UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR
THE QUARTERLY PERIOD ENDED
OR
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☐ | Smaller Reporting Company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As of May 12, 2025, the number of outstanding shares of Class A Common Shares, representing limited liability interests, of the registrant was .
TABLE OF CONTENTS
| 1 |
PART I – FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2025 (Unaudited) | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated in compliance with regulations | ||||||||
| Related party receivables | ||||||||
| Clearing deposits | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Investment securities, at fair value (held by our licensed broker dealer) (Note 2) | ||||||||
| Equity method investment | ||||||||
| Deferred costs related to deferred revenue | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Related party payables | ||||||||
| Payables to customers | ||||||||
| Payables to non-customers | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Equity: | ||||||||
| Preferred
shares, authorized
shares at | ||||||||
| Class
A common shares, authorized shares at | ||||||||
| Class
B common shares, authorized shares at | ||||||||
| Paid-in-capital | ||||||||
| Accumulated (deficit) income | ( | ) | ||||||
| Total MDB Capital Holdings, LLC Members’ equity | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 2 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating income (loss): | ||||||||
| Unrealized loss on investment securities, net (from our licensed broker dealer) (Notes 1 and 2) | $ | ( | ) | $ | ( | ) | ||
| Fee income (from our licensed broker dealer) | ||||||||
| Other operating income | ||||||||
| Total operating income (loss), net | ( | ) | ||||||
| Operating costs: | ||||||||
| General and administrative costs: | ||||||||
| Compensation | ||||||||
| Operating expense, related party | ||||||||
| Professional fees | ||||||||
| Information technology | ||||||||
| Clearing and other charges | ||||||||
| General and administrative-other | ||||||||
| Total general and administrative costs | ||||||||
| Research
and development costs, net of grants amounting to $ | ||||||||
| Total operating costs | ||||||||
| Net operating loss | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest income | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| Net loss before equity method investee | ( | ) | ( | ) | ||||
| Equity in loss of equity method investee | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Net loss attributable to MDB Capital Holdings, LLC | $ | ( | ) | $ | ( | ) | ||
| Loss per share attributable to MDB Capital Holdings, LLC: | ||||||||
| Loss per Class A common share – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average of Class A common shares outstanding – basic and diluted | ||||||||
| Loss per Class B common share – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average of Class B common shares outstanding – basic and diluted | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
MDB CAPITAL HOLDINGS, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
Three Months Ended March 31, 2025 and 2024
Class A Common Shares | Class B Common Shares | Paid-In | Accumulated Income | Noncontrolling | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | (Deficit) | Interest | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
Class A Common Shares | Class B Common Shares | Paid-In | Accumulated | Noncontrolling | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
MDB CAPITAL HOLDINGS, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Unrealized (gain) loss on investment securities, net | ||||||||
| Stock-based compensation | ||||||||
| Accretion of investments at amortized cost (U.S Treasury Bills) | ( | ) | ||||||
| Proceeds from sale of investment securities, at fair value (made by our licensed broker dealer) | ||||||||
| Depreciation of property and equipment | ||||||||
| Deferred costs related to revenue | ( | ) | ( | ) | ||||
| Warrants received as part of investment banking deal | ( | ) | ||||||
| Accretion of deferred grant reimbursement | ( | ) | ||||||
| Portion of loss from equity investment | ||||||||
| Change in ROU Asset | ||||||||
| Change in lease liability | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in - | ||||||||
| Grants receivable | ( | ) | ||||||
| Related party receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Clearing deposits | ( | ) | ||||||
| Increase (decrease) in - | ||||||||
| Accounts payable | ||||||||
| Payables to non-customers | ( | ) | ||||||
| Payables to customers | ( | ) | ||||||
| Related party payables | ||||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds of investments securities, at amortized cost (U.S Treasury Bills) | ||||||||
| Purchases of investments securities, at amortized cost (U.S Treasury Bills) | ( | ) | ||||||
| Deferred grant reimbursement | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Deferred costs of initial public offering | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ) | ||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - END OF PERIOD | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for - | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Warrants received as part of an investment banking deal | $ | $ | ||||||
| Deferred costs of initial public offering | $ | $ | ||||||
The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows:
| March 31, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated in compliance with regulations | ||||||||
| Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
MDB CAPITAL HOLDINGS, LLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 2025 and 2024
1. Organization and Description of Business
MDB Capital Holdings, LLC (“the Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC, d/b/a MDB Capital (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), one majority owned subsidiary, MDB Minnesota One (“M1”), and one minority owned company eXoZymes Inc., formerly known as Invizyne Technologies, Inc., (“eXoZymes”), that was majority owned and is consolidated up to until November 14, 2024, when eXoZymes issued securities in its IPO and no longer majority owned by MDB.
MDB Management is principally an “administrative” entity whose purpose is to conduct, and wherever possible, to consolidate shared services/resources, for our US-based operations.
Public Ventures is a U.S. registered broker-dealer under the Securities Exchange Act of 1934 (“Exchange Act”), and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Texas State Securities Board. Public Ventures operates on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”), and is not required to maintain a clearing deposit. Interactive Brokers is the clearing firm and custodian of investments maintained by Public Ventures.
PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’, due diligence functions on the intellectual property of partner and prospective partner companies, and creates an intellectual property roadmap for such partner companies. PatentVest also provides intellectual property validation services for other clients.
M1 is a majority owned subsidiary and was formed with the purpose of developing pharmaceuticals, based on patents and licensed technology from an affiliate of the Mayo Clinic organization, the Mayo Foundation for Medical Education and Research.
On
September 20, 2023, MDB completed an initial public offering “IPO”, consisting of the sale of shares of Class A Common Shares at $per share, for gross proceeds of $
On
July 1, 2024, the founding ownership of M1 had MDB owning
| 6 |
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying financial statements include the accounts of the Company and wholly-owned and majority owned subsidiaries. The financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of December 31, 2024, and related notes were derived from the audited condensed consolidated financial statements but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of March 31, 2025, the results of operations for the three months ended March 31, 2025 and 2024 and its cash flows for the three months ended March 31, 2025 and 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the operating results for the full year or any future period. The financial information should be read in conjunction with the Company’s audited condensed consolidated financial statements for the year ended December 31, 2024. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests at March 31, 2025 and 2024, relate to the interests of third parties in the majority owned subsidiaries.
The managing members of the Company have a controlling interest in MDB Capital, S.A., a company organized and based in Nicaragua. As the Company does not have a controlling financial interest in this entity, and management has determined PatentVest, S.A. is not a variable interest entity and as such should not be consolidated as it has no ownership interests nor is a variable interest, so has excluded this entity from the Company’s financial statements. It is the Company’s policy to reevaluate this conclusion on an annual basis or if there are significant changes in ownership.
Income Taxes
The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest, and M1 are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company.
| 7 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the valuation of investment securities, valuing equity instruments issued for services, stock-based compensation and the realization of any deferred tax assets.
Emerging Growth Company
The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents.
The
Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured
by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”).
The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $
The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company did not experience any credit risk losses during the three ended March 31, 2025 and 2024.
Segregated Cash and Deposits
From
time to time the Company provides deposits or enters into agreements that would require funds to be held in a segregated cash account.
At March 31, 2025, the Company had $
Clearing Deposits
The
Company is obligated to maintain security deposits with the DTC and NSCC. At March 31, 2025 and December 31, 2024, these deposits
totaled $
| 8 |
Prepaid Expenses and Other Current Assets
The Company has the following prepaid and other expenses totaling for the periods ending March 31, 2025 and December 31, 2024:
| March 31, 2025 | December 31, 2024 | |||||||
| Acquired intangible assets | $ | $ | ||||||
| Prepaid professional fees | ||||||||
| Security deposits totaling | ||||||||
| Prepaid insurance | ||||||||
| Other current assets | ||||||||
| Various prepaid expenses | ||||||||
| Total prepaid and other expenses | $ | $ | ||||||
Leases
Leases of the Company consist primarily of contracts for the right to use and direct use of an individual property. Leases were analyzed for evidence of significant additional components and to determine if these components were separately identifiable within the context of the contract. As an accounting policy, to account for these components, the Company has elected the practical expedient option for property leases that have both lease and non-lease components for them to be combined into a single component and account for as a lease. This policy is effective for all current and future property operating leases and applied uniformly and will be disclosed as such within the financial statements. Operating lease assets are included within right-of-use assets and the corresponding operating lease liabilities are included within liabilities on the Company’s condensed consolidated balance sheet as of March 31, 2025 and December 31, 2024.
The Company has elected not to present short-term leases on the condensed consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Because the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
Stock-based Compensation
Stock-based compensation primarily consists of restricted stock units with service or market/performance conditions. Equity awards are measured at the fair market value of the underlying stock at the grant date. The Company recognized stock-based compensation expense using the straight-line method over the requisite service period. The Company accounts for forfeitures as they occur, rather than applying an estimated forfeiture rate. For performance-based restricted stock units, the compensation cost is recognized based on the number of units expected to vest upon the achievement of the performance conditions. Shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued to the employee than the number of awards outstanding. The Company records a liability for the tax withholding to be paid by it as a reduction to Additional paid-in capital.
Investment Securities
The Company strategically invests funds in U.S. Treasury Bills, early-stage technology companies, and equity securities and options of publicly traded and privately held companies. The Company classifies investment securities as either investment securities, at amortized cost, investment securities, at fair value, or investment securities, at cost less impairment.
Investment securities, at amortized cost – From time to time the Company will hold funds in investment securities, at amortized cost. This is comprised of debt securities held by MDB and are classified as investment securities held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. Initially, the cost of these securities was recorded, and later on, they were assessed at amortized cost, which was modified for unamortized purchase premiums and discounts, and also for credit losses provision. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the other operating income in the statements of operations. Interest income is recognized when earned. The Company recognizes estimated expected credit losses over the life of the investment security through the allowance for credit losses account. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the investment security to present the net amount expected to be collected. In determining expected credit losses, the Company considers relevant qualitative factors including, but not limited to, term and structure of the instrument, credit rating by rating agencies and historic credit losses adjusted for current conditions and reasonable and supportable forecasts. The Company holds investments in U.S. Treasury Bills or money market funds backed by U.S. Treasury Bills, so there are no expected credit losses. Declines in fair value of these securities is due to changes in market interest rates, and because it expects to hold these securities until maturity, it does not expect to realize any losses.
| 9 |
Investment securities, at fair value - This is comprised of equity investments held by the broker dealer subsidiary and are reported at fair value with changes in fair value recognized in the statement of operations. Purchases and sales of equity securities, consisting of common stock and warrants to purchase common stock, are recorded based on the respective market price quotations on the trade date. Realized gains and losses on investments represent the net gains and losses on investments sold during the period based on the average cost method. Differences between the fair value of investments at the beginning of the year and the end of the year are recorded on the income statement as unrealized gains and losses.
Investment securities, at cost less impairment - This is comprised of equity securities without a readily determinable fair value held by the broker dealer subsidiary, the Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee’s historical and forecasted performance. The Company has assessed this investment and determined that a full impairment of such securities held at the year ended December 31, 2024.
Investment securities are as follows:
There were no securities at amortized cost on March 31, 2025 and December 31, 2024.
Broker/Dealer Securities
| March 31, 2025 | December 31, 2024 | |||||||
| Investment securities, at fair value: | ||||||||
| Common stock of publicly traded companies | $ | $ | ||||||
| Warrants of publicly traded companies | ||||||||
| Investment securities, at fair value | $ | $ | ||||||
For
investment securities at fair value, net unrealized loss of $
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no significant concentration of credit risk, due to the majority of assets being invested in U.S. Treasury Bills.
The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:
Level 1–- Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.
Level 2–- Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3–- Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.
The Company’s financial instruments primarily consist of cash and investment securities. As of the balance sheets date, certain investment securities are required to be recorded at fair value with the change in fair value during the period being recorded as an unrealized gain or loss. As of March 31, 2025 and December 31, 2024, the estimated fair values of investment securities, at amortized cost were not materially different from their carrying values as presented as of the balance sheet date. This is primarily attributed to the short-term maturities of these instruments.
| 10 |
Investment securities, at amortized cost: The fair value of U.S. Treasury Bills classified as held-to-maturity investment securities is based on the market price and is classified as Level 1 of the fair value hierarchy.
A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
Investment securities: Public equity securities are assessed for valuation at the close of each period. Warrants are valued using the Black-Scholes model, which considers the stock price at the date of the valuation, the warrants strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock.
Investment securities, at cost less impairment: Non-public equity securities and simple agreements for future equity are valued based on the initial investment, less impairment. The Company determined that no impairment was warranted. Since these securities are not actively traded, we will apply valuation adjustments when they become available, and they are categorized in Level 3 of the fair value hierarchy.
The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 except for the Level 3 investment that is recorded at cost:
| Assets | Classification | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Investment Securities (held by our licensed broker dealer) | Equity securities–- common stock | $ | $ | $ | $ | |||||||||||||
| Investment Securities (held by our licensed broker dealer) | Warrants | |||||||||||||||||
| Total assets measured at fair value (held by our licensed broker dealer) | $ | $ | $ | $ | ||||||||||||||
During the three months ended March 31, 2025, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.
Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:
| December 31, 2024 | $ | |||
| Receipt from investment banking fees | ||||
| Realized gains | ||||
| Unrealized losses | ( |
) | ||
| Sales or distribution | ||||
| Purchases | ||||
| March 31, 2025 | $ |
The following table presents information about significant unobservable inputs related to material components of Level 3 warrants as of March 31, 2025.
| Assets | Fair Value | Valuation Techniques | Significant Unobservable Inputs | Range of Inputs | Weighted-Average | |||||||||||
| Warrants | $ | Black Scholes | Volatility | % | % | |||||||||||
| 11 |
The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 except for the Level 3 investment that is recorded at cost:
| Assets | Classification | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Investment Securities (held by our licensed broker dealer) | Equity securities–- common stock | $ | $ | $ | $ | |||||||||||||
| Investment Securities (held by our licensed broker dealer) | Warrants | |||||||||||||||||
| Total assets measured at fair value (held by our licensed broker dealer) | $ | $ | $ | $ | ||||||||||||||
During the three months ended December 31, 2024, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.
Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:
| December 31, 2023 | $ | |||
| Receipt from investment banking fees | ||||
| Realized gains | ||||
| Unrealized losses | ( |
) | ||
| Sales or distribution | ||||
| Purchases | ||||
| December 31, 2024 | $ |
| Assets | Fair Value | Valuation Techniques | Significant Unobservable Inputs | Range of Inputs | Weighted-Average | |||||||||||
| Warrants | $ | Black Scholes | Volatility | % | % | |||||||||||
Secured Debt–- Revolving Credit Facility
The
Company entered into a revolving credit facility with a bank, (the “Lender”) on July 26, 2024 for a commitment of up to $
The
Company granted the Lender a security interest in a cash checking account held at the bank as collateral. The Lender has a right of
setoff available from this cash account when the line of credit is accessed. As of March 31, 2025, there was $
The Company is responsible for the payment of all of the Lender’s legal and other fees incurred in connection with administering the loan. The Company has incurred no such costs or debt issue costs.
As
of March 31, 2025 and December 31, 2024, there are
| 12 |
Property and Equipment
Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statements of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:
| Laboratory equipment | ||
| Furniture and fixtures | ||
| Leasehold improvements |
Property and equipment consist of the following as of March 31, 2025 and December 31, 2024, respectively:
| March 31, 2025 | December 31, 2024 | |||||||
| Laboratory equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Developed software | ||||||||
| Leasehold improvements | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Revenue
The Company generates revenue primarily from providing brokerage, placement agent and underwriting services through Public Ventures. PatentVest and M1 are operating companies and have had limited activity during the three months ended March 31, 2025 and 2024.
Brokerage revenues consist of (i) trade-based commission income from executed trade orders, (ii) net realized gains and losses from proprietary trades, and (iii) other income consisting primarily of stock loan income earned on customer accounts. Public Ventures recognizes revenue from trade-based commissions and other income when performance obligations are satisfied through the transfer of control, as specified in the contract, of promised services to the customers of Public Ventures. Commissions are recognized on a trade date basis. Public Ventures believes that each executed trade order represents a single performance obligation that is fulfilled on the trade date because that is when the underlying financial instrument is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer. When another party is involved in transferring a good or service to a customer, Public Ventures assesses whether revenue is presented based on the gross consideration received from customers (principal) or net of amounts paid to a third party (agent). Public Ventures has determined that it is acting as the principal as the provider of the brokerage services and therefore records this revenue on a gross basis. Clearing, custody and trade administration fees incurred from the Company’s clearing firm, are recorded effective as of the trade date. The costs are treated as fulfillment costs and are recorded in operating expenses in the condensed consolidated statements of operations.
Brokerage revenue is measured by the transaction price, which is defined as the amount of consideration that Public Ventures expects to receive in exchange for services to customers. The transaction price is adjusted for estimates of known or expected variable consideration based upon the individual contract terms. Variable consideration is recorded as a reduction to revenue based on amounts that Public Ventures expects to refund back to the customer. There were no variable considerations for the three months ended March 31, 2025 and 2024, respectively.
| 13 |
Investment banking revenues consist of private placement and underwriting fees. The Company generally does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions, and therefore, as of March 31, 2025, the Company did not have any contract assets or liabilities related to these revenues on its condensed consolidated balance sheets.
Private placement fees are related to non-underwritten transactions such as private placements of equity securities, private investments in public equity, and Rule 144A private offerings and are recorded on the closing date of the transaction. Client reimbursements for costs associated for private placement fees are recorded gross within investment banking and various expense captions, excluding compensation. The Company typically receives payments on private placements transactions at the completion of the contract. The Company views the majority of placement fees as a single performance obligation that is satisfied when the transaction is complete, and the revenue is recognized at that point in time.
Taxes and regulatory fees assessed by a government authority or agency that are both imposed on and concurrent with a specified revenue-producing transaction, which are collected by Public Ventures from a customer, are excluded from revenue and recorded against general and administrative expenses.
Public Ventures does not incur any costs to obtain contracts with customers for revenues that are eligible for deferral or receive fees prior to recognizing revenue, and therefore, as of March 31, 2025 and 2024, Public Ventures did not have any contract assets or liabilities related to these revenues in its condensed consolidated balance sheet.
During
the three months ended March 31, 2025 and 2024, respectively, the Company’s technology development segment revenue had
PatentVest recognizes revenue when performance obligations are satisfied by transferring promised goods and services to customers in an amount the Company expects to receive in exchange for those goods or services. PatentVest enters into contracts that can include various combinations of its offerings which are generally capable of being distinct and accounted for as a separate performance obligation for the entire contract or a portion of the contract. When performance obligations are combined into a single contract, PatentVest utilizes stand-alone selling prices to allocate the transaction price among the performance obligations.
Certain contracts or portions of contracts are duration-based, which in the event of customer cancellation, provide PatentVest with an enforceable right to a proportional payment for the portion of the services provided. Accordingly, revenue from duration-based contracts is recognized using a time-based measure of progress, which PatentVest believes best depicts how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from certain contracts is recognized over the expected period of performance using a single measure of progress, typically based on hours incurred. Payments received in advance of services being rendered are recorded as a component of contract liabilities.
PatentVest’s contract liabilities which is presented as deferred revenue, consist of advance payments. The table below shows changes in deferred revenue:
| Balance as of December 31, 2023 | $ | |||
| Amounts billed but not recognized | ||||
| Revenue recognized | ||||
| Balance as of March 31, 2024 | ||||
| Amounts billed but not recognized | ||||
| Revenue recognized | ||||
| Balance as of December 31, 2024 | ||||
| Amounts billed but not recognized | ||||
| Revenue recognized | ||||
| Balance as of March 31, 2025 | $ |
| 14 |
Research Grants
On November 14, 2024 eXoZymes was deconsolidated from the Company’s condensed consolidated financial statements. As all grant-related costs were associated with eXoZymes, no grant-related figures are reported for 2025. eXoZymes receives grant reimbursements, which are netted against research and development expenses in the condensed consolidated statement of operations. Grant reimbursements for capitalized assets are recognized over the useful life of the assets, with the unrecognized portion recorded as deferred grant reimbursements and included in liabilities in the condensed consolidated balance sheet.
Grants function on a reimbursement model are accounted for using the accrual method. They are treated as reductions to expenses, corresponding to the amount of disbursements and obligations eligible for reimbursement. These are for permissible expenses incurred as of March 31, 2024. The reimbursements are anticipated to be received from the respective funding entities in the following year. Management considered such receivables at March 31, 2024, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying condensed consolidated financial statements.
Summary of grants receivable activity for the three-months ended March 31, 2024 is presented below:
| 2024 | ||||
| Balance at beginning of period | $ | |||
| Grant costs expensed | ||||
| Grants for equipment purchased | ||||
| Grant fees | ||||
| Grant funds received | ( | ) | ||
| Balance at end of period | $ | |||
The
first grant was awarded on October 1, 2023 and the latest of these grants was set to expire on May 14, 2026, however grants can be
extended, or new phases can be granted, extending the expiration of the grant. None of the grants have commitments made by the
parties, provisions for recapture, or any other contingencies, beyond complying with the normal terms of each research and
development grant. Research grants received from organizations are subject to the contract agreement as to how eXoZymes, formerly
known as Invizyne Technologies, Inc., conducts its research activities, and eXoZymes is required to comply with the agreement terms relating to those
grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to
the extent that such amounts are expended in accordance with the approved grant project. eXoZymes is permitted to draw down the
research grants after incurring the related expenses. Amounts received under research grants are offset against the related research
and development costs in the Company’s condensed consolidated statement of operations. For the three-months ended March 31,
2024, respectively, grants amounting to $
Research and Development Costs
Research
and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to
consultants, and other expenses relating to the development of eXoZymes’ technology. For the three-months ended March 31, 2025
and 2024, research and development costs prior to offset of the grants amounted to $
Patent and Licensing Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.
| 15 |
Patent
and licensing legal and filing fees and costs were $
3. Segment Reporting
In its operation of the business, management, including the Company’s chief operating decision maker, who is also the Company’s Chief Executive Officer, reviews certain financial information, including segmented profit and loss and balance sheet statements.
The
Company currently operates in
The broker dealer & intellectual property service segment currently has two subsidiaries, Public Ventures and PatentVest. Public Ventures is a full-service broker dealer firm focusing on conducting private and public securities offerings. PatentVest offers in-depth patent research used for investment banking due diligence.
For the three months ended March 31, 2025, the Company’s technology development segment consisted of a single subsidiary, M1, a research and development stage company focused on developing a small molecule senescence platform started in July 2024. For the three months ended March 31, 2024, the technology segment included one subsidiary, eXoZymes, a research and development stage synthetic biology company. eXoZymes was consolidated in the Company’s Statement of Operations through November 14, 2024, at which point it was deconsolidated and subsequently accounted for as an equity method investment.
Non-income generating subsidiaries for management of the business, including MDB CG Management Company, Inc. are reported in the Other column in the table below
The following sets forth the long-lived assets and total assets by segment at March 31, 2025:
| ASSETS | Broker Dealer & Intellectual Property Service |
Technology Development |
Other | Eliminations | Consolidated | |||||||||||||||
| Long-lived assets | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| 16 |
The following sets forth statements of operations by segment for the three-months March 31, 2025:
| Broker Dealer & Intellectual Property Service | Technology Development | Other | Eliminations | Consolidated | ||||||||||||||||
| Operating income: | ||||||||||||||||||||
| Unrealized loss on investment securities, net (from our licensed broker dealer) (Notes 1 and 2) (1) | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||
| Fee income (from our licensed broker dealer) (2) | ||||||||||||||||||||
| Other operating income (3) | ||||||||||||||||||||
| Total operating income, net | ||||||||||||||||||||
| Operating costs: | ||||||||||||||||||||
| General and administrative costs: | ||||||||||||||||||||
| Compensation | ||||||||||||||||||||
| Operating expense, related party | ||||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Information technology | ||||||||||||||||||||
| Clearing and other charges | ||||||||||||||||||||
| General and administrative-other | ||||||||||||||||||||
| General and administrative costs | ||||||||||||||||||||
| Research and development costs | ||||||||||||||||||||
| Total operating costs | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other income and expense: | ||||||||||||||||||||
| Miscellaneous income | ||||||||||||||||||||
| Interest expense | ( | ) | ||||||||||||||||||
| Interest income | ( | ) | ||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ||||||||||||||||||||
| Loss before equity method investee | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Equity in loss of equity method investee | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||||||
| Net loss attributable to MDB Capital Holdings, LLC | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||
| (1) | |
| (2) | |
| (3) |
The following sets forth the long-lived assets and total assets by segment at December 31, 2024:
| ASSETS | Broker Dealer & Intellectual Property Service | Technology Development | Other | Eliminations | Consolidated | |||||||||||||||
| Long-lived assets | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| 17 |
The following sets forth statements of operations by segment for the three-months March 31, 2024:
| Broker
Dealer & Intellectual Property Service |
Technology Development | Other | Eliminations | Consolidated | ||||||||||||||||
| Operating income: | ||||||||||||||||||||
| Unrealized loss on investment securities, net (from our licensed broker dealer) (1) | $ | ( |
$ | $ | $ | $ | ( |
|||||||||||||
| Other operating income (2) | ||||||||||||||||||||
| Total operating loss, net | ( |
( |
||||||||||||||||||
| Operating costs: | ||||||||||||||||||||
| General and administrative costs: | ||||||||||||||||||||
| Compensation | ||||||||||||||||||||
| Operating expense, related party | ||||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Information technology | ||||||||||||||||||||
| Clearing and other charges | ||||||||||||||||||||
| General and administrative-other | ||||||||||||||||||||
| General and administrative costs | ||||||||||||||||||||
| Research and development costs | ||||||||||||||||||||
| Total operating costs | ||||||||||||||||||||
| Net operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Other income and expense: | ||||||||||||||||||||
| Interest expense | ( |
) | ||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Income tax expense | ||||||||||||||||||||
| Net Loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Net loss attributable to non-controlling interests | ( |
) | ( |
) | ||||||||||||||||
| Net loss attributable to MDB Capital Holdings, LLC | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | |||||||
| (1) | |
| (2) |
4. Equity and Non-Controlling Interests
Equity
Preferred shares – shares authorized, shares issued and outstanding. The board of directors may designate preferred shares to be issued, and may rank preferred shares as junior to, on parity with or senior to other preferred shares (in each case, with respect to distributions or other payments in respect of shares). Since the board of directors may set all the terms of any class of preferred shares, these are considered “blank check” preferred shares. Currently the board has not defined dividend and liquidation preference, participation rights, call prices and dates, sinking-fund requirements, or terms that may change the conversation or exercise price.
Class
A Common Shares –
shares authorized,
shares issued and outstanding as of March 31, 2025 and December 31, 2024. These shares are common shares and have
Class
B Common Shares –
shares authorized,
issued and outstanding as of March 31, 2025 and December 31, 2024. These shares are common shares and have
Placement Agent and Selling Agent Warrants – warrants of Class A common shares have been issued as part of the private placement and the initial public offering. The Placement Agent and Selling Agent Warrants are subject to standard anti-dilution provisions and may include cashless exercise provisions under certain circumstances. The issuance of the Placement and Selling Agent Warrants is a customary part of compensation for the placement or selling agent’s services in connection with prior offerings.
| 18 |
Non-Controlling Interests (NCI)
For
the three months ended March 31, 2025, the Company held a weighted average of
During
each period, controlling and NCI changes as a result of capital infusions from the Company. For the
three months ended March 31, 2025 there were $
For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Non-controlling companies net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average non-controlling percentage | % | % | ||||||
| Net loss non-controlling interest | $ | ( | ) | $ | ( | ) | ||
| Prior period balance | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Ending period balance | $ | ( | ) | $ | ( | ) | ||
If there is a change in the parent ownership in a subsidiary from an additional investment or from the issuance of stock based compensation, a change of the non-controlling ownership is recognized based on the amount invested as required, and per ASC 810-45-21A, the carrying amount of the NCI is adjusted to reflect the change in the non-controlling ownership in the subsidiary’s net assets. Since there was a change in the equity, a reclassification of the NCI in the subsidiary’s net assets is required and reflected in the ending period balance above.
5. Equity Method Investment
On
November 14, 2024, eXoZymes underwent an initial public offering in which MDB’s ownership interest in eXoZymes decreased from
The fair value of the equity method investment was determined based on the number of eXoZymes shares held by MDB and the market price of eXoZymes stock on the deconsolidation date. This valuation also included the estimated fair value of warrants held in eXoZymes, along with an assessment of the investment for any potential impairment.
The
Company’s portion of the net loss for the three-months ended March 31, 2025 was $
The following summarizes the Company’s equity method investment:
| Carrying Amount | ||||
| December 31, 2024, beginning balance | $ | |||
| Portion of loss from eXoZymes | ( | ) | ||
| March 31, 2025, carrying amount | $ | |||
| 19 |
Between April 19, 2022 and September 21, 2022, the Company granted restricted stock units (“RSUs”). In 2024 an additional RSUs were granted, RSUs were either canceled or forfeited, and RSUs vested. The total unrecognized compensation expense based on the shares price sold in the private placement as of March 31, 2025 was $. During the three months ended March 31, 2025 RSUs were canceled due to holder leaving the Company.
On April 19, 2022 the Company granted restricted stock units (“RSUs”). . As these RSUs did not begin to vest until the completion of an initial public offering, which was completed on September 20, 2023, by the Company, which was outside of the control of the Company, compensation expense related to these RSUs has been recorded. The estimated unrecognized compensation expense for performance/market vesting RSUs is $.
| Time-Based | Performance-Based | |||||||||||||||
| Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||||||||
| Restricted stock units outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( |
) | $ | |||||||||||||
| Expired/Cancelled | ( |
) | $ | |||||||||||||
| Restricted stock units outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired/Cancelled | ( |
) | ||||||||||||||
| Restricted stock units outstanding at March 31, 2025 | $ | $ | ||||||||||||||
| Restricted stock units at March 31, 2024 | $ | $ | ||||||||||||||
| Restricted stock units at March 31, 2025 | $ | $ | ||||||||||||||
| 20 |
The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods.
| For the Three Months Ended | ||||||||||||||||
| Basic | March 31, 2025 | March 31, 2024 | ||||||||||||||
| Class A Common Shares | Class B Common Shares | Class A Common Shares | Class B Common Shares | |||||||||||||
| Net loss attributable to MDB Capital Holdings, LLC | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding – basic | ||||||||||||||||
| Net loss per share – basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Class A Common Shares and Class B common stock are equal for ownership purposes, but Class B shares have five times the voting rights of Class A shares and Class B shares can be exchanged on a one-to-one basis for purposes of sale.
8. Related Party Transactions
The
principal members of the Company have a controlling interest in MDB Capital, S.A., a company organized
and based in Nicaragua that provides outsourced services to the Company and other non-related entities. During the three months ended
March 31, 2025 and 2024, the Company paid $
During
the three months ended March 31, 2025, PatentVest, a
| 21 |
During
the three months ended March 31, 2025, PatentVest, a
During
the three months ended March 31, 2025, the Company recorded related party receivables totaling $
9. Commitments and Contingencies
Legal Claims
The Company may be subject to legal claims and actions from time to time as part of its business activities. As of March 31, 2025 and 2024, the Company was not subject to any pending or threatened legal claims or actions.
External Risks Associated with the Company’s Business Activities
Net Capital Requirement (Public Ventures)
MDB
Capital dba Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission
(the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of
aggregate indebtedness to net capital. At March 31, 2025 and 2024, Public Ventures had net capital of $
In
2024 the Company entered into a subordinated loan agreement with its broker-dealer subsidiary for $
At
March 31, 2025, the broker-dealer subsidiary’s ratio of aggregate indebtedness of $
To
comply with DTC membership requirements, the broker-dealer subsidiary has committed to maintain at least $
The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.
Indemnification Provisions
Public Ventures has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing broker have no maximum amount. All unsettled trades at March 31, 2025 and 2024 have subsequently settled with no resulting material liability to Public Ventures, LLC. For the three-months ended March 31, 2025 and 2024, Public Ventures had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of March 31, 2025 and 2024.
| 22 |
10. Employee Benefit Plans
MDB
Management and eXoZymes both sponsored individual 401(k) defined contribution plans for the benefit of each company’s eligible
employees. The plans allow eligible employees to contribute a portion of their annual compensation, not to exceed annual limits
established by the Department of Treasury. eXoZymes makes matching contributions for participating employees up to a certain
percentage of the employee contributions; matching contributions were funded for the three-months ended March 31, 2025 and 2024.
Benefits under the eXoZymes plan were available to all employees, and employees become fully vested in the employer contribution
upon receipt. For the three-months ended March 31, 2025 and 2024, a total of $
MDB Management also provides health and related benefit plans for eligible employees.
11. Exclusive License Agreement (MDB Minnesota One)
On July 1, 2024, MDB M1 entered into a Patent and Know-How License Agreement (the “License Agreement”) with Mayo for certain patent rights and associated technology pursuant to which M1 intends to develop a small molecule senescence platform. The License Agreement grants M1 rights to develop and commercialize Mayo’s patented technology and know-how for all fields of use on a worldwide basis. Under the terms of the License Agreement, M1 holds an exclusive license of patent rights and a non-exclusive license for the associated technology to make, have made, use, offer for sale, sell, and import licensed products and derivatives.
As
part of initial consideration for the License Agreement, M1 issued shares of common stock equity to Mayo; which at that time
represented thirty-three percent of its shares. M1 also paid an initial license fee of $
Under the License Agreement, M1 is required to achieve certain development milestones within designated time periods. For select development milestones, as listed below, M1 will be required to make a payment to Mayo, also as noted below:
| ● | A
payment of $ | |
| ● | A
payment of $ | |
| ● | A
payment of $ | |
| ● | A
payment of $ |
As of March 31, 2025 the development milestones noted above are not required to have been met and have not been met. There are other developmental milestones in the License Agreement relating to funding of the business and to initiating various clinical trial phases over time.
If M1 materially breaches the terms of the License Agreement, and such material breach remains uncured after an opportunity to cure, Mayo may terminate the License Agreement.
| 23 |
12. Leases
For operating leases, the Company records right-of-use assets and corresponding lease liabilities in the balance sheets for all leases with terms longer than twelve months. The Company has one operating lease, with no variable lease costs, and no finance leases as of March 31, 2025 and December 31, 2024.
On
July 1, 2022 the Company executed a lease for new office space in the Dallas, Texas metropolitan area, and took occupancy December 20, 2022. The lease with a term of
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.
| March 31, 2025 | December 31, 2024 | |||||||
| Operating leases: | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease costs | ||||||||
| Total operating lease costs | $ | $ | ||||||
| 24 |
Future payments due under operating leases as of March 31, 2025 are as follows:
| Year | Amount | |||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | $ | |||
| Less effects of discounting | ( | ) | ||
| Total operating lease liabilities | $ | |||
13. Income Taxes
The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest, and M1 are Subchapter C-corporations subject to federal and state income taxes.
Amounts recognized as income taxes are included in “income tax expense” on the statements of operations. The Company recognized no income tax expense for the three months ended March 31, 2025, and March 31, 2024, because of a full valuation allowance recorded against the Company’s net deferred tax assets.
The
Company’s federal and state statutory tax rate net of the federal tax benefit was approximately
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At the end of 2024, the Company’s corporate earnings were in a cumulative loss position. Based on the cumulative losses and projections of future taxable income for the periods in which the deferred tax assets are deductible, the Company recorded a valuation allowance against all its net deferred tax assets as of March 31, 2025, and March 31, 2024. The Company intends to maintain a full valuation allowance on its net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of deferred tax assets considered realizable could materially increase in the future, and the amount of valuation allowance recorded could materially decrease if estimates of future taxable income are increased.
14. Subsequent Events
On April 28, 2025, Mo Hayat, Chris Marlett, George Brandon, and Anthony DiGiandomenico voluntarily relinquished their outstanding restricted stock units (RSUs) in exchange for stock options for an equivalent number of Class A shares and similar verting schedules. This exchange was executed as part of a broader equity compensation strategy aimed at aligning long-term incentives with shareholder value creation. The terms of the stock options, including exercise price and vesting schedules, were approved by the Company’s Board of Directors in accordance with the existing equity incentive plan and Section 16 of the Exchange Act.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
MDB Capital Holdings, LLC (the “Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC, d/b/a MDB Capital (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), has one majority-owned partner company MDB Minnesota One, Inc. (“MDB Minnesota One”), and one minority owned company eXoZymes Inc., formerly known as Invizyne Technologies, Inc., (“eXoZymes”), that was majority owned and is consolidated up to until November 14, 2024, when eXoZymes issued securities in its IPO and no longer majority owned by MDB.
MDB Management is principally an “administrative” entity whose purpose is to conduct, and wherever possible, to consolidate shared services/resources, for our US-based operations.
Public Ventures is a U.S. registered broker-dealer under the Exchange Act and is a member of FINRA and the Texas State Securities Board. Public Ventures is managed by Christopher A. Marlett, who is also a founder of MDB. Public Ventures operates on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”), and is not required to maintain a clearing deposit. Interactive Brokers is the clearing firm and custodian of investments maintained by Public Ventures. Public Ventures also operates as a self-clearing broker dealer, and began carrying accounts for customers in January 2024.
PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’ due diligence functions on the intellectual property of partner and prospective partner companies and creates an intellectual property roadmap for such partner companies. PatentVest also provides intellectual property validation services for other clients.
M1 is a majority owned subsidiary and was formed with the purpose of developing pharmaceuticals, based on patents and licensed technology from the Mayo Foundation for Medical Education and Research (“Mayo”).
On November 14, 2024, eXoZymes completed its initial public offering (IPO), in which it sold common stock, reducing the Company’s ownership interest from approximately 60% to 47%. As a result, effective November 14, 2024, eXoZymes became a minority owned company and is now accounted for under the equity method of accounting.
Results of Operations
The Company has determined its reporting units in accordance with ASC (Accounting Standards Codification) 280, Segment Reporting. The Company currently operates in two reportable segments: (i) the broker dealer and intellectual property service segment and (ii) the technology development segment.
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The Company’s unaudited condensed consolidated statements of operations as discussed herein are presented below.
Unaudited Condensed Consolidated Results of Operations for the Three Months Ended March 31, 2025 and 2024
| 2025 | 2024 | $ Change | % Change | |||||||||||||
| Operating income (loss): | ||||||||||||||||
| Unrealized loss on investment securities, net (from our licensed broker dealer) | $ | (1,462,842 | ) | $ | (747,268 | ) | $ | (715,574 | ) | (95.8 | )% | |||||
| Fee income (from our licensed broker dealer) | 2,140,238 | - | 2,140,238 | 100.0 | % | |||||||||||
| Other operating income | 150,702 | 86,879 | 63,823 | 73.5 | % | |||||||||||
| Total operating income (loss), net | 828,098 | (660,389 | ) | 1,488,487 | 225.4 | % | ||||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 4,336,016 | 4,892,675 | (556,659 | ) | (11.4 | )% | ||||||||||
| Operating expense, related party | 455,358 | 320,292 | 135,066 | 42.2 | % | |||||||||||
| Professional fees | 788,733 | 919,089 | (130,356 | ) | (14.2 | )% | ||||||||||
| Information technology | 249,920 | 205,991 | 43,929 | 21.3 | % | |||||||||||
| Clearing and other charges | 288,648 | 2,036 | 286,612 | 14,077.2 | % | |||||||||||
| General and administrative-other | 619,327 | 669,126 | (49,799 | ) | (7.4 | )% | ||||||||||
| Total general and administrative costs | 6,738,002 | 7,009,209 | (271,207 | ) | (3.9 | )% | ||||||||||
| Research and development costs, net of grants amounting to $0 and $708,700 | - | 277,582 | (277,582 | ) | (100.0 | )% | ||||||||||
| Total operating costs | 6,738,002 | 7,286,791 | (548,789 | ) | (7.5 | )% | ||||||||||
| Net operating loss | (5,909,904 | ) | (7,947,180 | ) | 2,037,276 | 25.6 | % | |||||||||
| Other income: | ||||||||||||||||
| Interest income | 180,629 | 337,852 | (157,223 | ) | 46.5 | % | ||||||||||
| Loss before income taxes | (5,729,275 | ) | (7,609,328 | ) | 1,880,053 | 24.7 | % | |||||||||
| Income taxes | - | - | - | 0.0 | % | |||||||||||
| Net loss before equity method investee | (5,729,275 | ) | (7,609,328 | ) | 1,880,053 | 24.7 | % | |||||||||
| Equity in loss of equity method investee | (872,518 | ) | - | (872,518 | ) | 100.0 | % | |||||||||
| Net loss | (6,601,793 | ) | (7,609,328 | ) | 1,007,535 | 13.2 | % | |||||||||
| Net loss attributable to non-controlling interests | (14,431 | ) | (393,903 | ) | 379,472 | 96.3 | % | |||||||||
| Net loss attributable to MDB Capital Holdings, LLC | $ | (6,587,362 | ) | $ | (7,215,425 | ) | $ | 628,063 | 8.7 | % | ||||||
Operating Income. For the three-month periods ending March 31, 2025, and 2024, the Company generated operating income primarily due to investment banking activity completed in February 2025, this was offset to unrealized losses in the broker-dealer and intellectual property service segments. There was other income generated from operational fees within the same segments.
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General and Administrative Costs. During the three-month period ended March 31, 2025, and 2024, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The majority of the decrease in compensation expense was attributable to the deconsolidation of eXoZymes, as well as the forfeiture of restricted stock options during the period, this was offset by cash raises that were distributed in May 2024. | |
| ● | Related Party Operating Expenses: The increase is primarily due to the outsourcing of support services related to the Company’s self-clearing operations within the broker-dealer, as well as services provided by the intellectual property segment. | |
| ● | Professional Fees: The decrease compared to the prior period was largely due to a reduction in audit and consulting fees that were primarily associated with fiscal year 2023 reporting activities. | |
| ● | Information Technology Costs: Costs increased from the prior period, driven by higher expenses incurred for self-clearing operations. | |
| ● | Clearing and Other Charges: The increase is in line with broker-dealer activity, as these costs generally correlate with fee-generating transactions, which compared to the prior period had no fee-generating transactions. | |
| ● | Other General and Administrative Costs: The primary driver for the decrease in general and administrative expenses was the deconsolidation of eXoZymes, which resulted in the removal of related operating costs from the condensed consolidated financials. |
Research and Development Costs. The research and development costs were incurred by the Company’s technology development segment. For the three-month period ended March 31, 2025, R&D expenses decreased compared to the same period in the prior year, due to the deconsolidation of eXoZymes.
Other Income and Expense. For the three-month period ended March 31, 2025, the decrease in other income compared to the same period in the prior year was the result of less interest generated on U.S. Treasury Bill interest from cash used on operating activities during the year. The increase in equity in loss of equity method investee was due to recording the net loss for eXoZymes as equity investee.
Broker Dealer and Intellectual Property Service Segment (Public Ventures and PatentVest) Results of Operations for the Three Months Ended March 31, 2025 and 2024
| 2025 | 2024 | $ Change | % Change | |||||||||||||
| Operating income (loss): | ||||||||||||||||
| Unrealized loss on investment securities, net (from our licensed broker dealer) | $ | (1,462,842 | ) | $ | (747,268 | ) | $ | (715,574 | ) | (95.8 | )% | |||||
| Fee income (from our licensed broker dealer) (2) | 2,140,238 | - | 2,140,238 | 100.0 | ||||||||||||
| Other operating income | 150,702 | 86,879 | 63,823 | 73.5 | % | |||||||||||
| Total operating income (loss), net | 828,098 | (660,389 | ) | 1,488,487 | 225.4 | % | ||||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 778,067 | 679,907 | 98,160 | 14.4 | % | |||||||||||
| Operating expense, related party | 360,546 | 243,876 | 116,670 | 47.8 | % | |||||||||||
| Professional fees | 272,114 | 145,907 | 126,207 | 86.5 | % | |||||||||||
| Information technology | 229,898 | 180,914 | 48,984 | 27.1 | % | |||||||||||
| Clearing and other charges | 288,648 | 2,036 | 286,612 | 14,077.2 | % | |||||||||||
| General and administrative-other | 206,188 | 218,936 | (12,748 | ) | (5.8 | )% | ||||||||||
| Total General and administrative costs | 2,135,461 | 1,471,576 | 663,885 | 45.1 | % | |||||||||||
| Research and development costs | - | - | - | - | ||||||||||||
| Total operating costs | 2,135,461 | 1,471,576 | 663,885 | 45.1 | % | |||||||||||
| Net operating loss | (1,307,363 | ) | (2,131,965 | ) | 824,602 | 38.7 | % | |||||||||
| Other income: | ||||||||||||||||
| Interest expense | (247,500 | ) | (110,625 | ) | (136,875 | ) | (123.7 | )% | ||||||||
| Interest income | 115,115 | 52,459 | 62,656 | 119.4 | % | |||||||||||
| Loss before income taxes | (1,439,748 | ) | (2,190,131 | ) | 750,383 | 34.3 | % | |||||||||
| Income taxes | - | - | - | 0.0 | % | |||||||||||
| Net loss | $ | (1,439,748 | ) | $ | (2,190,131 | ) | $ | 750,383 | 34.3 | % | ||||||
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Operating Income. For the three-month periods ending March 31, 2025, and 2024, the Company generated operating income primarily due to investment banking activity completed in February 2025, this was offset to unrealized losses in the broker-dealer and intellectual property service segments. There was other income generated from operational fees within the same segments.
General and Administrative Costs. During the three-month periods ended March 31, 2025, and 2024, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The increase in compensation expense compared to the prior period was primarily driven by salary increases that took effect in May 2024. | |
| ● | Related Party Operating Expenses: The increase is primarily due to the outsourcing of support services related to the Company’s self-clearing operations within the broker-dealer, as well as services provided by the intellectual property segment. | |
| ● | Professional Fees: The increase compared to the prior period was largely due to consulting activities and audit costs for the self-clearing operations. | |
| ● | Information Technology Costs: Costs increased from the prior period, driven by higher expenses incurred for self-clearing operations. | |
| ● | Clearing and Other Charges: The increase is in line with broker-dealer activity, as these costs generally correlate with fee-generating transactions, which compared to the prior period had no fee-generating transactions. | |
| ● | Other General and Administrative Costs: The reduction in costs for the three-month period ending March 31, 2025, was negligible compared to the same period in the previous year. |
Other Income. The increase in other income for the three-month periods ending March 31, 2025, can be attributed to the growth in bank interest income, stemming from an increase in the cash balance.
Technology Development Segment (M1 and eXoZymes) Results of Operations for the Three Months Ended March 31, 2025 and 2024
| 2025 | 2024 | $ Change | % Change | |||||||||||||
| Total operating income | $ | - | $ | - | $ | - | 0.0 | % | ||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | - | 390,043 | (390,043 | ) | (100.0 | )% | ||||||||||
| Professional fees | 44,789 | 256,563 | (211,774 | ) | (82.5 | )% | ||||||||||
| Information technology | - | 3,891 | (3,891 | ) | (100.0 | )% | ||||||||||
| General and administrative-other | - | 80,378 | (80,378 | ) | (100.0 | )% | ||||||||||
| Total general and administrative costs | 44,789 | 730,875 | (686,086 | ) | (93.9 | )% | ||||||||||
| Research and development costs, net of grants amounting to $708,700 and $793,540 | - | 277,582 | (277,582 | ) | (100.0 | )% | ||||||||||
| Total operating costs | 44,789 | 1,008,457 | (963,668 | ) | (95.6 | )% | ||||||||||
| Net operating loss | (44,789 | ) | (1,008,457 | ) | 963,668 | 95.6 | % | |||||||||
| Other income: | ||||||||||||||||
| Interest income | - | - | - | 0.0 | % | |||||||||||
| Loss before income taxes | (44,789 | ) | (1,008,457 | ) | 963,668 | 95.6 | % | |||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss | (44,789 | ) | (1,008,457 | ) | 963,668 | 95.6 | % | |||||||||
| Net loss attributable to non-controlling interests | (14,431 | ) | (393,903 | ) | 379,472 | 96.3 | % | |||||||||
| Net loss attributable to controlling interests | $ | (30,358 | ) | $ | (614,554 | ) | $ | 584,196 | 95.1 | % | ||||||
Operating Income. There was no activity during the periods ended March 31, 2025 and 2024.
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General and Administrative Costs. During the three-month periods ended March 31, 2025, and 2024, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The decrease in compensation expense was attributable to the deconsolidation of eXoZymes. | |
| ● | Professional Fees: The increase in The decrease in professional fees was attributable to the deconsolidation of eXoZymes, that was offset by legal fees for M1. | |
| ● | Information Technology Costs: The decrease in information technology costs was attributable to the deconsolidation of eXoZymes. | |
| ● | Other General and Administrative Costs: The decrease in general and administrative costs was attributable to the deconsolidation of eXoZymes. |
Research and Development Costs. The research and development costs were incurred by the Company’s technology development segment. For the three-month period ended March 31, 2025, R&D expenses decreased compared to the same period in the prior year, due to the deconsolidation of eXoZymes.
Condensed Consolidated Balance Sheets March 31, 2025 and December 31, 2024
March
31, (unaudited) |
December
31, 2024 |
$ Change | % Change | |||||||||||||
| ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 19,551,997 | $ | 20,437,492 | $ | (885,495 | ) | (4.3 | )% | |||||||
| Cash segregated in compliance with regulations | 471,381 | 843,741 | (372,360 | ) | (44.1 | )% | ||||||||||
| Receivables to related party | 86,764 | 63,759 | 23,005 | 36.1 | ||||||||||||
| Clearing deposits | 1,015,049 | 1,737,771 | (722,722 | ) | (41.6 | )% | ||||||||||
| Prepaid expenses and other current assets | 473,725 | 513,249 | (39,524 | ) | (7.7 | )% | ||||||||||
| Investment securities, at fair value (held by our licensed broker dealer) | 5,385,918 | 5,858,336 | (472,418 | ) | (8.1 | )% | ||||||||||
| Equity method investment | 40,891,050 | 41,763,568 | (872,518 | ) | (2.1 | )% | ||||||||||
| Deferred costs related to deferred revenue | 47,310 | 26,638 | 20,672 | 77.6 | % | |||||||||||
| Property and equipment, net | 84,836 | 90,491 | (5,655 | ) | (6.2 | )% | ||||||||||
| Operating lease right-of-use assets, net | 618,388 | 641,354 | (22,966 | ) | (3.6 | )% | ||||||||||
| Total assets | $ | 68,626,418 | $ | 71,976,399 | $ | (3,349,981 | ) | (4.7 | )% | |||||||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Accounts payable | $ | 375,994 | $ | 323,926 | $ | 52,068 | 16.1 | % | ||||||||
| Accrued expenses | 170,718 | 72,188 | 98,530 | 136.5 | % | |||||||||||
| Payables to non-customers | - | 41 | (41 | ) | (100.0 | )% | ||||||||||
| Payables to customers | 372,880 | 772,565 | (399,685 | ) | 51.7 | % | ||||||||||
| Payables to related party | 33,567 | 22,842 | 10,725 | 47.0 | % | |||||||||||
| Operating lease liabilities | 686,861 | 711,503 | (24,642 | ) | (3.5 | )% | ||||||||||
| Total liabilities | 1,640,020 | 1,903,065 | (263,045 | ) | (13.8 | )% | ||||||||||
| Equity: | ||||||||||||||||
| Paid-in-capital | 72,235,787 | 68,720,930 | 3,514,857 | 5.1 | % | |||||||||||
| Accumulated (deficit) income | (5,145,287 | ) | 1,442,075 | (6,587,362 | ) | (456.8 | )% | |||||||||
| Total MDB Capital Holdings, LLC Members’ equity | 67,090,500 | 70,163,005 | (3,072,505 | ) | (4.4 | )% | ||||||||||
| Non-controlling interest | (104,102 | ) | (89,671 | ) | (14,431 | ) | (16.1 | )% | ||||||||
| Total equity | 66,986,398 | 70,073,334 | (3,086,936 | ) | (4.4 | )% | ||||||||||
| Total liabilities and equity | $ | 68,626,418 | $ | 71,976,399 | $ | (3,349,981 | ) | (4.7 | )% | |||||||
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Financial Condition: Overall, the reduction in assets was primarily attributed to their utilization for operational activities during the period. The decrease in cash segregated in compliance with regulations stemmed from customer deposits being moved into securities. The drop in investment securities at fair value was due to a decrease in the value of common stock and warrants over the period, offset by the receipt of warrants for investment banking activities. Prepaid expenses remained stable compared to the previous period. The decrease in equity method investment is directly tied to the Company’s portion of the net loss. Finally, the reduction in property and equipment & right-of-use asset was due to its regular utilization.
The increase in accounts payable was primarily driven by payments for audit and legal services associated with audits and legal matters related to the annual audits. The increase in accrued expenses resulted from various expenses to be paid in 2025. Additionally, the decrease in payables to customers and non-customers stemmed from the movement of cash into securities. Finally, the reduction in lease liability was due to its routine utilization.
The decrease in equity was primarily due from net losses from previous periods.
The increase in non-controlling interest resulted from the net loss experienced by M1.
Liquidity and Capital Resources – March 31, 2025 and 2024
The Company’s unaudited condensed consolidated statements of cash flows as discussed herein are presented below.
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (1,257,855 | ) | $ | (2,259,097 | ) | ||
| Net cash provided by investing activities | - | 3,445,523 | ||||||
| Net cash used in financing activities | - | (91,507 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (1,257,855 | ) | $ | 1,094,919 | |||
At March 31, 2025, the Company had $20,174,376 of working capital. This is a decrease of $7,109,991, from the working capital of $27,284,367 that the Company had at March 31, 2024. The decrease in working capital is primarily attributed to the use of cash to fund operations for the three months ended on March 31, 2025.
Operating Activities. For the three months ended March 31, 2025, operating activities use of cash represented a combination of increased activity in the broker dealer, increased professional and consulting fees related to year end audits and issuance of the tax preparation fees related to the publicly traded partnership.
For the three months ending on March 31, 2024, there was accretion of investments at amortized costs (U.S. Treasury Bills) and the acquisition of investment securities. However, this decrease in cash was partly offset by an increase in accounts payable, grants receivable for the technology segment. Furthermore, clearing deposits, payables to customers, and payables were non-customers all increased due to the implementation of self-clearing operations. There was a decrease in the accrued expenses due to bonuses being paid in Q1 of 2024.
Investing Activities. There was no activity for the three months ended March, 31, 2025. For the three months ended March 31, 2024, investing activities consisted of the proceeds from the sale and the maturing of U.S. Treasury Bills and purchases of investment securities, which was offset by the reinvestment of the proceeds into new U.S. Treasury Bills and the transfer of cash for operating activities.
Financing Activities. There was no activity for the three months ended March, 31, 2025. For the three months ended March 31, 2024, financing activities consisted of costs related to the deferred costs of the IPO of eXoZymes.
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Recently Issued Accounting Pronouncements
See Note 2 in the unaudited condensed consolidated financial statements for the discussion on recently accounting pronouncements.
Critical Accounting Estimates
The preparation of financial statements in conformity with general accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have identified certain accounting policies as being critical because they require us to make difficult, subjective, or complex judgments about matters that are uncertain. We believe that the judgment, estimates, and assumptions used in the preparation of our financial statements are appropriate given the factual circumstances at the time. However, actual results could differ, and the use of other assumptions or estimates could result in material differences in our results of operations or financial condition. Our critical accounting estimates are:
Revenue recognition – Investment Banking and Warrants Valuation
The Company receives income from equity underwriting and similar fees. As an underwriter and placement agent, the Company helps clients raise capital via the private placement of various types of equity and debt instruments. The fees are primarily based on the issuance price and quantity of the underlying instruments and are recognized as revenue typically upon execution of the client’s transaction. The Company generally does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions. If the Company did have any contract assets or liabilities related to these revenues it would be recorded on the balance sheets.
Revenue recognition may involve the bundling of investment banking services with other financial instruments. In such cases, we estimate the fair value of the services provided and allocate the revenue accordingly. This estimation process involves significant judgment and sensitivity to market conditions. Additionally, our investment banking activities may include the compensation for our services in warrants granted to us. The valuation of these warrants requires significant estimates, including the use of option pricing models like the Black-Scholes model. The key assumptions in this valuation process include the stock price on the date of valuation, the exercise price of the warrant, the term to expiry, risk-free interest rate, and the expected volatility of the underlying stock.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The fair value of U.S. Treasury Bills and public equity securities are based on quoted market prices and are classified as level 1 of the fair value hierarchy. The fair value of public equity securities that are not actively traded is based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data and are classified as level 2 of the fair value hierarchy. The fair value of warrants is based on a Black-Scholes model, which considers the stock price at the date of the valuation, the warrant strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock. The level in the fair value hierarchy for warrants depends primarily on whether the stock price is determinable from active trades, and whether the expected volatility of the underlying stock is observable and are either classified as level 2 or level 3. The fair value of non-public equity securities and simple agreements for future equity is based on the initial investment, less impairment, and they are classified as level 3 in the fair value hierarchy. For the significant unobservable inputs and assumptions used in level 3 fair value measurements, see Fair Value of Financial Instruments section of Note 2: Summary of Significant Accounting Policies.
Summary of Business Activities and Plans
On September 20, 2023, the Company completed an initial public offering (IPO), which consisted of the sale of 1,666,666 shares of Class A common shares at $12.00 per share, for gross proceeds of $19,999,992 that was used for the development of eXoZymes, identifying and developing new partner companies, and general corporate and working capital requirements.
On June 15, 2022, the Company completed a closing of a private placement, consisting of total gross proceeds of $25,289,660 from the sale of 2,528,966 shares of Class A common shares, which was used for the development of eXoZymes, identifying and developing new partner companies, and general corporate and working capital requirements.
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External Risks Associated with the Company’s Business Activities
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. The effect of tariffs imposed by United States and other countries and changing global trade policies should not have a direct effect on the Company but are likely to influence the overall economy. Although unclear at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, if there is a recession, such an event could affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
Technology. Our partner companies’ endeavors to create and bring new technologies to the market may never come to fruition or might not reach a level of development sufficient for commercial viability. Even if they do achieve a commercial level of development, the acceptance of these technologies within the marketplace is uncertain. There’s a possibility that the technologies they develop may not gain widespread or timely acceptance, leading to the necessity for further funding to support the partner companies, or potentially even prompting the difficult choice of discontinuing the business at a financial loss. Moreover, technologies from our partner companies that undergo regulatory scrutiny, testing, and approval may ultimately fail to receive the necessary approvals from relevant regulatory bodies.
Principal Commitments
Net Capital Requirement (Public Ventures)
MDB Capital dba Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission (the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of aggregate indebtedness to net capital. At March 31, 2025 and 2024, Public Ventures had net capital of $10,184,725 and $6,285,959, respectively, which was $9,934,725 and $6,035,959 in excess of the minimum $250,000, as required by the Securities and Exchange Commission Rule 15c3-1.
At March 31, 2025, the Company’s ratio of aggregate indebtedness of $7,067,718 to net capital was 0.69 to 1, as compared to the maximum of a 15 to 1 allowable ratio of a broker dealer. Minimum net capital is based upon the greater of the statutory minimum net capital of $250,000 or 2% of customer debits, which was calculated as $0 at March 31, 2025.
The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.
Indemnification Provisions
Public Ventures has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing broker have no maximum amount. All unsettled trades at March 31, 2025 and 2024 have subsequently settled with no resulting material liability to Public Ventures. For the three months ended March 31, 2025 and 2024 Public Ventures, had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of March 31, 2025 and 2024.
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Trends, Events and Uncertainties
Other than as discussed above, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in internal control over financial reporting described below, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, the disclosure controls and procedures were not effective at the reasonable assurance level. In light of this fact, the Company has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in the internal control over financial reporting, the financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly state, in all material respects, the financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
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Ongoing Remediation of Previously Identified Material Weakness
The Company is implementing measures designed to ensure that control deficiencies contributing to the previously disclosed material weakness are remediated, such that these controls are designed, implemented, and operating effectively. These remediation actions are ongoing, and they include our expansion of our controls or control designs based on updated enhanced risk assessments. We have redesigned the financial reporting process, to remediate the previously identified material weakness. We expect these changes to materially improve our internal controls.
The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Other than the material weakness remediation efforts underway, there were no changes in the internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that the disclosure controls and procedures or the internal control over financial reporting will prevent or detect 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. 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 the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. We believe that from time to time we will have commercial disputes arising in the ordinary course of our business.
Item 1A. Risk Factors
In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other registration statements, reports and periodic filings with the SEC that could materially and adversely affect our business, financial condition, and results of operations. The risk factors we have identified and discussed, however, do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.
Changes to United States tariff and import/export regulations may have an adverse effect on our business, financial condition and results of operations.
The United States has enacted and continues to enact significant new tariffs, and President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy. There has been and are ongoing discussions and commentaries regarding potential significant changes to U.S. trade policies, treaties and tariffs. There exists significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global and domestic economic conditions, whether or not there will be a recession, and the stability of global and domestic financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. As a primary part of our business is focused on financial services, that segment of our business and the value of our financial assets may be adversely impacted. These actions and policies may also adversely affect the ability of our subsidiaries to carry on their respective businesses. Although it is not yet possible to assess their impact, any of these factors could depress economic activity and restrict access to suppliers or customers and have a material adverse effect on our overall business, financial condition and results of operations.
Government Action on tariffs and research grants and other funding may impede our ability to conduct our research and to raise capital by and for our partner companies and other clients.
Early 2025 federal government actions to impose tariffs, to change trade policies, to change immigration policies, and to limit research grants and other forms of federal government funding, including direct government grants and the funding of universities and research enterprises, that may cause disruption to our consolidated business activities based on their direct and indirect effect on our partner companies and our other clients. Many of these government actions have been only recently implemented, others are being threatened and many will be ongoing. Therefore the full impact has yet to be realized by the Company and its partner companies and clients. Nonetheless, (i) tariffs are likely to increase the cost of doing business in the general economy and to make it more difficult to obtain items where imported equipment is required by our own activities and the activities of our partner companies and clients, (ii) ending or reducing research funding is likely to make it more difficult to find collaborative research partners to work with us and our partner companies as government funding is an indirect support for research and product development activities, and (iii) the curtailment of direct funding will have an immediate adverse impact on our partner companies and clients and their ability to continue their development work. We also believe that as these policies are implemented, it will make raising capital from private investors far more difficult, as they will want to know if the Company will be able to use the proceeds effectively and will be of sufficient amount.
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
Not applicable.
Item 6. Exhibits
The documents listed in the Exhibit Index of this Form 10-Q are incorporated by reference or are filed with this Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MDB CAPITAL HOLDINGS, LLC | ||
| (the “Registrant”) | ||
| Dated: May 12, 2025 | By: | /s/ Christopher A. Marlett |
| Christopher A. Marlett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: May 12, 2025 | By: | /s/ Jeremy W. James |
| Jeremy W. James | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
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