alts-20240928

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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 September 28, 2024

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

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 November 7, 2024, there were 14,069,469 outstanding shares of the registrant’s common stock, with a par value of $0.001.

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ALT5 SIGMA CORPORATION

INDEX TO FORM 10-Q


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of September 28 , 2024 and December 30, 202 3	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the 13 and 39 weeks ended September 28 , 2024 and September 30 , 202 3	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the 39 weeks ended September 28 , 2024 and September 30 , 202 3	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the 13 and 39 weeks ended September 28 , 2024 and September 3 0 , 202 3	6

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5	Other Information	41

Item 6.	Exhibits	41

SIGNATURES		43

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

ALT5 SIGMA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per-share amounts)


	September 28, 2024		December 30, 2023
	(Unaudited)
Assets
Cash and cash equivalents	$	8,669	$	5
Trade and other receivables, net	903		266
Digital assets receivable	20,888		—

Prepaid expenses and other current assets	1,437		75
Total current assets	31,897		346
Property and equipment, net	1,170		—
Right of use assets	120		—
Marketable securities	—		286
Deposits and other assets	—		9
Intangible assets, net	33,977		17,846
Goodwill	7,724		—
Total assets	$	74,888	$	18,487
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable	$	2,879	$	2,272
Accrued liabilities	3,801		3,633
Digital assets payable	28,834		—
Due to Soin	2,850		—
Convertible debentures	563		—
Operating lease liabilities	26		—
Notes payable	2,577		—
Related party notes payable and advances	798		—
Total current liabilities	42,328		5,905
Deferred income taxes, net	1,161		639
Related party notes payable	529		707
Notes payable	6,695		—
Operating lease liabilities	94		—
Other noncurrent liabilities	—		34
Total liabilities	50,807		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 September 28, 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, 23,480 and 193,730 shares issued and outstanding at September 28, 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 September 28, 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 September 28, 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 September 28, 2024 and December 30, 2023, respectively	7,993		—
Common stock, par value $0.001 per share, 200,000,000 shares authorized, 14,019,015 and 4,957,647 shares issued and outstanding at September 28, 2024 and at December 30, 2023, respectively	7		3
Accumulated other comprehensive deficit	(2,995)		—
Additional paid-in capital	59,679		47,323
Accumulated deficit	(53,011)		(50,634)
Total stockholders' equity (deficit)	20,225		(3,308)
Total liabilities and stockholders' equity	$	74,888	$	18,487

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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 Thirty-Nine Weeks Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Revenues	$	4,941	$	—	$	7,110	$	—
Cost of revenues	2,580		—		3,651		—
Gross profit	2,361		—		3,459		—
Operating expenses:
Selling, general and administrative expenses	3,582		764		9,402		2,923
Operating loss	(1,221)		(764)		(5,943)		(2,923)
Other income (expense):
Interest income, net	253		758		5		1,598
Unrealized loss on marketable securities	(688)		(267)		(1,058)		(514)
Unrealized (loss) gain on exchange transactions	(30)		—		431		—
Realized gain on exchange transactions	391		—		631		—
Other (loss) income, net	(44)		6		114		745
Total other (loss) income, net	(118)		497		123		1,829
Loss from continuing operations before provision for income taxes	(1,339)		(267)		(5,820)		(1,094)
Income tax benefit	(517)		(25)		(3,443)		(269)
Net loss from continuing operations	(822)		(242)		(2,377)		(825)
Gain from discontinued operations	—		—		—		13,976
Income tax provision (benefit) for discontinued operations	—		(28)		—		3,158
Net income from discontinued operations	—		28		—		10,818
Net (loss) income	$	(822)	$	(214)	$	(2,377)	$	9,993
Net income (loss) per share:
Net income (loss) per share from continuing operations, basic	$	(0.06)	$	(0.06)	$	(0.24)	$	(0.22)
Net income (loss) per share from continuing operations, diluted	$	(0.06)	$	(0.06)	$	(0.24)	$	(0.22)
Net income per share from discontinued operations, basic	$	—	$	0.01	$	—	$	2.93
Net income per share from discontinued operations, diluted	$	—	$	0.01	$	—	$	2.93
Net income per share, basic	$	(0.06)	$	(0.05)	$	(0.24)	$	2.71
Net income per share, diluted	$	(0.06)	$	(0.05)	$	(0.24)	$	2.71
Weighted average common shares outstanding:
Basic	12,805,718		4,198,940		10,030,608		3,687,986
Diluted	12,805,718		4,198,940		10,030,608		3,687,986

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ALT5 SIGMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	For the Thirty-Nine Weeks Ended
	September 28, 2024		September 30, 2023
OPERATING ACTIVITIES:
Net loss from continuing operations	$	(2,377)	$	(825)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	2,319		1,090
Charge in reserve for uncollectible accounts	254		—
Stock based compensation expense	1,507		14
Related party notes issued for shared services	600		—
Accretion of note receivable discount	—		(1,021)
Amortization of ROU asset	14		—
Unrealized gain on marketable securities	1,058		514
Unrealized loss on digital assets	(431)		—
Change in deferred tax liability	(3,353)		—

Changes in assets and liabilities:
Accounts receivable, net of acquisitions and dispositions	1,303		506
Digital assets receivable	(11,060)		—
Prepaid expenses and other current assets, net of dispositions	483		309
Digital assets payable	12,071		—
Accounts payable and accrued expenses, net of dispositions	1,331		(689)
Other Assets	10		(346)
Operating cash flows provided by discontinued operations	—		2,320
Net cash provided by operating activities	3,729		1,872
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		792
Proceeds from the issuance of notes payable	3,100		—
Proceeds from related parties	603		—
Warrants exercised	—		259
Payments on notes payable	(2,229)		(274)
Payments on related party notes payable	(248)		—
Financing cash flows from discontinued operations	—		(2,212)
Net cash provided by (used in) financing activities	2,077		(1,435)
Effect of changes in exchange rate on cash and cash equivalents	(2,995)		17
INCREASE IN CASH AND CASH EQUIVALENTS	8,664		298
CASH AND CASH EQUIVALENTS, beginning of period	5		115

CASH AND CASH EQUIVALENTS, end of period	$	8,669	$	413
Supplemental cash flow disclosures:
Interest paid	$	—	$	118
Income taxes paid	—		—
Noncash recognition of new leases	134		—
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 for liability obligations	367		—
Notes payable converted to common stock	467		—
Common stock issued for property and equipment	1,170		—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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		—			100,000		—		34,207		8,552		3,200		—			12,589,015	7		59,374		(52,189)		(807)		22,930
Conversion of notes payable to common stock	—		—			—		—		—		—		—		—			500,000	—		$	305	—		—		305
Conversion of Series A-1 to common stock	(46,500)		—			—		—		—		—		—		—			930,000	—		—		—		—		—
Foreign currency adjustment	—		—			—		—		—		—		—		—		—	—	—		—		—		(2,188)		(2,188)
Net income	—		—			—		—		—		—		—		—		—	—	—		—		$	(822)	—		(822)
Balance, September 28, 2024	23,480	23480	$	—	0	100,000	100000	$	—	34,207	34207	$	8,552	3,200	3200	$	—		14,019,015	$	7	$	59,679	$	(53,011)	$	(2,995)	$	20,225

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	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	217403	—			100,000	—		3,614,937	3		46,299		(32,614)		—		13,688
Share based compensation	—		—			—	—		—	—		1		—		—		1
Series A-1 Preferred Stock converted for legal settlement	(22,168)		—			—	—		443,362	—		340		—		—		340
Series A-1 Preferred Stock forfeited	(1,505)		—			—	—			—		—		—		—		—
Warrants exercised	—		—			—	—		481,348	—		259		—		—		259
Common stock issued for equity financing	—		—			—	—		418,000	—		424		—		—		424
Net Income	—		—			—	—		—	—		—		(214)		—		(214)
Balance, September 30, 2023	193,730	193730	$	—	0	100,000	$	—	4,957,647	$	3	$	47,323	$	(32,828)	$	—	$	14,498

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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 patented product, a novel formulation of low-dose naltrexone, (“JAN123”). The product is being initially 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. The FDA has granted JAN123 Orphan Drug Designation 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. 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).

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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 $2.4 million for the 39 weeks ended September 28, 2024. Additionally, as of September 28, 2024, 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 provided by operations from continuing operations was approximately $3.7 million. Additionally, stockholders’ equity, as of September 28, 2024, is approximately $20.2 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 Preferred Stock 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.

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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 September 28, 2024, the outstanding balance of digital assets and other receivables was approximately $20.9 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 September 28, 2024, the outstanding balance of digital assets and other payables was approximately $28.8 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.

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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 No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The amendments in ASU No. 2023-08 are intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. 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 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

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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):


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 be deductible for tax purposes. During the thirteen weeks ended September 28, 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

and an

Proforma Information

The table below presents selected proforma information for the Company for the thirteen and twenty-six week periods ended September 28, 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

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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 September 28, 2024		ALT5 Subsidiary Unaudited 13 weeks ended September 28, 2024		Adjustments(1)		ALT5 Sigma Corporation for the 13 weeks ended September 28, 2024
Net revenue	$	4,941	$	—			$	4,941
Net income	$	(822)	$	—	$	—	$	(822)
Earnings per basic common share	$	(0.06)					$	0.10
Earnings per basic diluted share	$	(0.06)					$	0.10

	As Reported				Adjustments		Proforma
	ALT5 Sigma Corporation Unaudited 13 weeks ended September 30, 2023		ALT5 Subsidiary Unaudited 13 weeks ended September 30, 2023		Adjustments(1)		ALT5 Sigma Corporation for the 13 weeks ended September 30, 2023
Net revenue	$	—	$	1,657			$	1,657
Net income	$	(214)	$	953	$	(537)	$	202
Earnings per basic common share	$	(0.05)					$	0.05
Earnings per basic diluted share	$	(0.05)					$	0.05

	As Reported				Adjustments		Proforma
	ALT5 Sigma Corporation Unaudited 39 weeks ended September 28, 2024		ALT5 Subsidiary Unaudited 39 weeks ended September 28, 2024		Adjustments(1)		ALT5 Sigma Corporation for the 39 weeks ended September 28, 2024
Net revenue	$	7,110	$	2,918			$	10,028
Net income	$	(2,377)	$	71	$	(806)	$	(3,112)
Earnings per basic common share	$	(0.24)					$	(0.36)
Earnings per basic diluted share	$	(0.24)					$	(0.36)

	As Reported				Adjustments		Proforma
	ALT5 Sigma Corporation Unaudited 39 weeks ended September 30, 2023		ALT5 Subsidiary Unaudited 39 weeks ended September 30, 2023		Adjustments(1)		ALT5 Sigma Corporation for the 39 weeks ended September 30, 2023
Net revenue	$	—	$	4,912			$	4,912
Net income	$	9,993	$	2,345	$	(1,611)	$	10,727
Earnings per basic common share	$	2.71					$	2.91
Earnings per basic diluted share	$	2.71					$	2.91

(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.

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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 September 28, 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 September 28, 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 39 weeks ended September 28, 2024 and September 30, 2023 have been reflected as discontinued operations in the consolidated statements of operations and comprehensive income (loss) and consist of the following:

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	13 weeks ended				39 Weeks Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 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	—		—		—		(2)
Total other income (loss), net	—		—		$	—	$	(183)
Income before provision for income taxes from discontinued operations	—		—		—		13,976
Income tax provision (benefit)	—		(28)		—		3,158
Net income from discontinued operations	$	—	$	28	$	—	$	10,818

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 39 weeks ended September 28, 2024 and September 30, 2023 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following:

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	39 weeks ended
	September 28, 2024		September 30, 2023
DISCONTINUED OPERATING ACTIVITIES:
Net income from discontinued operations	—		10,818
Depreciation and amortization	—		96
Amortization of debt issuance costs	—		11
Amortization of right-of-use assets	—		53
Change in deferred taxes	—		3,157
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 September 28, 2024 and December 30, 2023, respectively, were as follows (in $000’s):


	September 28, 2024		December 30, 2023
Trade receivables	853		—
Interest receivable - SPYR	—		266
Other receivables	50		—
Trade and other receivables, net	$	903	$	266

During the three months ended September 28, 2024, the Company was notified that SPYR Technologies, Inc. (“SPYR”) had ceased operations, and that no future quarterly interest payments on the promissory note for the Company’s sale of its subsidiary GeoTraq, Inc. would be made. Consequently, the Company has recorded an allowance of approximately $250,000 against the existing balance in accounts receivable related to SPYR’s interest payments.

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Note 6: Prepaids and other current assets

Prepaids and other current assets as of September 28, 2024 and December 30, 2023 consist of the following (in $000’s):


	September 28, 2024		December 30, 2023
Prepaid consulting agreements	$	1,149	$	3
Prepaid insurance	3		72
Prepaid other	285		—
Total prepaid expenses and other current assets	$	1,437	$	75

Note 7: Property and Equipment

Property and equipment as of September 28, 2024 and December 30, 2023 consist of the following:


	September 28, 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 39 weeks ended September 28, 2024 and September 30, 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 September 28, 2024 and December 30, 2023 (in $000’s):


	September 28, 2024		December 30, 2023
Right of use asset - operating leases	$	120	$	—
Lease liabilities:
Current - operating	26		—
Long term - operating	94		—

As of September 28, 2024, the weighted average remaining lease term for operating leases is 2.4 years. The Company’s weighted average discount rate for operating leases is 11.0%. Total cash payments for operating leases for the 39 weeks ended September 28, 2024 was approximately $19,000. No cash payments for operating leases were made during the 39

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weeks ended September 30, 2023. Additionally, the Company recognized approximately $134,000 in right of use assets and liabilities upon commencement of operating leases during the 39 weeks ended September 28, 2024.

Total present value of future lease payments of operating leases as of September 28, 2024 (in $000’s):


Twelve months ended
2025	$	57
2026	57
2027	24



Total	138
Less implied interest	(18)
Present value of payments	$	120

Note 9: Intangible Assets

Intangible assets as of September 28, 2024 and December 30, 2023 consist of the following (in $000’s):


	September 28, 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	(3,770)		(1,451)
Total intangible assets	$	33,977	$	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 $2.1 million and $363,000 for the 13 weeks ended September 28, 2024 and September 30, 2023 and $2.3 million and $1.1 million for the 39 weeks ended September 28, 2024 and September 30, 2023.

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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
Write off of marketable securities				(434)

Ending Balance, September 28, 2024	—	—	—	$	—

During the three months ended September 28, 2024, the Company was notified that SPYR Technologies, Inc. (“SPYR”) had ceased operations, and that no future quarterly interest payments on the promissory note, which may be remitted in either restricted shares of common stock or restricted shares of Series G Convertible Preferred Stock of SPYR, or in cash, would be made. Consequently, the Company has recorded a full write-off of approximately $434,000 of its Series G Convertible Preferred shares of SPYR.

Note 11: Deposits and Other Assets

Deposits and other assets as of September 28, 2024 and December 30, 2023 consist of the following (in $000’s):


	September 28, 2024		December 30, 2023
Other	—		9
Total deposits and other assets	$	—	$	9

Note 12: Accrued Liabilities

Accrued liabilities as of September 28, 2024 and December 30, 2023 consist of the following (in $000’s):


	September 28, 2024		December 30, 2023
Compensation and benefits	$	80	$	37
Accrued guarantees	1,209		3,049
Accrued legal	472