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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 29, 2024
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No. 0-19621
ALT5 Sigma Corporation
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Nevada (State or other jurisdiction of incorporation or organization) | | 41-1454591 (I.R.S. Employer Identification No.) |
| | |
325 E. Warm Springs Road, Suite 102 Las Vegas, Nevada (Address of principal executive offices) | | 89119 (Zip Code) |
702-997-5968
(Registrant’s telephone number, including area code)
JanOne Inc.
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.001 par value per share | | ALTS | | The Nasdaq Stock Market LLC (The Nasdaq Capital Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days. x Yes o 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
| | | | | | | | | | | | | | |
Large accelerated filer | o | | Accelerated filer | o |
Non-accelerated filer | x | | Smaller reporting company | x |
Emerging growth company | o | | | |
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No
As of August 15, 2024, there were 12,769,015 outstanding shares of the registrant’s common stock, with a par value of $0.001.
ALT5 SIGMA CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
ALT5 SIGMA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per-share amounts)
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
| (Unaudited) | | |
Assets | | | |
Cash and cash equivalents | $ | 5,764 | | | $ | 5 | |
Trade and other receivables, net | 984 | | | 266 | |
Digital assets receivable | 22,477 | | | — | |
| | | |
Prepaid expenses and other current assets | 1,660 | | | 75 | |
Total current assets | 30,885 | | | 346 | |
Property and equipment, net | 1,170 | | | — | |
Right of use assets | 186 | | | — | |
Marketable securities | 434 | | | 286 | |
Deposits and other assets | — | | | 9 | |
Intangible assets, net | 34,996 | | | 17,846 | |
Goodwill | 7,724 | | | — | |
Total assets | $ | 75,395 | | | $ | 18,487 | |
Liabilities and Stockholders' Equity | | | |
Liabilities: | | | |
Accounts payable | $ | 2,937 | | | $ | 2,272 | |
Accrued liabilities | 2,438 | | | 3,633 | |
Digital assets payable | 28,241 | | | — | |
Due to Soin | 2,900 | | | — | |
Convertible debentures | 1,686 | | | — | |
Operating lease liabilities | 59 | | | — | |
Notes payable | 3,244 | | | — | |
Related party notes payable and advances | 1,006 | | | — | |
Total current liabilities | 42,511 | | | 5,905 | |
Deferred income taxes, net | 1,587 | | | 639 | |
Related party notes payable | 516 | | | 707 | |
Notes payable | 3,868 | | | — | |
Operating lease liabilities | 127 | | | — | |
Other noncurrent liabilities | — | | | 34 | |
Total liabilities | 48,609 | | | 7,285 | |
Commitments and contingencies (Note 16) | | | |
Mezzanine equity | | | |
Convertible preferred stock, series S - par value $0.001 per share, 200,000 authorized, 100,000 and 100,000 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively | 3,856 | | | 14,510 | |
Stockholders' equity: | | | |
Preferred stock, series A-1 - par value $0.001 per share, 2,000,000 authorized, 69,980 and 193,730 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively | — | | | — | |
Preferred stock, series B - par value $0.001 per share, 34,250 authorized, 34,207 and 0 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively | 8,552 | | | — | |
Preferred stock, series M - par value $0.001 per share, 3,200 authorized, 3,200 and 0 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively | — | | | — | |
Convertible preferred stock, series S - par value $0.001 per share, 200,000 authorized, 100,000 and 100,000 shares issued and outstanding at June 29, 2024 and December 30, 2023, respectively | 7,993 | | | — | |
Common stock, par value $0.001 per share, 200,000,000 shares authorized, 12,589,015 and 4,957,647 shares issued and outstanding at June 29, 2024 and at December 30, 2023, respectively | 7 | | | 3 | |
Accumulated other comprehensive deficit | (807) | | | — | |
Additional paid-in capital | 59,374 | | | 47,323 | |
Accumulated deficit | (52,189) | | | (50,634) | |
Total stockholders' equity (deficit) | 22,930 | | | (3,308) | |
Total liabilities and stockholders' equity | $ | 75,395 | | | $ | 18,487 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALT5 SIGMA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(Dollars in thousands, except per-share)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Thirteen Weeks Ended | | For the Twenty-Six Weeks Ended |
| June 29, 2024 | | July 1, 2023 | | June 29, 2024 | | July 1, 2023 |
Revenues | $ | 2,169 | | | $ | — | | | $ | 2,169 | | | $ | — | |
Cost of revenues | 1,071 | | | — | | | 1,071 | | | — | |
Gross profit | 1,098 | | | — | | | 1,098 | | | — | |
Operating expenses: | | | | | | | |
Selling, general and administrative expenses | 4,014 | | | 1,060 | | | 5,820 | | | 2,159 | |
Operating loss | (2,916) | | | (1,060) | | | (4,722) | | | (2,159) | |
Other income (expense): | | | | | | | |
Interest income (expense), net | 4 | | | 365 | | | (248) | | | 840 | |
Unrealized loss on marketable securities | (180) | | | — | | | (370) | | | (247) | |
Unrealized gain on exchange transactions | 461 | | | — | | | 461 | | | — | |
Realized gain on exchange transactions | 240 | | | — | | | 240 | | | — | |
Other income, net | 129 | | | 757 | | | 158 | | | 739 | |
Total other income, net | 654 | | | 1,122 | | | 241 | | | 1,332 | |
Income (loss) from continuing operations before provision for income taxes | (2,262) | | | 62 | | | (4,481) | | | (827) | |
Income tax benefit | (2,851) | | | (17) | | | (2,926) | | | (244) | |
Net income (loss) from continuing operations | 589 | | | 79 | | | (1,555) | | | (583) | |
Gain from discontinued operations | — | | | 1 | | | — | | | 13,976 | |
Income tax provision (benefit) for discontinued operations | — | | | (43) | | | — | | | 3,186 | |
Net income from discontinued operations | — | | | 44 | | | — | | | 10,790 | |
Net income (loss) | $ | 589 | | | $ | 123 | | | $ | (1,555) | | | $ | 10,207 | |
Net income (loss) per share: | | | | | | | |
Net income (loss) per share from continuing operations, basic | $ | 0.07 | | | $ | 0.02 | | | $ | (0.18) | | | $ | (0.17) | |
Net income (loss) per share from continuing operations, diluted | $ | 0.07 | | | $ | 0.02 | | | $ | (0.18) | | | $ | (0.17) | |
Net income per share from discontinued operations, basic | $ | — | | | $ | 0.01 | | | $ | — | | | $ | 3.14 | |
Net income per share from discontinued operations, diluted | $ | — | | | $ | 0.01 | | | $ | — | | | $ | 3.14 | |
Net income per share, basic | $ | 0.07 | | | $ | 0.03 | | | $ | (0.18) | | | $ | 2.97 | |
Net income per share, diluted | $ | 0.07 | | | $ | 0.03 | | | $ | (0.18) | | | $ | 2.97 | |
Weighted average common shares outstanding: | | | | | | | |
Basic | 8,404,102 | | 3,665,887 | | 8,426,349 | | 3,432,374 |
Diluted | 8,404,102 | | 3,665,887 | | 8,426,349 | | 3,432,374 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALT5 SIGMA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
| | | | | | | | | | | |
| For the Twenty-Six Weeks Ended |
| June 29, 2024 | | July 1, 2023 |
OPERATING ACTIVITIES: | | | |
Net income loss from continuing operations | $ | (1,555) | | | $ | (583) | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | |
Depreciation and amortization | 1,300 | | | 727 | |
| | | |
Stock based compensation expense | 1,507 | | | 12 | |
Related party notes issued for shared services | 600 | | | — | |
Accretion of note receivable discount | — | | | (518) | |
Unrealized gain on marketable securities | 370 | | | 247 | |
Unrealized gain on digital assets | (461) | | | — | |
Change in deferred tax liability | (2,927) | | | — | |
| | | |
Changes in assets and liabilities: | | | |
Accounts receivable, net of acquisitions and dispositions | 1,730 | | | 342 | |
Digital assets receivable | (13,280) | | | — | |
Prepaid expenses and other current assets, net of dispositions | 262 | | | 292 | |
Digital assets payable | 11,478 | | | — | |
Accounts payable and accrued expenses, net of dispositions | 503 | | | (529) | |
Other Assets | 9 | | | 1 | |
Operating cash flows provided by discontinued operations | — | | | 2,320 | |
Net cash (used in) provided by operating activities | (464) | | | 2,311 | |
INVESTING ACTIVITIES: | | | |
Cash acquired in Alt5 Subsidiary acquisition | 5,853 | | | — | |
| | | |
Investing cash flows used in discontinued operations | — | | | (156) | |
Net cash provided by (used in) investing activities | 5,853 | | | (156) | |
FINANCING ACTIVITIES: | | | |
Proceeds from equity financing, net | 851 | | | 368 | |
Proceeds from related parties | 577 | | | — | |
| | | |
Payments on notes payable | (251) | | | (274) | |
| | | |
Financing cash flows from discontinued operations | — | | | (2,212) | |
Net cash provided by (used in) financing activities | 1,177 | | | (2,118) | |
Effect of changes in exchange rate on cash and cash equivalents | (807) | | | 17 | |
INCREASE IN CASH AND CASH EQUIVALENTS | 5,759 | | | 54 | |
CASH AND CASH EQUIVALENTS, beginning of period | 5 | | | 115 | |
LESS CASH OF DISCONTINUED OPERATIONS, end of period | — | | | — | |
CASH AND CASH EQUIVALENTS, end of period | $ | 5,764 | | | $ | 169 | |
Supplemental cash flow disclosures: | | | |
Interest paid | $ | — | | | $ | 118 | |
Income taxes paid | — | | | — | |
Noncash recognition of new leases | 186 | | | — | |
Noncash financing and investing activities: | | | |
Stock issued for the acquisition of Alt5 Subsidiary | $ | 16,000 | | | $ | — | |
Common stock issued for consulting services | 853 | | | — | |
Common stock issued liability obligations | 367 | | | — | |
Notes payable converted to common stock | 122 | | | — | |
Common stock issued for property and equipment | 1,170 | | | — | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALT5 SIGMA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A-1 Preferred | | Series S-1 Preferred | | Series B Preferred | | Series M Preferred | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Deficit | | Total Stockholders' Equity |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
Balance, December 30, 2023 | 193,730 | | $ | — | | | 100,000 | | $ | — | | | — | | $ | — | | | — | | — | | 4,957,647 | | $ | 3 | | | $ | 47,323 | | | $ | (50,634) | | | $ | — | | | $ | (3,308) | |
Share based compensation | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 345 | | | — | | | — | | | 345 | |
Reclassification of Series S stock to liability | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | (339) | | | — | | | — | | | (339) | |
Reclassification of Series S stock to permanent equity | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | 7,993 | |
Common stock issued for equity financing | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 884,880 | | 1 | | | 626 | | | — | | | — | | | 627 | |
Common stock issued for consulting agreement | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 200,000 | | — | | | 232 | | | — | | | — | | | 232 | |
Common stock issued in lieu of notes payable obligation | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 600,000 | | 1 | | | 366 | | | — | | | — | | | 367 | |
Common stock issued for RSU's granted | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 908,852 | | — | | | — | | | — | | | — | | | — | |
Net income | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | | (2,144) | | | — | | | (2,144) | |
Balance, March 30, 2024 | 193,730 | | — | | | 100,000 | | — | | | — | | — | | | — | | — | | | 7,551,379 | | 5 | | | 48,553 | | | (52,778) | | | — | | | 3,773 | |
Share based compensation | — | | — | | — | | — | | — | | — | | | — | | — | | | 295,000 | | — | | 1,161 | | — | | — | | 1,161 | |
Common stock issued for acquisition of Alt5 Subsidiary | — | | — | | — | | — | | — | | — | | | — | | — | | | 1,799,115 | | 1 | | | 7,447 | | — | | — | | 7,448 | |
Series B preferred stock issued for acquisition of Alt5 Subsidiary | — | | — | | — | | — | | 34,207 | | 8,552 | | | 3,200 | | — | | | — | | — | | — | | — | | — | | 8,552 | |
Conversion of note receivable to common stock | — | | — | | — | | — | | — | | — | | | — | | — | | | 200,000 | | — | | 122 | | — | | — | | 122 | |
Common stock issued for equity financing | — | | — | | — | | — | | — | | — | | | — | | — | | | 120,598 | | — | | 342 | | — | | — | | 342 | |
Conversion of Series A-1 to common stock | (123,750) | | — | | — | | — | | — | | — | | | — | | — | | | 2,125,000 | | — | | — | | — | | — | | — | |
Common stock issued for consulting agreement | — | | — | | — | | — | | — | | — | | | — | | — | | | 197,923 | | 1,000 | | 579 | | — | | — | | 580 | |
Common stock issued for property and equipment | — | | — | | — | | — | | — | | — | | | — | | — | | | 300,000 | | — | | 1,170 | | — | | — | | 1,170 | |
Foreign currency adjustment | — | | — | | — | | — | | — | | — | | | — | | — | | | — | | — | | — | | | | (807) | | (807) | |
Net income | — | | — | | — | | — | | | | | | | | | | — | | — | | — | | 589 | | — | | 589 | |
Balance, June 29, 2024 | 69,980 | 69980 | $ | — | | | 100,000 | 100000 | $ | — | | | 34,207 | 34207 | $ | 8,552 | | | 3,200 | 3200 | $ | — | | | 12,589,015 | | $ | 7 | | | $ | 59,374 | | | $ | (52,189) | | | $ | (807) | | | $ | 22,930 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A-1 Preferred | | Series S-1 Preferred | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Deficit | | Total Stockholders' Deficit |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | |
Balance, December 31, 2022 | 222,588 | | $ | — | | | 100,000 | | $ | — | | | 3,150,230 | | $ | 2 | | | $ | 45,748 | | | $ | (42,822) | | | $ | (621) | | | $ | 2,307 | |
Share based compensation | — | | — | | | — | | — | | | — | | — | | | 8 | | | — | | | — | | | 8 | |
Common stock issued for equity financing | — | | — | | | — | | — | | | 361,000 | | 1 | | | 368 | | | — | | | — | | | 369 | |
Series A-1 Preferred converted for legal settlement | (5,185) | | — | | | — | | — | | | 103,707 | | — | | | 170 | | | — | | | — | | | 170 | |
Other comprehensive income | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | 621 | | | 621 | |
Net Income | — | | — | | | — | | — | | | — | | — | | | — | | | 10,085 | | | — | | | 10,085 | |
Balance, April 1, 2023 | 217,403 | | — | | 100,000 | | — | | 3,614,937 | | 3 | | | 46,294 | | | (32,737) | | | — | | | 13,560 | |
Share based compensation | — | | $ | — | | | — | | $ | — | | | — | | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | 5 | |
Net Income | — | | $ | — | | | — | | $ | — | | | — | | $ | — | | | $ | — | | | $ | 123 | | | $ | — | | | 123 | |
Balance, July 1, 2023 | 217,403 | | $ | — | | | 100,000 | | $ | — | | | 3,614,937 | | $ | 3 | | | $ | 46,299 | | | $ | (32,614) | | | $ | — | | | $ | 13,688 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Note 1: Background
The accompanying consolidated financial statements include the accounts of ALT5 Sigma Corporation, a Nevada corporation, and its subsidiaries (collectively, the “Company” or “ALT5”). Effective July 15, 2024, the Company changed its corporate name from “JanOne Inc.” to “ALT5 Sigma Corporation,” and also changed its Nasdaq common stock ticker symbol from “JAN” to “ALTS”. The corporate name change was effected through a parent/subsidiary short-form merger of ALT5 Sigma Corporation, the Company's wholly-owned Nevada subsidiary formed solely for the purpose of effectuating the name change), whereby it merged with and into the Company, with the Company being the surviving entity, albeit with its new name.
The Company had three operating segments – Biotechnology, Fintech, and Recycling. In connection with the sale of ARCA Recycling, Inc. (“ARCA Recycling”), the accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements.
Biotechnology
During September 2019, ALT5 Sigma Corporation, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties. Effective December 28, 2022, the Company acquired Soin Therapeutics LLC, a Delaware limited liability company (“STLLC”), and its product, a patent-pending, novel formulation of low-dose naltrexone, (“JAN123”). The product is being developed for the treatment of Complex Regional Pain Syndrome (CRPS), an indication that causes severe, chronic pain generally affecting the arms or legs. At present, there are no truly effective treatments for CRPS. Because of the relatively small number of patients afflicted with CRPS, the FDA has granted Orphan Drug Designation for any product approved for treatment of CRPS. This designation will provide the Company with tax credits for its clinical trials, exemption of user fees, and the potential of seven years of market exclusivity following approval. In addition, development of orphan drugs currently also involves smaller trials and quicker times to approval, given the limited number of patients available to study. However, there can be no assurance that the product will receive FDA approval or that it will result in material sales.
Fintech
On May 15, 2024, the Company acquired ALT5 Sigma, Inc. (“ALT5 Subsidiary”). ALT5 Subsidiary is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. ALT5 Subsidiary, through its respective subsidiaries, offers two main platforms to its customers: “ALT5 Pay” and “ALT5 Prime.” ALT5 Pay is a crypto-currency payment gateway that enables registered and approved global merchants to accept and make crypto-currency payments or to integrate the ALT5 Pay payment platform into their application or operations using the plugin with WooCommerce and or ALT5 Pay’s checkout widgets and APIs. Merchants have the option to convert to fiat currency (US Dollars, Canadian Dollars, Euros, and British Pounds Sterling) automatically or to receive their payment in digital assets (see Note 3).
Recycling
ARCA Recycling was the Company’s Recycling segment and provides turnkey recycling services for electric utility energy efficiency programs in the United States. ARCA Canada Inc. (“ARCA Canada”) provides turnkey recycling services for electric utility energy efficiency programs in Canada. Customer Connexx, LLC (“Connexx”) provides call center services for ARCA Recycling and ARCA Canada. On March 9, 2023, retroactive to March 1, 2023, the Company entered into a Stock Purchase Agreement with VM7 Corporation, a Delaware corporation, under which the Buyer agreed to acquire all of the outstanding equity interests of (a) ARCA Recycling, Inc., a California corporation, (b) Customer Connexx LLC, a Nevada limited liability company, and (c) ARCA Canada Inc., a corporation organized under the laws of Ontario, Canada (“ARCA Canada”; and, together with ARCA and Connexx, the “Subsidiaries”). The principal of the Buyer is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Subsidiaries to the Buyer under the Purchase Agreement was consummated simultaneously with the execution of the Purchase Agreement. The Company’s Board of Directors unanimously approved the Purchase Agreement and the Disposition Transaction. In connection with the disposition of ARCA Recycling, accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements (see Note 4).
The Company reports on a 52- or 53-week fiscal year. The Company’s 2023 fiscal year (“2023”) ended on December 30, 2023, and the current fiscal year (“2024”) will end on December 28, 2024.
Going concern
The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business, however, the issues described below raise substantial doubt about the Company’s ability to do so.
The Company currently faces a challenging competitive environment and is focused on improving its overall profitability, which includes managing expenses. The Company reported a net loss from continuing operations of approximately $1.6 million for the 26 weeks ended June 29, 2024. Additionally, as of June 29, 2024, the Company has total current assets of approximately $30.9 million and total current liabilities of approximately $42.5 million resulting in a net negative working capital of approximately $11.6 million. Cash used in operations from continuing operations was approximately $464,000. Additionally, stockholders’ equity, as of June 29, 2024, is approximately $22.9 million.
The Company intends to raise funds to support future development of JAN 123 and JAN 101 and through a combination of cash flows derived from its acquisition of ALT5 (see Note 3), capital raises, and/or structured arrangements. However, the success of such funding cannot be assured.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, the Company’s results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 30, 2023.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain amounts in the prior period have been reclassified to conform to the current period presentation. These reclassifications have no material effect on the reported financial results.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumption that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates made in connection with the accompanying consolidated financial statements include the fair value in connection with the Series S convertible preferred stock issued in the Soin merger, the Series B and Series M preferred stock issued in the transaction, pursuant to which the Company acquired the ALT5 Subsidiary, valuation allowance against deferred tax assets, and estimated useful lives for intangible assets.
Financial Instruments
Financial instruments consist primarily of cash equivalents, trade and other receivables, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments.
Digital Assets and other Receivables
Digital assets and other receivables are the Company’s digital assets and its customer prepayments in the form of digital assets. The Company holds all digital assets in secure non-custodial wallets through the wallet services from Fireblocks. As of June 29, 2024, the outstanding balance of digital assets and other receivables was approximately $22.5 million.
Digital Assets and other Payables
Digital assets and other payables are liabilities that represent the Company’s obligation to deliver the settlement of transactions in the form of digital assets and or cash. The Company safeguards these digital assets and cash for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes digital assets and other payables, on initial recognition and at each reporting date, at fair value of the digital assets. Any loss, theft, or other misuse would impact the measurement of digital assets and other payables. As of June 29, 2024, the outstanding balance of digital assets and other payables was approximately $28.2 million.
Revenue Recognition
Revenue recognition applies to the Company's Fintech segment only, as the Company's Biotech segment has not recognized revenue to date. Revenue is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
1.Executed contracts with the Company’s customers that it believes are legally enforceable;
2.Identification of performance obligations in the respective contract;
3.Determination of the transaction price for each performance obligation in the respective contract;
4.Allocation of the transaction price to each performance obligation; and
5.Recognition of revenue only when the Company satisfies each performance obligation.
These five elements, as applied to each of the Company’s revenue category, is summarized below:
1.Product sales – revenue is recognized at the time of sale of equipment to the customer.
2.Service sales – revenue is recognized based on when the service has been provided to the customer.
The Company’s service is comprised of a single performance obligation to buy and sell or convert digital assets to currencies. That is, the Company is the counter party to all transactions between customers and liquidity providers and presents revenue for the fees earned on a net basis.
The Company is acting as principal in all transactions, and control the digital assets being provided before it is transferred to the buyer, and has risk related to the digital assets, and is responsible for the fulfillment of the digital asset transactions. The Company sets the price for the digital assets by aggregating prices from several liquidity providers and displays them on the Company’s platform. As a result, the Company acts as a price discovery service and acts as a principal facilitating the ability for a customer to purchase or sell digital assets.
The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed. Contracts with customers are usually open-ended and can be terminated by either party without a termination penalty. Therefore, contracts are defined at the transaction level and do not extend beyond the service already provided.
The Company charges a fee at the transaction level. The transaction price, represented by the trading fee, is calculated based on volume and varies depending on payment type and the value of the transaction. Digital asset purchases or sale transactions executed by a customer on the Company’s platform is based on tiered pricing that is driven primarily by transaction volume processed for a specific historical period. The Company has concluded that this volume-based pricing approach does not constitute a future material right since the discount is within a range typically offered to a class of customers with similar volume. The transaction fee is collected from the customer at the time the transaction is executed. In certain instances, the transaction fee can be collected in digital assets, with revenue measured based on the amount of digital assets received and the fair value of the digital assets at the time of the transaction. The Company also marks up or down the digital asset prices and earns revenue from the spread between the buying and selling price. The Company also earns a fee from transfers of currencies and or digital assets. The transfer fees are nominal and are set to offset the fees associated with banking and or blockchain mining fees.
Stock-Based Compensation
The Company from time to time grants stock options to employees, non-employees and Company executives and directors. Such awards are valued based on the grant date fair-value of the instruments. The value of each award is amortized on a straight-line basis over the vesting period.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the CODM, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
Note 3: Mergers and Acquisitions
ALT5
On May 15, 2024, the Company acquired ALT5 Sigma, Inc. (“ALT5 Subsidiary”). ALT5 Subsidiary is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. ALT5 Subsidiary, through its respective subsidiaries, offers two main platforms to its customers: “ALT5 Pay” and “ALT5 Prime.” ALT5 Pay is a crypto-currency payment gateway that enables registered and approved global merchants to accept and make crypto-currency payments or to integrate the ALT5 Pay payment platform into their application or operations using the plugin with WooCommerce and or ALT5 Pay’s checkout widgets and APIs. Merchants have the option to convert to fiat currency (US Dollars, Canadian Dollars, Euros, and British Pounds Sterling) automatically or to receive their payment in digital assets.
As consideration under the acquisition, the Company issued 1,799,100 shares of its common stock to the legacy equity holders of the capital stock of ALT5 Subsidiary. Those shares represented approximately 19.9% of the Company's then-issued and outstanding shares of common stock. Each of the shares of the Company's newly-issued common stock was valued at $4.14, which was the Nasdaq NOCP on Thursday, May 9, 2024, the day immediately prior to the date on which the agreement was executed. The Company also issued 34,207 shares of its newly-designated Series B Preferred Stock (the “Series B Stock”) to the legacy equity holders of the capital stock of ALT5. In connection with the closing of the acquisition of ALT5 Subsidiary, the Company also issued 3,200 shares of its newly-designated Series M Preferred Stock (the “Series M Stock”) to two entities that acted as finders for the transaction.
The fair value of the purchase price components outlined above was $16.0 million due to fair value adjustments for the shares of Series B and Series M Preferred Stock, as detailed below (in $000’s):
| | | | | | | | |
Common stock | | $ | 7,448 | |
Series B preferred stock | | 8,552 | |
Total purchase price | | $ | 16,000 | |
Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $3.8 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of May 10, 2024, as calculated by an independent third-party firm. Because the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition will deductible for tax purposes. During the thirteen weeks ended June 29, 2024, the Company recorded a noncash fair value adjustment related to deferred tax liabilities in the aggregate amount of approximately $3.9 million, which was recorded to goodwill. The table
below outlines the purchase price allocation of the purchase for ALT5 Subsidiary to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
| | | | | | | | | | | |
Total purchase price | | | $ | 16,000 | |
Accounts payable | | | 267 | |
Digital assets payable | | | 16,763 | |
Debt | | | 7,613 | |
Total liabilities assumed | | | 24,643 | |
Total consideration | | | 40,643 | |
Cash | | | 5,853 | |
Accounts receivable | | | 2,917 | |
Digital assets receivable | | | 9,082 | |
Intangible assets | | | |
Customer relationships | | $ | 13,925 | | |
Trade names | | 2,675 | | |
Developed technology | | 1,850 | | |
Subtotal intangible assets | | | 18,450 | |
Other | | | 492 | |
Total assets acquired | | | 36,794 | |
Total goodwill | | | $ | 3,849 | |
Proforma Information
The table below presents selected proforma information for the Company for the thirteen and twenty-six week periods ended June 29, 2024, assuming that the acquisition had occurred on January 1, 2023 (the beginning of the Company’s 2023 fiscal year), pursuant to ASC 805-10-50 (in $000's). This proforma information does not purport to represent what the
actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.
| | | | | | | | | | | | | | | | | | | | | | | |
| As Reported | | Adjustments | | Proforma |
| ALT5 Sigma Corporation Unaudited 13 weeks ended June 29, 2024 | | ALT5 Subsidiary Unaudited 13 weeks ended June 29, 2024 | | Adjustments(1) | | ALT5 Sigma Corporation for the 13 weeks ended June 29, 2024 |
Net revenue | $ | 2,169 | | | $ | 693 | | | | | $ | 2,862 | |
Net income | $ | 589 | | | $ | 206 | | | $ | (269) | | | $ | 526 | |
Earnings per basic common share | $ | 0.07 | | | | | | | $ | 0.06 | |
Earnings per basic diluted share | $ | 0.07 | | | | | | | $ | 0.06 | |
| | | | | | | |
| As Reported | | Adjustments | | Proforma |
| ALT5 Sigma Corporation Unaudited 13 weeks ended July 1, 2023 | | ALT5 Subsidiary Unaudited 13 weeks ended July 1, 2023 | | Adjustments(1) | | ALT5 Sigma Corporation for the 13 weeks ended July 1, 2023 |
Net revenue | $ | — | | | $ | 2,021 | | | | | $ | 2,021 | |
Net income | $ | 123 | | | $ | 1,157 | | | $ | (537) | | | $ | 743 | |
Earnings per basic common share | $ | 0.03 | | | | | | | $ | 0.20 | |
Earnings per basic diluted share | $ | 0.03 | | | | | | | $ | 0.20 | |
| | | | | | | |
| As Reported | | Adjustments | | Proforma |
| ALT5 Sigma Corporation Unaudited 26 weeks ended June 29, 2024 | | ALT5 Subsidiary Unaudited 26 weeks ended June 29, 2024 | | Adjustments(1) | | ALT5 Sigma Corporation for the 26 weeks ended June 29, 2024 |
Net revenue | $ | 2,169 | | | $ | 2,918 | | | | | $ | 5,087 | |
Net income | $ | (1,555) | | | $ | 71 | | | $ | (806) | | | $ | (2,290) | |
Earnings per basic common share | $ | (0.18) | | | | | | | $ | (0.27) | |
Earnings per basic diluted share | $ | (0.18) | | | | | | | $ | (0.27) | |
| | | | | | | |
| As Reported | | Adjustments | | Proforma |
| ALT5 Sigma Corporation Unaudited 26 weeks ended July 1, 2023 | | ALT5 Subsidiary Unaudited 26 weeks ended July 1, 2023 | | Adjustments(1) | | ALT5 Sigma Corporation for the 26 weeks ended July 1, 2023 |
Net revenue | $ | — | | | $ | 3,254 | | | | | $ | 3,254 | |
Net income | $ | 10,207 | | | $ | 1,392 | | | $ | (1,074) | | | $ | 10,525 | |
Earnings per basic common share | $ | 2.97 | | | | | | | $ | 3.07 | |
Earnings per basic diluted share | $ | 2.97 | | | | | | | $ | 3.07 | |
(1)Adjustments are related to adjustments made for the following:
•Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date.
Soin Pharmaceuticals
Effective January 24, 2024, the Company, Amol Soin (“Dr. Soin”), and Soin Therapeutics LLC, a wholly-owned subsidiary of the Company that was had acquired from Dr. Soin entered into an amendment (the “Soin Amendment”) to the parties’ Agreement and Plan of Merger that was dated as of December 28, 2022 (the “Soin Agreement”). With reference to
the Soin Agreement, the parties to the Soin Amendment agreed that the $3.0 million convertible tranche (the first of the three original conversion tranches under the Soin Agreement) would be payable to Dr. Soin in cash rather than through his conversion of shares of the Series S Convertible Preferred Stock (the “Soin Preferred”) that constituted the consideration under the Soin Agreement. We tendered the first $100,000 amended tranche cash payment to Dr. Soin in March 2024; the second amended tranche cash payment to Dr. Soin, also in the amount of $100,000, is due on July 1, 2024; and the third amended tranche cash payment to Dr. Soin, in the amount of $2.8 million, is due on December 31, 2024. During the pendency of the amended cash tranche period, Dr. Soin agreed that he would not convert any of his shares of Soin Preferred. After we have tendered the second and third amended tranche cash payments to Dr. Soin, his conversion rights for the second and third original conversion tranches will remain convertible under the original provisions of the Soin Agreement and the related Certificate of Designation for the Soin Preferred. If we do not tender the second and third amended tranche cash payments to Dr. Soin, we agreed that we will transfer to him the membership interests of Soin Therapeutics LLC, and he will transfer to us the shares of Soin Preferred for cancellation.
In connection with the Soin Amendment, the Company reclassified the $3.0 million convertible tranche, originally valued at approximately $2.7 million on our balance sheet, from mezzanine equity to current liabilities, and reclassified the $10.0 million convertible tranche, originally valued at approximately $8.0 million on our balance sheet, to permanent equity. As of June 29, 2024, the outstanding balance in mezzanine equity relates to the $17.0 million convertible tranche originally valued at approximately $3.9 million.
Note 4: Discontinued Operations
On March 9, 2023, the Company discontinued operations of its Recycling segment as follows:
On March 9, 2023, the Company executed a Stock Purchase Agreement with VM7 Corporation, a Delaware corporation, under which, as of March 1, 2023, the Buyer agreed to acquire all of the outstanding equity interests of (a) ARCA Recycling, Inc., a California corporation, (b) Customer Connexx LLC, a Nevada limited liability company, and (c) ARCA Canada Inc., a corporation organized under the laws of Ontario, Canada (“ARCA Canada”; and, together with ARCA and Connexx, the “Subsidiaries”). The principal of the Buyer is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Subsidiaries to the Buyer under the Purchase Agreement was consummated simultaneously with the execution of the Purchase Agreement. As of June 29, 2024 and December 30, 2023, no Recycling assets or liabilities were included in discontinued operations.
In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the consolidated statements of operations and comprehensive income (loss). The results of operations for these entities for the 26 weeks ended June 29, 2024 and July 1, 2023 have been reflected as discontinued operations in the consolidated statements of operations and comprehensive income (loss) and consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| 13 weeks ended | | 26 Weeks Ended |
| June 29, 2024 | | July 1, 2023 | | June 29, 2024 | | July 1, 2023 |
Revenues | $ | — | | | $ | — | | | $ | — | | | $ | 3,795 | |
Cost of revenues | — | | | — | | | — | | | 3,992 | |
Gross profit | — | | | — | | | — | | | (197) | |
Operating expenses from discontinued operations: | | | | | | | |
Selling, general and administrative expenses | $ | — | | | $ | — | | | — | | | 1,468 | |
Gain on sale of ARCA | — | | | — | | | — | | | (15,824) | |
Total operating expenses from discontinued operations | — | | | — | | | — | | | (14,356) | |
Operating income from discontinued operations | — | | | — | | | — | | | 14,159 | |
Other income (expense) from discontinued operations | | | | | | | |
Interest expense, net | — | | | — | | | — | | | (181) | |
Other income expense, net | — | | | 1 | | | — | | | (2) | |
Total other income (loss), net | — | | | 1 | | | $ | — | | | $ | (183) | |
Income before provision for income taxes from discontinued operations | — | | | 1 | | | — | | | 13,976 | |
Income tax provision (benefit) | — | | | (43) | | | — | | | 3,186 | |
Net income from discontinued operations | $ | — | | | $ | 44 | | | $ | — | | | $ | 10,790 | |
In accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the 26 weeks ended June 29, 2024 and July 1, 2023 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following:
| | | | | | | | | | | |
| 26 weeks ended |
| June 29, 2024 | | July 1, 2023 |
DISCONTINUED OPERATING ACTIVITIES: | | | |
Net income from discontinued operations | — | | | 10,790 | |
Depreciation and amortization | — | | | 96 | |
Amortization of debt issuance costs | — | | | 11 | |
Amortization of right-of-use assets | — | | | 53 | |
Change in deferred taxes | — | | | 3,185 | |
Gain on sale of ARCA, net of cash | — | | | (15,967) | |
Gain on sale of GeoTraq | — | | | — | |
Changes in assets and liabilities: | | | |
Accounts receivable | — | | | 2,932 | |
Inventories | — | | | 299 | |
Prepaid expenses and other current assets | — | | | 55 | |
Accounts payable and accrued expenses | — | | | 866 | |
Net cash provided by operating activities from discontinued operations | $ | — | | | $ | 2,320 | |
DISCONTINUED INVESTING ACTIVITIES: | | | |
Purchases of property and equipment | — | | | (123) | |
Purchase of intangible assets | — | | | (33) | |
Net cash used in investing activities from discontinued operations | $ | — | | | $ | (156) | |
DISCONTINUED FINANCING ACTIVITIES: | | | |
Proceeds from note payable | — | | | 5,162 | |
Payment on related party note | — | | | (38) | |
Proceeds from issuance of short-term notes payable | — | | | (7,291) | |
Payments on notes payable | — | | | (45) | |
Net cash used in financing activities from discontinued operations | $ | — | | | $ | (2,212) | |
Effect of changes in exchange rate on cash and cash equivalents | — | | | (5) | |
DECREASE IN CASH AND CASH EQUIVALENTS | — | | | (53) | |
CASH AND CASH EQUIVALENTS, beginning of period | — | | | 53 | |
CASH AND CASH EQUIVALENTS, end of period | $ | — | | | $ | — | |
Note 5: Trade and other receivables
The Company’s trade and other receivables as of June 29, 2024 and December 30, 2023, respectively, were as follows (in $000’s):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Trade receivables | 865 | | | — | |
Interest receivable - SPYR | 69 | | | 266 | |
Other receivables | 50 | | | — | |
Trade and other receivables, net | $ | 984 | | | $ | 266 | |
Note 6: Prepaids and other current assets
Prepaids and other current assets as of June 29, 2024 and December 30, 2023 consist of the following (in $000’s):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Prepaid consulting agreements | $ | 1,145 | | | $ | 3 | |
Prepaid insurance | 3 | | | 72 | |
Prepaid other | 512 | | | — | |
Total prepaid expenses and other current assets | $ | 1,660 | | | $ | 75 | |
Note 7: Property and Equipment
Property and equipment as of June 29, 2024 and December 30, 2023 consist of the following:
| | | | | | | | | | | | | | |
| | June 29, 2024 | | December 30, 2023 |
Projects under construction | | $ | 1,170 | | | $ | — | |
Total property and equipment, net | | $ | 1,170 | | | $ | — | |
The Company recorded no depreciation expense from continuing operations for the 26 weeks ended June 29, 2024 and July 1, 2023.
Note 8: Leases
In connection with its acquisition of ALT5 Subsidiary (see Note 3), the Company leases commercial office space. These assets and properties are leased under noncancelable agreements that expire at various future dates. The agreements, which have been classified as operating leases, provide for minimum rent and require the Company to pay all insurance, taxes, and other maintenance costs. As a result, the Company recognizes assets and liabilities for leases with lease terms greater than 12 months. The amounts recognized reflect the present value of remaining lease payments for all leases. The discount rate used is an estimate of the Company’s blended incremental borrowing rate based on information available associated with each subsidiary’s debt outstanding at lease commencement. In considering the lease asset value, the Company considers fixed and variable payment terms, prepayments and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.
The following table details the Company's right of use assets and lease liabilities as of June 29, 2024 and December 30, 2023 (in $000's):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Right of use asset - operating leases | $ | 186 | | | $ | — | |
Lease liabilities: | | | |
Current - operating | 59 | | | — | |
Long term - operating | 127 | | | — | |
As of June 29, 2024, the weighted average remaining lease term for operating leases is 2.7 years. The Company's weighted average discount rate for operating leases is 11.5%. Total cash payments for operating leases for the 26 weeks ended June 29, 2024 was approximately $39,000. No cash payments for operating leases were made during the 26 weeks ended July 1,
2023. Additionally, the Company recognized approximately $186,000 in right of use assets and liabilities upon commencement of operating leases during the 26 weeks ended June 29, 2024.
Total present value of future lease payments of operating leases as of June 29, 2024 (in $000's):
| | | | | |
Twelve months ended | |
2025 | $ | 77 | |
2026 | 77 | |
2027 | 65 | |
| |
| |
| |
Total | 219 | |
Less implied interest | (33) | |
Present value of payments | $ | 186 | |
Note 9: Intangible Assets
Intangible assets as of June 29, 2024 and December 30, 2023 consist of the following (in $000’s):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Soin intangibles * | $ | 19,293 | | | $ | 19,293 | |
Customer relationships | 13,925 | | | — | |
Trade names | 2,675 | | | — | |
Developed technology | 1,850 | | | — | |
Patents and domains | $ | 4 | | | $ | 4 | |
Intangible assets | 37,747 | | | 19,297 | |
Less accumulated amortization | (2,751) | | | (1,451) | |
Total intangible assets | $ | 34,996 | | | $ | 17,846 | |
*The Soin intangibles acquired by the Company consist of the following:
1.Two pending patents and one approved patent related to the methods of using low-dose Naltrexone to treat chronic pain;
2.Final formula for Naltrexone; and
3.Orphan drug designation as approved by the FDA.
Intangible amortization expense was $660,000 and $363,000 for the 13 weeks ended June 29, 2024 and July 1, 2023 and $1.3 million and $726,000 for the 26 weeks ended June 29, 2024 and July 1, 2023.
Note 10: Marketable Securities
Marketable securities in connection with SPYR's acquisition of GeoTraq consist of the following (in $000’s, except shares):
| | | | | | | | | | | | | | | | | |
| Series G Convertible Preferred Shares | | Common Shares Equivalent | | Amount |
Beginning Balance, December 30, 2023 | 9,224 | | 952,442,000 | | $ | 286 | |
Securities received | 8,469 | | 846,900,000 | | 84 | |
Mark-to-market | — | | — | | (190) | |
Ending Balance, March 30, 2024 | 17,693 | | 1,799,342,000 | | 180 | |
Securities received | 25,407 | | 25,407,000,000 | | 434 | |
Mark-to-market | — | | — | | (180) | |
Ending Balance, June 29, 2024 | 43,100 | | 27,206,342,000 | | $ | 434 | |
Note 11: Deposits and Other Assets
Deposits and other assets as of June 29, 2024 and December 30, 2023 consist of the following (in $000’s):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Other | — | | | 9 | |
Total deposits and other assets | $ | — | | | $ | 9 | |
Note 12: Accrued Liabilities
Accrued liabilities as of June 29, 2024 and December 30, 2023 consist of the following (in $000’s):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Compensation and benefits | 46 | | | 37 | |
Accrued guarantees | 1,209 | | | 3,049 | |
Accrued Legal | 397 | | | — | |
Accrued taxes | 110 | | | 102 | |
Accrued litigation settlement | 650 | | | 397 | |
Other | 26 | | | 48 | |
Total accrued expenses | $ | 2,438 | | | $ | 3,633 | |
Note 13: Debentures
Debentures outstanding as of June 29, 2024 and December 30, 2023 consisted for the following (in $000's):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Interest rate of 12%, maturity date of June 30, 2024 | $ | 576 | | | $ | — | |
Interest rate of 12%, maturity date of June 30, 2025 | 1,110 | | | — | |
Total debentures | $ | 1,686 | | | $ | — | |
ALT Subsidiary issued 39 debentures over a period from October 2018 through September 2019. The debentures bear interest at 12% per annum and mature as of June 30, 2024 or June 30, 2025, as detailed in the table above.
Note 14: Long-Term Debt
Long-term debt as of June 29, 2024 and December 30, 2023 consisted of the following (in $000's):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Legacy subsidiary fixed deposits | $ | 2,134 | | | $ | — | |
Legacy subsidiary loan | 3,167 | | | — | |
Unaffiliated third-party | 1,735 | | | — | |
Other | 76 | | | — | |
Total notes payable, related parties | 7,112 | | | — | |
Less current portion | (3,244) | | | — | |
Total long-term notes payable, related parties | $ | 3,868 | | | $ | — | |
Legacy Subsidiary Fixed Deposits
During April 2024, the Company's recently acquired subsidiary, ALT5 Sigma, Inc., entered into several Corporate Fixed Deposit Agreements with otherwise unaffiliated third-parties, pursuant to which the Company became obligated for an aggregate of $2.4 million, as set forth in the respective agreements. Each obligation bears interest at a rate of 12% per annum, and has a maturity date of March 13, 2027. As of June 29, 2024, the outstanding aggregate obligations totaled approximately $2.1 million.
Legacy Subsidiary Loan
On August 10, 2023, the Company's recently acquired subsidiary, ALT5 Sigma, Inc., entered into an extension agreement for a Bitcoin promissory note with an otherwise unaffiliated third-party. Pursuant to the terms of the extension agreement, the maturity date is August 10, 2024. The promissory note bears interest at 15% per annum. As of June 29, 2024, the outstanding balance of the note was approximately $3.2 million (principal and accrued interest).
Unaffiliated Third-Party Loans
On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “ICG Note”) in favor of Isaac Capital Group (“ICG”) to add a convertibility provision. In accordance with Nasdaq Rules, the per-share conversion price was set at $0.61, subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions. The Company’s board of directors provided its approvals of the amendments on February 7, 2024. On March 6, 2024, ICG entered into a Note Purchase Agreement with an otherwise unaffiliated third party, under which the third party acquired the ICG Note. The terms and conditions of the ICG Note were not modified in connection with its acquisition by the third party. The principal amount of the ICG Note on the date of acquisition was approximately $1.2 million. On March 25, 2024, the third party converted $183,000 of the Company's obligation under the ICG Note into 300,000 shares of the Company's common stock, and on April 12, 2024, the third-party converted $60,900 into 100,000 shares of the Company's common stock. As of June 29, 2024, the amount outstanding on the ICG Note was approximately $952,000.
On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “Live Note”) in favor of Live Ventures Incorporated (“Live”) to add a convertibility provision. In accordance with Nasdaq Rules, the per-share conversion price for each obligation, as amended, was set at $0.61, subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions. The Company’s board of directors provided its final approvals of the amendments on February 7, 2024. On March 6, 2024, Live entered into a Note Purchase Agreement with with another otherwise unaffiliated third party, under which under which the third party acquired the Live Note. The terms and conditions of the acquired Live Note were not modified in connection with its acquisition by the third party. The principal amount of the Live Note on the date of acquisition was approximately $1.0 million. On March 22, 2024, the third party converted $183,000 of the Company's obligation under the Live Note into 300,000 shares of the Company's common stock, and on April 10, 2024, the third-party converted $60,900 into 100,000 shares of the Company's common stock. As of June 29, 2024, the amount outstanding on the Live Note was approximately $782,000.
Note 15: Related Party Debt
Long-term debt payable to related parties (see Note 20) as of June 29, 2024 and December 30, 2023 consisted of the following (in $000's):
| | | | | | | | | | | |
| June 29, 2024 | | December 30, 2023 |
Isaac Capital Group | $ | — | | | $ | 707 | |
Isaac Capital Group, 10% interest rate, matures December 31, 2024 | 312 | | | — | |
Live Ventures Incorporated, 10% interest rate, matures December 31, 2024 | 312 | | | — | |
Jon Isaac consulting agreement, 10% interest rate, matures March 4, 2026 | 516 | | | |
Isaac Capital Group short-term demand advance, 10% interest rate | 100 | | | — | |
Novalk Apps SAA, LLP short-term demand advance, 10% interest rate | 220 | | | — | |
Tony Isaac short-term demand advance, 10% interest rate | 62 | | | — | |
Total notes payable, related parties | 1,522 | | | 707 | |
Less current portion | (1,006) | | | — | |
Total long-term notes payable, related parties | $ | 516 | | | $ | 707 | |
| | | | | |
Twelve months ending June 29, | |
2025 | $ | |