AIFC 10-Q
AI Financial Corp (AIFC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
or
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The
| ||||
| (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. ☒
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). ☒
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 | ☐ | |
| ☒ | 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
As of August 12, 2026, there were outstanding shares of the registrant’s common stock, with a par value of $.
AI FINANCIAL CORPORATION
INDEX TO FORM 10-Q
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
AI FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per-share amounts)
| June
27, 2026 | December
27, 2025* | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Short term investment | ||||||||
| Trade and other receivables, net | ||||||||
| Digital assets receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Other current assets | ||||||||
| Current assets from discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets | ||||||||
| Intangible assets, net | ||||||||
| Cryptocurrency assets at fair value | ||||||||
| Deferred income taxes, net | ||||||||
| Goodwill | ||||||||
| Other assets from discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit) | ||||||||
| Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities - other | ||||||||
| Digital assets payable | ||||||||
| Convertible debentures | ||||||||
| Operating lease liabilities | ||||||||
| Notes payable | ||||||||
| Current liabilities from discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Notes payable | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 15) | ||||||||
| Mezzanine equity | ||||||||
| Convertible preferred stock, series S - par value $ per share authorized, shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, series A-1 - par value $ per share authorized, shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Preferred stock, series B - par value $ per share, authorized, shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Convertible preferred stock, series I - par value $ per share, authorized, and shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Preferred stock, series M - par value $ per share, authorized, shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Preferred stock, series Q - par value $ per share, authorized, and shares issued and outstanding at June 27, 2026 and December 27, 2025 | ||||||||
| Convertible preferred stock, series S - par value $ per share authorized, shares issued and outstanding at June 27, 2026 and December 27, 2025, respectively | ||||||||
| Convertible preferred stock, series V - par value $ per share, authorized, and shares issued and outstanding at June 27, 2026 and December 27, 2025, respectively | ||||||||
| Common stock, par value $ per share, shares authorized, and shares issued and outstanding at June 27, 2026 and at December 27, 2026, respectively | ||||||||
| Treasury stock, at cost, and shares outstanding at June 27, 2026 and December 27, 2026 | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Equity attributable to AI Financial Corporation shareholders | ||||||||
| Noncontrolling interest | $ | $ | ||||||
| Total stockholder’s equity | ||||||||
| Total liabilities, mezzanine equity and stockholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
AI FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(Dollars in thousands, except per-share)
| For the Thirteen Weeks Ended | For the Twenty-Six Weeks Ended | |||||||||||||||
| June
27, 2026 | June
28, 2025 | June
27, 2026 | June
28, 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized gain on exchange transactions | ||||||||||||||||
| Unrealized loss on crypto-currency assets | ( | ) | ( | ) | ||||||||||||
| Realized gain (loss) on exchange transactions | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Total other (expense) income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before benefit (provision) for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (provision) | ( | ) | ( | ) | ||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision from discontinued operations | ||||||||||||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Net loss per share from continuing operations, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Net loss per share from discontinued operations, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Net loss per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Effect of foreign currency translation adjustments | ( | ) | ||||||||||||||
| Total other comprehensive loss, net of tax | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
AI FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
| For the Twenty-Six Weeks Ended | ||||||||
| June 27, 2026 | June 28, 2025 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of seller note discount | ||||||||
| Unrealized gain/loss on cryptocurrency assets | ||||||||
| Amortization of ROU assets | ||||||||
| Unrealized gain on digital assets | ( | ) | ||||||
| Realized gain on digital assets | ||||||||
| Change in deferred tax liability | ( | ) | ( | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Digital assets receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Digital assets payable | ( | ) | ( | ) | ||||
| Operating cash flows from discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of treasury common shares | ( | ) | ||||||
| Cash acquired in Mswipe acquisition | ||||||||
| Investing cash flows from discontinued operations | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| FINANCING ACTIVITIES: | ||||||||
| Purchases of short term certificates of deposits | ( | ) | ||||||
| Proceeds from return of certificate of deposits | ||||||||
| Proceeds from the issuance of notes payable | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Proceeds from warrants exercised | ||||||||
| Payments on related party notes payable | ( | ) | ||||||
| Financing cash flows from discontinued operations | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of changes in exchange rate on cash and cash equivalents | ||||||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, beginning of period | ||||||||
| LESS CASH OF DISCONTINUED OPERATIONS, end of period | ||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | $ | ||||||
| Supplemental cash flow disclosures: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Noncash financing and investing activities: | ||||||||
| Common stock issued for Block Street asset acquisition | $ | $ | ||||||
| Common stock issued for consulting services | $ | $ | ||||||
| Common stock issued for the acquisition of Mswipe | $ | $ | ||||||
| Common stock warrants issued for the acquisition of Mswipe | $ | $ | ||||||
| Alyea common stock issued for the acquisition of Mswipe | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
AI FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(Dollars in thousands)
Series A-1 Preferred | Series S-1 Preferred | Series B Preferred | Series I Preferred | Series M Preferred | Series Q Preferred | Series V Preferred | Common Stock | Additional Paid-in | Treasury | Accumulated | Accumulated Other Comprehensive | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Deficit | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 27, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series I convertible stock converted | — | — | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series Q convertible stock converted | — | — | — | ( | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for consulting agreement | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Debenture converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in lieu of notes payable obligation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prior period adjustment | — | — | — | — | — | — | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 28, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 28, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury share buyback | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for Block Street | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 27, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 |
Series A-1 Preferred | Series S-1 Preferred | Series B Preferred | Series I Preferred | Series M Preferred | Series Q Preferred | Series V Preferred | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Noncontrolling | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 28, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for warrants exercised | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series V Preferred converted | — | — | — | — | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for consulting agreement | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | — | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | 0 | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 29, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 29, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A-1 adjustment | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A-1 Preferred | ( | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for RSU’s granted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for note payable obligations | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for consulting agreement | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for Mswipe acquisition | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock warrants for Mswipe acquisition | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Alyea common stock warrants for Mswipe acquisition | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for Series Q convertible stock converted | — | — | — | — | — | ( | ) | ( | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALT5 Sigma Corp common stock issued for professional services | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustment | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 28, 2025 | - | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
Note 1: Background
The accompanying consolidated financial statements include the accounts of AI Financial Corporation, a Nevada corporation, and its subsidiaries (collectively, the “Company” or “AIFC”). Effective April 28, 2026, the Company changed its name to “AI Financial Corporation” from “Alt5 Sigma Corporation”. The Company also changed its Nasdaq common stock symbol to “AIFC” from “ALTS.” Previously, effective July 15, 2024, the Company had changed its corporate name to “ALT5 Sigma Corporation” from “JanOne Inc.” and also changed its Nasdaq common stock ticker symbol to “ALTS” from “JAN”. In each instance, the corporate name changes were effected through a parent/subsidiary short-form merger of Company’s wholly-owned Nevada subsidiary formed solely for the purpose of effectuating the name change, whereby that “name change subsidiary” subsidiary merged with and into the Company, with the Company being the surviving entity, albeit with its new name.
The
Company had
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).
On May 9, 2025, the Company acquired Fortress II Holdings Ltd. d/b/a Mswipe. Mswipe is a next-generation payment solutions provider offering multi-currency, fiat payment card services, along with crypto-enabled capabilities through its existing integration with the ALT5 Subsidiary platform. Its suite of physical and virtual cards, available on both the Visa® and Mastercard® networks, allows users to seamlessly spend traditional and digital currencies worldwide (see Note 3).
Biotechnology
During
September 2019, the Company, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company
focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.
Effective December 28, 2022, the Company acquired Soin Therapeutics LLC, a Delaware limited liability company (“STLLC”),
and its product, a patent-pending, novel formulation of low-dose naltrexone (“JAN123”). The product is being developed for
the treatment of Complex Regional Pain Syndrome (CRPS), an indication that causes severe, chronic pain generally affecting the arms or
legs. At present, there are no truly effective treatments for CRPS. Because of the relatively small number of patients afflicted with
CRPS, the FDA has granted Orphan Drug Designation for any product approved for treatment of CRPS. This designation will provide the Company
with tax credits for its clinical trials, exemption of user fees, and the potential of
| 8 |
Corporate and Other
Our Corporate and Other segment consists of WLFI assets, including any additions, redemptions, or mark-to-market changes in value, which are recorded within the Company’s Corporate and Other segment.
The
WLFI treasury program was initiated on August 12, 2025, with purchases executed in
| 1. | Tranche
1: | |
| 2. | Tranche
2: |
As
of June 27, 2026, all
In connection with the WLFI treasury program, the Company entered into lock-up agreements restricting certain equity issuances. Pursuant to the Purchase Agreements, the Company agreed not to issue, or enter into any agreement to issue, shares of Common Stock or Common Stock equivalents, or file any registration statement or amendment thereto, for a period of 30 days following the closing date of the Offerings, subject to customary exceptions including issuances under the ATM Sales Agreement.
In addition, each of the Company’s directors and executive officers is subject to a lock-up agreement prohibiting the sale, pledge, or other transfer or disposition of 50% of their shares of Common Stock, or securities convertible into or exchangeable for Common Stock, for a period of 90 days following the closing date, with the remaining 50% subject to the same restrictions until the later of 90 days following the closing date or the date Stockholder Approval was obtained. Transfers for bona fide estate or tax planning purposes are permitted, provided the transferee agrees to be bound by the same lock-up terms.
WLFI
is considered a related party to the Company by virtue of the following relationships. Zachary Witkoff, the Chairman of the Company’s
Board of Directors, is a Co-Founder and Chief Executive Officer of WLFI. Zachary Folkman, a member of the Company’s Board of Directors,
is also a Co-Founder of WLFI. In addition, WLFI is the record owner of shares of the Company’s Common Stock and holds
pre-funded warrants to purchase up to
All acquisitions of WLFI tokens were executed through on-chain transactions and direct Token Purchase Agreements with the WLFI Foundation. The Company did not hold any WLFI tokens prior to August 12, 2025.
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 2025 fiscal year (“2025”) ended on December 27, 2025, and the current fiscal year (“2026”) will end on December 26, 2026.
| 9 |
Liquidity Considerations
The Company has incurred recurring losses from operations, including a
net loss from continuing operations of approximately $
The Company owns
Based on the current market value of the Company’s WLFI token holdings, the Company believes it possesses sufficient liquidity and financial resources to fund its anticipated operations and satisfy its obligations for at least the next 12 months.
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 27, 2025.
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.
Financial Statement Reclassification
Certain prior-period amounts have been reclassified to conform to the current period presentation. These reclassifications relate primarily to the presentation of the Biotechnology segment as discontinued operations.
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 December 28, 2022 acquisition of STLLC, 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. The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs). The carrying amounts of long-term debt at June 27, 2026 and December 27, 2025 approximate fair value.
Cryptocurrency Assets
The
Company’s cryptocurrency assets consist of World Liberty Financial (“WLFI”) tokens, a scarce, governance-enabled digital
asset with long-term capital preservation and appreciation potential, inflation-hedging characteristics, and embedded productivity through
protocol participation and revenue-sharing mechanisms. With a fixed maximum supply of
Cryptocurrency assets acquired are initially recorded at cost, which represents the cash, cash equivalents, or other financial assets paid to acquire the asset, including transaction fees. Cryptocurrency assets are subsequently measured in accordance with ASC 350-60, Intangibles—Goodwill and Other—Accounting for and Disclosure of Cryptocurrency Assets, at fair value in the statement of financial position with unrealized gains and losses resulting from changes in fair value recognized in net income. The Company determines and records at each reporting period the fair value of its cryptocurrency assets in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices. Changes in the fair value are recognized in net income within “Unrealized gain on crypto assets”, while realized gains and losses from the derecognition of crypto assets are included in “Realized gain on crypto assets, net” in the Company’s condensed consolidated statements of operations. Purchases and redemptions of cryptocurrency assets are reflected as cash flows from investing activities in the consolidated statements of cash flows.
| 10 |
Digital Assets and other Receivables
Digital
assets and other receivables are the Company’s digital assets and its customer prepayments in the form of digital assets. The Company
holds all digital assets in secure non-custodial wallets through the wallet services from Fireblocks. As of June 27, 2026 and December
27, 2025, the outstanding balances of digital assets and other receivables was approximately $
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/or cash for customers and is obligated to
safeguard them from loss, theft, or other misuse. The Company recognizes digital assets and other payables, on initial recognition
and at each reporting date, at fair value of the digital assets. Any loss, theft, or other misuse would impact the measurement of
digital assets and other payables. As of June 27, 2026, the outstanding balance of digital assets and other payables was
approximately $
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, are 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.
| 11 |
The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time that 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.
The
Company receives consideration in the form of digital assets as payment for commissions and other fees and utilizes these assets as part
of its working capital. In accordance with ASC 606, the fair value of digital assets received is measured based on quoted prices
in active markets on the date control of the related goods or services transfers to the customer. Subsequent to initial recognition,
the Company measures digital assets at fair value using quoted prices obtained from active, highly liquid exchanges that the Company
has determined to be its principal market. Because these valuations are based on unadjusted quoted prices for identical assets in active
markets, the fair value measurements are classified within Level 1 of the fair value hierarchy. The Company presents these assets
within other current assets on its consolidated balance sheets. As of June 27, 2026, the balance of digital assets included in other
current assets was approximately $
The Company from time to time grants restricted stock units, warrants, and 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 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. The Company adopted this pronouncement effective with its fiscal year ending December 27, 2025.
Note 3: Mergers and Acquisitions
Block Street
On
April 20, 2026, the Company entered into, a Stock Exchange Agreement (the “SEA”) with the four stockholders of Block Street
Corp., a Nevada corporation (“Block Street”), pursuant to which the Company acquired
| 12 |
The Company evaluated the acquired set under ASC 805 and concluded that it did not meet the definition of a business. Accordingly, the transaction was accounted for as an asset acquisition under ASC 805-50 rather than as a business combination.
The
purchase price for this transaction consisted of
shares of the Company’s common stock issued at closing, valued at approximately $
The
fair value of the purchase price components outlined above was $
| ALT5 Common stock | $ | |||
| Total purchase price | $ |
The table below outlines the purchase price allocation of the purchase for Block Street to the acquired identifiable intangible assets (in $000’s):
| Total purchase price | $ | |||
| Total intangible assets acquired | $ |
Mswipe
Effective on May 9, 2025, the Company and our indirect, wholly-owned second-tier Canadian subsidiary entered into an agreement to purchase all of the outstanding capital stock of Fortress II Holdings Ltd. d/b/a Mswipe, an entity that, through its subsidiaries, offers multi-currency, fiat- and crypto-enabled payment card services of Mswipe. The company conducts business 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 to seamlessly spend traditional and digital currencies across the globe. The 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 other product offerings, 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) issuing
million restricted shares of our common stock to the
| 13 |
The
fair value of the purchase price components outlined above was $
| ALT5 Common stock | $ | |||
| Common stock warrants | ||||
| Seller notes | ||||
| Alyea Common Stock | ||||
| Total purchase price | $ |
Under
the preliminary purchase price allocation, the Company recognized goodwill of approximately $
| Total purchase price | $ | |||
| Accounts payable | ||||
| Total liabilities assumed | ||||
| Total consideration | ||||
| Cash | ||||
| Accounts receivable | ||||
| Property and equipment | ||||
| Intangible assets | ||||
| Customer relationships | ||||
| Trade names | ||||
| Developed technology | ||||
| Subtotal intangible assets | ||||
| Other | ||||
| Total assets acquired | ||||
| Total goodwill |
Proforma Information
The table below presents selected proforma information for the Company for the 13 and 26 weeks ended June 28, 2025, assuming that the acquisition had occurred on December 31, 2023 (the beginning of the Company’s 2024 fiscal year), pursuant to ASC 805-10-50. 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 (in $000’s).
| As Reported | Adjustments | Proforma | ||||||||||||||
AI Financial Corporation Unaudited 13 weeks ended June 28, 2025 | Mswipe Unaudited 13 weeks ended June 28, 2025 | Adjustments(1) | AI Financial Corporation for the 13 weeks ended June 28, 2025 | |||||||||||||
| Net revenue | $ | $ | $ | |||||||||||||
| Net income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Earnings per basic common share | $ | ( | ) | $ | ( | ) | ||||||||||
| Earnings per basic diluted share | $ | ( | ) | $ | ( | ) | ||||||||||
| As Reported | Adjustments | Proforma | ||||||||||||||
AI Financial Corporation Unaudited 26 weeks ended June 28, 2025 | Mswipe Unaudited 26 weeks ended June 28, 2025 | Adjustments(1) | AI Financial Corporation for the 26 weeks ended June 28, 2025 | |||||||||||||
| Net revenue | $ | $ | $ | |||||||||||||
| Net income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Earnings per basic common share | $ | ( | ) | $ | ( | ) | ||||||||||
| Earnings per basic diluted share | $ | ( | ) | $ | ( | ) | ||||||||||
| (1) |
● Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date.
Note 4: Discontinued Operations
As of December 27, 2025, the Company has characterized its Biotechnology segment as a discontinued operation on its financial statements, as follows: on May 21, 2025, the Company announced the planned formal separation of its healthcare assets, known as Alyea, and noted that the scope and method of a partial or full disposition, whatever the methodology, would be determined and announced at a later date.
| 14 |
In accordance with the provisions of ASC 360-10 and ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheet, as of June 27, 2026 and December 28, 2025, and consists of the following (in $000s):
| June 27, 2026 | December 27, 2025 | |||||||
| Assets from discontinued operations | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| Total current assets from discontinued operations | ||||||||
| Property and equipment, net 1 | ||||||||
| Intangible assets, net 2 | ||||||||
| Deferred income taxes | ||||||||
| Other assets | ||||||||
| Total other assets from discontinued operations | ||||||||
| Total assets from discontinued operations | $ | $ | ||||||
| Liabilities from discontinued operations | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities - other 3 | ||||||||
| Total current liabilities from discontinued operations | ||||||||
| Total noncurrent liabilities from discontinued operations | ||||||||
| Total liabilities from discontinued operations | $ | $ | ||||||
| 1 |
| June 27, 2026 | December 27, 2025 | |||||||
| Projects under construction | $ | $ | ||||||
| Property and equipment | ||||||||
| Less accumulated depreciation | ||||||||
| Total property and equipment, net, from discontinued operations | $ | $ | ||||||
| 2 | The Company’s intangible assets consisted of the following (in $000s): |
| June 27, 2026 | December 27, 2025 | |||||||
| Soin intangible | $ | $ | ||||||
| Intangible assets | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets | $ | $ | ||||||
Amortization
expense was $
| 15 |
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)
3 The Company’s accrued liabilities consisted of the following (in $000s):
| June 27, 2026 | December 27, 2025 | |||||||
| Due to Dr. Soin | $ | $ | ||||||
| Total accrued expenses | $ | $ | ||||||
In accordance with the provisions of ASC 360-10 and 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 this entity for the 26 weeks ended June 27, 2026 and June 28, 2025 have been reflected as discontinued operations in the consolidated statements of operations and comprehensive income (loss) and consist of the following (in $000s):
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses from discontinued operations: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses from discontinued operations | ||||||||||||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) from discontinued operations | ||||||||||||||||
| Total other income (loss), net | $ | $ | ||||||||||||||
| Loss before provision for income taxes from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
In accordance with the provisions of ASC 360-10 and ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the 26 weeks ended June 27, 2026 and June 28, 2025 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following (in $000s):
| 26 weeks ended | ||||||||
| June 27, 2026 | June 28, 2025 | |||||||
| DISCONTINUED OPERATING ACTIVITIES: | ||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Depreciation and amortization | ||||||||
| Noncash expense funded by parent | ||||||||
| Change in deferred taxes | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaids and other current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities from discontinued operations | $ | ( | ) | $ | ||||
| DISCONTINUED INVESTING ACTIVITIES: | ||||||||
| Net cash used in investing activities from discontinued operations | $ | $ | ||||||
| DISCONTINUED FINANCING ACTIVITIES: | ||||||||
| Net cash used in financing activities from discontinued operations | $ | $ | ||||||
| Effect of changes in exchange rate on cash and cash equivalents | ||||||||
| DECREASE IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENTS, beginning of period | ||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | $ | ||||||
| 16 |
Note 5: Trade and other receivables
The Company’s trade and other receivables as of June 27, 2026 and December 27, 2025, respectively, were as follows (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Other receivables | $ | $ | ||||||
| Trade and other receivables, net | $ | $ | ||||||
Note 6: Prepaids and other current assets
Prepaids and other current assets as of June 27, 2026 and December 27, 2025 consist of the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Prepaid licensing | $ | $ | ||||||
| Prepaid consulting | ||||||||
| Prepaid legal | ||||||||
| Prepaid purchase commitments | ||||||||
| Prepaid rent | ||||||||
| Prepaid insurance | ||||||||
| Prepaid credit card | ||||||||
| Prepaid other | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
Note 7: Property and Equipment
Property and equipment as of June 27, 2026 and December 27, 2025 consist of the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Computer equipment | ||||||||
| Property and equipment | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
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 non-cancellable 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.
| 17 |
The following table details the Company’s right of use assets and lease liabilities as of June 27, 2026 and December 27, 2025 (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Right of use asset - operating leases | $ | $ | ||||||
| Lease liabilities: | ||||||||
| Current - operating | ||||||||
| Long term - operating | $ | $ | ||||||
As
of June 27, 2026, the weighted average remaining lease term for operating leases is
Total present value of future lease payments of operating leases as of June 27, 2026 (in $000’s):
| Twelve months ended | ||||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | ||||
| Less implied interest | ( | ) | ||
| Present value of payments | $ |
Note 9: WLFI Treasury Program
The
WLFI treasury program was initiated on August 12, 2025, with purchases executed in
| ● | Tranche
1: | |
| ● | Tranche
2: |
All acquisitions were executed through on-chain transactions and direct Token Purchase Agreements with the WLFI Foundation. The Company did not hold any WLFI tokens prior to August 12, 2025.
The outstanding units, cost basis, and fair value as of June 27, 2026 were as follows (in $000’s, except for units):
| Units | Cost Basis | Fair Value | ||||||||||
| Balance, June 27, 2026: | ||||||||||||
| WLFI | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
The following table presents a reconciliation of WLFI assets to fair value as of June 27, 2026 (in $000’s):
| June 27, 2026 | ||||
| Fair value, December 27, 2025 | $ | |||
| Additions | ||||
| Redemptions | ||||
| Fees paid | ||||
| Subtotal | ||||
| Unrealized loss | ||||
| Fair value, June 27, 2026 | $ | |||
| 18 |
During
the 26 weeks ended June 27, 2026, the Company recognized an unrealized loss of approximately $
Note 10: Intangible Assets
Intangible assets as of June 27, 2026 and December 27, 2025 consist of the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Noncompete agreements | $ | $ | ||||||
| Qoden intangible | ||||||||
| Patents and domains | ||||||||
| Trade names | ||||||||
| Customer relationships | ||||||||
| Block Street intangible | ||||||||
| Developed technology | ||||||||
| Intangible assets | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets | $ | $ | ||||||
Intangible
amortization expense was $
Block Street
Effective on April 20, 2026, the Company entered into an agreement to purchase all of the outstanding capital stock of Block Street which operates a platform designed to support token issuances aligned with applicable regulatory frameworks and the tokenization of real-world assets. Block Street’s capabilities have not yet been deployed commercially and Block Street has not generated revenues to date. The Company will amortize the intangible assets over a ten (10)-year period when the assets are placed in service (see Note 3).
Mswipe
Effective on May 9, 2025, the Company 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 (see Note 3).
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 a two (2)-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 of
Note 11: Goodwill
The following table details the Company’s goodwill as of June 27, 2026 and December 27, 2025 (in $000’s):
| Fintech | Biotech | Corporate and Other | Total | |||||||||||||
| December 27, 2025 | ||||||||||||||||
| June 27, 2026 | $ | $ | $ | $ | ||||||||||||
The
Company accounts for purchased goodwill and intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Goodwill
recognized during the 39 weeks ended September 27, 2025 was approximately $
| 19 |
Note 12: Accrued Liabilities
Accrued liabilities as of June 27, 2026 and December 27, 2025 consist of the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Compensation and benefits | $ | $ | ||||||
| Accrued guarantees | ||||||||
| Accrued settlements | ||||||||
| Accrued interest | ( | ) | ||||||
| Accrued professional fees | ||||||||
| Accrued Qoden payments | ||||||||
| Accrued litigation/legal | ||||||||
| Customer deposits | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
Note 13: Debentures
Debentures outstanding as of June 27, 2026 and December 27, 2025 consisted for the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Interest
rate of | $ | $ | ||||||
| Total debentures | $ | $ | ||||||
ALT5
Subsidiary issued
During
March 2026,
Note 14: Debt
Long-term debt as of June 27, 2026 and December 27, 2025 consisted of the following (in $000’s):
| June 27, 2026 | December 27, 2025 | |||||||
| Fixed deposits | $ | $ | ||||||
| WLFI loan | ||||||||
| Unaffiliated third-party | ||||||||
| Seller notes | ||||||||
| Total notes payable, related parties | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Total long-term notes payable, related parties | $ | $ | ||||||
Fixed Deposits
The
Company entered into several Corporate Fixed Deposit Agreements with otherwise unaffiliated third-parties, pursuant to which the Company
became obligated for an aggregate of $
| 20 |
WLFI Loan Agreement
On January 29, 2026, we, through our indirect, wholly-owned subsidiary, ALT5 Digital Holdings, Inc. (“ALT5 Digital” or the “Borrower”), entered into a Master Loan and Security Agreement (the “Loan Agreement”) with WLFI. Zachary Witkoff, Chairman of our Board, is the Chief Executive Officer and Co-Founder of WLFI, and Zachary Folkman, a member of our Board, is the Co-Founder of WLFI.
The
Loan Agreement provides for collateralized loans in the aggregate principal amount of $
The Loan Agreement includes customary representations, warranties, covenants, risk disclosures relating to digital asset collateral, and other terms and conditions customary for transactions of this type, including provisions regarding public disclosure, successor and assignment rights, modification and waiver, notices, and interpretation. The governing law for the Loan Agreement and related documents (other than UCC matters) is the law of the State of Delaware, and disputes are subject to binding arbitration administered by the International Centre for Dispute Resolution seated in Miami, Florida.
On
January 29, 2026, the Borrower drew down the entire $
As of March 28, 2026, the Company pledged , with an additional pledged in the 13 weeks ended June 27, 2026, for a total of WLFI tokens as collateral as of June 27, 2026.
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 $, 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 $
Big/Small Debentures
On
August 20, 2024, the Company entered into
| 21 |
The
Debentures are unsecured and subordinated to any existing or future debt. The Debentures bear interest at a rate of (i)
The
Big Debenture was issued with an original issue discount (an “OID”) initially of $
The
Small Debentures were issued with an OID initially of $
As
of November 1, 2024, the first of the
The
Big Warrant is exercisable, at an exercise price of $
The
Small Warrant is exercisable, at an exercise price of $
As of November 1, 2024, the contingent second tranche of the Warrants vested.
Except
as disclosed with respect to the final tranche of the Big Warrant, each Investor is required to exercise the initial tranche of each
Warrant within
| 22 |
During
the quarter ended June 28, 2025, one of the two non-affiliated Investors exercised the remainder of the Small Warrant for a total of
shares (see Note 17). During the fourth quarter of the year ended December 28, 2024, the non-affiliated Investor exercised the
Big Warrant for a total of shares of the Company’s common stock, and the other two non-affiliated Investors exercised the
Small Warrant for a total of 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 $
Note 15: 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 and one 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 $
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, which the Court granted with leave for Plaintiffs to file a second amended complaint. Plaintiffs filed their Second Amended Complaint on October 31 2024. On December 16, 2024, the Company filed a Motion to Dismiss, which the Court denied. Thereafter, the Company filed an answer to the Second Amended Complaint. The Company strongly disputes and denies all of the allegations contained therein and will continue to defend itself vigorously against the claims.
| 23 |
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 $
Gulf Coast Bank and Trust vs. ALT5 Sigma Corporation, et al.
In
a matter in the United States District Court for the State of Minnesota, Hennepin County, Case No. 27-CV-24-340, styled as Gulf Coast
Bank and Trust Company, Plaintiffs, v ARCA Recycling, Inc., JanOne Inc., and Virland A. Johnson, Defendants; plaintiff sought the
payment of approximately $
Virland Johnson Bankruptcy
On August 14, 2025, the Company received a Summons and Complaint in an Adversary Proceeding (the “Complaint”) filed on August 6, 2025 in connection with the Chapter 7 bankruptcy proceeding titled In re Virland Johnson, No. 2:24-bk-00226-BKM, pending in the United States Bankruptcy Court for the District of Arizona and involving the Company’s former Chief Financial Officer, Virland Johnson. The Complaint alleges that Mr. Johnson had been awarded in October 2023 restricted stock units entitling him to receive shares of the Company’s common stock under the Company’s 2023 Equity Incentive Plan. According to the Complaint, Mr. Johnson did not disclose the existence of the stock award in his January 11, 2024 Chapter 7 bankruptcy petition or accompanying disclosure schedules. The Complaint alleges that the common stock may not have been delivered to Mr. Johnson, may have been assigned by Mr. Johnson to the Company or another unknown assignee, may have been sold by Mr. Johnson, or may even continue to be held by Mr. Johnson. Through the Complaint, the U.S. Trustee seeks to recover the common stock or, if it is no longer available, the equivalent value from the Company on behalf of the bankruptcy estate. On September 30, 2025 the Company filed its Answer to the Complaint and denied the allegations of any wrongdoing by the Company. The Company disputes the allegations concerning the Company and will continue to defend itself vigorously against the claims.
First Capital Consulting, Inc. DBA Trusaic vs. ALT5 Sigma Corporation
In
a matter in the Los Angeles, California Superior Court Case No. 24STCV02261, styled as First Capital Consulting, Inc., Plaintiff
v ALT5 Sigma Corporation, ARCA Recycling, Inc., Customer Connexx LLC; and DOES 3 through 10, inclusive, Defendants; plaintiff is
seeking $
| 24 |
Judgment in Rwanda
ALT
5 Sigma Canada Inc., our indirect-, wholly-owned second-tier Canadian subsidiary, is the subject of certain legal proceedings in the
Rwanda judicial system stemming from issues that allegedly occurred in 2023, prior to the Company’s acquisition of the ALT 5
Subsidiary (and, indirectly, the Canadian subsidiary). At stake in those proceedings is US$
Other Commitments
On
December 30, 2017, the Company disposed of its retail appliance segment and sold ApplianceSmart to Live Ventures Incorporated (“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 $
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 June 27, 2026.
Note 16: Registered Direct Offering
Registered Direct Offering
On or about August 12, 2025, the Company entered into securities purchase agreements (the “Registered Offering Purchase Agreements”) with certain institutional investors, pursuant to which the Company agreed to issue to the Purchasers (as defined therein), in a registered direct offering (the “Registered Offering”), an aggregate of shares of the Company’s common stock, par value $ per share (“Common Stock”), at a purchase price of $ per share.
The
Company intends to use up to $
| 25 |
Private Placement Offering
Also,
on August 12, 2025, the Company consummated transactions resulting from a Securities Purchase Agreement (the “Private Placement
Purchase Agreement” and, together with the Registered Offering Purchase Agreements, the “Purchase Agreements”), with
the Lead Investor, pursuant to which the Company received $
Pursuant
to the Private Placement Purchase Agreement, the Lead Investor was issued Common Stock Purchase Warrants (the “Lead Investor Warrants”)
to purchase up to
The issuance and sale of the PIPE Shares, the PIPE Pre-Funded Warrants, the Lead Investor Warrants, and the Lead Investor Shares (collectively, the “PIPE Securities”) were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws. The PIPE Securities were, or will be, as relevant, issued in reliance on the exemption from registration provided by Section 4(a)(2) under the Securities Act and/or Regulation D promulgated thereunder for transactions not involving a public offering. Pursuant to the terms of the Registration Rights Agreement (as defined herein), the Company is required to file a registration statement providing for the resale of the PIPE Securities within 15 days of the closing of the Private Placement. As of the date of this Quarterly Report, the registration statement has not yet been filed.
The
Registered Offering resulted in gross proceeds of $
Pursuant to the Purchase Agreements, the Company has agreed not to issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents, or file any registration statement or any amendment or supplement thereto, for a period of thirty (30) days after the initial registration statement was declared effective, subject to certain customary exceptions, including the use of the Sales Agreement (as defined herein), without the consent of the Purchasers, the Lead Investor, and the Placement Agent.
Placement Agency Agreements
The
Company entered into a Placement Agency Agreement with A.G.P./Alliance Global Partners (the “Placement Agent”), dated August
11, 2025, pursuant to which the Placement Agent acted as the exclusive placement agent for the Company in connection with the Registered
Offering (the “RD Placement Agency Agreement”). Pursuant to the RD Placement Agency Agreement, the Company paid the Placement
Agent a cash fee of
| 26 |
The
Company also entered into a Placement Agency Agreement with the Placement Agent, dated August 11, 2025, pursuant to which the Placement
Agent acted as the exclusive placement agent for the Company in connection with the Private Placement (the “PIPE Placement Agency
Agreement”). Pursuant to the PIPE Placement Agency Agreement, the Company paid the Placement Agent (or its designees) a cash fee
of (i) $
The issuance of the Placement Agent Warrants and the shares of Common Stock underlying the Placement Agent Warrants (the “Placement Agent Warrant Shares”) will not be registered under the Securities Act or any state securities laws. The Placement Agent Warrant Shares will be issued in reliance on the exemption from registration provided by Section 4(a)(2) under the Securities Act and/or Regulation D promulgated thereunder for transactions not involving a public offering.
The Placement Agency Agreement contains customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties, and termination provisions.
On
December 30, 2025, the Company entered into an agreement (the “Placement Agent Subsequent Agreement”) with the Placement
Agent that modified certain of the terms of the Placement Agent Agreements. The parties agreed, subject to certain limitations, to extend
the Placement Agent’s irrevocable right of first refusal to act as sole investment banker, sole book-runner, sole sales agent,
and/or sole placement agent, at its sole discretion, for the Company’s future public and private equity and debt offering, including
all equity linked financings, through December 31, 2026, on terms customary to the Placement Agent. The fee tail period, as provided
in the Placement Agent Agreements, was also extended from August 12, 2026 through December 31, 2026. In connection with such extensions,
the Placement Agent (i) paid the Company the sum of one million dollars and (ii) agreed that, once it has received one million dollars
in fees paid to it by the Company with respect to any financing consummated during the extended right of first refusal period or in respect
of the extended fee tail period, the Company may allocate
In connection with the Placement Agent Subsequent Agreement, on December 26, 2025, the Company entered into an agreement with Keefe,
Bruyette & Woods, Inc. (“KBW”), that superseded and terminated the parties’ May 14, 2025 and June 16, 2025, agreements,
which provided that KBW would render certain financial advisory and investment banking services to the Company. Under this agreement,
the Company agreed to pay to KBW the sum of
Registration Rights Agreement
On or about August 11, 2025, the Company and the Lead Investor entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to file a registration statement (the “Resale Registration Statement”), providing for the resale of the PIPE Securities within 15 days of the closing of the Private Placement, to have such registration statement declared effective with 30 days of the filing date (or 60 days, if the SEC conducts a full review) (the date of such effectiveness, the “Effective Date”), and to maintain the effectiveness of such registration statement. As of the date of this Quarterly Report, the registration statement has not yet been filed.
Asset Management Agreement
Further, on or about August 11, 2025 (the “AMA Commencement Date”), the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with Kraken (the “Asset Manager”), pursuant to which the Asset Manager agreed to provide discretionary investment management services with respect to the Company’s cryptocurrency treasury. The term of the Asset Management Agreement was for thirty (30) days renewable upon the mutual consent of the parties. The Asset Manager received a nominal fee as compensation for its services under the Asset Management Agreement, which was not renewed.
| 27 |
Lock-Up Agreements
Pursuant to the Purchase Agreements, the Company will not issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents, or file any registration statement or any amendment or supplement thereto, for a period of 30 days after the Effective Date, subject to certain customary exceptions, including the use of the Sales Agreement (as defined herein), without the consent of the Purchasers, the Lead Investor and the Placement Agent.
In
addition, each of the Company’s directors and executive officers are subject to a lock-up agreement, which prohibits them from
offering for sale, pledging, announcing the intention to sell, selling, contracting to sell, granting any option, right or warrant to
purchase, or otherwise transferring or disposing of,
Common Stock: Our Articles of Incorporation authorize billion 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 June 28, 2026 and June 28, 2025, shares of common stock were issued in lieu of professional services.
During the quarter ended June 27, 2026, the Company issued shares of its common stock for the acquisition of Block Street.
During
the quarter ended June 28, 2025, the Company issued shares of its common stock to one individual under the Company’s 2023
Equity Incentive Plan. The aggregate value of the shares at issuance was approximately $
During the quarter ended June 28, 2025, the Company issued shares of its common stock to a non-affiliated third-party in exchange for brokerage services rendered.
During
the quarter ended June 28, 2025, the Company issued an aggregate of restricted stock units to Tony Isaac, the Company’s
President. of the restricted stock units were issued from the Company’s 2024 Plan and were issued from the Company’s
2023 Plan. The aggregate value of the shares at issuance was approximately $
During
the quarter ended June 28, 2025, pursuant to the terms and conditions of a related party promissory note, the Company converted approximately
$
During
the quarter ended June 28, 2025, pursuant to the terms and conditions of a related party promissory note, the Company converted approximately
$
On
May 15, 2025, pursuant to the terms and conditions of a promissory note, the Company converted approximately $
On May 9, 2025, the Company acquired Mswipe. As consideration under the acquisition, the Company issued shares of its common stock to the sellers of Mswipe (see Note 3).
On May 2, 2025, the Company entered into a licensing agreement with a non-affiliated third-party, pursuant to which the third-party will provide software licensing and support to the Company. In connection with the agreement, the Company issued to the third-party shares of its common stock.
During the quarter ended March 29, 2025, the Company issued shares of its common stock related to the exercise of warrants under the Small Debenture (see Note 14).
| 28 |
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 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 shares of the Company’s common stock.
On January 15, 2025, the Company entered into a six-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 shares of its common stock.
As of June 27, 2026, and December 27, 2025, there were and shares, respectively, of common stock issued and outstanding, net of shares held in Treasury of as of June 27, 2026.
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 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 June 28, 2026, there were no 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 () 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 June 28, 2026 and June 28, 2025, the Company recognized $ and $ in share-based compensation expense related to the 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 to . The vesting period is determined by the Board of Directors at the time of the stock option grant. As of June 28, 2026 and December 27, 2025, 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 June 28, 2026 and December 27, 2025, 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 were no stock options granted during the 13 weeks ended June 27, 2026.
| 29 |
Options Outstanding | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life | |||||||||||||
| Outstanding at December 27, 2025 | $ | $ | ||||||||||||||
| Outstanding at March 28, 2026 | $ | $ | ||||||||||||||
| Outstanding at June 27, 2026 | $ | $ | ||||||||||||||
| Exercisable at June 27, 2026 | $ | $ | ||||||||||||||
The Company recognized $ and $ in share-based compensation expense related to restricted stock units for the 13 weeks ended June 27, 2026 and June 28, 2025, respectively, and $ and $ for the 26 weeks ended June 27, 2026 and June 28, 2025, respectively.
As of June 27, 2026, the Company had unrecognized share-based compensation expense associated with equity awards.
Series I Convertible Preferred Stock
Shares
of Series I Preferred Stock are convertible into the Company’s common shares at a ratio of
Series Q Convertible Preferred Stock
Shares
of Series Q Preferred Stock are convertible into the Company’s common shares at a ratio of
Series S Preferred Stock
On
December 28, 2022 the Company acquired Soin Therapeutics LLC, by way of a triangular merger. In connection with this transaction,
with a potential value of up to $
Series V Convertible Preferred Stock
Shares
of Series V Preferred Stock are convertible into the Company’s common shares at a ratio of
Note 18: Mezzanine Equity
During
the year ended December 28, 2024, the Company reclassified approximately $
| 30 |
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, warrants, and convertible preferred stock.
| For the Thirteen Weeks Ended | For the Twenty-Six Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||
| Continuing Operations | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic and diluted loss per share from continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Discontinued Operations | ||||||||||||||||
Basic and diluted | ||||||||||||||||
| Net loss from discontinuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
Basic and diluted loss per share from discontinuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Total | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic and diluted loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Potentially dilutive securities totaling approximately million and million were excluded from the calculation of diluted earnings per share for the 13 weeks ended June 27, 2026 and June 28, 2025, respectively, and million and million were excluded from the calculation of diluted earnings per share for the 26 weeks ended June 27, 2026 and June 28, 2025, respectively, because the effects were anti-dilutive.
Note 20: Income Taxes
The
Company recorded an income tax benefit from continuing operations of approximately $
Note 21: Segment Information
The
Company operates within targeted markets through
| 31 |
The following tables present the Company’s segment information for the 13 and 26 weeks ended June 27, 2026 and June 28, 2025 (in $000’s):
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | June 27, 2026 | June 28, 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Fintech | $ | $ | $ | $ | ||||||||||||
| Corporate and other | ||||||||||||||||
| Discontinued operations | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||||
| Fintech | $ | $ | $ | $ | ||||||||||||
| Corporate and other | ||||||||||||||||
| Discontinued operations | ||||||||||||||||
| Total Gross profit | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ||||||||||||||||
| Fintech | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Corporate and other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Depreciation and amortization | ||||||||||||||||
| Fintech | $ | $ | $ | $ | ||||||||||||
| Corporate and other | ||||||||||||||||
| Discontinued operations | ||||||||||||||||
| Total Depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Interest expense, net | ||||||||||||||||
| Fintech | $ | $ | $ | $ | ||||||||||||
| Corporate and other | ||||||||||||||||
| Discontinued operations | ||||||||||||||||
| Total Interest expense, net | $ | $ | $ | $ | ||||||||||||
| Net loss before income taxes | ||||||||||||||||
| Fintech | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Corporate and other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total net loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Note 22: Related Parties
Shared Services
Tony
Isaac, the Company’s President, 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 is a member 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 $
| 32 |
Note 23: Subsequent Events
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:
Sale of ALT5 Sigma Canada, Inc.
On
July 29, 2026, the Company and its first tier, wholly -(a Delaware corporation referenced in Note 1 as the “ALT5 Subsidiary”),
owned subsidiary, Alt 5 Sigma, Inc., entered into an Acquisition Agreement with Prime Delta Corp., a Delaware corporation (“Prime
Delta”), pursuant to which the Alt 5 Subsidiary sold to Prime Delta all of the issued and outstanding shares of Alt 5 Sigma Canada,
Inc. (“Alt 5 Canada”; referenced in these Notes as our indirect, wholly-owned second tier Canadian subsidiary), through which
the Company conducted its payments business. In exchange, the Company received the following consideration: (i) a four (
The Prime Delta Note is secured by substantially all of the assets of Prime Delta and is guaranteed by certain affiliates of Prime Delta. In connection with the transaction, the Company assigned to Prime Delta the “Alt 5” and “Alt 5 Sigma” trademarks and related rights, agreed to cease use of those names, and agreed to change the names of its subsidiaries whose legal names include “Alt 5” within 90 days following the closing.
Additionally, through counsel for Prime Delta, the Company may offer the holders of its Series B Preferred Stock the opportunity to redeem their shares of Series B Preferred Stock, on a consensual basis, in exchange for their pro rata share of up to shares of Prime Delta Stock, on a one share of Series B Preferred Stock -for-one share of Prime Delta Stock basis. No such redemption offer has commenced and no documentation has been prepared or filed, as applicable.
Amendments to Promissory Notes and Warrants
Effective
July 7, 2026, the Company entered into Extension and First Amendment Agreements with the holders of ten promissory notes with an
aggregate principal amount of CAD$
Concrete Agreement
On July 30, 2026, Alt5 Digital Holdings, Inc., a Wyoming corporation and indirect, wholly-owned subsidiary of the
Company (“Alt5 Digital”), and Concrete Network Services Ltd, a BVI business company (“Concrete”), entered into
a two-year Master Services Agreement (the “Agreement”), pursuant to which the parties determined that Concrete would provide
certain services to Alt 5 Digital through two separate Statements of Work (the “SOWS”). The services are generally described
as vault infrastructure and related services on an exclusive basis in respect of $
| 33 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Dollars stated in thousands, except per–share amounts.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of Exchange Act, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as ‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates’’ or ‘‘anticipates’’ or similar expressions that concern our strategy, plans or intentions. Any statements we make relating to our future operations, performance and results, and anticipated liquidity are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Quarterly Report on Form 10-Q, are disclosed in “Item 1-Business, Item 1A – Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 27, 2025, and Part II, Item 1A of this Report.
We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Our MD&A should be read in conjunction with our Form 10-K (including the information presented therein under the caption Risk Factors), together with our Quarterly Reports on Forms 10-Q and other publicly available information. All amounts herein are unaudited.
Our Company
Through our Fintech segment, we provide next generation blockchain-powered technologies to enable a migration to a new global financial paradigm, and, through our Biotechnology segment, we are focused on finding treatments for conditions that cause chronic pain and bringing to market drugs with non-addictive and non-sedative pain-relieving properties.
During the periods disclosed in this Quarterly Report, we operated three reportable segments:
Fintech
Our Fintech segment provides next generation blockchain-powered technologies for tokenization, trading, clearing, settlement, payment, and safe-keeping of digital assets
Biotechnology
Our Biotechnology segment is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties. 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 to decouple it from us so that it would operate on a stand-alone basis. The Biotech segment is being presented as discontinued operations for the 13 and 26 weeks ended June 27, 2026 and June 28, 2025.
| 34 |
Corporate and Other
In August 2025, we closed a $1.5 billion registered direct offering and concurrent private placement to launch our WLFI Treasury Strategy. This “capital with a purpose” financing positioned the Company as one of the most significant institutional holders of WLFI, securing a meaningful stake in the native governance token of the World Liberty Financial ecosystem.
Our policy remains a committed long-term “HODL” approach, with future acquisitions funded through operating cash flows, structured debt, and selective capital raises. Sales are restricted to liquidity requirements or material portfolio rebalancing events.
Our Corporate and Other segment consists of WLFI assets, including any additions, redemptions, or mark-to-market changes in value, are recorded within the Company’s Corporate and Other segment.
Our Corporate and Other segment consists of certain corporate general and administrative costs.
For the Thirteen Weeks Ended June 27, 2026 and June 28, 2025
Results of Operations
The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated (in $000’s):
| 13 Weeks Ended | 13 Weeks Ended | |||||||
| June 27, 2026 | June 28, 2025 | |||||||
| Statement of Operations Data: | ||||||||
| Revenue | $ | 2,414 | $ | 6,378 | ||||
| Gross profit | 2,355 | 2,775 | ||||||
| Selling, general and administrative expenses | 3,063 | 4,870 | ||||||
| Interest (expense), net | (570 | ) | (550 | ) | ||||
| Unrealized loss on cryptocurrency assets | (285,149 | ) | — | |||||
| Unrealized gain on exchange transactions | 41 | 211 | ||||||
| Realized gain (loss) on exchange transactions | 520 | (3,485 | ) | |||||
| Other (expense), net | 376 | (15 | ) | |||||
| Net loss from continuing operations before provision of income taxes | (285,490 | ) | (5,934 | ) | ||||
| Income tax provision (benefit) from continuing operations | 57,143 | (432 | ) | |||||
| Net loss from continuing operations | (228,347 | ) | (5,502 | ) | ||||
| Net loss from discontinued operations before provision of income taxes | $ | (1,210 | ) | $ | (657 | ) | ||
| Income tax expense from discontinued operations | — | 2,956 | ||||||
| Net loss from discontinued operations | $ | (1,210 | ) | $ | (3,613 | ) | ||
| Net loss | $ | (229,557 | ) | $ | (9,115 | ) | ||
The following tables set forth revenues for key product and service categories, percentages of total revenue and gross profits earned by key product and service categories and gross profit percent as compared to revenues for each key product category indicated (in $000’s):
| 13 Weeks Ended | 13 Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | |||||||||||||||
| Net Revenue | Percent of Total | Net Revenue | Percent of Total | |||||||||||||
| Revenue | ||||||||||||||||
| Fintech | $ | 2,414 | 100.0 | % | $ | 6,378 | 100.0 | % | ||||||||
| Corporate & Other | — | — | % | — | — | % | ||||||||||
| Discontinued operations | — | — | % | — | — | % | ||||||||||
| Total revenue | $ | 2,414 | 100.0 | % | $ | 6,378 | 100.0 | % | ||||||||
| 35 |
| 13 Weeks Ended | 13 Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | |||||||||||||||
| Gross Profit | Gross Profit Percentage | Gross Profit | Gross Profit Percentage | |||||||||||||
| Gross Profit | ||||||||||||||||
| Fintech | $ | 2,355 | 97.6 | % | $ | 2,775 | 43.5 | % | ||||||||
| Corporate & Other | — | — | % | — | — | % | ||||||||||
| Discontinued operations | — | — | % | — | — | % | ||||||||||
| Total gross profit | $ | 2,355 | 97.6 | % | $ | 2,775 | 43.5 | % | ||||||||
Revenue
Revenue decreased by approximately $4.0 million for the 13 weeks ended June 27, 2026, as compared to the 13 weeks ended June 28, 2025. The decrease is due to the loss of a large customer.
Gross Profit
Gross profit decreased by approximately $0.4 million for the 13 weeks ended June 27, 2026, as compared to the 13 weeks ended June 28, 2025. The decrease is primarily due to the loss of a large customer.
Selling, General and Administrative Expense
Selling, general and administrative expenses decreased by approximately $1.8 million for the 13 weeks ended June 27, 2026, as compared to the 13 weeks ended June 28, 2025, primarily due to lower labor costs and the higher costs due to the acquisition of Mswipe in 2025.
Unrealized Loss on Cryptocurrency Assets
Unrealized loss on cryptocurrency assets for the 13 weeks ended June 27, 2026 was approximately $285.1 million. An unrealized gain or loss on cryptocurrency assets was recorded to mark the fair value of the WLFI tokens.
Segment Performance
We report our business in the following segments: Fintech, Biotechnology and Corporate and Other. During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. Consequently, the Biotech segment is being presented as discontinued operations for the 13 weeks ended June 27, 2026 and June 28, 2025.
| 36 |
Operating loss by operating segment, is defined as loss before net interest expense, other income and expense, provision for income taxes ($000’s).
| 13 Weeks Ended June 27, 2026 | 13 Weeks Ended June 28, 2025 | |||||||||||||||||||||||||||||||
| Fintech | Corporate and Other | Biotech (Discontinued Operations) | Total | Fintech | Corporate and Other | Biotech (Discontinued Operations) | Total | |||||||||||||||||||||||||
| Revenue | $ | 2,414 | $ | — | $ | — | $ | 2,414 | $ | 6,378 | $ | — | $ | — | $ | 6,378 | ||||||||||||||||
| Cost of revenue | 59 | — | — | 59 | 3,603 | — | — | 3,603 | ||||||||||||||||||||||||
| Gross profit | 2,355 | — | — | 2,355 | 2,775 | — | — | 2,775 | ||||||||||||||||||||||||
| Selling, general and administrative expense | (263 | ) | 3,326 | 1,210 | 4,273 | 3,854 | 1,016 | 657 | 5,527 | |||||||||||||||||||||||
| Operating income (loss) | $ | 2,618 | $ | (3,326 | ) | $ | (1,210 | ) | $ | (1,918 | ) | $ | (1,079 | ) | $ | (1,016 | ) | $ | (657 | ) | $ | (2,752 | ) | |||||||||
Fintech Segment
Our Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024, as well as Mswipe, which was acquired during May 2025. Revenue for the 13 weeks ended June 28, 2026 was approximately $2.4 million, and gross margin percentage was 97.6%. Operating income for the fiscal year ended 13 weeks ended June 27, 2026 was approximately $2.6 million.
Corporate and Other Segment
Our Corporate and Other segment generated no revenue for the for the 13 weeks ended June 27, 2026 and the 13 weeks ended June 28, 2025. Selling, general and administrative expenses increased primarily due to increased labor costs.
Biotechnology Segment
During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. Consequently, the Biotech segment is being presented as discontinued operations for the 13 weeks ended June 27, 2026 and June 28, 2025. Our Biotech segment generated no revenue for the 13 weeks ended June 27, 2026 and the 13 weeks ended June 28, 2025. Selling, general and administrative expenses increased $0.5 million due to increased research and development expenses.
| 37 |
For the Twenty-six Weeks Ended June 27, 2026 and June 28, 2025
Results of Operations
The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated (in $000’s):
| 26 Weeks Ended | 26 Weeks Ended | |||||||
| June 27, 2026 | June 28, 2025 | |||||||
| Statement of Operations Data: | ||||||||
| Revenue | $ | 7,126 | $ | 11,892 | ||||
| Gross profit | 5,929 | 5,366 | ||||||
| Selling, general and administrative expenses | 9,380 | 9,091 | ||||||
| Interest expense, net | (1,076 | ) | (1,270 | ) | ||||
| Unrealized loss on cryptocurrency assets | (633,450 | ) | — | |||||
| Unrealized gain on exchange transactions | — | 298 | ||||||
| Realized gain on exchange transactions | (5,562 | ) | (3,177 | ) | ||||
| Other income (expense), net | 1,654 | (96 | ) | |||||
| Loss from continuing operations before provision of income taxes | (641,885 | ) | (7,970 | ) | ||||
| Income tax provision (expense) from continuing operations | 142,223 | (147 | ) | |||||
| Net loss from continuing operations | $ | (499,662 | ) | $ | (7,823 | ) | ||
| Loss from discontinued operations before provision of income taxes | (1,387 | ) | (1,197 | ) | ||||
| Income tax expense from discontinued operations | — | 2,956 | ||||||
| Net loss from discontinued operations | $ | (1,387 | ) | $ | (4,153 | ) | ||
| Net loss | $ | (501,049 | ) | $ | (11,976 | ) | ||
The following tables set forth revenues for key product and service categories, percentages of total revenue and gross profits earned by key product and service categories and gross profit percent as compared to revenues for each key product category indicated (in $000’s):
| 26 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | |||||||||||||||
| Net Revenue | Percent of Total | Net Revenue | Percent of Total | |||||||||||||
| Revenue | ||||||||||||||||
| Fintech | $ | 7,126 | 100.0 | % | $ | 11,892 | 100.0 | % | ||||||||
| Corporate & Other | — | — | % | — | — | % | ||||||||||
| Discontinued operations | — | — | % | — | — | % | ||||||||||
| Total revenue | $ | 7,126 | 100.0 | % | $ | 11,892 | 100.0 | % | ||||||||
| 26 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 27, 2026 | June 28, 2025 | |||||||||||||||
| Gross Profit | Gross Profit Percentage | Gross Profit | Gross Profit Percentage | |||||||||||||
| Gross Profit | ||||||||||||||||
| Fintech | $ | 5,929 | 83.2 | % | $ | 5,366 | 45.1 | % | ||||||||
| Corporate & Other | — | — | % | — | — | % | ||||||||||
| Discontinued operations | — | — | % | — | — | % | ||||||||||
| Total gross profit | $ | 5,929 | 83.2 | % | $ | 5,366 | 45.1 | % | ||||||||
Revenue
Revenue decreased by approximately $4.8 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025. The decrease is due to the loss of a major customer.
| 38 |
Gross Profit
Gross profit increased by approximately $0.6 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025. The increase is due to the loss of a large low margin customer.
Selling, General and Administrative Expense
Selling, general and administrative expenses increased by approximately $0.3 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025, the decrease is due an increase in professional fees in 2026 and due to higher costs due to the acquisition of Mswipe in 2025.
Interest Expense, net
Interest expense, net decreased by approximately $0.2 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025 primarily due to pay down of debt.
Unrealized Loss on Cryptocurrency Assets
Unrealized loss on cryptocurrency assets for the 26 weeks ended June 27, 2026 was approximately $633.5 million. An unrealized gain or loss on cryptocurrency assets was recorded to mark the fair value of the WLFI tokens.
Segment Performance
We report our business in the following segments: Fintech, Biotechnology and Corporate and Other. During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. As a result, the Biotech segment is being presented as discontinued operations for the 26 weeks ended June 27, 2026 and June 28, 2025.
Operating loss by operating segment, is defined as loss before net interest expense, other income and expense, provision for income taxes ($000’s).
| 26 Weeks Ended June 27, 2026 | 26 Weeks Ended June 28, 2025 | |||||||||||||||||||||||||||||||
| Fintech | Corporate and Other | Biotech (Discontinued Operations) | Total | Fintech | Corporate and Other | Biotech (Discontinued Operations | Total | |||||||||||||||||||||||||
| Revenue | $ | 7,126 | $ | — | $ | — | $ | 7,126 | $ | 11,892 | $ | — | $ | — | $ | 11,892 | ||||||||||||||||
| Cost of revenue | 1,197 | — | — | 1,197 | 6,526 | — | — | 6,526 | ||||||||||||||||||||||||
| Gross profit | 5,929 | — | — | 5,929 | 5,366 | — | — | 5,366 | ||||||||||||||||||||||||
| Selling, general and administrative expense | 4,949 | 4,431 | 1,387 | 10,767 | 5,611 | 2,283 | 1,197 | 9,091 | ||||||||||||||||||||||||
| Operating (loss) income | $ | 980 | $ | (4,431 | ) | $ | (1,387 | ) | $ | (4,838 | ) | $ | (245 | ) | $ | (2,283 | ) | $ | (1,197 | ) | $ | (3,725 | ) | |||||||||
Fintech Segment
Our Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024, as well as Mswipe, which was acquired during May 2025. Revenue for the 26 weeks ended June 27, 2026 was approximately $7.1 million, and gross margin percentage was 83.2%. Operating income for the fiscal year ended 26 weeks ended June 28, 2025 was approximately $1.0 million.
Corporate and Other Segment
Our Corporate and Other segment generated no revenue for the for the 26 weeks ended June 27, 2026 and the 26 weeks ended June 28, 2025. Selling, general and administrative expenses increased primarily due to increased costs for labor, accounting and public company expenses.
| 39 |
Biotechnology Segment
During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. As a result, the Biotech segment is being presented as discontinued operations for the 26 weeks ended June 27, 2026 and June 28, 2025. Our Biotech segment generated no revenue for the for the 26 weeks ended June 27, 2026 and the 26 weeks ended June 28, 2025. Selling, general and administrative expenses were primarily due to research and development expenses.
Liquidity and Capital Resources
Overview
As of June 27, 2026, our cash on hand net of reserve, was $3.1 million. Approximately $3.5 million of cash has been fully reserved in connection with the legal matter, further described in Note 15 to the consolidated financial statements. We intend to raise funds either through capital raises or structured arrangements, which would include effectuating our previously announced 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, although its financial statements would continue to be consolidated with ours for as long as we have a controlling interest.
Cash Flows
During the 26 weeks ended June 27, 2026, cash used in continuing operations was approximately $18.5 million, compared to cash used in continuing operations of approximately $6.7 million during the 26 weeks ended June 28, 2025. The decrease in cash was primarily due an unrealized loss on crypto currency assets offset by a change in deferred tax liability.
Cash used in investing activities for continued operations was $0.5 million for the 26 weeks ended June 27, 2026, compared to cash provided by investing activities of $0.1 million for the 26 weeks ended June 28, 2025. Cash provided by investing activities for the 26 weeks ended June 28, 2025 was related to the purchase of treasury shares offset by the acquisition of Mswipe, in 2025. There was no cash used in investing activities for discontinued operations during the 26 weeks ended June 27, 2026 or June 28, 2025.
Cash provided by financing activities was $10.7 million for the 26 weeks ended June 27, 2026, and relates to proceeds from notes payable, partially offset by purchases of short-term certificates of deposits and cash paid for notes payable. Cash provided by financing activities was approximately $3.7 million for the 26 weeks ended June 28, 2025, and relates to proceeds received from the issuance of notes payable, as well as warrants converted to our common stock, partially offset by cash paid for notes payable and related party notes payable. There was no cash provided by financing activities for discontinued operations during the 26 weeks ended June 27, 2026 or June 28, 2025.
Future Sources of Cash; Phase 2b Trials, New Acquisitions, Products, and Services
We may require additional debt financing and/or capital to finance new acquisitions, conduct our Phase IIb clinical trials for our Biotechnology segment, or consummate other strategic investments in our business. No assurance can be given any financing obtained may not further dilute or otherwise impair the ownership interest of our existing stockholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk and Impact of Inflation
Interest Rate Risk. We do not believe there is any significant risk related to interest rate fluctuations on our short and long-term fixed rate debt.
We do not hold any derivative financial instruments, nor do we hold any securities for trading or speculative purposes.
| 40 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure control and Procedures. We carried out an evaluation, under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 27, 2026, the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure due to material weaknesses in internal control over financial reporting further described below.
Despite the identified material weaknesses, management concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the financial position, results of operations and cash flows for the periods disclosed in conformity with GAAP. LJ Soldinger Associates, LLC, the Company’s independent registered public accounting firm, issued an unqualified opinion on our consolidated financial statements as of and for the year ended December 27, 2025. They were not engaged to perform, and did not perform, an audit of internal control over financial reporting. This material weakness has no impact on our consolidated financial statements in prior years.
Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, including our CEO and CFO, do not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting will prevent or detect all errors and all fraud. A control system, regardless of how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following: judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes, controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Our management assessed the effectiveness of our internal control over financial reporting as of June 27, 2026. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) of 2013 regarding Internal Control – Integrated Framework. Based on our assessment using those criteria, our management concluded that our internal control over financial reporting were not effective as of June 27, 2026. Management noted the following deficiencies that management believes to be material weaknesses:
| ● | The Company does not have a properly documented internal control system in accordance with the requirements of the Committee on Sponsoring Organizations (“COSO”) or some similarly appropriate internal control methodology or formal documentation of the Company’s systems of internal control. This control deficiency contributed to errors that necessitated a restatement of the Company’s 2024 consolidated financial statements and represents a material weakness in internal control over financial reporting. | |
| ● | The Company did not properly apply ASC 820 in valuing certain equity instruments issued as consideration in a business combination. The Company recorded and adjustment to correct the error. |
| 41 |
In response to the above identified weaknesses in our internal control over financial reporting, we plan to improve the documentation of our internal control policies and procedures and develop an internal testing plan to document our evaluation of effectiveness of the internal controls. We expect to conclude these remediation initiatives during the fiscal year ended December 26, 2026. We continue to evaluate testing of our internal control policies and procedures, including assessing internal and external resources that may be available to complete these tasks, but do not know when these tasks will be completed.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
| ● | The Company improperly recorded an adjustment that duplicated certain fees and overstated revenue. The Company recorded an adjustment to correct the error. | |
| ● | The Company used an incorrect grant-date fair value in measuring certain equity awards. The amount of the misstatement was not material. | |
| ● | The Company did not appropriately record certain qualifying equity issuance costs as a reduction of equity and instead recognized them in the income statement. The amount of the resulting misstatement was not material. |
This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Quarterly Report.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting identified in management’s evaluation pursuant to Rule 13a-15and 15d-15 of the Exchange Act that occurred during the fiscal year ended June 27, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 42 |
PART II. Other Information
Item 1. Legal Proceedings
The information in response to this item is included in Note 15, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of funds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information.
None.
| 43 |
Item 6. Exhibits.
Index to Exhibits
* Filed herewith.
| 44 |
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on our behalf by the undersigned, thereunto duly authorized.
| AI Financial Corporation | |||
| (Registrant) | |||
| Date: | August 17, 2026 | By: | /s/ Tony Isaac |
| Tony Isaac | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Date: | August 17, 2026 | By: | /s/Steven M. Plumb |
| Steven M. Plumb | |||
| Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
| 45 |