ALTS.NASDAQAlt5 Sigma CORP
10-Q: ALT5 Sigma Corp Reports Q2 2024 Results, Fueled by Fintech Acquisition
Sentiment:
Quarterly Report
ALT5 Sigma Corporation's Q2 2024 results show a significant shift with the acquisition of a fintech company, impacting both revenue and expenses.
Capital raiseThe company intends to raise funds to support future development of JAN 123.The company may require additional debt financing and/or capital to finance new acquisitions, conduct Phase IIb clinical trials, or consummate other strategic investments in its business.
Worse than expectedThe company reported a net loss of $1.555 million for the six months ended June 29, 2024, which is worse than expected.The company has a negative working capital of $11.6 million, which is worse than expected.The company reported an operating loss of $2.916 million for the quarter, which is worse than expected.
Summary
- ALT5 Sigma Corporation reported its financial results for the quarter ended June 29, 2024, which includes the impact of acquiring ALT5 Sigma, Inc., a fintech company.
- The company's revenue for the quarter was $2.169 million, all of which came from the newly acquired fintech segment.
- The cost of revenue was $1.071 million, resulting in a gross profit of $1.098 million.
- Operating expenses were $4.014 million, leading to an operating loss of $2.916 million.
- The company reported a net income of $589,000, or $0.07 per share, due to a significant income tax benefit.
- For the six months ended June 29, 2024, the company reported a net loss of $1.555 million, or $0.18 per share.
- The company's total assets were $75.395 million, and total liabilities were $48.609 million, with a negative working capital of $11.6 million.
- The company's cash and cash equivalents were $5.764 million as of June 29, 2024.
- The company's intangible assets were valued at $34.996 million, and goodwill was $7.724 million.
- The company has reclassified a $3 million convertible tranche from mezzanine equity to current liabilities and a $10 million convertible tranche to permanent equity.
Sentiment
Score: 4
Explanation: The document presents a mixed picture. While the acquisition of the fintech company is a positive development, the company's negative working capital, operating losses, and reliance on future capital raises are significant concerns. The positive net income for the quarter is primarily due to a tax benefit, not core operations.
Positives
- The acquisition of ALT5 Sigma, Inc. has brought in revenue of $2.169 million in the quarter.
- The company reported a net income of $589,000 for the quarter, primarily due to a large income tax benefit.
- The company has $5.764 million in cash and cash equivalents.
Negatives
- The company has a negative working capital of $11.6 million.
- The company reported an operating loss of $2.916 million for the quarter.
- The company reported a net loss of $1.555 million for the six months ended June 29, 2024.
- The company has significant liabilities, including $28.241 million in digital assets payable.
Risks
- The company faces a challenging competitive environment and is focused on improving overall profitability.
- The company's ability to continue as a going concern is dependent on future capital raises or structured settlements and cash flows from the acquisition of ALT5.
- The company has material weaknesses in internal control over financial reporting, including insufficient written documentation and resources.
- The company is involved in several legal proceedings, including an SEC complaint and other litigation matters.
Future Outlook
The company intends to raise funds to support future development of JAN 123 and through a combination of cash flows derived from its acquisition of ALT5, capital raises, and/or structured arrangements. However, the success of such funding cannot be assured.
Management Comments
- The company is focused on improving its overall profitability, which includes managing expenses.
- The company intends to raise funds to support future development of JAN 123 and through a combination of cash flows derived from its acquisition of ALT5, capital raises, and/or structured arrangements.
Industry Context
The acquisition of a fintech company signals a strategic shift for ALT5 Sigma, moving beyond its previous focus on biotechnology and recycling. This move aligns with the growing trend of companies diversifying into digital and blockchain-related technologies.
Comparison to Industry Standards
- The company's negative working capital of $11.6 million is a concern, as many companies in the fintech and biotech sectors aim for positive working capital to ensure operational stability.
- The company's revenue of $2.169 million in the quarter is relatively low compared to established fintech companies, but it is a positive start for the newly acquired segment.
- The company's net income of $589,000 for the quarter is positive, but it is primarily due to a large income tax benefit, not from core operations.
- The company's intangible assets of $34.996 million and goodwill of $7.724 million are significant, indicating the value placed on the acquired technology and customer base, which is common in acquisitions of early-stage tech companies.
- The company's operating loss of $2.916 million for the quarter is a concern, as many companies in the fintech and biotech sectors aim for profitability or at least a path to profitability.
Legal Proceedings
- The company is involved in several legal proceedings, including an SEC complaint, Skybridge litigation, GeoTraq litigation, Alixpartners litigation, Sieggreen litigation, Main/270 litigation, and Westerville Square litigation.
Related Party Transactions
- The company shares certain executive, accounting, and legal services with Live Ventures.
- The company has notes payable to related parties, including Isaac Capital Group, Live Ventures Incorporated, and Jon Isaac.
- The company has short-term advances from related parties, including Isaac Capital Group, Novalk Apps SAA, LLP, and Tony Isaac.
Stakeholder Impact
- Shareholders may be concerned about the company's negative working capital and operating losses.
- Employees may be affected by the company's focus on managing expenses.
- Customers of the fintech segment may benefit from the company's new blockchain-powered technologies.
- Creditors may be concerned about the company's significant liabilities.
Next Steps
- The company intends to raise funds to support future development of JAN 123.
- The company will continue to focus on improving its overall profitability, which includes managing expenses.
- The company will work to remedy the material weaknesses in internal control over financial reporting.
Key Dates
| Date | Description |
|---|---|
| 2016-12-29 | Company served a Minnesota state court complaint for breach of contract on Skybridge Americas, Inc. |
| 2017-12-03 | Company disposed of its retail appliance segment and sold ApplianceSmart to Live Ventures. |
| 2018-10-01 | Start date of debentures issued by ALT Subsidiary. |
| 2019-09-03 | End date of debentures issued by ALT Subsidiary. |
| 2019-09 | ALT5 Sigma Corporation broadened its business perspectives to become a pharmaceutical company. |
| 2020-11-03 | Date of the Company's 2016 Plan. |
| 2020-11-04 | Date of the Company's 2016 Plan amendment. |
| 2021-01-02 | Company accrued an aggregate amount of future real property lease payments of approximately $767,000. |
| 2021-02-01 | District Court assessed damages against the Company in the amount of approximately $715,000 plus interest, fees, and costs and attorneys fees of $475,000 in the Skybridge litigation. |
| 2021-04-09 | Date of resolution of claims related to the Company's acquisition of GeoTraq. |
| 2021-06-01 | Commencement of quarterly installments for the GeoTraq settlement. |
| 2021-08-02 | SEC filed a civil complaint against the Company and one of its executive officers. |
| 2022-10-19 | Alixpartners, LLC filed a complaint against the Company. |
| 2022-12-28 | Company acquired Soin Therapeutics LLC. |
| 2023-03-01 | Effective date of the Stock Purchase Agreement with VM7 Corporation for the sale of the recycling segment. |
| 2023-03-09 | Company executed a Stock Purchase Agreement with VM7 Corporation for the sale of the recycling segment. |
| 2023-03-17 | Company converted 5,185 of Mr. Sullivans Series A-1 Preferred shares and issued 103,707 shares of the Company's common stock as payment for its quarterly installment. |
| 2023-06-01 | Company converted 7,697 of Mr. Sullivans Series A-1 Preferred shares into 153,941 shares of the Companys common stock in payment of its June 30, 2023 quarterly installment. |
| 2023-06-04 | Effective date of settlement with Westerville Square, Inc. |
| 2023-07-01 | End of the comparative period for the 26 weeks ended July 1, 2023. |
| 2023-08-10 | Company's recently acquired subsidiary, ALT5 Sigma, Inc., entered into an extension agreement for a Bitcoin promissory note with an otherwise unaffiliated third-party. |
| 2023-08-18 | Date of Securities Purchase Agreement with a certain institutional investor. |
| 2023-09-01 | Company converted 14,471 of Mr. Sullivans Series A-1 Preferred shares into 289,421 shares of the Companys common stock in payment of its September 30, 2023 quarterly installment. |
| 2023-10-09 | Stockholders approved the Company's 2023 Equity Incentive Plan. |
| 2023-12-30 | End of the company's 2023 fiscal year. |
| 2024-01-24 | Company, Amol Soin, and Soin Therapeutics LLC entered into an amendment to the parties Agreement and Plan of Merger. |
| 2024-02-07 | Company amended its outstanding related party promissory obligations (the ICG Note) in favor of Isaac Capital Group (ICG) and (the Live Note) in favor of Live Ventures Incorporated (Live) to add a convertibility provision. |
| 2024-02-23 | Company entered into Unit Purchase Agreements with two otherwise unaffiliated third-party investors. |
| 2024-03-04 | Company entered into a two-year Consulting Agreement with Jon Isaac. |
| 2024-03-06 | ICG and Live entered into Note Purchase Agreements with otherwise unaffiliated third parties. |
| 2024-03-13 | Maturity date of Corporate Fixed Deposit Agreements. |
| 2024-03-22 | Third party converted $183,000 of the Company's obligation under the Live Note into 300,000 shares of the Company's common stock. |
| 2024-03-25 | Third party converted $183,000 of the Company's obligation under the ICG Note into 300,000 shares of the Company's common stock. |
| 2024-04-10 | Third party converted $60,900 of the Company's obligation under the Live Note into 100,000 shares of the Company's common stock. |
| 2024-04-12 | Third party converted $60,900 of the Company's obligation under the ICG Note into 100,000 shares of the Company's common stock. |
| 2024-04-18 | ICG made a short-term demand advance to the Company in the amount of $100,000. |
| 2024-05-01 | Company entered into a Securities Purchase Agreement with two institutional investors. |
| 2024-05-09 | Nasdaq NOCP on Thursday, May 9, 2024, the day immediately prior to the date on which the agreement was executed. |
| 2024-05-15 | Company acquired ALT5 Sigma, Inc. |
| 2024-05-28 | Company settled its litigation with the SEC. |
| 2024-05-28 | Novalk Apps SAA, LLP made short-term demand advances in the amount of $120,000 to the Company. |
| 2024-06-03 | Novalk Apps SAA, LLP made short-term demand advances in the amount of $100,000 to the Company. |
| 2024-06-03 | Company entered into a six-month marketing agreement with a non-affiliated third-party. |
| 2024-06-03 | Tony Isaac made a number of short-term demand advances in the aggregate amount of $62,000 to the Company. |
| 2024-06-06 | Company entered into a one-year consulting agreement with a non-affiliated third-party. |
| 2024-06-29 | End of the reporting period for the quarterly report. |
| 2024-07-01 | Second amended tranche cash payment to Dr. Soin is due. |
| 2024-07-15 | Company changed its corporate name from JanOne Inc. to ALT5 Sigma Corporation. |
| 2024-08-15 | Date of outstanding shares of the registrants common stock. |
| 2024-08-28 | Court hearing on the Motion to Dismiss in the Sieggreen litigation. |
| 2024-09-07 | $100,000 of principal, and accrued interest thereon, is due on September 7, 2024 for each note with Live Ventures and ICG. |
| 2024-12-28 | End of the company's 2024 fiscal year. |
| 2024-12-31 | Third amended tranche cash payment to Dr. Soin is due. |
| 2024-12-31 | Balance of each note with Live Ventures and ICG is due. |
| 2025-06-30 | Maturity date of some debentures. |
| 2026-03-04 | Maturity date of the promissory note with Jon Isaac. |
| 2027-03-13 | Maturity date of Corporate Fixed Deposit Agreements. |
Keywords
Fintech, Biotechnology, Blockchain, Digital Assets, Acquisition, ALT5 Sigma, Financial Results, Convertible Debt, Working Capital, Legal Proceedings
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