COVENANT TRIGGERS
In the event that the Employee’s employment with the Company is terminated by the Employee or by the Company, whether voluntarily or involuntarily, for any reason whatsoever, then, in such event, the covenants herein shall apply to the Employee. Notwithstanding the foregoing, the confidentiality obligations described in Section 2 below shall apply throughout the term of the Employee’s employment with the Company and shall continue thereafter.
2. CONFIDENTIALITY
Unless the Employee obtains the prior written consent of the Company, the Employee shall at all times keep confidential and shall refrain from using for her own benefit, or for the benefit of any person or entity other than the Company or its subsidiaries or affiliates, any material document or other information (in any form whatsoever) obtained from the Company or otherwise in the course of the Employee’s employment with the Company, concerning, but not limited to, such matters as the Company’s business, operations, finances, strategies, technology, clients and/or properties (unless such document or information is or becomes readily ascertainable from public or published information or trade sources, or has otherwise been made available to the public through no fault of the Employee in breach of this provision) until the same ceases to be material (or becomes so publicly ascertainable or available); provided, however, that nothing in this Section 2 shall prevent the Employee, with or without the Company’s consent, from participating in or disclosing documents or information is required by law, legal process or rule or self-regulatory organization or in connection with any judicial or administrative investigation, inquiry or proceeding or the Company’s public reporting requirements to the extent that such participation or disclosure is required under applicable law, regulation or judicial order or in connection with any proceeding or claims between the Company or the Broker-Dealer and the Employee. Nothing herein is in any way intended to limit the Employee’s right, as described in the Company’s Whistleblower Report Process and Anti-Retaliation Policy, to report any alleged wrongdoing (e.g., any potential misconduct, illegal activity, or violations of applicable laws, rules and/or regulations) to appropriate governmental and regulatory authorities. Pursuant to the requirements of the Defend Trade Secrets Act of 2016, the Employee is also hereby notified that she may not be held criminally or civilly liable for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official or to an attorney when made solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal. Upon termination of the relationship between the Company and Employee, the Company will port to Employee the contact information for each Client covered by the proviso clause in section 3(a) below in accordance with the industry standard and subject to legal requirements.
3. SOLICITATION
The Employee hereby covenants and agrees that, for a period of twelve (12) months following termination of the Employee’s employment with the Company for any reason, voluntarily or involuntarily, the Employee shall not, without the prior written consent of the Company, either directly or indirectly:
| (a) | Solicit any client of the Company, or provide any information, advice or recommendation or take any other action intended to cause, or that a reasonable person acting in like circumstances would expect to have the effect of causing, any client of the Company to terminate an existing relationship with the Company or transfer any current business with the Company to another firm; provided, however, that the restrictions described in this paragraph shall not apply to any Client, or any other client of the Company who was a client of the Employee or the Team immediately prior to the Employee’s employment with the Company or, as determined by the Company in good faith, became a client of the Employee during her employment. |
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| (b) | Solicit for employment (or a consulting, independent contractor, or similar engagement) outside the Company, or offer employment or any such engagement outside the Company to, any employee of the Company or any of its subsidiaries or affiliates, or engage in any action (including providing information, advice or a recommendation regarding any such employee to a third party) which causes or is intended to cause, or which a reasonable person acting in like circumstances would expect, or would believe is intended, to cause, any such employee to terminate his or her employment with the Company and accept employment or engagement with another party provided, however, that the restrictions described in this paragraph shall not apply to the members of the Employee’s team on the Effective Date. |
4. SPECIFIC PERFORMANCE AND OTHER DAMAGES
The Employee expressly agrees and acknowledges that: (i) the restrictions contained herein represent a reasonable protection of the legitimate interests of the Company; (ii) the Employee’s failure to observe and comply with the restrictions will cause irreparable harm to the Company; (iii) it is and will continue to be difficult to ascertain the nature, scope and extent of such harm; and (iv) a remedy at law for such failure and harm will be inadequate. Accordingly, it is the intention of the parties that, in addition to any other rights and remedies which the Company may have in the event of any breach of the restrictions contained herein, the Company shall be entitled, and is expressly and irrevocably authorized by the Employee, to demand and obtain specific performance, temporary and permanent injunctive relief, and all other appropriate equitable relief against the Employee in order to enforce the restrictions against the Employee contained in Sections 1, 2, 3(a) and 3(b) hereof, or in order to prevent any breach of the above-mentioned restrictions by the Employee.
5. ENFORCEABILITY
The parties hereto agree that the covenants set forth herein are reasonable and valid in temporal, topical and geographical scope and in all other respects. Notwithstanding the foregoing, if at any time a court of competent jurisdiction holds that any of the restrictions are invalid or unenforceable, for any reason (including without limitation geographic, temporal or subject matter scope) in whole or part, such term or provision shall be ineffective only to the extent of such invalidity or unenforceability, without rendering invalid or unenforceable the remaining terms and provisions of the restrictions or any other term or provision of this Agreement. Any such invalid or unenforceable provision shall be construed to be valid and enforceable to the maximum extent compatible with and possible under applicable law, and the parties hereby request that the scope of any such provision be judicially modified accordingly in any proceedings brought to enforce any of the restrictions. If a court or arbitration panel concludes that the Employee has breached the covenants set forth herein, the term of the covenants shall be extended for a period of time equal to the time the Employee is determined to have been in breach of the covenants.
6. OTHER AGREEMENTS
The terms hereof are subject to the terms of such other agreements as the parties may enter into from time to time.
7. ASSIGNABILITY
The benefits and obligations described herein shall inure to the benefit of the Company’s affiliated entities and any successor-in-interest, whether by merger, stock acquisition or sale of assets.
8. ARBITRATION
The parties agree that, with the exception of claims for injunctive relief, and unless prohibited by applicable law, any disputes between Employee and the Company shall be determined by binding arbitration as authorized and governed by the laws of the State of New York. Any such arbitration shall be conducted under the auspices and rules of the Financial Industry Regulatory Authority (FINRA), except that the Employee may elect to arbitrate discrimination claims under any federal, state or local law (including claims of harassment and retaliation under those laws) before the American Arbitration Association.
9. GOVERNING LAW
The terms of these covenants shall be interpreted pursuant to the laws of the State of New York without regard to principles of conflicts of laws.
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Exhibit 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement, dated as of April 19, 2023 (the “Amendment”), is made to that certain Employment Agreement (the “Agreement”), dated as of April 3, 2023, between Dominari Securities LLC (the “Company”) and Soo Yu (the “Employee”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.
WHEREAS, Section 7(d) of the Agreement provides for the payment to Employee of $8,000,000.00 in three substantially equal payments of $2,666,666.00;
WHEREAS, the Company and the Employee wish to reduce the aggregate payments due under Section 7(d) from $8,000,000.00 to $7,800,000.00.
NOW, THEREFORE, the Company and the Company hereby agree as follows:
Section 7(d) of the Agreement is hereby amended to read as follows:
| D. | “Notwithstanding and in addition to the foregoing and contingent on the Employee meeting each or any of the production hurdles set forth below, the Company shall pay the Employee in three payments (collectively, the “Payments”) based on an aggregate amount of eight million dollars ($7,800,000.00) (“the Production Payment”) payable to the Employee on the following terms: |
| (i) | Payment One – contingent upon the Employee completing all required registrations and providing binding commitments and opening accounts for Clients with assets under management or account value of at least $50,000,000, then Payment One shall be deemed earned by Employee and due and owing from Company to Employee in the amount of $2,400,000.00; |
| (ii) | Payment Two - contingent upon the Employee providing binding commitments and opening accounts for Clients with assets under management or account value of at least $150,000,000 in the aggregate, then Payment Two shall be deemed earned by Employee and due and owing from Company to Employee in the amount of $2,700,000.00; and |
| (iii) | Payment Three - contingent upon the Employee providing binding commitments and opening accounts for Clients with assets under management or account value of at least $560,000,000 in the aggregate then Payment Three shall be deemed earned by Employee and due and owing from Company to Employee in the amount of $2,700,000.00. |
Each Payment shall be made when the threshold in sub-section (i), (ii) or (iii) are met, and there is no obligation to meet all three thresholds to receive any Payment. In addition, and for avoidance of doubt, the account values are inclusive of prior account values (for example the $150,000,000 for Payment Two may and will include the $50,000,000 in assets counted for Payment One). Each of the Payments described in this section shall be paid to the Employee as soon as administratively feasible after the date on which the conditions for a given Payment are met but no later than 30 days, and provided that Company is in full compliance with its net capital and other regulatory requirements at that time, fifty percent (50%) in cash and fifty percent (50%) in shares of its parent company, Dominari Holdings, Inc., the number of such shares to be determined based on the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on such market for the day of payment, as reported in The Wall Street Journal or such other source as the Company deems reliable; provided, that the Company’s failure to be in compliance with its net capital requirements shall not relieve the Company of its obligations hereunder. To the extent that the Company is not so in compliance then the Company shall use its best efforts to cure any failure through such means as reasonably available including reducing expenses or raising capital. Once cured, the Company shall have 30 days to pay the applicable Payment(s).”
Section 7(e)(ii) of the Agreement is hereby amended to read as follows:
| (ii) | “The portion of a Payment which shall be subject to the Clawback Rights shall be determined by multiplying the relevant Payment by a fraction, the numerator of which is the number of full months remaining in the Clawback Period and the denominator of which is eighty-four (84). For example, if Payment One ($2,400,000.00) is paid on June 1, 2023, the Clawback Period shall end on May 31, 2030. If the Employee is terminated by the Company without Cause or resigns for Good Reason on December 15, 2025, the amount subject to the Company’s Clawback Rights would be $1,542,857.14 (54/84 x $2,400,000.00). The amount subject to the Company’s Clawback Rights, if any, shall be paid by the Employee entirely in cash.” |
Except as specifically provided herein, the terms and conditions of the Agreement shall remain in full force and effect and the rights and obligations of the parties thereunder shall, except as specifically provided herein, be unaffected by this Amendment and shall continue as provided in such documents and shall not be in any way changed, modified or superseded by the terms set forth herein. This Amendment may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement.
[signature page follows]
2
IN WITNESS WHEREOF, this agreement is executed as of the date first set forth above.
| DOMINARI SECURITIES LLC | |||
| By: | /s/ Scott Noah | ||
| Name: | Scott Noah | ||
| Title: | President | ||
| EMPLOYEE | |||
| By: | /s/ Soo Yu | ||
| Name: | Soo Yu | ||
3
Exhibit 31.1
Certification of Principal Executive, Financial
and Accounting Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
I, Anthony Hayes, certify that:
| 1. | I have reviewed this report on Form 10-Q of Dominari Holdings Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Anthony Hayes | |
| Anthony Hayes | |
| Chief Executive Officer | |
| (Principal Executive Officer, | |
| Principal Financial Officer and Principal Accounting Officer) | |
| May 10, 2023 |
Exhibit 32.1
Certification of Principal Executive, Financial
and Accounting Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
I, Anthony Hayes, Director, Chief Executive Officer, Principal Financial and Accounting Officer of Dominari Holdings Inc. (the “Company”), in compliance with Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, to the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 (the “Report”) filed with the Securities and Exchange Commission:
| ● | Fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Anthony Hayes | |
| Anthony Hayes | |
| Chief Executive Officer | |
| (Principal Executive Officer, | |
| Principal Financial Officer and Principal Accounting Officer) | |
| May 10, 2023 |
A signed copy of this written statement required by Section 906 has been provided to Dominari Holdings Inc. and will be retained by Dominari Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.