ALT5 Sigma Corp

Previous wording

Through our Biotechnology segment, we are focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties and, through our Fintech segment, we provide next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. In addition, through our now-sold subsidiaries ARCA Recycling, Connexx, and ARCA Canada, we were engaged in the business of recycling major household appliances in North America by providing turnkey appliance recycling and replacement services for utilities and other sponsors of energy efficiency programs. Also, through our now-sold GeoTraq Inc. subsidiary, we were engaged in the development and design of wireless transceiver modules with technology that provides LBS directly from global Mobile IoT networks.

Current wording

Through our Biotechnology segment, we are focused on finding treatments for conditions that cause chronic pain and bringing to market drugs with non-addictive and non-sedative pain-relieving properties and, through our Fintech segment, we provide next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. In addition, through our sale of subsidiaries ARCA Recycling, Connexx, ARCA Canada and, GeoTraq Inc., we have exited these legacy businesses; Consequently, the results for these businesses are reported as discontinued operations for the 13 and 39 weeks ended September 28, 2024 and September 30, 2023.

Previous wording

During the periods disclosed in this Quarterly Report, we operated three reportable segments:

Current wording

During the periods disclosed in this Quarterly Report, we operated two reportable segments:

Previous wording

•Biotechnology: Our Biotechnology segment is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

Current wording

•Biotechnology: Our Biotechnology segment is focused on finding treatments for conditions that cause chronic pain and bringing to market drugs with non-addictive and non-sedating pain-relieving properties.

Previous wording

The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated (in $000’s):

Current wording

The following table sets forth certain statement of operations items for the periods indicated (in $000’s):

Previous wording

Selling, general and administrative expenses increased by approximately $3.0 million for the 13 weeks ended June 29, 2024, as compared to the 13 weeks ended July 1, 2023, primarily due to the acquisition of ALT5 Subsidiary during May 2024, stock-based compensation expense recognized due issuances of the Company’s common stock (see Note 17), as well as amortization costs relating to the Soin intangibles. This increase relates only to continuing operations.

Current wording

Selling, general and administrative expenses increased by approximately $2.8 million for the 13 weeks ended September 28, 2024, as compared to the 13 weeks ended September 30, 2023, primarily due to the acquisition of ALT5 Subsidiary during May 2024, as well as the allowance recorded against the SPYR receivable (see Note 5). This increase relates only to continuing operations.

Previous wording

Interest income, net increased by approximately $360,000 for the 13 weeks ended June 29, 2024, as compared to the 13 weeks ended July 1, 2023 primarily due to the accretion of discount in connection with the promissory note with SPYR and receivable from VM7, as well as interest recorded on the note with SPYR.

Current wording

Interest income, net decreased by approximately $500,000 for the 13 weeks ended September 28, 2024, as compared to the 13 weeks ended September 30, 2023 primarily due to no longer accreting the discounts in connection with the promissory note with SPYR and the receivable from VM7, as well as the acquisition of ALT5 Subsidiary during May 2024.

Previous wording

Our biotechnology segment incurred expenses of approximately $3.2 million and $1.1 million related to employee costs and professional services related to research, and corporate services, as well as amortization of the Soin intangibles for the 13 weeks ended June 29, 2024 and the 13 weeks ended July 1, 2023, respectively.

Current wording

Our biotechnology segment incurred expenses of approximately $1.6 million and $764,000 related to employee costs and professional services related to research, and corporate services, as well as amortization of the Soin intangibles for the 13 weeks ended September 28, 2024 and the 13 weeks ended September 30, 2023, respectively.

Previous wording

Our fintech segment, which includes ALT5 Subsidiary, which was acquired during May 2024. Revenue for the 13 weeks ended June 29, 2024, was approximately $2.2 million, while cost of revenue was approximately $1.1 million. Operating income for the 13 weeks ended June 29, 2024 was approximately $260,000.

Current wording

Our fintech segment, which includes ALT5 Subsidiary, which was acquired during May 2024. Revenue for the 13 weeks ended September 28, 2024, was approximately $4.9 million, while cost of revenue was approximately $2.6 million. Operating income for the 13 weeks ended September 28, 2024 was approximately $353,000. On November 8, 2024, we entered into an agreement with a vendor of services to ALT5 Subsidiary, pursuant to which we acquired certain assets of the vendor that ALT5 Subsidiary has been using. A detailed description of the transaction is included in Note 23, Subsequent event, to the Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.

Previous wording

The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated (in $000’s):

Current wording

The following table sets forth certain statement of operations items for the periods indicated (in $000’s):

Previous wording

Selling, general and administrative expenses increased by approximately $3.7 million for the 26 weeks ended June 29, 2024, as compared to the 26 weeks ended July 1, 2023, primarily due to the acquisition of ALT5 Subsidiary during May 2024, stock-based compensation expense recognized due to the grants of RSU’s and the Company's common stock (see Note 17), as well as amortization costs relating to the Soin intangibles. This increase relates only to continuing operations.

Current wording

Selling, general and administrative expenses increased by approximately $5.0 million for the 39 weeks ended September 28, 2024, as compared to the 39 weeks ended September 30, 2023, primarily due to the acquisition of ALT5 Subsidiary during May 2024, stock-based compensation expense recognized due to the grants of RSU’s and the Company’s common stock (see Note 17), as well as amortization costs relating to the Soin intangibles. This increase relates only to continuing operations.

Previous wording

Interest expense, net increased by approximately $1.1 million for the 26 weeks ended June 29, 2024, as compared to the 26 weeks ended July 1, 2023 primarily due to no longer accreting the discounts in connection with the promissory note with SPYR and the receivable from VM7, as well as the acquisition of ALT5 Subsidiary during May 2024.

Current wording

Interest expense, net decreased by approximately $1.6 million for the 39 weeks ended September 28, 2024, as compared to the 39 weeks ended September 30, 2023 primarily due to no longer accreting the discounts in connection with the promissory note with SPYR and the receivable from VM7, as well as the acquisition of ALT5 Subsidiary during May 2024.

Previous wording

As of June 29, 2024, our cash on hand was approximately $5.8 million. We intend to raise funds to support future development of JAN 123 either through capital raises or structured arrangements.

Current wording

As of September 28, 2024, our cash on hand was approximately $8.7 million. We intend to raise funds to support future development of JAN 123 either through capital raises or structured arrangements.

Previous wording

During the 26 weeks ended June 29, 2024, cash used in operations was approximately $460,000, compared to cash provided by operations of approximately $2.3 million during the 26 weeks ended July 1, 2023. Cash provided by discontinued operations during the 26 weeks ended July 1, 2023 was approximately $2.3 million, while cash used in continuing operations was approximately $9,000. The decrease in cash was primarily due to results of operations as discussed above.

Current wording

During the 39 weeks ended September 28, 2024, cash provided by operations was approximately $3.7 million, compared to cash provided by operations of approximately $1.9 million during the 39 weeks ended September 30, 2023. Cash provided by discontinued operations during the 39 weeks ended September 30, 2023 was approximately $2.3 million, while cash used in continuing operations was approximately $448,000. The decrease in cash was primarily due to results of operations as discussed above.

Previous wording

Cash provided by investing activities was approximately $5.9 million for the 26 weeks ended June 29, 2024, compared to cash used in investing activities of $156,000 for the 26 weeks ended July 1, 2023. Cash provided by investing activities for the 26 weeks ended June 29, 2024 was related to cash acquired in the acquisition of ALT5 Subsidiary, while cash used in investing activities for the 26 weeks ended July 1, 2023 was all associated with discontinued operations and was related to purchases of property and equipment.

Current wording

Cash provided by investing activities was approximately $5.9 million for the 39 weeks ended September 28, 2024, compared to cash used in investing activities of $156,000 for the 39 weeks ended September 30, 2023. Cash provided by investing activities for the 39 weeks ended September 28, 2024 was related to cash acquired in the acquisition of ALT5 Subsidiary, while cash used in investing activities for the 39 weeks ended September 30, 2023 was all associated with discontinued operations and was related to purchases of property and equipment.

Previous wording

Cash provided by financing activities was $1.2 million for the 26 weeks ended June 29, 2024, and relates to proceeds received from warrants converted to our common stock and proceeds received from related parties, partially offset by payments on notes payable. Cash used in financing activities was approximately $2.1 million for the 26 weeks ended July 1, 2023. Cash used in financing activities from discontinued operations for the 26 weeks ended July 1, 2023 was approximately $2.2 million and was primarily due to the repayment of debt obligations. Cash provided financing activities from continued operations for the 26 weeks ended July 1, 2023 was approximately $94,000 and was related to $368,000 in proceeds from equity financing, partially offset by $274,000 in debt repayments.

Current wording

Cash provided by financing activities was $2.1 million for the 39 weeks ended September 28, 2024, and relates to proceeds received from warrants converted to our common stock and proceeds received from related parties, partially offset by payments on notes payable, and payment on related party notes payable. Cash used in financing activities was approximately $1.4 million for the 39 weeks ended September 30, 2023. Cash used in financing activities from discontinued operations for the 39 weeks ended September 30, 2023 was approximately $2.2 million and was primarily due to the repayment of debt obligations. Cash provided financing activities from continued operations for the 39 weeks ended September 30, 2023 was approximately $777,000 and was $792,000 in proceeds from equity financing and $259,000 from warrants issued, partially offset by $274,000 in debt repayments.

Previous wording

We continue to face a challenging competitive environment as we continue to focus on raising capital and managing expenses. We reported a net loss of approximately $1.6 million from continuing operations in for the 26 weeks ended June 29, 2024, and a net loss from continuing operations of approximately $583,000 for the 26 weeks ended July 1, 2023 primarily due to increased amortization expense of the Soin intangible and stock-based compensation expense of $1.5 million. Additionally, 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 continuing operations was approximately $464,000.

Current wording

We continue to face a challenging competitive environment as we continue to focus on raising capital and managing expenses. We reported a net loss of approximately $2.4 million from continuing operations in for the 39 weeks ended September 28, 2024, and a net loss from continuing operations of approximately $825,000 for the 39 weeks ended September 30, 2023 primarily due to increased amortization expense of the Soin intangible and stock-based compensation expense of $1.5 million. Additionally, the Company has total current assets of approximately $31.9 million and total current liabilities of approximately $42.3 million resulting in a net negative working capital of approximately $10.4 million. Cash used in continuing operations was approximately $3.7 million.