ATCH 10-K
AtlasClear Holdings, Inc. (ATCH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
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by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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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
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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.
| 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. ☐
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by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
As
of December 31, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter), the registrant’s
common stock Market Value held by non-affiliates was approximately $
As of September 22, 2026, there were shares of our Common Stock issued and outstanding, par value $ per share.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Unless the context otherwise requires, throughout this Annual Report on Form 10-K (“Annual Report”), the words “ATCH,” “we,” “us,” “AtlasClear Holdings,” or the “Company” refer to AtlasClear Holdings, Inc. and its subsidiaries (as applicable).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report and some of the information incorporated herein by reference includes forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. These statements are based on the beliefs and assumptions of our management. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “continues,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “might,” “will,” “should,” “could,” “seeks,” “plans,” “scheduled,” “possible,” “potential,” “predict,” “project,” “anticipates,” “intends,” “aims,” “works,” “focuses,” “aspires,” “strives” or “sets out” or similar expressions.
Forward-looking statements are not guarantees of performance, and the absence of these words does not mean that a statement is not forward looking. You should understand that the following important factors could affect our future results, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements herein:
| ● | our ability to realize the benefits expected from the Business Combination (as defined herein); | |
| ● | our ability to complete the acquisition of Commercial Bancorp of Wyoming (“Commercial Bancorp”); | |
| ● | our ability to complete the acquisitions of Ark Financial Services, Inc. (“Ark”), the holding company of Dawson James Securities, Inc. (“Dawson James”), or an institutional digital asset business and to realize the anticipated benefits thereof; | |
| ● | our ability to successfully integrate our acquisitions, including the proposed acquisitions of Commercial Bancorp and Ark, and to realize the synergies and benefits of such acquisitions; | |
| ● | our significant indebtedness and our ability to service such indebtedness; | |
| ● | the volatility of the price of our common stock, par value $0.0001 per share (the “Common Stock”) and the possibility that stockholders could incur substantial losses; | |
| ● | dilution of our stockholder interests resulting from our issuance of equity securities; | |
| ● | the ability to maintain the listing of our Common Stock on the NYSE American LLC (“NYSE”), and the potential liquidity and trading of such securities; | |
| ● | our ability to grow and manage growth profitably; | |
| ● | our ability to raise financing in the future, if and when needed; | |
| ● | our success in retaining or recruiting, or adapting to changes in, our officers, key employees, or directors; | |
| ● | our ability to attract and retain our senior management and other highly qualified personnel; | |
| ● | our ability to achieve or maintain profitability; | |
| ● | the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements; | |
| ● | our ability to successfully protect against cybersecurity attacks or breaches, ransomware attacks, and other disruptions to our information technology structure; | |
| ● | our ability to successfully compete against other companies; | |
| ● | our estimates regarding expenses, future revenue, and needs for additional financing; | |
| ● | the effect of economic downturns and political and market conditions beyond our control; and | |
| ● | other factors detailed under the section entitled “Risk Factors.” |
The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of the other documents we file from time to time with the SEC. There can be no assurance that future developments affecting us will be those that we have anticipated. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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PART I
Item 1. Business
BUSINESS OF ATLASCLEAR HOLDINGS
Our goal is to build a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products such as crypto that focus on financial services firms. We are a fintech driven business-to-business platform that expects to power innovation in fintech, investing, underwriting and trading. We believe we are positioned to provide a modern, mission-critical suite of solutions to our clients, enabling them to reduce their transactions costs and compete more effectively in their businesses.
Our target client base for our prime banking and prime brokerage services includes financial services firms, generally with annual revenues up to $1 billion, including brokerage firms, hedge funds, pension plans, and family offices that are not adequately served by today’s larger correspondent clearing firms and banks. The larger clearing firms have raised their minimums to a point where it is difficult for this segment of the market to meet the requirements for access to their clearing offerings. Smaller financial services firms are thus forced to find alternative solutions to continue to service their client bases. The practice of obtaining these services through intermediaries (often referred to as piggy-backing) results in additional fees and a loss of transparency and control for such financial services firms. As a result, such financial services firms are ideal clients for the “one stop shop” solutions our integrated business model intends to provide.
Through our 2024 acquisitions of Wilson-Davis (now known as AtlasClearing, Inc. “AtlasClearing”), a correspondent clearing company, and Quantum FinTech Acquisition Corporation (“Quantum”), and our anticipated acquisition of Commercial Bancorp, a federal reserve member, and our anticipated acquisition of Ark Financial Services, Inc., the holding company of Dawson James, we expect to acquire the capabilities to provide specialized clearing and banking services to financial services firms, with an emphasis on global markets currently underserviced by larger vendors. Once properly integrated, anticipated synergies between Commercial Bancorp, Ark, Quantum, and AtlasClearing are expected to allow for lower cost of capital, higher net interest margins, expanded product development and greater credit extension. We cannot assure you that the Commercial Bancorp acquisition, the Ark acquisition or any other acquisition will be consummated or that, if consummated, any anticipated synergies or benefits will be realized by the Company.
In addition, we believe the AtlasClear Platform is cutting-edge, flexible and scalable. Unlike other companies that are beholden to legacy technology stacks, that may struggle to keep pace with rapidly evolving client and customer expectations in an ever-increasing digital world, we believe our platform is modern, nimble and unencumbered.
Our team is comprised of experienced fintech innovators - a characteristic that we believe drives our corporate culture.
Business Opportunity
Technology has opened up financial services to new users and changed expectations for customers of legacy financial services firms. Both expect a modern and frictionless financial services experience that we believe AtlasClear Holdings is well positioned to deliver.
Once fully integrated, we believe our technology platform and specialized clearing and banking services will be mission-critical to our clients, given the complexities of investing infrastructure, the complications around collateral and capital requirements, and the complicated regulatory landscape. We expect to benefit as new fintech firms launch and existing firms scale, potentially outpacing legacy financial firms in their own categories.
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We believe consumer expectations for a one-stop shop for their investing, banking, spending, insurance and borrowing needs is driving the convergence of financial services. As a result, financial companies that traditionally operated as single-product specialists (e.g., savings-focused platform, lending-focused platform) are now seeking to integrate trading and investing capabilities into their broader offering. Further, we anticipate increased interest from non-financial services firms (e.g., consumer retail firms) in leveraging their brand and customer reach to offer financial services as a means to drive incremental revenue and customer engagement. We believe AtlasClear Holdings is well positioned to provide the “investing-as-a-service” platform these firms may require to develop such offerings.
Our Growth Strategy
Our growth strategy includes:
Growing our base of clients organically and through channel partners
We believe that attracting and acquiring new clients will be a key growth driver for our combined business. Looking ahead, our technology platforms, combined with the rapidly accelerating demand for cost efficiencies - are expected to drive growth in our prospective client base. For new market entrants, we believe the efficiencies of our prospective turnkey solutions, and speed at which we expect to be able to bring a client’s offering to market will position us to win new clients. With respect to the traditional wealth advisor landscape, we expect to be a beneficiary of clients seeking to transition to a new provider that can offer the digital-focused solutions required to compete in the rapidly changing environment.
Growing our clients’ revenue
We believe we will succeed when our clients succeed. The more assets, services or transactions that customers direct through our prospective platform, the more revenue we and our clients would be able to generate. Through innovation, we also expect to enhance our product offerings and add more products, capabilities, and functionality for our clients, which in turn should allow such clients to drive growth in their business. We expect to provide the tools to streamline the complex aspects of custody clearing and banking to empower our clients to focus on attracting new end customers as well as growing their share of revenue from existing ones.
Pursuing potential international expansion opportunities
While we expect our operations will initially be U.S.-focused, we see opportunity to grow our business and total addressable market by expanding into international markets. As we assess international opportunities, we believe our core competencies and operational excellence position us well to win in new markets, many of which are experiencing secular tailwinds similar to what we are seeing in the U.S. (e.g., growth of mobile and digital solutions).
Identifying and executing strategic acquisitions
We expect to selectively pursue acquisitions that we believe will create value for our shareholders. We plan to evaluate acquisition opportunities based on a number of strategic parameters, including their ability to (i) enhance our product capabilities, (ii) broaden our client reach, (iii) drive further scale, (iv) increase our presence in new geographies, and (v) generate attractive financial returns. We also plan to weigh the potential benefits from an acquisition against other alternatives, such as building similar capabilities in-house or partnering with third parties.
Our Product Offerings
We offer clients the flexibility to choose from a variety of pre-built suites that serve a wide range of business models. For example, clients who do not wish to build a complete user interface will be able to opt for our white label solutions. Once fully integrated, we expect to be a turnkey brokerage solution, offering highly configurable front office functions for launching and running investing applications. This offering “extends” beyond our “back” and “middle” office roots into direct customer facing experience. We expect that customers that choose our white label solutions will also be able to take advantage of our “middle” and “back” office offerings to ensure smooth processes around risk management, profit and loss, and account maintenance.
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Back and Middle Office Solutions
Our full technology stack is expected to automate “back office” and “middle office” processes that were typically manual paper-based process, creating a seamless and unified experience for our clients. Typically, new financial services firms or advisors would need to individually source multiple middle and back office solutions from multiple vendors. By partnering with us, we believe our clients will get a seamless and unified middle and back-office experience that is based on the technology we expect to acquire.
We offer a range of technical services that we believe will support the mission-critical functions needed to run a modern financial services company. We believe this self-service platform will provide clients with the operational online tools they need, including:
| ● | Trading: Flexible suite of APIs enabling clients to execute across several major asset classes. | |
| ● | Lending: Integrated and automated margin lending and fully paid stock lending program. Previously only available to the largest firms, professional investors, and wealthiest shareholders, we believe AtlasClear Holdings will expand the availability of fully paid stock lending (and its income generating interest). | |
| ● | Portfolios: APIs allowing clients to build portfolio models, assign them to accounts and automate rebalancing trade proposal generation, including straight through processing of order execution and trade allocation to maximize operational efficiency. We believe these are essential tools for financial advisors, as well as robo-advisor platforms for do-it-yourself investors. | |
| ● | Accounts: Everything clients need to open, authenticate, qualify, approve, onboard and maintain accounts including in-line investor verification, applicant verification, risk and compliance management, suitability requirements, paperless enrollments, and account preference configurations. | |
| ● | Cash: APIs to streamline cash movements in every direction, including ACH and wire transactions, recurring scheduled transfers, authorizing and managing bank linkages and more. We believe efficiency and scale are achieved by aggregation and net settlement workflows for real time transfers of cash with banking partners. | |
| ● | Transfers: APIs to streamline, initiate, manage and report on Automated Customer Account Transfer Service account transfers. Provides transparency and controls to enable specific user business requirements. We believe this will be a critical onboarding capability for AtlasClear Holdings clients to bring on high quality customers who hold assets elsewhere. | |
| ● | Regulations: We expect to provide consolidated oversight and services for relevant regulations applicable to brokerage and investment services. These laws, rules, regulations and requirements are ever-changing and include back-end compliance processes and regulatory requirements like Consolidated Audit Trail and Order Audit Trail System reporting, compliance with Reg 606 (Best Execution), trade surveillance and anti-money laundering rules. This is an often-underestimated burden for fintech disruptors. | |
| ● | Communications: Everything that allows clients to manage and distribute end investor communications including electronic delivery of trade confirmations, statements, tax reporting and more. |
Commercial Bancorp Share Purchase Agreement
On February 5, 2026, the Company entered into a share purchase agreement (the “Purchase Agreement”) with Commercial Bancorp, and each of the shareholders of Commercial Bancorp (collectively, the “Sellers”). The Purchase Agreement provides for the Company to acquire (the “CB Acquisition”) from the Sellers all of the outstanding shares (the “Shares”) of common stock of Commercial Bancorp, which is the owner of all of the outstanding stock of Farmers State Bank, a Wyoming state-chartered member bank (the “Bank”), subject to the terms and conditions set forth in the Purchase Agreement. As previously disclosed, the Company had previously entered into an agreement and plan of merger, as amended, to acquire Commercial Bancorp, which agreement has expired in accordance with its terms.
Pursuant to the terms of the Purchase Agreement, the Company has agreed to purchase the Shares from the Sellers for consideration consisting of a combination of cash and shares of Common Stock, with the total amount of consideration to be determined based on (i) each Seller’s election to receive cash, shares of Common Stock, or a combination thereof, (ii) the adjusted book value of the operational portion of the equity capital of Commercial Bancorp as of the closing of the CB Acquisition (the “CB Closing”), determined in accordance with the provisions of the Purchase Agreement (the “ABV”), (iii) the value of the existing building and land comprising the physical location of the Bank (the “Premises”), and (iv) Commercial Bancorp’s net operating loss as reflected on its most recent tax return prior to the CB Closing, multiplied by the maximum corporate federal income tax rate in effect as of the date of the CB Closing (the “NOL Tax Benefit”). Each Seller may elect (the “Election”) to receive an amount equal to any of the following three options: (i) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable one-third in cash and two-thirds in shares of Common Stock; (ii) two times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in cash; or (iii) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in shares of Common Stock. The Company has made an earnest money deposit payment in the amount of $100,000 to Commercial Bancorp, which deposit will be applied to the cash portion of the consideration payable at the CB Closing or, if the CB Closing does not occur under certain circumstances, retained by Commercial Bancorp.
The shares of Common Stock to be issued pursuant to the Purchase Agreement will be valued based on either the closing price of the Common Stock on the date of execution of the Purchase Agreement ($0.23), or on the business day immediately preceding the date of the CB Closing, at each Seller’s option. The Company agreed to file with the Securities Exchange Commission (the “SEC”) a resale registration statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement (the “Resale Registration Statement”), which was filed on June 8, 2026.
The obligations of each of the Sellers and the Company under the Purchase Agreement are subject to specified conditions, including, among other matters: (i) the receipt of all required regulatory approvals, (ii) the Resale Registration Statement having been declared effective by the SEC, such that all shares of Common Stock to be issued pursuant to the Purchase Agreement shall be registered for resale and freely tradeable (which occurred on June 17, 2026), (iii) the receipt of certain specified third-party consents, and (iv) the absence of any injunctions being entered into or law being adopted that would make the CB Acquisition illegal.
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The Purchase Agreement contains customary representations and warranties of Commercial Bancorp and the Bank, the Sellers and the Company. It also contains customary covenants, including (i) covenants providing for each of the parties to use reasonable best efforts to cause the CB Acquisition to be consummated and to receive all required regulatory approvals, including from the Federal Reserve Board and the Wyoming Division of Banking, (ii) covenants providing for Commercial Bancorp and the Bank to carry on their respective businesses in the ordinary course of business, and to refrain from taking certain actions, during the period between the execution of the Purchase Agreement and the CB Closing, and (iii) granting the Company observation rights with respect to meetings of the boards of directors of Commercial Bancorp and the Bank during the period between the execution of the Purchase Agreement and the CB Closing. Commercial Bancorp, the Bank and the Sellers have also agreed not to initiate, solicit, encourage or otherwise facilitate the making of any proposal or offer relating to alternate transactions or, engage in any discussions or negotiations with respect to alternate transactions.
The Purchase Agreement contains termination rights for each of the Sellers and the Company, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order denying approval of the CB Acquisition; (ii) the CB Acquisition is not consummated within two years of the execution of the Purchase Agreement, subject to extension under certain circumstances; or (iii) the other party breaches its representations, warranties or covenants under the Purchase Agreement which would give rise to the failure of a closing condition and such breach is not cured within 30-days of receipt of written notice of such breach.
Revenue Sources
We generate revenue through transactional and recurring sources. Transactional revenue is reliant upon customer-driven activity that ultimately results in fees being paid to us. Examples of these are clearing, execution, banking, confirms, and more. Further, we expect to generate recurring revenue streams simply by acting as the custodian of customer assets and customer cash through our anticipated acquisition of Commercial Bancorp, and to generate investment banking, underwriting and brokerage revenue through our anticipated acquisition of Ark Financial Services, Inc., the holding company of Dawson James. Examples of these are platform minimums, asset-based fees, credit and debit balances, securities lending, statements, and account maintenance. Since all revenue generating activities can be tied back to the account, we believe the best proxy for future revenue is the number of customer accounts on our platform.
AtlasClear Holdings Competition
We believe that through our technology and source code acquisitions discussed herein, we have the capabilities to deliver a complete and modern platform that would give our clients the flexibility, speed, risk-management expertise and scale they need to grow. While several participants offer a subset of our solutions, we do not believe any single competitor has a comparable modern platform or ability to offer a truly frictionless investing, clearing, custody and banking experience, such as we will strive to offer.
Custody and clearing businesses such as AtlasClearing, which we acquired, and banking businesses such as Commercial Bancorp, which we expect to acquire, are scale-driven businesses with high barriers to entry, including expansive overhead and technology costs, complicated capital and collateral management requirements, and a complex regulatory and legal environment. We believe that legacy providers will not be able to offer our combination of flexibility, speed, execution, and broad asset-class capabilities.
AtlasClear Holdings is led by a seasoned team of industry executives supported by a purpose-built board of directors. Collectively, our leadership team will have over 30 years of combined experience spanning the technology, investing, custody, banking and clearing lifecycles. The team has held leadership and operational roles at firms such ICE, Penson Clearing, Southwest Securities, NexTrade, Anderen Bank, Stonex and The Chicago Board of Trade, among others. Clearing, custody and banking are highly regulated and complex businesses, and we believe that our team’s combined experience, coupled our technological capabilities provide us an advantage over our competitors.
Large trust banks as well as large financial firms have historically been the providers of clearing and custody services. We believe their solutions are more limited, more expensive and less responsive for clients because of their legacy technology, analog processes, outdated compliance processes, and less flexible architecture. For clients, this translates to slower account opening and funding, higher embedded costs and limited flexibility.
In contrast to these legacy custodians, we believe that our systems make use of highly virtualized systems operating in a hybrid cloud model using cloud infrastructure as well as private data centers for redundancy.
ATLASCLEARING
AtlasClearing is a correspondent securities broker-dealer registered with the SEC, licensed in 50 states District of Columbia, and Puerto Rico, and a member in good standing of FINRA. AtlasClearing has operated continuously since it was incorporated as a Utah corporation and obtained its license in December 1968. Effective August 25, 2026, Wilson-Davis was rebranded as AtlasClearing Inc. References in this Annual Report to “Wilson-Davis” or “AtlasClearing” refer to that entity, which now conducts business under the AtlasClearing Inc. name.
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AtlasClearing is engaged principally in the over-the-counter, or “OTC,” markets in microcap securities. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade for less than $5.00 per share and have a market capitalization of less than $50 million. AtlasClearing also executes transactions in exchange-traded securities. It derives its revenue from the liquidation of restricted and control microcap securities; clearing transactions on behalf of an introducing broker-dealer on a fully disclosed basis; and trading in equity securities for its own account. It receives limited revenues from fully paid stock lending and margin accounts. During its history, AtlasClearing has underwritten at-the-market offerings for publicly traded companies, placed private offerings, sold mutual funds, introduced margin accounts cleared by other firms on a fully disclosed basis, and provided ancillary financial services.
During the year ended June 30, 2026, revenues from commissions and related vetting fees accounted for approximately 46% and 7%, of total revenue, respectively. During the year ended June 30, 2025, revenues from commissions and related vetting fees accounted for approximately 55% and 13%, of total revenue, respectively. During the year ended June 30, 2026 and 2025, 7% and 13% of commissions respectively, were attributable to AtlasClearing’s securities liquidations of private placement and open market purchased securities for U.S. customers in Canadian traded securities in companies engaged in the legal cannabis industry in Canada and other businesses referred by Canaccord Genuity, a global full-service investment banking firm with principal activities in Canada. During the year ended June 30, 2026 and 2025 revenue from Stock locate fees accounted for approximately 34% and 3%, respectively. The increase in stock locate fees is due to stock locate services being, in effect, an entirely new line of business that the Company implemented and rapidly expanded during the year ended June 30, 2026. Stock locate fees are fees charged to primarily broker-dealers for the confirmation that borrowable shares are available for a proposed short sale.
Canaccord Genuity serves as an investment banker for the placement of securities eligible for resale after the passage of an applicable holding period or other compliance requirements. Canaccord Genuity executes trades for AtlasClearing that are not permitted in the United States. AtlasClearing’s arrangement with Canaccord is to facilitate transactions with Canadian exchanges. The customers that are referred by Canaccord Genuity under a commission sharing arrangement with AtlasClearing open customer cash accounts with AtlasClearing and deposit with the firm their securities that are required to be sold in the Canadian securities markets via an omnibus account that AtlasClearing maintains at a Canadian brokerage firm. AtlasClearing completes vetting of proposed sales, deposits securities in the omnibus account, and executes the customer orders through the omnibus Canadian account. The transaction thereafter is non-cancelable.
AtlasClearing had approximately 4,826 and 4,652 active customer accounts as of June 30, 2026 and 2025, respectively.
AtlasClearing maintains its headquarters in Salt Lake City, Utah. It also has registered representatives who work remotely from California, New York, Arizona, Nevada, Oklahoma, and Florida.
Securities Liquidations
AtlasClearing sells into the trading markets securities that have been acquired by customers through registration or in reliance on exemptions from registration under the Securities Act or corresponding provisions of Canadian provincial securities laws. The liquidation process requires depositing the securities in the customer’s account, obtaining detailed information and supporting documentation regarding the details of the customer’s acquisition of the securities, reviewing the customer’s information and supporting documents by AtlasClearing personnel and outside legal counsel, and if believed appropriate, selling the securities.
AtlasClearing derives revenues, which it calls vetting fees, from fees charged to customers to deposit the securities, review the material submitted, and determine the propriety of the sale as well as commissions on the securities sales.
Transactions in U.S. traded securities are executed in the OTC or other principal market on which the securities are traded. Transactions in Canadian traded securities are executed through a Canadian dealer and settled through AtlasClearing’s omnibus account with a Canadian broker-dealer.
AtlasClearing’s customers predominantly consist of small individual investors or their private family or other closely held entities that frequently and repeatedly purchase securities in private placements.
Clearing Services
As a member of the Depository Trust & Clearing Corporation, or “DTCC,” and the National Securities Clearing Corporation, or “NSCC,” AtlasClearing clears securities transactions through these clearing firms. This includes AtlasClearing’s own transactions and transactions cleared on a fully disclosed basis on behalf of Glendale, as introducing broker.
AtlasClearing generates revenue from the service charges to Glendale for the clearing services provided by AtlasClearing. Under AtlasClearing’s clearing agreement with Glendale Securities, AtlasClearing provides fully disclosed clearing services to Glendale Securities, as introducing broker. Under this agreement, AtlasClearing (i) executes orders for Glendale customers, (ii) settles contracts and transactions in securities, (iii) prepares and distributes transaction confirmations and monthly account statements to Glendale’s customers, (iv) provides back-office services, (v) creates and maintain books and records of all transactions, and (vi) monitors all customer accounts for AML, Federal Reserve Regulation T violations.
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The clearing houses through which AtlasClearing clears securities transactions, DTCC and NSCC, require margin deposits in amounts determined by them to mitigate the risk to them of potential losses resulting from transactions that fail to clear for one reason or another. To meet these anticipated contingencies, AtlasClearing maintains a margin deposit at NSCC larger than required. As of June 30, 2026 and 2025, AtlasClearing’s margin deposit at NSCC was $5.0 million and $4.3 million, respectively, which was well over the requirement of $1.0 million and $2.3 million, respectively. DTCC and NSCC have the authority to, and frequently do, require additional margin deposits that must be deposited on the same business day, otherwise, AtlasClearing could face liquidation of the clearing position and damages. AtlasClearing attempts to manage margin call risk exposure by limiting the size of transactions and restricting transactions of securities deemed to be too volatile. However, AtlasClearing cannot control or predict the nature, amount, or timing of additional NSCC margin calls. Margin deposits are generally released within two business days of the transaction trade date.
From time to time during its history, AtlasClearing has cleared transactions on behalf of several introducing brokers.
Fully Paid Stock Lending
Eligible customers of AtlasClearing can lend their fully paid securities to AtlasClearing, which in turn can lend them to other broker-dealers in the industry. AtlasClearing derives revenue from the interest spread between the two legs of the transaction. Stock lending was introduced in 2021 and continues only on a limited basis as operating and compliance systems are refined.
Margin Accounts
AtlasClearing acts as a fully disclosed introducing broker to customer margin accounts that are maintained at another firm under its requirements. As a companion to the fully paid stock lending, AtlasClearing began offering its own margin accounts on a limited basis as operating and compliance systems are refined. Under applicable Federal Reserve Regulation T requirements, AtlasClearing is authorized to extend credit for up to 50% of the cost of new securities purchases. Credit is extended on equities over $5 with average 30-day trading volume of 100,000 shares per day. Margin securities are collateral for the margin loan to the customer. Maintenance of the margin accounts is based on individual securities collateralizing the loan based on the risk tolerance of the firm on each position as determined by senior management. Maintenance requirements generally range from 25% to 60%. Exceptions to the policy may be authorized by senior management. The customer may be required to deposit additional cash or securities collateral if the value of the margin securities fail to meet required amounts. If additional collateral is not deposited as required, AtlasClearing may liquidate the margin position and hold the customer liable for any deficiency.
Market Making
AtlasClearing regularly publishes quotations to purchase or sell securities in inter-dealer quotation services and buys and sells securities for its own account, commonly referred to as market making. AtlasClearing believes that its market making activities principally facilitate obtaining favorable execution terms for the securities liquidation transactions for its customers.
Underwriting
AtlasClearing acts as an underwriter for securities offerings, offers led by AtlasClearing are generally limited to Best Effort underwritings.
Other
On a limited basis, AtlasClearing sells mutual funds and real estate investment trusts or “REIT” securities.
Marketing
AtlasClearing relies on its industry contacts and customer referrals to market its services.
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Strategy
AtlasClearing’s strategy is to:
| ● | expand its principal securities liquidation activities through retail customer marketing; | |
| ● | identify and pursue opportunities to provide and securities clearing services to additional broker-dealers, particularly those that deal in micro-cap securities to address needs that AtlasClearing believes are under-served; | |
| ● | fully market its recently introduced fully paid stock lending and margin capabilities with existing and potential new customers; | |
| ● | participate as agent, and not as principal, in selected at-the-market equity offerings and private placements, including expanded REITs and mutual funds; and | |
| ● | broaden its range of services and products to reactivate historical offerings. |
AtlasClearing Competition
AtlasClearing encounters intense competition in all aspects of its business and competes for clients directly with many national and regional full service financial services firms, other independent brokerage firms, and other companies offering financial services in the United States, globally, and through the Internet.
AtlasClearing believes its principal direct competitors consist of other firms that liquidate investment and control securities in microcap stocks. This includes firms that clear their own securities transactions and firms that clear transactions through another firm on a fully disclosed basis. AtlasClearing believes that the number of broker-dealers that clear transactions in microcap stocks is declining. The level of customer demand for micro-cap securities liquidations reflects the level of private investment in such securities. AtlasClearing believes that it benefits from its ability to provide clearing services for all kinds of securities.
Competition among firms that clear microcap stocks may be affected by NSCC rules that require firms clearing for other introducing brokers to maintain at least $10.0 million in excess net capital. The failure of any firm, including AtlasClearing, to maintain excess net capital as required by the new rule may limit access of firms liquidating microcap stocks to clearing services.
AtlasClearing does not offer a full array of financial services that may be offered by large, diversified financial services firms. Accordingly, AtlasClearing’s customers typically withdraw proceeds from the liquidation of their securities for other uses, including perhaps deposit with full-service firms. Many of AtlasClearing’s competitors have significantly greater financial, technical, marketing, and other resources than AtlasClearing has. Also, many firms offer discount brokerage services and generally effect transactions at substantially lower commission rates on an “execution only” basis, without offering other services such as financial planning, investment recommendations, and research. Moreover, there is substantial commission discounting by full-service brokerage firms competing for institutional and retail brokerage business.
AtlasClearing believes that a limited number of securities firms liquidate restricted or control microcap stocks. Other firms with greater financial, technical, managerial, and other resources may offer such services, either alone or as adjuncts to other full financial services.
There is significant competition for qualified personnel in the financial services industry. AtlasClearing’s ability to compete effectively depends on attracting, retaining, and motivating qualified operating and supervisory personnel and other revenue-producing or specialized personnel.
Government Regulation
The securities industry, including AtlasClearing’s business, is subject to extensive regulation by the SEC, self-regulatory organizations, or “SROs,” such as FINRA, DTCC, and NSCC, state securities regulators, and other governmental regulatory authorities. The primary purpose of these regulations is the protection of customers and the securities markets. The SEC is the federal agency administering and enforcing the federal securities laws. Much of the regulation of broker-dealers, however, has been delegated to the SROs, principally FINRA. FINRA and other SROs adopt rules, subject to approval by the SEC, that govern their members. SROs, particularly FINRA, conduct periodic detailed examinations of member firms’ operations.
Securities firms are also subject to regulation by state securities commissions in the states in which they are registered. AtlasClearing is registered in 50 states, District of Columbia, and Puerto Rico.
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The regulations to which broker-dealers are subject cover numerous aspects of the securities industry, including:
| ● | conduct and supervision of operations; | |
| ● | capital requirements; | |
| ● | qualifications and licensing of supervisory and other personnel; | |
| ● | use and protection of customer funds and securities; | |
| ● | recordkeeping; | |
| ● | communications with current and prospective customers; | |
| ● | business practices among broker-dealers; and | |
| ● | the structure and operation of securities markets. |
Changes in rules promulgated by the SEC and by SROs and changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers.
Regulation Best Interest, among other things, requires broker-dealers to act in the best interest of retail customers when making a recommendation concerning a securities transaction or investment strategy involving securities, and to identify, disclose, and mitigate or eliminate material conflicts of interest arising from financial incentives associated with such recommendations. Although AtlasClearing, as a matter of policy, does not currently make recommendations concerning a securities transaction or investment strategy involving securities, this rule has imposed new compliance responsibilities and costs, including enhanced disclosures. AtlasClearing cannot assess the full potential costs or risk of Regulation Best Interest.
Several states have adopted or are considering adopting and implementing laws and regulations that would impose a fiduciary duty on broker-dealers under state law. Laws and regulations resulting from this trend may negatively impact AtlasClearing’s results of operations and capital requirements and may result in increased legal, compliance, information technology, and other costs, as well as increased legal risks.
The GENIUS Act, enacted in July 2025, is the United States’ first federal law establishing a comprehensive regulatory framework for payment stablecoins—digital tokens pegged to monetary value and intended for payments. The law authorizes only permitted financial institutions and approved nonbank issuers to create stablecoins, requires strict 1:1 reserve backing using U.S. dollars or U.S. Treasuries, and mandates public disclosure and audits of reserves to protect consumers and ensure transparency.
Issuers must comply with anti-money laundering laws, cannot promote stablecoins as federally insured or legal tender, and are subject to routine regulatory oversight and risk management rules. The GENIUS Act affirms that compliant stablecoins are neither securities nor commodities, and holders have prioritized claims in any issuer insolvency. The Act harmonizes federal and state oversight, helping position the U.S. as a leader in responsible digital asset innovation.
The USA PATRIOT Act of 2001 contains AML and financial transparency laws and mandates the implementation of various regulations applicable to broker-dealers and other financial services companies. Accordingly, AtlasClearing generally must have AML procedures in place, implement specialized employee training programs, designate an AML compliance officer, and be subject to periodic audits by an independent party to test the effectiveness of such compliance. AtlasClearing has established policies, procedures, and systems designed to comply with these regulations.
Under the Bank Secrecy Act (“BSA”), AtlasClearing is required to: develop and maintain internal AML policies, procedures, and controls; maintain and update customer information and conduct ongoing monitoring of customers to identify and report suspicious transactions; undergo independent testing of its compliance with AML laws; and conduct ongoing AML training of appropriate persons. AtlasClearing is further required to maintain procedures for the verification of a customer’s identity. AtlasClearing is also obligated to file confidential suspicious activity reports, or “SARS,” with the Financial Crimes Enforcement Network, or FinCEN, if it detects evidence of any suspicious transaction relevant to a possible violation of AML laws, in addition to transactions in currency of more than $10,000. SARs may need to be required by individual events or a series of apparently related events. SARs require important information in summary form that is sometimes difficult to assemble reliably or quickly. AtlasClearing may be subject to adverse regulatory action if it fails to develop or adhere to appropriate policies and procedures, has deficiencies highlighted by the firm’s independent testing, fails to identify and report suspicious transactions, fails to properly verify customer identities, or fails to file SARs in the manner or timeframe required or preferred by regulators.
Further, the regulations relating to AML compliance policies and procedures are subject to revision, supplementation, or evolving interpretations and application, and it can be difficult to predict how regulators will apply regulations to a given risk or situation. The National Defense Authorization Act (“NDAA”) passed by Congress in 2021 included various changes to the AML regulatory regime.
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For example, the NDAA mandated FinCEN to establish an information exchange platform for financial institutions, law enforcement, and national security agencies to share AML information. FinCEN will also revise customer due diligence standards. In addition, the NDAA expanded the scope of BSA violations and increased penalties for BSA violations. When FinCEN passes the customer due diligence and information sharing rules, AtlasClearing could incur substantial additional costs in complying with those rules.
Regulation regarding privacy and data protection continues to increase worldwide and is generally driven by the growth of technology and related concerns about the rapid and widespread dissemination and use of information. AtlasClearing must comply with applicable global, federal, and state information-related laws and regulations, including, for example, those in the United States, such as the 1999 Gramm-Leach-Bliley Act, SEC Regulation S-P, and the Fair Credit Reporting Act of 1970, as amended.
The SEC and the SROs may conduct administrative proceedings that can result in censure, fine, suspension, or expulsion of a broker-dealer and its supervisors, officers, or employees. AtlasClearing and its personnel have been and are subject to various such disciplinary proceedings. See “Item 3 – Legal Proceedings”.
Net Capital Requirements
AtlasClearing is required under applicable rules of the SEC and FINRA to maintain net capital of at least $250,000. As of June 30, 2026 and 2025, AtlasClearing had net capital, computed in accordance with the applicable detailed calculation requirements, of $14.4 million and $11.2 million, respectively or excess net capital by $14.2 million and $10.9 million, respectively.
As of June 30, 2026 and 2025, AtlasClearing’s net capital included $1,930,000 in subordinated loans. AtlasClearing has not applied to repay these subordinated loans and expects to renew the subordinated loans in the 3rd calendar quarter of 2026.
Failure to maintain the required net capital may subject AtlasClearing to fines, suspension, or expulsion by FINRA, the SEC, and other regulatory bodies and may require its liquidation. There is currently no regulatory requirement to maintain excess net capital. However, as noted above, under recently adopted NSCC rules, effective October 26, 2023, AtlasClearing must maintain excess net capital of at least $10.0 million to continue to clear securities transactions for any broker-dealer on a fully disclosed basis.
Human Capital Resources
ATCH has 3 executive and 2 support full-time employees and 1 consulting executive. AtlasClearing has 46 full-time employees and consultants, consisting of 20 full-time registered representatives, or consultants, 20 full-time operating personnel, and 6 executives and supervisors. No employees or consultants are represented by a collective bargaining agreement. AtlasClearing emphasizes compliance and risk management principles to manage the day-to-day business. In recruiting, training and retaining personnel, AtlasClearing relies on industry training and competitive compensation. AtlasClearing considers its relationship with its employees and consultants to be good.
Facilities
Our principal executive offices are located at 4350 West Cypress Street, Suite 270, Tampa, FL 33607 and our phone number is (727) 446 6660. AtlasClearing’s office is located in Salt Lake City, Utah. AtlasClearing also has registered representatives who work remotely from California, New York, Arizona, Nevada, Oklahoma, and Florida. Following our contemplated acquisition of Commercial Bancorp, we expect to add its facility in Pine Bluffs, Wyoming.
Item 1A. Risk Factors
Investing in our Common Stock involves risk. You should carefully consider the risks described below as well as all the other information in this Annual Report, including the consolidated financial statements and the related notes included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, results of operations and financial condition could suffer. In that event, the trading price of our Common Stock could decline, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
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Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in this Item 1A, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following risks, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of our Common Stock or warrants and result in a loss of all or a portion of your investment:
| ● | We have a short operating history, which makes it difficult to evaluate our business and prospects. | |
| ● | We may require substantial funding to finance our operations, but adequate financing may not be available when we need it, on acceptable terms or at all. | |
| ● | Uncertain global macro-economic and political conditions could materially and adversely affect our results of operations and financial condition. | |
| ● | The loss of key personnel, or failure to attract and retain other highly qualified personnel, could harm our business. | |
| ● | The requirement that we repay the Restated Note (as defined below). | |
| ● | Restrictive covenants under the Convertible Notes (as defined below) could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests. | |
| ● | We may not be able to complete our proposed acquisitions of Commercial Bancorp, Ark or an institutional digital asset business. | |
| ● | If any of our proposed acquisitions are completed, we may experience difficulties in integrating the operations of the acquired companies and in realizing the expected benefits of these transactions. | |
| ● | Commercial Bancorp, Ark or any other business, if acquired, may have liabilities that are not known to AtlasClear and the indemnities negotiated in the applicable acquisition agreement may not offer adequate protection. | |
| ● | We may in the future make acquisitions, and such acquisitions could disrupt our operations, and may have an adverse effect on our operating results. | |
| ● | Any acquisitions, partnerships or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. | |
| ● | We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain our executive officers and other key management and technical personnel. | |
| ● | AtlasClearing’s liquidation of microcap securities and related activities in the over-the-counter market segment expose it to significant risk. | |
| ● | The over-the-counter markets for the microcap securities AtlasClearing liquidates frequently have limited trading volume and volatile trading prices. | |
| ● | The penny stock rules limit AtlasClearing’s trading practices. | |
| ● | AtlasClearing needs to continue to maintain its excess net capital above the NSCC requirement of $10 million to continue to provide correspondent clearing services for introducing brokers. | |
| ● | AtlasClearing is substantially dependent on one principal customer. | |
| ● | AtlasClearing customers liquidate securities of smaller reporting companies that have relaxed disclosure obligations. | |
| ● | AtlasClearing customers also liquidate securities in companies that do not file SEC reports, so there is very little, if any, reliable data publicly available about them. | |
| ● | AtlasClearing is, and may in the future be, subject to significant regulatory enforcement proceedings. | |
| ● | AtlasClearing and certain of its personnel are subject to various regulatory disciplinary orders that could be the basis of future regulatory action. | |
| ● | AtlasClearing’s procedures, policies, and practices to comply with the comprehensive anti-money laundering regulatory regime may not be sufficient to assure compliance. | |
| ● | General, long-term financial and economic conditions and unforeseen events may adversely affect AtlasClearing’s financial condition and results of operations. | |
| ● | AtlasClearing may be unable to attract and retain registered representatives and other professional employees. | |
| ● | FINRA has adopted rules that impose significant compliance requirements on making investment recommendations to retail customers. | |
| ● | AtlasClearing is exposed to credit risk and other risks from customers, market makers, and other counterparties. AtlasClearing faces significant risks in conducting its market making business. Systems and security failures could significantly disrupt AtlasClearing’s business and subject the firm to losses, litigation, and regulatory actions. | |
| ● | AtlasClearing relies on numerous external service providers whose failure to provide those services properly may result in significant adverse events. | |
| ● | AtlasClearing relies on representations of third parties to ensure compliance with applicable laws and rules. Damage to AtlasClearing’s reputation could adversely impact its business. | |
| ● | We are or may be subject to numerous risks relating to the need to comply with data and information privacy laws. | |
| ● | We are subject to cybersecurity risks and interruptions or failures in our information technology systems and as we grow, we will need to expend additional resources to enhance our protection from such risks. Any cyber incident could result in information theft, data corruption, operational disruption, and/or a financial loss that has a material adverse impact on our business and that could subject us to legal claims. |
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| ● | Issues in the use of artificial intelligence, including machine learning and computer vision (together, “AI”), in our analytics platforms may result in reputational harm or liability. | |
| ● | AtlasClearing is subject to extensive regulation from the SEC and FINRA, and the failure to comply with this regulation can result in significant penalties, fines, liability, and reputational harm. | |
| ● | The misconduct of AtlasClearing’s employees could expose the firm to significant legal liability and reputational harm. | |
| ● | The proposed CB Acquisition may not be completed on the terms or timeline currently contemplated, or at all, as the parties may be unable to satisfy the conditions or obtain the approvals required to complete the CB Acquisition. | |
| ● | Failure to complete the CB Acquisition may hinder the Company from achieving its anticipated business goals, and negatively impact the Company’s share price and its business, prospects, financial condition and results of operations. | |
| ● | The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified independent board members. | |
| ● | Stock trading volatility could impact our ability to recruit and retain employees. | |
| ● | Our existing indebtedness, and any indebtedness we incur in the future, could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments. | |
| ● | Future sales of our Common Stock could cause the market price for our Common Stock to decline. | |
| ● | An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities. | |
| ● | If we are not able to raise sufficient capital to satisfy our payment obligations under the Convertible Notes, or otherwise restructure the Convertible Notes, and payment of principal and accrued and unpaid interest thereon is demanded by the holders thereof, we will be in default, and may not be able to continue as a going concern. | |
| ● | We cannot assure you that we will continue to be able to comply with the continued listing standards of the NYSE American. | |
| ● | Terms of our promissory notes may result in likely non-compliance and default. |
Risks Related to AtlasClear Holdings’ Business
Unless the context otherwise requires, all references in this section to “we,” “us” or “AtlasClear Holdings” refer to the business of AtlasClear Holdings following the consummation of the Business Combination.
We have a short operating history, which makes it difficult to evaluate our business and prospects.
We have a short operating history, which makes it difficult to evaluate our business and prospects or forecast our future results. In addition, our subsidiary, AtlasClear was formed in March 2022. Prior to such time, AtlasClear had no operations or assets. Upon Closing, AtlasClear received certain intellectual property from Atlas FinTech and Atlas Financial Technologies Corp., acquired the Pacsquare Assets and completed the acquisitions of AtlasClearing. AtlasClear expects to complete CB Acquisition or a similar acquisition, however, we cannot assure you that the CB Acquisition will be completed as anticipated. As a result of these transactions, AtlasClear expects to acquire the capabilities to provide specialized banking and clearing services to other financial services firms. Even if AtlasClear is able to consummate CB Acquisition, we cannot assure you that we will achieve the anticipated synergies and benefits of such transactions, that our service offerings will appeal to our target market of financial services firms, generally with annual revenues up to $1 billion, or that we will achieve our anticipated financial results. If we are not able to complete the CB Acquisition, or if the combined company does not achieve the anticipated operational and financial results, the value of your investment would be materially and adversely affected.
Our financial results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:
| ● | the development and introduction of new services by us or our competitors; | |
| ● | increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive, and increased expenses we have incurred and will continue to incur as a public company; | |
| ● | legislation and regulation; | |
| ● | our ability to achieve operating margins; | |
| ● | system failures or breaches of security or privacy; | |
| ● | competition in the markets in which we operate, and our ability to successfully compete; and | |
| ● | negative publicity we may encounter as we seek to grow our business. |
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We may require substantial funding to finance our operations, but adequate financing may not be available when we need it, on acceptable terms or at all.
We expect to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business.
We have in the past and expect to continue to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. In addition, inflation rates in the U.S. have been higher than in previous years, which may result in higher costs of capital and constrained credit and liquidity. The Federal Reserve has raised, and may again raise, interest rates in response to concerns over inflation risk. Increases in interest rates could impact our ability to access the capital markets. We may sell equity securities or debt securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, our current investors may be materially diluted. Any debt financing, if available, may involve restrictive covenants and could reduce our operational flexibility or achieve profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures and consumer member demand.
We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests and the per share value of our Common Stock could decline. Furthermore, if we engage in debt financing, the holders of debt would have priority over the holders of our equity holders, and we may be required to accept terms that restrict our ability to incur additional indebtedness. We may also be required to take other actions that would otherwise be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations, and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:
| ● | to expand our sales and marketing; | |
| ● | acquire complementary technologies or businesses; | |
| ● | expand operations in the United States or internationally; | |
| ● | hire, train, and retain employees; or | |
| ● | respond to competitive pressures or unanticipated working capital requirements. |
Our failure to have sufficient capital to do any of these things could harm our business, financial condition, and results of operations.
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Uncertain global macro-economic and political conditions could materially and adversely affect our results of operations and financial condition.
Our results of operations could be materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, availability of capital, war, terrorism, aging infrastructure, pandemics, energy and commodity prices, trade laws, election cycles and the effects of governmental initiatives to manage economic conditions.
The loss of members of our senior management or other key personnel, or failure to attract and retain other highly qualified personnel, could harm our business.
Our future success depends in large part on the continued services of senior management and other key personnel. In particular, we are dependent on the services of John Schaible, our Executive Chairman, Craig Ridenhour, our President, and Sandip Patel, our General Counsel and Chief Financial Officer, each of whom is critical to the future vision and strategic direction of our business. Our senior management and other key personnel are all employed on an at-will basis, which means that their employment could be terminated by us at any time, for any reason, and without notice. Conversely, employees may voluntarily terminate their employment at any time, for any reason, and without notice, and the risk of forfeiting equity incentives and/or losing other employee benefits might not be sufficient incentive for them to remain employed with us. If we lose the services of our senior management, or other key personnel, or if we are unable to attract, train, assimilate, and retain the highly skilled personnel that we need, our business, operating results, and financial condition could be adversely affected.
Our future success depends on our continuing ability to attract, train, assimilate, and retain highly skilled personnel. We face intense competition for qualified individuals from numerous software and other technology companies. We may not be able to retain our current key employees or attract, train, assimilate, or retain other highly skilled personnel in the future. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to our competitors before we realize the benefit of our investment in recruiting and training them. If we are unable to attract and retain suitably qualified individuals who are capable of meeting our growing technical, operational, and managerial requirements, on a timely basis or at all, our business, operating results, and financial condition may be adversely affected.
Changes in tax rates or the adoption of new tax legislation may adversely impact our financial results.
Due to shifting economic and political conditions in both the United States or elsewhere, tax policies, laws, or rates may be subject to significant changes in ways that impair our financial results. Various jurisdictions have enacted or are considering digital services taxes, which could lead to inconsistent and potentially overlapping tax regimes. In the United States, the rules dealing with federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the United States Treasury Department.
Changes in the various tax laws can and do occur. For example, in July 2025, the U.S. government enacted the One Big Beautiful Bill Act (the 2025 U.S. Tax Act). The 2025 U.S. Tax Act extended or made permanent many of the corporate tax changes arising under the Tax Cuts and Jobs Act passed in 2017 (the 2017 U.S. Tax Act). We do not anticipate the 2025 U.S. Tax Act to have a material impact to our financial condition, results of operations, cash flows or effective tax rate. Additional changes to tax laws (which changes may have retroactive application) could adversely affect us. It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws may be enacted, or regulations and rulings may be promulgated or issued under existing or new tax laws, which could result in an increase in our tax liability or require changes in the manner in which we operates in order to minimize or mitigate any adverse effects of changes in tax law or in the interpretation thereof.
Natural disasters, including and not limited to unusual weather conditions, epidemic outbreaks, terrorist acts and political events could disrupt our business schedule.
The occurrence of one or more natural disasters, including and not limited to tornadoes, hurricanes, fires, floods and earthquakes, unusual weather conditions, pandemics and endemic outbreaks, terrorist attacks or disruptive political events in certain regions where our facilities are located, or where our third-party contractors’ and suppliers’ facilities are located, could adversely affect our business. Natural disasters including tornados, hurricanes, floods and earthquakes may damage our facilities and terrorist attacks, actual or threatened acts of war or the escalation of current hostilities, or any other military or trade disruptions could have a material adverse effect on our business, financial condition and results of operations. These events also could cause or act to prolong an economic recession in the United States or abroad.
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Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.
The U.S. generally accepted accounting principles (the “GAAP”) is subject to interpretation by the Financial Accounting Standard Board (the “FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
The requirement that we repay all outstanding notes, including the Restated Note, could adversely affect our business plan, liquidity, financial condition, and results of operations.
As discussed below, the Company has sold and issued promissory notes, including the Restated Note and other convertible notes issued under the Securities Purchase Agreements (as defined below) (collectively, the Convertible Notes”). If not converted, we are required to repay principal amounts outstanding under the Convertible Notes, as well as interest thereon. These obligations could have important consequences on our business. In particular, they could:
| ● | limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; | |
| ● | increase our vulnerability to general adverse economic and industry conditions; and | |
| ● | place us at a competitive disadvantage compared to our competitors. |
We cannot assure you that we will be successful in making the required payments under the Convertible Notes. If we are unable to make the required cash payments, there could be a default under the Convertible Notes. In such event, or if a default otherwise occurs under the Convertible Notes, including as a result of our failure to comply with the financial or other covenants contained therein:
| ● | the interest rate payable under the Convertible Notes could be increased, and holders of the Convertible Notes could declare all outstanding principal and interest to be due and payable; | |
| ● | the holders of the Restated Note could foreclose against our assets; and/or | |
| ● | we could be forced into bankruptcy or liquidation. |
Restrictive covenants under the Convertible Notes could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests.
The Convertible Notes contain a number of affirmative and negative covenants regarding matters such as the payment of dividends, maintenance of our properties and assets, transactions with affiliates, and our ability to issue other indebtedness.
Our ability to comply with these covenants may be adversely affected by events beyond our control, and we cannot assure you that we can maintain compliance with these covenants. The financial covenants could limit our ability to make needed expenditures or otherwise conduct necessary or desirable business activities.
Risks Related to Our Business Strategy and Industry
If the proposed CB Acquisition is completed, we may experience difficulties in integrating the operations of AtlasClearing and Commercial Bancorp and in realizing the expected benefits of these transactions.
Our success will depend, in part, on the ability of AtlasClear to successfully complete the proposed CB Acquisition, or a similar acquisition, and to realize the anticipated benefits of combining the operations of AtlasClearing and Commercial Bancorp in an efficient and effective manner. The integration process could take longer than anticipated and could result in the loss of key employees from either company, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to continue relationships with AtlasClearing’s and Commercial Bancorp’s customers, employees or other third parties, or our ability to achieve the anticipated benefits of the transactions or the Business Combination, and could harm the Company’s financial performance. If we are unable to successfully integrate the operations of AtlasClearing and Commercial Bancorp with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, operating efficiencies, synergies and other anticipated benefits resulting from such transactions and the Business Combination, and the Company’s business, results of operations and financial condition could be materially and adversely affected.
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We may not be able to successfully consummate the acquisitions of Ark or an institutional digital asset business.
On April 24, 2026, we announced that we had entered into a letter of intent to acquire Ark and its wholly-owned subsidiary, Dawson James Securities, Inc., and on July 22, 2026, we announced that we had amended the letter of intent to acquire Ark and had entered into a letter of intent to acquire an institutional digital asset business. Each of these letters of intent is non-binding, except for certain provisions including exclusivity and confidentiality. The completion of a definitive agreement to acquire either business remains subject to a number of factors, including due diligence satisfactory to us and board approvals by both companies. Although each letter of intent provides that certain provisions are binding on the parties, they do not obligate the parties to consummate the proposed transactions. If definitive agreements are entered into, the closing of each transaction will be subject to various closing conditions, including regulatory approval. There can be no assurance that any definitive agreements will be entered into or that the proposed transactions (or either of them) will be consummated on the terms contemplated by the letters of intent, or at all.
Commercial Bancorp, Ark or any other business we may acquire may have liabilities that are not known to AtlasClear and the indemnities negotiated in the applicable acquisition agreement may not offer adequate protection.
As part of the Broker-Dealer Acquisition Agreement, AtlasClear assumed certain liabilities of AtlasClearing and as part of the Purchase Agreement, AtlasClear expects to assume certain liabilities of Commercial Bancorp if the transaction is consummated. In addition, we expect that any definitive agreements to acquire Ark, the institutional digital asset business or any other business we may seek to acquire will require AtlasClear to assume certain liabilities of the acquired company if the transaction is consummated. There may be liabilities that AtlasClear failed or was unable to discover in the course of performing due diligence investigations into these companies. AtlasClear may also have not correctly assessed the significance of certain liabilities identified in the course of its due diligence. Any such liabilities, individually or in the aggregate, could have a material adverse effect on the combined company’s business, financial condition and results of operations. As we integrate AtlasClearing and, if acquired, Commercial Bancorp, Ark or any other business into our operations, we may learn additional information about the acquired business, such as unknown or contingent liabilities and issues relating to compliance with applicable laws, that could potentially have a materially adverse effect on our business, financial condition and results of operations.
We may in the future make acquisitions, and such acquisitions could disrupt our operations, and may have an adverse effect on our operating results.
In order to expand our business, we have made and expect to continue to make acquisitions as part of our growth strategy. The success of our future growth strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions. Acquisitions are inherently risky, and any acquisitions we complete may not be successful. Any acquisitions that we may undertake in the future involve numerous risks, including, but not limited to, the following:
| ● | difficulties in integrating and managing the operations, personnel, systems, technologies, and products of the companies we acquire; | |
| ● | diversion of our management’s attention from normal daily operations of our business; | |
| ● | our inability to maintain the key business relationships and the reputations of the businesses we acquire; | |
| ● | uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; | |
| ● | our inability to increase revenue from an acquisition; | |
| ● | increased costs related to acquired operations and continuing support and development of acquired products; | |
| ● | our responsibility for the liabilities of the businesses we acquire; | |
| ● | potential goodwill and intangible asset impairment charges and amortization associated with acquired businesses; | |
| ● | adverse tax consequences associated with acquisitions; | |
| ● | changes in how we are required to account for our acquisitions under the GAAP, including arrangements that we assume from an acquisition; | |
| ● | potential negative perceptions of our acquisitions by consumer and business members, financial markets or investors; | |
| ● | failure to obtain required approvals from governmental authorities under competition and antitrust laws on a timely basis, if at all, which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition; | |
| ● | our inability to apply and maintain our internal standards, controls, procedures and policies to acquired businesses; | |
| ● | potential loss of key employees of the companies we acquire; | |
| ● | potential security vulnerabilities in acquired products that expose us to additional security risks or delay our ability to integrate the product into our service offerings; | |
| ● | difficulties in increasing or maintaining security standards for acquired technology consistent with our other services, and related costs; | |
| ● | ineffective or inadequate controls, procedures and policies at the acquired company; | |
| ● | inadequate protection of acquired IP rights; and | |
| ● | potential failure to achieve the expected benefits on a timely basis or at all. |
Acquisitions involve many complexities, including, but not limited to, risks associated with the acquired business’ past activities, difficulties in integrating personnel and human resource programs, integrating technology systems and other infrastructures under our control, unanticipated expenses and liabilities, and the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). There is no guarantee that our acquisitions will increase our profitability or cash flow, and our efforts could cause unforeseen complexities and additional cash outflows, including financial losses. As a result, the realization of anticipated synergies or benefits from acquisitions may be delayed or substantially reduced.
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Additionally, acquisitions or asset purchases made entirely or partially for cash may reduce our cash reserves or require us to incur debt under credit agreements or otherwise. We may seek to obtain additional cash to fund any acquisition by selling equity or debt securities. We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us. If we finance acquisitions by issuing equity, convertible debt or other equity-linked securities, our existing stockholders will experience ownership dilution. The incurrence of debt may subject us to financial or other covenants, or other constraints on our business. The occurrence of any of the foregoing risks associated with acquisitions could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or substantially concurrent acquisitions.
Any acquisitions, partnerships or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.
From time to time, we may evaluate potential strategic acquisitions of businesses, including partnerships or joint ventures with third parties. We may not be successful in identifying acquisition, partnership and joint venture candidates. In addition, we may not be able to continue the operational success of such businesses or successfully finance or integrate any businesses that we acquire or with which we form a partnership or joint venture. We may have potential write-offs of acquired assets and/or an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. Any acquisition, partnership or joint venture may not be successful, may reduce our cash reserves, may negatively affect our earnings and financial performance and, to the extent financed with the proceeds of debt, may increase our indebtedness. We cannot ensure that any acquisition, partnership or joint venture we make will not have a material adverse effect on our business, financial condition and results of operations.
We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain our executive officers and other key management and technical personnel.
We believe our future success depends upon our ability to attract and retain highly competent personnel. Our employees are at-will and not subject to employment contracts. We could potentially lose the services of any of our senior management personnel at any time due to a variety of factors that could include, without limitation, death, incapacity, military service, personal issues, retirement, resignation or competing employers. Our ability to execute current plans could be adversely affected by such a loss. We may fail to attract and retain qualified technical, sales, marketing and managerial personnel required to continue to operate our business successfully. Personnel with the expertise necessary for our business are scarce and competition for personnel with proper skills is intense.
In addition, new hires frequently require extensive training before they achieve desired levels of productivity. Additionally, attrition in personnel can result from, among other things, changes related to acquisitions, retirement and disability. We may not be able to retain existing key technical, sales, marketing and managerial employees or be successful in attracting, developing or retaining other highly-qualified technical, sales, marketing and managerial personnel, particularly at such times in the future as we may need to fill a key position. If we are unable to continue to develop and retain existing executive officers or other key employees or are unsuccessful in attracting new highly-qualified employees, our financial condition, cash flows, and results of operations could be materially and adversely affected.
Risk Related to AtlasClearing’s Business and Industry
AtlasClearing’s liquidation of microcap securities and related activities in the over-the-counter market segment expose it to significant risk.
AtlasClearing conducts activities, including customer liquidations of restricted and control securities, in microcap securities, which are subject to higher risks than securities traded on national securities exchanges. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade at below $5.00 per share and have a market capitalization of less than $50 million. Microcap securities frequently are issued by smaller reporting companies, which relaxes many of the disclosure obligations applicable to larger companies (see below). Further, trading in such microcap securities requires AtlasClearing to meet heightened customer disclosure obligations for any retail transactions. Because of perceived risks associated with the above factors, AtlasClearing believes it faces heightened regulatory scrutiny from the SEC and the Financial Industry Regulatory Authority (the “FINRA”) and other self-regulatory organizations that require particular attention to compliance measures and supervision.
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The over-the-counter markets for the microcap securities AtlasClearing liquidates frequently have limited trading volume and volatile trading prices.
The trading markets for the microcap securities AtlasClearing liquidates frequently have limited trading volume and volatile price fluctuations, which sometimes makes it difficult to fulfill customers’ orders at requested amounts or prices. In addition, because of market conditions, AtlasClearing may restrict the number of shares that a customer or a group of customers may liquidate in a single security to mitigate possible undue market selling pressure or to reduce potential market impact. AtlasClearing may not be successful in detecting market conditions that warrant the above or other trading precautions to meet its compliance obligations. Any such trading limitations may impair AtlasClearing’s competitive position and contribute to customer dissatisfaction.
The penny stock rules limit AtlasClearing’s trading practices.
AtlasClearing must comply with special penny stock rules if it sells such stock to retail customers, as distinguished from other broker-dealers. Although AtlasClearing has a policy of limiting penny stock sales only to other broker-dealers, if AtlasClearing sells penny stocks to retail customers, it must provide purchasers of these stocks with a standardized risk disclosure document prepared by the Commission. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for investors to sell their shares of penny stock. Because of these rules, many brokers choose not to participate in penny stock transactions and there is less trading in penny stocks. Accordingly, investors may not always be able to resell shares of penny stock publicly at times and prices that they feel are appropriate. AtlasClearing cannot assure that any penny stock rules compliance measures that it adopts and implements will be effective.
AtlasClearing needs to continue to maintain its excess net capital above the NSCC requirement of $10 million to continue to provide correspondent clearing services for introducing brokers.
AtlasClearing is subject to amendments of rules adopted by NSCC that require AtlasClearing to have excess net capital of at least $10.0 million as of October 26, 2023 if AtlasClearing clears for an introducing broker. As of June 30, 2026 and 2025, AtlasClearing had net capital of approximately $14.4 million and $11.2 million, respectively. The Company has entered into FINRA-approved subordinated loan agreements totaling $1,930,000. The agreements consist of (i) six legacy subordinated notes totaling $650,000 with current and former officers, directors, and related parties that bear at 5% per annum, and (ii) six subordinated loan agreements totaling $1,280,000 funded in October 2023. The October 2023 subordinated loans were renewed through amendments approved by FINRA and bear interest at 10% per annum, payable quarterly. The amended October 2023 subordinated notes mature in October 2026.
During the year ended June 30, 2026, Glendale, provided $1.4 million or approximately 6.6% of AtlasClearing’s revenues. During the year ended June 30, 2025, Glendale, provided $0.84 million or approximately 6.5% of AtlasClearing revenues. However, the growth of clearing services for introducing broker customers is expected to be a key driver to meet the Company’s future revenue goals. As a result, if we fail to meet the increased capital requirements of NSCC on an ongoing basis, we would be unable to provide clearing services for introducing brokers which could have a material adverse effect on the Company’s revenues in the future.
AtlasClearing customers liquidate securities of smaller reporting companies that have relaxed disclosure obligations.
The microcap securities AtlasClearing customers principally liquidate are issued by smaller reporting companies. The disclosures smaller reporting companies are required to provide in SEC periodic reports are less than those of larger reporting companies. Specifically, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 requiring that independent registered public accounting firms provide an attestation on the effectiveness of internal control over financial reporting, and have certain other reduced disclosure obligations in their SEC filings, including being permitted to provide two, rather than three, years of audited financial statements in annual reports. Reduced disclosures in smaller reporting company periodic reports may make it harder for investors to analyze results of operations and financial prospects. AtlasClearing believes that the foregoing contributes to increased volatility and lower trading volume for the securities markets for smaller reporting companies, many of which are microcap securities.
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AtlasClearing customers also liquidate securities in companies that do not file SEC reports, so there is very little, if any, reliable data publicly available about them.
In addition to smaller reporting companies, AtlasClearing customers also liquidate securities of companies that are not subject to SEC reporting requirements and thus do not file any periodic reports. Frequently, there is little reliable available public information about the business activities, financial condition or results of operations, management, operating risks, or other material matters about such companies. Many of such companies have only recently been organized, have inadequate financial resources or liquidity and rely on the ongoing sale of stock or borrowings to sustain operations, do not have independent directors, and have engaged in material transactions with related parties. These companies may not have financial statements that have been reviewed by independent auditors. Transactions in the securities of these companies may expose AtlasClearing to liability.
AtlasClearing is, and may in the future be, subject to significant regulatory enforcement proceedings.
In the ordinary course of business, securities broker-dealers such as AtlasClearing are highly regulated and are routinely and frequently examined by the SEC, FINRA, and the securities regulatory authorities of states in which they are licensed or conduct business. Such examinations review a broad ranges of business activities for compliance with the many statutes, rules, regulations, and interpretations governing AtlasClearing’s activities. Examinations by any of the above authorities may lead to enforcement actions that expose AtlasClearing and its personnel to defense costs and potential fines or other sanctions. For example, AtlasClearing has appealed to the SEC an adverse ruling by FINRA’s National Adjudicatory Council, or “NAC,” finding that AtlasClearing had violated FINRA rules respecting short sales, failing to supervise and implement adequate anti money-laundering procedures. NAC had ordered AtlasClearing to pay a $1.265 million fine. Atlas Clearing appealed to the SEC, the SEC affirmed the findings but sent the matter back to the NAC to reconsider the appropriate sanctions. On July 10, 2025 the NAC reduced the fines to an aggregate of $490,000. The Company made a timely appeal to the SEC to hear the case. Pursuant to FINRA Rules, the Company’s timely appeal of the decision to the SEC deferred the effectiveness of the findings and sanctions. AtlasClearing established a $100,000 contingency reserve in the year ended June 30, 2021, for this litigation contingence, but cannot assure that this amount is adequate to cover any penalty determined on appeal. The amount of the fine and disgorgement by which a final judgment exceeds the contingency reserve amount would reduce AtlasClearing’s excess capital. In addition to the payment of defense costs and potential fines or other sanctions associated with enforcement actions, customers may assert claims against AtlasClearing or its personnel in legal suits or arbitration proceedings.
AtlasClearing and certain of its personnel are subject to various regulatory disciplinary orders that could be the basis of future regulatory action.
AtlasClearing is subject to previous disciplinary orders by FINRA and the SEC which, by their terms, do not expire. FINRA and the SEC can impose special supervision and compliance measures and may increase future regulatory scrutiny. In July 2019, FINRA initiated an enforcement proceeding against AtlasClearing, certain former principals of AtlasClearing, and a former registered representative/trader alleging that the firm and the registered representative manipulated the market of a designated security, responsible supervisory personnel failed to establish and maintain appropriate supervisory procedures, the firm and a former principal failed to implement and maintain appropriate anti-money laundering procedures, and provided inaccurate documents to FINRA staff (the “2019 FINRA Action”). AtlasClearing and its former principals agreed to settle the matter, without admitting or denying the allegations respecting supervision, anti-money laundering, and documentation in July 2021 by consenting to an order under which the firm was censured and paid a $500,000 monetary penalty, one former principal was suspended in all capacities for 90 days, that principal and two other former principals were suspended for two years, and the firm was required to undertake certain compliance and remediation efforts. The firm promptly paid the fine and timely completed the required compliance and remediation efforts. In connection with the resolution of some matters, AtlasClearing engaged qualified consultants to recommend specific compliance procedures and has implemented such required compliance enhancements. AtlasClearing believes it has fully complied with all sanctions related to the July 2019 complaint. Previously, in December 2016, FINRA filed a complaint against AtlasClearing asserting potential violations of several securities laws and regulations, regarding supervision, anti-money-laundering, and Regulation SHO speculation prohibitions (the “2016 FINRA Action”). AtlasClearing denied the allegations and FINRA-imposed sanctions have been stayed pending appeal.
AtlasClearing’s procedures, policies, and practices to comply with the comprehensive anti-money laundering regulatory regime may not be sufficient to assure compliance.
AtlasClearing is subject to comprehensive anti-money laundering (“AML”) laws, regulations, and interpretations that apply to its activities under the Bank Secrecy Act. The AML regulatory regime covers a wide range of activities, including trading activities, securities liquidations and other transactions, funds and securities transfers, the opening of customer accounts, customer interactions, and other activities.
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In July 2019, FINRA censured AtlasClearing and assessed a $500,000 fine for violations, among others, of applicable AML rules. Further, AtlasClearing engaged an independent consultant to help develop and implement new comprehensive policies and procedures designed to comply with applicable AML requirements. AtlasClearing has completed this process but cannot assure that its new policies and procedures will in fact be adequate to assure AML compliance in practice. This enforcement proceeding and the related implementation of new AML policies and procedures may have heightened regulatory scrutiny of AtlasClearing. Regulatory authorities may consider AtlasClearing’s previous discipline as warranting increased sanctions in any subsequent enforcement proceeding finding AML violations.
Although AtlasClearing expends significant time and financial resources to monitor and investigate potential AML issues, AtlasClearing’s resources, technologies, personnel, and fraud detection tools may be insufficient to accurately detect and prevent such activities. Significant increases in fraudulent or illegal activities could negatively impact AtlasClearing’s reputation and reduce the trading volume through the firm. Any misbehavior of or violation by AtlasClearing’s customers may also lead to regulatory investigations into the firm. Further, although AtlasClearing may ultimately conclude that no fraud or money laundering exists, regulatory authorities may disagree that the red flags pointed towards such a conclusion and may impose various penalties without needing to point to any evidence of fraud or money laundering. Any such penalties could significantly harm the financial condition and results of operations of AtlasClearing.
AtlasClearing cannot predict the duration or severity of economic conditions that may adversely affect its results of operations.
AtlasClearing’s revenue and profitability had been adversely affected by general downturns in the securities markets since early 2022, resulting from rising inflation, increased interest rates, the lingering economic effects of the COVID-19 pandemic, the military conflict in Ukraine and Israel, Hamas’ attack on Israel and the ensuing war and other factors. AtlasClearing cannot predict the duration or severity of downturns of the securities markets or the economic and other factors that contribute to these market conditions.
General, long-term financial and economic conditions and unforeseen events may adversely affect AtlasClearing’s financial condition and results of operations.
In addition to the previous and current securities markets and economic challenges, previous long-term market downturns, economic depressions and unforeseen events, such as the COVID-19 pandemic, have had an adverse impact on AtlasClearing’s business. Although AtlasClearing has established a disaster recovery plan, there is no guarantee that it could operate without disruption in the event a disaster were to occur. The occurrence of various unforeseeable events such as natural disasters, pandemics, terrorism and acts of war, could result in fewer customer orders and, as a result, decreased commissions and revenue, resulting in a significant impact on AtlasClearing’s ability to conduct business and adversely affecting its results of operations and financial condition.
AtlasClearing may be unable to attract and retain registered representatives and other professional employees.
There is intense competition for experienced registered representatives with a knowledge of over-the-counter markets and a large customer network. Further, many customers may be more loyal to individual representatives than to the firm itself. If AtlasClearing is unable to attract and retain the services of registered representatives, the firm may be unable to maintain or expand its customer base or may be unable to effectively manage the volume of orders it executes and clears. Likewise, AtlasClearing relies upon financial and compliance professionals who are not registered representatives but who perform important services to the firm. If AtlasClearing is unable to attract and retain such professionals, it may be unable to stay compliant in an increasingly complex regulatory environment. Further, the number of young professionals entering the broker-dealer industry has declined over time and AtlasClearing’s inability to hire young professionals, particularly in light of the average age of AtlasClearing’s existing professionals, may adversely impact its ability to retain or expand its customer base.
FINRA has adopted rules that impose significant compliance requirements on making investment recommendations to retail customers.
AtlasClearing policy is to not recommend investments to its customers. However, AtlasClearing cannot assure you that its policy of not making recommendations to customers will be observed in all cases or that any investment recommendation rules compliance measures that AtlasClearing adopts and implements will be effective. Breaches of AtlasClearing’s policy could expose AtlasClearing to regulatory enforcement and to liability from its customers.
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AtlasClearing faces significant competition from other brokers and clearing firms.
The broker-dealer and clearing firm industries are dominated by a small number of very large broker-dealers and clearing firms and a number of smaller self-clearing firms and clearing firms that clear for small introducing brokers clearing microcap securities transactions. AtlasClearing continues to compete with larger firms that have greater financial resources, vast customer networks, diverse business lines, household name recognition, large-scale marketing campaigns, and established relationships with regulatory and legislative institutions. Further, the firm’s competitors are comparatively less impacted by adverse regulatory actions and rulemaking than AtlasClearing as a smaller firm, including impacts of net capital and margin calls imposed by NSCC. If AtlasClearing does provide new products and services, doing so may require substantial expenditures and take considerable time. If AtlasClearing fails to innovate and deliver products and services quickly enough as compared to its competitors, it might fail to attract and retain customers.
AtlasClearing is exposed to credit risk and other risks from customers, market makers, and other counterparties.
AtlasClearing is exposed to the risk that third parties that owe the firm money, securities, or other assets will not perform their obligations. These parties include other clearing firms, broker-dealers, customers, clearing houses, exchanges, and other financial intermediaries. Such parties may default on their obligations owed to AtlasClearing due to bankruptcy, lack of liquidity, operational failure, or other reasons. For example, AtlasClearing permits certain clients to purchase securities on a margin basis. These transactions may be collateralized by the customer’s cash and securities. If customers are unable to cover their short position or repay the credit extended by AtlasClearing, the firm may incur a loss if it liquidates the customer’s collateral at market rates. Those risks may be particularly great during periods of rapidly declining markets in which the value of the collateral held by AtlasClearing may fall below the amount of a customer’s indebtedness.
NSCC requires daily cash deposits on unsettled trades, those between trade date and settlement date. In some cases, the deposit may be an amount that is significantly in excess of the value of the trade itself. NSCC also may require intraday deposits that must be met in only a few hours or less. If the cash to make these deposits is not available, NSCC may impose penalties that could be severe, such as revoking membership or restricting correspondent clearing, either of which would have a significant negative impact on the business. Although AtlasClearing imposes limits on the size of some trades as a risk management procedure, it is not always possible to determine in advance the size of the deposit requirements.
Additionally, if AtlasClearing fails to adequately monitor its customers’ accounts and certain business reorganizations are not timely or properly updated on its system, such failure could lead to severe losses. For example, if when undertaking a reverse stock split, a customer sells the previous amount of shares at the new share price, it would result in a severe loss, which has resulted in some broker-dealers going out of business. Although AtlasClearing’s procedure is to put a freeze on trading for companies that are in the process of a reorganization in advance of the effective date of such reorganization, if AtlasClearing is not aware of the pending reorganization or fails to adequately update its system, any improper sales could significantly harm the results of operations of AtlasClearing.
AtlasClearing faces significant risks in conducting its market making business.
AtlasClearing faces various risks relating to making markets in microcap securities. The regulations relating to market making are complex and subject to a significant breadth of regulatory interpretation, resulting in inconsistent and unpredictable enforcement of applicable law. If the firm acts in a manner that a regulator perceives to be inconsistent with applicable law, the firm may be subject to costly penalties and sanctions. Regulatory scrutiny of AtlasClearing’s market making activities may have increased because of AtlasClearing’s previous sanctions for short sale compliance deficiencies.
Systems and security failures could significantly disrupt AtlasClearing’s business and subject the firm to losses, litigation, and regulatory actions.
AtlasClearing’s business depends on its ability to execute large volumes of transactions for its own customers and to clear large volumes of transactions for introducing broker-dealers. The firm relies heavily on its communications systems and on stable and functioning Internet, mobile devices, and computer systems, all of which are subject to internal and external security vulnerabilities. Those vulnerabilities include disruptions from natural disasters, power and service outages, interruptions or losses, software bugs, cybersecurity attacks, computer viruses, malware, phishing, unauthorized entry, and other similar events. Further, AtlasClearing is reliant on numerous service providers that may themselves have insufficient security measures that AtlasClearing cannot effectively monitor. Although AtlasClearing generally has agreements, policies, and procedures relating to cybersecurity and data privacy in place with third-party service providers, security breaches may still occur. Vulnerabilities with AtlasClearing and third-party systems may result in, for example, the inability of AtlasClearing to conduct its business, the theft or ransom of AtlasClearing property, or the unauthorized disclosure of confidential customer information or the proprietary or confidential data of AtlasClearing and its supervised persons. Unauthorized disclosures may in turn result in reputational damage, regulatory action, and civil suits, and may further require AtlasClearing to expend significant additional resources to modify its protective measures, to investigate and remediate vulnerabilities, and to defend against legal and regulatory claims. Such events may also result in uninsured liability and the firm being subject to increased regulatory scrutiny and legal liabilities. AtlasClearing may be unable to receive reimbursement from third-party service providers in the event of a security incident but may still be subject to adverse regulatory action if the firm is held responsible for security failures attributed to its vendors.
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AtlasClearing also faces risks relating to mistakes made in recoding, accounting for, confirming, and settling transactions. AtlasClearing also faces risks relating to software and internet malfunctions. Any such malfunction or depletion of functionality could result in AtlasClearing’s inability to execute trade orders, adverse operational and regulatory action, and reputational damage. AtlasClearing’s board oversees cybersecurity risk management and controls, including appropriate risk mitigation strategies, systems, processes, and controls. This oversight involves reviewing an annual cybersecurity report from the firm’s chief information security officer, with whom the board maintains an ongoing dialog on current strategies, systems, processes, controls and possible needs for additional processes and controls to keep current with the latest threats.
AtlasClearing relies on numerous external service providers whose failure to provide those services properly may result in significant adverse events.
AtlasClearing relies on numerous third-party service providers, including communication systems providers, regulatory services providers, clearing systems, exchange systems, banking systems, and market information providers. If the provision of services by these third parties is interrupted or terminated, AtlasClearing may be unable to conduct its business effectively, including by being unable to accept receipt of securities or funds or to provide information regarding stock trades. For example, the firm relies heavily on websites and software provided by or relating to OTC Markets. Any disruption to those websites or services could result in a significant reduction of orders received from the firm’s customers and even a cessation of the firm’s business activities.
AtlasClearing relies on representations of third parties to ensure compliance with applicable laws and rules.
AtlasClearing is required to comply with various securities laws and apply a compliance program designed to detect and prevent various kinds of illegality and misconduct, including fraud, money laundering, and the unregistered sale of securities. In applying its compliance program, the firm relies on various customer and other third-party representations. Inaccurate or incomplete representations or information could result in adverse consequences for the firm. For example, before liquidating restricted securities, AtlasClearing is required to conduct a reasonable investigation of facts supporting an exemption from registration of the securities. Such reasonable investigation may not reveal whether the proposed liquidation is in fact exempt from registration or may involve other illegal activity by others, including AtlasClearing’s customer. Any enforcement investigation or action relating to issuers or their affiliates may subsequently encompass AtlasClearing, which could require the firm to incur costs of defense and expose it to fines and other sanctions. Similarly, in making a market in securities, AtlasClearing frequently relies on exemption from certain requirements that depend in part on conclusions of third parties. If those third-party conclusions are incorrect, AtlasClearing could be subject to regulatory sanctions.
Damage to AtlasClearing’s reputation could adversely impact its business.
AtlasClearing’s reputation is critical to its ability to attract and retain customers that use AtlasClearing’s brokerage services and current and prospective introducing brokers that use or may use AtlasClearing’s clearing services. The perceived inability of AtlasClearing or its supervised persons to operate the firm’s business efficiently, securely, and in compliance with applicable law may adversely harm its business.
Risks Related to Regulatory, Compliance and Legal
We are or may be subject to numerous risks relating to the need to comply with data and information privacy laws.
We are or may become subject to data privacy and securities laws and regulations that apply to the collection, transmission, storage, use, processing, destruction, retention and security of personal information. Our current privacy policies and practices are designed to comply with privacy and data protection laws in the United States. These policies and practices inform members how we handle their personal information and, as permitted by law, allow members to change or delete the personal information in their member accounts. The legislative and regulatory landscape for privacy and data protection continues to evolve in the United States, both federally and at the state level, as well as in other jurisdictions worldwide, and these laws and regulations may at times be conflicting. It is possible that these laws may be interpreted and applied in a manner that is inconsistent from one jurisdiction or is inconsistent with our practices, and our efforts to comply with the evolving data protection rules may be unsuccessful. We must devote significant resources to understanding and complying with this changing landscape. Failure to comply with federal, state, provincial and international laws regarding privacy and security of personal information could expose us to penalties under such laws, orders requiring that we change our practices, claims for damages or other liabilities, regulatory investigations and enforcement action (including fines and penalties), litigation, significant costs for remediation, and damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Although we endeavor to comply with our published privacy policies and related documentation, and all applicable privacy and security laws and regulations, we may at times fail to do so or may be perceived to have failed to do so. Even if we have not violated these laws and regulations, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Additionally, if we are unable to properly protect the privacy and security of personal information, including sensitive personal information (e.g., financial information), we could be found to have breached our contracts with certain third parties.
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There are numerous U.S. and Canadian federal, state, and provincial laws and regulations related to the privacy and security of personal information. Determining whether protected information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation. For example, in 2018, California enacted the California Consumer Privacy Act (“CCPA”), which, among other things, requires new disclosures to California consumers and affords such consumers new abilities to opt out of certain sales of information and may restrict the use of cookies and similar technologies for advertising purposes. The CCPA, which became effective on January 1, 2020, was amended on multiple occasions and is the subject of regulations issued by the California Attorney General regarding certain aspects of the law and its application. Moreover, California voters approved the California Privacy Rights Act (the “CPRA”) in November 2020. The CPRA significantly modifies the CCPA, creating additional obligations relating to consumer data, with enforcement beginning July 1, 2023. Aspects of the CCPA and CPRA remain unclear, resulting in further uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply. Similar laws have been proposed, and likely will be proposed, in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging. Similar state laws have been passed in Virginia, Colorado, Utah, Connecticut, and New Jersey and other states are expected to follow. If we fail to comply with applicable privacy laws, we could face civil and criminal fines or penalties.
Failing to take appropriate steps to keep consumers’ personal information secure, or misrepresentations regarding our current privacy practices, can also constitute unfair acts or practices in or affecting commerce and be construed as a violation of Section 5(a) of the Federal Trade Commission Act (the “FTCA”), 15 U.S.C. § 45(a). The Federal Trade Commission (“FTC”) expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of our business, and the cost of available tools to improve security and reduce vulnerabilities. The FTC may also bring an action against a company who collects or otherwise processes personal information for any statements it deems misleading or false contained in privacy disclosures to consumers. While we use best efforts to comply with our published privacy policies and related documents, we may at times fail to do so, or may be perceived to have failed to do so. In addition, we may be unsuccessful in achieving compliance if our personnel, partners, or service providers fail to comply with our published privacy policies and related documentation. Such failures can subject us to potential foreign, local, state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. In addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced or applied to our operations. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems.
Overall, because of the complexity of these laws, the changing obligations and the risk associated with our collection and use of data, we cannot guarantee that we are, or will be, in compliance with all applicable U.S., Canadian, or other international regulations as they are enforced now or as they evolve.
We are subject to cybersecurity risks and interruptions or failures in our information technology systems and as we grow, we will need to expend additional resources to enhance our protection from such risks. Any cyber incident could result in information theft, data corruption, operational disruption, and/or a financial loss that has a material adverse impact on our business and that could subject us to legal claims.
We rely on sophisticated information technology (“IT”) systems and infrastructure to support our business. At the same time, cybersecurity incidents, including deliberate attacks, malware, viruses, ransomware attacks, denial of service attacks, phishing schemes, and other attempts to harm IT systems are prevalent and have increased. Our technologies, systems and networks and those of our vendors, suppliers and other business partners may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of business operations. In addition, certain cyber incidents, such as surveillance or vulnerabilities in widely used open source software, may remain undetected for an extended period. Our systems for protecting against cybersecurity risks may not be sufficient. As the sophistication of cyber incidents continues to evolve, we have been and will likely continue to be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. Additionally, any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, usage errors by employees, computer viruses, cyber-attacks or other security breaches or similar events. The failure of any of our IT systems may cause disruptions in our operations, which could adversely affect our revenues and profitability, and lead to claims related to the disruption of our services from members of the AtlasClear Platform and advertisers.
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Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, which may remain undetected until after they occur. Despite our efforts to protect our information technology networks and systems, payment processing, and information, we may not be able to anticipate or to implement effective preventive and remedial measures against all data security and privacy threats. Our security measures may not be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences. No security solution, strategy, or measures can address all possible security threats. Our applications, systems, networks, software, and physical facilities could have material vulnerabilities, be breached, or personal or confidential information could be otherwise compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our personnel or our business members to disclose information or usernames and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. We cannot be certain that we will be able to address any such vulnerabilities, in whole or part, and there may be delays in developing and deploying patches and other remedial measures to adequately address vulnerabilities, and taking such remedial steps could adversely impact or disrupt our operations. We expect similar issues to arise in the future as products and services sold through the AtlasClear Platform are more widely adopted, and as we continue to introduce future products and services. An actual or perceived breach of our security systems or those of our third party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and payment processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees, and expenses. Moreover, pursuant to SEC rules, public companies must disclose material cybersecurity incidents on Form 8-K within four business days (subject to a delayed compliance date for smaller reporting companies, of which we are one). In addition, companies must provide cybersecurity risk management disclosures in their annual reports.
The costs to respond to a security breach or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful. These costs include, but are not limited to: retaining the services of cybersecurity providers; complying with requirements of existing and future cybersecurity, data protection and privacy laws and regulations, including the costs of notifying regulatory agencies and impacted individuals; and maintaining redundant networks, data backups, and other damage-mitigation measures. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business. Additionally, most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach.
We may not have adequate insurance coverage for handling cyber security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees, and other impacts that arise out of incidents or breaches. If the impacts of a security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could harm our business. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss. Moreover, our privacy risks are likely to increase as we continue to expand, grow our consumer and business member base, and process, store, and transmit increasingly large amounts of personal or sensitive data.
Issues in the use of artificial intelligence, including machine learning and computer vision (together, “AI”), in our analytics platforms may result in reputational harm or liability.
AI is enabled by or integrated into some of our analytics platforms and is a growing element of our business offerings going forward. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Data sets may be insufficient, of poor quality, or contain biased information. Inappropriate or controversial data practices by data scientists, engineers, and end-users of our systems could impair the acceptance of AI solutions. If the analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Some uses of AI present ethical issues, and our judgment as to the ethical concerns may not be accurate. If we use AI as part of the AtlasClear Platform in a manner that is controversial because of the purported or real impact on our business members or vendors, this may lead to adverse results for our financial condition and operations or the financial condition and operations of our business members, which may further lead to us experiencing competitive harm, legal liability and brand or reputational harm.
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We could face employee claims.
We could face employee claims against us based on, among other things, wage and hour violations, discrimination, harassment, or wrongful termination that may also create not only legal and financial liability, but also negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations.
Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
From time to time, we may be party to various claims and litigation proceedings.
Even when not merited, the lawsuits and other legal proceedings may divert management’s attention, and we may incur significant expenses in pursuing or defending these lawsuits or other legal proceedings. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could negatively impact our financial position, cash flows or results of operations. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while we maintain insurance for certain potential liabilities, our insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
AtlasClearing is subject to extensive regulation from the SEC and FINRA, and the failure to comply with this regulation can result in significant penalties, fines, liability, and reputational harm.
As a broker-dealer and clearing firm, AtlasClearing is subject to extensive regulation by the SEC as well as self-regulatory organizations, particularly FINRA. Statutes, rules, and related interpretations can change rapidly, and the cost of remaining compliant with applicable regulations is costly. The SEC and FINRA have comprehensive examination and monitoring practices, which have resulted in previous regulatory actions against AtlasClearing and certain of its personnel. AtlasClearing is subject to periodic examinations from the SEC and FINRA. Any finding of violation of any applicable regulation may result in formal administrative or judicial proceedings that subject AtlasClearing to costly settlement agreements, censure, fines, civil penalties, cease-and-desist orders, termination or suspension of broker-dealer activities, and suspension or disqualification of supervised persons.
AtlasClearing and its supervised persons have been previously subject to various sanctions. The imposition of compliance sanctions may have a material adverse effect on AtlasClearing’s operating results and financial condition, including the expulsion of the firm from the industry. AtlasClearing expends significant time and financial resources to address compliance concerns of regulators, communicate with regulators, contest preliminary examination conclusions with which AtlasClearing disagrees, and defend against regulatory action.
The misconduct of AtlasClearing’s employees could expose the firm to significant legal liability and reputational harm.
AtlasClearing employees may violate AtlasClearing’s written supervisory procedures or engage in other unlawful activities, which could expose AtlasClearing to regulatory action, sanctions or damage to its reputation. Improper activity by employees may expose AtlasClearing to regulatory action for failing to supervise its employees. AtlasClearing’s compliance measures to detect and prevent employee misconduct may not be effective or deemed adequate by regulatory authorities.
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AtlasClear Holdings relies on the third-party services of Pacsquare which may expose it to additional risks and could have an adverse impact on its business.
AtlasClear Holdings relies on the third-party services of Pacsquare to customize and integrate the AtlasClear Platform, source code and technology assets and to maintain the software it provides along with industry updates as needed. If Pacsquare fails to perform these services properly, this could have an adverse impact on the Company’s business. Any errors or defects in the software incorporated into the Company’s service offerings, may result in a delay or loss of revenue, diversion of resources, damage to the Company’s reputation, the loss of the affected customer, loss of future business, increased service costs or potential litigation claims against the Company.
Risks Relating to the Proposed Acquisition of Commercial Bancorp
The proposed CB Acquisition may not be completed on the terms or timeline currently contemplated, or at all, as the parties may be unable to satisfy the conditions or obtain the approvals required to complete the CB Acquisition.
Completion of the CB Acquisition is subject to certain customary conditions, including, among other things, (i) approval by the stockholders of Commercial Bancorp, Commercial Bancorp’s wholly-owned subsidiary Farmers State Bank (“FSB”), AtlasClear and the Company, (ii) receipt of certain regulatory approvals, and (iii) the prior completion of the Business Combination. We cannot assure you that these conditions will be fulfilled or that the CB Acquisition will be completed on the terms or timeline currently contemplated, or at all. The Federal Reserve and the Wyoming Division of Banking may not approve the CB Acquisition, may impose conditions to the approval of the CB Acquisition or require changes to the terms of the CB Acquisition. Any such conditions or changes could have the effect of delaying completion of the CB Acquisition, imposing costs on AtlasClear and the Company or limiting the Company’s revenues following the CB Acquisition or otherwise reducing the anticipated benefits of the CB Acquisition. In addition, AtlasClear and Commercial Bancorp can mutually agree at any time prior to the effective time of the CB Acquisition to terminate the Purchase Agreement, even after the approval by Commercial Bancorp’s shareholders of the CB Acquisition. AtlasClear and Commercial Bancorp may also terminate the Purchase Agreement in the event of breach of the agreement as specified in the Purchase Agreement.
Failure to complete the CB Acquisiton may hinder the Company from achieving its anticipated business goals, and negatively impact the Company’s share price and its business, prospects, financial condition and results of operations.
Through the acquisition of AtlasClearing and the proposed acquisition of Commercial Bancorp, a federal reserve member, the Company expects to acquire the capabilities to provide specialized clearing and banking services to financial services firms, with an emphasis on global markets currently underserviced by larger vendors. If the Company is able to complete the CB Acquisition, once properly integrated, anticipated synergies between Commercial Bancorp and AtlasClearing are expected to allow for lower cost of capital, higher net interest margins, expanded product development and greater credit extension. Management considered the importance of the CB Acquisition to the overall success of the combined company and determined that such acquisition is not critical. While AtlasClear needs an institution that can carry funds greater than FDIC insurance limits, this can be any FDIC institution that can hold funds of the qualified accounts (profit sharing and IRA). Furthermore, AtlasClear does not believe that the income that Commercial Bancorp is expected to contribute to the combined company will be material. Although AtlasClear believes that Commercial Bancorp can be replaced with a substantially similar alternative acquisition, if needed, this would require the Company to expend additional time and resources to identify and consummate such similar alternative acquisition. In addition, it is possible that AtlasClear will not be able to successfully acquire an alternative FDIC institution for any number of reasons, including the factors that create substantial uncertainty regarding the ability to complete the CB Acquisition. For example, assuming AtlasClear is able to identify a suitable alternative acquisition candidate that is willing to sell to AtlasClear on terms that the parties agree upon, such transaction may not receive required regulatory approval or other closing conditions may not be satisfied. For example, the Federal Reserve and/or any applicable state banking regulatory authority may not approve any such proposed alternative acquisition, may impose conditions to the approval of such alternative acquisition or require changes to the terms of the proposed transaction. Any such conditions or changes could have the effect of delaying completion of the transaction, imposing costs on AtlasClear and the Company or limiting the Company’s revenues following the transaction or otherwise reducing the anticipated benefits of the transaction. If the CB Acquisition or an alternative acquisition is not consummated, without a Federal Reserve member bank as part of its future business, the Company may not be able to realize these anticipated business goals in the anticipated timeframe, or at all. In particular, the Company may not be able to attract as many, or the pedigree of, customers it anticipates without an FDIC institution. Without an FDIC institution, the Company may face greater risk of trade fails and inferior real-time cash management, and may not be able to maximize net interest margins or sweep deposits to an institution owned by the Company. In addition, if the CB Acquisition is not completed, the price of our Common Stock may decline to the extent that its then current market price reflects a market assumption that the CB Acquisition will be completed or it may decline due to a market perception that the CB Acquisition was not completed due to an adverse change in the Company’s business. Furthermore, the Company may experience negative reactions from its stockholders, customers and/or other persons with whom it has a business relationship. In addition, some costs related to the CB Acquisition, such as legal, accounting and financial advisory fees, must be paid by AtlasClear, and, following the Business Combination, the Company, even if the CB Acquisition is not completed. Furthermore, AtlasClear has expended, and the Company’s management will have expended, valuable time and resources to matters relating to the CB Acquisition that could otherwise have been devoted to other beneficial activities for the Company. As a result of all the foregoing, failure to complete the CB Acquisition may negatively impact the Company and its business, prospects, financial condition and results of operations.
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The terms of our promissory notes make non-compliance or default likely, and this can result in additional legal and other fees as well as impact the Company’s share price and its business, prospects, financial condition and results of operations.
As part of our recent acquisition and ongoing efforts to acquire another company, we have entered into several promissory notes with terms that are more onerous than usual. These promissory notes contain covenants and obligations that, if not met, could result in default. Given the significant changes and integration efforts currently underway, there is an increased risk that we may not be able to comply with these terms.
In the event of non-compliance or default, we could face severe financial penalties, acceleration of debt repayment obligations, and potential legal actions. Such outcomes could materially and adversely affect our financial condition, liquidity, and overall business operations. Additionally, a default could damage our reputation and hinder our ability to secure future financing on favorable terms, thereby impacting our long-term growth and strategic objectives.
Risks Related to Our Operations as a Public Company
The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified independent board members.
As a public company, we are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the NYSE and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly now that we are no longer an “emerging growth company” as defined in the JOBS Act. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting. In order to improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects. Although we have already hired additional personnel to help comply with these requirements, we may need to further expand our legal and finance departments in the future, which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed. As a result of disclosure of information in the filings required of a public company and in this report, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, results of operations and prospects could be materially harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and materially harm our business, financial condition, results of operations and prospects.
We may have increasing difficulty attracting and retaining qualified outside independent board members.
The directors and management of publicly traded corporations are increasingly concerned with the extent of their personal exposure to lawsuits and shareholder claims, as well as governmental and creditor claims that may be made against them in connection with their positions with publicly held companies. Outside directors are becoming increasingly concerned with the availability of directors’ and officers’ liability insurance to pay on a timely basis the costs incurred in defending shareholder claims. Directors’ and officers’ liability insurance is expensive and difficult to obtain. The SEC and NYSE have also imposed higher independence standards and certain special requirements on directors of public companies. Accordingly, it may become increasingly difficult to attract and retain qualified outside directors to serve on our Board.
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Stock trading volatility could impact our ability to recruit and retain employees.
Volatility or lack of appreciation in our stock price may also affect our ability to attract and retain our key employees. Employees may be more likely to leave us if the shares they own or the shares underlying their vested equity have not significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our Common Stock. If we are unable to retain our employees, or if we need to increase our compensation expenses to retain our employees, our business, operating results, and financial condition could be adversely affected.
We may be exposed to risk if we cannot enhance, maintain, and adhere to our internal controls and procedures.
As a public company trading on the NYSE American, we are subject to significant requirements for enhanced financial reporting and internal controls.
The process of designing and implementing effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business accounting, auditing and regulatory requirements and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company, and we are still early in the process of generating a mature system of internal controls and integration across business systems. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our financial statements, harm our operating results, and subject us to litigation and claims arising from material weaknesses in our internal controls and any resulting consequences, including restatements of our financial statements. See “Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.”
Matters impacting our internal controls may cause us to be unable to report our financial information in an accurate manner or on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of NYSE rules. There also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements also could suffer if we or our independent registered public accounting firm continue to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in the market price of our Common Stock.29
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If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our Company and materially and adversely affect our business and operating results.
A material weakness 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 the annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis. Effective internal controls are necessary for the Company to provide reliable financial reports and prevent fraud. As previously reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, management determined that our internal control over financial reporting and our disclosure controls and procedures were not effective due to a material weakness relating to the technical review and disclosures surrounding complex financial instruments, merger agreements, and related going concern assessments.
During the fiscal year ended June 30, 2026, management implemented a formal remediation plan to enhance our internal controls over accounting for complex transactions. Specifically, management (i) established formal, standardized control activities requiring pre-closing accounting evaluation for complex and equity-linked transactions, (ii) implemented protocols requiring the retention and direct engagement of qualified external third-party technical accounting advisors, and (iii) expanded technical accounting research resources and strengthened internal review protocols prior to financial statement authorization. Based on management’s assessment using the criteria set forth in the COSO (2013) framework, management concluded that our internal control over financial reporting and our disclosure controls and procedures were effective as of June 30, 2026, and that this material weakness was fully remediated.
While we have remediated this material weakness, the process of maintaining an effective system of internal controls is a continuous effort. If we identify new material weaknesses or control deficiencies in future periods, such weaknesses could limit our ability to prevent or detect misstatements, prevent us from maintaining compliance with SEC periodic reporting rules and NYSE American listing standards, cause investors to lose confidence in our financial reporting, and lead to a decline in our stock price. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses or control deficiencies.
As a public company, we have incurred and expect to continue to incur increased expenses associated with the costs of being a public company.
We have and expect to continue to face a significant increase in insurance, legal, auditing, accounting, administrative and other costs and expenses as a public company that we did not currently incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404 of that Act, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (“PCAOB”), the SEC and the NYSE, impose additional reporting and other obligations on public companies. Compliance with public company requirements have and will continue to increase our costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities that we have not done previously. For example, we recently created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, additional expenses associated with SEC reporting requirements have and will continue to be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if our independent registered accounting firm identifies a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs to remediate those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it. Being a public company has and may in the future make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance. We may ultimately be forced to accept reduced policy limits and coverage with increased self-retention risk or incur substantially higher costs to obtain the same or similar coverage in the future. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Common Stock, fines, sanctions and other regulatory action and potentially civil litigation.
The additional reporting and other obligations imposed by various rules and regulations applicable to public companies has and is expected to continue to increase legal and financial compliance costs and the costs of related legal, auditing, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by shareholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
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Our existing indebtedness, and any indebtedness we incur in the future, could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments.
Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal of, interest on, or other amounts due with respect to our indebtedness. Our leverage and debt service obligations could adversely impact our business, including by:
| ● | impairing our ability to generate cash sufficient to pay interest or principal, including periodic principal payments; | |
| ● | increasing our vulnerability to general adverse economic and industry conditions; | |
| ● | requiring the dedication of a portion of our cash flow from operations to service our debt, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures, dividends to stockholders or to pursue future business opportunities; | |
| ● | requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; | |
| ● | limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete; and | |
| ● | placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources. |
Any of the foregoing factors could have negative consequences on our financial condition and results of operations.
Limited insurance coverage and availability may prevent us from obtaining insurance to cover all risks of loss.
We have insured certain products and launches to the extent that insurance was available at acceptable premiums. This insurance will not protect us against all losses due to specified exclusions, deductibles and material change limitations.
We have obtained and maintain insurance for director and officers, cybersecurity, business owner, commercial general liability and workers’ compensation, based on a variety of factors, including the availability of insurance in the market, the cost of available insurance and the redundancy of our operating entities. Higher premiums on insurance policies will increase our costs and consequently reduce our operating income by the amount of such increased premiums. If the terms of these insurance policies become less favorable than those currently available, there may be limits on the amount of coverage that we can obtain or we may not be able to obtain insurance at all. Even as obtained, our insurance will not cover any loss in revenue incurred as a result of a partial or total loss.
Moreover, our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, passenger insurance may not be accepted or may be prohibitive to procure. Moreover, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us, could harm our business, financial condition and results of operations.
Our amended and restated certificate of incorporation (the “Charter”) contains anti-takeover provisions that could adversely affect the rights of our stockholders.
Our Charter contains provisions to limit the ability of others to acquire control of the Company or cause it to engage in change-of-control transactions, including, among other things:
| ● | provisions that authorize its board of directors, without action by its stockholders, to issue additional shares of Common Stock and preferred stock with preferential rights determined by its board of directors; and | |
| ● | provisions that permit only a majority of its board of directors, the chairperson of the board of directors or the executive chairman to call stockholder meetings and therefore do not permit stockholders to call special meetings of the stockholders. |
These provisions could have the effect of depriving our stockholders of an opportunity to sell their Common Stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.
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Our Charter provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our Charter requires, to the fullest extent permitted by law, that, unless we consent in writing to the selection of an alternative forum, (a) any derivative action or proceeding brought on behalf of the Company; (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of the Company to the Company or the Company’s stockholders; (c) any action asserting a claim against the Company arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), our Charter or the bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of the Charter or the bylaws. Subject to the preceding sentence, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. However, such forum selection provisions will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
Additionally, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As noted above, the Charter will provide that the federal district courts of the United States of America will have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and consented to the forum provisions in our Charter.
Risks Related to Ownership of Our Common Stock
Future sales or resales of our Common Stock could cause the market price for our Common Stock to decline significantly, even if the Company’s business is doing well.
We had 151,838,744 shares of Class A common stock outstanding as of September 22, 2026. We have filed registration statements registering the resale of a significant number of shares of our common stock, as well as a “shelf” registration statement allowing us to issue a significant number of newly-issued shares. The Company’s stockholders may sell our common stock in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of our common stock or putting significant downward pressure on the price of our common stock.
Until such time that the registration statements are no longer effective or all securities thereunder are sold, the registration statements will permit the resale of these securities. The resale, or expected or potential resale, of a substantial number of our Common Stock in the public market could adversely affect the market price for our Common Stock and make it more difficult for our stockholders to sell their Common Stock at times and prices that they feel are appropriate. Furthermore, we expect that, because there was a large number of shares registered pursuant to the registration statement, the selling stockholders will continue to offer the securities covered by the registration statement for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time.
Further, sales of our Common Stock upon expected expiration of resale restrictions could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. As such, short sales of our Common Stock could have a tendency to depress the price of our Common Stock, which could further increase the potential for short sales.
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We cannot predict the effect, if any, that market sales of shares of our Common Stock or the availability of shares of our Common Stock for sale will have on the market price of our Common Stock prevailing from time to time. Sales of substantial amounts of shares of our Common Stock in the public market, or the perception that those sales will occur, could cause the market price of our Common Stock to decline or be depressed.
We may issue our securities if we need to raise capital in connection with a capital expenditure, working capital requirement or acquisition. The number of shares of our Common Stock issued in connection with a capital expenditure, working capital requirement or acquisition could constitute a material portion of our then-outstanding shares of Common Stock. Any perceived excess in the supply of our shares in the market could negatively impact our share price and any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.
In addition, registration rights we may grant in the future, including in the ordinary course of the Company’s business, may further depress market prices if these registration rights are exercised or shares of our Common Stock are sold under the registration statements, the presence of additional shares trading in the public market may also adversely affect the market price of our Common Stock.
An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
The price of our securities may vary significantly due to factors specific to us as well as to general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Issuances of shares of Common Stock pursuant to conversion of any amounts under the Restated Note, the exercise of the warrants included in the Units sold in the October 2025 financing the Company’s securities purchase agreements or pursuant to acquisition agreements (including the Purchase Agreement), have resulted and would continue to result in substantial dilution of our stockholders and have had and may continue to have a negative impact on the market price of our Common Stock.
In connection with the Closing, AtlasClear Holdings entered into the Broker-Dealer Acquisition Agreement and other notes to settle accrued expenses and obligations. Many of our outstanding notes are convertible into shares of our Common Stock, at various conversion prices (which may be reduced under certain circumstances). The issuance of any of these shares will dilute our other equity holders, which could cause the price of our Common Stock to decline.
In addition, in October 2025 the Company issued the Restated Note to Funicular and sold Units consisting of shares of Common Stock and warrants. The Restated Note is convertible into, and the warrants included in the Units are exercisable for, shares of Common Stock at conversion and exercise prices that are subject to adjustment, and the issuance of shares of Common Stock upon such conversion or exercise would result in additional dilution to our stockholders. The warrants were valued using a Black-Scholes option pricing model, and changes in the assumptions underlying that valuation may result in additional charges to our results of operations.
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On August 4, 2025, the Company entered into a securities purchase agreement (“August Securities Purchase Agreement”) with an institutional investor under which the Company agreed to issue and sell, in a private placement, Series A convertible debentures (a “Debenture”) for an aggregate principal amount of $500,000, for a gross purchase price of $490,000, net of legal fees. The Debenture bears 10% interest and, following an amendment entered into in September 2026,matures on February 3, 2027. The holder is entitled to convert the unpaid face amount of this Debenture, plus accrued interest and penalties, at any time, at $0.15 per share. If, at any time prior to maturity, the Company receives financing from a third party (excluding the holder), the Company is required to pay to the holder, in the form of cash, equity, or a combination of the two, solely at the discretion of the holder, 100% of the proceeds raised from the third party until such time as the face amount of the Debenture has been paid in full.
Our issuance of additional capital stock in connection with future financings, acquisitions, investments, the AtlasClear 2024 Equity Incentive Plan (the “Incentive Plan”) or otherwise will dilute all other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under the Incentive Plan. We may also raise capital through equity financings in the future. We may acquire or make investments in complementary companies or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Common Stock to decline.
If we are not able to raise sufficient capital to satisfy our payment obligations under the Convertible Notes, or otherwise restructure the Convertible Notes, and payment of principal and accrued and unpaid interest thereon is demanded by the holders thereof, we will be in default, and may not be able to continue as a going concern.
In the event we are not able to raise sufficient capital to pay our Convertible Notes, (or any other financial obligation) when due, or otherwise restructure the same, and payment of principal and accrued interest thereon is demanded by the holders thereof, we will be in default, and may not be able to continue as a going concern. In the past, we have not timely satisfied certain payment obligations under our outstanding notes. Although none of the holders of such notes have elected to pursue remedies against us, we cannot assure you that they will not do so in the future. The institution of collection actions could have a material adverse effect on our business and could force us to seek relief through insolvency or other proceedings. On each interest payment date of the Restated Note, the accrued and unpaid interest shall, at the election of the Company in its sole discretion, be either paid in cash or paid in-kind by increasing the principal amount of the Restated Note. In the event of an Event of Default (as defined in the Restated Note), in addition to Funicular’s other rights and remedies, the interest rate would increase to 14% per annum.
We cannot assure you that we will continue to be able to comply with the continued listing standards of the NYSE American, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our continued eligibility to maintain the listing of our Common Stock on the NYSE American depends on a number of factors, including the price of our Common Stock and the number of persons that hold our Common Stock. Our Common Stock has traded below the $1.00 minimum share price requirement since March 25, 2025. If the NYSE American delists our securities from trading on its exchange for failure to meet its listing standards, and we are not able to list such securities on another national securities exchange, then our Common Stock could be quoted on an over-the-counter market. If this were to occur, we and our stockholders could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; | |
| ● | reduced liquidity for our securities; |
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| ● | a determination that the Common Stock is a “penny stock,” which will require brokers trading the Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of Common Stock; | |
| ● | a limited amount of news and analyst coverage; and | |
| ● | a decreased ability for us to issue additional securities or obtain additional financing in the future. |
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, markets, revenue streams, and competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, our share price and trading volume would likely be negatively impacted. If any of the analysts who may cover us adversely change their recommendation regarding our shares of Common Stock or provide relatively more favorable recommendations with respect to competitors, the price of our shares of Common Stock would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.
We do not intend to pay cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in the Stockholders’ Agreement and future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Common Stock at a price greater than what you paid for it.
We intend to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of our Common Stock will be at the sole discretion of the Board. The Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as the Board may deem relevant. As a result, you may not receive any return on an investment in the Common Stock unless you sell your Common Stock for a price greater than that which you paid for it.
Our Warrants may have an adverse effect on the market price of our Common Stock.
In connection with the Business Combination, 10,062,500 public warrants (the “Public Warrants”) and 5,553,125 private placement warrants (the “Private Warrants” and collectively, the “Warrants”) became exercisable to purchase our Common Stock, each exercisable to purchase one share of our Common Stock at $689.86 per share. Such Warrants, when and if exercised, will increase the number of issued and outstanding shares of Common Stock and may reduce the value of the Common Stock.
The exercise of Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the Warrant and the price of our Common Stock at the time of exercise. For example, to the extent that the price of our Common Stock exceeds $689.86 per share, it is more likely that holders of our Warrants will exercise their warrants. If the price of our Common Stock is less than $689.86 per share, we believe it is much less likely that such holders will exercise their warrants. On September 21, 2026, the closing price of the Common Stock as reported by the NYSE American was $0.1958 per share, which price was less than the $689.86 per share exercise price of the Private Warrants. We cannot assure you that our Warrants will be in the money after the date of this report and prior to their expiration. Quantum Ventures and its distributees have the option to exercise the Private Warrants on a cashless basis. Holders of public warrants may generally only exercise such warrants for cash, subject to very limited exceptions in certain circumstances as provided for in the Warrant Agreement relating to the warrants.
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Our warrants are accounted for as a warrant liability and were recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our Common Stock.
In accordance with ASC 815, Derivatives and Hedging (“ASC 815”), the Company’s warrants are classified as derivative liabilities and measured at fair value on its balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.
As a result of the recurring fair value measurement, our financial statements may fluctuate quarterly, based on factors that are outside of our control. Due to the recurring fair value measurement, we expect we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
Future sales, or the perception of future sales, by us or our stockholders in the public market following could cause the market price for the Common Stock to decline.
The sale of shares of our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for the us to sell equity securities in the future at a time and at a price that it deems appropriate.
As of September 22, 2026, we had a total of 151,838,744 shares of Common Stock outstanding (i) without giving effect to any awards that may be issued under the Incentive Plan or any earnout shares that may be issued in the future, and (ii) assuming no exercise of the outstanding Warrants. All shares currently held by public stockholders and all of the shares issued in the Business Combination to former AtlasClear’s stockholders are freely tradable without registration under the Securities Act, and without restriction by persons other than our “affiliates” (as defined under Rule 144), including our directors, executive officers and other affiliates.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of the Common Stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of the Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
We are a “smaller reporting company” within the meaning of the Securities Act, and if we continue to take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are a “smaller reporting company” within the meaning of the Securities Act, as modified by the JOBS Act. We may continue to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies or smaller reporting companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We cannot predict whether investors will find securities issued by us less attractive because we elect to rely on these exemptions. If some investors find those securities less attractive as a result of its reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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Our operating results may be negatively impacted by unfavorable economic and market conditions and the uncertain geopolitical environment.
Our operating results may be negatively impacted by unfavorable economic and market conditions and the uncertain geopolitical environment, including tariffs or other trade barriers, rising inflation, and other macroeconomic shifts. These factors may materially affect investor confidence and the success of a potential business combination, including one involving a special purpose acquisition company (SPAC).
The global macroeconomic environment remains challenging and uncertain. For example, uncertainty regarding global central bank monetary policy, instability in the geopolitical environment in many parts of the world, including the ongoing Russia-Ukraine war, conflicts in the Middle East, and tensions surrounding China-Taiwan relations, may continue to pressure global economic conditions. If these conditions were to deteriorate further, we could experience material harm to our business, operating results, and financial condition, which may in turn affect the attractiveness and valuation of any proposed business combination.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Management’s Role
The goal of our cybersecurity program is to establish processes for identification, assessment, and management of cybersecurity risks. We conduct periodic risk assessments, including with support from external vendors, if needed, to assess our cyber program, identify potential areas of enhancement, and develop strategies for the mitigation of cyber risks. We also conduct security testing and have established a vulnerability detection process, supported by security testing, that is designed to address the treatment of identified security risks based on severity. Our risk assessments include, but are not limited to:
| Interfaces | Storage security |
| Applications | Hardware security |
| Data | Remote access security |
| IT architecture | Information flow |
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Risks from Cybersecurity Threats
Some potential cybersecurity threats include, but are not limited to:
| ● | Human
errors or sabotage: Company employees or a | |
| ● | Data leaks: Data leaks could result in a breach of our privacy policies for customers sensitive data, resulting in potential regulatory violations or commercial litigation. Our processes aim to restrict access and monitor for leaks of internal and/or external data. | |
| ● | Unauthorized access: Unauthorized access could be due to password theft, malware attacks, employee involvement, or hackers. Preventing unauthorized access is a top priority within our cybersecurity protocols. | |
| ● | Natural or man-made disasters: Data can be threatened by natural or human disasters. Lightning strikes, fire, floods, hurricanes, bombings, etc. Without proper data backup, all company data could be compromised in one incident. Backups, co-location of servers and data is regularly monitored and adjusted as needed with a goal of insulating the Company from this type of risk. | |
| ● | Failed system: Our cybersecurity policies contemplate enterprise system failures due to cyber-attacks, network connections, hardware challenges, bottleneck problems and other issues. We seek to mitigate these potential vulnerabilities through monitoring and redundancy. |
Item 2. Properties
The Company maintains its principal executive offices at 4350 West Cypress Street, Suite 270 Tampa, FL, 33607 and a satellite office on 1745 Shea Center Dr Ste 467, Highlands Ranch, CO 80129. Our facilities, which are leased, are adequate to meet our current needs though we intend to procure additional space in the future, if and as necessary, as we continue to add employees and expand our business.
Item 3. Legal Proceedings
From time to time, we are subject to legal proceedings and claims in the ordinary course of business. Other than as disclosed in Note 11, we are not presently a party to any legal proceedings that are expected to have a material adverse impact on our financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Common Stock is currently listed on NYSE American under the symbol “ATCH.” Our Public Warrants trade on the over-the-counter (“OTC”) market under the symbol “ATCHW.”
Holders
As of September 22, 2026, there were 256 holders of record of our Common Stock, and 46 holders of record of our warrants. A substantially greater number of holders are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Dividends
We have not paid any cash dividends on our Common Stock to date. It is the present intention of our Board to retain all earnings, if any, for use in our business operations and, accordingly, our Board does not anticipate declaring any dividends in the foreseeable future.
Unregistered Sales of Equity Securities
Not applicable.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this section of the annual report to “we,” “us” or the “Company” refer to AtlasClear Holdings, Inc., a Delaware corporation. References to our “management” or our “management team” refer to our officers and directors. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the sections entitled “Risk Factors”,” “Business” and the audited financial statements, including the related notes, appearing elsewhere in this annual report. All references to years, unless otherwise noted, refer to our fiscal years, which end on June 30.
Overview
Our goal is to build a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products such as crypto that focus on financial services firms. We are a fintech driven business-to-business platform that expects to power innovation in fintech, investing, underwriting and trading. We believe we are positioned to provide a modern, mission-critical suite of solutions to our clients, enabling them to reduce their transactions costs and compete more effectively in their businesses.
Our target client base for our prime banking and prime brokerage services includes financial services firms, generally with annual revenues up to $1 billion, including brokerage firms, hedge funds, pension plans, and family offices that are not adequately served by today’s larger correspondent clearing firms and banks.
Through our subsidiary AtlasClearing (formerly Wilson-Davis), a correspondent clearing company, and the anticipated CB Acquisition, we provide specialized clearing and banking services to financial services firms, with an emphasis on global markets currently underserviced by larger vendors. Once properly integrated, anticipated synergies between Commercial Bancorp, if acquired, and AtlasClearing are expected to allow for lower cost of capital, higher net interest margins, expanded product development and greater credit extension.
AtlasClearing
AtlasClearing is a correspondent securities broker-dealer registered with the SEC, licensed in 50 states, District of Columbia, and Puerto Rico, and is a member in good standing of FINRA. AtlasClearing derives revenue principally from commissions charged on the liquidation of restricted and control microcap securities, vetting, and clearing service fees charged to introducing brokers for which AtlasClearing clears transactions on a fully disclosed basis, and other financial service fees. Commissions are earned by executing transactions for customers. Vetting fee revenues are earned when AtlasClearing vests stock the customers want to bring into their accounts. Clearing fees are earned by clearing transactions for Glendale Securities, as introducing broker on a fully disclosed basis, pursuant to a clearing agreement with Glendale Securities.
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Key Factors Impacting AtlasClearing’s Business
AtlasClearing’s business and results of operations have been, and will continue to be, affected by numerous factors and trends, which AtlasClearing believes include those discussed in the section titled “Risk Factors” of the Annual Report.
| ● | Liquidity. As a clearing broker-dealer in the U.S., AtlasClearing is subject to cash deposit requirements with clearing organizations, brokers, and banks that may be large in relation to its total liquid assets. | |
| ● | Growth of Customer Base. AtlasClearing’s growth requires continued use of its services by new customers. | |
| ● | Expanding AtlasClearing’s Relationship with Existing Customers. AtlasClearing’s ability to expand its relationship with its existing customers will be an important contributor to its long-term growth. | |
| ● | Market Trends. As financial markets grow and contract, AtlasClearing’s customers’ behaviors are affected. AtlasClearing’s revenue and profitability can be affected by general downturns in the securities markets, resulting from factors such as increased inflation, increased interest rates and other factors. |
Debenture
On August 4, 2025, the Company entered into the August Securities Purchase Agreement with an institutional investor controlled by one of our directors, under which the Company agreed to issue and sell, in a private placement, a Series A convertible debentures (the “Debenture”) for an aggregate principal amount of $500,000, for a gross purchase price of $490,000, net of legal fees. The Debenture bears 10% interest and originally was to mature on August 3, 2026. Pursuant to an amendment entered into on September 11, 2026, the maturity date was extended to February 3, 2027. The holder is entitled to convert the unpaid principal amount of the Debenture, plus accrued interest and penalties, any time, at $0.15 per share. If, at any time prior to maturity, the Company receives financing from third party (excluding the Holder), the Company is required to pay to the Holder, in the form of cash, equity, or a combination of the two, solely at the discretion of the Holder, one hundred percent (100%) of the proceeds raised from the third party until such time as the face amount of the Debenture has been paid in full.
Convertible Notes
On September 16, 2025, September 19, 2025 and September 23, 2025, the Company entered into separate securities purchase agreements (each, a “September-Securities Purchase Agreement”) with certain institutional investors under which the Company agreed to issue and sell, in a private placement, convertible promissory notes (each, a “Convertible Note” and collectively, the “Convertible Notes”) for an aggregate principal amount of $6,000,000, for a gross purchase price of $5,000,000, reflecting a 20% original issue discount, before fees and other expenses. The Convertible Notes did not bear interest, and were to mature on the earlier of six-months from issuance or the date that the Company completes a Qualified Financing (meaning an issuance and sale of capital stock raising gross proceeds of at least $10 million, as defined in the Notes). The Convertible Notes were convertible into equity, at each holder’s option, at the closing of a Qualified Financing, at the same per share price as the securities sold in the Qualified Financing. The Convertible Notes were subject to customary events of default and related remedies. In October 2025, upon the consummation of the transactions contemplated by the Equity SPA (as defined below), $4.15 million payable by the Company under the Convertible Notes was converted into Units (as defined below), and the remaining balance of the Convertible Notes was paid in full.
Convertible Note Financing
On October 8, 2025, the Company entered into an amended and restated securities purchase agreement (the “Restated SPA”) with Funicular Funds, LP (“Funicular”), which amended and restated in its entirety the securities purchase agreement, dated February 9, 2024, pursuant to which the Company had issued and sold to Funicular, in a private placement, a secured convertible note in the original principal amount of $6,000,000 (the “Funicular Note”). Pursuant to the Restated SPA, the Company issued and sold to Funicular, for a purchase price of $10,000,000, an amended and restated convertible promissory note, dated October 8, 2025 (the “Restated Note”), which amends and restates the Funicular Note in its entirety. The principal amount of the Restated Note is $10,097,782, consisting of the $10,000,000 purchase price plus $97,782 in remaining outstanding principal under the Funicular Note.
The Restated Note has a stated maturity date of October 8, 2030. Interest accrues at a rate per annum equal to 11%, and is payable semi-annually on each June 30 and December 31. On each interest payment date, the accrued and unpaid interest shall, at the election of the Company in its sole discretion, be either paid in cash or paid in-kind by increasing the principal amount of the Restated Note. In the event of an Event of Default (as defined in the Restated Note), in addition to Funicular’s other rights and remedies, the interest rate would increase to 14% per annum. The Restated Note is convertible, in whole or in part, into shares of the Company’s Common Stock at the election of the holder at any time at an initial conversion price of $0.75 per share (the “Conversion Price”). The Conversion Price is subject to adjustment if the Company issues or is deemed to issue shares of Common Stock at a price below the then-current conversion price (subject to certain exceptions), and is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. The Restated Note contains covenants which, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness, incur additional liens and sell its assets or properties.
The Restated Note is secured by a perfected security interest in substantially all of the existing and future assets of the Company and each Grantor (as defined in the Security Agreement, as defined below), including a pledge of all of the capital stock of each of the Grantors, subject to certain exceptions, as evidenced by (i) the security agreement, dated as of February 9, 2024 (the “Security Agreement”), among the Company, each of the Company’s subsidiaries and Funicular, and (ii) the guaranty, dated as of February 9, 2024 (the “Guaranty”), executed by each of the Company’s subsidiaries pursuant to which each of them has agreed to guaranty the obligations of the Company under the Restated Note and the other Loan Documents (as defined in the Restated Note), each of which was entered into in connection with the Funicular Note.
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Pursuant to the Restated SPA, the Company agreed, among other things, that if the Restated Note becomes convertible into a number of shares of Common Stock in excess of 19.9% of the Company’s total number of shares of Common Stock outstanding, to seek the approval of its stockholders for the issuance of all shares of Common Stock issuable upon conversion of the Restated Note in excess of that amount, in accordance with the rules of the NYSE American.
Equity Financing
On October 8, 2025, the Company entered into a securities purchase agreement (the “Equity SPA”) with certain institutional investors (each, an “Investor”), including Funicular, pursuant to which the Company agreed to issue and sell, in a private placement, an aggregate of 16,666,666 units of securities (each, a “Unit”), for a purchase price of $0.60 per Unit. Each Unit consists of one share of Common Stock and one warrant (each, a “Warrant Liability”) to purchase Common Stock. Due to rounding the units were split into16,666,665 shares of Common Stock and 16,666,668 warrants. Of the total investment amount of $10,000,000, $5,850,000 of proceeds were received and $4,150,000 were converted from the Convertible Notes discussed above.
The Warrant Liability are immediately exercisable on a cash basis or exchangeable on a cashless basis and will expire five years from the date of issuance. Each Warrant Liability will be initially exercisable for one share of Common Stock at an initial exercise price of $0.75 per share, subject to adjustment for stock splits, distributions and the like (the “Initial Exercise Price”). The Initial Exercise Price is also subject to potential increase if the Company completes certain subsequent offerings at a price greater than the Initial Exercise Price while the Warrant Liability remain outstanding. At any time after the issuance of the Warrant Liability, the holder of the Warrant Liability may exchange the Warrant Liability on a cashless basis for a number of shares of Common Stock determined by multiplying the total number of shares with respect to which the Warrant Liability is then being exercised by the Black Scholes Value (as defined in the Warrant Liability) divided by the lower of the two closing bid prices of the Common Stock in the two days prior the time of such exercise.
In the event of a Fundamental Transaction (as defined in the Warrant Liability), the holders of the Warrant Liability will be entitled to receive upon exercise of the Warrant Liability the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrant Liability immediately prior to such Fundamental Transaction. Additionally, as more fully described in the Warrant Liability , the holders of the Warrant Liability will be entitled to receive consideration in an amount equal to the Black Scholes value of the Warrant Liability in connection with a Fundamental Transaction. If the Company fails to timely deliver the shares of Common Stock issuable upon exercise of the Warrant Liability, the Company will be subject to liquidated damages.
Subject to the provisions of the Equity SPA, if, during the 12-month period commencing on the date of the closing, the Company carries out one or more Subsequent Financings (as defined in the Equity SPA), each Investor that purchases $50,000 or more of Units will have the right to participate in an amount up to 100% of such Investor’s investment amount under the Equity SPA in any such securities offered by the Company, subject to certain exceptions.
The Company engaged Dawson James Securities, Inc. as the placement agent (the “Placement Agent”) with respect to the offering of the Restated Note and the Units. The Company agreed to pay the Placement Agent’s fees totaling (i) 4.5% of the aggregate gross from the sale of the Restated Note, (ii) 6% of the aggregate gross proceeds from the sale of the Units to current or previous investors not introduced to the Company by the Placement Agent and (iii) 7% of the aggregate gross proceeds from the sale of the Units to investors introduced to the Company by the Placement Agent, and to reimburse the Placement Agent’s expenses (subject to a cap), resulting in total transaction cost paid of $1,228,500. The Company also agreed to issue warrants to purchase up to an aggregate of 1,000,000 shares of Common Stock with a fair value of $334,062 to the Placement Agent and its designees, resulting in total transaction cost of $1,562,562. The fair value of the warrants issued to the Placement Agent was included in the transaction cost and allocated between the Warrant Liability in the amount of $865,659 and the Common Stock in the amount of $696,903 on a pro rated basis.
$500,000 of the Units sold pursuant to the Equity SPA were purchased by Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, Jr., who is a member of the Company’s board of directors and the Chief Executive Officer of the Placement Agent.
The closings of the issuance and sale of the Restated Note and the Units occurred on October 9 through October 14, 2025.
At the closings, the Company entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file one or more registration statements covering the resale of the shares of Common Stock included as part of the Units, as well as the shares issuable upon conversion of the Restated Note or exercise of the Warrants. The Company will be subject to liquidated damages if it fails to meet certain conditions set forth in the Registration Rights Agreement.
| 41 |
Commercial Bancorp Share Purchase Agreement
On February 5, 2026, the Company entered into the Purchase Agreement with Commercial Bancorp, and each of the shareholders of Commercial Bancorp. The Purchase Agreement provides for the Company to acquire from the Sellers all of the outstanding Shares of common stock of Commercial Bancorp, which is the owner of all of the outstanding stock of Farmers State Bank, a Wyoming state-chartered member bank, subject to the terms and conditions set forth in the Purchase Agreement. As previously disclosed, the Company had previously entered into an agreement and plan of merger, as amended, to acquire Commercial Bancorp, which agreement has expired in accordance with its terms.
Pursuant to the terms of the Purchase Agreement, the Company has agreed to purchase the Shares from the Sellers for consideration consisting of a combination of cash and shares of Common Stock, with the total amount of consideration to be determined based on (i) each Seller’s election to receive cash, shares of Common Stock, or a combination thereof, (ii) the ABV of the operational portion of the equity capital of Commercial Bancorp as of the closing of the CB Acquisition (the “CB Closing”), determined in accordance with the provisions of the Purchase Agreement, (iii) the value of the existing building and land comprising the physical location of the Bank, and (iv) Commercial Bancorp’s net operating loss as reflected on its most recent tax return prior to the CB Closing, multiplied by the maximum corporate federal income tax rate in effect as of the date of the CB Closing. Each Seller may make an Election to receive an amount equal to any of the following three options: (i) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable one-third in cash and two-thirds in shares of Common Stock; (ii) two times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in cash; or (iii) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in shares of Common Stock. The Company has made an earnest money deposit payment in the amount of $100,000 to Commercial Bancorp, which deposit will be applied to the cash portion of the consideration payable at the CB Closing or, if the CB Closing does not occur under certain circumstances, retained by Commercial Bancorp.
The shares of Common Stock to be issued pursuant to the Purchase Agreement will be valued based on either the closing price of the Common Stock on the date of execution of the Purchase Agreement ($0.23), or on the business day immediately preceding the date of the CB Closing, at each Seller’s option. The Company agreed to file with the SEC a Resale Registration Statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement, which was filed on June 8, 2026.
The obligations of each of the Sellers and the Company under the Purchase Agreement are subject to specified conditions, including, among other matters: (i) the receipt of all required regulatory approvals, (ii) the Resale Registration Statement having been declared effective by the SEC, such that all shares of Common Stock to be issued pursuant to the Purchase Agreement shall be registered for resale and freely tradeable (which occurred on June 17, 2026), (iii) the receipt of certain specified third-party consents, and (iv) the absence of any injunctions being entered into or law being adopted that would make the CB Acquisition illegal.
The Purchase Agreement contains customary representations and warranties of Commercial Bancorp and the Bank, the Sellers and the Company. It also contains customary covenants, including (i) covenants providing for each of the parties to use reasonable best efforts to cause the CB Acquisition to be consummated and to receive all required regulatory approvals, including from the Federal Reserve Board and the Wyoming Division of Banking, (ii) covenants providing for Commercial Bancorp and the Bank to carry on their respective businesses in the ordinary course of business, and to refrain from taking certain actions, during the period between the execution of the Purchase Agreement and the CB Closing, and (iii) granting the Company observation rights with respect to meetings of the boards of directors of Commercial Bancorp and the Bank during the period between the execution of the Purchase Agreement and the CB Closing. Commercial Bancorp, the Bank and the Sellers have also agreed not to initiate, solicit, encourage or otherwise facilitate the making of any proposal or offer relating to alternate transactions or, engage in any discussions or negotiations with respect to alternate transactions.
The Purchase Agreement contains termination rights for each of the Sellers and the Company, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order denying approval of the CB Acquisition; (ii) the CB Acquisition is not consummated within two years of the execution of the Purchase Agreement, subject to extension under certain circumstances; or (iii) the other party breaches its representations, warranties or covenants under the Purchase Agreement which would give rise to the failure of a closing condition and such breach is not cured within 30-days of receipt of written notice of such breach.
| 42 |
Results of Operations
Comparison of the Year Ended June 30, 2026 and 2025
| Year Ended | Year Ended | |||||||||||
| June 30, | June 30, | |||||||||||
| 2026 | 2025 | Changes | ||||||||||
| REVENUES | ||||||||||||
| Commissions | $ | 9,253,906 | $ | 5,937,532 | $ | 3,316,374 | ||||||
| Vetting fees | 1,391,135 | 1,459,321 | (68,186 | ) | ||||||||
| Clearing fees | 2,055,780 | 3,165,714 | (1,109,934 | ) | ||||||||
| Stock locate fees | 6,780,814 | 287,465 | 6,493,349 | |||||||||
| Net gain/(loss) on firm trading accounts | 506,141 | 6,580 | 499,561 | |||||||||
| Other revenue | 64,859 | — | 64,859 | |||||||||
| TOTAL REVENUES | 20,052,635 | 10,856,612 | 9,196,023 | |||||||||
| EXPENSES | ||||||||||||
| Compensation, payroll taxes and benefits | 11,730,081 | 6,150,257 | 5,579,824 | |||||||||
| Data processing and clearing costs | 5,668,429 | 2,104,107 | 3,564,322 | |||||||||
| Regulatory, professional fees and related expenses | 4,858,675 | 4,137,631 | 721,044 | |||||||||
| Stock compensation - founder share transfer | 3,647,695 | — | 3,647,695 | |||||||||
| Communications | 867,518 | 650,560 | 216,958 | |||||||||
| Occupancy and equipment | 235,040 | 211,347 | 23,693 | |||||||||
| Transfer fees | 158,766 | 210,423 | (51,657 | ) | ||||||||
| Bank charges | 235,437 | 223,938 | 11,499 | |||||||||
| Intangible assets amortization | 1,411,577 | 1,362,446 | 49,131 | |||||||||
| Other | 955,190 | 324,358 | 630,832 | |||||||||
| Bad debt | 54,543 | 398,826 | (344,283 | ) | ||||||||
| TOTAL EXPENSES | 29,822,951 | 15,773,893 | 14,049,058 | |||||||||
| LOSS FROM OPERATIONS | (9,770,316 | ) | (4,917,281 | ) | (4,853,035 | ) | ||||||
| OTHER INCOME/(EXPENSE) | ||||||||||||
| Interest income | 1,848,873 | 1,996,399 | (147,526 | ) | ||||||||
| Change in fair value, warrant liability derivative | 1,704,499 | 184,594 | 1,519,905 | |||||||||
| Change in fair value, convertible note derivative | 382,154 | 3,990,385 | (3,608,231 | ) | ||||||||
| Change in fair value, long-term and short-term note derivative | 103,185 | 12,369,120 | (12,265,935 | ) | ||||||||
| Change in fair value, contingent guarantee | — | (839,775 | ) | 839,775 | ||||||||
| Change in fair value, secured convertible note | (306,137 | ) | — | (306,137 | ) | |||||||
| Change in fair value, merger financing | 63,696 | 49,348 | 14,348 | |||||||||
| Change in fair value, earnout liability | 11,106,000 | 929,000 | 10,177,000 | |||||||||
| Change in fair value, Winston & Strawn agreement | 1,799,545 | (64,298 | ) | 1,863,843 | ||||||||
| Change in fair value of debenture derivative | 99,693 | — | 99,693 | |||||||||
| Change in fair value, stock payable | — | 232,793 | (232,793 | ) | ||||||||
| Change in fair value, Tau agreement | 334,549 | (357,435 | ) | 691,984 | ||||||||
| Loss on settlement on Winston & Strawn agreement | (570,300 | ) | — | (570,300 | ) | |||||||
| Interest expense | (5,084,671 | ) | (8,081,938 | ) | 2,997,267 | |||||||
| TOTAL OTHER INCOME/(EXPENSE) | 11,481,086 | 10,408,193 | 1,072,893 | |||||||||
| Income before provision for income taxes | 1,710,770 | 5,490,912 | (3,780,142 | ) | ||||||||
| Benefit (provision) for income taxes | 252,105 | 259,381 | (7,276 | ) | ||||||||
| Net income (loss) | $ | 1,962,875 | $ | 5,750,293 | $ | (3,787,481 | ) | |||||
| 43 |
Revenues of $20,052,635 for the year ended June 30, 2026, represent a 85% increase from revenues of $10,856,612 for the year ended June 30, 2025. The increase is primarily due to the increase in commissions and stock locate fees revenue. The increase in stock locate fees revenue is due to stock locate services being, in effect, an entirely new line of business that the Company implemented and rapidly expanded during the year ended June 30, 2026. AtlasClearing is a correspondent securities broker-dealer registered with the SEC and a member in good standing of FINRA. AtlasClearing is engaged principally in the over-the-counter, or “OTC,” markets in microcap securities. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade for less than $5.00 per share and have a market capitalization of less than $50 million. AtlasClearing also executes transactions in exchange-traded securities. It derives its revenue from the liquidation of restricted and control microcap securities; clearing transactions on behalf of an introducing broker-dealer on a fully disclosed basis; and trading in equity securities for its own account. It receives limited revenues from fully paid stock lending and margin accounts. During its history, AtlasClearing has underwritten at-the-market offerings for publicly traded companies, placed private offerings, sold mutual funds, introduced margin accounts cleared by other firms on a fully disclosed basis, and provided ancillary financial services.
Total expenses of $29,822,951 for the year ended June 30, 2026 represent an 89% increase of $14,049,058 from total expenses for the year ended June 30, 2025. The increase was primarily due to the variable expenses related to the increase in revenue during the year ended June 30, 2026.
Compensation, payroll taxes and benefits increased to $11,730,081 for the year ended June 30, 2026, a 91% increase compared to $6,150,257 for the year ended June 30, 2025. The increase was primarily due to increase in variable compensation related to the increase in revenue and the hiring of additional employees and executive officers and management during the year ended June 30, 2026.
Data processing and clearing costs increased to $5,668,429 for the year ended June 30, 2026, a 169% increase compared to $2,104,107 for the year ending June 30, 2025. The increase was primarily due to increase in variable costs related to the increase in revenue as well as the new stock locate revenue stream that increased by 2,259% in the current year.
Regulatory, professional fees and related expenses increased to $4,858,675 for the year ended June 30, 2026, a 17% increase from $4,137,631 for the year ended June 30, 2025. The increase was primarily due to professional fees and consulting services as a result of the Commercial Bancorp negotiations and hiring of new consulting support.
Stock based compensation increased to $3,647,695 for the year ended June 30, 2026 as a result of the new employment agreement entered into with the Company’s executive officers in September 2025. The expense incurred during the year ended June 30, 2026 is the portion over the service period of the granted stock based compensation. No such expense was present in the year ended June 30, 2025.
Loss from operations was $9,770,316 for the year ended June 30, 2026. Loss from operations was $4,917,281 in the prior year ended June 30, 2025. The increase in loss from operations was primarily due to the variable expenses related to the increase in revenue during the year ended June 30, 2026. Revenues increased by 85%, operating expenses increased by approximately 89% and loss from operations increased by 99%.
Total other income of $11,481,086 for the year ended June 30, 2026, represents an increase of $1,072,893 from $10,408,193 for the year ended June 30, 2025. The increase is due to net changes in fair value for the various financial instruments as follows: (a) $1,519,905 increase in income for the warrant liability, (b) $839,775 increase related to the change in fair value of the contingent guarantee that was not present in the current year, (c) $10,177,000 increase related to changes in assumptions such as revenue targets being deemed less likely to be reached, resulting in a significant decrease in the value of earnout liability, (d) $1,863,843 increase in income as a result to the changes in fair value of the Winston & Strawn subscription agreement as a result of the full settlement in the current year, (e) $691,984 increase in income related to the Tau Agreement as the company did not utilize the ELOC and does not intend to utilize it further, and (f) $2,997,267 increase as a result of the reduction of interest expenses due to the settlement of various financial debt obligations and therefore reduction in interest expense as a result. This was partially offset by the following: (a) $3,608,231 reduction in the income related to the change in fair value of the convertible note held by Chardan as the note was settled in the current year, (b) $12,265,935 decrease in income as a result of changes in fair value due to seller notes being fully converted and settled during the current year, (c) $570,300 increase in expense as a result of full settlement in the current year with the Winston & Strawn subscription agreement, and (d) $306,137 increase in expense as a result of change in fair value of the secured convertible note.
The foregoing factors resulted in net income of $1,962,875 for the year ended June 30, 2026, compared to net income of $5,750,293 for the year ended June 30, 2025. The decrease was primarily due to the overall increase in revenue and associated increase in expenses offset by the other income related to the financial instruments described above.
| 44 |
Liquidity and Capital Resources
Cash used in operating activities for the year ended June 30, 2026 was $6,187,135, compared to cash provided by operating activities of $822,027 for the year ended June 30, 2025. This was primarily affected by cash used of $4,057,533 related to changes in operational assets. Adjustment to net income primarily consisted of net changes in fair value for various financial instruments as follows: (a) $1,704,499 income for the change in fair value of the warrant liabilities, (b) $11,106,000 income from change in the fair value of earnout liability, (c) $382,154 income in change in fair value of convertible note, (d) $103,185 income in change in fair value of long term seller notes, (e) $334,549 income related to the Tau Agreement as the company did not utilize the ELOC and does not intend to utilize it further, (f) $1,799,545 income from change in the fair value of the Winston & Strawn subscription agreement, (g) $99,693 income from change in the fair value of the Debenture, and (h) $63,696 income from change in the fair value of the sellers convertible notes. This was partially offset by the following: (a) $306,137 loss from change in the fair value of the Restated Note, (b) $570,300 loss on settlement of the Winson and Strong settlement agreement, (c) $4,033,880 non-cash interest expense on financial instruments, (d) $865,659 of non-cash transaction cost incurred in connection with the Equity SPA, (e) $3,647,695 of stock based compensation, (f) $601,831 in consulting expenses paid with stock, and (g) $1,411,577 in amortization of intangible assets.
Cash used for investing activities for year ended June 30, 2026 was $65,000 as compared to $145,000 for the year ended June 30, 2025. This is primarily due to the payment of $65,000 towards the extension of the prior agreement pursuant to which we were to acquire Commercial Bancorp. During the year ended June 30, 2025 the Company paid an additional $125,000 to Pacsquare and $20,000 towards the extension of such prior acquisition agreement.
Cash provided by financing activities for the year ended June 30, 2026 was $16,485,397, compared to cash provided by financing activities for the year ended June 30, 2025 of $1,624,306. This is primarily due to the closing of the Equity SPA raising proceeds of $5,850,000 and payment of transaction cost of $1,228,500, proceed from the September SPA of $4,700,000, repayment of $1,850,000 from the September SPA of which the other remaining amounts was applied to the Equity SPA, $200,000 from Hanire for deposit towards future financing, $490,000 in proceeds from debenture, proceeds for $10,000,000 from the Restated Note payment of $25,000 of legal cost in connection with the SPA, cash payment of $651,103 of promissory notes and cash payment of $1,000,000 to Winston & Strawn as part of the settlement. During the year ended June 30, 2025 the Company paid $226,075 on promissory notes and $20,000 on subordinated debt and received proceeds of $1,870,381 under the ELOC agreement.
Financing Arrangements
Line of Credit
AtlasClearing has a $10,000,000 revolving line of credit with BMO Bank N.A. The interest rate is determined at the time of borrowing as agreed by the Company and the bank. The line of credit currently provides for interest at the bank’s overnight rate plus 1.5% and is secured by AtlasClearing’s customer assets. In addition, the line of credit carries an interest rate of 0.5% on its unused portion. The line of credit agreement requires AtlasClearing to maintain line of credit collateral with value, as determined by the bank, in an amount at least equal to a percentage of the loan amount as specified by the bank. Advances on the line of credit are payable on demand. The entire amount of this credit facility is available to be drawn and used to meet AtlasClearing’s liquidity requirements for NSCC clearing margin deposits. AtlasClearing did not draw on its line of credit during the year ended June 30, 2026 or June 30, 2025. As of June 30, 2026, AtlasClearing was in compliance with all financial covenants contained in its revolving line of credit agreement.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2026.
Contractual Obligations
The Company holds debt obligations with outside vendors and investors, with loans maturing between 2026 and 2030 (see Notes 10 to the accompanying audited financial statements). Additionally, the Company leases office space under several operating leases (see Note 7 to the accompanying audited financial statements). The Company has no capital lease obligations. There are no other outstanding long-term liabilities contractually obligated by the Company.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. We evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could materially differ from those estimates.
| 45 |
Revenue Recognition
The Company, through its subsidiary AtlasClearing, recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be received. The Company applies the five-step model under ASC 606: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) each performance obligation is satisfied.
Brokerage Commissions. AtlasClearing earns commissions from executing securities transactions for customers. The Company acts as an agent in these arrangements. Commission revenue is recognized on the trade date, which is the point in time when the performance obligation is satisfied, as the security is selected, the price is determined, the trade is executed, and the risks and rewards of ownership have transferred to/from the customer.
Mutual Fund Commissions. AtlasClearing earns commissions from sales of mutual funds. The Company recognizes revenue at the point in time when the mutual fund is purchased by the customer and the performance obligation has been satisfied.
Other Transaction-Based Fees. The Company earns revenues from vetting services for customers converting restricted stock to eligible trading stock, as well as from clearing fees charged to another broker-dealer for which it clears trades. These revenues are recognized as the related performance obligations are satisfied.
Service Fees. AtlasClearing charges customers for various services including wires, transfer agent services, corporate actions, blue sheet filings, and Automated Customer Account Transfer Service (ACATS) fees. These fees are recognized as revenue at the point in time the related service is provided.
Interest Income. AtlasClearing also earns interest on balances held with financial institutions, which is recognized in the period earned.
Judgments and Estimates. The recognition of revenue involves judgment, particularly in identifying performance obligations, determining the timing of satisfaction of those obligations, and estimating variable consideration (e.g., contingent fees). Changes in these judgments could have a material impact on the timing and amount of revenue recognized.
Goodwill and Long-Lived Asset Impairments
We assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. The determination of fair value involves significant judgment, including the selection of appropriate valuation methodologies, discount rates, and assumptions about future cash flows. Changes in these estimates or in market conditions could result in impairment charges that may be material to our financial statements.
Derivative Liabilities
We account for derivative instruments as either equity-classified or liability-classified instruments based on an assessment of the derivative instruments’ specific terms and applicable authoritative guidance FASB Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the derivative instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the derivative instruments meet all of the requirements for equity classification under ASC 815, including whether the derivative instruments are indexed to our own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance and as of each subsequent quarterly period end date while the warrants and derivatives are outstanding.
For issued or modified derivatives that meet all of the criteria for equity classification, the derivatives are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified derivatives that do not meet all the criteria for equity classification, the derivatives are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the derivatives are recognized as a non-cash gain or loss on the statements of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data
| 46 |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders of AtlasClear Holdings, Inc.
Opinion on the Financial Statements
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Complex Financial Instruments and Earnout Liability
Description of the Matter:
As described in Notes 10, 11 and 15 to the consolidated financial statements, the Company accounts for various financial instruments and contingent obligations at fair value, including the earnout liability, warrant liabilities, derivative liabilities, debenture derivative, and secured convertible note. These instruments are measured using Level 3 valuation techniques and involve significant management estimates and assumptions.
We identified the valuation of these instruments as a critical audit matter because auditing the fair value estimates involved especially challenging auditor judgment due to the subjectivity of significant assumptions, including forecasted revenues, volatility assumptions, discount rates, probability assessments, and other unobservable inputs.
How the Matter was Addressed in Our Audit:
Our audit procedures related to the valuation of these instruments included, among others:
| ● | Evaluating management’s process for developing the fair value estimates. | |
| ● | Assessing the appropriateness of the valuation methodologies utilized by management and its third-party valuation specialist. | |
| ● | Testing significant assumptions and inputs utilized in the valuation models. | |
| ● | Evaluating the completeness and accuracy of data used in the valuation models. | |
| ● | Assessing the reasonableness of the conclusions reached by management and its third-party valuation specialist. | |
| ● | Assessing the adequacy of the related financial statement disclosures. |
/s/
Haynie
September 23, 2026
We have served as the Company’s auditor since 2024.
| F-2 |
ATLASCLEAR HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated - customers | ||||||||
| Cash segregated - PAB | ||||||||
| Receivables - broker-dealers and clearing organizations | ||||||||
| Receivables - customers, net of allowance for credit losses of $ | ||||||||
| Other receivables | ||||||||
| Prepaids | ||||||||
| Trading securities, market value, net | ||||||||
| Total Current Assets | ||||||||
| Operating lease right to use lease asset | ||||||||
| Customer list, net | ||||||||
| Goodwill | ||||||||
| Developed technology, net | ||||||||
| Bank acquisition deposit | ||||||||
| Cash deposits - broker-dealers and clearing organizations | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| LIABILITIES | ||||||||
| Payables to customers | $ | $ | ||||||
| Accounts and payables to officers/directors | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Payables - broker-dealers and clearing organizations | ||||||||
| Commissions, payroll and payroll taxes | ||||||||
| Current portion of lease liability | ||||||||
| Promissory notes | ||||||||
| Current portion of long-term merger financing, net | ||||||||
| Derivative liability - convertible notes | ||||||||
| Merger financing payable | ||||||||
| Merger financing payable - derivative | ||||||||
| Tau agreement | ||||||||
| Debenture | ||||||||
| Debenture – derivative | ||||||||
| Subscription agreement | ||||||||
| Stock payable- related party | ||||||||
| Excise tax payable | ||||||||
| Total Current Liabilities | ||||||||
| Accrued contingent liability | ||||||||
| Long-term secured convertible note, net | ||||||||
| Long-term convertible notes, net | ||||||||
| Warrant Liability | ||||||||
| Derivative liability - warrants | ||||||||
| Earnout - liability | ||||||||
| Deferred income tax liability | ||||||||
| Subordinated borrowings | ||||||||
| Trading account deposit | ||||||||
| Long-term lease liability | ||||||||
| TOTAL LIABILITIES | ||||||||
Commitments and Contingencies (Note 11) | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value; shares authorized; issued or outstanding at June 30, 2026 and 2025 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at June 30, 2026 and 2025, respectively | ||||||||
| Stock subscription receivable | ( | ) | ( | ) | ||||
| Additional paid-in-capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-3 |
ATLASCLEAR HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| FOR THE YEAR | FOR THE YEAR | |||||||
| ENDED | ENDED | |||||||
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| REVENUES | ||||||||
| Commissions | $ | $ | ||||||
| Vetting fees | ||||||||
| Clearing fees | ||||||||
| Stock locate fees | ||||||||
| Net gain/(loss) on firm trading accounts | ||||||||
| Other revenue | ||||||||
| TOTAL REVENUES | ||||||||
| EXPENSES | ||||||||
| Compensation, payroll taxes and benefits | ||||||||
| Data processing and clearing costs | ||||||||
| Regulatory, professional fees and related expenses | ||||||||
| Stock compensation | ||||||||
| Communications | ||||||||
| Occupancy and equipment | ||||||||
| Transfer fees | ||||||||
| Bank charges | ||||||||
| Bad debt | ||||||||
| Intangible assets amortization | ||||||||
| Other | ||||||||
| TOTAL EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME/(EXPENSE) | ||||||||
| Interest income | ||||||||
| Change in fair value of warrant liability derivative | ||||||||
| Change in fair value of convertible note derivative | ||||||||
| Change in fair value of long-term and short-term note derivative | ||||||||
| Change in fair value of contingent guarantee | ( | ) | ||||||
| Change in fair value of secured convertible note | ( | ) | ||||||
| Change in fair value of merger financing | ||||||||
| Change in fair value of earnout liability | ||||||||
| Change in fair value of Winston & Strawn agreement | ( | ) | ||||||
| Change in fair value of debenture derivative | ||||||||
| Change in fair value of stock payable | ||||||||
| Change in fair value of Tau agreement | ( | ) | ||||||
| Loss on settlement on Winston & Strawn agreement | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| TOTAL OTHER INCOME | ||||||||
| NET INCOME BEFORE INCOME TAXES | ||||||||
| Income tax benefit | ||||||||
| NET INCOME | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Common Stock | ||||||||
| Basic and diluted net income per share, Common Stock | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
ATLASCLEAR HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2026 AND 2025
| Total | ||||||||||||||||||||||||
| Common Stock | Stock Subscription | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||
| Shares | Amount | Receivable | Capital | Deficit | (Deficit) | |||||||||||||||||||
| Balance — June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued to settled vendor obligations | ||||||||||||||||||||||||
| Shares issued under stock promotion agreement | ||||||||||||||||||||||||
| Common stock issued to for consulting services | ||||||||||||||||||||||||
| Shares issued under Tau agreement settle through June 30, 2025 | ( | ) | ||||||||||||||||||||||
| Commitment fee shares settled under the Tau agreement | ||||||||||||||||||||||||
| Shares issued as purchase consideration for developed technology | ||||||||||||||||||||||||
| Shares issued as deposit for purchase of Commercial Bank | ||||||||||||||||||||||||
| Shares transferred by related parties as settlement for Company obligations under various financial instruments see Note 8 | — | |||||||||||||||||||||||
| Shares issued for shares transferred by related party as repayment of shares transferred to cover Company obligations as noted above net of contributed capital for debt assumed (see Note 8) | ( | ) | ||||||||||||||||||||||
| Shares issued to related party as settlement for $ | ||||||||||||||||||||||||
| Shares issued to as additional consideration for delayed payment on merger financing notes | ||||||||||||||||||||||||
| Rounding up for fractional shares in 1:60 reverse stock split | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Balance — June 30, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued under Software as a Service License Agreement | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued for consulting services provided by director. | ||||||||||||||||||||||||
| Shares issued to settled vendor invoice | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued under Equity SPA, net of offering cost of $ | ||||||||||||||||||||||||
| Shares issued in non-cash exercise of Warrant Liability | ||||||||||||||||||||||||
| Shares issued to Winston & Strawn as partial payment in settlement agreement | ||||||||||||||||||||||||
| Vested portion of stock based compensation | — | |||||||||||||||||||||||
| Reversal of excise tax related to prior shareholder redemptions | — | |||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Balance — June 30, 2026 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
ATLASCLEAR HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| FOR THE YEAR | FOR THE YEAR | |||||||
| ENDED | ENDED | |||||||
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Change in fair value, warrant liability derivative | ( | ) | ( | ) | ||||
| Change in fair value, convertible note derivative | ( | ) | ( | ) | ||||
| Change in fair value, long-term and short-term note derivative | ( | ) | ( | ) | ||||
| Change in fair value, contingent guarantee | ||||||||
| Change in fair value of debenture derivative | ( | ) | ||||||
| Change in fair value of secured convertible note | ||||||||
| Change in fair value, WDCO sellers convertible notes | ( | ) | ( | ) | ||||
| Change in fair value, earnout liability | ( | ) | ( | ) | ||||
| Change in fair value, subscription agreement | ( | ) | ||||||
| Change in fair value, stock payable | ( | ) | ||||||
| Change in fair value, Tau agreement | ( | ) | ||||||
| Loss on settlement on Winston & Strawn agreement | ||||||||
| Fee on sellers notes | ||||||||
| Interest expense on convertible notes | ||||||||
| Transaction costs attributed to Warrant Liability | ||||||||
| Stock based compensation | ||||||||
| Consulting expense paid with stock | ||||||||
| Other non-cash (gain) loss | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangibles | ||||||||
| Bad debt expense | ||||||||
| Amortization of right of use asset | ||||||||
Deferred tax liability | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables from brokers & dealers | ( | ) | ||||||
| Receivables from customers | ( | ) | ||||||
| Receivables from others | ||||||||
| Advances and Prepaid expenses | ||||||||
| Cash deposits with clearing organization & other B/Ds | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Payables to customers | ( | ) | ||||||
| Payables to officers & directors | ( | ) | ( | ) | ||||
| Payable to brokers & dealers | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Commissions and payroll taxes payable | ||||||||
Lease liability | ( | ) | ( | ) | ||||
| Trading deposits | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| F-6 |
ATLASCLEAR HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| Cash Flows from Investing Activities: | ||||||||
| Cash paid for purchase of Pacsquare | ( | ) | ||||||
| Cash paid for bank acquisition deposit | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from stock issuance | ||||||||
| Proceeds from Equity SPA | ||||||||
| Transaction cost paid for Equity SPA | ( | ) | ||||||
| Proceeds from Secured Convertible Note | ||||||||
| Transaction cost paid for Secured Convertible Note | ( | ) | ||||||
| Proceeds from Convertible Notes, net of transaction cost | ||||||||
| Payment on Convertible Notes | ( | ) | ||||||
| Proceeds from debenture, net of transaction cost | ||||||||
| Proceeds from third party advances | ||||||||
| Payment on Winston & Strawn settlement agreement | ( | ) | ||||||
| Repayment on subordinated debt | ( | ) | ||||||
| Repayment of promissory note | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Decrease in goodwill due to change in deferred tax liability | $ | $ | ||||||
| Shares issued under Tau agreement | $ | $ | ||||||
| Value of shares transferred by related parties to settle obligation | $ | $ | ||||||
| Shares issued for conversion on convertible notes | $ | $ | ||||||
| Shares issued for conversion of secured convertible notes | $ | $ | ||||||
| Shares issued to related party for settlement of accounts payable | $ | $ | ||||||
| Shares issued for conversion of principal and interest on short-term note | $ | $ | ||||||
| Shares issued for conversion of principal and interest on long-term note and merger financing | $ | $ | ||||||
| Shares issued for commercial bank acquisition extension | $ | $ | ||||||
| Initial value of derivative included in merger financing | $ | $ | ||||||
| Shares issued for stock payable | $ | $ | ||||||
| Promissory note issued under insurance premium | $ | $ | ||||||
| Prepaid stock based compensation | $ | $ | ||||||
| Shares issued to purchase Pacsquare | $ | $ | ||||||
| Receivable from shares advanced under Tau agreement | $ | $ | ||||||
| Shares issued for conversion of principal and interest on promissory note | $ | $ | ||||||
| Initial value of derivative included in debenture | $ | $ | ||||||
| Initial value of derivative included in convertible note | $ | $ | ||||||
| Reversal of excise tax | $ | $ | ||||||
| Convertible Notes transferred to Equity SPA | $ | $ | ||||||
| Initial value of warrant issued as transaction cost under Equity SPA | $ | $ | ||||||
| Shares issued for Winston & Strawn settlement agreement | $ | $ | ||||||
| Shares issued for non-cash exercise of Warrant Liability | $ | $ | ||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ |
The accompanying notes are an integral part of the consolidated financial statements.
| F-7 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
AtlasClear Holdings, Inc. (formerly known as Calculator New Pubco, Inc.) (the “Company” or “AtlasClear Holdings”) is a Delaware corporation and prior to the Business Combination (defined below), was a direct, wholly-owned subsidiary of Quantum FinTech Acquisition Corporation (“Quantum”). Quantum was incorporated in Delaware on October 1, 2020. Quantum was a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.
On February 9, 2024 (the “Closing Date”), the Company consummated the previously announced transactions pursuant to that certain Business Combination Agreement, dated November 16, 2022 (as amended, the “Business Combination Agreement”), by and among the Company, Quantum, Calculator Merger Sub 1, Inc., a Delaware corporation and a wholly-owned subsidiary of the registrant (“Merger Sub 1”), Calculator Merger Sub 2, Inc., a Delaware corporation and a wholly-owned subsidiary of the registrant (“Merger Sub 2”), AtlasClear, Inc., a Wyoming corporation (“AtlasClear”), Atlas FinTech Holdings Corp., a Delaware corporation (“Atlas FinTech”) and Robert McBey. The transactions consummated as a result of the Business Combination Agreement are hereinafter referred to as the “Business Combination.” In connection with the consummation of the Business Combination (the “Closing”), the Company changed its name from “Calculator New Pubco, Inc.” to “AtlasClear Holdings, Inc.” As a result, the operation history of Quantum survived the merger. Pursuant to the Business Combination Agreement, AtlasClear received certain assets from Atlas FinTech and Atlas Financial Technologies Corp., a Delaware corporation, and pursuant to the Broker-Dealer Acquisition Agreement (as defined in the Business Combination Agreement), AtlasClear completed the acquisition of broker-dealer, Wilson-Davis & Co., Inc. (now known as AtlasClearing, Inc.) (“AtlasClearing”).
On February 16, 2024, AtlasClear and Pacsquare Technologies, LLC (“Pacsquare”) entered into a Source Code Purchase and Master Services Agreement (the “Pacsquare Purchase Agreement”). On June 10, 2025, AtlasClear entered into an amended Software Development and License Agreement with Pacsquare, pursuant to which AtlasClear purchased a proprietary data management platform that was developed by Pacsquare, including certain software and source code (the “AtlasClear Platform”).
AtlasClear Holdings’ goal is to build a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products such as crypto that focus on financial services firms. AtlasClear Holdings is a fintech driven business-to-business platform that expects to power innovation in fintech, investing, and trading.
AtlasClear does not meet the definition of a business and therefore was treated as an asset acquisition by AtlasClear Holdings. As such the assets contributed from Atlas FinTech and the net assets of AtlasClear were recognized at historical cost. ASC 350 prohibits the recognition of goodwill in an asset purchase with related parties.
Quantum was deemed the accounting acquirer based on the following factors: i) Quantum issued cash and shares of its common stock; ii) Quantum controlled the voting rights under the no redemption and the maximum contractual redemption scenarios; iii) Quantum had the largest minority voting interest; iv) Quantum has control over the board of directors of the post-combination company and most of senior management of the post-combination company are former officers of Quantum.
AtlasClearing is a securities broker and dealer, dealing in over-the-counter listed securities and clears for one other broker-dealer on a fully disclosed basis. AtlasClearing is required to comply with all applicable rules and regulations of the Securities and Exchange Commission (the “SEC”), Financial Industry Regulatory Authority, Inc. (“FINRA”), and the various securities exchanges in which it maintains a membership.
Revenue is derived principally from AtlasClearing’s operations in four areas: commission revenue, fee revenue, security locates and interest revenue.
AtlasClearing has operations in Utah, Arizona, California, Florida, New York, Oklahoma and Nevada. Transactions for customers are principally in the states where the Company operates, however, some customers are located in other states in which the Company is registered. Principal trading activities are conducted with other broker dealers throughout the United States.
Liquidity and Going Concern Consideration
Since inception, the Company has incurred recurring operating losses and negative cash flows from operations. These conditions previously raised substantial doubt about the Company’s ability to continue as a going concern within one year following the financial statement issuance date.
During October 2025, management successfully executed a series of financing transactions designed to address the Company’s liquidity needs and alleviate this uncertainty:
Debt
Restructuring: On October 8, 2025, the Company entered into an amended and restated securities purchase agreement (the “Restated
SPA”) with Funicular Funds, LP (“Funicular”). Pursuant to the Restated SPA, the Company issued and sold an amended
and restated secured convertible promissory note in the principal amount of $
| F-8 |
Equity
Financing: On October 8, 2025, the Company entered into a securities purchase agreement (the “Equity SPA”) with certain institutional
investors, including Funicular. Pursuant to the Equity SPA, the Company issued and sold units (“Units”) at $
The
closings for the Restated Note and Units occurred between October 9, 2025, and October 14, 2025, yielding aggregate gross net-new cash
proceeds of approximately $
Management evaluated these implemented financing plans in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-40, Presentation of Financial Statements – Going Concern. Based on the capital raised and management’s operational cash flow forecasts, the Company expects to have sufficient liquidity to satisfy its obligations as they become due for at least twelve months following the issuance date of these financial statements. Accordingly, management has concluded that substantial doubt regarding the Company’s ability to continue as a going concern has been alleviated.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. As such the Company has accrued for the estimated excise tax as a result of the redemptions that occurred
after December 31, 2022. On November 24, 2025, the Treasury Department and Internal Revenue Service issued final regulations (the “Final
Regulations”) regarding the application of the excise tax on repurchases of corporate stock. The Final Regulations, which generally
apply to stock repurchases occurring after December 31, 2022, generally provide an exception for repurchases of certain types of stock
issued prior to August 16, 2022. Quantum completed its initial public offering prior to August 16, 2022 and, as such, the Company has
determined that certain of its stock repurchases qualify for this exception and has reversed the accrual of $
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions 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 expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Prevailing industry practices requires management to make estimates and assumptions regarding trading securities, depreciation and other matters that affect certain reported amounts and disclosures in the financial statements. The more significant accounting estimates included in these consolidated financial statements is the determination of the fair value of the private warrant liabilities, the fair value of the warrant liability, the fair value of the derivatives included in the convertible notes and debenture agreement, the fair value of the secured convertible note, the merger financing, the short-term merger financing, the long-term merger financing, the fair value of the earnout liability, realization of deferred tax assets and the useful life of its intangible assets. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all bank accounts highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
| F-9 |
Trading Securities
Securities held in the Company’s trading account and trading securities sold not yet purchased, consist primarily of over-the-counter securities and are valued based upon quoted market prices. The value of securities that are not readily marketable are estimated by management based upon quoted prices, the number of market makers, trading volume and number of shares held. Unrealized gains and losses are reflected in income in the financial statements.
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation on property and equipment is provided using accelerated
and straight-line methods over expected useful lives of
three to
Leases
The Company leases office space under the terms of several operating leases. The determination of whether an arrangement is a lease is made at the lease’s inception. Under ASC 842, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined under the standard as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed.
Right-of-use assets (“ROU assets”) represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate based on the information available at lease commencement.
Goodwill
Goodwill
represents the excess of purchase price in a business combination over the fair value of the net identifiable assets acquired. The Company
evaluated goodwill for impairment at the reporting unit level by assessing whether it is more likely than not that the fair value of
a reporting unit exceeds its carrying value. If this assessment concludes that it is more likely than not that the fair value of a reporting
unit exceeds its carrying value, then goodwill is not considered impaired and no further impairment testing is required. Conversely,
if the assessment concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value,
a goodwill impairment test is performed to compare the fair value of the reporting unit to its carrying value. The Company determines
fair value of the reporting unit using income models. The models contain significant assumptions and accounting estimates about discount
rates, future cash flows, that could materially affect operating results or financial position if they were to change significantly in
the future and could result in an impairment. The Company performs our goodwill impairment assessment whenever events or changes in facts
or circumstances indicate that impairment may exist and during the fourth quarter each year. The cash flow estimates and discount rates
incorporate management’s best estimates, using appropriate and customary assumptions and projections at the date of evaluation.
As of June 30, 2026 and 2025, the carrying value of goodwill was $
Intangible Assets
Intangible
assets are presented at fair value, net of amortization. The fair value is determined based on the appraised value of the asset.
Intangible assets comprise of developed technology and customer relationships (See Note 8). Developed technology and customer list
are amortized using the straight-line method over the ten-year
and twelve-year estimated useful lives of the assets, respectively. As of June 30, 2026 and 2025, the carrying value of developed
technology was $
Impairment of Long-lived and Intangible Assets
In
accordance with ASC 360-10 Property Plant and Equipment and ASC 350-10 Intangibles, the Company, on a regular basis, reviews the carrying
amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The
Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest,
from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds
the fair value of the asset. Fair value is determined based on the appraised value of the assets or the anticipated cash flows from the
use of the asset, discounted at a rate commensurate with the risk involved. The Company had
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants that do not meet all the criteria for equity classification are recognized as a non-cash gain or loss on the consolidated statements of operations. The fair value of the private warrants and the warrant liability were estimated using a Black-Scholes model approach (see Note 15).
| F-10 |
Income Taxes
The Company utilizes the asset and liability method to account for income taxes. The objective of this method is to establish deferred tax assets and liabilities for the temporary differences between net income for financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized.
Income tax expense or benefit is provided based upon the financial statement earnings of the Company. The allowance for doubtful accounts is deductible for financial statement purposes, but not for tax purposes. Depreciation expense is recognized in different periods for tax and financial accounting purposes due to the use of accelerated depreciation methods for income tax purposes. The tax effects of such differences are reported as deferred income taxes in the financial statements.
Revenue Recognition
AtlasClearing, a subsidiary of the Company, recognizes revenue in accordance with ASC 606. This revenue recognition guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five-step model to: (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when the entity satisfies a performance obligation.
AtlasClearing acts as an agent by selling securities to customers and collecting commissions. AtlasClearing recognizes commissions on a trade date basis, which is the day the transaction is executed. AtlasClearing believes that the performance obligation is satisfied on the trade date because that is when the security is selected, the price is determined, the trade is executed, and the risks and rewards of ownership have been transferred to/from the customer.
AtlasClearing also receives commissions on mutual funds purchased by customers. AtlasClearing believes that the performance obligation is not satisfied until the mutual funds are purchased by customers and recognizes the commission revenue upon receipt from fund.
AtlasClearing performs vetting services to customers who wish to convert restricted stock to eligible trading stock. In addition, AtlasClearing charges clearing fees to another broker-dealer that it clears trades for. AtlasClearing recognizes revenue as the related performance obligations are satisfied.
AtlasClearing earns fees from providing security locates to other broker-dealers in connection with short sale transactions. The Company’s performance obligation is satisfied when the locate is provided to the requesting broker-dealer. Revenue from locate services is recognized at a point in time upon delivery of the locate, in an amount that reflects the consideration the Company expects to receive for the service provided.
AtlasClearing charges customers for wires and transfer agent fees. The customer is also charged for blue sheet fees, corporate actions, and ACATS fees. AtlasClearing recognizes revenue as the related performance obligations are satisfied.
AtlasClearing performs underwriting services for companies going public. AtlasClearing enters into an agreement detailing the services to be performed. AtlasClearing recognizes revenue when the shares of stock have been delivered and wire payments have been processed.
AtlasClearing earns interest on its balances with its financial institution. AtlasClearing recognizes the interest income at month end when the income has been earned.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period.
Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding plus potential incremental common shares that would have been outstanding if dilutive potential common shares had been issued, calculated using the treasury stock method or the if-converted method, as applicable. Potential common shares are excluded from the computation of diluted net income (loss) per share if their effect would be antidilutive.
For the year ended June 30, 2026 and 2025, the if-converted calculation for convertible notes, sellers notes, and debentures resulted in an adjusted net loss position; therefore, the effect of assuming conversion was antidilutive, and basic and diluted net income per share remain equal. For the years ended June 30, 2026 and 2025, outstanding stock warrants were excluded from the computation of diluted EPS as their exercise prices exceeded the average market price of the common stock during the respective periods, rendering them antidilutive.
Certain time-based and performance-based equity awards granted to officers are subject to stockholder approval of an amendment to the Company’s equity incentive plan to increase authorized shares. Under ASC 260, these awards are treated as contingently issuable shares and are excluded from the calculation of basic and diluted net income (loss) per share prior to obtaining stockholder approval.
| F-11 |
| For the year Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Basic and diluted net income (loss) per share of Common Stock | ||||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ||||||
| Denominator: | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income (loss) per share of Common Stock | $ | $ | ||||||
| Description | June 30, 2026 | June 30, 2025 | ||||||
| Convertible Securities (if-Converted): | ||||||||
| Sellers Notes | ||||||||
| Convertible notes | ||||||||
| Debenture | ||||||||
| Secured convertible note | ||||||||
| Subscription agreement | ||||||||
| Tau agreement | ||||||||
| Promissory note | ||||||||
| Total Convertible Securities Excluded | ||||||||
| Contingently issuable shares (Pending Stockholder Approval) | ||||||||
| Time-Based Stock Awards | ||||||||
| Performance-Based (Market Condition) Stock Awards | ||||||||
| Total contingently issuable shares– excluded | ||||||||
| Out-of-the Money Warrants: | ||||||||
| Public Warrants | ||||||||
| Private Warrants | ||||||||
| Secured convertible note warrants | ||||||||
| Warrant Liability | ||||||||
| Total Warrants excluded | ||||||||
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Deposit Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for warrant liabilities, convertible notes derivative liability and the earnout out liability (see Note 15).
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Segment Reporting
The Company operates and manages its business as a single operating and reportable segment in accordance with FASB ASC Topic 280, Segment Reporting. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is the Executive Chairman, who reviews consolidated financial results, assets, and operational metrics to make decisions for the enterprise as a whole.
| F-12 |
Risk Management
Transactions involving financial instruments involve varying degrees of market, credit and operating risk. The Company monitors its exposure to risk on a daily basis.
Market Risk
Market risk is the potential change in value of the financial instrument caused by unfavorable changes in interest rates and equity prices. Management is responsible for reviewing trading positions, exposure limits, profits and losses, and trading strategies. In the normal course of business, the Company purchases, and makes markets in non-investment grade securities. These activities expose the Company to a higher degree of market risk than is associated with investing or trading in investment grade instruments.
Operating Risk
Operating risk focuses on the Company’s ability to accumulate, process and communicate information necessary to conduct its daily operations. Deficiencies in technology, financial systems and controls and losses attributable to operational problems all pose potential operating risks. In order to mitigate these risks, the Company has established and maintains an internal control environment which incorporates various control mechanisms throughout the organization. In addition, the Company periodically monitors its technological needs and makes changes as deemed appropriate.
Credit Risk
AtlasClearing’s transactions with customers and other broker dealers are recorded on a trade date basis and are collateralized by the underlying securities. AtlasClearing’s exposure to credit risk associated with nonperformance by customers or contra brokers is impacted by volatile or illiquid trading markets. Should either the customers or other broker dealers fail to perform, AtlasClearing may be required to complete the transactions at prevailing market prices. AtlasClearing manages credit risk by monitoring net exposure to individual counterparties on a regular basis. Historically, reserve requirements arising from instruments with off-balance sheet risk have not been material. Receivables and payables with clearing and other broker dealers are generally collateralized by cash deposits. Additional cash deposits are requested when considered necessary by the clearing organization or contra broker dealer.
Customer transactions are primarily entered in cash accounts. AtlasClearing maintains a few customer margin accounts which exposes the company to credit and market risks. However, this risk is minimized by AtlasClearing requirement that margin accounts must maintain at least a 4:1 ratio of securities to margin obligations.
Concentrations of credit risk that arise from financial instruments (whether on or off-balance sheet) exist for groups of counterparties when they have similar economic characteristics that would cause their ability to meet obligations to be similarly affected by economic, industry or geographic factors.
Recent Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 became effectuve for the Company for the annual period ended June 30, 2026. The adoption of ASU 2023-09 impacted the Company’s income tax disclosures only and did not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.
Recent Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, a new standard to expand disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on the income statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The standard will be effective for annual periods beginning after December 15, 2026 (the Company’s fiscal year ending June 30, 2028), and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the provision of this ASU.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) Induced Conversions of Convertible Debt Instruments, a new standard to clarify the accounting for settlements of convertible debt instruments. The amendments clarify the criteria used to determine whether a settlement of convertible debt should be accounted for as an induced conversion (resulting in the recognition of an inducement expense) or as a debt extinguishment (resulting in a gain or loss on extinguishment). Specifically, the update clarifies that induced conversion accounting applies only if the inducement offer preserves the form and amount of consideration issuable under the instrument’s existing conversion privileges. It also extends the guidance to include convertible debt instruments containing cash conversion features and instruments that are not currently convertible at the offer date, provided they contain a substantive conversion feature. ASU 2024-04 is effective for the Company for fiscal years beginning after December 15, 2025 (the Company’s fiscal year ending June 30, 2027), including interim periods within that fiscal year, with early adoption permitted. The guidance may be applied either retrospectively to all prior periods presented or prospectively to all debt settlements occurring on or after the adoption date. The Company is currently evaluating the impact that ASU 2024-04 will have on its consolidated financial statements and its existing debt obligations, including its Convertible Notes, Debentures, and Secured Convertible Notes.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
| F-13 |
NOTE 3. CASH SEGREGATED IN ACCORDANCE WITH FEDERAL REGULATIONS
The
AtlasClearing is required by Rule 15c3-3 of the Securities and Exchange Commission to maintain a cash reserve with respect to customers’
transactions and credit balances, on a settlement date basis. Such a reserve is computed weekly using a formula provided by the rule
and the reserve account must be separate from all other bank accounts of AtlasClearing. The required reserve as of June 30, 2026 and
2025, was calculated to be $
AtlasClearing
is required by Rule 15c3-3 of the Securities and Exchange Commission to maintain a cash reserve with respect to broker-dealer
transactions and credit balances. Such a reserve is computed weekly using a formula provided by the rule and the reserve account
must be separate from all other bank accounts of AtlasClearing. The required reserve as of June 30, 2026 and 2025, was calculated to
be $
NOTE 4. NET CAPITAL REQUIREMENTS
As
a broker dealer, AtlasClearing is subject to the uniform net capital rule adopted and administered by the Securities and Exchange Commission.
The rule requires maintenance of minimum net capital and prohibits a broker dealer from engaging in securities transactions at a time
when its net capital falls below minimum requirements, as those terms are defined by the rule. Under the alternative method permitted
by this rule, net capital shall not be less than the greater of $250,000 or 2% of aggregate debit items arising from customer transactions,
as defined. Also, the AtlasClearing has a minimum requirement based upon the number of securities’ markets that the Company maintains.
At June 30, 2026 and 2025, AtlasClearing’s net capital was $
NOTE 5 – CASH AND RESTRICTED CASH
Reconciliation of cash and restricted cash as shown in the statements of cash flows is presented in the table below:
| June 30, 2026 | June 30, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated - customers | ||||||||
| Cash segregated - PAB | ||||||||
| Total cash and restricted cash shown in the statement of cash flows. | $ | $ | ||||||
NOTE 6 – RECEIVABLES & PAYABLES WITH BROKER DEALERS AND CLEARING ORGANIZATION
Amounts receivable and payable with broker dealers and the clearing organization include:
| June 30, 2026 | June 30, 2025 | |||||||
| Due from clearing organizations, net | $ | $ | ||||||
| Fails to deliver and receive | ||||||||
| Total receivables | $ | $ | ||||||
| Due from clearing organizations, net | $ | $ | ||||||
| Fails to deliver and receive | ||||||||
| Total payables | $ | $ | ||||||
Accounts
receivable from and payable to customers at June 30, 2026 and 2025, include cash and margin accounts. Securities owned by customers are
held as collateral for any unpaid amounts. Such collateral is not reflected in the financial statements. The Company provides an allowance
for credit losses, as needed, for accounts in which collection is uncertain. Management periodically evaluates each account on a case-by-case
basis to determine impairment. Accounts that are deemed uncollectible are written off to bad debt expense. Bad debt expense net of bad
debt recoveries and trading error adjustments for the year ended June 30, 2026 and 2025 was $
| F-14 |
NOTE 7. LEASE COMMITMENTS
The Company has operating lease obligations for office spaces at its headquarters location for AtlasClearing and for a corporate apartment utilized for business purposes.
The various leases have the following characteristics:
The Company renewed a three-year operating lease for office space in February 2024, which will expire January 31, 2027. The terms of the agreement call for an annual 3% escalation in rents and one three-year renewal option at market rates.
The Company entered into a sublease agreement for additional office space in February 2026. The sublease commenced on March 1, 2026 and expires February 28, 2029. The lease provides for annual rent escalations over the lease term.
The Company entered into an operating lease for a corporate apartment in February 2026. The lease commenced on February 4, 2026 and expires April 2, 2027.
The Company entered into an operating lease for a corporate office in June 2026. The lease commenced on June 11, 2026 and expires August 31, 2029.
Rent
expense under the four operating agreements totaling $
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total minimum lease payments | ||||
| Less interest factor | ( | ) | ||
| Total operating lease liability | ||||
| Less operating lease liability - current portion | ( | ) | ||
| Operating lease liability - long term portion | $ |
As disclosed in Note 2, the Company adopted ASU No. 2016-02, Leases (Topic 842), which requires leases with durations greater than 12 months to be recognized on the statement of financial condition. The Company uses its estimated cost-of-capital at lease commencement as its interest rate, as the operating leases do not provide readily determinable implicit interest rates.
The following table presents the Company’s lease-related assets and liabilities as of June 30, 2026 and 2025:
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| Operating lease ROU Asset - Opening Balance | $ | $ | ||||||
| Increase | ||||||||
| Decrease | ( | ) | ( | ) | ||||
| Operating lease ROU Asset - Ending Balance | $ | $ | ||||||
| Operating lease liability - Short Term | $ | $ | ||||||
| Operating lease liability - Long Term | ||||||||
| Operating lease liability - Total | $ | $ | ||||||
The following table presents the weighted-average remaining lease term and weighted-average discount rates related to the Company’s operating leases as of June 30, 2026 and 2025:
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
| F-15 |
NOTE 8. INTANGIBLE ASSETS AND GOODWILL
Amortization
expense related to the amortization of the developed technology and customer list. During the year ended June 30, 2026 and 2025 amortization
expense of $
Intangible Assets of the Company at June 30, 2026 and 2025 are summarized as follows:
| June 30, 2026 | ||||||||||||||||||
| Est useful | Accumulated | Impairment | ||||||||||||||||
| life | Cost | Amortization | of Asset | Net | ||||||||||||||
| Goodwill | Indefinite | $ | $ | $ | $ | |||||||||||||
| Developed technology | ( | ) | ||||||||||||||||
| Customer Lists | ( | ) | ||||||||||||||||
| Intangible Assets | $ | $ | ( | ) | $ | $ | ||||||||||||
| June 30, 2025 | ||||||||||||||||||
| Est useful | Accumulated | Impairment | ||||||||||||||||
| life | Cost | Amortization | of Asset | Net | ||||||||||||||
| Goodwill | Indefinite | $ | $ | $ | $ | |||||||||||||
| Developed technology | ( | ) | ||||||||||||||||
| Customer Lists | ( | ) | ||||||||||||||||
| Intangible Assets | $ | $ | ( | ) | $ | $ | ||||||||||||
Below is a summary of the amortization of intangible assets for the next five years:
| Year | Amount | |||
| June 30, 2027 | $ | |||
| June 30, 2028 | ||||
| June 30, 2029 | ||||
| June 30, 2030 | ||||
| June 30, 2031 | ||||
| Thereafter | ||||
NOTE 9. RELATED PARTY TRANSACTIONS
Advances from Related Parties
On
May 9, 2024, Quantum Ventures, a related party, transferred shares of Common Stock to pay for $
As
of June 30, 2026 and 2025, amounts due to Executive Chairman for advances made were $
As
of June 30, 2026 and 2025, amounts due to the President for advances made were $
As
of June 30, 2026 and 2025, $
| F-16 |
Note Financing
In
September 2025, the Company entered into the September Securities Purchase Agreements, as defined and described in Note 10 below.
$
On
October 8, 2025, the Company repaid the principal to Sandip Patel $
Other related party transactions
On
July 17, 2025, the Company issued shares of Common Stock to Sandip I. Patel, P.A., a law firm that is wholly owned by Sandip
I. Patel, the Company’s General Counsel, Chief Financial Officer and a member of the Company’s board of directors, as consideration
for legal and consulting services provided to the Company prior to his employment. The shares were valued based on the closing price
of the date of issuance of $ for a total value of $
Twelve
subordinated loan agreements totaling $
Debenture
On
August 4, 2025, the Company entered into a securities purchase agreement (“August Securities Purchase Agreement”) with an
institutional investor (the “Holder”) controlled by Robert D.Keyser, Jr., a member of our board of directors, under which the
Company agreed to issue and sell, in a private placement, a Series A convertible debentures (the “Debenture”) for an aggregate
principal amount of $
The Debenture is within the scope of ASC 470-10 and is not an ASC 480 liability. The Company did not elect the fair value option under ASC 825-10. The instrument contains two embedded derivatives—the conversion option and the event-of-default feature—each of which requires bifurcation and separate measurement at fair value through earnings. Other redemption and prepayment features are clearly and closely related and remain within the debt host. The Debenture is therefore recognized net of a debt discount, with the derivative liabilities recorded separately and subsequently remeasured to fair value through earnings. Interest expense will be recognized using the effective-interest method.
The
Company recognized the discount of $
NOTE 10. NOTES PAYABLE
The following table represents the notes payable and related financing as of June 30, 2026 and June 30, 2025:
| June 30, 2026 | June 30, 2025 | |||||||
| Promissory notes | $ | $ | ||||||
| Current portion of long-term merger financing, net | ||||||||
| Merger financing payable | ||||||||
| Merger financing -derivative | ||||||||
| Tau Agreement | ||||||||
| Debenture (related party) | ||||||||
| Derivative liability - debenture | ||||||||
| Convertible note - derivative | ||||||||
| Current portion | $ | $ | ||||||
| Long-term convertible note Chardan, net | $ | $ | ||||||
| Secured Convertible Note, net | ||||||||
| Subordinated borrowings | ||||||||
| Long term portion | $ | $ | ||||||
| F-17 |
Chardan Convertible Note
During
the year ended June 30, 2026, the Company issued a total of shares of Common Stock to Chardan Capital Markets LLC (“Chardan”)
under a promissory note issued to Chardan on October 23, 2024 (the “Chardan Note”), for a total of $
See Note 15 for additional information on the fair value and change in fair value related to the derivative.
Secured Convertible Note Financing
On
January 7, 2025, the Company and Funicular Funds, LP (“Funicular”) entered into an Amendment, Waiver and Consent (the “Amendment”).
Pursuant to the Amendment, the Company and Funicular agreed to certain amendments to the secured promissory note, in the original principal
amount of $
As of January 7, 2025, AtlasClear Holdings, Inc. accounted for the Amendment as a restructuring under troubled debt restructuring in accordance with ASC 470-60 (“TDR”) of the outstanding liabilities related to the Amendment. The Amendment resulted in the future undiscounted cash flows of the modified debt being greater than the net carrying value of the original debt, as the only change to cash flows was the additional interest for the period from old maturity date to the new maturity date. Since the maximum total undiscounted future cash payments exceeded the carrying amount of the payable, no adjustment to the carrying amount of the restructured debt was required and no restructuring gain was recognized.
During
the year ended June 30, 2025, the Company received notice to convert principal and interest under the Secured Note totaling $
During
the year ended June 30, 2025, the Company incurred an additional $
For
the year ended June 30, 2025, the Company recognized $
During
the year ended June 30, 2026, the Company issued a total of shares of Common Stock to Funicular under the Secured Note for
total of $
As
of October 8, 2025, the company had recognized $
On
October 8, 2025, the Company entered into the Restated SPA with Funicular, which amended and restated in its entirety the securities
purchase agreement, dated February 9, 2024, pursuant to which the Company had issued and sold to Funicular, in a private placement, the
Secured Note, in the original principal amount of $
The
Restated Note has a stated maturity date of
The Restated Note is secured by a perfected security interest in substantially all of the existing and future assets of the Company and each Grantor (as defined in the Security Agreement, as defined below), including a pledge of all of the capital stock of each of the Grantors, subject to certain exceptions, as evidenced by (i) the security agreement, dated as of February 9, 2024 (the “Security Agreement”), among the Company, each of the Company’s subsidiaries and Funicular, and (ii) the guaranty, dated as of February 9, 2024 (the “Guaranty”), executed by each of the Company’s subsidiaries pursuant to which each of them has agreed to guaranty the obligations of the Company under the Restated Note and the other Loan Documents (as defined in the Restated Note), each of which was entered into in connection with the Funicular Note.
| F-18 |
Pursuant
to the Restated SPA, the Company agreed, among other things, that if the Restated Note becomes convertible into a number of shares of
Common Stock in excess of
The
Restated Note issued by the Company to Funicular on October 8, 2025 represents a freestanding financial liability within the scope of
ASC 470-10 Debt – Overall, with certain fair value election provisions applied under ASC 825-10 Financial Instruments – Overall.
The Restated Note replaces the prior Secured Note originally issued on February 9, 2024, described above, increasing the principal balance
from approximately $
The Company elected to apply the Fair Value Option (FVO) under ASC 825-10 to the Restated Note. Under ASC 825-10-15-4 and 825-10-25-4, the Restated Note qualifies as an eligible financial liability because it is recognized upon initial issuance and not within any of the prohibited categories. The election was made at initial recognition and applies to the entire instrument, with upfront fees and costs expensed as incurred. As a result, the Restated Note is measured at fair value with changes recognized in earnings each reporting period, and the Company separately presents in other comprehensive income the portion of fair value changes attributable to instrument-specific credit risk, consistent with ASC 825-10-45-5.
As
part of the transaction, fees and expenses incurred in connection with the amendment—principally legal and negotiation costs up
to $
As
a result, the Company recognized $
For
the year ended June 30, 2026, the Company recognized $
Sellers Note
As
a result of the acquisition of Wilson-Davis the company issued (i) $
As
of September 19, 2025, all of the Seller Notes have been fully settled via the conversion to shares of Common Stock. The Company
during the year ended June 30, 2026, issued a total of
shares of Common Stock to the AtlasClearing sellers under both the Long-Term Notes and the Merger Financing Note, as defined above,
for total of $
During
the year ended June 30, 2025, the Company received conversion notices for a total $
Contingent Guarantee/ Merger Financing
The
carrying balance of the Merger Financing Note as of June 30, 2025, net of principal converted to shares of $
| F-19 |
Tau Agreement – ELOC and Second ELOC Agreement
As
of June 30, 2026, there are
shares available under the ELOC (as defined below) and accordingly no further advances are anticipated. Therefore the fair value of
the ELOC was deemed to be $
As such, as of June 30, 2025 the Company requested advance notices under the at-the-market agreement entered into between the Company and Tau on July 31, 2024 (the “ELOC” or “Tau agreement”) for a total of $ which resulted in approximately shares to be sold by Tau. Tau sold and settled shares, of which were shares transferred by a related party and were shares issued by the Company, under the ELOC resulting in $ of proceeds under the ELOC of which $ remain as stock receivable. Tau purchased the shares from the Company at $ resulting in a realized gain of $. As of June 30, 2025, all shares issued to Tau towards have been settled.
Promissory Notes
Interest
Solutions, LLC. Shares of Common Stock were issuable to Interest Solutions, LLC (“Interest Solutions”) pursuant to a convertible
promissory note, dated as of February 9, 2024, in the aggregate principal amount of $
JonesTrading
Institutional Services LLC. Up to shares of Common Stock were issuable to JonesTrading Institutional Services LLC (“JonesTrading”),
pursuant to a convertible promissory note, dated as of February 9, 2024, in the aggregate principal amount of $
Toppan
Merrill LLC. The Company issued to Toppan Merrill LLC (“Toppan”) a promissory note, dated as of February 9, 2024, in the
aggregate principal amount of $
Hanire
Purchase Agreement: During the year ended June 30, 2026, the Company received $
D&O
financing: During the year ended June 30, 2026, the Company renewed its Directors and Officers insurance policy and entered into a premium
financing agreement to fund the annual premium which is included in Promissory note balance of $
Convertible Notes
On
September 16, 2025, September 19, 2025 and September 23, 2025, the Company entered into separate securities purchase agreements (each,
a “September Securities Purchase Agreement”) with certain institutional investors under which the Company agreed to issue
and sell, in a private placement, convertible promissory notes (each, a “Convertible Note” and collectively, the “Convertible
Notes”) for an aggregate principal amount of $
The
Convertible Notes are within the scope of ASC 470-10 and not an ASC 480 liability. The Company did not elect the ASC 825-10 fair value
option. The instrument includes two embedded derivative features—the Conversion upon Qualified Financing and Event of Default acceleration—each
meeting the definition of a derivative under ASC 815-15 and therefore requiring bifurcation and separate recognition at fair value. The
Convertible Notes were issued at a
| F-20 |
The
Company recognized the discount of $
Equity Financing
On
October 8, 2025, the Company entered into the Equity SPA with certain institutional investors (each, an “Investor”),
including Funicular, pursuant to which the Company agreed to issue and sell, in a private placement,
Units for a purchase price of $
per Unit. Each Unit consists of one share of the Common Stock and one warrant (each, a “Warrant Liability”) to purchase
Common Stock. Due to rounding the units were split into shares of Common Stock and warrants. Of the total
investment amount of $
The
Warrant Liability are immediately exercisable on a cash basis or exchangeable on a cashless basis and will expire
In the event of a Fundamental Transaction (as defined in the Warrant Liability ), the holders of the Warrant Liability will be entitled to receive upon exercise of the Warrant Liability the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrant Liability immediately prior to such Fundamental Transaction. Additionally, as more fully described in the Warrant Liability , the holders of the Warrant Liability will be entitled to receive consideration in an amount equal to the Black Scholes value of the Warrant Liability in connection with a Fundamental Transaction. If the Company fails to timely deliver the shares of Common Stock issuable upon exercise of the Warrant Liability, the Company will be subject to liquidated damages.
Subject
to the provisions of the Equity SPA, if, during the
The
Company engaged Dawson James Securities, Inc. as the placement agent (the “Placement Agent”) with respect to the offering
of the Restated Note and the Units. The Company agreed to pay the Placement Agent’s fees totaling (i)
$
The
closings of the issuance and sale of the Restated Note and the Units occurred on October 9th through October 14th, 2025, and the Company
issued an aggregate of shares of Common Stock and Warrant Liability . Total proceeds were allocated between the
warrants and the shares included in the units using the residual method with $
At the closings, the Company entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file one or more registration statements covering the resale of the shares of Common Stock included as part of the Units, as well as the shares issuable upon conversion of the Restated Note or exercise of the Warrant Liability. The Company will be subject to liquidated damages if it fails to meet certain conditions set forth in the Registration Rights Agreement.
The Company evaluated the classification of the Warrant Liability , Common Stock, and the Registration Rights Agreement issued or entered into pursuant to the Equity SPA. The assessment was performed under the relevant guidance in ASC 480-10, ASC 815-10, ASC 815-40, and ASC 825-20, to determine whether these instruments should be accounted for as freestanding or embedded financial instruments, and whether they meet the criteria for equity or liability classification. The Warrant Liability are classified as freestanding derivative financial liabilities within the scope of ASC 815-10 and ASC 815-40, measured initially and subsequently at fair value through earnings. The issued shares of Common Stock are freestanding equity instruments. The Registration Rights Agreement is a freestanding contingent obligation within the scope of ASC 825-20, with potential liability recognition contingent on probability and estimability under ASC 450-20. See Note 15 for additional disclosure regarding fair value of the Warrant Liability .
| F-21 |
Winston & Strawn Agreement
Up
to $
On
January 26, 2026, the Company and Winston & Strawn entered into a settlement agreement. The Company agreed to provide Winston &
Strawn with cash and shares of the Company’s Common Stock. The Company paid $
Subordinated borrowings
The
Company has entered into FINRA-approved subordinated loan agreements totaling $
The subordinated loan agreements generally mature annually and may be renewed upon agreement of the parties and approval by FINRA. Management currently anticipates that these borrowings will continue to be renewed as they mature; however, future renewals are subject to regulatory approval and the Company’s capital requirements.
The loan principal and related accrued interest are unsecured and subordinated in right of payment to all present and future creditors of the Company. The subordinated loans are allowable in the computation of net capital under Rule 15c3-1 of the Securities Exchange Act of 1934. To the extent the subordinated borrowings are required for compliance with minimum net capital requirements, they may not be repaid without FINRA approval.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Earnout Liability
In
connection with the Closing, and pursuant to the terms of the Business Combination Agreement, stockholders of AtlasClear (the “AtlasClear
Stockholders”) received merger consideration (the “Merger Consideration Shares”) consisting of shares of Common
Stock. In addition, the AtlasClear Stockholders were entitled to receive up to shares of Common Stock (the “Earn Out
Shares”) upon certain milestones (based on the achievement of certain price targets of Common Stock following the Closing). The
milestones were not met during the first months following the Closing, and as such the price target Earn Out Shares will not be issued.
Atlas FinTech will also receive up to $ million of shares of Common Stock (“Software Products Earn Out Shares”), which
will be issued to Atlas FinTech upon certain milestones based on the achievement of certain revenue targets of software products contributed
to AtlasClear by Atlas FinTech and Atlas Financial Technologies Corp. following the Closing. The revenue targets will be measured yearly
for
As
of June 30, 2026 and June 30, 2025 the fair value of the earnout liability was $
Employment Agreements
On September 19, 2025, the Company entered into employment agreements and amendments to employment agreements with each of John Schaible, the Company’s Executive Chairman, and Craig Ridenhour, the Company’s President, and on September 24, 2025, the Company entered into second amendments to such agreements with each such officer.
The
employment agreements with Mr. Schaible and Mr. Ridenhour, as amended by such amendments (as so amended, the “Schaible Employment
Agreement” and the “Ridenhour Employment Agreement,” respectively) provide for the employment of Mr. Schaible and Mr.
Ridenhour as Executive Chairman and President, respectively, reporting to the Board, for an initial term of three
years, subject to automatic successive one-year
renewals unless either party provides written notice of non-renewal at least 60 days’ prior to the end of the then-current term.
Each executive is entitled to receive an initial annual base salary of $
| F-22 |
On
September 24, 2025, the Company entered into an employment agreement with Sandip Patel (the “Patel Employment Agreement”),
a member of the Board, pursuant to which Mr. Patel is employed as the Company’s General Counsel and Chief Financial Officer, reporting
to the Board, for an initial term of
Refer
to Note 13 for discussion regarding stock based compensation. As of June 30, 2026 the Company paid the one time signing bonuses for a
total of $
Commercial Bancorp Share Purchase Agreement
On February 5, 2026, the Company entered into a share purchase agreement (the “Purchase Agreement”) with Commercial Bancorp, and each of the shareholders of Commercial Bancorp (collectively, the “Sellers”). The Purchase Agreement provides for the Company to acquire (the “CB Acquisition”) from the Sellers all of the outstanding shares (the “Shares”) of common stock of Commercial Bancorp, which is the owner of all of the outstanding stock of Farmers State Bank, a Wyoming state-chartered member bank (the “Bank”), subject to the terms and conditions set forth in the Purchase Agreement. As previously disclosed, the Company had previously entered into an agreement and plan of merger, as amended, to acquire Commercial Bancorp, which agreement has expired in accordance with its terms.
Pursuant
to the terms of the Purchase Agreement, the Company has agreed to purchase the Shares from the Sellers for consideration consisting
of a combination of cash and shares Common Stock, with the total amount of consideration to be determined based on (i) each
Seller’s election to receive cash, shares of Common Stock, or a combination thereof, (ii) the adjusted book value of the
operational portion of the equity capital of Commercial Bancorp as of the closing of the CB Acquisition (the “CB
Closing”), determined in accordance with the provisions of the Purchase Agreement (the “ABV”), (iii) the value of
the existing building and land comprising the physical location of the Bank (the “Premises”), and (iv) Commercial
Bancorp’s net operating loss as reflected on its most recent tax return prior to the CB Closing, multiplied by the maximum
corporate federal income tax rate in effect as of the date of the CB Closing (the “NOL Tax Benefit”). Each Seller may
elect (the “Election”) to receive an amount equal to any of the following three options: (i) three times such
Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax
Benefit, payable one-third in cash and two-thirds in shares of Common Stock; (ii) two times such Seller’s pro rata portion of
the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in cash;
or (iii) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the
Premises and the NOL Tax Benefit, payable entirely in shares of Common Stock. The Company has made an earnest money deposit payment
in the amount of $
The shares of Common Stock to be issued pursuant to the Purchase Agreement will be valued based on either the closing price of the Common Stock on the date of execution of the Purchase Agreement ($0.23), or on the business day immediately preceding the date of the CB Closing, at each Seller’s option. The Company agreed to file with the SEC, by the later of 90 days following the date of the Purchase Agreement and ten business days following the deadline for each Seller to make an Election, a resale registration statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement (the “Resale Registration Statement”). The Company agreed to file with the SEC a Resale Registration Statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement, which was filed on June 8, 2026.
The obligations of each of the Sellers and the Company under the Purchase Agreement are subject to specified conditions, including, among other matters: (i) the receipt of all required regulatory approvals, (ii) the Resale Registration Statement having been declared effective by the SEC, such that all shares of Common Stock to be issued pursuant to the Purchase Agreement shall be registered for resale and freely tradeable, (iii) the receipt of certain specified third-party consents, and (iv) the absence of any injunctions being entered into or law being adopted that would make the CB Acquisition illegal.
The Purchase Agreement contains customary representations and warranties of Commercial Bancorp and the Bank, the Sellers and the Company. It also contains customary covenants, including (i) covenants providing for each of the parties to use reasonable best efforts to cause the CB Acquisition to be consummated and to receive all required regulatory approvals, including from the Federal Reserve Board and the Wyoming Division of Banking, (ii) covenants providing for Commercial Bancorp and the Bank to carry on their respective businesses in the ordinary course of business, and to refrain from taking certain actions, during the period between the execution of the Purchase Agreement and the CB Closing, and (iii) granting the Company observation rights with respect to meetings of the boards of directors of Commercial Bancorp and the Bank during the period between the execution of the Purchase Agreement and the CB Closing. Commercial Bancorp, the Bank and the Sellers have also agreed not to initiate, solicit, encourage or otherwise facilitate the making of any proposal or offer relating to alternate transactions or, engage in any discussions or negotiations with respect to alternate transactions.
The Purchase Agreement contains termination rights for each of the Sellers and the Company, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order denying approval of the CB Acquisition; (ii) the CB Acquisition is not consummated within two years of the execution of the Purchase, subject to extension under certain circumstances; or (iii) the other party breaches its representations, warranties or covenants under the Purchase Agreement which would give rise to the failure of a closing condition and such breach is not cured within 30-days of receipt of written notice of such breach.
| F-23 |
Line of Credit
AtlasClearing
has a $
The line of credit agreement requires AtlasClearing to maintain line of credit collateral with value, as determined by the bank, in an amount at least equal to a percentage of the loan amount as specified by the bank. Advances on the line of credit are payable on demand. The entire amount of this credit facility is available to be drawn and used to meet AtlasClearing’s liquidity requirements for NSCC clearing margin deposits.
Indemnification Agreements
On the Closing Date, in connection with the Closing, the Company entered into indemnification agreements with each of its directors and executive officers, which provide for indemnification and advancements by the Company of certain expenses and costs under certain circumstances. The indemnification agreements provide that AtlasClear Holdings will indemnify each of its directors and executive officers against any and all expenses incurred by that director or executive officer because of his or her status as a director or officer of AtlasClear Holdings, to the fullest extent permitted by Delaware law, the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws.
AtlasClearing
On
February 27, 2018, an extended hearing panel of the Department of Enforcement of the Financial Industry Regulatory Authority, Inc. (“FINRA”),
Office of Hearing Officers, issued its decision ordering fines aggregating $
Software Development and License agreement
On
June 10, 2025, the Company and Pacsquare entered into a Software Development and License agreement, where the parties agreed to supersede
and replace the Pacsquare Purchase Agreement and to fully release one another form any and all obligations or claims arising from or
pursuant to the prior agreement. Therefore as a result of entering into the agreement the parties agreed to a
| F-24 |
NOTE 12. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock — The Company is authorized to issue shares of preferred stock with a par value of $ per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2026 and June 30, 2025, there were shares of preferred stock issued or outstanding.
Common
stock — The Company is authorized to issue shares of common stock with a par value of $ per share. Holders
of the Company’s common stock are entitled to
The Common Stock commenced trading on the NYSE American LLC (“NYSE American”) under the symbol “ATCH” on February 12, 2024. AtlasClear Holdings’ public warrants (the “Public Warrants”) commenced trading on the over-the-counter market (the “OTC”) under the symbol “ATCHW” on February 12, 2024.
On
July 17, 2025, the Company issued shares of Common Stock to Sandip I. Patel, P.A., a law firm that is wholly owned by Sandip
I. Patel, the Company’s General Counsel, Chief Financial Officer and a member of the Company’s board of directors, as consideration
for legal and consulting services provided to the Company prior to his employment. The shares were valued based on the closing price
of the date of issuance of $ for a total value of $
On
August 11, 2025, the Company issued shares of Common Stock as consideration for $
Pursuant
to a Software As A Services License Agreement, as payment in shares for services rendered during the year ended June 30, 2026, the Company
issued shares of Common Stock valued at the closing price on the date of issuance of $ per share on September 17, 2025,
$ on April 20, 2026, resulting in compensation expense of $
On
October 1, 2025, the Company and Interest Solutions entered into an amendment to the Interest Solutions Note whereby the conversion price
floor of $
On
October 13, 2025, the Company and a vendor entered into a settlement agreement and release, whereas the Company agreed to issue
shares of Common Stock in settlement of $
On
October 13, 2025, the Company issued shares of Common Stock to consultants for services rendered. The shares were valued based
on the date the date shares were issued for total compensation expenses of $
In connection with the Equity SPA discussed in Note 10 above, the closings of the issuance and sale of the Units occurred on October 9 through October 14, 2025, and the Company issued an aggregate of shares of Common Stock.
Refer to Note 10 for details regarding shares issued during the year ended June 30, 2026 and 2025.
Warrants—In connection with the Equity SPA, on October 8, 2025, the Company issued the Warrant Liability as discussed in Note 10 above. The warrants were issued to investors as an equity-linked incentive and to the placement agent as part of transaction compensation. The warrants entitle holders to purchase fully paid and non-assessable shares of common stock, subject to the terms summarized below.
Instruments Issued and Outstanding
| ● | Investor Warrants: warrants issued on October 8, 2025 | |
| ● | Placement Agent Warrants: warrants issued on October 8, 2025 | |
| ● | Public Warrants: warrants issued on February 9, 2024 | |
| ● | Private Warrants: warrants issued on February 9, 2024 | |
| ● | Secured Convertible Note Warrants: issued February 9, 2024 | |
| ● | As of June 30, 2026 there
are a total of |
The warrants are freestanding financial instruments within the scope of ASC 815-10 and ASC 815-40. Although indexed to the Company’s own stock, the warrants do not qualify for equity classification because they contain provisions that could require net cash settlement (e.g., cash payout upon certain fundamental transactions and cash penalties for delayed share delivery). Accordingly, the warrants are classified as derivative financial liabilities and recorded at fair value on the balance sheet, with subsequent changes in fair value recognized in earnings.
| F-25 |
Refer to Note 15 for discussion regarding the fair value disclosures.
The following is a roll forward of the warrants as of June 30, 2026 and 2025:
| Warrant class | Beginning Balance June 30, 2025 | Issued | Exercised | Expired/Cancelled | Ending Balance June 30, 2026 | |||||||||||||||
| Investor warrants | ( | ) | ||||||||||||||||||
| Placement Agent Warrants | ||||||||||||||||||||
| Public Warrants | ||||||||||||||||||||
| Private Warrants | ||||||||||||||||||||
| Secured Note Warrants | ||||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||
Executive Employment Agreements and Equity Awards
In September 2025, the Company entered into the Schaible Employment Agreement, the Ridenhour Employment Agreement and the Patel Employment Agreement, each as discussed in Note 11.
Under
the terms of these agreements, the executives are entitled to annual base salaries ranging from $
Time-Based Stock Awards
Each of Messrs. Schaible and Ridenhour became entitled to receive a one-time grant of shares of Common Stock upon execution of their respective agreements and an additional shares on July 1, 2026, in each case subject to stockholder approval of an amendment to the Company’s equity incentive plan to increase the number of shares authorized for issuance thereunder. Each such grant vests on June 30 of the year following the grant date, subject to continued employment. The shares to each were issued on July 14, 2026.
The grant-date fair value of the time-based awards was measured based on the closing price of the Company’s Common Stock determined to be $ each for total of $, on the respective grant dates and is recognized as compensation expense on a straight-line basis over the vesting period.
Schedule of Nonvested Stock Awards
(Shares in units; weighted-average grant-date fair value in $)
| Activity | Shares | Weighted-Average Grant-Date Fair Value | ||||||
| Nonvested at July 1, 2025 | ||||||||
| Granted | $ | |||||||
| Vested | ||||||||
| Forfeited/Expired | ||||||||
| Nonvested at June 30, 2026 | $ | |||||||
Performance-Based (Market Condition) Stock Awards
Each of Messrs. Schaible and Ridenhour is eligible to receive up to performance-based stock awards, each equal to % of the Company’s total outstanding shares at the time of grant, and Mr. Patel is eligible to receive up to performance-based stock awards, each equal to % of the Company’s total outstanding shares, upon achievement of specified stock price milestones, in each case subject to stockholder approval of an amendment to the Company’s equity incentive plan to increase the number of shares authorized for issuance thereunder.
| F-26 |
These milestones are based on the Company’s Common Stock achieving a 10-day volume-weighted average price (“VWAP”) of $, $, $, $, and $, respectively. Each award vests over following achievement of the applicable stock price target, subject to continued employment.
| Tranche | VWAP Milestone | Grant-Date FV/Share | Nonvested at July 1, 2025 | Granted | Vested | Forfeited/Expired | Nonvested at June 30, 2026 | |||||||||||||||||||||
| 1 | $ | |||||||||||||||||||||||||||
| 2 | $ | |||||||||||||||||||||||||||
| 3 | $ | |||||||||||||||||||||||||||
| 4 | $ | |||||||||||||||||||||||||||
| 5 | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||
Because these awards include market conditions, the Company estimated their grant-date fair value using a Monte Carlo simulation model. The following table summarizes the key assumptions used in the valuation of these awards:
| Assumption | September 2025 Grants | |||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected term | years | |||
| Expected dividend yield | % | |||
| Fair value per share (Tranche 1) | $ | |||
| Fair value per share (Tranche 2) | $ | |||
| Fair value per share (Tranche 3) | $ | |||
| Fair value per share (Tranche 4) | $ | |||
| Fair value per share (Tranche 5) | $ | |||
Compensation cost for these awards will be recognized over the derived service period, regardless of whether the market condition is ultimately achieved, provided the requisite service is rendered. Expense is not reversed solely because the market condition is not satisfied.
Forfeiture Policy
The Company accounts for forfeitures of share-based awards as they occur. Previously recognized compensation cost is reversed in the period an unvested award is forfeited.
Stock-Based Compensation Expense
As of June 30, 2026, none of the stock price milestones had been achieved and shares had vested under the performance-based awards.
| Year Ended | Year Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Time-based stock awards | $ | $ | ||||||
| Market-based stock awards | $ | $ | ||||||
| Total stock-based compensation expense | $ | $ | ||||||
As of June 30, 2026, total unrecognized compensation cost related to unvested time- and market-based stock awards was approximately $, which is expected to be recognized over a weighted-average period of years.
| F-27 |
NOTE 14. INCOME TAX
The Company accounts for income taxes using an asset and liability approach. Under this method, the tax provision includes taxes currently due plus the net change in deferred tax assets and liabilities. Deferred tax assets and liabilities arise from temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refund received, as provided for under currently enacted tax law. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, is not expected to be realized.
The benefit (provision) for income taxes consisted of the following for the periods indicated:
| June 30, 2026 | June 30, 2025 | |||||||
| Current Tax: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total current | ||||||||
| Deferred Tax: | ||||||||
| Federal | ( | ) | ( | ) | ||||
| State | ( | ) | ( | ) | ||||
| Total deferred | ( | ) | ( | ) | ||||
| Total benefit on income taxes | $ | ( | ) | $ | ( | ) | ||
The benefit from or provision for income taxes differs from the amount computed by applying the federal statutory income tax rate to the Company’s loss or income before income taxes as follows for the periods indicated:
| June 30, 2026 | Rate | |||||||
| Tax at rate ( | $ | % | ||||||
| Permanent Differences: | ||||||||
| Change in fair value of warrant liability | $ | ( | ) | ( | )% | |||
| Meals | % | |||||||
| Entertainment | % | |||||||
| Chane in fair value of convertible note | ( | ) | ( | )% | ||||
| Change in fair value of Earnout Liability | ( | ) | ( | )% | ||||
| Change in fair value of Subscription Agreement | ( | ) | ( | )% | ||||
| Change in fair value of Convertible note SPA | ( | ) | ( | )% | ||||
| Change in fair value of Debenture | ( | ) | ( | )% | ||||
| Change in fair value of Secured convertible note | % | |||||||
| Change in fair value of Tau Agreement | ( | ) | ( | )% | ||||
| Change in fair value of WDCO sellers convertible note | ( | ) | ( | )% | ||||
| Stock compensation | % | |||||||
| Change in statutory rate | ( | ) | ( | )% | ||||
| Return To Provision | % | |||||||
| State Tax – Net of Federal Benefit | ( | ) | ( | )% | ||||
| State Minimum Tax – Net of Federal Benefit | % | |||||||
| Chang in Valuation Allowance – State | % | |||||||
| Chang in Valuation Allowance - Federal | % | |||||||
| –Goodwill intangible DTA recognized as part of acquisition | ( | ) | ( | )% | ||||
| Income tax benefit | $ | ( | ) | ( | )% | |||
| F-28 |
| June 30, 2025 | Rate | |||||||
| Tax at rate ( | $ | % | ||||||
| Permanent Differences: | ||||||||
| Change in fair value of warrant liability | $ | ( | ) | ( | )% | |||
| Meals | % | |||||||
| Entertainment | % | |||||||
| Chane in fair value of convertible note | ( | ) | ( | )% | ||||
| Change in fair value of Long-Term and Short-Term Investor Notes | ( | ) | ( | )% | ||||
| Change in fair value of Earnout Liability | ( | ) | ( | )% | ||||
| Change in fair value of Subscription Agreement | % | |||||||
| Change in fair value of Stock Payable | ( | ) | ( | )% | ||||
| Change in fair value of Tau Agreement | % | |||||||
| Change in fair value of Tau commitment fee | ( | ) | ( | )% | ||||
| Change in fair value of WDCO sellers convertible note | ( | ) | ( | )% | ||||
| Change in fair value of WDCO Share payable | % | |||||||
| Change in statutory rate | % | |||||||
| Return To Provision | ( | ) | ( | )% | ||||
| State Tax – Net of Federal Benefit | ( | ) | ( | )% | ||||
| State Minimum Tax – Net of Federal Benefit | % | |||||||
| Chang in Valuation Allowance – State | % | |||||||
| Chang in Valuation Allowance - Federal | % | |||||||
| Net adjustments - Federal | % | |||||||
| –Goodwill intangible DTA recognized as part of acquisition | % | |||||||
| Income tax benefit | $ | ( | ) | ( | )% | |||
The change in the Company’s effective tax rate in the current year, as compared to the prior year, was primarily due to the addition of the state tax provision.
| F-29 |
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows for the periods indicated:
| June 30, 2026 | June 30, 2025 | |||||||
| Deferred Tax Assets: | ||||||||
| Fixed Assets | $ | $ | ||||||
| Business Combination Expenses | ||||||||
| IRC Sec. 195 Start-Up Costs | ||||||||
| Allowance for Bad Debt | ||||||||
| Accrued Contingent Liability | ||||||||
| Lease Liability (ASC 842) | ||||||||
| IRC Sec. 1231 Losses | ||||||||
| Net Operating Loss | ||||||||
| Total Deferred Tax Asset | ||||||||
| Deferred Tax Liabilities: | ||||||||
| Intangible Assets | ||||||||
| ROU Lease Asset (ASC 842) | ||||||||
| State Tax - Current | ||||||||
| State Tax - Deferred | ||||||||
| Total Deferred Tax Liability | ||||||||
| Net Deferred Tax Asset before Valuation allowance | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Net Deferred Tax Asset/(Liability) | $ | ( | ) | $ | ( | ) | ||
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets (“DTA”). Under ASC 740, the guidance requires an analysis of deferred tax assets to determine the realizability of deferred tax assets. Deferred tax assets require a valuation allowance if its more-likely-than-not, greater than 50% likelihood that some portion, or all, of the deferred tax assets will not be realized in the near future. The analysis is based on the weight of all available evidence, both positive and negative evidence. Management has considered all available positive and negative evidence in performing an assessment as to the need for a deferred tax asset valuation allowance.
The negative evidence considered included:
| ● | Tax net operating loss carryforwards generated in the current year. | |
| ● | The Company has deemed to begin business operations in the current year and is no longer considered a startup company pursuant to IRC Sec. 195. As a result, the Company is eligible to start amortizing previously capitalized startup costs for income tax purposes, which will generate current and future tax deductions. |
The positive evidence considered included:
| ● | The Company has had taxable income in the most recent previous tax years. |
On
the basis of this evaluation, as of June 30, 2026 and 2025, a valuation allowance of $
The
Company’s policy is to record interest and penalties related to unrecognized tax benefits in general and administrative expenses.
The Company has
For
financial statement disclosure of tax positions taken or expected to be taken on a tax return, the impact of an uncertain income tax
position on the income tax return is recognized at the largest amount that is more-likely than-not to be sustained upon audit by the
relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
There was no recognition of uncertain tax positions required for the period ended June 30, 2026 and 2025. Based upon review of the federal
and state return for the open years and review of the draft financial statements for the period ended June 30, 2025, there are no material
uncertain tax positions that require financial statement disclosure. The Company has federal income tax net operating loss (“NOL”)
carryforwards of $
The Company is subject to taxation in the U.S. and state jurisdictions. Tax returns for fiscal years ended June 30, 2023 and subsequent years remain open to examination by the relevant tax authorities.
| F-30 |
NOTE 15. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2026 and June 30, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, | June 30, | |||||||||
| Description | Level | 2026 | 2025 | |||||||
| Assets: | ||||||||||
| Trading securities | 1 | $ | $ | |||||||
| Liabilities: | ||||||||||
| Winston & Strawn Agreement | 3 | $ | $ | |||||||
| Warrant liability – Private Warrants | 3 | $ | $ | |||||||
| Earnout liability | 3 | $ | $ | |||||||
| Convertible notes derivative | 3 | $ | $ | |||||||
| Merger financing derivative | 3 | $ | $ | |||||||
| Tau agreement | 3 | $ | $ | |||||||
| Debenture – derivative | 3 | $ | $ | |||||||
| Secured Convertible Note | 3 | $ | $ | |||||||
| Warrants liability – Equity SPA | 3 | $ | $ | |||||||
Winston & Strawn Agreement
On February 9, 2024, the Company entered into the Winston & Strawn Agreement, as described in Note 10.
The Winston & Strawn Agreement is considered a variable-share obligation under ASC Topic 480 (“Distinguishing Liabilities from Equity”). The Winston & Strawn Agreement meets the requirements for classification under ASC 480 and as a result is required to be accounted for as a liability under ASC 480 and is presented as such on the Condensed Consolidated Balance Sheets. The Company will record a change in fair value on each reporting period until settlement in its Condensed Consolidated Statement of Operations. See Note 10 for further discussion.
As
of January 26, 2026 the Company entered into a settlement agreement Winston & Strawn Agreement and, as such, the Company
derecognized the carrying value of the agreement and recognized a loss on settlement of $
The key inputs into the Monte Carlo model for the Winston & Strawn Agreement were as follows:
| Input | June 30, 2025 | |||
| Market price of public shares | $ | |||
| Equity volatility | % | |||
| Risk-free rate | % | |||
| F-31 |
Warrant Liability
The private placement warrants originally issued by Quantum and assumed by the Company in connection with the Business Combination (the “Private Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the consolidated statements of operations.
The Private Warrants were, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the Company’s Common Stock. The expected volatility of the Company’s Common Stock was determined based on the implied volatility of the publicly traded Public Warrants.
The key inputs into the Black-Scholes model for the Private Warrants were as follows:
| Input | June 30, 2026 | June 30, 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Effective expiration date | ||||||||
Earnout Liability
The liability associated with the Earnout Shares was, initially as of February 9, 2024, valued using a Monte Carlo simulation to determine if and when the revenue hurdles would be achieved. The revenue volatility and revenue to equity correlation was based upon the same guideline public companies. As of June 30, 2026, the Company revised when revenue hurdles would be achieved, as a result of the delay in financing and implementation of the Commercial Bancorp acquisition. Revenue targets were deemed less likely to be reached and as such, this resulted in a significant decrease in the value of the Earnout liability. The Monte Carlo simulation was performed simultaneously on both the share price and revenue to account for the correlation between revenue and equity.
The key inputs into the Monte Carlo model for the Earnout liability were as follows:
| Input | June 30, 2026 | June 30, 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Revenue volatility | % | % | ||||||
| Discount factor for revenue | % | % | ||||||
Convertible Note Derivatives
The
conversion derivatives associated with Short-Term Notes, Long-Term Notes and the Chardan Note were accounted for as a liability in accordance
with ASC 815-40. The conversion derivative liabilities were measured at fair value at inception and on a recurring basis, with changes
in fair value presented within change in fair value of conversion derivative liability in the consolidated statements of operations.
The convertible note derivatives are made up of the fair value of the embedded conversion option included in the Long-Term Notes and
the Chardan Note, which each had fair value as of June 30, 2026 of $
Long-Term Notes
As
of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included
in the Long-Term Notes at $
| F-32 |
The key inputs into the Monte-Carlo model for the conversion derivative as of June 30, 2025 were as follows:
| Input | June 30, 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
Secured Convertible Note
On
October 8, 2025, the Company entered into the Restated SPA with Funicular. The Restated Note issued pursuant to the Restated SPA is convertible,
in whole or in part, into shares of the Company’s Common Stock at the election of the holder at any time at an initial Conversion
price of $
As
of June 30, 2026 and October 8, 2025, the Restated Note was valued using Black-Scholes model combined with the discounted cash flow model,
resulting in the fair value of the Restated Note of $
The key inputs into the Black-Scholes model for the conversion derivative as of June 30, 2026 and October 8, 2025 were as follows:
| Input | June 30, 2026 | October 8, 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Conversion Price | $ | $ | ||||||
| Principal and interest balance at valuation date | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Discount rate | % | % | ||||||
| Volatility | % | % | ||||||
| Effective expiration date | ||||||||
| Term | ||||||||
Merger Financing Note
As
of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included
in the Merger Financing Note of $
| Input | June 30, 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
| F-33 |
Tau Agreement
As
discussed in Note 10, the Tau Agreement no longer has shares available to utilize and management does not intend to utilize the ELOC.
As such as of June 30, 2026 the fair value of the Tau Agreement was deemed to be zero. As of June 30, 2025 the Tau Agreement and the
related Commitment Fee was valued using Monte Carlo model resulting in the fair value of $
The key inputs into the Monte-Carlo model for the Commitment Amount as of issuance date of June 30, 2025 was as follows:
| Input | June 30, 2025 | |||
| Anticipated Monthly Advance Amounts | $ | |||
| Risk-free rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
Debenture Derivative
On
August 4, 2025 the Company issued the Debenture as discussed in Note 10. The Company determined that the conversion feature was required
to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of June 30, 2026 the Debenture was valued
using a Black-Scholes model and as of August 4, 2025, the issuance date, the Debenture was valued using a Scenario Based Methodology
model resulting in the fair value of the conversion option included in the Debenture embedded derivative of $
The key inputs into the Black-Scholes for the conversion derivative as of June 30, 2026 and Scenario Based Methodology model August 4, 2025 were as follows:
| Input | June 30, 2026 | August 4, 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Discount rate | % | % | ||||||
| Volatility | % | % | ||||||
| Effective expiration date | ||||||||
Convertible Note Derivative
On
September 16, 2025 the Company issued Convertible Notes as discussed in Note 10. The Company determined that the conversion feature was
required to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of September 16, 2025, the
issuance date, the Convertible Notes derivative was valued using a Scenario Based methodology model resulting in the fair value of the
embedded derivatives included in the Convertible Notes of $
The key inputs into Scenario Based Method for the conversion derivative as of September 16, 2025 were as follows:
| Input | September 16, 2025 | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Effective expiration date | ||||
| F-34 |
Warrant Liability- Equity SPA
On
October 8, 2025, the Company entered into the Equity SPA pursuant to which the Company agreed to issue and sell, in a private
placement,
Units for a purchase price of $
per Unit. Each Unit consists of one share of the Company’s Common Stock and one Warrant Liability. Due to rounding the units
were split into shares of Common Stock and warrants. In addition,
of Warrant Liability was issued to the placement agent as transaction cost. The Warrant Liability was accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant
liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in
fair value of warrant liability in the consolidated statements of operations. The fair value of all Warrant Liability issued at
issuance was $
The Warrant Liability was, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Warrant Liability is the expected volatility of the Company’s Common Stock.
The key inputs into the Black-Scholes model for the Warrant Liability was as follows:
| Input | June 30, 2026 | October 8, 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Term | ||||||||
| Effective expiration date | ||||||||
The following table presents the changes in the fair value of the following:
| Private Placement | Tau Agreement | |||||||
| Warrants | Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Write off receivable | ( | ) | ||||||
| ( | ) | |||||||
| Fair value as of June 30, 2026 | $ | $ | ||||||
| Private Placement | Tau Agreement | |||||||
| Warrants | Liability | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Initial measurement | ||||||||
| Fair value of advance requests | ||||||||
| Transferred to equity | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Conversion | Earnout | |||||||
| Derivative | Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of June 30, 2026 | $ | $ | ||||||
| F-35 |
| Conversion | Earnout | |||||||
| Derivative | Liability | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Winston & Strawn | Merger Financing | |||||||
| Agreement | Derivative | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value of settlement consideration | ( | ) | ||||||
| Loss on settlement | ||||||||
| Fair value liability as of June 30, 2026 | $ | $ | ||||||
| Winston & Strawn | Merger Financing | |||||||
| Agreement | Derivative | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Initial measurement | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value liability as of June 30, 2025 | $ | $ | ||||||
| Contingent | ||||||||
| Guarantee | ||||||||
| Fair value as of June 30, 2024 | $ | |||||||
| Shares issued as partial payment | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ||||||||
| Exchange to Merger financing note | ( | ) | ||||||
| Fair value as of June 30, 2025 | $ | |||||||
| Debenture | Convertible Notes | |||||||
| Derivative | Derivative | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Initial measurement | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of June 30, 2026 | $ | $ | ||||||
| F-36 |
| Secured | 2025 | |||||||
| Convertible Note | Warrant Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Principal amount | ||||||||
| Day 1 fair value charge to earnings | ||||||||
| Initial measurement October 8, 2025 | ||||||||
| Accrued interest through June 30, 2026 | ||||||||
| Fair value of warrants exercised | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of June 30, 2026 | $ | $ | ||||||
There
were
NOTE 16. SEGMENT REPORTING
The
Company operates as
The Chief Operating Decision Maker (CODM), identified as the Executive Chairman, who reviews financial performance and allocates resources on a consolidated basis. The Company’s internal reporting is prepared and reviewed as a single operating unit, without disaggregated information by product line, region, or customer type. Accordingly, the Company has determined that it operates in a single reportable segment.
The following table presents revenue and operating income (loss) for the periods presented:
| Year Ended | Year Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Commissions | $ | $ | ||||||
| Vetting fees | ||||||||
| Clearing fees | ||||||||
| Stock locate fees | ||||||||
| Net gain/(loss) on firm trading accounts | ||||||||
| Other revenue | ||||||||
| Total revenue | $ | $ | ||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
| Total assets | $ | $ | ||||||
Corporate general and administrative expenses are not allocated to any specific operating component and are included within total operating income.
Segment Assets
The Company does not report separate asset information by segment to the CODM. However, in accordance with ASC 280-10-50-30, the Company has elected to disclose total segment assets, which are equal to consolidated total assets. The table above summarizes total assets.
NOTE 17. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements, other than as described below.
On July 1, 2026, the number of shares available for issuance under the Incentive Plan increased by shares, equal to 5% of the total number of shares outstanding as of that date, in accordance with the terms of the Plan.
On July 14, 2026, the Board of Directors authorized the execution and delivery of equity award agreements in connection with stock option grants previously approved by the Company. Under the authorized agreements, the Company issued Nonstatutory Stock Option Agreements reflecting, 2025 Stock Options: An aggregate of stock options granted to officers, directors, and key personnel, with an expiration date of January 26, 2030 and 2026 Director Stock Options: An aggregate of stock options granted to members of the Board of Directors, with an expiration date of June 30, 2031.
Also
July 14, 2026, each of Messrs. Schaible and Ridenhour received shares in connection with the one-time grant of
shares of Common Stock as well as one-time grants of
shares of restricted stock, in each case pursuant to their respective employment agreements. On July 17, 2026,
On
July 23, 2026, the Company received two cash less warrant exercise notices from the Warrant Liability holders, resulting in
warrants exercised and the issuance of
shares of Common Stock valued at $
On
September 11, 2026, the Company and Sixth Borough Capital Fund, LP entered into Amendment No. 1 to Debenture Agreement (the “Amendment”).
The Amendment amends the Debenture Agreement, dated August 4, 2025 (the “Debenture”), between the Company and the Holder,
pursuant to which the Company borrowed the principal amount of $
| F-37 |
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Executive Chairman and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026. Based on that evaluation, and as a result of the remediation of the material weakness in our internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026 at a reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, | |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and | |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. 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 or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at June 30, 2026. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal control over financial reporting was effective as of June 30, 2026.
Remediation of Previously Reported Material Weakness
As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, management identified a material weakness in our internal control over financial reporting relating to the technical review and disclosures surrounding complex financial instruments, merger agreements, and related going concern assessments.
During the fiscal year ended June 30, 2026, management implemented a formal remediation plan to enhance our internal controls over accounting for complex transactions. Specifically, management:
1. Enhanced Management Oversight and Review Procedures: Established formal, standardized control activities requiring timely, pre-closing accounting evaluation and documentation for all complex, non-routine, and equity-linked financial transactions.
2. Engagement of Independent Technical Specialists: Implemented a formal control requiring the retention and direct engagement of qualified external third-party technical accounting advisors to assist management in evaluating, accounting for, and reviewing disclosure requirements for complex financial instruments and structural transaction terms.
3. Expanded Technical Accounting Resources: Enhanced access to authoritative GAAP accounting literature and technical research tools, and strengthened internal review protocols prior to financial statement authorization.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm due to our status as non-accelerated filer under the JOBS Act.
Changes in Internal Control Over Financial Reporting
Except for the remediation controls and enhancements described above implemented during the fiscal year ended June 30, 2026, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended June 30, 2026.
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevents Inspections
Not applicable.
| 47 |
PART III - OTHER INFORMATION
Item 10. Directors , Executive Officers and Corporate Governance
Management and Board of Directors
The board of directors of AtlasClear Holdings is currently comprised of the six directors listed below. Each director holds office until his term expires at the next annual meeting of stockholders in the year following the year of such director’s election or until his or her death, resignation, removal or the earlier termination of his term of office. In August 2025, Mark Smith left our board of directors and Robert D. Keyser, Jr. was appointed to fill the resulting vacancy. In September 2025, Steven Carlson was re-appointed to serve as a member of our board of directors and Sandip Patel was appointed as the Company’s General Counsel and Chief Financial Officer.
| Name | Age | Position(s) | ||
| Directors | ||||
| John M. Schaible | 56 | Executive Chairman | ||
| Craig Ridenhour | 55 | President and Director | ||
| Sandip I. Patel | 59 | General Counsel, Chief Financial Officer and Director | ||
| Steven Carlson | 65 | Director | ||
| Thomas J. Hammond | 69 | Director | ||
| Robert D. Keyser, Jr. | 67 | Director | ||
| Executive Officers | ||||
| John M. Schaible | 56 | Executive Chairman | ||
| Craig Ridenhour | 55 | President and Director | ||
| Sandip I. Patel | 59 | General Counsel, Chief Financial Officer and Director |
John Schaible, 56, has served as our Executive Chairman since May 2024. Previously, he served as our Chief Strategy Officer and a member of our board from February 2024 to May 2024. Prior to that, he served as Chairman and Chief Executive Officer of Quantum from October 2020 to February 2024. Mr. Schaible is a co-founder, Chairman and Chief Executive Officer of AtlasBanc Holdings since 2010 and of Atlas FinTech, an affiliate of AtlasBanc, since 2016. Mr. Schaible also co-founded Anderen Bank and was Chief Operating Officer of Anderen Financial, a FDIC-chartered financial institution and bank holding company regulated by the Federal Reserve Board, respectively, from 2007 until the acquisition of Anderen by First United Bank in 2012, each affiliates of Atlas Banc. Mr. Schaible also founded and served as Chief Executive Officer of NexTrade, which created an electronic communications network (ECN) in 1994 that was sold to Citigroup in 2006. Mr. Schaible has a degree in business management from Colorado State University. Mr. Schaible has also served on the board of Colorado State University’s General Leadership Council and Center for Entrepreneurship.
Craig Ridenhour, 55, has served as our President since May 2024. Previously, he served as our Chief Business Development Officer and a member of our board from February 2023 to May 2024. Mr. Ridenhour has served as co-founder and Executive Vice President of Business Development for Atlas FinTech, a position that he has held since 2016. Since August 2022, he has also served as Chief Business Development Officer and a director of our subsidiary, AtlasClear. He sits on the board of directors of Atlas FinTech. Mr. Ridenhour is co-founder of AtlasBanc Holdings and EVP of Business Development, a position he has held since 2012. Mr. Ridenhour has been a licensed representative of Buckman, Buckman & Reid, Inc., a registered broker-dealer, since 2017. Mr. Ridenhour was the Managing Director of Wealth Management for Anderen Capital, a subsidiary of Anderen Financial, a FDIC-chartered financial institution and bank holding company regulated by the Federal Reserve Board, respectively, from 2008 until the acquisition of Anderen by First United Bank in 2012. Mr. Ridenhour has been securities licensed with FINRA since 1994 and held various positions throughout his career including acting in executive and principal capacities within brokerage firms. Mr. Ridenhour is a graduate of the University of Florida.
Thomas J. Hammond, 69, has served as a member of our board since February 2024. Previously, he served as a member of the Quantum Board from February 2021 to February 2024. Mr. Hammond was the President of ICE Clear U.S., a wholly owned clearing house of Intercontinental Exchange, Inc. (NYSE: ICE) from 2007 until his retirement in 2017. In that role, Mr. Hammond oversaw all technology, operations and financial functions at the clearing house. Prior to joining ICE, Mr. Hammond was Managing Director, Trading Operations at the Chicago Board of Trade (later the CME Group) where he played a leadership role in the successful transition
to the Common Clearing Link. Before joining the CME Group in 2003, for a 17-year period, Mr. Hammond served as Chief Executive Officer, Executive Vice President and Chief Operating Officer of the Board of Trade Clearing Corporation (BOTCC), where he successfully managed the development and implementation of integrated over the counter (OTC) clearing systems. Mr. Hammond served on the boards of the Financial Services Division and the Chicago Operations Division of the Futures Industry Association, and participated in the Chicago Federal Reserve Bank’s Working Group on Financial Markets. Mr. Hammond earned a Bachelor of Science degree in Business Administration from Lewis University in Romeoville, IL.
| 48 |
Sandip I. Patel, 59, has served as a member of our board since February 2024. Previously, he served as a member of the Quantum Board from October 2020 to February 2024. Mr. Patel has been an attorney and corporate business consultant at Sandip I. Patel, P.A., a law firm founded by Mr. Patel in 2000. Since 2017, Mr. Patel has also served as Chief Legal Counsel of Channel Investments, LLC, a medical device company. Mr. Patel has been involved in the formation, acquisition, development, growth, and liquidity events related to companies in the healthcare, insurance and financial services fields. Mr. Patel currently holds public and private investments in a wide range of industries with a focus on medical devices, biotechnology, healthcare services and related technologies, as well as FinTech and related services. Mr. Patel is also a co-founding stockholder of AtlasBanc Holdings, and was a co-founding stockholder and board member of Anderen Bank. Mr. Patel was the Founder, President and Chief Executive Officer of the Orion group of companies, a full-service real estate development company. Previously, Mr. Patel served as Head of the New Business Development and M&A team to national health insurance companies. Mr. Patel oversaw all legal, regulatory and governmental affairs on behalf of WellCare, while serving as the General Counsel and a partner in the company. Since September 2021, Mr. Patel previously served as a director of Monterey Bio Acquisition Corporation, a former special purpose acquisition company (Nasdaq: MTRY). Mr. Patel received his JD degree from the Stetson University College of Law, and a B.B.A in Finance from the University of Georgia.
Robert D. Keyser, Jr., 67, has served as a member of our board since August 2025. Mr. Keyser is a veteran finance professional with over 40 years’ experience as a financial professional, investor and serial entrepreneur with extensive experience on both the sell and buy-side, including Investment Banking, M&A, Advisory, Capital Markets, Retail, and Institutional Sales. Mr. Keyser currently serves as the Director of Ark Financial Services, Inc., (“Ark”) which he founded in 2002. Ark is the holding Company of multiple financial services subsidiaries, the most active being Dawson James Securities, Inc. (“Dawson James”). Since 2002, Mr. Keyser has been the founder, CEO and Chairman of the Board of Directors of Dawson James, a full-service, Florida-based investment bank focused on emerging growth micro and small-cap private and public companies with expertise in the Life Sciences/Healthcare, Technology, AI, Crypto, and Consumer sectors. Mr. Keyser, is also the Founder, Managing Member, President and Portfolio Manager of Sixth Borough Capital Management, LLC, a multi-stage, event driven, alternative investment management company.
Steven J. Carlson, 65, rejoined our board in September 2025, after previously serving from February to December 2024. He was also a member of the Quantum Board from February 2021 to February 2023. Between October 2022 and February 2023, Mr. Carlson held the roles of President, Secretary, and director at AtlasClear Holdings. Since 2016, Mr. Carlson has been Co-Chairman of Magellan Global, a financial services holding company. He serves as Chairman of Marco Polo Securities, Inc., and as Managing Partner of Pi Capital International LLC, along with involvement in several other early-stage firms. Pi Capital, based in New York City, is a global advisory firm offering capital raising, M&A advisory, and corporate advisory services to financial institutions, renewable power generation, and real estate sectors worldwide. Securities are offered through Marco Polo Securities, Inc., an affiliate that enables foreign financial services firms to market their products in the U.S. and other select jurisdictions. Before founding Pi Capital, Mr. Carlson was President and Head of Investment Banking at INTL FCStone Financial Inc. from 2010 to 2016. Prior to that, he founded and led the Provident Group as Chairman and CEO, a boutique investment banking firm specializing in capital raising, M&A, and corporate finance advisory services globally. Provident Group was acquired by INTL in 2010. Before establishing Provident in 1999, Mr. Carlson was a Managing Director at Lehman Brothers, where he held various senior positions. He began his career at Fannie Mae. Mr. Carlson holds a BA in Economics from the University of Maryland and a Master’s Degree in Public Policy from the Kennedy School of Government at Harvard University.
Board Committees
The Board has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and the responsibilities described below. Each of these committees operates under a written charter that was approved by the Board and satisfies the applicable listing standards of NYSE, copies of which will are available on the investor relations portion of our website. Members will serve on these committees until their resignation or until otherwise determined by the Board. The Board may establish other committees as it deems necessary or appropriate from time to time.
| 49 |
Audit Committee
Our audit committee consists of Steven Carlson, Thomas J. Hammond and Robert D. Keyser, with Mr. Keyser serving as chair. Rule 10A-3 of the Exchange Act and the NYSE American listing standards require that our audit committee be composed entirely of independent members. The Board has determined that each of Messrs. Hammond Carlson and Keyser meets the definition of “independent director” for purposes of serving on the audit committee under Rule 10A-3 of the Exchange Act and the NYSE listing standards and each also meets the financial literacy requirements of the NYSE American listing standards. In addition, the Board has determined that each of Messrs. Hammond, Carlson and Keyser qualifies as an “audit committee financial expert” within the meaning of the SEC regulations.
The primary purpose of the audit committee is to discharge the responsibilities of the Board with respect to our corporate accounting and financial reporting processes, systems of internal control and financial statement audits and to oversee our independent registered public accounting firm. The principal functions of the audit committee are expected to include, among other things:
| ● | helping the Board oversee our corporate accounting and financial reporting processes; | |
| ● | managing the selection, engagement, qualifications, independence, and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; | |
| ● | reviewing and discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results; | |
| ● | obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes our internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; | |
| ● | establishing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; | |
| ● | overseeing our policies on risk assessment and risk management, including cybersecurity risks; | |
| ● | overseeing compliance with our code of business conduct and ethics; | |
| ● | reviewing related person transactions; and | |
| ● | approving or, as required, pre-approving audit and permissible non-audit services to be performed by the independent registered public accounting firm. |
Compensation Committee
Our compensation committee currently consists of Steven Carlson, Thomas J. Hammond and Robert D. Keyser, with Mr. Hammond serving as chair. The Board has determined that each of Messrs. Carlson, Hammond and Keyser meets the definition of “independent director” for purposes of serving on the compensation committee under the NYSE American listing standards, including the heightened independence standards for members of a compensation committee.
The primary purpose of our compensation committee will be to discharge the responsibilities of the Board in overseeing our compensation policies, plans and programs and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. The principal functions of the compensation committee are expected to include, among other things:
| ● | reviewing, approving and determining, or making recommendations to the Board regarding, the compensation of our chief executive officer, other executive officers and senior management; | |
| ● | reviewing, evaluating and recommending to the Board succession plans for our executive officers; | |
| ● | reviewing and recommending to the Board the compensation paid to our non-employee directors; | |
| ● | administering our equity incentive plans and other benefit programs; | |
| ● | reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for our executive officers and other senior management; and | |
| ● | reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation philosophy. |
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Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Steven Carlson, Thomas J. Hammond, and Robert D. Keyser, with Mr. Hammond serving as chair. The Board has determined that each of Messrs. Carlson, Hammond and Keyser meets the definition of “independent director” under the NYSE listing standards.
Our nominating and corporate governance committee will be responsible for, among other things:
| ● | identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on the Board; | |
| ● | considering and making recommendations to the Board regarding the composition and chairmanship of the committees of the Board; | |
| ● | instituting plans or programs for the continuing education of the Board and the orientation of new directors; | |
| ● | developing and making recommendations to the Board regarding corporate governance guidelines and matters; | |
| ● | overseeing our corporate governance practices; | |
| ● | overseeing periodic evaluations of the Board’s performance, including committees of the Board; and | |
| ● | contributing to succession planning. |
Code of Business Conduct and Ethics & Insider Trading Policy
We adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is available on the investor relations portion of our website. In addition, we intend to post on our website all disclosures that are required by law or the NYSE American listing standards concerning any amendments to, or waivers from, any provision of the code.
Our board of directors adopted an Insider Trading Policy that applies to our officers, directors, and employees. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this report.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers, directors, and beneficial owners of more than 10% of our equity securities to timely file certain reports regarding ownership of and transactions in our securities with the SEC. To our knowledge, during the year ended June 30, 2026, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth, for the Company’s last completed fiscal year, the dollar value of all cash and noncash compensation earned by John Schaible, the Company’s Executive Chairman, Craig Ridenhour, the Company’s President, and Sandip Patel, the Company’s Chief Financial Officer and General Counsel. Other than as set forth herein, no executive officer’s total compensation exceeded $100,000 in any of the applicable years.
| Name and Principal Position | Year
Ended June 30 | Salary ($) | Stock Awards | Bonus/Director Compensation ($) | All
other Compensation | Total
($) | |||||||||||||||||
| John Schaible | 2026 | 595,268 | 641,900 | (2) | 201,374 | 16,725 | 1,455,267 | ||||||||||||||||
| Executive Chairman | 2025 | — | — | — | 271,000 | (1) | 271,000 | ||||||||||||||||
| Craig Ridenhour | 2026 | 595,268 | 641,900 | (2) | 201,374 | 110,274 | (3) | 1,548,815 | |||||||||||||||
| President | 2025 | — | — | — | 282,527 | (1) | 282,527 | ||||||||||||||||
| Sandip Patel | 2026 | 508,605 | — | (2) | 201,374 | 14,062 | 724,041 | ||||||||||||||||
| Chief Financial Officer | 2025 | — | — | — | — | — | |||||||||||||||||
| (1) | Consists of consulting payments of $208,500 for each Executive Chairman and President and payments made to an affiliate entity as consulting services of $62,500 and $74,027, respectively, earned in the fiscal years ended June 30, 2025. |
| (2) | Consist of the 700,000 shares issued to each Executive Chairman and President granted, which are reported based on the aggregate grant date fair value under ASC Topic 718 for awards granted during the year, rather than the GAAP accounting expense recognized during the period. Amounts exclude performance-based awards as the contingency is not yet satisfied. |
| (3) | Consists of commissions earned in the year. |
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Equity Incentive Plan
In connection with the Business Combination, the Board adopted and the stockholders approved the AtlasClear Holdings, Inc. 2024 Equity Incentive Plan (the “Incentive Plan”), which allows the compensation committee to provide cash incentive awards to selected officers and key employees, including our executive officers, based upon performance goals established by the compensation committee.
The purpose of the Incentive Plan is to enhance the Company’s ability to attract, retain and incentivize employees, independent contractors and directors and promote the success of its business. The Board anticipates that equity compensation will be a vital element of the Company’s compensation program and believes the Incentive Plan is critical in enabling the Company to grant stock awards as an incentive and retention tool as the Company continues to compete for talent. The Incentive Plan permits the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and stock bonus awards.
On July 1, 2026, the number of shares available for issuance under the Incentive Plan increased by 7,516,888 shares, equal to 5% of the total number of shares outstanding as of that date, in accordance with the terms of the Plan.
Executive Employment Agreements
On September 19, 2025, the Company entered into employment agreements and amendments to employment agreements with each of John Schaible, the Company’s Executive Chairman, and Craig Ridenhour, the Company’s President, and on September 24, 2025, the Company entered into second amendments to such agreements with each such officer.
The employment agreements with Mr. Schaible and Mr. Ridenhour, as amended by such amendments (as so amended, the “Schaible Employment Agreement” and the “Ridenhour Employment Agreement,” respectively) provide for the employment of Mr. Schaible and Mr. Ridenhour as Executive Chairman and President, respectively, reporting to the Board, for an initial term of three years, subject to automatic successive one-year renewals unless either party provides written notice of non-renewal at least 60 days’ prior to the end of the then-current term. Each executive is entitled to receive an initial annual base salary of $400,000, subject to review at least annually and increase to $450,000 and $500,000 in the second and third years of the term, respectively. In addition, each executive is entitled to receive (i) a one-time cash signing bonus of $300,000, of which one-third is payable immediately and the balance is payable upon the earlier of (a) a minimum qualified cumulative financing of $5 million or (b) one-third at the end of the fourth quarter of 2025 and one-third at the end of the first quarter of 2026; and (ii) one-time stock grants of 700,000 shares and 286,842 shares on signing and July 1, 2026, respectively, in each case to vest on June 30 of the year following the grant. Each executive is also entitled to receive an annual bonus, provided that the Company is profitable and determined at the discretion of the Board, annual equity awards under the Company’s equity incentive plan, and up to five stock awards, each in an amount equal to 1% of the total number of the Company’s outstanding shares, vesting over three years, in the event the Company’s stock trading price reaches the following 10-day volume weighted average prices: $0.75, $1.00, $1.24, $1.49 and $1.74. On July 17, 2026, the compensation committee approved in principal the modification of the performance-based stock awards, to reduce the applicable price trigger adjustments to $0.44, $0.59, $0.73, $0.88 and $1.02 and modify the VWAP measurement period from 10 days to 3days.
Under each of the Schaible Employment Agreement and the Ridenhour Employment Agreement, if the applicable executive’s employment is terminated by the executive for Good Reason or by the Company without Cause (as such terms are defined in the employment agreements), other than due to the executive’s death or disability or the Company’s failure to renew the term, the applicable executive would be entitled to receive, in addition to accrued salary and benefits, and subject signing a release (i) a lump sum payment equal to three times the executive’s base salary and target bonus for the year of termination, minus $300,000, (ii) a lump sum payment equal to a pro-rata portion of the annual bonus that the executive would have earned for the year of termination based on the target bonus for such year, based on the portion of the year that the executive was employed by the Company, (iii) reimbursement for monthly “COBRA” premiums for a period not to exceed two years and (iv) treatment of any outstanding equity awards determined in accordance with the terms of the equity incentive plan and applicable award agreements. If any such termination were to occur within 12 months of a Change in Control (as defined in the employment agreements), the executive would instead be entitled to receive, subject to certain conditions (i) a lump sum payment equal to three times the executive’s base salary and target bonus for the year of termination (or, if greater, the immediately preceding year), (ii) a lump sum payment equal to the executive’s target bonus for the year of termination (or, if greater, the year in which the Change in Control occurs), (iii) reimbursement for monthly “COBRA” premiums for a period not to exceed two years and (iv) treatment of any outstanding equity awards determined in accordance with the terms of the equity incentive plan and applicable award agreements.
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On September 24, 2025, the Company entered into an employment agreement with Sandip Patel (the “Patel Employment Agreement”), a member of the Board, pursuant to which Mr. Patel will be employed as the Company’s General Counsel and Chief Financial Officer, reporting to the Board, for an initial term of three years, subject to automatic successive one-year renewals unless either party provides written notice of non-renewal at least 60 days’ prior to the end of the then-current term. Mr. Patel is entitled to receive an initial annual base salary of $350,000, subject to review at least annually and increase to $400,000 and $450,000 in the second and third years of the term, respectively. In addition, Mr. Patel is entitled to receive a one-time cash signing bonus of $250,000, of which one-third is payable immediately and the balance is payable upon the earlier of (a) a minimum qualified cumulative financing of $5 million or (b) one-third at the end of the fourth quarter of 2025 and one-third at the end of the first quarter of 2026. Mr. Patel is also entitled to receive an annual bonus, provided that the Company is profitable and determined at the discretion of the Board, annual equity awards under the Company’s equity incentive plan, and up to five stock awards, each in an amount equal to 0.5% of the total number of the Company’s outstanding shares, vesting over three years, in the event the Company’s stock trading price reaches the following 10-day volume weighted average prices: $0.75, $1.00, $1.24, $1.49 and $1.74. On July 17, 2026, the compensation committee approved in principal the modification of the performance-based stock awards, to reduce the applicable price trigger adjustments to $0.44, $0.59, $0.73, $0.88 and $1.02 and modify the VWAP measurement period from 10 days to 3 days.
Under the Patel Employment Agreement, if Mr. Patel’s employment is terminated by Mr. Patel for Good Reason or by the Company without Cause (as such terms are defined in the Patel Employment Agreement), other than due to the executive’s death or disability or the Company’s failure to renew the term, Mr. Patel would be entitled to receive, in addition to accrued salary and benefits, and subject signing a release (i) a lump sum payment equal to two times his base salary and target bonus for the year of termination, minus $300,000, (ii) a lump sum payment equal to a pro-rata portion of the annual bonus that the executive would have earned for the year of termination based on the target bonus for such year, based on the portion of the year that the executive was employed by the Company, (iii) reimbursement for monthly “COBRA” premiums for a period not to exceed two years and (iv) treatment of any outstanding equity awards determined in accordance with the terms of the equity incentive plan and applicable award agreements. If any such termination were to occur within 12 months of a Change in Control (as defined in the Patel Employment Agreement), Mr. Patel would instead be entitled to receive, subject to certain conditions (i) a lump sum payment equal to two times the executive’s base salary and target bonus for the year of termination (or, if greater, the immediately preceding year), (ii) a lump sum payment equal to the executive’s target bonus for the year of termination (or, if greater, the year in which the Change in Control occurs), (iii) reimbursement for monthly “COBRA” premiums for a period not to exceed two years and (iv) treatment of any outstanding equity awards determined in accordance with the terms of the equity incentive plan and applicable award agreements.
Each of the Schaible Employment Agreement, the Ridenhour Employment Agreement and the Patel Employment Agreement contains covenants restricting the use of the Company’s confidential information, as well as regarding non-competition and the non-solicitation of employee and customer covenants during the term of employment and one year thereafter.
Stock Options
On July 13, 2026, the Board of Directors authorized the execution and delivery of equity award agreements in connection with stock option grants previously approved by the Company. Under the authorized agreements, the Company issued Nonstatutory Stock Option Agreements reflecting, 2025 Stock Options: An aggregate of 196,713 stock options granted to officers, directors, and key personnel, with an expiration date of January 26, 2030 and 2026 Director Stock Options: An aggregate of 3,289,634 stock options granted to members of the Board of Directors, with an expiration date of June 30, 2031.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information known to the Company regarding the beneficial ownership of shares of Common Stock as of June 30, 2026:
each person who is the beneficial owner of more than 5% of the outstanding shares of Common Stock;
the Company’s executive officers and directors; and
all of the Company’s executive officers and directors as a group.
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We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities as well as any shares of common stock that the person has the right to acquire within 60 days of June 30, 2026 through the exercise of stock options or other rights. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The column entitled “Percentage of Outstanding Shares Beneficially Owned” is calculated based on 150,337,774 shares of common stock outstanding as of June 30, 2026. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
| Approximate
Percentage of | ||||||||
| Number of Shares | Outstanding Shares | |||||||
| Name and Address of Beneficial Owner(1) | Beneficially
Owned | of Common Stock | ||||||
| Directors and executive officers of AtlasClear Holdings: | ||||||||
| Steven Carlson(2) | 52,928 | * | ||||||
| Thomas J. Hammond(3) | 2,041 | * | ||||||
| Robert D. Keyser(4) | 5,536,000 | 3.6 | % | |||||
| Sandip I. Patel(5) | 1,159,719 | * | ||||||
| Craig Ridenhour | — | — | ||||||
| John Schaible(6) | 11,719 | * | ||||||
| All directors and executive officers as a group (6 individuals) | 6,762,407 | 4.43 | % | |||||
| 5% or More Stockholders | ||||||||
| Funicular Funds, LP(7) | 16,232,439 | 9.99 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o AtlasClear Holdings, Inc., 4350 West Cypress Street, Suite 270, Tampa, FL 33607. |
| (2) | Consists of Private Warrants to purchase 52,928 shares of Common Stock that are currently exercisable. |
| (3) | Consists of (i) 706 shares of Common Stock and (ii) Private Warrants to purchase 1,335 shares of Common Stock that are currently exercisable. |
| (4) | Consists of (i) 833,333 shares owned by Sixth Borough Capital Fund, LP (“Sixth Borough”), 833,334 shares of Common Stock issuable upon the exercise of warrants held by Sixth Borough, 3,333,333 shares of Common Stock issuable upon the exercise of a convertible debenture held by Sixth Borough and (iv) 536,000 warrants held by Dawson James Securities, Inc. (“Dawson James”). Mr. Keyser is the President of Sixth Borough and the Chief Executive Officer of Dawson James and, accordingly, may be deemed to beneficially own the securities held by Sixth Borough and Dawson James. Mr. Keyser disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein. |
| (5) | Consists of (i) 805,130 shares of Common Stock and (ii) warrants to purchase 354,589 shares of Common Stock that are currently exercisable. |
| (6) | Consists of Private Warrants to purchase 11,719 shares of Common Stock that are currently exercisable. |
| (7) | According to a Schedule 13G filed with the SEC on October 17, 2025 by Funicular Funds, LP, a Delaware limited partnership, Cable Car Capital, LP, a Delaware limited partnership and Jacob Ma-Weaver, a citizen of the United States. Based on the Schedule 13G, the reporting persons’ ownership consists of 4,083,333 shares of Common Stock as well as a convertible promissory note and warrants which are exercisable for Common Stock within 60 days, in each case subject to a 9.99% beneficial ownership limitation. Each of the reporting persons’ principal business address is 601 California Street, Suite 1151, San Francisco, CA 94108. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pre-Business Combination Related Person Transactions
On March 14, 2022, Quantum issued an unsecured promissory note, effective as of January 3, 2022, in the amount of up to $480,000 to Quantum Ventures as evidence of the working capital loans. The note bore no interest and was payable in full upon the earlier (i) February 9, 2023 and (ii) the effective date of the consummation of Quantum’s initial business combination. The note was required to be repaid in cash at the closing of the Business Combination and was not convertible into Private Warrants. A principal balance of $480,000 had been advanced under the note. On February 9, 2024, upon the closing of the Business Combination, the unsecured promissory note, among other indebtedness, was settled with the issuance of 33,334 shares described below.
In connection with the closing of the Business Combination the Company issued 33,334 shares of Common Stock to Qvent, LLC, an affiliate of Quantum Ventures, in settlement of an aggregate of $4,577,569 advanced to Quantum through the closing date of the Business Combination.
The Company has entered into FINRA-approved subordinated loan agreements totaling $1,930,000. The agreements consist of (i) six legacy subordinated notes totaling $650,000 with current and former officers, directors, and related parties that bear at 5% per annum, and (ii) six subordinated loan agreements totaling $1,280,000 funded in October 2023. The October 2023 subordinated loans were renewed through amendments approved by FINRA and bear interest at 10% per annum, payable quarterly. The amended October 2023 subordinated notes mature in October 2026.
Post-Business Combination Related Party Transactions
On February 16, 2024, AtlasClear and Pacsquare entered into the Pacsquare Purchase Agreement, pursuant to which certain technology assets were transferred to AtlasClear. The purchase price for the assets was $4.8 million as follows: (i) $1.9 million, consisting of (A) $100,000 payable in a cash upon delivery of the source code and execution of the Pacsquare Purchase Agreement; (B) $850,000 payable in shares of Common Stock at a price of $6.00 per share; and (C) $950,000 to be paid in four monthly installments of $237,500, payable in cash or shares of Common Stock at the price per share on the day of issuance provided the On-line Account Application and Level one Trading Platform have been delivered, and final payment for this part of the software is dependent on connectivity to FIS at the sole discretion of AtlasClear and (ii) $2.9 million to be paid ratably on a module-by-module basis upon delivery and acceptance of each of the AtlasClear Platform modules. Following the Closing, Mr. Schaible, Executive Chairman of AtlasClear and Mr. Ridenhour, President and a director of AtlasClear, each had a less than 10% ownership interest in Atlas FinTech which, prior to the Business Combination, owned 50% of AtlasClear.
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On August 9, 2024, Atlas FinTech and the Company entered into the Atlas FinTech Agreement pursuant to which the Company issued to Atlas FinTech 46,471 shares of Common Stock in settlement of $803,860 of expenses that were paid by Atlas FinTech in connection with a previous proposed business combination of Quantum.
During 2025, Sandip I. Patel, P.A., a law firm that is wholly owned by Sandip I. Patel, our director, provided legal and consulting services to the Company. As consideration for such services, on July 17, 2025, the Company issued to Mr. Patel 800,000 shares of Common Stock as retainer for legal services. The shares were valued based on the closing price of the date of issuance of $0.21 for total retainer value amount of $169,920.
On August 4, 2025, the Company entered into the August Securities Purchase Agreement with Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, our director, under which the Company agreed to issue and sell, in a private placement, the Debenture for an aggregate principal amount of $500,000, for a gross purchase price of $490,000, net of legal fees. The Debenture bears 10% interest and originally was to mature on August 3, 2026. Pursuant to an amendment entered into on September 11, 2026, the maturity date was extended to February 3, 2027. The holder is entitled to convert the unpaid principal amount of the Debenture, plus accrued interest and penalties, any time, at $0.15 per share. If, at any time prior to maturity, the Company receives financing from third party (excluding the Holder), the Company is required to pay to the Holder, in the form of cash, equity, or a combination of the two, solely at the discretion of the Holder, one hundred percent (100%) of the proceeds raised from the third party until such time as the face amount of the Debenture has been paid in full.
On September 16, 2025, the Company entered Securities Purchase Agreements with certain investors. $600,000 of the aggregate principal amount of the Notes sold pursuant to the Securities Purchase Agreements was purchased by Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, Jr., our director and the Chief Executive Officer of Dawson James Securities, Inc., the placement agent with respect to the Notes offering (the “Placement Agent”).
On September 19 and September 23, 2025, the Company entered into additional securities purchase agreements with certain additional investors. $1,000,000 of the aggregate principal amount of the additional Notes sold pursuant to the Securities Purchase Agreements were purchased by Sandip Patel, our director and executive officer. $450,000 of the aggregate principal amount of the additional Notes sold pursuant to the Securities Purchase Agreements were purchased by Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, Jr., our director and the Chief Executive Officer of the Placement Agent.
On October 8, 2026, $500,000 of the Units sold pursuant to the Equity SPA were purchased by Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, Jr., who is a member of the Company’s board of directors and the Chief Executive Officer of the Placement Agent.
Twelve subordinated loan agreements totaling $1,930,000 are with current and former shareholders and debt holders of the AtlasClearing. $1,280,000 of the loans are no longer treated as related parties. The $250,000 note from SureRoute is a related party transaction as the Executive Chairman of the Company is the beneficial owner of SureRoute.
The Notes do not bear interest, and mature on the earlier of six months from issuance or the date that the Company completes a Qualified Financing (meaning an issuance and sale of capital stock raising gross proceeds of at least $10 million, as defined in the Notes). The Notes may be converted into equity, at each holder’s option, at the closing of a Qualified Financing, at the same per share price as the securities sold in the Qualified Financing. The Placement Agent is not purchasing or selling any securities offered by the Company, nor is it required to arrange for the purchase or sale of any specific number or dollar amount of securities. The Company agreed to pay the Placement Agent’s fees totaling 5% of the aggregate gross proceeds from the sale of the Notes, and to reimburse the Placement Agent’s expenses (subject to a cap).
Director Independence
The Board determined, based on information provided by each director concerning his background, employment and affiliations, that Steven Carlson, Thomas J. Hammond and Robert D. Keyser, Jr., representing three of the Company’s six directors, do not have material relationships with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the NYSE American listing standards and the rules of the SEC relating to director independence requirements. In making these determinations, the Board considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of the Company’s securities by non-employee directors and the transactions described above under the heading “Certain Relationships and Related Party Transactions” of this Annual Report.
Item 14. Principal Accountant Fees and Services
On February 15, 2024, Marcum LLP was dismissed as Quantum’s independent registered public accounting firm, as AtlasClear Holdings engaged AtlasClearing’s auditor, Haynie & Company (“Haynie”), as its independent registered public accounting firm following the closing of the Business Combination. Since February 15, 2024, Haynie acts as our independent registered public accounting firm. The following is a summary of fees paid to Haynie for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of (i) the Company’s financial statements for the year ended June 30, 2025, in the amount of $216,362, and (ii) the Company’s financial statements for the year ended June 30, 2026, in the amount of $229,050.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Haynie for consultations concerning financial accounting and reporting standards for the years ended June 30, 2025 and 2026.
Tax Fees. We did not pay Haynie for tax planning and tax advice for the year ended June 30, 2025 and paid $28,000 for the year ended June 30, 2026.
All Other Fees. We did not pay Haynie for other services for the year ended June 30, 2025 and 2026.
Pre-Approval Policy
The audit committee has and will pre-approve all audit services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
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PART IV
Item 15. Exhibit and Financial Statement Schedules
| (a) | Documents filed as part of this report |
| (1) | All financial statements |
| (2) | Financial Statement Schedules |
All financial statement schedules are omitted because they are either inapplicable or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto contained in this Annual Report.
| (3) | Exhibits required by Item 601 of Regulation S-K |
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| 58 |
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| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| * | Filed herewith. |
| ** | Furnished herewith. |
| # | Indicates management contract or compensatory plan, contract or arrangement. |
| ## | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules upon request by the SEC. |
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AtlasClear Holdings, Inc. | ||
| Date: September 23, 2026 | /s/ John Schaible | |
| Name: | John Schaible | |
| Title: | Executive Chairman | |
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ John Schaible | Executive Chairman | September 23, 2026 | ||
| John Schaible | (Principal Executive Officer) | |||
| /s/ Sandip I. Patel | General Counsel, Chief Financial Officer and Director | September 23, 2026 | ||
| Sandip I. Patel | (Principal Financial and Accounting Officer) | |||
| /s/ Craig Ridenhour | President and Director | September 23, 2026 | ||
| Craig Ridenhour | ||||
| /s/ Thomas J. Hammond | Director | September 23, 2026 | ||
| Thomas J. Hammond | ||||
| /s/ Robert D. Keyser | Director | September 23, 2026 | ||
| Robert D. Keyser | ||||
| /s/ Steven Carlson | Director | September 23, 2026 | ||
| Steven Carlson |
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Schaible, certify that:
| 1. | I have reviewed this annual report on Form 10-K of AtlasClear Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: September 23, 2026 | /s/ John Schaible |
| John Schaible | |
| Executive Chairman | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sandip Patel, certify that:
| 1. | I have reviewed this annual report on Form 10-K of AtlasClear Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: September 23, 2026 | /s/ Sandip Patel |
| Sandip Patel | |
| General Counsel and Chief Financial Officer | |
| (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AtlasClear Holdings, Inc. (the “Company”) on Form 10-K for the period ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, John Schaible, the Executive Chairman of the Company, and Sandip Patel, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Dated: September 23, 2026 | /s/ John Schaible |
| John Schaible | |
| Executive Chairman | |
| (Principal Executive Officer) | |
| /s/ Sandip Patel | |
| Sandip Patel | |
| General Counsel and Chief Financial Officer | |
| (Principal Financial Officer) |