Business Overview
Dominari Holdings Inc. (NASDAQ:AIKI), formerly known as AIkido Pharma, Inc., is a diversified company that has recently shifted its focus from biotechnology to the fintech and financial services industries. After years of operating as a biotech firm, the company has formed a wholly owned subsidiary, Dominari Financial Inc., in an effort to enhance shareholder value and capitalize on the growing financial services sector.Dominari Holdings was founded in 1967 as Spherix Incorporated and has operated as a biotechnology company since 2017, with a portfolio of small-molecule anticancer and antiviral therapeutics. However, in June 2022, the company made a strategic decision to transition its primary focus away from biotechnology and towards the fintech and financial services industries.
Through its newly formed subsidiary, Dominari Financial, the company acquired Dominari Securities LLC, 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.
Concurrent with this shift in focus, the company's wholly owned subsidiary, AIkido Labs, LLC, is in the process of winding down its historical pipeline of biotechnology assets. AIkido Labs has previously explored opportunities in high-growth industries and has equity holdings in various companies, including Anduril Industries, Databricks, Discord, Epic Games, Kraken, SpaceX, Tevva Motors, Thrasio, and Masterclass.
Financials
Dominari Holdings' financial performance has been challenging, reflecting the difficulties of its transition from biotechnology to financial services. For the fiscal year ended December 31, 2023, the company reported annual net income of -$29,868,000, annual revenue of $1,034,000, annual operating cash flow of -$10,597,000, and annual free cash flow of -$10,597,000.On a quarterly basis, the company's financial results have been equally challenging. For the three months ended September 30, 2023, Dominari Holdings reported revenue of $963,000, a loss from operations of $3,104,000, and a net loss of $3,541,000. The decrease in loss from operations was primarily attributable to a $0.4 million decrease in general and administrative expenses and a $0.6 million decrease in research and development expenses, as the company shifted its focus away from biotechnology.
For the nine months ended September 30, 2023, the company reported revenue of $1,034,000, a loss from operations of $15,949,000, and a net loss of $15,966,000. The increase in loss from operations was primarily due to an $8.4 million increase in general and administrative expenses, driven by professional fees and increased compensation expenses related to the establishment and operation of Dominari Financial and Dominari Securities. This was partially offset by a $2.6 million decrease in research and development expenses.
Liquidity
As of September 30, 2023, Dominari Holdings had working capital of approximately $33.2 million, consisting of cash and cash equivalents and marketable securities. The company believes its current cash and cash equivalents, together with the anticipated cash flow from operations, will be sufficient to meet its working capital and capital expenditure requirements for at least the next 12 months.However, the company's ability to obtain additional capital to implement its growth strategy over the longer term will depend on its future operating performance, financial condition, and the availability of equity and debt financing. The company has noted that recent volatility and weakness in the public markets may make it more difficult to raise additional capital when needed.
Risks and Challenges
Dominari Holdings faces several risks and challenges as it navigates its transition from biotechnology to financial services. The company's shift in focus may not be successful, and it may struggle to compete in the highly competitive financial services industry. Additionally, the company's historical pipeline of biotechnology assets may not generate the expected returns, and the winding down of AIkido Labs could result in further losses.The company's reliance on a limited number of large customers for its financial services business also poses a risk, as the loss of any of these customers could have a significant impact on the company's revenue and profitability. Furthermore, the company's exposure to market volatility and changes in interest rates could adversely affect its financial performance.