AtlasClear Holdings, Inc 8-K/A, filed Apr 1, 2024
AtlasClear Holdings, Inc. (ATCH)
About this 8-K/A
AtlasClear Holdings, Inc filed this 8-K/A on April 1, 2024, reporting on events of February 9, 2024.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 9, 2024
AtlasClear Holdings,
Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction |
001-41956 (Commission |
92-2303797 (I.R.S. Employer |
4030 Henderson Blvd., Suite 712 Tampa, FL (Address of principal executive offices) |
33629 (Zip Code) |
(727) 446-6660
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 per share | ATCH | NYSE American LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
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. ¨
EXPLANATORY NOTE
This Amendment No. 1 to the Current Report on Form 8-K/A (the “Amendment”) is being filed with the Securities and Exchange Commission (“SEC”) to amend the Current Report filed by AtlasClear Holdings, Inc. (the “Company”) on February 15, 2024 (the “Original 8-K”) and to provide certain additional information.
The Company is filing this Amendment to, among other things, include:
(a) the unaudited consolidated financial statements of Wilson-Davis & Co., Inc. (“Wilson-Davis”), as of September 30, 2023 and for the three months ended September 30, 2023 and 2022 as Exhibit 99.1;
(b) the Management’s Discussion and Analysis of Financial Condition and Results of Operations of Wilson-Davis as Exhibit 99.2; and
(c) the unaudited pro forma condensed combined financial information of the Company as Exhibit 99.3.
This Amendment does not amend any other item of the Original 8-K or purport to provide an update or a discussion of any developments at the Company or its subsidiaries subsequent to the filing date of the Original 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial statements of businesses or funds acquired.
The unaudited condensed consolidated financial statements of Wilson-Davis as of September 30, 2023, and for the three months ended September 30, 2023 and 2022, and the related notes thereto, are set forth in Exhibit 99.1 attached hereto and are incorporated by reference herein.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of the Company as of September 30, 2023, and for the nine months ended September 30, 2023 and for the year ended December 31, 2022 is set forth in Exhibit 99.3 hereto and is incorporated herein by reference.
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ATLASCLEAR HOLDINGS, INC. | |
| Date: March 29, 2024 |
/s/ Robert McBey |
| Name: Robert McBey | |
| Title: Chief Executive Officer |
Exhibit 99.1
WILSON-DAVIS &CO., INC.
UNAUDITED CONDENSED STATEMENTS OF FINANCIAL CONDITION
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 7,396,964 | $ | 9,094,381 | ||||
| Cash segregated - customers | 23,254,148 | 26,764,260 | ||||||
| Cash segregated - PAB | 200,740 | 200,715 | ||||||
| Receivables – broker-dealers and clearing organizations | 2,477,206 | 782,515 | ||||||
| Receivables – customers, net | 303,148 | 195,689 | ||||||
| Other receivables | 51,325 | 50,381 | ||||||
| Trading securities, market value, net | 2,829 | 3,598 | ||||||
| Prepaid income tax | 415,286 | 313,286 | ||||||
| Prepaids | 28,878 | 81,107 | ||||||
| Total Current Assets | 34,130,524 | 37,485,932 | ||||||
| Operating Lease Right to Use Lease Asset | 105,133 | 146,247 | ||||||
| Cash deposits – broker-dealers and clearing organizations | 2,536,664 | 2,536,664 | ||||||
| Property and equipment, net | 29,738 | 34,307 | ||||||
| Deferred income tax | - | - | ||||||
| Other assets | 385,058 | 385,058 | ||||||
| TOTAL ASSETS | $ | 37,187,117 | $ | 40,588,208 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Payables to customers | $ | 24,702,633 | $ | 27,944,467 | ||||
| Accounts and payables to officers/directors | 752,826 | 679,775 | ||||||
| Accounts payable and accrued expenses | 883,710 | 793,596 | ||||||
| Payables brokers-dealers and clearing organizations | 22,224 | 19,648 | ||||||
| Commissions, payroll and payroll taxes | 215,879 | 207,934 | ||||||
| Current portion of lease liability | 83,448 | 115,952 | ||||||
| Deferred income tax liability | 900 | 900 | ||||||
| Total Current Liabilities | 26,661,620 | 29,762,272 | ||||||
| Accrued contingent liability | 100,000 | 100,000 | ||||||
| Subordinated borrowings | 650,000 | 650,000 | ||||||
| Trading account deposit | 100,000 | 100,000 | ||||||
| Long-term lease liability | 29,568 | 39,768 | ||||||
| TOTAL LIABILITIES | 27,541,188 | 30,652,040 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $0.10 par value, 1,000,000 shares authorized, 410,000 shares issued and outstanding | 41,000 | 41,000 | ||||||
| Additional paid-in-capital | 303,837 | 303,837 | ||||||
| Retained earnings | 9,301,092 | 9,591,331 | ||||||
| TOTAL STOCKHOLDERS’ EQUITY | 9,645,929 | 9,936,168 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 37,187,117 | $ | 40,588,208 | ||||
The accompanying notes are an integral part of these condensed financial statements.
F-1
WILSON-DAVIS & CO., INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| REVENUES | ||||||||
| Commissions | $ | 1,226,172 | $ | 1,870,885 | ||||
| Vetting fees | 295,210 | 157,806 | ||||||
| Clearing fees | 120,984 | 80,326 | ||||||
| Fees charged to customers | 166,798 | - | ||||||
| Net gain/(loss) on firm trading accounts | 15,946 | (3,492 | ) | |||||
| Other | 9,054 | 8,835 | ||||||
| TOTAL REVENUES | 1,834,164 | 2,114,360 | ||||||
| EXPENSES | ||||||||
| Compensation, payroll taxes and benefits | 1,138,798 | 1,422,382 | ||||||
| Data processing and clearing costs | 553,832 | 424,540 | ||||||
| Regulatory, professional fees and related expenses | 440,856 | 300,590 | ||||||
| Communications | 153,567 | 176,154 | ||||||
| Occupancy and equipment | 54,811 | 63,655 | ||||||
| Transfer fee | 45,282 | 4,873 | ||||||
| Bank charges | 52,719 | 115 | ||||||
| Other | 308,701 | 39,151 | ||||||
| TOTAL EXPENSES | 2,748,566 | 2,431,460 | ||||||
| INCOME/(LOSS) FROM OPERATIONS | (914,402 | ) | (317,100 | ) | ||||
| OTHER INCOME/(EXPENSE) | ||||||||
| Interest income | 543,066 | 61,375 | ||||||
| Interest expense | (20,903 | ) | (8,125 | ) | ||||
| TOTAL OTHER INCOME/(EXPENSE) | 522,163 | 53,250 | ||||||
| NET INCOME/(LOSS) BEFORE INCOME TAXES | (392,239 | ) | (263,850 | ) | ||||
| Income tax benefit/(expense) | 102,000 | 70,000 | ||||||
| NET INCOME/(LOSS) | $ | (290,239 | ) | $ | (193,850 | ) | ||
The accompanying notes are an integral part of these condensed financial statements.
F-2
WILSON-DAVIS & CO., INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended September, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income/(loss) | $ | (290,239 | ) | $ | (193,850 | ) | ||
| Noncash revenue and expense adjustments: | ||||||||
| Depreciation and amortization expense | 4,569 | 7,238 | ||||||
| Change in allowance for doubtful accounts | 277,416 | - | ||||||
| (Increase)/decrease in assets: | ||||||||
| Receivables from broker-dealers and clearing organizations | (1,694,690 | ) | (488,970 | ) | ||||
| Receivables from customers | (384,876 | ) | 837,372 | |||||
| Trading securities, market value, net | 769 | (3,779 | ) | |||||
| Commissions receivable | 5,762 | 14,577 | ||||||
| Cash deposits with clearing organizations and other broker-dealers | - | (999,719 | ) | |||||
| Income tax receivable | - | (71,400 | ) | |||||
| Operating lease right-of-use asset | 41,114 | 33,110 | ||||||
| Other assets | (56,478 | ) | 2,254 | |||||
| Increase/(decrease) in liabilities: | ||||||||
| Payables to customers | (3,241,834 | ) | (6,471,044 | ) | ||||
| Accounts of and payables to officers and directors | 73,052 | (606,102 | ) | |||||
| Accounts payable and accrued expenses | 132,114 | (600,631 | ) | |||||
| Commissions, payroll and payroll taxes payable | 7,945 | (32,938 | ) | |||||
| Stock loan | (42,000 | ) | 119,181 | |||||
| Payables to broker-dealers and clearing organizations | 2,576 | (413,717 | ) | |||||
| Operating lease liability | (42,704 | ) | (33,578 | ) | ||||
| Net cash used in operating activities | (5,207,504 | ) | (8,901,996 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for purchase of property and equipment | - | - | ||||||
| Cash paid for purchase of other investments | - | - | ||||||
| Net cash used in investing activities | - | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Dividends paid | - | - | ||||||
| Net cash used in financing activities | - | - | ||||||
| Net decrease in cash and restricted cash | (5,207,504 | ) | (8,901,996 | ) | ||||
| Cash and restricted at beginning of year | 36,059,356 | 59,249,523 | ||||||
| Cash and restricted cash at end of year | $ | 30,851,852 | $ | 50,347,527 | ||||
The accompanying notes are an integral part of these condensed financial statements.
F-3
WILSON-DAVIS & CO., INC.
CONDENSED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
(Unaudited)
| For
the Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Interest paid | $ | 62,447 | $ | 8,125 | ||||
| Income taxes paid | $ | 169,800 | $ | 3,852 | ||||
Schedule of non-cash transactions:
None
The accompanying notes are an integral part of these condensed financial statements.
F-4
WILSON-DAVIS & CO., INC.
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months Ended September 30, 2022
(Unaudited)
| Common Stock | Additional Paid-In |
Retained | ||||||||||||||||||
| Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
| Balance, June 30, 2022 | 410,000 | $ | 41,000 | $ | 303,837 | $ | 9,500,997 | $ | 9,845,834 | |||||||||||
| Net Income/(Loss) | - | - | - | (193,850 | ) | (193,850 | ) | |||||||||||||
| Dividends paid | - | - | - | - | - | |||||||||||||||
| Balance, September 30, 2022 | 410,000 | $ | 41,000 | $ | 303,837 | $ | 9,307,147 | $ | 9,651,984 | |||||||||||
The accompanying notes are an integral part of these condensed financial statements.
WILSON-DAVIS & CO., INC.
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months Ended September 30, 2023
(Unaudited)
| Common Stock | Additional Paid-In |
Retained | ||||||||||||||||||
| Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
| Balance, June 30, 2023 | 410,000 | $ | 41,000 | $ | 303,837 | $ | 9,591,331 | $ | 9,936,168 | |||||||||||
| Net Income/(Loss) | - | - | - | (290,239 | ) | (290,239 | ) | |||||||||||||
| Dividends paid | - | - | - | - | - | |||||||||||||||
| Balance, September 30, 2023 | 410,000 | $ | 41,000 | $ | 303,837 | $ | 9,301,092 | $ | 9,645,929 | |||||||||||
The accompanying notes are an integral part of these condensed financial statements.
F-5
WILSON-DAVIS & CO., INC.
Notes to the Unaudited Condensed Financial Statements
September 2023
NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by Wilson-Davis & Co., Inc. (“Wilson-Davis”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Wilson-Davis believes the disclosures and information presented are adequate to make the information not misleading. These interim condensed financial statements should be read in conjunction with Wilson-Davis’s most recent audited financial statements and notes thereto included in its Annual Report for the year ended June 30, 2023. Operating results for the three months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the current fiscal year ending June 30, 2024.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Wilson-Davis recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, using the modified retrospective method. 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.
Wilson-Davis acts as an agent by selling securities to customers and collecting commissions. Wilson-Davis recognizes commissions on a trade date basis, which is the day the transaction is executed. Wilson-Davis 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.
Wilson-Davis also receives commissions on mutual funds purchased by customers. Wilson-Davis believes that the performance obligation is not satisfied until the mutual funds are purchased by customers and recognizes the commission at that time.
Wilson-Davis performs vetting services to customers that wish to convert restricted stock to eligible trading stock. In addition, Wilson-Davis charges clearing fees to another broker-dealer for which it clears trades. Wilson-Davis recognizes revenue as the related performance obligations are satisfied.
Financial Statement Reclassification
Certain account balances from current periods have been reclassified in these financial statements to conform to prior period classifications.
F-6
Recent Accounting Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC, did not, or are not believed by management to, have a material impact on the Wilson-Davis’s present or future financial position, results of operations, or cash flows.
NOTE 3 – CASH SEGREGATED IN ACCORDANCE WITH FEDERAL REGULATIONS
Wilson-Davis is required by Rule 15c3-3 of the SEC 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 Wilson-Davis. The required reserve as of June 30, 2023, was calculated to be $27,111,239. Wilson-Davis had $26,764,260 cash on deposit in the reserve account, which was $346,979 less than the amount required. On July 3, 2023, Wilson-Davis deposited $701,893 to the reserve account in accordance with the rule, which resulted in an excess of $354,914. The required reserve as of September 30, 2023, was calculated to be $22,062,910. Wilson-Davis had $23,100,000 cash on deposit in the reserve account. On October 2, 2023, Wilson-Davis transferred $700,000 out of the reserve account leaving $22,400,000, which was $337,090 over the amount required.
Wilson-Davis is required by Rule 15c3-3 of the SEC 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 Wilson-Davis. The required reserve as of June 30, 2023, and September 30, 2023, was calculated to be $100,000. Wilson-Davis had $200,000 cash on deposit in the reserve account, which was $100,000 more than the amount required.
NOTE 4 – NET CAPITAL REQUIREMENTS
As a broker-dealer, Wilson-Davis is subject to the uniform net capital rule adopted and administered by the SEC. 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, Wilson-Davis has a minimum requirement based upon the number of securities markets that it maintains. On June 30, 2023, Wilson-Davis’s net capital was $9,727,713, which was $9,477,713 in excess of the minimum required. On September 30, 2023, Wilson-Davis’s net capital was $9,398,705, which was $9,148,705 in excess of the minimum required.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
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 $1.47 million for violations of the applicable short sales and anti-money laundering rules. Wilson-Davis appealed the decision to the National Adjudicatory Council (“NAC”). On December 19, 2019, NAC issued its decision ordering that the fines be reduced by $205,000 to an aggregate $1.265 million. Wilson-Davis made a timely appeal to the SEC to hear the case. Pursuant to FINRA rules, Wilson-Davis’s timely appeal of the decision to the SEC deferred the effectiveness of the findings and sanctions. Due to the disparity in the range of fines of similar cases, Wilson-Davis believes that the final amount is not reasonably estimable. Wilson-Davis has booked a contingent liability totaling $100,000, which represents the estimated low end of the possible range of fines.
F-7
NOTE 6 – CASH AND RESTRICTED CASH
Reconciliation of cash and restricted cash as shown in the condensed statements of cash flows is presented in the table below:
| For the Three Months Ended September 30, |
||||||||
| 2023 | 2022 | |||||||
| Cash and cash equivalents | $ | 7,396,964 | $ | 8,347,527 | ||||
| Cash segregated - customers | 23,254,148 | 41,800,000 | ||||||
| Cash segregated - PAB | 200,740 | 200,000 | ||||||
| Total cash and restricted cash shown in the statement of cash flows. | $ | 30,851,852 | $ | 50,347,527 | ||||
NOTE 7 – SUBSEQUENT EVENTS
On October 16, 2023, Wilson-Davis entered into a Fifth Addendum to Lease for the Salt Lake City office. The lease is for three years.
On December 28, 2023, the SEC issued an Opinion sustaining FINRA’s findings of violations against Wilson-Davis. The Opinion set aside the fines FINRA imposed on Wilson-Davis for the Reg SHO violations and the supervisory and AML violations. The SEC remanded the case to FINRA to reconsider the appropriate sanctions.
On December 21, 2023, Wilson-Davis entered into a Second Amendment to Office Lease for the Denver office. The lease is for one year.
F-8
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF WILSON-DAVIS & CO., INC.
Unless otherwise indicated or the context otherwise requires, all references in this Exhibit 99.2 shall have the meanings ascribed to them in the Current Report on Form 8-K (the “Original Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 16, 2024 and the Current Report on Form 8-K (the “Amended Form 8-K”) filed with the SEC on March 29, 2024 and, if not defined in the Original Form 8-K or the Amended Form 8-K, the final prospectus dated October 10, 2023 filed by the registrant prior to the consummation of the Business Combination (the “Final Prospectus”).
You should read the following discussion and analysis of the financial condition and results of operations of Wilson-Davis & Co. Inc. (“Wilson-Davis”) in conjunction with Wilson-Davis’ audited financial statements as of June 30, 2023 and 2022, and for the years ended June 30, 2023 and 2022, together with related notes included in the Final Prospectus and Wilson-Davis’ unaudited condensed financial statements and notes thereto included elsewhere in the Amended Form 8-K. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Amended Form 8-K includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section “Risk Factors – Risks Relating to Wilson-Davis’ Business and Industry” of the Final Prospectus, Wilson-Davis’ actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise indicated for the context otherwise requires, references in this section to the “Company,” “we,” “us,” “Wilson-Davis,” or “our” refer to the business of Wilson-Davis and its subsidiaries.
Overview
Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC, licensed in 43 states and territories, and a member in good standing of FINRA. Wilson-Davis has operated continuously since it was incorporated as a Utah corporation and obtained its license in December 1968.
Wilson-Davis 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 Wilson-Davis 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 Wilson-Davis vets 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.
Key Factors Impacting Wilson-Davis’ Business
Wilson-Davis’ business and results of operations have been, and will continue to be, affected by numerous factors and trends, which Wilson-Davis believes include those discussed below and in the section titled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.
• Liquidity. As a clearing broker-dealer in the U.S., Wilson-Davis 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. Wilson-Davis’ growth requires continued use of its services by new customers.
• Expanding Wilson-Davis’ Relationship with Existing Customers. Wilson-Davis’ 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, Wilson-Davis’ customers’ behaviors are affected. Wilson-Davis’ recent revenue and profitability have been adversely affected by the general downturn in the securities markets since early 2022, resulting from increasing inflation, increasing interest rates, the lingering economic effects of the COVID-19 pandemic, supply chain disruptions and other factors.
• Macroeconomic Events. Customer behavior is impacted by the overall macroeconomic environment, which is influenced by elements beyond Wilson-Davis’ control, including economic and political conditions, inflation, tax rates, the ongoing COVID-19 pandemic, the military conflict in Ukraine, and natural disasters.
Liquidity and Capital Resources
Cash used in operating activities for the three months ended September 30, 2023, was $5,207,504, as compared to $8,901,996 of cash used by operating three months ended September 30, 2022. The decrease from the prior period was primarily due to substantially reduced revenues and profitability.
Cash used in investing activities for the three months ended September 30,2023, was $0 compared to $0 compared to the three months ended September 30, 2022.
Cash used in financing activities for the three months ended September 30,2023, was $0 compared to $0 compared to the three months ended September 30, 2022.
As a result of the foregoing, during the three months ended September 30, 2023, Wilson-Davis reported a net decrease in cash and restricted cash of $5,207,504, as compared to the prior period.
Wilson-Davis believes that its working capital together with expected operating profit, will provide the liquidity it requires for the next 12 months of its operation, except for additional amounts that will be required to meet new regulatory requirements effective October 26, 2023 that it have at least $10 million in excess net capital in order to clear securities transactions on a fully disclosed basis for other firms. To provide the additional capital needed, Wilson-Davis, and investors, including the owners of Wilson-Davis and Mr. Schaible, funded $1,300,000 in subordinated demand notes in October 2023. The notes are
expected to mature in October 2024 and have an interest rate of 5% per annum, payable quarterly.
The actual amounts of Wilson-Davis’ liquidity and capital requirements depend on the level of its future activities, which in turn depend on prevailing conditions in the securities markets, all of which are outside Wilson-Davis’ ability to influence or control. In addition, significant expansion of its activities to implement its fully paid stock lending or margin account offerings could require additional capital. Furthermore, changes to applicable regulations or governing interpretations could alter Wilson-Davis’ net capital or liquidity requirements.
Wilson-Davis’ capital includes $1,950,000 in proceeds from several subordinated loans payable to current and former officers and directors of Wilson-Davis and Mr. Shaible. The original agreements renew annually and provide for interest at 5% per annum. The loan principal and interest are unsecured and subordinated in right of payment to all claims of present and future creditors of Wilson-Davis. Wilson-Davis plans to seek FINRA consent to repay all subordinated loans. The terms of the Broker-Dealer Acquisition Agreement require repayment of these subordinated loans, as well as any additional subordinated loans that may be funded to meet new increased excess net capital requirements applicable October 26, 2023, at closing. The surviving corporation after the Business Combination will be responsible for funding Wilson-Davis. Accordingly, repayment of the subordinated loans would not adversely affect ongoing operations but would increase the amount of external funding required to be provided by the surviving corporation to meet higher National Securities Clearing Corporation (NSCC) excess net capital requirements by October 26, 2023.
In addition to capital of $250,000 currently required to meet regulatory requirements, Wilson-Davis requires liquidity to fund day-to-day activities associated with executing securities transactions for its own customers as well as for the customers of its clearing correspondents. The amount of liquidity required generally is affected by the aggregate dollar volume of open securities transactions that Wilson-Davis submits to the NSCC. Currently the amount of Wilson-Davis’ liquidity exceeds amounts required at NSCC for operations at current transaction levels.
Line of Credit
Wilson-Davis has a $10,000,000 revolving line of credit with BMO Harris Bank N.A. The interest rate is determined at the time of borrowing as agreed by Wilson-Davis and the bank. The line of credit currently provides for interest at the bank’s overnight rate plus 1.5% and is secured by Wilson-Davis’ assets. In addition, the line of credit carries an interest rate of 0.5% on its unused portion. The line of credit agreement requires Wilson-Davis 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 Wilson-Davis’ liquidity requirements for NSCC clearing margin deposits. Wilson-Davis did not draw on its line of credit during the three months ended September 30, 2023 and 2022. As of September 30, 2023 and 2022, Wilson-Davis was in compliance with all financial covenants contained in its revolving line of credit agreement.
Recent Accounting Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on Wilson-Davis’ present or future financial position, results of operations, or cash flows.
Wilson-Davis has reviewed all other recently issued, but not yet adopted, accounting standards to determine their effects, if any, on Wilson-Davis’ consolidated results of operations, financial position, and cash flows. Based on that review, Wilson-Davis believes that none of these pronouncements will have a significant effect on current or future earnings or operations.
Critical Accounting Policies
A summary of Wilson-Davis’ significant accounting policies is included in Note 1 of its audited financial statements contained in this prospectus/proxy statement. Wilson-Davis believes the application of these accounting policies on a consistent basis enables it to provide financial statement users with useful, reliable, and timely information about Wilson-Davis’ earnings results, financial condition, and cash flows.
Critical accounting policies are those that require a company to make significant judgments, estimates or assumptions that affect amounts reported in its consolidated financial statements or the notes thereto. Wilson-Davis bases its judgments, estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable and prudent. Actual results may differ materially from these estimates. At present Wilson-Davis does not have any critical accounting policies that require critical management judgments and estimates about matters that may be uncertain.
Results of Operations
During the three months ended September 30, 2023, Wilson-Davis executed 7,556 trades, as compared to 9,354 trades during the same period in the prior year, which represented a 19% decrease from the prior year. The decrease was attributable to the general decrease in trading activity in the securities markets generally. The decrease in trading volume coupled with the lower dollar amount of the transactions has resulted in decreased revenues during the three months ended September 30, 2023. Wilson-Davis had 10,939 customer accounts as of September 30, 2023, and 11,716 as of September 30, 2022.
Revenues of $1,834,164 for the three months ended September 30, 2023, represent a 13% decrease from revenues of $ 2,114,360 for the same period in 2022. The decrease was the result of market volatility and recession fears. The main component of this revenue decline was attributable to the reduction in commission revenue to $1,226,171 for the three months ended September 30,2023, from $1,870,885 in the corresponding prior year period because of the general downturn in the securities markets referred to above.
Vetting fees increased to $295,210 for the three months ended September 30, 2023 compared to $157,806 for the three months ended September 30, 2022 due to an increase in securities being vetted.
Clearing fees increased to $120,984 for the three months ended September 30, 2023 compared to $80,326 for the three months ended September 30, 2022 due to an increase in fees charged to Glendale Securities.
Net gain on firm trading accounts increased to $15,946 for the three months ended September 30, 2023 when compared to a ($3,492) loss for the three months ended September 30, 2022.
Wilson-Davis created a fees charged to customers line item in 2023 to further break out revenues. The result is an increase of $166,798 when compared to the prior year. Wilson-Davis charges fees to its customers for postage, bank wires, ACATS, and clearing and transfer agent costs.
Other income increased to $9,054 for the three months ended September 30, 2023 when compared to $8,835 for the three months ended September 30, 2022.
Expenses of $2,748,566 for the three months ended September 30, 2023, represent a 13% increase from expenses of $2,431,460 for the same period in 2022.
Compensation, payroll taxes and benefits decreased to $1,138,798 for the three months ended September 30, 2023 compared to $1,422,382 in the prior year. The decrease of 20% was largely driven by the decrease in commission revenues.
Data processing and clearing costs increased to $553,832 for the three months ended September 30, 2023, compared to $424,450 during the prior year. The 30% increase was due to an increase in fees charged by Wilson-Davis’ trading software provider.
Regulatory, professional fees and related expenses increased to $440,856 for the three months ended September 30, 2023, compared to $300,590 in the prior year. The increase was due an increase in legal fees due to the pending acquisition and audit fees.
Other expenses, which includes: Communications, Occupancy and equipment, Transfer fees, Bank charges and Other, increased to $615,080 for the three months ended September 30, 2023 when compared to $283,948 for the prior year. The increase was due to an increase in bad debt expense.
Loss from operations was ($914,402) for the three months ended September 30, 2023, compared to a loss of ($317,100) in the three months ended September 30, 2022.
Other income of $522,163 for the three months ended September 30, 2023, represents an 881% increase from $53,250 when compared to the prior year. The increased interest rates resulted in an increase in interest income and an offsetting increase in interest expense. Wilson-Davis obtained a $10,000,000 line of credit through its financial institution in the fall of 2021. The line of credit carries a 0.5% interest rate for nonuse. Wilson-Davis did not draw on its line of credit during the three months ended September 30, 2023 and 2022.
The foregoing factors resulted in net loss of $290,239 for the quarter ended September 30, 2023, as compared to $193,850 in net loss for the corresponding period in the prior year.
Wilson-Davis principally relies on its net capital to provide the liquidity needed to sustain operations.
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
AtlasClear Holdings, Inc. is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination and related transactions, (collectively, the “Transactions”). The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Quantum FinTech Acquisition Corporation (“Quantum”), Wilson-Davis & Co., Inc. (“Wilson-Davis”) and the assets to be contributed by AtlasClear, Inc. (“AtlasClear”), adjusted to give effect to the Transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. Defined terms included below have the same meaning as terms defined and included in the final proxy statement/prospectus dated October 10, 2023 filed in connection with the Transactions.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2023 combines the unaudited historical balance sheet of Wilson-Davis as of September 30, 2023 with the unaudited historical consolidated balance sheet of Quantum as of September 30, 2023, giving effect to the Transactions as if they had been consummated as of that date.
The following unaudited pro forma condensed combined income statement for the nine months ended September 30, 2023 combines the unaudited historical statement of income of Wilson-Davis for the period from January 1, 2023 through September 30, 2023 on a pro forma basis with the unaudited historical consolidated statement of operations of Quantum for the nine months ended September 30, 2023, giving effect to the Transactions as if they had occurred on January 1, 2022.
The following unaudited pro forma condensed combined income statement for the year ended December 31, 2022 combines the unaudited historical statement of income of Wilson-Davis for the period from January 1, 2022 through December 31, 2022 on a pro forma basis with the audited historical consolidated statement of operations of Quantum for the year ended December 31, 2022, giving effect to the Transactions as if they had occurred on January 1, 2022.
The unaudited pro forma condensed combined balance sheet as of September 30, 2023, has been derived from:
| · | the historical unaudited consolidated financial statements of Quantum as of September 30, 2023, and the related notes thereto included elsewhere in this Form 8-K; and |
| · | the historical unaudited financial statements of Wilson-Davis as of September 30, 2023. |
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023, has been derived from:
| · | the historical unaudited consolidated financial statements of Quantum for the nine months ended September 30, 2023, and the related notes thereto included elsewhere in this Form 8-K; and |
| · | the historical audited financial statements of Wilson-Davis for the year ended June 30, 2023, and the related notes thereto incorporated by referenced to the proxy statement/prospectus less the historical unaudited financial statements of Wilson-Davis for the six months ended December 31, 2022 plus the three months ended September 30, 2023. Refer to Note 2 — “Basis of Presentation” for more detail. |
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, has been derived from:
| · | the historical audited consolidated financial statements of Quantum for the year ended December 31, 2022, and the related notes thereto included elsewhere in this proxy statement/prospectus; and |
| · | the historical unaudited financial statements of Wilson-Davis for the six months ended December 31, 2022, and the related notes thereto included elsewhere in this proxy statement/prospectus, the historical audited financial statements of Wilson-Davis for the year ended June 30, 2022, and the related notes thereto included elsewhere in this proxy statement/prospectus and the historical unaudited financial statements of Wilson-Davis for the six months ended December 31, 2021. Refer to Note 2 — “Basis of Presentation” for more detail. |
This information should be read together with Wilson-Davis’ and Quantum’s audited and unaudited consolidated financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Target Companies,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Quantum,” and other financial information incorporated by reference in the Registration Statement and proxy statement/prospectus filed on October 2, 2023.
1
PRO FORMA CONDENSED COMBINED BALANCE SHEET AS
OF SEPTEMBER 30, 2023
(UNAUDITED)
(in thousands, except share and per share amounts)
| Transaction | ||||||||||||||||||||||||||||||||||||||
| Accounting | Pro Forma | |||||||||||||||||||||||||||||||||||||
| (A) | Fair Value | Transaction | (B) | Adjustments | Combined | |||||||||||||||||||||||||||||||||
| Wilson Davis | True up | Adjusted | Accounting | Consolidated | Quantum | (Assuming Actual | (Assuming Actual | |||||||||||||||||||||||||||||||
| (Historical) | Adjustments | Wilson Davis | Adjustments | AtlasClear | (Historical) | Redemptions) | Redemptions) | |||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 7,397 | 2 | 2 | $ | 7,399 | - | $ | 7,399 | $ | 713 | $ | 1,196 | 4 | $ | 6,693 | ||||||||||||||||||||||
| $ | 6,000 | 8 | ||||||||||||||||||||||||||||||||||||
| (522 | ) | 6 | ||||||||||||||||||||||||||||||||||||
| (8,093 | ) | 10 | ||||||||||||||||||||||||||||||||||||
| Cash segregated customers | 23,254 | - | 23,254 | - | 23,254 | - | - | 23,254 | ||||||||||||||||||||||||||||||
| Cash segregated PAB | 201 | - | 201 | - | 201 | - | - | 201 | ||||||||||||||||||||||||||||||
| Receivables - broker-dealers and clearing organizations | 2,477 | - | 2,477 | - | 2,477 | - | - | 2,477 | ||||||||||||||||||||||||||||||
| Receivables - customers net | 303 | - | 303 | - | 303 | - | - | 303 | ||||||||||||||||||||||||||||||
| Other receivable | 51 | - | 51 | - | 51 | - | - | 51 | ||||||||||||||||||||||||||||||
| Trading securities, market value | 3 | - | 3 | - | 3 | - | - | 3 | ||||||||||||||||||||||||||||||
| Prepaid income tax | 415 | - | 415 | - | 415 | - | - | 415 | ||||||||||||||||||||||||||||||
| Prepaids | 29 | - | 29 | - | 29 | 48 | - | 77 | ||||||||||||||||||||||||||||||
| Due from AtlasClear | - | - | - | - | - | 54 | - | 54 | ||||||||||||||||||||||||||||||
| Total Current Assets | 34,130 | 2 | 34,132 | - | 34,132 | 815 | (1,419 | ) | 33,528 | |||||||||||||||||||||||||||||
| Operating lease right-of-use assets | 105 | - | 105 | - | 105 | - | - | 105 | ||||||||||||||||||||||||||||||
| Cash deposits - broker-dealers and clearing organizations | 2,537 | - | 2,537 | - | 2,537 | - | - | 2,537 | ||||||||||||||||||||||||||||||
| Property and equipment, net | 30 | - | 30 | - | 30 | - | - | 30 | ||||||||||||||||||||||||||||||
| Deferred income tax | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Other assets | 385 | - | 385 | - | 385 | - | - | 385 | ||||||||||||||||||||||||||||||
| Licenses | - | 6,939 | 2 | 6,939 | - | 6,939 | - | - | 6,939 | |||||||||||||||||||||||||||||
| Customer list | - | 10,163 | 2 | 10,163 | - | 10,163 | - | - | 10,163 | |||||||||||||||||||||||||||||
| Developed technology | - | - | 18,163 | 1 | 18,163 | - | - | 18,163 | ||||||||||||||||||||||||||||||
| Goodwill | - | 4,250 | 2 | 4,250 | - | 4,250 | - | - | 4,250 | |||||||||||||||||||||||||||||
| Cash and marketable securities held in Trust Account | - | - | - | - | - | 53,975 | (1,195 | ) | 4 | - | ||||||||||||||||||||||||||||
| (53,947 | ) | 3 | ||||||||||||||||||||||||||||||||||||
| 1,167 | 7 | |||||||||||||||||||||||||||||||||||||
| Total Assets | $ | 37,187 | $ | 21,354 | $ | 58,541 | $ | 18,163 | $ | 76,704 | $ | 54,790 | $ | (55,394 | ) | $ | 76,100 | |||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||||||||||||||||||||
| Payables to customers | $ | 24,703 | $ | - | $ | 24,703 | $ | - | $ | 24,703 | $ | - | $ | - | $ | 24,703 | ||||||||||||||||||||||
| Accounts and payables to officers/directors | 753 | - | 753 | - | 753 | - | - | 753 | ||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | 884 | - | 884 | - | 884 | 4,621 | (4,321 | ) | 6 | 1,184 | ||||||||||||||||||||||||||||
| Payables - broker-dealers and clearing organixations | 22 | - | 22 | - | 22 | - | - | 22 | ||||||||||||||||||||||||||||||
| Payable to Wilson-Davis shareholders | - | 18,079 | 2 | 18,079 | - | 18,079 | - | (8,092 | ) | 10 | 9,987 | |||||||||||||||||||||||||||
| Short-term Note to Wilson Davis | - | 5,000 | 2 | 5,000 | 5,000 | - | - | 5,000 | ||||||||||||||||||||||||||||||
| Commissions, payroll and payroll taxes | 216 | - | 216 | - | 216 | - | - | 216 | ||||||||||||||||||||||||||||||
| Current portion of lease liability | 83 | - | 83 | - | 83 | - | - | 83 | ||||||||||||||||||||||||||||||
| Stock loan | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Income taxes payable | - | - | - | - | - | 722 | - | 722 | ||||||||||||||||||||||||||||||
| Excise taxes payable | - | - | - | - | - | 1,528 | - | 1,528 | ||||||||||||||||||||||||||||||
| Advances from related party | - | - | - | - | - | 2,321 | (2,321 | ) | 7 | - | ||||||||||||||||||||||||||||
| Promissory note - related party | - | - | - | - | - | 480 | (480 | ) | 7 | - | ||||||||||||||||||||||||||||
| Convertible note, net of discount | - | - | - | - | - | - | 5,028 | 8 | 5,028 | |||||||||||||||||||||||||||||
| Sofware earnout liability | - | - | - | 10,426 | (1) | 10,426 | - | - | 10,426 | |||||||||||||||||||||||||||||
| Total current liabilities | 26,661 | 23,079 | 49,740 | 10,426 | 60,166 | 9,672 | (10,186 | ) | 59,652 | |||||||||||||||||||||||||||||
| Accrued contingent liability | 100 | - | 100 | - | 100 | - | - | 100 | ||||||||||||||||||||||||||||||
| Subordinated borrowings | 650 | - | 650 | - | 650 | - | - | 650 | ||||||||||||||||||||||||||||||
| Trading account deposit | 100 | - | 100 | - | 100 | - | - | 100 | ||||||||||||||||||||||||||||||
| Long-term lease liability | 30 | - | 30 | - | 30 | - | - | 30 | ||||||||||||||||||||||||||||||
| Non redemption liability | - | - | - | - | - | 1,893 | (1,893 | ) | 9 | - | ||||||||||||||||||||||||||||
| Deferred long term accounts payable | - | - | - | - | - | - | 9,162 | 6 | 9,162 | |||||||||||||||||||||||||||||
| Long-term Note to Wilson Davis | - | 7,921 | 7,921 | - | 7,921 | - | - | 7,921 | ||||||||||||||||||||||||||||||
| Warrant liabilities | - | - | - | - | - | 492 | - | 492 | ||||||||||||||||||||||||||||||
| Total Liabilities | 27,541 | 31,000 | 58,541 | 10,426 | 68,967 | 12,057 | (2,917 | ) | 78,107 | |||||||||||||||||||||||||||||
| Common stock subject to possible redemption | - | - | - | - | - | 53,848 | 99 | 5 | - | |||||||||||||||||||||||||||||
| (53,947 | ) | 3 | ||||||||||||||||||||||||||||||||||||
| - | - | - | - | - | 53,848 | (53,848 | ) | - | ||||||||||||||||||||||||||||||
| Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Common stock | 41 | (41 | ) | 2 | - | - | 1 | - | 1 | - | 5 | 1 | ||||||||||||||||||||||||||
| - | 6 | |||||||||||||||||||||||||||||||||||||
| - | 7 | |||||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 304 | (304 | ) | 2 | - | 72,099 | 1 | 72,099 | - | (99 | ) | 5 | 77,433 | |||||||||||||||||||||||||
| 1,020 | 6 | |||||||||||||||||||||||||||||||||||||
| 3441 | 7 | |||||||||||||||||||||||||||||||||||||
| 972 | 8 | |||||||||||||||||||||||||||||||||||||
| Accumulated deficit | 9,301 | (9,301 | ) | 2 | - | (64,362 | ) | 1 | (64,362 | ) | (11,116 | ) | (6,383 | ) | 6 | (79,441 | ) | |||||||||||||||||||||
| 1,893 | 9 | |||||||||||||||||||||||||||||||||||||
| 527 | 7 | |||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | 9,646 | (9,646 | ) | - | 7,737 | 7,737 | (11,115 | ) | 1,371 | (2,007 | ) | |||||||||||||||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 37,187 | $ | 21,354 | $ | 58,541 | $ | 18,163 | $ | 76,704 | $ | 54,790 | $ | (55,394 | ) | $ | 76,100 | |||||||||||||||||||||
2
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTH ENDED SEPTEMBER 30, 2023
(UNAUDITED)
(in thousands, except share and per share amounts)
| Transaction | ||||||||||||||||||||||||||||||||||||
| Accounting | Pro Forma | |||||||||||||||||||||||||||||||||||
| (C) | Fair Value | Transaction | (D) | Adjustments | Combined | |||||||||||||||||||||||||||||||
| Wilson Davis | True up | Adjusted | Accounting | Consolidated | Quantum | (Assuming Actual | (Assuming Actual | |||||||||||||||||||||||||||||
| (Historical) | Adjustments | Wilson Davis | Adjustments | AtlasClear | (Historical) | Redemptions) | Redemptions) | |||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||
| Comissions | $ | 3,888 | $ | - | $ | 3,888 | $ | - | $ | 3,888 | $ | - | $ | - | $ | 3,888 | ||||||||||||||||||||
| Vetting fees | 1,191 | - | 1,191 | - | 1,191 | - | - | 1,191 | ||||||||||||||||||||||||||||
| Clearing fees | 400 | - | 400 | - | 400 | - | - | 400 | ||||||||||||||||||||||||||||
| Fees charged to customers | 1,191 | - | 1,191 | - | 1,191 | - | - | 1,191 | ||||||||||||||||||||||||||||
| Net loss on firm trading accounts | 25 | - | 25 | - | 25 | - | - | 25 | ||||||||||||||||||||||||||||
| Other | (27 | ) | - | (27 | ) | - | (27 | ) | - | - | (27 | ) | ||||||||||||||||||||||||
| Total Revenue | 6,668 | - | 6,668 | - | 6,668 | - | - | 6,668 | ||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||
| Compensation, payroll taxes and benefits | 3,399 | - | 3,399 | - | 3,399 | - | - | 3,399 | ||||||||||||||||||||||||||||
| Data processing and clearing costs | 2,011 | - | 2,011 | - | 2,011 | - | - | 2,011 | ||||||||||||||||||||||||||||
| Regulatory, professional fees and related expenses | 1,426 | - | 1,426 | - | 1,426 | - | - | 1,426 | ||||||||||||||||||||||||||||
| Communications | 443 | - | 443 | - | 443 | - | - | 443 | ||||||||||||||||||||||||||||
| Occupancy and equipment | 177 | - | 177 | - | 177 | - | - | 177 | ||||||||||||||||||||||||||||
| Transfer fees | 189 | - | 189 | - | 189 | - | - | 189 | ||||||||||||||||||||||||||||
| Bank charges | 132 | - | 132 | - | 132 | - | - | 132 | ||||||||||||||||||||||||||||
| Other | 361 | - | 361 | - | 361 | - | - | 361 | ||||||||||||||||||||||||||||
| Amortization of intangible assets | - | 2,211 | 1 | 2,211 | - | 2,211 | - | - | 2,211 | |||||||||||||||||||||||||||
| Operating expenses | - | - | - | - | - | 2,126 | - | 2,126 | ||||||||||||||||||||||||||||
| Total expenses | 8,138 | 2,211 | 10,349 | - | 10,349 | 2,126 | - | 12,475 | ||||||||||||||||||||||||||||
| Operating loss | (1,470 | ) | (2,211 | ) | (3,681 | ) | - | (3,681 | ) | (2,126 | ) | - | (5,807 | ) | ||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||
| Interest income | 1,574 | - | 1,574 | - | 1,574 | 14 | - | 1,588 | ||||||||||||||||||||||||||||
| Interest expense | (75 | ) | - | (75 | ) | - | (75 | ) | - | (736 | ) | 5 | (811 | ) | ||||||||||||||||||||||
| Gain/loss on fixed assets | (7 | ) | - | (7 | ) | - | (7 | ) | - | (7 | ) | |||||||||||||||||||||||||
| Net gain on settlement | - | - | - | - | - | 830 | 830 | |||||||||||||||||||||||||||||
| Change in fair value of warrants | - | - | - | - | - | (308 | ) | - | (308 | ) | ||||||||||||||||||||||||||
| Change in fair value of PIPE derivative liability | - | - | - | - | - | (12 | ) | - | (12 | ) | ||||||||||||||||||||||||||
| Interest earned on investments held in Trust Account | - | - | - | - | - | 2,746 | (2,746 | ) | 4 | - | ||||||||||||||||||||||||||
| (Loss) income before taxes | 22 | (2,211 | ) | (2,189 | ) | - | (2,189 | ) | 1,144 | (3,482 | ) | (4,527 | ) | |||||||||||||||||||||||
| Income tax benefit (expense) | (5 | ) | - | (5 | ) | - | (5 | ) | (722 | ) | - | (727 | ) | |||||||||||||||||||||||
| Net (loss) income | $ | 17 | $ | (2,211 | ) | $ | (2,194 | ) | $ | - | $ | (2,194 | ) | $ | 422 | $ | (3,482 | ) | $ | (5,254 | ) | |||||||||||||||
| Weighted average shares outstanding, basic and diluted | 12,552,751 | (750,992 | ) | 11,801,759 | ||||||||||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | $ | 0.03 | $ | (0.45 | ) | |||||||||||||||||||||||||||||||
| Weighted average shares outstanding, diluted | 12,552,751 | (750,992 | ) | 11,801,759 | ||||||||||||||||||||||||||||||||
| Diluted net (loss) income per share | $ | 0.03 | $ | (0.45 | ) | |||||||||||||||||||||||||||||||
3
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2022
(UNAUDITED)
(in thousands, except share and per share amounts)
| Transaction | Transaction | |||||||||||||||||||||||||||||||||||||
| Accounting | Accounting | Pro Forma | ||||||||||||||||||||||||||||||||||||
| (A) | Fair Value | Adjustments | (B) | Adjustments | Combined | |||||||||||||||||||||||||||||||||
| Wilson Davis | True up | Adjusted | (Assuming No | Consolidated | Quantum | (Assuming No | (Assuming No | |||||||||||||||||||||||||||||||
| (Historical) | Adjustments | Wilson Davis | Redemptions) | AtlasClear | (Historical) | Redemptions) | Redemptions) | |||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Comissions | $ | 8,239 | $ | - | $ | 8,239 | $ | - | $ | 8,239 | $ | - | $ | - | $ | 8,239 | ||||||||||||||||||||||
| Vetting fees | 1,042 | - | 1,042 | - | 1,042 | - | - | 1,042 | ||||||||||||||||||||||||||||||
| Clearing fees | 206 | - | 206 | - | 206 | - | - | 206 | ||||||||||||||||||||||||||||||
| Net loss on firm trading accounts | (48 | ) | - | (48 | ) | - | (48 | ) | - | - | (48 | ) | ||||||||||||||||||||||||||
| Other | 88 | - | 88 | - | 88 | - | - | 88 | ||||||||||||||||||||||||||||||
| Total Revenue | 9,527 | - | 9,527 | - | 9,527 | - | - | 9,527 | ||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Compensation, payroll taxes and benefits | 6,572 | - | 6,572 | - | 6,572 | - | - | 6,572 | ||||||||||||||||||||||||||||||
| Data processing and clearing costs | 1,751 | - | 1,751 | - | 1,751 | - | - | 1,751 | ||||||||||||||||||||||||||||||
| Regulatory, professional fees and related expenses | 1,059 | - | 1,059 | - | 1,059 | - | - | 1,059 | ||||||||||||||||||||||||||||||
| Communications | 618 | - | 618 | - | 618 | - | - | 618 | ||||||||||||||||||||||||||||||
| Occupancy and equipment | 262 | - | 262 | - | 262 | - | - | 262 | ||||||||||||||||||||||||||||||
| Transfer fees | 56 | - | 56 | - | 56 | - | - | 56 | ||||||||||||||||||||||||||||||
| Bank charges | 61 | - | 61 | - | 61 | - | - | 61 | ||||||||||||||||||||||||||||||
| Other | 144 | - | 144 | - | 144 | - | - | 144 | ||||||||||||||||||||||||||||||
| Amortization of intangible assets | - | 2,948 | 1 | 2,948 | - | 2,948 | - | - | 2,948 | |||||||||||||||||||||||||||||
| Transaction cost | - | - | 64,362 | 2 | 64,362 | - | - | 64,362 | ||||||||||||||||||||||||||||||
| Operating expenses | - | - | - | - | - | 3,024 | 6,383 | 3 | 9,407 | |||||||||||||||||||||||||||||
| Total expenses | 10,523 | 2,948 | 13,471 | 64,362 | 77,833 | 3,024 | 6,383 | 87,240 | ||||||||||||||||||||||||||||||
| Operating loss | (996 | ) | (2,948 | ) | (3,944 | ) | (64,362 | ) | (68,306 | ) | (3,024 | ) | (6,383 | ) | (77,713 | ) | ||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||||
| Interest income | 612 | 612 | - | 612 | - | - | 612 | |||||||||||||||||||||||||||||||
| Interest expense | (82 | ) | - | (82 | ) | - | (82 | ) | - | (2,944 | ) | 5 | (3,026 | ) | ||||||||||||||||||||||||
| Change in fair value of warrants | - | - | - | - | - | 6,953 | - | 6,953 | ||||||||||||||||||||||||||||||
| Change in fair value of PIPE derivative liability | - | - | - | - | - | 4,566 | - | 4,566 | ||||||||||||||||||||||||||||||
| Interest earned on investments held in Trust Account | - | - | - | - | 3,087 | (3,087 | ) | 4 | - | |||||||||||||||||||||||||||||
| Unrealized loss on marketable securities in Trust Account | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
| (Loss) income before taxes | (466 | ) | (2,948 | ) | (3,414 | ) | (64,362 | ) | (67,776 | ) | 11,582 | (12,414 | ) | (68,608 | ) | |||||||||||||||||||||||
| Income tax benefit (expense) | 160 | - | 160 | - | 160 | (537 | ) | - | (377 | ) | ||||||||||||||||||||||||||||
| Net (loss) income | $ | (306 | ) | $ | (2,948 | ) | $ | (3,254 | ) | $ | (64,362 | ) | $ | (67,616 | ) | $ | 11,045 | $ | (12,414 | ) | $ | (68,985 | ) | |||||||||||||||
| Weighted average shares outstanding, basic and diluted | 25,156,250 | (13,354,491 | ) | 11,801,759 | ||||||||||||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | $ | 0.44 | $ | (5.85 | ) | |||||||||||||||||||||||||||||||||
| Weighted average shares outstanding, diluted | 25,156,250 | (13,354,491 | ) | 11,801,759 | ||||||||||||||||||||||||||||||||||
| Diluted net (loss) income per share | $ | 0.44 | $ | (5.85 | ) | |||||||||||||||||||||||||||||||||
4
Note 1 — Description of the Transactions
On February 9, 2024 (the “Closing Date”), the registrant 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 registrant, Quantum FinTech Acquisition Corporation (“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 contemplated by the Business Combination Agreement are hereinafter referred to as the “Business Combination.” In connection with the consummation of the Business Combination (the “Closing”), the registrant changed its name from “Calculator New Pubco, Inc.” to “AtlasClear Holdings, Inc.” (hereinafter referred to as “AtlasClear Holdings”).
In addition:
| · | Simultaneously with the execution of the Business Combination Agreement, AtlasClear entered into Amendment No. 2 to the Stock Purchase Agreement, dated as of April 11, 2022 (as further amended on May 30, 2023, the “Broker-Dealer Acquisition Agreement”), with Wilson-Davis and its selling shareholders, pursuant to which, among other things, AtlasClear will acquire all of the issued and outstanding shares of Wilson-Davis. As of February 9, 2024, the transaction closed. |
| · | Simultaneously with the execution of the Business Combination Agreement, AtlasClear entered into the CB Merger Agreement with Commercial Bancorp, pursuant to which, among other things, Commercial Bancorp will be merged with and into a subsidiary of AtlasClear. The Closing of the CB Merger is expected to occur after the consummation of the Business Combination. |
| · | Simultaneously with the execution of the Business Combination Agreement, AtlasClear entered into the Contribution Agreement with Atlas FinTech, and Atlas Financial Technologies Corp. pursuant to which Atlas FinTech and Atlas Financial Technologies Corp. will contribute to AtlasClear all rights, title and interest in the Transferred Intellectual Property (as defined in the Contribution Agreement), among other things. As of February 9, 2024, the transaction closed. |
At the Closing, AtlasClear equity holders received merger consideration in shares of common stock of AtlasClear Holdings, Inc. (the “AtlasClear Holdings Common Stock”) equal to the quotient of (i) $75.4 million, less the purchase prices for Wilson-Davis and Commercial Bancorp, divided by (ii) $10 (the “Merger Consideration”). As such 4,440,000 shares were issued on February 9, 2024.
In addition, the AtlasClear stockholders will receive up to 5,944,444 shares of common stock of AtlasClear Holdings, Inc. (the “Earn Out Shares”). The Earn Out Shares will be issued to AtlasClear Stockholders upon certain milestones (based on the achievement of certain price targets of New Pubco Common Stock following the Closing). In the event such milestones are not met within the first 18 months following the Closing, the Earn Out Shares will be cancelled. Atlas FinTech will also receive up to $20 million of AtlasClear Holdings 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 the five years following Closing, with no catch-up between the years.
In connection with the Closing, each share of Quantum Common Stock that was outstanding and has not been redeemed was converted into one share of AtlasClear Holdings Common Stock.
Each outstanding Quantum Public Warrant has become a warrant to purchase one-half of a share of AtlasClear Holdings Common Stock. Each outstanding Quantum Private Warrant will become a warrant to purchase one share of AtlasClear Holdings Common Stock.
In connection with the stockholder vote to approve the Business Combination Agreement and the Business Combination, holders of an aggregate of 4,940,885 shares of Quantum Common Stock properly exercised their right to have their shares redeemed for a full pro rata portion of the Trust Account holding the proceeds from the IPO, which was approximately $10.92 per share, or $53,947,064.28 in the aggregate. The remaining balance of the Trust Account immediately prior to the Closing of approximately $1.2 million was used to partially fund the Business Combination.
5
As a result of such redemptions, a total of 109,499 Public Shares remained outstanding at the Closing. After giving effect to the Business Combination, the redemption of the Public Shares described above, the separation of the former Quantum Units and the issuance of Merger Consideration Shares and the issuance of shares of Common Stock pursuant to Expense Settlements (described below), as of the Closing Date, there were 11,781,759 shares of Common Stock issued and outstanding.
Amendments to Broker-Dealer Acquisition Agreement
Prior to the Closing, AtlasClear and the Company entered into two amendments to the Broker-Dealer Acquisition Agreement with Wilson-Davis and the then-owners of Wilson-Davis (the “Wilson-Davis Sellers”), Amendment No. 8 dated January 9, 2024 (“Amendment No. 8”) and Amendment No. 9 dated February 7, 2024 (“Amendment No. 9” and, together with Amendment No. 8, the “Amendments”). Among other things, the Amendments reduced the total purchase price payable under the Broker- Dealer Acquisition Agreement by $5 million and reduced the cash payable at the Wilson-Davis Closing as part of the purchase price to $8 million, with the balance of the purchase price paid in the form of convertible promissory notes issued by AtlasClear to the Wilson-Davis Sellers, as follows: (i) $5,000,000 in aggregate principal amount of notes due 90 days after the Closing Date (the “Short-Term Notes”) and (ii) $7,971,000 in aggregate principal amount of notes due 24 months after the Closing Date (the “Long-Term Notes” and, together with the Short-Term Notes, the “Seller Notes”). The Short-Term Notes accrue interest at a rate of 9% per annum, payable quarterly in arrears, in shares of Common Stock at a rate equal to 90% of the trailing seven-trading day volume weighted average price of the Common Stock (“VWAP”) prior to payment (or, at the Company’s option, cash), and are convertible at the option of the holder at any time during the continuance of an event of default, at a rate equal to 90% of the trailing seven-trading day VWAP prior to conversion. The Long-Term Notes accrue interest at a rate of 13% per annum, payable quarterly in arrears, in shares of Common Stock at a rate equal to 90% of the trailing seven-trading day VWAP prior to payment (or, at the Company’s option, in cash), and are convertible at the option of the holder at any time commencing six months after the Closing Date, at a rate equal to 90% of the trailing seven-trading day VWAP prior to conversion (or 85% if an event of default occurs and is continuing).
Pursuant to the terms of the Amendments, at the closing of the transactions contemplated by the Broker-Dealer Acquisition Agreement (the “Wilson-David Closing”) the Company entered into a parent guaranty and registration rights agreement with the Wilson-Davis Sellers (the “Wilson-Davis Guaranty and RRA”), pursuant to which the Company guaranteed the obligations of AtlasClear under the Notes. The Company also agreed (i) to file, within 30 days of the Closing Date, a registration statement with the SEC, registering the resale of the shares of Common Stock issuable upon conversion of the Notes and (ii) if necessary to allow any of the Notes to be converted into shares of Common Stock in accordance with the rules of the NYSE, to seek stockholder approval for the issuance of such shares, including by filing a proxy statement by no later than April 30, 2024.
Quantum Ventures LLC (the “Sponsor”) also entered into Amendment No. 9, for the limited purpose of agreeing to transfer certain Founder Shares owned by the Sponsor to the Wilson-Davis Sellers. The Sponsor agreed to transfer to the Wilson-Davis Sellers, at the Wilson-Davis Closing, Founder Shares having an aggregate value of $6 million, based on the VWAP of Quantum Common Stock for the five trading days immediately prior to the Wilson-Davis Closing, which resulted in the transfer of an aggregate of 885,010 Founder Shares at the Closing. From time to time prior to the six month anniversary of the Closing, the Sponsor may be required to transfer additional Founder Shares to the Wilson-Davis Sellers, as set forth in Amendment No. 9, provided that in no event will the Sponsor be required to transfer more than an aggregate of 2,500,000 Founder Shares (including the Founder Shares transferred at the Closing).
6
Convertible Note Financing
On February 9, 2024, the Company and Quantum entered into a securities purchase agreement (the “Purchase Agreement”) with Funicular Funds, LP, a Delaware limited partnership (“Funicular”), pursuant to which the Company sold and issued to Funicular, on that date, a secured convertible promissory note in the principal amount of $6,000,000 (the “Funicular Note”) for a purchase price of $6,000,000, in a private placement (the “Note Financing”). The proceeds raised in the Note Financing were used to pay a portion of the purchase price paid at Closing to the Wilson-Davis Sellers.
The Funicular Note has a stated maturity date of November 9, 2025. Interest accrues at a rate per annum equal to 12.5%, 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 Funicular Note. In the event of an Event of Default (as defined in the Funicular Note), in addition to Funicular’s other rights and remedies, the interest rate would increase to 20% per annum. The Funicular Note is convertible, in whole or in part, into shares of Common Stock at the election of the holder at any time at an initial conversion price of $10.00 per share (the “Conversion Price”). The Conversion Price is subject to adjustment monthly to a price equal to the trailing five-day VWAP, subject to a floor of $2.00 per share (provided that if the Company sells stock at an effective price below $2.00 per share, such floor would be reduced to such effective price), and is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. The Company has the right to redeem the Funicular Note upon 30 days’ notice after the earlier of August 7, 2024 and the effectiveness of the Registration Statement (as defined in the Funicular Note), and Funicular would have the right to require the Company to redeem the Note in connection with a Change of Control (as defined in the Note), in each case for a price equal to 101% of the outstanding principal amount of the Note plus accrued and unpaid interest. The Funicular 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 Funicular 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) a security agreement, dated as of February 9, 2024 (the “Security Agreement”), entered into among the Company, each of the Company’s subsidiaries and Funicular, and (ii) a 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 Funicular Note and the other Loan Documents (as defined in the Funicular Note).
Pursuant to the Purchase Agreement, the Company agreed, among other things, that if the Funicular 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 Funicular Note in excess of that amount, in accordance with the rules of the NYSE American. Also pursuant to the Purchase Agreement, at the Closing the Sponsor transferred 600,000 Founder Shares and 600,000 private placement warrants to Funicular, which transfers terminated Quantum’s obligation to issue shares to Funicular pursuant to the terms of the non-redemption agreement, dated August 1, 2023, between Quantum and Funicular and previously disclosed in the Proxy Statement/Prospectus.
In connection with the Note Financing, on February 9, 2024, the Company entered into a registration rights agreement with Funicular (the “Funicular Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file with the U.S. Securities and Exchange Commission within 15 days after the Closing Date a registration statement registering the resale of the shares of Common Stock issuable upon exercise of the Funicular Note (the “Funicular Registration Statement”), and the Company agreed to use its best efforts to have the Funicular Registration Statement declared effective as promptly as reasonably possible after the filing thereof, but in any event within 60 days of the Closing Date. If the registration statement is not filed within 30 days after the Closing or is not declared effective by the applicable deadline set forth in the Registration Rights Agreement, or under certain other circumstances described in the Registration Rights Agreement, then the Company shall be obligated to pay to the Buyer an amount in cash equal to 5% of the original principal amount of the Note on a monthly basis until the applicable event giving rise to such payments is cured. The Funicular Registration Rights Agreement also provides that the Company is obligated to file additional registration statements under certain circumstances, and provides Funicular with customary “piggyback” registration rights.
7
Expense Settlements
In connection with the Closing, the Company and Chardan Capital Markets LLC (“Chardan”) agreed that the fee, in the amount of $7,043,750, payable by Quantum to Chardan upon the Closing pursuant to the terms of the business combination marketing agreement entered into in connection with Quantum’s initial public offering, would be waived in exchange for the issuance by the Company to Chardan of a convertible promissory note in the aggregate principal amount of $4,150,000. Such note (the “Chardan Note”) was issued by the Company at the Closing.
The Chardan Note has a stated maturity date of February 9, 2028. Interest accrues at a rate per annum equal to 13%, and is payable quarterly on the first day of each calendar quarter. On each interest payment date, the accrued and unpaid interest shall, at the election of the Company, be either paid in cash or, subject to the satisfaction of certain conditions, in shares of Common Stock, at a rate equal to 85% of the VWAP for the trading day immediately prior to the applicable interest payment date. The Chardan Note is convertible, in whole or in part, into shares of Common Stock at the election of the holder at any time at a conversion price equal to 90% of the VWAP of the Common Stock for the trading day immediately preceding the applicable conversion date. In addition, on each conversion date the Company is required to pay to Chardan in cash (or, at the Company’s option and subject to certain conditions, a combination of cash and Common Stock) all accrued interest on the Chardan Note and all interest that would otherwise accrue on the amount of the Note being converted if such converted amount would be held to three years after the applicable conversion date. Conversion of the Chardan Note, including the issuance of shares to pay interest thereon, is limited to the extent that such conversion would result in Chardan (together with its affiliates and any other persons acting as a group together with Chardan or its affiliates) beneficially owning in excess of 9.99% of the outstanding shares of Common Stock outstanding immediately prior to such conversion. The conversion price applicable to the Chardan Note is subject to adjustment is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and is subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable conversion price (subject to certain exceptions). The Chardan Note is subject to a demand for immediate repayment in cash upon the occurrence of certain events of default specified therein.
Also on February 9, 2024, the Company entered into a registration rights agreement with Chardan (the “Chardan Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file with the U.S. Securities and Exchange Commission within 45 days after the Closing Date a registration statement registering the resale of the shares of Common Stock issuable upon exercise of the Chardan Note and to use its reasonable best efforts to have such registration statement declared effective as soon as possible after filing. If the registration statement is not filed within 45 days after the Closing or is not effective within a specified period after the Closing (or if effectiveness is subsequently suspended or terminated for at least 15 days, subject to certain exceptions), then the interest rate of the Chardan Note will increase by 2% for each week that such event continues. The Chardan Registration Rights Agreement also provides that the Company is obligated to file additional registration statements under certain circumstances, and provides Chardan with customary “piggyback” registration rights.
Also in connection with the Closing, the Company agreed to settle certain accrued expenses and other obligations to certain parties through the issuance of shares of Common Stock. Pursuant to such arrangements, the Company issued an aggregate of 2,201,010 shares of Common Stock in settlement of obligations in the aggregate amount of $5,448,933, including the issuance of 2,000,000 shares of Common Stock to Qvent, LLC, an affiliate of the Sponsor, in settlement of an aggregate of $4,633,833 advanced to Quantum through the Closing Date.
Accounting for the Transactions
The Business Combination will be accounted for in accordance with the acquisition method of accounting, with Quantum considered to be the accounting acquirer of Wilson-Davis and Commercial Bancorp. Under the acquisition method of accounting, the preliminary purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess purchase price, if any, allocated to goodwill. Costs related to the transaction are expensed as incurred. The Company has determined that Wilson-Davis should be considered a probable acquisition and is over 50% significant and therefore should be included in the pro forma financial information and in accordance with Rule 3-05, Wilson-Davis financial statements should be included in this proxy statement/prospectus. However, the Company determined that the acquisition of Commercial Bancorp was neither probable nor significant and therefore the Company has neither included Commercial Bancorp in the pro forma financial information nor included separate financial statements for Commercial Bancorp in this proxy statement/prospectus.
8
AtlasClear does not meet the definition of a business and will therefore be treated as an asset acquisition by Quantum, which will include the assets contributed from Atlas Fintech. AtlasClear’s assets and liabilities will be measured and recognized at their relative fair values, as estimated in good faith by management, and allocated to the net assets acquired as of the transaction date, and combined with the assets, liabilities, and results of operations of Quantum on consummation of the Business Combination. The reported consolidated financial condition and results of operations of the combined company after completion of the Business Combination will reflect these fair values.
Quantum was deemed the accounting acquirer based on the following factors:
| · | Quantum will be issuing cash and shares of its common stock; |
| · | Quantum will control the voting rights under the no redemption and the maximum contractual redemption scenarios; |
| · | Quantum will have the largest minority voting interest; |
| · | Quantum will have control over the Board; and |
| · | Most of senior management of the post-combination company will be former Quantum officers. |
Note 2 — Basis of Pro Forma Presentation
The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Transactions, are factually supportable and are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Transactions.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results would have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. AtlasClear, Wilson-Davis and Quantum have not had any historical relationship prior to the Transactions. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified Transaction Accounting Adjustments and allow for presentation of Management’s Adjustments. Quantum has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information.
9
As Quantum and Wilson-Davis have different fiscal year ends, in order to meet the SEC’s pro forma requirements of combining operating results for an annual period that ends within 93 days of the end of Quantum’s latest annual fiscal year ended December 31, 2022, Wilson-Davis’s financial results for the twelve months ended December 31, 2022, have been calculated by taking (i) Wilson-Davis’s results for the year ended June 30, 2022, minus Wilson-Davis’s results for the six months ended December 31, 2021, plus (ii) Wilson-Davis’s results for the six months ended December 31, 2022.
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma condensed combined financial statements are 4,440,000 shares of New Pubco Common Stock issued to AtlasClear stockholders.
The unaudited pro forma condensed combined financial information has been prepared based on the actual redemptions which resulted in an additional redemption of 4,940,885 shares leaving 109,499 shares which were not redeemed and no longer subject to redemption as a result of the closing of the transaction.
The following summarizes the pro forma shares issued and outstanding immediately after the Business Combination, presented under actual redemptions:
| No Redemptions | ||||||||
| Ownership percentage post-Business Combination | Number of Shares | Percent Outstanding | ||||||
| AtlasClear Merger Consideration shares | 4,440,000 | 37.6 | % | |||||
| Financing Investors | 600,000 | 5.1 | % | |||||
| Expense settlemnt Shareholders | 221,010 | 1.9 | % | |||||
| Quantum public stockholders | 109,499 | 0.9 | % | |||||
| Quantum Founder Shares(1) | 6,431,250 | 54.4 | % | |||||
| Total shares outstanding | 11,801,759 | |||||||
| (1) | Including the issuance of 2,000,000 shares of Common Stock to Qvent, LLC, an affiliate of the Sponsor, in settlement of an aggregate of $4,633,833 advanced to Quantum through the Closing Date. |
The share amounts and ownership percentages set forth above do not take into account Quantum Warrants that will remain outstanding immediately following the Business Combination and may be exercised thereafter.
Upon consummation of the Business Combination, management will perform a comprehensive review of the entity’s accounting policies. As a result of the review, management may identify differences between the accounting policies of the entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
10
Note 3 — Pro Forma Adjustments
Pro Forma Adjustments to the Unaudited Condensed Combined Balance Sheet
| (A) | Derived from the audited balance sheet of Wilson-Davis as of September 30, 2023. |
| (B) | Derived from the unaudited consolidated balance sheet of Quantum as of September 30, 2023. |
| (1) | To reflect the purchase of Developed Technology identified under the Assignment and Assumption Agreement and Bill of Sale (the “Contribution Agreement”) between AtlasClear, Atlas FinTech and Atlas Financial Technologies Corp., pursuant to which Atlas FinTech and Atlas Financial Technologies Corp. will contribute to AtlasClear all rights, title and interest in certain intellectual property, among other things. There are no historical revenues for the Developed Technology and AtlasClear’s management determined the fair value based on their experience and expectations from running similar models in previous companies. The value was derived based on the purchase price allocation as follows: (the table below is expressed in thousands) |
| Total Purchase Price(a) | $ | 75,400 | ||
| Fair value of Software Product Earn Out Shares(b) | 10,426 | |||
| Fair value of Earn Out Shares(c) | 27,063 | |||
| Deficient Cash Free Net Working Capital(d) | 636 | |||
| Total consideration | 113,525 | |||
| Purchase price allocated to Wilson-Davis (see adjustment 8 below) | (31,000 | ) | ||
| Purchase price allocated to Contribution Agreement | $ | 82,525 | ||
| SURFACExchange | $ | 381 | ||
| Bond Quantum | 32 | |||
| Atlas | 7,749 | |||
| Rubicon | 10,000 | |||
| Total Developed Technology acquired(e) | $ | 18,163 | ||
| Transaction cost(f) | $ | 64,362 |
| (a) | The closing consideration of $75.40 million is to be delivered in common stock reduced by the purchase price of Wilson-Davis of $31.00 million. The purchase price consists of $20.00 million, the value based on management’s experience with similar firms in the past, plus net capital of approximately $11.00 million. As such 4,400,000 were delivered based on $10 per share presumed value of common stock. |
| (b) | Atlas FinTech will receive up to $20.00 million of New Pubco 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 the five years following Closing, with no catch-up between the years. The value was determined based on projected revenue based on a discount factor. The Earn Out provision was analyzed under ASC 480 and ASC 815. the Software Products Earn Out Shares Payments in this transaction are within the scope of ASC 480 and therefore will be accounted for as a liability and included in the purchase price consideration. The revenue earnout was estimated 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. The Monte Carlo simulation was performed simultaneously on both the share price and revenue to account for the correlation between revenue and equity |
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| (c) | Atlas FinTech will receive up to 5,944,444 shares of New Pubco Common Stock (the “Earn Out Shares”). The Earn Out Shares will be issued to AtlasClear Stockholders upon certain milestones (based on the achievement of certain price targets of New Pubco Common Stock following the Closing). In the event such milestones are not met within the first 18 months following the Closing, the Earn Out Shares will be cancelled. The Earn Out provision was analyzed under ASC 480 and ASC 815. The earnout provision was deemed to be indexed to the Company’s own stock and therefore equity classified. The share based earnout was estimated using a Monte Carlo simulation to determine if and when the stock price hurdles would be achieved. The expected stock price volatility was based upon guideline public companies. |
| (d) | The Deficient Cash Free Net Working Capital represents the difference between the working capital balance of AtlasClear and Wilson-Davis (excluding cash) of ($636,369), and the normalized working capital of $0. The excess/deficiency is determined by reviewing the working capital requirements of similar guideline public companies. The normalized working capital was considered reasonable provided the guideline public companies. The actual working capital is not a subjective input and represents actual amounts at the closing balance sheet dates. The normalized working capital is calculated as the last twelve months (“LTM”) revenue of $0 for AtlasClear multiplied by the working capital requirement of -5%. The working capital balance of the company should be zero given that AtlasClear has no revenue. |
| (e) | Under SAB topic 5G transfers of nonmonetary assets for stock prior to an initial offering should be recorded at predecessor cost in accordance with GAAP. As such the value of the Developed Technology was based on the carrying value of Atlas FinTech of $18.16 million. The estimated useful life was determined to be eight years. There are no historical revenues for the Developed Technology and AtlasClear’s management determined the fair value based on their experience and expectations from running similar models in previous companies. |
| (f) | ASC 350 prohibits the recognition of goodwill in an asset purchase. As such the difference between the purchase price of $81.93 million was charged as transactions and recorded under accumulated deficit of $64.36 million. |
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| (2) | Reflects the allocation, on a preliminary basis, of cost associated with the acquisition of Wilson-Davis under the acquisition method of accounting as though the acquisition occurred on September 30, 2023. The final allocation of the purchase consideration for the Mergers will be determined after the completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed, but in no event later than one year following the completion of the Mergers. Accordingly, the final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of the Company following the Mergers due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities. The preliminary allocation of the purchase price is as follows: (the table below is expressed in thousands) |
| Cash paid to Wilson-Davis shareholders | $ | 31,000 | ||
| Allocated to: | ||||
| Cash | $ | 7,397 | ||
| Cash segregated | 23,455 | |||
| Receivables | 2,832 | |||
| Trading Securities, market value | 3 | |||
| Prepaid Income Tax | 444 | |||
| Accounts payable, accrued expenses and other current liabilities | (26,576 | ) | ||
| Current portion of lease liability | (83 | ) | ||
| Property and equipment | 30 | |||
| Cash deposit BDs and Clearing Organizations | 2,537 | |||
| Operating Lease Right-to-Use Lease Assets | 105 | |||
| Deferred Income Tax | ||||
| Other Assets | 385 | |||
| Stok loan | (1 | ) | ||
| Long-term Lease liability | (30 | ) | ||
| Accrued Contingent Liability | (100 | ) | ||
| Subordinated Borrowing | (650 | ) | ||
| Trading Account deposit | (100 | ) | ||
| Net assets acquired | 9,648 | |||
| Excess of purchase price over net liabilities assumed before allocation to identifiable intangible assets and goodwill | $ | 21,352 |
The fair value of property and equipment was determined using the indirect cost approach which utilizes fixed asset record information including historical costs, acquisition dates, and asset descriptions and applying asset category specific nationally recognized indices to the historical cost of each asset to derive replacement cost new less depreciation. Management has also made the initial determination that all other assets and liabilities to be acquired are primarily estimated to be stated at their fair values, which approximates their recorded cost. While a final determination of the value of the identifiable intangibles has not been completed, management has made an initial determination that approximately $21.35 million of the excess of the purchase price over the net assets acquired should be allocated to identifiable intangible assets. The unidentified excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. (The table below is expressed in thousands)
| Amount | Estimated Useful Life (Years) | |||||||
| Licenses(a) | $ | 6,939 | Indefinite | |||||
| Customer Lists(b) | 10,163 | 15 | ||||||
| Intangible Assets | 17,102 | — | ||||||
| Goodwill | 4,250 | — | ||||||
| $ | 21,352 | — | ||||||
| (a) | The value of the licenses was based on replacement costs for an operating enterprise which are estimated to be $4.60 million over 16 months. The replication cost was then allocated a 12% estimated developers profit and The entrepreneurial incentive indicates the incremental amount of net cash flow that the owner/operator of the process will earn during the development period compared to the amount of net cash flow the same owner/operator would earn from using an alternative process. The development period was estimated as 1.25 years. The rate of return was based on an annual rate of return of 27.9% resulting in an estimated value of $6.94 million. |
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| (b) | The Wilson Davis customer relationships were valued using the Multi-Period Excess Earnings Method (“MPEEM”). The MPEEM reflects the present value of the operating cash flows generated by existing customer relationships after taking into account the cost to realize the revenue and an appropriate discount rate to reflect the time value and risk associated with the cash flows. |
| (3) | To reflect the redemption in connection with the stockholder vote to approve the Business Combination Agreement and the Business Combination, holders of an aggregate of 4,940,885 shares of Quantum Common Stock properly exercised their right to have their shares redeemed for a full pro rata portion of the Trust Account holding the proceeds from the IPO, which was approximately $10.92 per share, or $53.95 million in the aggregate. |
| (4) | To reflect the release of cash from investments held in the trust account. The remaining balance of the Trust Account immediately prior to the Closing of approximately $1.19 million was used to partially fund the Business Combination. |
| (5) | The reclass the 109,499 shares which were not redeemed into permanent equity. |
| (6) | To reflect the settlement of $10.50 million of legal, financial advisory and other professional fees related to the Transactions, of which $0.52 million represents the cash payment of transaction expenses $4.32 million represents the release of previously accrued transaction expenses, the issuance of 221,010 of common stock to settled $1.02 million in transaction cost and the recording of $9.16 million in expense settlements where vendors agreed to be repaid in long term basis . The amount of $6.18 million is reflected as an adjustment to accumulated losses for incremental transaction cost incurred as a result. The $9.16 million of long term notes is summarized below: |
| a. | $4.15 million under The Chardan Note has a stated maturity date of February 9, 2028. Interest accrues at a rate per annum equal to 13%, and is payable quarterly on the first day of each calendar quarter. On each interest payment date, the accrued and unpaid interest shall, at the election of the Company, be either paid in cash or, subject to the satisfaction of certain conditions, in shares of Common Stock, at a rate equal to 85% of the VWAP for the trading day immediately prior to the applicable interest payment date. The Chardan Note is convertible, in whole or in part, into shares of Common Stock at the election of the holder at any time at a conversion price equal to 90% of the VWAP of the Common Stock for the trading day immediately preceding the applicable conversion date. In addition, on each conversion date the Company is required to pay to Chardan in cash (or, at the Company’s option and subject to certain conditions, a combination of cash and Common Stock) all accrued interest on the Chardan Note and all interest that would otherwise accrue on the amount of the Note being converted if such converted amount would be held to three years after the applicable conversion date. Conversion of the Chardan Note, including the issuance of shares to pay interest thereon, is limited to the extent that such conversion would result in Chardan (together with its affiliates and any other persons acting as a group together with Chardan or its affiliates) beneficially owning in excess of 9.99% of the outstanding shares of Common Stock outstanding immediately prior to such conversion. The conversion price applicable to the Chardan Note is subject to adjustment is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and is subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable conversion price (subject to certain exceptions). The Chardan Note is subject to a demand for immediate repayment in cash upon the occurrence of certain events of default specified therein. |
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| b. | $2.50 million to be repaid via issuance of common stock in trenches over a two year period. |
| c. | $2.51 million to be repaid to various vendors with a 13% interest with a maturity dat of February 8, 2026. |
| (7) | To reflect the funding of $0.64 million for the July through February extension payments, which was funded by a non-interest bearing, unsecured promissory note payable upon consummation of the Business Combination (each, an “Extension Payment”) and the corresponding settlement of this note payable and the Advances from related party and Promissory note- related party at the consummation of the Business Combination with the issuance of 2,000,000 shares of Common Stock to Qvent, LLC, an affiliate of the Sponsor, in settlement of an aggregate of $4.6 million advanced to Quantum through the Closing Date. |
| (8) | To reflect the cash proceeds from the Financing event on February 9, 2024. The Company and Quantum entered into a securities purchase agreement (the “Purchase Agreement”) with Funicular Funds, LP, a Delaware limited partnership (“Funicular”), pursuant to which the Company sold and issued to Funicular, on that date, a secured convertible promissory note in the principal amount of $6.00 million (the “Funicular Note”) for a purchase price of $6,000,000, in a private placement (the “Note Financing”). Also pursuant to the Purchase Agreement, at the Closing the Sponsor transferred 600,000 Founder Shares and 600,000 private placement warrants to Funicular, which transfers terminated Quantum’s obligation to issue shares to Funicular pursuant to the terms of the non-redemption agreement, dated August 1, 2023, between Quantum and Funicular and previously disclosed in the Proxy Statement/Prospectus. As such the Proceeds were allocated between the convertible note and the shares transferred on a relative fair value basis, resulting in a debt discount of $0.97 million to be amortized over the maturity of the note. |
| (9) | To reflect the settlement of the no redemption liability as of the closing of the business combination as there is no further obligation to the holder post closing. |
| (10) | The proceeds raised in the Note Financing were used to pay a portion of the purchase price paid at Closing to the Wilson-Davis Sellers. To reflect the payment of $8.00 million to the shareholders of Wilson-Davis for the cash purchase consideration as discussed in note 2 above. The remaining will be settled as follows: i) $5,000,000 in aggregate principal amount of notes due 90 days after the Closing Date (the “Short-Term Notes”) and (ii) $7,971,000 in aggregate principal amount of notes due 24 months after the Closing Date (the “Long-Term Notes” and, together with the Short-Term Notes, the “Seller Notes”) (iii) the remaining $10.00 million will be paid via issuance of up to 2.5 million shares to be transferred by the sponsor group. |
Pro Forma Adjustments to the Unaudited Condensed Combined Income Statements
| (A) | Derived from the unaudited statements of income of Wilson-Davis for the six months ended December 31, 2022 and 2021, derived from the audited statement of income of Wilson-Davis for the year ended June 30, 2022. |
| (B) | Derived from the audited consolidated statements of operations of Quantum for the year ended December 31, 2022. |
| (C) | Derived from the audited statements of income of Wilson-Davis for the year ended June 30, 2023 and 2022 less the unaudited statement of income of Wilson-Davis for the six month period ended December 31, 2022 plus the three month period ended September 30, 2023. |
| (D) | Derived from the unaudited consolidated statements of operations of Quantum for the nine months ended September 30, 2023. |
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| (1) | To reflect the amortization of the values assigned to the intangible assets acquired as summarized in the Note 1(d) and 2 of the balance sheet adjustments above. The amortization is over an estimated useful life of 8 years for the developed technology and an estimated useful life of 15 years for the customer lists. (The table below is expressed in thousands) |
| AMORTIZATION OF INTANGIBLES: | Developed technology | Customer Lists | ||||||
| Amount | $ | 18,163 | $ | 10,163 | ||||
| Useful Life | 8 | 15 | ||||||
| Annual Amortization | $ | 2,270 | $ | 678 | ||||
| (2) | To reflect the one time transaction cost as a result of the nonmonetary asset transfer made by Atlas FinTech to AtlasClear in connection with the transaction, refer to balance sheet adjustment 1e above. |
| (3) | Represents an adjustment for additional direct, incremental costs of the Transactions of $6.38 million. These costs will not affect the statement of operations beyond 12 months after the closing. |
| (4) | Represents an adjustment to eliminate interest income on marketable securities held in the trust account as of the beginning of the period. |
| (5) | Represent additional interest that would be incurred for the expense settlement debt of $9.21 million and the $6.00 million Financing as described in adjustment 6 to the balance sheet above. The debt holds interest rates of approximately 13% which results in annualized interest of approximately $2.94 million and $0.74 million for the nine months period ended September 30, 2023. |
Note 4 — Pro Forma Income (Loss) per Share
Represents the unaudited income (loss) per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2022. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net income (loss) per share assumes that the shares issued relating to the Business Combination have been outstanding for the entire periods presented. The following tables set forth the computation of pro forma basic and diluted income (loss) per share for the nine months ended September 30, 2023 and for the year ended December 31, 2022.
The Earn Out Shares are contingently issuable and are therefore not included in the calculation of pro forma income (loss) per share, basic and diluted. The Earn Out Shares would only be included when the contingency has been met and there is no longer a circumstance in which those shares would not be issued. The warrants are not included in the computation of pro forma income (loss) per share, basic and diluted as the warrants as of the date of this prospectus are out of the money and would not be included under the treasury stock method. As such basic and diluted shares are the same.
(The table below is expressed in thousands, except share and per share data)
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| Assuming Actual Redemption | ||||
| Year ended | ||||
| 30-Sep-23 | ||||
| Pro Forma Combined | ||||
| Net loss | $ | (5,254 | ) | |
| Weighted average shares outstanding – basic and diluted | 11,801,759 | |||
| Net loss per share – basic and diluted | $ | (0.45 | ) | |
| Weighted average shares calculation, basic | ||||
| AtlasClear Merger Consideration Shares | 4,440,000 | |||
| Financing Investors | 600,000 | |||
| Expense Settlement Shareholders | 221,010 | |||
| Quantum Public Shares | 109,499 | |||
| Quantum Founder Shares | 6,431,250 | |||
| Weighted average shares, basic and diluted | 11,801,759 | |||
| Assuming Actual Redemption | ||||
| Year ended | ||||
| December 31, 2022 | ||||
| Pro Forma Combined | ||||
| Net loss | $ | (68,985 | ) | |
| Weighted average shares outstanding – basic and diluted | 11,801,759 | |||
| Net loss per share – basic and diluted | $ | (5.85 | ) | |
| Weighted average shares calculation, basic | ||||
| AtlasClear Merger Consideration Shares | 4,440,000 | |||
| Financing Investors | 600,000 | |||
| Expense Settlement Shareholders | 221,010 | |||
| Quantum Public Shares | 109,499 | |||
| Quantum Founder Shares | 6,431,250 | |||
| Weighted average shares, basic and diluted | 11,801,759 | |||
| Percent of shares owned by AtlasClear | 38 | % | ||
| Percent of shares owend by Financing Investors | 5 | % | ||
| Percentage of shares owend by Expense Settlement stockholders | 2 | % | ||
| Percent of shares owned by Quantum public stockholders | 1 | % | ||
| Percent of shares owned by Quantum founders | 54 | % | ||
| Excluded securities: | ||||
| Quantum Public Warrants share equivalent | 10,062,500 | |||
| Quantum Private Warrants share equivalent | 4,495,546 | |||
| Earn Out Shares | 5,944,444 | |||
| Software Product Earn Out Shares (assuming $10 per share) | 2,000,000 | |||
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