MDB Capital (MDBH) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets This statement summarizes the company's assets, liabilities, and equity at the end of the reporting periods Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Assets | | | | | | Cash and cash equivalents | $17,091,584 | $20,437,492 | $(3,345,908) | (16.4)% | | Investment securities, at fair value | $3,189,688 | $5,858,336 | $(2,668,648) | (45.6)% | | Equity method investment | $39,783,824 | $41,763,568 | $(1,979,744) | (4.7)% | | Total assets | $63,517,689 | $71,976,399 | $(8,458,710) | (11.8)% | | Liabilities | | | | | | Total liabilities | $1,734,255 | $1,903,065 | $(168,810) | (8.9)% | | Equity | | | | | | Total MDB Capital Holdings, LLC Members' equity | $61,889,502 | $70,163,005 | $(8,273,503) | (11.8)% | | Total equity | $61,783,434 | $70,073,334 | $(8,289,900) | (11.8)% | Unaudited Condensed Consolidated Statements of Operations This statement details the company's revenues, costs, and resulting net loss over the reporting periods Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on investment securities, net | $(2,192,970) | $899,544 | $(3,092,514) | (343.8)% | | Fee income | $- | $1,303,398 | $(1,303,398) | (100.0)% | | Total operating income (loss), net | $(1,900,420) | $2,288,450 | $(4,188,870) | (183.0)% | | Total operating costs | $5,492,265 | $7,413,179 | $(1,920,914) | (25.9)% | | Net operating loss | $(7,392,685) | $(5,124,729) | $(2,267,956) | (44.3)% | | Net loss attributable to MDB Capital Holdings, LLC | $(8,247,631) | $(4,274,441) | $(3,973,190) | (93.0)% | | Net loss per Class A common share – basic and diluted | $(0.83) | $(0.46) | $(0.37) | (80.4)% | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on investment securities, net | $(3,655,812) | $152,276 | $(3,808,088) | (2,500.8)% | | Fee income | $2,140,238 | $1,303,398 | $836,840 | 64.2% | | Total operating income (loss), net | $(1,072,322) | $1,628,061 | $(2,700,383) | (165.9)% | | Total operating costs | $12,230,267 | $14,699,970 | $(2,469,703) | (16.8)% | | Net operating loss | $(13,302,589) | $(13,071,909) | $(230,680) | (1.8)% | | Net loss attributable to MDB Capital Holdings, LLC | $(14,834,993) | $(11,489,866) | $(3,345,127) | (29.1)% | | Net loss per Class A common share – basic and diluted | $(1.49) | $(1.24) | $(0.25) | (20.2)% | Unaudited Condensed Consolidated Statements of Changes in Equity This statement reconciles the beginning and ending balances of the company's equity accounts Condensed Consolidated Statements of Changes in Equity (Six Months Ended June 30, 2025) | Metric | December 31, 2024 | Stock-based Compensation | Net Loss | June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Paid-in-capital | $68,720,930 | $6,561,490 | $- | $75,282,420 | | Accumulated (deficit) income | $1,442,075 | $- | $(14,834,993) | $(13,392,918) | | Total MDB Capital Holdings, LLC Members' equity | $70,163,005 | $6,561,490 | $(14,834,993) | $61,889,502 | | Non-controlling interest | $(89,671) | $- | $(16,397) | $(106,068) | | Total equity | $70,073,334 | $6,561,490 | $(14,851,390) | $61,783,434 | Condensed Consolidated Statements of Changes in Equity (Six Months Ended June 30, 2024) | Metric | December 31, 2023 | Stock-based Compensation | Net Loss | June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Paid-in Capital | $49,405,779 | $7,659,866 | $- | $57,065,645 | | Accumulated Deficit | $(12,092,927) | $- | $(11,489,866) | $(23,582,793) | | Non-controlling Interest | $7,250 | $491,085 | $(925,326) | $(426,991) | | Total Equity | $37,320,102 | $8,150,951 | $(12,415,192) | $32,555,861 | Unaudited Condensed Consolidated Statements of Cash Flows This statement reports the cash generated and used by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,406,093) | $(6,468,895) | | Net cash provided by investing activities | $- | $19,895,066 | | Net cash used in financing activities | $- | $(282,175) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(3,406,093) | $13,143,996 | | Cash, cash equivalents, and restricted cash - End of Period | $17,875,140 | $20,501,683 | Reconciliation of Cash, Cash Equivalents, and Restricted Cash | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $17,091,584 | $20,437,492 | | Cash segregated in compliance with regulations | $783,556 | $843,741 | | Total cash, cash equivalents, and restricted cash | $17,875,140 | $21,281,233 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures and explanations of the company's accounting policies and financial results 1. Organization and Description of Business MDB Capital Holdings, LLC is a holding company with subsidiaries in administrative, broker-dealer, IP, and pharmaceutical development sectors - MDB Capital Holdings, LLC operates as a holding company with several subsidiaries: MDB CG Management Company (administrative), Public Ventures (broker-dealer), PatentVest (intellectual property validation), and MDB Minnesota One (pharmaceutical development)[19][20][21][22][23] - eXoZymes Inc, previously a majority-owned subsidiary, was deconsolidated on November 14, 2024, following its IPO, and is now a minority-owned company[19] - MDB completed an IPO on September 20, 2023, selling 1,666,666 Class A Common Shares at $12.00 per share, raising $19,999,992 in gross proceeds[24] 2. Summary of Significant Accounting Policies This section outlines the key accounting principles and policies applied in preparing the financial statements Basis of Presentation and Principles of Consolidation The financial statements are prepared under U.S. GAAP and consolidate all wholly-owned and majority-owned subsidiaries - The financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, prepared in accordance with U.S. GAAP for interim financial statements and Article 10 of Regulation S-X[27] - All intercompany accounts and transactions are eliminated in consolidation, with non-controlling interests relating to third parties in majority-owned subsidiaries[27] Income Taxes (Accounting Policy) The Company is a pass-through entity for tax purposes, while its C-corporation subsidiaries are subject to income taxes - The Company is treated as a partnership for federal and state income tax purposes (except Texas), passing liabilities/benefits to unitholders, while its subsidiaries are Subchapter C-corporations subject to income taxes[29] Use of Estimates Financial statement preparation requires management estimates, particularly for valuations and deferred tax assets - Preparation of financial statements requires management to make estimates and assumptions, particularly for investment securities valuation, equity instruments for services, stock-based compensation, and deferred tax asset realization[31] Emerging Growth Company The Company qualifies as an emerging growth company but has opted out of the extended accounting transition period - The Company is an 'emerging growth company' (EGC) but has elected to opt out of the extended transition period for complying with new or revised financial accounting standards[32][33] Cash and Cash Equivalents Highly liquid investments with maturities of three months or less are considered cash equivalents - Highly liquid investments with original or remaining maturities of three months or less are considered cash equivalents, with balances maintained at high-credit-rating institutions, potentially exceeding FDIC/SIPC insurance limits[34][35] Segregated Cash and Deposits This section details cash held separately for customer funds in compliance with regulations Segregated Cash (Customer Funds) | Date | Amount | | :--- | :--- | | June 30, 2025 | $783,556 | | December 31, 2024 | $843,741 | Clearing Deposits This section details deposits maintained with clearing organizations like DTC and NSCC Clearing Deposits (DTC and NSCC) | Date | Amount | | :--- | :--- | | June 30, 2025 | $1,015,049 | | December 31, 2024 | $1,737,771 | Prepaid Expenses and Other Current Assets This section provides a breakdown of prepaid expenses and other current assets on the balance sheet Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Acquired intangible assets | $43,500 | $43,500 | | Prepaid professional fees | $50,000 | $50,000 | | Security deposits | $18,628 | $18,628 | | Prepaid insurance | $53,225 | $159,675 | | Other current assets | $19,376 | $65,140 | | Various prepaid expenses | $199,941 | $151,606 | | Total | $384,670 | $488,549 | Leases (Accounting Policy) The Company recognizes right-of-use assets and lease liabilities for its property leases - The Company combines lease and non-lease components for property leases into a single component and accounts for them as a lease[40] - Short-term leases (12 months or less) are not presented on the balance sheet, while other leases are recognized based on the present value of lease payments[41] Stock-based Compensation (Accounting Policy) Equity awards are measured at fair value on the grant date and expensed over the service period - Stock-based compensation includes stock options and restricted stock units (RSUs), measured at fair market value on the grant date and expensed using the straight-line method over the service period[42] - Forfeitures are accounted for as they occur, and compensation for market-based options is recognized based on units expected to vest[42] Investment Securities (Accounting Policy) The Company's investments are classified and accounted for based on their type and management's intent - The Company invests in U.S. Treasury Bills, early-stage technology companies, and equity securities/options of publicly traded and privately held companies[43] - Investment securities are classified as at amortized cost, at fair value, or at cost less impairment depending on their nature[43][44][45][46] Broker/Dealer Investment Securities, at Fair Value | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common stock of publicly traded companies | $1,392,219 | $2,527,871 | | Warrants of publicly traded companies | $1,797,469 | $3,330,465 | | Total | $3,189,688 | $5,858,336 | Net Unrealized Gain (Loss) on Investment Securities | Period | 2025 (Loss) | 2024 (Gain) | | :--- | :--- | :--- | | Three months ended June 30 | $(2,192,970) | $899,544 | | Six months ended June 30 | $(3,655,812) | $152,276 | Fair Value of Financial Instruments Financial instruments are categorized into a three-level hierarchy based on the observability of valuation inputs - Fair value is categorized into a three-level hierarchy: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[49][50][51] - Public equity securities are Level 1, warrants can be Level 2 or 3, and non-public equity securities are Level 3[53][54] Fair Value Hierarchy of Financial Assets (June 30, 2025) | Assets | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Equity securities – common stock | $1,392,219 | $- | $- | $1,392,219 | | Warrants | $- | $135,885 | $1,661,584 | $1,797,469 | | Total | $1,392,219 | $135,885 | $1,661,584 | $3,189,688 | Level 3 Warrants Reconciliation (Six Months Ended June 30, 2025) | Metric | Amount | | :--- | :--- | | December 31, 2024 | $2,662,719 | | Receipt from investment banking fees | $990,426 | | Unrealized losses | $(1,991,561) | | June 30, 2025 | $1,661,584 | Secured Debt– Revolving Credit Facility The Company maintains a $2 million revolving credit facility secured by a cash account - The Company has a revolving credit facility of up to $2,000,000, maturing July 26, 2026, with a variable interest rate[61] - As of June 30, 2025, there were no outstanding balances under the facility, and the Company was in compliance with all covenants[62][63] Property and Equipment (Accounting Policy) Property and equipment are recorded at cost and depreciated using the straight-line method - Property and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives[65] Property and Equipment, Net | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total property and equipment | $113,114 | $113,114 | | Less: Accumulated depreciation | $(33,934) | $(22,623) | | Property and equipment, net | $79,180 | $90,491 | Revenue (Accounting Policy) Revenue is primarily generated from brokerage, underwriting, and intellectual property validation services - Revenue is primarily generated from brokerage, placement agent, and underwriting services through Public Ventures and intellectual property validation services from PatentVest[66][73] - Brokerage revenues are recognized on the trade date, when performance obligations are satisfied[67] - Investment banking revenues are recognized on the closing date of the transaction[69][70] Research Grants Grant reimbursements, previously received by a deconsolidated subsidiary, were netted against R&D expenses - eXoZymes, deconsolidated in November 2024, previously received grant reimbursements, which were netted against R&D expenses, with no grant activity reported for 2025[76] - Grants function on a reimbursement model and are accounted for using the accrual method as reductions to expenses[77] Summary of Grants Receivable Activity (Six Months Ended June 30, 2024) | Metric | Amount | | :--- | :--- | | Balance at beginning of period | $882,319 | | Grant costs expensed | $1,272,127 | | Grant funds received | $(1,053,026) | | Balance at end of period | $1,147,171 | Research and Development Costs (Accounting Policy) Research and development costs are expensed as incurred and primarily consist of compensation and consultant fees - Research and development costs are expensed as incurred, primarily consisting of compensation, consultant fees, and other expenses related to technology development[79] Research and Development Costs (Prior to Grant Offset) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $0 | $846,602 | | Six months ended June 30 | $0 | $1,832,855 | Patent and Licensing Legal and Filing Fees and Costs All costs related to intellectual property development and protection are expensed as incurred - All patent and licensing legal and filing fees and costs are charged to operations as incurred due to significant uncertainty of commercial viability[80] Patent and Licensing Legal and Filing Fees and Costs | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $12,543 | $62,537 | | Six months ended June 30 | $28,545 | $104,760 | 3. Segment Reporting The Company operates in two reportable segments: broker-dealer & intellectual property service and technology development - The Company operates in two reportable segments: broker dealer & intellectual property service (Public Ventures and PatentVest) and technology development (M1)[82][83][84] - The technology development segment for Q2 2025 consisted solely of M1, whereas in Q2 2024 it included eXoZymes, which was deconsolidated on November 14, 2024[84] Total Assets by Segment (June 30, 2025) | Segment | Total Assets | | :--- | :--- | | Broker Dealer & Intellectual Property Service | $19,635,294 | | Technology Development | $3,311 | | Other | $43,879,084 | | Consolidated Total Assets | $63,517,689 | Net Loss Attributable to MDB Capital Holdings, LLC by Segment (Three Months Ended June 30, 2025) | Segment | Net Loss | | :--- | :--- | | Broker Dealer & Intellectual Property Service | $(3,746,878) | | Technology Development | $(4,199) | | Other | $(4,496,554) | | Consolidated Net Loss | $(8,247,631) | Net Loss Attributable to MDB Capital Holdings, LLC by Segment (Six Months Ended June 30, 2025) | Segment | Net Loss | | :--- | :--- | | Broker Dealer & Intellectual Property Service | $(5,186,626) | | Technology Development | $(34,557) | | Other | $(9,613,810) | | Consolidated Net Loss | $(14,834,993) | 4. Equity and Non-Controlling Interests This section details the Company's equity structure and changes in non-controlling interests - The Company has 95,000,000 authorized Class A Common Shares and 5,000,000 authorized Class B Common Shares, which have 5 votes per share[91][93] - Placement Agent and Selling Agent Warrants for 43,420 Class A common shares were issued as compensation for prior offerings[94] - For the six months ended June 30, 2025, MDB held 67.82% ownership in M1 (32.18% NCI), compared to 60.94% in eXoZymes in the prior year period before its deconsolidation[95] Non-controlling Interests Net Loss | Period | 2025 | 2024 | | :--- | :--- | :--- | | Non-controlling companies net loss | $(50,954) | $(2,368,987) | | Weighted average non-controlling percentage | 32.18% | 39.06% | | Net loss non-controlling interest | $(16,397) | $(925,326) | | Ending period balance | $(106,068) | $(426,991) | 5. Equity Method Investment This section details the accounting for eXoZymes Inc as an equity method investment following its deconsolidation - On November 14, 2024, eXoZymes was deconsolidated and became an equity method investment after its IPO reduced MDB's ownership from 60% to 47%[97] - The fair value of the equity method investment was determined based on eXoZymes shares and market price on the deconsolidation date[98] Equity Method Investment Summary (eXoZymes) | Metric | Amount | | :--- | :--- | | December 31, 2024, beginning balance | $41,763,568 | | Portion of loss from eXoZymes (six months ended June 30, 2025) | $(1,979,744) | | June 30, 2025, carrying amount | $39,783,824 | MDB's Portion of Net Loss from eXoZymes | Period | Amount | | :--- | :--- | | Three months ended June 30, 2025 | $1,107,226 | | Six months ended June 30, 2025 | $1,979,744 | 6. Share-Based Compensation – Modification of Awards The Company modified outstanding RSUs into stock options, resulting in a decrease in aggregate fair value - On April 28, 2025, certain time-based and market-based RSUs were modified and exchanged for stock options under the 2022 Equity Award Plan[101] - The modification was classified as a Type I modification (probable-to-probable) under ASC 718-20-35-2A[101] - The modification resulted in a decrease in the aggregate fair value of the awards, thus no incremental compensation costs are recognized[105] 7. Stock-Based Compensation This section details the Company's stock-based compensation activities, including RSU and stock option grants - On April 28, 2025, 1,600,000 unvested time-based RSUs were exchanged for stock options with an exercise price of $4.25 per share[109] - Additionally, 2,000,000 unvested market-based RSUs were exchanged for stock options with an exercise price of $4.25 per share, vesting upon specific targets[110] Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Metric | Time-Based (Number of Units) | Market-Based (Number of Units) | | :--- | :--- | :--- | | Outstanding at December 31, 2024 | 2,995,000 | 2,000,000 | | Exchanged/Modified | (1,600,000) | (2,000,000) | | Expired/Cancelled | (5,000) | - | | Outstanding at June 30, 2025 | 1,390,000 | - | | Unrecognized compensation expense (time-based) | $9,551,646 | | | Unrecognized compensation expense (market-based) | | $13,965,672 | 8. Earnings Per Share This section details the calculation of basic and diluted earnings per share for Class A and Class B common shares - Basic EPS is calculated as net income (loss) attributable to common stockholders divided by weighted average common shares outstanding[112] - Class A and Class B Common Shares are equal for ownership, but Class B shares have five times the voting rights and are exchangeable one-to-one for Class A shares[113] Net Loss Per Share Attributable to MDB Capital Holdings, LLC | Period | Class A Common Share (Basic & Diluted) | Class B Common Share (Basic & Diluted) | | :--- | :--- | :--- | | Three months ended June 30, 2025 | $(0.83) | $(0.83) | | Three months ended June 30, 2024 | $(0.46) | $(0.46) | | Six months ended June 30, 2025 | $(1.49) | $(1.49) | | Six months ended June 30, 2024 | $(1.24) | $(1.24) | 9. Related Party Transactions This section discloses transactions with related parties, including payments for outsourced services and revenue from affiliates - The Company paid $928,867 to Point 1286 (controlled by principal members) for outsourced services during the six months ended June 30, 2025[114] - PatentVest recognized $69,288 in revenue from eXoZymes during the six months ended June 30, 2025[116] - MDB Capital Holdings agreed to acquire a 30.6% ownership interest in Paulex on May 15, 2025[116] 10. Commitments and Contingencies This section addresses potential legal claims, net capital requirements, and indemnification provisions - The Company was not subject to any pending or threatened material legal claims as of June 30, 2025 and 2024[118] - Public Ventures' net capital was $8,612,745 at June 30, 2025, exceeding the minimum $250,000 requirement by $8,362,745[119][121] - Public Ventures indemnifies its clearing broker for customer account losses, with no maximum amount and no material losses reported[122] 11. Employee Benefit Plans This section describes the Company's 401(k) defined contribution plans and other health benefits - MDB Management and eXoZymes (prior to deconsolidation) sponsor 401(k) plans with matching contributions[123][124] Total 401(k) Contributions | Period | Amount | | :--- | :--- | | Six months ended June 30, 2025 | $196,466 | | Six months ended June 30, 2024 | $348,121 | 12. Exclusive License Agreement (MDB Minnesota One) This section details the exclusive license agreement between M1 and Mayo for a small molecule senescence platform - On July 1, 2024, M1 entered an exclusive license agreement with Mayo for patent rights and technology to develop a small molecule senescence platform[125] - Initial consideration included M1 issuing 1,980,000 common stock shares (33% ownership) to Mayo and a $150,000 license fee[126] - Future payments include earned royalties on net sales and milestone payments, such as $5 million for FDA NDA approval[126][129] 13. Leases (Note) This section provides details on the Company's operating lease for office space, including assets, liabilities, and future payments - The Company has one operating lease for office space in Dallas, Texas, with a term ending July 20, 2030[130][131] - Operating lease ROU assets and liabilities are recognized based on the present value of lease payments using an estimated incremental borrowing rate of 7.80%[132][133] Operating Lease Information | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Right-of-use assets | $594,937 | $641,354 | | Operating lease liabilities | $661,735 | $711,503 | | Weighted average remaining lease term (years) | 5.00 | 5.50 | | Weighted average discount rate | 7.80% | 7.80% | | Total operating lease costs | $119,781 | $233,973 | Future Operating Lease Payments (as of June 30, 2025) | Year | Amount | | :--- | :--- | | Remainder of 2025 | $78,096 | | 2026 | $157,573 | | 2027 | $160,336 | | 2028 | $163,098 | | 2029 | $165,860 | | 2030 | $92,912 | | Total | $817,875 | | Less effects of discounting | $(156,140) | | Total operating lease liabilities | $661,735 | 14. Income Taxes (Note) This section explains the Company's income tax treatment and the recognition of a full valuation allowance - The Company is treated as a partnership for tax purposes, while its subsidiaries are Subchapter C-corporations[135] - No income tax expense was recognized for the six months ended June 30, 2025 and 2024, due to a full valuation allowance[136] - A full valuation allowance is maintained on net deferred tax assets due to cumulative losses and uncertainty about their realization[137] 15. Subsequent Events Management has evaluated subsequent events and determined none require recognition or disclosure - No subsequent events requiring recognition or disclosure were identified through the date of filing[138] Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations Overview MDB Capital Holdings operates as a holding company with subsidiaries in broker-dealer, IP, and technology development sectors - MDB Capital Holdings, LLC is a holding company with subsidiaries MDB CG Management Company, Public Ventures, PatentVest, MDB Minnesota One, and minority-owned eXoZymes Inc[139] - Public Ventures operates as a U.S. registered broker-dealer, including self-clearing operations since January 2024[141][142] - eXoZymes' IPO on November 14, 2024, reduced MDB's ownership from ~60% to 47%, leading to its accounting under the equity method[144] Results of Operations (Consolidated) This section provides a consolidated overview of the company's operational performance for the reported periods - The Company operates in two reportable segments: broker dealer and intellectual property service, and technology development[145] Consolidated Results of Operations (Three Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating income (loss), net | $(1,900,420) | $2,288,450 | $(4,188,870) | (183.0)% | | Total operating costs | $5,492,265 | $7,413,179 | $(1,920,914) | (25.9)% | | Net operating loss | $(7,392,685) | $(5,124,729) | $(2,267,956) | (44.3)% | | Net loss attributable to MDB Capital Holdings, LLC | $(8,247,631) | $(4,274,441) | $(3,973,190) | (93.0)% | Consolidated Results of Operations (Six Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating income (loss), net | $(1,072,322) | $1,628,061 | $(2,700,383) | (165.9)% | | Total operating costs | $12,230,267 | $14,699,970 | $(2,469,703) | (16.8)% | | Net operating loss | $(13,302,589) | $(13,071,909) | $(230,680) | (1.8)% | | Net loss attributable to MDB Capital Holdings, LLC | $(14,834,993) | $(11,489,866) | $(3,345,127) | (29.1)% | Unaudited Condensed Consolidated Results of Operations for the Three-Months Ended June 30, 2025 and 2024 This section details the consolidated operating results for the three-month period ending June 30 Consolidated Operating Income (Loss) (Three Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on investment securities, net | $(2,192,970) | $899,544 | $(3,092,514) | (343.8)% | | Fee income | $- | $1,303,398 | $(1,303,398) | (100.0)% | | Other operating income | $292,550 | $85,508 | $207,042 | 242.1% | | Total operating income (loss), net | $(1,900,420) | $2,288,450 | $(4,188,870) | (183.0)% | Unaudited Condensed Consolidated Results of Operations for the Six-Months Ended June 30, 2025 and 2024 This section details the consolidated operating results for the six-month period ending June 30 Consolidated Operating Income (Loss) (Six Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on investment securities, net | $(3,655,812) | $152,276 | $(3,808,088) | (2,500.8)% | | Fee income | $2,140,238 | $1,303,398 | $836,840 | 64.2% | | Other operating income | $443,252 | $172,387 | $270,865 | 157.1% | | Total operating income (loss), net | $(1,072,322) | $1,628,061 | $(2,700,383) | (165.9)% | Operating Income Analysis Operating income was driven by investment banking activity, offset by unrealized losses on securities - Operating income for the six months ended June 30, 2025, was primarily driven by investment banking activity in February 2025, but was offset by unrealized losses from securities[149] - Other operating income increased due to higher activity from legal and strategy services and increased clearing operations[149] General and Administrative Costs Analysis Changes in G&A costs were driven by deconsolidation, self-clearing operations, and compensation adjustments - Compensation expense decreased for the three-month period due to eXoZymes' deconsolidation and RSU-to-option exchanges but increased for the six-month period due to salary raises[154][157] - Related party operating expenses increased due to outsourced support for self-clearing operations and intellectual property services[154][157] - Professional fees decreased for the three-month period but increased for the six-month period due to costs for self-clearing operations[154][157] - Information technology costs increased due to higher expenses for self-clearing operations[154][157] - Other general and administrative costs decreased due to eXoZymes' deconsolidation and less travel-related costs[154][157] Research and Development Costs Analysis R&D expenses decreased significantly due to the deconsolidation of the eXoZymes subsidiary - Research and development expenses for the three and six-month periods ended June 30, 2025, decreased significantly compared to the prior year due to the deconsolidation of eXoZymes[151] Other Income and Expense Analysis Other income decreased due to lower interest, while equity method losses increased post-deconsolidation - Other income decreased for both periods ended June 30, 2025, primarily due to less interest generated on U.S. Treasury Bills[152] - Equity in loss of equity method investee increased due to recording the net loss for eXoZymes following its deconsolidation[152] Broker Dealer and Intellectual Property Service Segment Results of Operations This section details the operational performance of the broker-dealer and IP service segment Broker Dealer & IP Service Segment Results (Three Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on investment securities, net | $(2,192,970) | $899,544 | $(3,092,514) | (343.8)% | | Fee income | $- | $1,303,398 | $(1,303,398) | (100.0)% | | Other operating income | $292,550 | $85,508 | $207,042 | 424.1% | | Total operating income (loss), net | $(1,900,420) | $2,288,450 | $(4,188,870) | (183.0)% | | Net operating income (loss) | $(3,702,825) | $423,051 | $(4,125,876) | (975.3)% | | Net income (loss) | $(3,746,878) | $402,201 | $(4,149,079) | (1,031.6)% | Six-Months Ended June 30, 2025 and 2024 This section details the six-month operational performance of the broker-dealer and IP service segment Broker Dealer & IP Service Segment Results (Six Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Unrealized income (loss) on investment securities, net | $(3,655,812) | $152,276 | $(3,808,088) | (2,500.8)% | | Fee income | $2,140,238 | $1,303,398 | $836,840 | (69.2)% | | Other operating income | $443,252 | $172,387 | $270,865 | 157.1% | | Total operating income (loss), net | $(1,072,322) | $1,628,061 | $(2,700,383) | (165.9)% | | Net operating loss | $(5,010,188) | $(1,708,914) | $(3,301,274) | (193.2)% | | Net loss | $(5,186,626) | $(1,787,930) | $(3,398,696) | (190.1)% | Operating Income Analysis (Segment) Segment operating income was driven by investment banking activity, offset by unrealized security losses - Operating income for the broker-dealer and IP service segment was primarily from investment banking activity in February 2025, offset by unrealized losses on securities[155] - Other income increased due to higher activity from legal and strategy services and increased clearing operations[155] General and Administrative Costs Analysis (Segment) Segment G&A costs were impacted by compensation changes and increased expenses for self-clearing operations - Compensation expense decreased for the three-month period due to personnel departures, but increased for the six-month period due to salary increases[157] - Related party operating expenses and information technology costs increased due to outsourced support and higher expenses for self-clearing operations[157] - Professional fees increased due to consulting activities and audit costs for self-clearing operations[157] Other Income Analysis (Segment) The segment's other income decreased due to lower interest income from reduced cash balances - Other income decreased for both three and six-month periods ended June 30, 2025, primarily due to lower bank interest income resulting from decreased cash balances[156] Technology Development Segment Results of Operations This section details the operational performance of the technology development segment Technology Development Segment Results (Three Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating costs | $6,165 | $1,328,605 | $(1,322,440) | (99.5)% | | Net operating loss | $(6,165) | $(1,328,605) | $1,322,440 | 99.5% | | Net loss attributable to controlling interests | $(4,199) | $(829,107) | $824,908 | 99.5% | Six-Months Ended June 30, 2025 and 2024 This section details the six-month operational performance of the technology development segment Technology Development Segment Results (Six Months Ended June 30) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating costs | $50,954 | $2,337,062 | $(2,286,108) | (97.8)% | | Net operating loss | $(50,954) | $(2,337,062) | $2,286,108 | 97.8% | | Net loss attributable to controlling interests | $(34,557) | $(1,443,661) | $1,409,104 | 97.6% | Operating Income Analysis (Segment) The technology development segment reported no operating income during the periods - The Technology Development Segment reported no operating income activity for both the three and six-month periods ended June 30, 2025 and 2024[159] General and Administrative Costs Analysis (Segment) Segment G&A costs decreased significantly due to the deconsolidation of eXoZymes - Compensation expense, information technology costs, and other general and administrative costs decreased significantly due to the deconsolidation of eXoZymes[162] - Professional fees decreased due to eXoZymes' deconsolidation, partially offset by legal fees for M1[162] Research and Development Costs Analysis (Segment) Segment R&D expenses decreased primarily due to the deconsolidation of eXoZymes - Research and development expenses for the technology development segment decreased for both periods ended June 30, 2025, primarily due to the deconsolidation of eXoZymes[160] Condensed Consolidated Balance Sheets (MD&A) This section provides management's analysis of the changes in the company's balance sheet Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Assets | | | | | | Cash and cash equivalents | $17,091,584 | $20,437,492 | $(3,345,908) | (16.4)% | | Investment securities, at fair value | $3,189,688 | $5,858,336 | $(2,668,648) | (45.6)% | | Equity method investment | $39,783,824 | $41,763,568 | $(1,979,744) | (4.7)% | | Total assets | $63,517,689 | $71,976,399 | $(8,458,710) | (11.8)% | | Liabilities | | | | | | Accounts payable | $285,072 | $323,926 | $(38,854) | (12.0)% | | Payables to customers | $684,267 | $772,565 | $(88,298) | (11.4)% | | Total liabilities | $1,734,255 | $1,903,065 | $(168,810) | (8.9)% | | Equity | | | | | | Total equity | $61,783,434 | $70,073,334 | $(8,289,900) | (11.8)% | Financial Condition Analysis (Assets) Total assets decreased primarily due to cash used for operations and a drop in investment security values - Total assets decreased by $8.46 million (11.8%) primarily due to utilization for operational activities[161][164] - Cash and cash equivalents decreased by $3.35 million (16.4%), while cash segregated for regulations decreased as customer deposits moved into securities[161][164] - Investment securities at fair value dropped by $2.67 million (45.6%) due to decreased value of common stock and warrants[161][164] - Equity method investment decreased by $1.98 million (4.7%) directly linked to the Company's portion of net loss[161][164] Financial Condition Analysis (Liabilities) Total liabilities decreased due to payments for services and movement of customer funds - Total liabilities decreased by $0.17 million (8.9%), with accounts payable decreasing due to payments for audit and legal services[163][165] - Payables to customers decreased as cash was moved into securities, and lease liabilities reduced due to routine utilization[163][165] Financial Condition Analysis (Equity) Total equity decreased primarily due to net losses incurred during the period - Total equity decreased by $8.29 million (11.8%) primarily due to net losses from previous periods[163][166] - Non-controlling interest increased due to the net loss experienced by M1[163][167] Liquidity and Capital Resources This section analyzes the company's cash flows from operating, investing, and financing activities Cash Flows Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,406,093) | $(6,468,895) | | Net cash provided by investing activities | $- | $19,895,066 | | Net cash used in financing activities | $- | $(282,175) | | Net increase (decrease) in cash and cash equivalents | $(3,406,093) | $13,143,996 | Operating Activities Cash used in operations was driven by broker-dealer activity and professional fees - Net cash used in operating activities was $(3,406,093) for the six months ended June 30, 2025, driven by increased broker-dealer activity and higher professional/consulting fees[169][170] - For the six months ended June 30, 2024, net cash used was $(6,468,895), influenced by U.S. Treasury Bill activity and investment acquisitions[169][171] Investing Activities No investing activities occurred in 2025, while 2024 involved U.S. Treasury Bill transactions - No investing activities occurred for the six months ended June 30, 2025[172] - For the six months ended June 30, 2024, investing activities included proceeds from U.S. Treasury Bill sales and maturities, offset by reinvestment[172] Financing Activities No financing activities occurred in 2025, while 2024 involved costs related to the eXoZymes IPO - No financing activities occurred for the six months ended June 30, 2025[173] - For the six months ended June 30, 2024, financing activities consisted of deferred costs related to eXoZymes' IPO[173] Recently Issued Accounting Pronouncements This section refers to Note 2 for details on recently issued accounting pronouncements - Refer to Note 2 in the unaudited condensed consolidated financial statements for discussion on recently issued accounting pronouncements[174] Critical Accounting Estimates This section discusses management's most difficult, subjective, or complex judgments in financial reporting - The preparation of financial statements requires management to make difficult judgments, particularly for revenue recognition and fair value of financial instruments[175][176][177][178] Revenue recognition – Investment Banking and Warrants Valuation Investment banking revenue recognition involves significant estimates, especially for warrants received as compensation - Investment banking fees are primarily based on issuance price and quantity of underlying instruments, recognized upon transaction execution[176] - Warrants received as compensation are valued using option pricing models like Black-Scholes, involving significant estimates[177] Fair Value of Financial Instruments Fair value is categorized into a three-level hierarchy based on the observability of valuation inputs - Fair value is defined as the price to sell an asset or transfer a liability, categorized into Level 1, Level 2, and Level 3 inputs[178][179][180][182] - U.S. Treasury Bills and public equity are Level 1, while warrants and non-public equity can be Level 2 or 3[183] Summary of Business Activities and Plans The Company has raised capital through an IPO and private placement to fund its operations and investments - The Company completed an IPO on September 20, 2023, raising $19,999,992 for eXoZymes development, new partner companies, and working capital[184] - A private placement on June 15, 2022, raised $25,289,660 from Class A common shares for similar purposes[185] External Risks Associated with the Company's Business Activities The Company faces risks from inflation, supply chain issues, trade policies, and technology development uncertainties - The Company monitors inflation, supply chain issues, and potential recession, which could impact the business environment and capital markets[187][188][189] - Government actions on tariffs, trade policies, and research funding may disrupt business activities and increase costs[204][205] - Risks associated with partner companies' technology development include failure to commercialize, lack of market acceptance, and inability to obtain regulatory approvals[190] Principal Commitments The Company's principal commitments include net capital requirements and indemnification obligations - Public Ventures' net capital was $8,612,745 at June 30, 2025, exceeding the SEC's minimum of $250,000 by $8,362,745[191][192] - Public Ventures has indemnification obligations to its clearing broker for customer account losses, with no maximum amount[193] Trends, Events and Uncertainties The Company is not aware of any other trends or uncertainties likely to have a material effect on its financial condition - The Company is not currently aware of any other trends, events, or uncertainties likely to have a material effect on its financial condition in the near term[194] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the Company is not required to provide these disclosures - As a smaller reporting company, MDB Capital Holdings, LLC is exempt from providing quantitative and qualitative disclosures about market risk[195] Item 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and internal control over financial reporting Disclosure Controls and Procedures Disclosure controls were deemed not effective due to material weaknesses in internal control over financial reporting - As of June 30, 2025, the disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal control[196] - Despite the material weaknesses, management concluded that the financial statements fairly state the financial position in conformity with GAAP[196] Ongoing Remediation of Previously Identified Material Weakness The Company is actively implementing measures to remediate previously identified material weaknesses - The Company is implementing measures to remediate previously identified material weaknesses, including expanding controls and redesigning the financial reporting process[197] - Remediation will be considered complete only after controls operate effectively for a sufficient period and are confirmed through testing[198] Changes in Internal Control Over Financial Reporting No material changes were made to internal controls during the period, other than ongoing remediation efforts - Other than ongoing remediation efforts, no changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control[199] Inherent Limitations on Effectiveness of Controls and Procedures All control systems have inherent limitations and can provide only reasonable, not absolute, assurance - Management believes control systems provide reasonable, not absolute, assurance of achieving objectives due to inherent limitations[200] - Controls may become inadequate over time due to changing conditions or deteriorating compliance[200] PART II - OTHER INFORMATION This part contains disclosures on legal proceedings, risk factors, securities sales, and other required information Item 1. Legal Proceedings The Company is not currently a party to any material legal proceedings - The Company is not currently involved in any material legal proceedings and is unaware of any pending or threatened litigation that would have a material adverse effect[202] Item 1A. Risk Factors This section highlights risks from trade policies, government actions, and technology development uncertainties - Changes to U.S. tariff and import/export regulations may adversely affect the Company's business, financial condition, and results of operations[204] - Federal government actions to impose tariffs or limit research funding may disrupt business activities and make capital raising more difficult[205] - Partner companies face risks that new technologies may not achieve commercial viability or receive necessary regulatory approvals[190] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities or use of proceeds to report[206] Item 3. Defaults upon Senior Securities The Company reports no defaults upon senior securities for the period - There were no defaults upon senior securities to report[207] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[208] Item 5. Other Information No other information is reported under this item - No other information is applicable[209] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - The exhibit index includes certifications from the Principal Executive Officer and Principal Financial Officer and Inline XBRL Taxonomy documents[210][214] SIGNATURES This section provides the official sign-offs from the company's principal executive and financial officers - The report is signed by Christopher A. Marlett, Chief Executive Officer, and Jeremy W. James, Chief Financial Officer, on August 14, 2025[212](index=212&ty