AI Financial Corp

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 hadthree operating segments – Fintech, Biotechnology, and Corporate and Other.

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).

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 ofseven 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. In that regard, we have previously announced our intention to capitalize a subsidiary with certain of our biotechnology assets, acquire an additional biotechnology asset, and then engage in a financing of that subsidiary. The short-term intended result of that series of transactions would be for us to own a controlling interest in that subsidiary, but to decouple it from us so that it would operate on a stand-alone basis.

Corporate and Other

Our Corporate and Other segment consists of certain corporate general and administrative costs.

The Company reports on a 52- or 53-week fiscal year. The Company’s 2024 fiscal year (“2024”) ended on December 28, 2024, and the current fiscal year (“2025”) will end on December 27, 2025.

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 and liquidity, which includes managing expenses. The Company reported a net loss of approximately $2.9 million for the 13 weeks ended March 29, 2025. Additionally, as of March 29, 2025, the Company has total current assets of approximately $31.8 million and total current liabilities of approximately $38.2 million resulting in a net negative working capital of approximately $6.4 million. Cash used in operations was approximately $1.5 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. The Company currently expects that the biotechnology subsidiary transaction discussed above will allow us to finance our Phase III clinical trial for JAN123. No assurance can be given any financing obtained may not further dilute or otherwise impair the ownership interest of our existing stockholders or our ownership interest in the to-be-effectuated biotechnology subsidiary. The short-term intended result of that transaction would be for us to own a controlling interest in that subsidiary, but to decouple it from us so that it would operate on a stand-alone basis.

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 28, 2024.

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.

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, valuation allowance against deferred tax assets, and estimated useful lives for intangible assets.

Financial Instruments

Financial instruments consist primarily of cash, trade and other receivables, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of trade 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 March 29, 2025 and December 28, 2024, the outstanding balance of digital assets and other receivables was approximately $14.5 million and $23.8 million, respectively.

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 March 29, 2025, the outstanding balance of digital assets and other payables was approximately $25.2 million, of which approximately $14.5 was digital assets and $10.6 was cash deposits. As of December 28, 2024, the outstanding balance of digital assets and other payables was approximately $30.9 million, of which approximately $23.8 million was digital assets and $7.1 million was cash deposits.

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 does not anticipate this guidance will have a material impact upon its financial position and results of operations.

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

Qoden

On November 8, 2024, the Company acquired the Qodex Cryptocurrency Exchange Software platform and other related assets from Qoden Technologies, LLC, a provider of technology solutions for the blockchain industry. The purchase price was $2.2 million, consisting of $2.0 million, or 771,010 shares, of the Company’s Series Q Convertible Preferred Stock and $0.2 million in cash. The Series Q Convertible Stock was valued at $2.594 per share on the date issued, and is subject to a mandatory eight-calendar-quarter leak-out, such that no more than twelve-and-one-half percent of the shares may be converted into shares of the Company’s common stock on a trailing quarterly basis over a period oftwo years, and are subject to vesting provisions. The $0.2 million in cash is payable in increments of $10,000 per month for 24 months, commencing on the first day of the month following closing. The acquisition was determined to be an asset acquisition for accounting purposes.

ALT5

On May 14, 2024, the Company acquired its ALT5 Subsidiary, which 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 Historical 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 Stock and Series M Stock, as detailed below (in $000’s):

Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $11.7 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 be deductible for tax purposes. During the year ended December 28, 2024, the Company recorded a noncash fair value adjustment related to deferred tax liabilities and other liabilities acquired in the aggregate amount of approximately $7.9 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):

Note 4: Trade and other receivables

The Company’s trade and other receivables as of March 29, 2025 and December 28, 2024, respectively, were as follows (in $000’s):

Note 5: Prepaids and other current assets

Prepaids and other current assets as of March 29, 2025 and December 28, 2024 consist of the following (in $000’s):

Note 6: Property and Equipment

Property and equipment as of March 29, 2025 and December 28, 2024 consist of the following (in $000’s):

Note 7: 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 March 29, 2025 and December 28, 2024 (in $000’s):

As of March 29, 2025, the weighted average remaining lease term for operating leases is 4.67 years. The Company’s weighted average discount rate for operating leases is 12.8%. Total cash payments for operating leases for the 13 weeks ended March 29, 2025 was approximately $2,700. No cash payments for operating leases were made during the 13 weeks ended March 30, 2024. Additionally, the Company recognized approximatelyno right of use assets or lease liabilities during the 13 weeks ended March 29, 2025.

Total present value of future lease payments of operating leases as of March 29, 2025 (in $000’s):

Note 8: Intangible Assets

Intangible assets as of March 29, 2025 and December 28, 2024 consist of the following (in $000’s):

Intangible amortization expense was $1.2 million and $639,000 for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

Qoden Intangible Assets

On November 8, 2024, the Company acquired the Qodex Cryptocurrency Exchange Software platform and other related assets from Qoden Technologies, LLC, a provider of technology solutions for the blockchain industry. The Company will amortize the intangible assets over atwo-year period (see Note 3).

ALT5 Subsidiary Intangible Assets

On May 14, 2024, the Company acquired its ALT5 Subsidiary, which is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. As part of the acquisition, the Company acquired trade names, customer relationships, and developed technology, which will be amortized over a period ofseven years,10 years, andfive years, respectively (see Note 3).

Soin Intangible Assets

Effective as of 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. The assets acquired by the Company consist of 1)three pending patents 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. The Company reviewed the assets acquired and determined that no in-process research and development costs were acquired as part of the transaction, and, thus, all assets acquired represent intellectual property and should be capitalized. The Company will amortize the intangible assets ratably over a 10-year period.

Note 9: Accrued Liabilities

Accrued liabilities as of March 29, 2025 and December 28, 2024 consist of the following (in $000’s):

Note 10: Debentures

Debentures outstanding as of March 29, 2025 and December 28, 2024 consisted for the following (in $000’s):

ALT5 Subsidiary issued seven debentures over a period from October 2018 through September 2019. The debentures bear interest at 12% per annum and mature as of June 30, 2025.

Note 11: Debt

Long-term debt as of March 29, 2025 and December 28, 2024 consisted of the following (in $000’s):

Legacy Subsidiary Fixed Deposits

ALT5 Subsidiary entered into several Corporate Fixed Deposit Agreements with otherwise unaffiliated third-parties, pursuant to which the Company became obligated for an aggregate of $5.5 million, as set forth in the respective agreements. Each obligation bears interest at a rate of 13% or 15% per annum, and has a maturity date range of April 2026 to March 2027. Several of these unaffiliated third-parties agreed to convert their respective investments into Future Equity Agreements for shares of the Company’s subsidiary, Alyea Therapeutic and, consequently, approximately $125,000 of these deposits were reclassified as non-controlling interest. As of March 29, 2025 and December 28, 2024, the outstanding aggregate obligations totaled approximately $5.5 million and $4.2 million, respectively.

Legacy Subsidiary Loan

On August 10, 2023, ALT5 Subsidiary entered into an extension agreement for a Bitcoin promissory note with an otherwise unaffiliated third-party. The Bitcoin promissory note is denominated in Bitcoin and, thus, is adjusted to its fair value each period. Pursuant to the terms of an extension agreement, the maturity date is August 2025. The promissory note bears interest at 15% per annum. As of March 29, 2025 and December 28, 2024, the outstanding balance of the note was approximately $3.3 million and $3.8 million, respectively.

Unaffiliated Third-Party Loans

ICG Note

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “ICG Note”) in favor of Isaac Capital Group LLC (“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. During the year ended December 28, 2024, the third party converted $548,900 of the Company’s obligations under the ICG Note into 900,000 shares of the Company’s common stock. As of March 29, 2025 and December 28, 2024, the amount outstanding on the ICG Note was approximately $0.70 million and $0.7 million, respectively.

Live Note

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 another otherwise unaffiliated third party, 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. During the year ended December 28, 2024, the third party converted $243,900 of the Company’s obligations under the Live Note into 400,000 shares of the Company’s common stock. As of March 29, 2025 and December 28, 2024, the amount outstanding on the Live Note was approximately $0.80 million and $0.8 million.

Big/Small Debentures

On August 20, 2024, the Company entered into three Purchase Agreements with three otherwise unaffiliated third-party investors (the “Investors”), pursuant to which (1) one Investor agreed to purchase a unit (the “Unit”), consisting of (i) a non-convertible debenture in the principal amount of up to approximately $1.8 million (the “Big Debenture”), and (ii) a warrant (the “Big Warrant”) for the purchase of up to 400,000 shares of the Company’s Common Stock and (2) the two other Investors each agreed to purchase a Unit, consisting of (i) a non-convertible debenture in the principal amount of up to $404,454 (the “Small Debenture”, and, together with the Big Debenture, the “Debentures”) and (ii) a warrant (the “Small Warrant”, and, together with the Big Warrant, the “Warrants”) for the purchase of up 90,909 shares of Common Stock.

The Debentures are unsecured and subordinated to any existing or future debt. The Debentures bear interest at a rate of (i)1% per month from and after August 20, 2024 (“Original Issue Date”) through and including October 31, 2024, (ii)3% per month from and after November 1, 2024 through and including January 29, 2025, and (iii)4% per month from and after January 30, 2025 through and including the date of repayment.

The Big Debenture was issued with an original issue discount (an “OID”) initially of $171,000, which OID can be expanded with up totwo potential additions, the first in the amount of $171,000 and, thereafter, in the amount of $342,000, which OIDs will increase the principal amount owing on the Big Debenture. With the original OID, the initial principal amount owing under the Big Debenture is approximately $1.3 million; if, expanded, the principal amount would increase to approximately $1.4 million and, thereafter, potentially to approximately $1.8 million. The first potential increase in the Big Debenture OID would occur if the initial principal amount and interest accrued thereon is not paid in full on or before October 31, 2024. The second potential increase in the OID would occur if the initial principal amount (including the first potential increase in the OID) and interest accrued thereon is not paid in full on or before January 29, 2025.

The Small Debentures were issued with an OID initially of $38,863, which OID can be expanded with up totwo potential additions, the first in the amount of $38,863 and, thereafter, in the amount of $77,728, which OIDs will increase the principal amount owing on the Small Debentures. With the original OID, the initial principal amount owing under a Small Debenture is $288,864; if, expanded, the principal amount would increase to $327,726 and, thereafter, potentially to $404,454. The first potential increase in the Small Debenture OID would occur if the initial principal amount and interest accrued thereon is not paid in full on or before October 31, 2024. The second potential increase in the OID would occur if the initial principal amount (including the first potential increase in the OID) and interest accrued thereon is not paid in full on or before January 29, 2025.

As of November 1, 2024, the first of thetwo additional OIDs was effective. The final maturity date for each of the Debentures is April 28, 2025.

The Big Warrant is exercisable, at an exercise price of $1.71 per share, as follows: (i)100,000 shares of Common Stock as of Original Issue Date, (ii) contingently for an additional 100,000 shares of Common Stock as of October 31, 2024, if, as of such date, the Company has not repaid in full its obligations under the Big Debenture, and (iii) contingently for an additional 200,000 shares of Common Stock as of January 29, 2025, if, as of such date, the Company has not repaid in full its obligations under the Big Debenture.

The Small Warrant is exercisable, at an exercise price of $1.71 per share, as follows: (i)22,727 shares of Common Stock as of Original Issue Date, (ii) contingently for an additional 22,727 shares of Common Stock as of October 31, 2024, if, as of such date, the Company has not repaid in full its obligations under the Small Debenture, and (iii)45,455 shares of Common Stock as of January 29, 2025, if, as of such date, the Company has not repaid in full its obligations under the Small Debenture.

As of November 1, 2024, the contingent second tranche of the Warrants vested.

Each Investor is required to exercise the initial tranche of each Warrant within 15 days of the Original Issue Date. Upon the vesting of each contingent tranche of a Warrant vest, each Investor shall exercise such vested, contingent tranche within 15 days of the vesting of such contingent tranche. If the Company consummates any equity or debt financing before satisfying in full its obligations under the Debentures, then 50% of every net dollar received by the Company from any such financing transaction shall be paid by the Company to the holders of the Debentures, on a pro rata basis, as a mandatory pre-payment thereof. In the event the Company has repaid all sums owing under a Debenture to the Investor, except for an amount equal to any non-conditional OID, the Company has the right, not the obligation, to exercise the vested portion of the Warrant held by the Debenture holder through a set-off of any or all such unpaid OID, on a dollar-for-dollar basis. The Warrants also feature a “cashless” exercise provision. In lieu of making the cash payment otherwise contemplated to be made to the Company upon exercise of a Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in the Warrant.

During the quarter ended March 29, 2025, one of the two non-affiliated Investors exercised the remainder of the Small Warrant for a total of 45,455 shares (see Note 14). During the fourth quarter of the year ended December 28, 2024, the non-affiliated Investor exercised the Big Warrant for a total of 200,000 shares of the Company’s common stock, and the other two non-affiliated Investors exercised the Small Warrant for a total of 90,908 shares. Additionally, during the fourth quarter of the year ended December 28, 2024, these unaffiliated third-parties agreed to convert a portion their respective investment into Future Equity Agreements of the Company’s subsidiary, Alyea Therapeutics and, consequently, approximately $1.3 million was reclassified as non-controlling interest. During the 13 weeks ended March 29, 2025, the Company paid approximately $0.2 million, in principal and accrued interest, to one of the two non-affiliated Investors in settlement of its debt. As of March 29, 2025 and December 28, 2024, the outstanding balance due on the debentures was approximately $0.3 million and $0.5 million, respectively, consisting of principal and accrued interest.

Corporate Fixed Deposit Agreement

On September 19, 2024, ALT5 Subsidiary and an investor entered into a 12-month Corporate Fixed Deposit Agreement, pursuant to which ALT5 Subsidiary borrowed $1.5 million at an interest rate of 12% per annum, payable monthly, calculated on the then-unpaid principal amount. Upon maturity, ALT5 Subsidiary is obligated to repay the principal amount in full and any accrued and unpaid interest. The principal may be repaid in full, but not in part, with a pre-payment penalty equivalent to three month’s of interest. As of March 29, 2025 and December 28, 2024, the outstanding balance was approximately $1.6 million and $1.5 million, respectively, consisting of principal and accrued interest.

Personal Fixed Deposit Agreement

On February 1, 2025, ALT5 Subsidiary and an investor entered into a 24-month Personal Fixed Deposit Agreement, pursuant to which ALT5 Subsidiary borrowed $0.5 million at an interest rate of 13% per annum, payable monthly, calculated on the then-unpaid principal amount. Upon maturity, ALT5 Subsidiary is obligated to repay the principal amount in full and any accrued and unpaid interest. The principal may be repaid in full, but not in part, with a pre-payment penalty equivalent to three month’s of interest. As of March 29, 2025, the outstanding balance was approximately $0.5 million.

Note 12: Related Party Debt

Long-term debt payable to related parties as of March 29, 2025 and December 28, 2024 consisted of the following (in $000’s):

Total future maturities of long-term debt to related parties is as follows (in $000’s):

Isaac Capital Group LLC

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “ICG Note”) in favor of 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. As of March 29, 2025, 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. As of March 29, 2025 and December 28, 2024, the amount outstanding on the ICG Note was approximately $0.3 million (see Note 19).

On April 18, 2024, ICG made a short-term demand advance to the Company in the amount of $0.1 million. The advance bears interest at a rate of 10% per annum until repaid. As of March 29, 2025 and December 28, 2024, the principal amount outstanding was $49,000 and $48,000, respectively (see Note 19).

Live Ventures Incorporated

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “Live Note”) in favor of Live Ventures 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 Ventures entered into a Note Purchase Agreement with another otherwise unaffiliated third party, 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. As of March 29, 2025, 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. As of March 29, 2025 and December 28, 2024, the amount outstanding on the Live Note was approximately $0.3 million (see Note 19).

Novalk Apps SAA, LLP

On May 28, 2024 and June 3, 2024, Novalk Apps SAA, LLP (“Novalk”) made short-term demand advances in the amount of $120,000 and $100,000, respectively, to the Company. The advances bears interest at a rate of 10% per annum until repaid. As of March 29, 2025 and December 28, 2024, the principal amount outstanding was approximately $0.1 million (see Note 19).

Note 13: Commitments and Contingencies

Litigation

SEC Complaint

On August 2, 2021, the U.S. Securities and Exchange Commission (“SEC”) filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company andone of its executive officers, Virland Johnson, the Company's Chief Financial Officer, as defendants (collectively, the “Defendants”). Pursuant to an agreed-upon Order of the Court, on May 28, 2024, the Company settled its litigation with the SEC. The Settlement Agreement provided, in pertinent part: “Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which [the Company] admits), [the Company] hereby consents to the entry of the final Judgment in the form attached hereto (the “Final Judgment”) and incorporated by reference herein, which, among other things: “(a) permanently restrains and enjoins [the Company] from violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder [15 U.S.C. § 78j(b) and 17 C.F.R. §§ 240.10b-5]; and (c)[sic] orders [the Company] to pay a civil penalty in the amount of $250,000 under Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)).” The SEC has agreed to accept four quarterly payments from the Company, each in the amount of $62,500. The Settlement Agreement is attached to the Order as Exhibit 1, both of which documents may be viewed at https://ecf.nvd.uscourts.gov/doc1/115110470966.

The SEC Complaint's remaining allegations relate to financial, disclosure and reporting violations against the executive officer under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. The SEC Complaint also alleges various claims against the executive officer under Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13a-14, 13b2-1, and 13b2-2. The SEC continues to seek a permanent injunction, civil penalties, and an officer-and-director bar against the executive officer. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.

Sieggreen

In a matter pending in the United States District Court for the District Of Nevada, Case No. 2:21-cv-01517-CDS-EJY, styled as Sieggreen, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. Live Ventures Incorporated, Jon Isaac, and Virland A. Johnson, Defendants, the Company was added as a defendant on March 6, 2023, and was served on March 23, 2023. Plaintiff has alleged causes of action against the Company for (i) violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and (ii) violation of Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) promulgated thereunder. In June 2023 the Company filed a Motion to Dismiss, regarding which, as of the date of these financial statements, the Court has not ruled. The Company strongly disputes and denies all of the allegations contained therein and will continue to defend itself vigorously against the claims.

Main/270

The Company is a defendant in an action filed on April 11, 2022, in the U.S. District Court Southern District of Ohio, Eastern Division, styled, Trustees Main/270, LLC, Plaintiff, vs ApplianceSmart, Inc. and JANONE, Inc., Defendant, Case no.: 2:22-cv-01938-ALM-EPD. The Company was a guarantor of the lease between the Plaintiff and ApplianceSmart, Inc. Plaintiff alleged a cause of action against the Company in respect of the guaranty and seeks approximately $90,000 therefor. Plaintiff also seeks approximately $1,420,000 against ApplianceSmart and the Company on a joint and several basis. The Company does not believe that it is obligated to Plaintiff in that amount and the parties continue to negotiate a potential settlement.

Other Commitments

On December 30, 2017, the Company disposed of its retail appliance segment and sold ApplianceSmart to Live Ventures, a related party. In connection with that sale, as of January 1, 2022, the Company accrued an aggregate amount of future real property lease payments of approximately $767,000 which represented amounts guaranteed or which may have been owed under certain lease agreements tothree third party landlords in which the Company either remained the counterparty, was a guarantor, or had agreed to remain contractually liable under the lease (“ApplianceSmart Leases”). A final decree was issued by the court on February 28, 2022, upon the full satisfaction of the Plan, at which time ApplianceSmart emerged from Chapter 11. During the year ended December 28, 2024, the Company reversed approximately $637,000 of the accrual, as the Company is no longer liable fortwo of these guarantees upon ApplianceSmart's emergence from bankruptcy. As of December 28, 2024, a balance of approximately $130,000 remains as an accrued liability due to an ongoing dispute concerning one of the leases. The Company and Live Ventures have agreed to divide in half between them any ultimate balance owing thereunder and any attorneys’ fees expended in relation thereto.

The Company is party from time to time to other ordinary course disputes that we do not believe to be material to our financial condition as of March 29, 2025.

Note 14: Stockholders’ Equity

Common Stock: Our Articles of Incorporation authorize 200,000,000 shares of common stock that may be issued from time to time having such rights, powers, preferences and designations as the Board of Directors may determine. During the 13 weeks ended March 29, 2025 and March 30, 2024, no shares of common stock were issued in lieu of professional services.

On January 15, 2025, the Company entered into asix-month consulting agreement with a non-affiliated third-party, pursuant to which the third-party will provide a variety of corporate advisory services related to investment banking matters to the Company. In connection with the agreement, on January 15, 2025, the Company issued to the third-party 15,499 shares of its common stock.

On May 4, 2024, the Company entered into an Asset Purchase Agreement for the purchase of specified assets of an unaffiliated third-party. In connection with this transaction, the Company tendered 5,000 shares of the Company's Series V Convertible Preferred Stock. The conversion ratio of the Series V Convertible Preferred Stock is 1:120, meaning every one share of Series V Convertible Preferred Stock, if and when converted into shares of Common Stock shall convert into 120 shares of Common Stock. On March 12, 2025, the unaffiliated third-party exercised all tendered shares of Series V Convertible Preferred Stock into 600,000 shares of the Company’s common stock.

During the first quarter ended March 29, 2025, the Company issued 45,455 shares of its common stock related to the exercise of warrants under the Small Debenture (see Note 11).

As of March 29, 2025, and December 28, 2024, there were 16,078,647 and 15,417,693 shares, respectively, of common stock issued and outstanding.

Equity Offerings: The Company’s 2024 Plan, which was adopted by the Board in November 2024 and approved by the stockholders at the 2024 annual meeting of stockholders, replaces the 2023 Plan, which replaced the 2016 Plan, which replaced the 2011 Plan. Under the 2024 Plan, the maximum aggregate number of shares, which may be subject to or delivered under Awards granted under the Plan is 2,800,000 shares. Awards may be in the form of a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted in accordance with the terms of the respective Plan. During the 13 weeks ended March 29, 2025, there wereno grants under the 2024 Plan.

The Company's 2023 Plan, which was adopted by the Board in August 2023 and approved by the stockholders at the 2023 Annual Meeting of Stockholders, replaces the 2016 Plan, which replaced the 2011 Plan. Under the 2023 Plan, the maximum aggregate number of shares, which may be subject to or delivered under Awards granted under the Plan is two million (2,000,000) shares. Awards may be in the form of a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted in accordance with the terms of the respective Plan. During the 13 weeks ended March 29, 2025 and March 30, 2024, the Company recognized $0 and $345,000 in share-based compensation expense related to the 908,852 RSU's that were awarded and immediately vested.

The Company's 2016 Plan authorizes the granting of awards in any of the following forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) restricted stock awards, and (iv) restricted stock units, and expires on the earlier of October 28, 2026, or the date that all shares reserved under the 2016 Plan are issued or no longer available. On November 4, 2020, the Company amended the 2016 Plan to increase the issuance of common shares from 400,000 to 800,000. The vesting period is determined by the Board of Directors at the time of the stock option grant. As of March 29, 2025 and December 28, 2024,100,000 options were outstanding under the 2016 Plan.

The Company's 2011 Plan authorizes the granting of awards in any of the following forms: (i) stock options, (ii) stock appreciation rights, and (iii) other share-based awards, including but not limited to, restricted stock, restricted stock units or performance shares, and expired on the earlier of May 12, 2021, or the date that all shares reserved under the 2011 Plan are issued or no longer available. As of March 29, 2025 and December 28, 2024,8,000 were outstanding under the 2011 Plan. No additional awards will be granted under the 2011 Plan.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. There wereno stock options granted during the 13 weeks ended March 29, 2025.

Additional information relating to all outstanding stock options is as follows:

The Company recognizedno share-based compensation expense related to stock options for the 13 weeks ended March 29, 2025 and March 30, 2024.

As of March 29, 2025, the Company has the Company hadno unrecognized share-based compensation expense associated with equity awards.

Series A-1 Convertible Preferred Stock

Shares of Series A-1 Preferred Stock are convertible into the Company’s common shares at a ratio of 20:1. No shares were converted during the 13 weeks ended March 29, 2025. As of March 29, 2025 and December 28, 2024, there were 23,480 shares of Series A-1 Convertible Preferred Stock outstanding.

Series I Convertible Preferred Stock

Shares of Series I Preferred Stock are convertible into the Company’s common shares at a ratio of 100:1. No shares were converted during the 13 weeks ended March 29, 2025. As of March 29, 2025 and December 28, 2024, there were 17,000 shares of Series I Convertible Preferred Stock outstanding.

Series Q Convertible Preferred Stock

Shares of Series Q Preferred Stock are convertible into the Company’s common shares at a ratio of 1:1. No shares were converted during the 13 weeks ended March 29, 2025. As of March 29, 2025 and December 28, 2024, there were 925,212 shares of Series Q Convertible Preferred Stock outstanding.

Series S Preferred Stock

On December 28, 2022 the Company acquired Soin Therapeutics by way of merger. In connection with this transaction, with a potential value of up to $30 million, the Company tendered 100,000 shares of the Company's Series S Convertible Preferred Stock. Shares of Series S Convertible Preferred Stock are convertible into the Company’s common shares at a ratio of 1:1. No shares were converted during the 13 weeks ended March 29, 2025. As of March 29, 2025 and December 28, 2024, there were 100,000 shares of Series S Convertible Preferred Stock outstanding.

Series V Convertible Preferred Stock

Shares of Series V Preferred Stock are convertible into the Company’s common shares at a ratio of 120:1. During the 13 weeks ended March 29, 2025, all outstanding shares of Series V Preferred Stock were converted into 600,000 shares of the Company’s common stock (see above). As of March 29, 2025 and December 28, 2024, there were 0 and 5,000 shares of Series V Convertible Preferred Stock outstanding, respectively.

Note 15: Mezzanine Equity

During the year ended December 28, 2024, the Company reclassified approximately $2.7 million from mezzanine equity to current liabilities, and approximately $8.0 million from mezzanine equity to permanent equity. As of March 29, 2025, the outstanding balance in mezzanine equity was approximately $3.9 million.

Note 16: Earnings Per Share

Net income (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company’s Consolidated Balance Sheet. Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares consist of the additional common shares issuable in respect of restricted share awards, stock options and convertible preferred stock.

The following table presents the computation of basic and diluted net income (loss) per share (in $000’s, except share and per–share data):

Potentially dilutive securities totaling approximately 8.9 million and 3.8 million were excluded from the calculation of diluted earnings per share for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively, because the effects were anti-dilutive.

Note 17: Income Taxes

The Company recorded an income tax provision of approximately $285,000 for the 13 weeks ended March 29, 2025, and an income tax benefit of $75,000 for the 13 weeks ended March 30, 2024. The Company’s overall effective tax rate was -11.1% and 3.4% for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively. The effective tax rates and related provisional tax amounts vary from the U.S. federal statutory rate primarily due to state taxes and certain non-deductible expenses.

Note 18: Segment Information

The Company operates within targeted markets through three reportable segments for continuing operations: Fintech, Biotech, and Corporate and Other.

The following tables present the Company's segment information for the 13 weeks ended March 29, 2025 and March 30, 2024 (in $000's):

Note 19: Related Parties

Shared Services

Tony Isaac, the Company’s Chief Executive Officer, is the father of Jon Isaac, President and Chief Executive Officer of Live Ventures and managing member of Isaac Capital Group LLC (“ICG”). Tony Isaac, Chief Executive Officer, and Richard Butler, Board of Directors member of the Company, are members of the Board of Directors of Live Ventures. The Company also shares certain executive, accounting and legal services with Live Ventures. The total services shared were approximately $30,000 and $338,000 for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively. Customer Connexx rents approximately 9,900 square feet of office space from Live Ventures in Las Vegas, Nevada.

Notes with Live Ventures and ICG

On February 7, 2024, the Company entered into a promissory notes with each of Live Ventures and ICG. The initial principal amount of each note is $300,000, with an interest rate of 10% per annum. At the Company’s option, the obligation under each note is convertible after the six-month anniversary thereof at a per-share conversion price of $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 approved the issuance of the two notes on February 7, 2024. As of March 29, 2025 and December 28, 2024, the balances outstanding on each of the promissory notes was approximately $0.3 million, consisting of principal and accrued interest (see Note 12).

Short-Term Advances

On April 18, 2024, ICG made a short-term demand advance to the Company in the amount of $0.1 million. The advance bears interest at a rate of 10% per annum until repaid. As of March 29, 2025 and December 28, 2024, the principal amount outstanding was $49,000 and $48,000, respectively (see Note 12).

On May 28, 2024 and June 3, 2024, Novalk made short-term demand advances in the amount of $120,000 and $100,000, respectively, to the Company. Juan Yunis, an employee of Live Ventures, is the managing member of Novalk. The advances bears interest at a rate of 10% per annum until repaid. As of March 29, 2025 and December 28, 2024, the principal amount outstanding was $0.1 million (see Note 12).

Note 20: Subsequent event

The Company has evaluated subsequent events through the filing of this Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to disclosures in its condensed consolidated financial statements other than as discussed below:

Mswipe Transaction

Effective on May 9, 2025, we and our indirect, wholly-owned second tier Canadian subsidiary entered into an agreement to purchase all of the outstanding capital stock of an entity that, through its subsidiaries, offers multi-currency, fiat- and crypto-enabled payment card services. The business trades under the name Mswipe. Through a suite of physical and virtual cards that are available on both the Visa® and Mastercard® networks, the acquired operations enable users seamlessly to spend traditional and digital currencies across the globe. The acquired platform is built with robust compliance frameworks, advanced security protocols, and real-time exchange capabilities, which allow for fast, secure, and borderless transactions. This is a B2B solution, which, when combined with our current solutions, bridges the gap between the crypto economy and traditional financial systems—while ensuring regulatory alignment, interoperability with existing payment networks, and a seamless user experience for institutional partners and their end-users.

The purchase price for this transaction consisted of our (i) issuingone million restricted shares of our common stock to thethree sellers, valued at the Historical NOCP on May 9, 2025 of $6.10, (ii) granting five hundred thousand four-year common stock warrants to thethree sellers, with a per-share exercise price of $5.50 (which was the approximate market price at the time that we reached an agreement in principal for this transaction), (iii) issuing shares totwo of the sellers in “Alyea Therapeutics Corporation,” our biotech business that we are in process of separating from our core business, which shares we valued at $4.8 million, and (iv) issuingtwo 14-month straight promissory notes in the aggregate initial principal balance of approximatelyone million dollars with an interest rate at the AFR for quarterly compounded notes of 3.99% per annum and all principal and interest due at the maturity date. We also are acknowledging an equivalent 14-month term straight promissory note at the acquired company level that pre-dated our acquisition. The principal balance as of May 9, 2025 was approximately $5.1 million and the interest was reset to match that of thetwo notes that we issued. We also granted the sellers the right toone earn-out payment in the amount of $20 million (payable in cash or unregistered shares of our common stock) right if the Operating Subsidiaries generate a minimum of $15 million in annualized or actual total revenue from the assets owned by the Operating subsidiaries at May 9, 2025. Please see Exhibit 10.120 for the specific calculation modalities of the earn-out payments. None of the shares of our common stock, the shares underlying the common stock purchase warrants, and the shares of common stock of Alyea has any registration or equivalent rights.

The foregoing brief summary description of certain terms and provisions of (i) the purchase of the business that trades under the name Mswipe and the related covenant against competition do not purport to be complete and are qualified in their entirety by reference to the full text of the form of Share Purchase Agreement by and among ALT5 Sigma Corporation, ALT 5 Sigma, Inc., and the selling parties and related interest holders signatory thereto, in respect of the “Mswipe transaction”, dated May 9, 2025, and the form of Covenant Against Competition Agreement, a copy of each of which is filed as an exhibit to this Quarterly Report as Exhibit 10.120 and Exhibit 10.121, respectively, (ii) the form of Common Stock Purchase Agreement, granted May 9, 2025 in connection with the Mwsipe transaction, a copy of which is filed as an exhibit to this Quarterly Report as Exhibit 10.122; and (iii) the form of the 14-month Straight Promissory Note issued in connection with the “Mswipe transaction”, dated May 9, 2025, a copy of which is filed as an exhibit to this

Quarterly Report as Exhibit 10.123. Readers are encouraged to read those Exhibits in full for a more comprehensive understanding of the Mswipe transaction.