Quarterly report pursuant to Section 13 or 15(d)

Mergers and Acquisitions

v3.24.2.u1
Mergers and Acquisitions
 6 Months Ended
Jun. 29, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Mergers and Acquisitions Mergers and Acquisitions
ALT5
On May 15, 2024, the Company acquired ALT5 Sigma, Inc. (“ALT5 Subsidiary”). ALT5 Subsidiary is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm. ALT5 Subsidiary, through its respective subsidiaries, offers two main platforms to its customers: “ALT5 Pay” and “ALT5 Prime.” ALT5 Pay is a crypto-currency payment gateway that enables registered and approved global merchants to accept and make crypto-currency payments or to integrate the ALT5 Pay payment platform into their application or operations using the plugin with WooCommerce and or ALT5 Pay’s checkout widgets and APIs. Merchants have the option to convert to fiat currency (US Dollars, Canadian Dollars, Euros, and British Pounds Sterling) automatically or to receive their payment in digital assets.
As consideration under the acquisition, the Company issued 1,799,100 shares of its common stock to the legacy equity holders of the capital stock of ALT5 Subsidiary. Those shares represented approximately 19.9% of the Company's then-issued and outstanding shares of common stock. Each of the shares of the Company's newly-issued common stock was valued at $4.14, which was the Nasdaq NOCP on Thursday, May 9, 2024, the day immediately prior to the date on which the agreement was executed. The Company also issued 34,207 shares of its newly-designated Series B Preferred Stock (the “Series B Stock”) to the legacy equity holders of the capital stock of ALT5. In connection with the closing of the acquisition of ALT5 Subsidiary, the Company also issued 3,200 shares of its newly-designated Series M Preferred Stock (the “Series M Stock”) to two entities that acted as finders for the transaction.
The fair value of the purchase price components outlined above was $16.0 million due to fair value adjustments for the shares of Series B and Series M Preferred Stock, as detailed below (in $000’s):
Common stock $ 7,448 
Series B preferred stock 8,552 
Total purchase price $ 16,000 
Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $3.8 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of May 10, 2024, as calculated by an independent third-party firm. Because the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition will deductible for tax purposes. During the thirteen weeks ended June 29, 2024, the Company recorded a noncash fair value adjustment related to deferred tax liabilities in the aggregate amount of approximately $3.9 million, which was recorded to goodwill. The table
below outlines the purchase price allocation of the purchase for ALT5 Subsidiary to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
Total purchase price $ 16,000 
Accounts payable 267 
Digital assets payable 16,763 
Debt 7,613 
   Total liabilities assumed 24,643 
Total consideration 40,643 
Cash 5,853 
Accounts receivable 2,917 
Digital assets receivable 9,082 
Intangible assets
Customer relationships $ 13,925 
Trade names 2,675 
Developed technology 1,850 
Subtotal intangible assets 18,450 
Other 492 
Total assets acquired 36,794 
Total goodwill $ 3,849 
Proforma Information
The table below presents selected proforma information for the Company for the thirteen and twenty-six week periods ended June 29, 2024, assuming that the acquisition had occurred on January 1, 2023 (the beginning of the Company’s 2023 fiscal year), pursuant to ASC 805-10-50 (in $000's). This proforma information does not purport to represent what the
actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.
As Reported Adjustments Proforma
ALT5 Sigma Corporation Unaudited 13 weeks ended June 29, 2024 ALT5 Subsidiary Unaudited 13 weeks ended June 29, 2024 Adjustments(1) ALT5 Sigma Corporation for the 13 weeks ended June 29, 2024
Net revenue $ 2,169  $ 693  $ 2,862 
Net income $ 589  $ 206  $ (269) $ 526 
Earnings per basic common share $ 0.07  $ 0.06 
Earnings per basic diluted share $ 0.07  $ 0.06 
As Reported Adjustments Proforma
ALT5 Sigma Corporation Unaudited 13 weeks ended July 1, 2023 ALT5 Subsidiary Unaudited 13 weeks ended July 1, 2023 Adjustments(1) ALT5 Sigma Corporation for the 13 weeks ended July 1, 2023
Net revenue $ —  $ 2,021  $ 2,021 
Net income $ 123  $ 1,157  $ (537) $ 743 
Earnings per basic common share $ 0.03  $ 0.20 
Earnings per basic diluted share $ 0.03  $ 0.20 
As Reported Adjustments Proforma
ALT5 Sigma Corporation Unaudited 26 weeks ended June 29, 2024 ALT5 Subsidiary Unaudited 26 weeks ended June 29, 2024 Adjustments(1) ALT5 Sigma Corporation for the 26 weeks ended June 29, 2024
Net revenue $ 2,169  $ 2,918  $ 5,087 
Net income $ (1,555) $ 71  $ (806) $ (2,290)
Earnings per basic common share $ (0.18) $ (0.27)
Earnings per basic diluted share $ (0.18) $ (0.27)
As Reported Adjustments Proforma
ALT5 Sigma Corporation Unaudited 26 weeks ended July 1, 2023 ALT5 Subsidiary Unaudited 26 weeks ended July 1, 2023 Adjustments(1) ALT5 Sigma Corporation for the 26 weeks ended July 1, 2023
Net revenue $ —  $ 3,254  $ 3,254 
Net income $ 10,207  $ 1,392  $ (1,074) $ 10,525 
Earnings per basic common share $ 2.97  $ 3.07 
Earnings per basic diluted share $ 2.97  $ 3.07 
(1)Adjustments are related to adjustments made for the following:
•Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date.
Soin Pharmaceuticals
Effective January 24, 2024, the Company, Amol Soin (“Dr. Soin”), and Soin Therapeutics LLC, a wholly-owned subsidiary of the Company that was had acquired from Dr. Soin entered into an amendment (the “Soin Amendment”) to the parties’ Agreement and Plan of Merger that was dated as of December 28, 2022 (the “Soin Agreement”). With reference to
the Soin Agreement, the parties to the Soin Amendment agreed that the $3.0 million convertible tranche (the first of the three original conversion tranches under the Soin Agreement) would be payable to Dr. Soin in cash rather than through his conversion of shares of the Series S Convertible Preferred Stock (the “Soin Preferred”) that constituted the consideration under the Soin Agreement. We tendered the first $100,000 amended tranche cash payment to Dr. Soin in March 2024; the second amended tranche cash payment to Dr. Soin, also in the amount of $100,000, is due on July 1, 2024; and the third amended tranche cash payment to Dr. Soin, in the amount of $2.8 million, is due on December 31, 2024. During the pendency of the amended cash tranche period, Dr. Soin agreed that he would not convert any of his shares of Soin Preferred. After we have tendered the second and third amended tranche cash payments to Dr. Soin, his conversion rights for the second and third original conversion tranches will remain convertible under the original provisions of the Soin Agreement and the related Certificate of Designation for the Soin Preferred. If we do not tender the second and third amended tranche cash payments to Dr. Soin, we agreed that we will transfer to him the membership interests of Soin Therapeutics LLC, and he will transfer to us the shares of Soin Preferred for cancellation.
In connection with the Soin Amendment, the Company reclassified the $3.0 million convertible tranche, originally valued at approximately $2.7 million on our balance sheet, from mezzanine equity to current liabilities, and reclassified the $10.0 million convertible tranche, originally valued at approximately $8.0 million on our balance sheet, to permanent equity. As of June 29, 2024, the outstanding balance in mezzanine equity relates to the $17.0 million convertible tranche originally valued at approximately $3.9 million.