UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of February 10, 2026, there were shares of Common Stock, $ par value, issued and outstanding.
ATLASCLEAR HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2025
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements.
ATLASCLEAR HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | June 30, | |||||||
| 2025 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated - customers | ||||||||
| Cash segregated - PAB | ||||||||
| Receivables - broker-dealers and clearing organizations | ||||||||
| Receivables - customers, net, net of allowance for credit losses of $ | ||||||||
| Other receivables | ||||||||
| Prepaids | ||||||||
| Trading securities, market value, net | ||||||||
| Total Current Assets | ||||||||
| Operating lease right to use lease asset | ||||||||
| Customer list, net | ||||||||
| Goodwill | ||||||||
| Pacsquare asset purchase | ||||||||
| Cash deposits - broker-dealers and clearing organizations | ||||||||
| Bank acquisition deposit | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| LIABILITIES | ||||||||
| Payables to customers | $ | $ | ||||||
| Accounts and payables to officers/directors | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Payables - broker-dealers and clearing organizations | ||||||||
| Commissions, payroll and payroll taxes | ||||||||
| Current portion of lease liability | ||||||||
| Promissory notes | ||||||||
| Current portion of long-term merger financing, net | ||||||||
| Merger financing payable | ||||||||
| Merger financing payable - derivative | ||||||||
| Tau agreement liability | ||||||||
| Debenture | ||||||||
| Debenture – derivative | ||||||||
| Convertible Notes - derivative | ||||||||
| Winston & Strawn agreement | ||||||||
| Stock payable – related party | ||||||||
| Excise tax payable | ||||||||
| Total Current Liabilities | ||||||||
| Accrued contingent liability | ||||||||
| Secured convertible note, net | ||||||||
| Long-term convertible note Chardan, net | ||||||||
| 2025 Warrants | ||||||||
| Derivative liability - Warrants | ||||||||
| Earnout - liability | ||||||||
| Deferred income tax liability | ||||||||
| Subordinated borrowings | ||||||||
| Trading account deposit | ||||||||
| Long-term lease liability | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value; shares authorized; issued or outstanding | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at December 31, 2025 and June 30, 2025, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Stock subscription receivable | ( | ) | ( | ) | ||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 3 |
ATLASCLEAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| REVENUES | ||||||||||||||||
| Commissions | $ | $ | $ | $ | ||||||||||||
| Vetting fees | ||||||||||||||||
| Clearing fees | ||||||||||||||||
| Net gain/(loss) on firm trading accounts | ||||||||||||||||
| Other revenue | ||||||||||||||||
| TOTAL REVENUES | ||||||||||||||||
| EXPENSES | ||||||||||||||||
| Compensation, payroll taxes and benefits | ||||||||||||||||
| Data processing and clearing costs | ||||||||||||||||
| Regulatory, professional fees and related expenses | ||||||||||||||||
| Stock compensation expense | ||||||||||||||||
| Communications | ||||||||||||||||
| Occupancy and equipment | ||||||||||||||||
| Transfer fees | ||||||||||||||||
| Bank charges | ||||||||||||||||
| Bad debt | ( | ) | ( | ) | ||||||||||||
| Intangible assets amortization | ||||||||||||||||
| Other | ( | ) | ||||||||||||||
| TOTAL EXPENSES | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME/(EXPENSE) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Change in fair value of warrant liability derivative | ( | ) | ||||||||||||||
| Change in fair value of convertible note derivative | ||||||||||||||||
| Change in fair value of long-term and short-term note derivative | ||||||||||||||||
| Change in fair value of contingent guarantee | ( | ) | ||||||||||||||
| Change in fair value of secured convertible note | ( | ) | ( | ) | ||||||||||||
| Change in fair value of merger financing | ( | ) | ||||||||||||||
| Change in fair value of earnout liability | ||||||||||||||||
| Change in fair value of Winston & Strawn agreement | ( | ) | ( | ) | ||||||||||||
| Change in fair value of debenture derivative | ( | ) | ||||||||||||||
| Change in fair value of stock payable | ||||||||||||||||
| Change in fair value of Tau agreement | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| TOTAL OTHER INCOME/(EXPENSE) | ||||||||||||||||
| NET INCOME/(LOSS) BEFORE INCOME TAXES | ( | ) | ||||||||||||||
| Income tax (expense) benefit | ( | ) | ( | ) | ||||||||||||
| NET INCOME/(LOSS) | $ | $ | ( | ) | $ | $ | ||||||||||
| Basic weighted average shares outstanding, Common Stock | ||||||||||||||||
| Basic net income (loss) per share, Common Stock | $ | $ | ( | ) | $ | $ | ||||||||||
| Diluted weighted average shares outstanding, Common Stock | ||||||||||||||||
| Diluted net loss per share, Common Stock | $ | $ | ( | ) | $ | $ | ||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
ATLASCLEAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2025
| Additional | Total | |||||||||||||||||||||||
| Common Stock | Paid-in | Subscription | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | Deficit | |||||||||||||||||||
| Balance — June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued under Software as a Service License Agreement | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued for consulting services provided by director. | ||||||||||||||||||||||||
| Shares issued to settled vendor invoice | ||||||||||||||||||||||||
| Vested portion of stock based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance — September 30, 2025 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Shares issued to settle vendor invoice | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued under Equity SPA, net of offering cost of $ | ||||||||||||||||||||||||
| Vested portion of stock based compensation | — | |||||||||||||||||||||||
| Reversal of excise tax related to prior shareholder redemptions | — | |||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Balance — December 31, 2025 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 5 |
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2024
| Additional | Total | |||||||||||||||||||||||
| Common Stock | Paid-in | Subscription | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | Deficit | |||||||||||||||||||
| Balance — June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Common stock issued to for consulting services | ||||||||||||||||||||||||
| Shares issued as purchase consideration for the assets of Pacsquare | ||||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares transferred by related parties as settlement for Company obligations under various financial instruments | — | |||||||||||||||||||||||
| Shares issued as conversion of $ | ||||||||||||||||||||||||
| Shares issued to related party as settlement for $ | ||||||||||||||||||||||||
| Shares issued to as additional consideration for delayed payment on merger financing notes | ||||||||||||||||||||||||
| Shares issued under Tau agreement settled through September 30, 2024 | ( | ) | ||||||||||||||||||||||
| Shares issued for shares transferred by related party as repayment of shares transferred to cover Company obligations as noted above net of contributed capital for debt assumed | ( | ) | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Balance — September 30, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Shares issued under Tau agreement settled through December 31, 2024 | ||||||||||||||||||||||||
| Rounding up for fractional shares in | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance — December 31, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 6 |
ATLASCLEAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
| Change in fair value of warrant liability derivative | ( | ) | ( | ) | ||||
| Change in fair value of convertible note derivative | ( | ) | ( | ) | ||||
| Change in fair value of long-term and short-term note derivative | ( | ) | ( | ) | ||||
| Change in fair value of contingent guarantee | ||||||||
| Change in fair value of debenture derivative | ||||||||
| Change in fair value of secured convertible note | ||||||||
| Change in fair value of merger financing | ( | ) | ||||||
| Change in fair value of earnout liability | ( | ) | ( | ) | ||||
| Change in fair value of Winston & Strawn agreement | ( | ) | ||||||
| Change in fair value of stock payable | ( | ) | ||||||
| Change in fair value of Tau agreement | ( | ) | ||||||
| Late fee paid in shares to sellers | ||||||||
| Non-cash interest in expense on financial instruments | ||||||||
Transaction cost attributed to 2025 warrants | ||||||||
| Realized gain on Tau agreement | ||||||||
| Excise tax penalties and interest | ||||||||
| Consulting expense paid with stock | ||||||||
| Stock based compensation | ||||||||
| Bank acquisition deposit write off | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangibles | ||||||||
| Allowance for bad debt | ( | ) | ||||||
| Net lease payments | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Cash deposits with clearing organization & other B/Ds | ( | ) | ||||||
| Receivables from brokers & dealers | ||||||||
| Receivables from customers | ( | ) | ||||||
| Receivables from others | ( | ) | ||||||
| Advances & prepaid expenses | ||||||||
| Other assets | ||||||||
| Payables to customers | ( | ) | ||||||
| Payables to officers & directors | ( | ) | ||||||
| Payable to brokers & dealers | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Commissions and payroll taxes payable | ||||||||
| Deferred taxes | ( | ) | ||||||
| Trading deposits | ||||||||
| Net cash provided by (used for) operating activities | ( | ) | ||||||
| 7 |
ATLASCLEAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
(UNAUDITED)
| Cash Flows from Investing Activities | ||||||||
| Cash paid for purchase of Pacsquare | ( | ) | ( | ) | ||||
| Net cash used for investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Equity SPA | ||||||||
Transaction cost paid with Equity SPA | ( | ) | ||||||
| Proceeds from Secured Convertible Notes | ||||||||
Transaction cost paid with Security Convertible Notes | ( | ) | ||||||
| Proceeds from Tau agreement | ||||||||
| Proceeds from Convertible Notes, net of transaction cost | ||||||||
| Payment on Convertible Notes | ( | ) | ||||||
| Proceeds from debenture, net of transaction cost | ||||||||
| Proceeds from third party advances | ||||||||
| Subordinated debt payments | ( | ) | ||||||
| Repayment of promissory notes | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental cash flow information non-cash investing and financing activities: | ||||||||
| Decrease in goodwill due to change in deferred tax liability | $ | $ | ||||||
| Initial shares issued under Tau agreement | $ | $ | ||||||
| Value of shares transferred by related parties to settle obligations | $ | $ | ||||||
| Shares issued to purchase Pacsquare and amounts included in accounts payable | $ | $ | ||||||
| Shares payable for Commercial Bancorp acquisition extension | $ | $ | ||||||
| Shares issued to related party for settlement of accounts payable | $ | $ | ||||||
| Receivable from shares advanced under Tau agreement | $ | $ | ||||||
| Shares issued for conversion on convertible notes Chardan | $ | $ | ||||||
| Shares issued for conversion of principal and interest on short-term note | $ | $ | ||||||
| Initial value of derivative included in merger financing | $ | $ | ||||||
| Shares issued for conversion of principal and interest on short-term notes | $ | $ | ||||||
| Shares issued for conversion of principal and interest on merger financing | $ | $ | ||||||
| Shares issued for conversion of principal and interest on secured convertible note | $ | $ | ||||||
| Shares issued for conversion of principal and interest on promissory note | $ | $ | ||||||
| Reversal of excise tax | $ | $ | ||||||
| Convertible Notes transferred to Equity SPA | $ | $ | ||||||
Initial value of warrants allocated for Equity SPA | $ | $ | ||||||
| Initial value of warrant issued as transaction cost under Equity SPA | $ | $ | ||||||
| Initial value of derivative included convertible note derivative | $ | $ | ||||||
| Initial value of derivative included debenture derivative | $ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 8 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
AtlasClear Holdings, Inc. (formerly known as Calculator New Pubco, Inc.) (the “Company” or “AtlasClear Holdings”) is a Delaware corporation and, prior to the Business Combination (defined below), was a direct, wholly-owned subsidiary of Quantum FinTech Acquisition Corporation (“Quantum”). Quantum was incorporated in Delaware on October 1, 2020. Quantum was a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.
On February 9, 2024 (the “Closing Date”), the Company consummated the transactions pursuant to that certain Business Combination Agreement dated November 16, 2022 (as amended, the “Business Combination Agreement”), among the Company, Quantum, Atlas FinTech Holdings Corp. (“Atlas FinTech”) and certain other parties. The transactions consummated as a result of the Business Combination Agreement are hereinafter referred to as the “Business Combination.” In connection with the consummation of the Business Combination (the “Closing”), the Company changed its name from “Calculator New Pubco, Inc.” to “AtlasClear Holdings, Inc.” As a result, the operating history of Quantum survived the Business Combination. Pursuant to the Business Combination Agreement, AtlasClear received certain assets from Atlas FinTech and Atlas Financial Technologies Corp., a Delaware corporation, and completed the acquisition of broker-dealer Wilson-Davis & Co., Inc. (“Wilson-Davis”).
On February 16, 2024, AtlasClear and Pacsquare Technologies, LLC (“Pacsquare”) entered into a Source Code Purchase and Master Services Agreement (the “Pacsquare Purchase Agreement”), pursuant to which AtlasClear purchased a proprietary trading platform with clearing and settlement capabilities that will be developed by Pacsquare, including certain software and source code (the “AtlasClear Platform”).
AtlasClear Holdings is building a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products that focus on financial services firms. AtlasClear Holdings is a fintech driven business-to-business platform that seeks to power innovation in fintech, investing, and trading.
Wilson-Davis is a securities broker and dealer, dealing in over-the-counter and listed securities. Wilson-Davis is registered with the Securities and Exchange Commission (the “SEC”) and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
Revenue is derived principally from Wilson-Davis’ operations in three areas: commission revenue, fee revenue and interest revenue.
Wilson-Davis has operations in Utah, Arizona, California, Colorado, Florida, New York, Oklahoma and Texas. Transactions for customers are principally in the states where the Company operates, however, some customers are located in other states in which the Company is registered. Principal trading activities are conducted with other broker dealers throughout the United States.
Reverse Stock Split and Authorized Share Increase
On
December 31, 2024, the Company effected a
The reverse stock split has been applied retroactively in the accompanying consolidated financial statements and related disclosures for all periods presented. All share and per-share amounts, including earnings per share (“EPS”), have been adjusted accordingly to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented.
The impact of the reverse stock split is summarized as follows:
| ● | The total number of issued and outstanding shares of Common Stock decreased from to as of June 30, 2024. | |
| ● | EPS and other per-share data were adjusted proportionally to reflect the reverse stock split. | |
| ● | The reverse stock split had no impact on the Company’s total stockholders’ equity, net income, or overall financial condition. |
Management believes that the reverse stock split was necessary to regain compliance with stock exchange listing requirements and improve marketability of the stock.
| 9 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Liquidity and Going Concern Considerations
The Company has incurred recurring operating losses and negative cash flows from operations since inception. These conditions, when considered in the aggregate, previously raised substantial doubt about the Company’s ability to continue as a going concern.
During
the three-months ended December 31, 2025, the Company completed a financing transaction that alleviated this substantial doubt. On October
8, 2025, the Company entered into an amended and restated securities purchase agreement (the “Restated SPA”) with Funicular
Funds, LP (“Funicular”), pursuant to which the Company issued and sold, for a purchase price of $
In
addition, on October 8, 2025, the Company entered into a securities purchase agreement (the “Equity SPA”) with certain institutional
investors, including Funicular, pursuant to which the Company issued and sold units (“Units”), each consisting of share
of Common Stock and
The
aggregate gross proceeds from these financings totaled approximately $
Accordingly, management has concluded that the conditions that previously raised substantial doubt about the Company’s ability to continue as a going concern have been alleviated as a result of the successful completion of these financing transactions.
Inflation Reduction Act of 2022
Any
redemption or other repurchase of the Company’s Common Stock that occurs after December 31, 2022, including in connection with
a Business Combination, extension vote or otherwise, may be subject to the excise tax payable under the Inflation Reduction Act of
1922. The Company has accrued for the estimated excise tax as a result of the redemptions that occurred after December 31, 2022. On
November 24, 2025, the Treasury Department and Internal Revenue Service issued final regulations (the Final Regulations) regarding
the application of the excise tax on repurchases of corporate stock. The Final Regulations, which generally apply to stock
repurchases occurring after December 31, 2022, generally provide an exception for repurchases of certain types of stock issued prior
to August 16, 2022. Quantum completed its initial public offering prior to August 16, 2022 and, as such, the Company has determined
that certain of its stock repurchases qualify for this exception and has reversed the accrual of $
| 10 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A, as filed with the SEC on September 30, 2025. The accompanying condensed balance sheet as of June 30, 2025 has been derived from the audited financial statements included in the Form 10-K/A. The interim results for the three and six-months ended December 31, 2025 are not necessarily indicative of the results to be expected for the year ending June 30, 2026 or for any future periods.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Impairment of Long-lived and Intangible Assets
The
Company had
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net (loss) income per share of Common Stock is computed by dividing net (loss) income by the weighted average number of shares of Common Stock outstanding for the period.
The calculation of diluted net (loss) income per share does not consider the effect of the warrants issued and outstanding. For the three and six-months ended December 31, 2025 and 2024, the calculation excludes the dilutive impact of warrants because none would be issued under the treasury method.
For the three-months ended December 31, 2024, the dilutive shares were excluded as including them would be antidilutive.
For the three and six-months ended December 31, 2025 and the six-months ended December 31, 2024, the convertible financial instrument and other share obligations were included in the dilutive calculation under the as converted method, as such the number of shares were included as if the shares were issued on July 1, 2025 and 2024, respectively and the interest expense and the change in fair value associated with the financial instruments was adjusted from net income to determine the numerator and denominator.
| 11 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Basic net income (loss) per Common Stock | ||||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Basic weighted average Common Stock outstanding | ||||||||
| Basic net income (loss) per Common Stock | $ | $ | ( | ) | ||||
| Six Months Ended | Six Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Basic net income per Common Stock | ||||||||
| Numerator: | ||||||||
| Net income | $ | $ | ||||||
| Denominator: | ||||||||
| Basic weighted average Common Stock outstanding | ||||||||
| Basic net income per Common Stock | $ | $ | ||||||
The following table reflects the calculation of diluted net income (loss) per share of Common Stock (in dollars, except share amounts):
| Three Months Ended- | Three Months Ended- | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Diluted net (loss) income per Common Stock | ||||||||
| Numerator: | ||||||||
| Net (loss) income | $ | $ | ( | ) | ||||
| Change in fair value of financial instruments | ||||||||
| Interest on dilutive instruments | ||||||||
| Allocation of net (loss) income, as adjusted | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Basic weighted average Common Stock outstanding | ||||||||
| If converted shares | ||||||||
| Diluted weighted average Common Stock outstanding | ||||||||
| Diluted net (loss) income per Common Stock | $ | $ | ( | ) | ||||
| Six Months Ended- | Six Months Ended- | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Diluted net (loss) income per Common Stock | ||||||||
| Numerator: | ||||||||
| Net (loss) income | $ | $ | ||||||
| Change in fair value of financial instruments | ( | ) | ||||||
| Interest on dilutive instruments | ||||||||
| Allocation of net (loss) income, as adjusted | $ | $ | ||||||
| Denominator: | ||||||||
| Dilutive weighted average Common Stock outstanding | ||||||||
| If converted shares | ||||||||
| Diluted net (loss) income per Common Stock | $ | $ | ||||||
| 12 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| Description | December 31, 2025 | December 31, 2024 | ||||||
| Short Term Notes | ||||||||
| Convertible notes - Chardan | ||||||||
| Secured convertible note | ||||||||
| Winston & Strawn agreement | ||||||||
| Tau agreement | ||||||||
| Stock payable | ||||||||
| Debenture | ||||||||
| Stock Based Compensation | ||||||||
| Promissory note | ||||||||
| Total Shares issuable under Convertible Note obligations – if converted total dilutive | ||||||||
| Public Warrants | ||||||||
| Private Warrants | ||||||||
| 2025 Warrants | ||||||||
| Secured convertible note warrants | ||||||||
| Total excluded under treasury method – out of the money | ||||||||
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Deposit Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for warrant liabilities, convertible notes derivative liability and the earnout out liability (see Note 12).
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
| 13 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
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 December 31, 2025 and June 30, 2025, was calculated to be $
Wilson-Davis
is also 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 December 31, 2025 and June 30, 2025 was calculated to be $
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 December 31, 2025 and June 30, 2025, Wilson-Davis’s
net capital was $
NOTE 5 – 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:
| December 31, 2025 | June 30, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash segregated - customers | ||||||||
| Cash segregated - PAB | ||||||||
| Total cash and restricted cash shown in the statement of cash flows. | $ | $ | ||||||
NOTE 6. RELATED PARTY TRANSACTIONS
Related Party Share Issuance/Transfers
During
the month of July 2024, Quantum Ventures LLC (“Quantum Ventures” or the “Sponsor”) and AtlasFinTech transferred
to various debt holders as described below, and shares, respectively, for total contributed shares of shares recorded
as contributed capital for $
On
August 9, 2024, the Company entered into a Satisfaction of Discharge of Indebtedness Agreement with Atlas FinTech. Pursuant to the agreement,
the Company issued shares of Common Stock in satisfaction of $
| 14 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Advances from Related Parties
On
May 9, 2024, Quantum Ventures, a related party, transferred
shares of Common Stock to pay for the $
During
the six-months ended December 31, 2025, $
During
the six-months ended December 31, 2025 $
As of December 31, 2025, $
On
July 17, 2025, the Company issued shares of Common Stock to Sandip I. Patel, P.A., a law firm that is wholly owned by Sandip
I. Patel, the Company’s General Counsel, Chief Financial Officer and a member of the Company’s board of directors, as consideration
for legal and consulting services provided to the Company prior to his employment. The shares were valued based on the closing price
of the date of issuance of $ for a total value of $
Note Financing
In
September 2025, the Company entered into the September-Securities Purchase Agreements, as defined and described in Note 8 below. $
On
October 8, 2025 the Company repaid to Sandip Patel $
NOTE 7. COMMITMENTS AND CONTINGENCIES
Earnout Liability
In
connection with the Closing, and pursuant to the terms of the Business Combination Agreement, stockholders of AtlasClear (the “AtlasClear
Stockholders”) received merger consideration (the “Merger Consideration Shares”) consisting of shares of Common
Stock. In addition, the AtlasClear Stockholders will receive up to shares of Common Stock (the “Earn Out Shares”)
upon certain milestones (based on the achievement of certain price targets of Common Stock following the Closing). The milestones were
not met during the first following the Closing, and as such the price target Earn Out Shares will not be issued. Atlas FinTech
will also receive up to $ million of shares of Common Stock (“Software Products Earn Out Shares”), which will be issued
to Atlas FinTech upon certain milestones based on the achievement of certain revenue targets of software products contributed to AtlasClear
by Atlas FinTech and Atlas Financial Technologies Corp. following the Closing. The revenue targets will be measured yearly for
| 15 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Employment Agreements
On September 19, 2025, the Company entered into employment agreements and amendments to employment agreements with each of John Schaible, the Company’s Executive Chairman, and Craig Ridenhour, the Company’s President, and on September 24, 2025, the Company entered into second amendments to such agreements with each such officer.
The
employment agreements with Mr. Schaible and Mr. Ridenhour, as amended by such amendments (as so amended, the “Schaible Employment
Agreement” and the “Ridenhour Employment Agreement,” respectively) provide for the employment of Mr. Schaible and Mr.
Ridenhour as Executive Chairman and President, respectively, reporting to the Board, for an initial term of
On
September 24, 2025, the Company entered into an employment agreement with Sandip Patel (the “Patel Employment Agreement”),
a member of the Board, pursuant to which Mr. Patel is employed as the Company’s General Counsel and Chief Financial Officer, reporting
to the Board, for an initial term of
Refer
to Note 11 for discussion regarding stock based compensation. As of December 31, 2025 the Company paid the one time signing bonuses for
a total of $
Indemnification Agreements
On the Closing Date, in connection with the Closing, the Company entered into indemnification agreements with each of its directors and executive officers, which provide for indemnification and advancements by the Company of certain expenses and costs under certain circumstances. The indemnification agreements provide that AtlasClear Holdings will indemnify each of its directors and executive officers against any and all expenses incurred by that director or executive officer because of his or her status as a director or officer of AtlasClear Holdings, to the fullest extent permitted by Delaware law, the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws.
Wilson-Davis
On
February 27, 2018, an extended hearing panel of the Department of Enforcement of FINRA, Office of Hearing Officers, issued its decision
ordering Wilson-Davis to pay fines aggregating $
| 16 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
NOTE 8. NOTES PAYABLE
Chardan Convertible Note
During
the six-months ended December 31, 2025, the Company issued a total of shares of Common Stock to Chardan under the Chardan Note,
for a total of $
During
the six-month period ended December 31, 2024, the Company received conversion notices under the Chardan Note for an aggregate principal
amount of $
See Note 12 for additional information on the fair value and change in fair value related to the derivative.
Secured Convertible Note Financing
During
the six-months ended December 31, 2025, the Company issued a total of shares of Common Stock to Funicular under the Secured
Convertible Note for total of $
As
of December 31, 2025, the company recognized $
As
of June 30, 2025, the carrying value of the Secured Convertible Note was $
As
of December 31, 2024, the Company recognized $
On
October 8, 2025, the Company entered into the Restated SPA with Funicular, which amended and restated in its entirety the securities
purchase agreement, dated February 9, 2024, pursuant to which the Company had issued and sold to Funicular, in a private placement, the
Secured Convertible Note, in the original principal amount of $
| 17 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
The
Restated Note has a stated maturity date of October 8, 2030. Interest accrues at a rate per annum equal to
The Restated Note is secured by a perfected security interest in substantially all of the existing and future assets of the Company and each Grantor (as defined in the Security Agreement, as defined below), including a pledge of all of the capital stock of each of the Grantors, subject to certain exceptions, as evidenced by (i) the security agreement, dated as of February 9, 2024 (the “Security Agreement”), among the Company, each of the Company’s subsidiaries and Funicular, and (ii) the guaranty, dated as of February 9, 2024 (the “Guaranty”), executed by each of the Company’s subsidiaries pursuant to which each of them has agreed to guaranty the obligations of the Company under the Restated Note and the other Loan Documents (as defined in the Restated Note), each of which was entered into in connection with the Funicular Note.
Pursuant
to the Restated SPA, the Company agreed, among other things, that if the Restated Note becomes convertible into a number of shares of
Common Stock in excess of
The
Restated Note issued by the Company to Funicular on October 8, 2025 represents a freestanding financial liability within the scope of
ASC 470-10 Debt – Overall, with certain fair value election provisions applied under ASC 825-10 Financial Instruments – Overall.
The Restated Note replaces the prior Secured Convertible Note originally issued on February 9, 2024, described above, increasing the
principal balance from approximately $
The Company elected to apply the Fair Value Option (FVO) under ASC 825-10 to the Restated Note. Under ASC 825-10-15-4 and 825-10-25-4, the Restated Note qualifies as an eligible financial liability because it is recognized upon initial issuance and not within any of the prohibited categories. The election was made at initial recognition and applies to the entire instrument, with upfront fees and costs expensed as incurred. As a result, the Restated Note is measured at fair value with changes recognized in earnings each reporting period, and the Company separately presents in other comprehensive income the portion of fair value changes attributable to instrument-specific credit risk, consistent with ASC 825-10-45-5.
As
part of the transaction, fees and expenses incurred in connection with the amendment—principally legal and negotiation costs
up to $
As
a result, the Company recognized $
Sellers Note
As
a result of the acquisition of Wilson-Davis, the Company issued (i) $
| 18 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
As
of June 30, 2025 the principal balance and accrued interest of the Short-Term Notes was fully settled with shares in agreed upon conversion
terms. As of June 30, 2025 the principal balance on the Long-Term Notes was $
As
of September 19, 2025, all of the Seller Notes have been fully settled via the conversion to shares of Common Stock. The Company
during the six-months ended December 31, 2025, issued a total of
shares of Common Stock to the Wilson-Davis sellers under both the Long-Term Notes and the Merger Financing Note, as defined below,
for total of $
During
the six-months ended December 31, 2024, the Company received conversion notices for a total $
Contingent Guarantee/ Merger Financing
In
connection with the acquisition of Wilson-Davis, shares of Common Stock were transferred to the Wilson-Davis sellers, to cover a cash
deficit of $ (the Gross Proceeds Shortfall). The shares have a make-whole provision that is required to be accounted for under
ASC 480. The Company has valued the obligation as of June 30, 2024 of $
During
the six-month period ended December 31, 2024, Atlas FinTech agreed to transfer in shares of Common Stock to the Wilson-Davis
sellers under the contingent guarantee, resulting in a reduction in the contingent guarantee of $
On
August 9, 2024, the Company entered into an agreement to modify the terms of the contingent guarantee where the Company agreed to enter
into a convertible note on the amount that had not yet been recovered through share issuances of $
Under
ASC 815, the conversion feature was bifurcated resulting in a conversion liability of $
| 19 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
The
carrying balance of the Merger Financing Note as of June 30, 2025, net of principal converted to shares of $
Tau Agreement - ELOC
On
July 31, 2024, the Company and Tau Investment Partners LLC (“Tau”) entered into an at-the-market agreement (the “ELOC”).
Pursuant to the ELOC, upon the terms of and subject to the satisfaction of certain conditions, the Company has the right from time to
time at its option to direct Tau to purchase up to a specified maximum amount of shares of the Common Stock, up to a maximum aggregate
purchase price of $
The issuance and sale of the shares of Common Stock pursuant to the ELOC will be exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) thereof. The Company filed a registration statement with the Securities and Exchange Commission for the resale by Tau of at least pre reverse split or post reverse split shares of Common Stock.
When estimating the fair value, the Company has followed the guidance in ASC 820 Fair Value Measurement.
As both the Commitment Amount and Commitment Fee were issued in a single transaction and are both remeasured to fair value through earnings in each subsequent reporting period, the proceeds received should be allocated to each freestanding financial instrument on a relative fair value basis. As of December 31, 2024 the Company requested advance notices for a total of $ which resulted in approximately shares to be issued
During the six-months period ended December 31, 2024, Tau sold and settled of the shares which were issued under the ELOC resulting in the sale of $, Tau purchased the shares for $ resulting in a realized loss to the Company of $.
As of December 31, 2025, there are share available under the ELOC and accordingly no further advances are anticipated. See Note 12 for additional information regarding the fair value method and related disclosures.
| 20 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Second ELOC Agreement
On
February 5, 2025, the Company and Tau entered into an at-the-market agreement (“Second ELOC Agreement”). Pursuant to the
Second ELOC Agreement, upon the terms thereof and subject to the satisfaction of certain conditions, the Company has the right from time
to time at its option to direct Tau to purchase up to a specified maximum amount of shares of Common Stock, up to a maximum aggregate
purchase price of $
The Company analyzed both the Commitment Amount and the Commitment Fee (as defined below) under ASC 480 and ASC 815. The Commitment Amount is classified as a liability and is initially measured at fair value. The Commitment Amount is subsequently measured at fair value at each reporting period with subsequent changes in fair value recorded in earnings. ASC 815-40-35-8 through 35-9 require an issuer to reassess the classification of both freestanding equity contracts and embedded equity features at each balance sheet date. If the classification changes because of events occurring during the reporting period, the instrument is reclassified as of the date of the event that caused the reclassification.
As
consideration for the Second ELOC Agreement, the Company was to issue to Tau a fee equal to
Promissory Notes
Interest
Solutions, LLC. Shares of Common Stock may become issuable to Interest Solutions, LLC (“Interest Solutions”) pursuant to
a convertible promissory note, dated as of February 9, 2024, in the aggregate principal amount of $
JonesTrading
Institutional Services LLC. Up to
shares of Common Stock may become issuable to JonesTrading Institutional Services LLC (“JonesTrading”), pursuant to a
convertible promissory note, dated as of February 9, 2024, in the aggregate principal amount of $
Toppan
Merrill LLC. The Company issued to Toppan Merrill LLC (“Toppan”) a promissory note, dated as of February 9, 2024, in the
aggregate principal amount of $
| 21 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Winston & Strawn Agreement
Up
to $
On
January 26, 2026, the Company and Winston & Strawn, entered into a settlement agreement. The Company agreed to provide Winston
& Strawn with cash and shares of the Company’s Common Stock. The Company paid $
Hanire Purchase Agreement
During
the six-months ended December 31, 2025, the Company received $
Debenture
On
August 4, 2025, the Company entered into a securities purchase agreement (“August-Securities Purchase Agreement”) with an
institutional investor under which the Company agreed to issue and sell, in a private placement, Series A convertible debentures (the
“Debenture”) for an aggregate principal amount of $
The Debenture is within the scope of ASC 470-10 and is not an ASC 480 liability. The Company did not elect the fair value option under ASC 825-10. The instrument contains two embedded derivatives—the conversion option and the event-of-default feature—each of which requires bifurcation and separate measurement at fair value through earnings. Other redemption and prepayment features are clearly and closely related and remain within the debt host. The Debenture is therefore recognized net of a debt discount, with the derivative liabilities recorded separately and subsequently remeasured to fair value through earnings. Interest expense will be recognized using the effective-interest method.
The
Company recognized the discount of $
| 22 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Convertible Notes
On
September 16, 2025, September 19, 2025 and September 23, 2025, the Company entered into separate securities purchase agreements (each,
a “September-Securities Purchase Agreement”) with certain institutional investors under which the Company agreed to issue
and sell, in a private placement, convertible promissory notes (each, a “Convertible Note” and collectively, the “Convertible
Notes”) for an aggregate principal amount of $
The
Convertible Notes are within the scope of ASC 470-10 and not an ASC 480 liability. The Company did not elect the ASC 825-10 fair value
option. The instrument includes two embedded derivative features—the Conversion upon Qualified Financing and Event of Default acceleration—each
meeting the definition of a derivative under ASC 815-15 and therefore requiring bifurcation and separate recognition at fair value. The
Convertible Notes were issued at a
The
Company recognized the discount of $
Equity Financing
On
October 8, 2025, the Company entered into the Equity SPA with certain institutional investors (each, an “Investor”),
including Funicular, pursuant to which the Company agreed to issue and sell, in a private placement,
Units for a purchase price of $
per Unit. Each Unit consists of
The
2025 Warrants are immediately exercisable on a cash basis or exchangeable on a cashless basis and will expire
In the event of a Fundamental Transaction (as defined in the 2025 Warrants), the holders of the 2025 Warrants will be entitled to receive upon exercise of the 2025 Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the 2025 Warrants immediately prior to such Fundamental Transaction. Additionally, as more fully described in the 2025 Warrants, the holders of the 2025 Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the 2025 Warrant in connection with a Fundamental Transaction. If the Company fails to timely deliver the shares of Common Stock issuable upon exercise of the 2025 Warrants, the Company will be subject to liquidated damages.
| 23 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Subject
to the provisions of the Equity SPA, if, during the
The
Company engaged Dawson James Securities, Inc. as the placement agent (the “Placement Agent”) with respect to the
offering of the Restated Note and the Units. The Company agreed to pay the Placement Agent’s fees totaling (i)
$
The closings of the issuance and sale of the Restated Note and the Units occurred on October 9 through October 14, 2025, and the Company issued an aggregate of shares of Common Stock and 2025 Warrants.
At the closings, the Company entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file one or more registration statements covering the resale of the shares of Common Stock included as part of the Units, as well as the shares issuable upon conversion of the Restated Note or exercise of the 2025 Warrants. The Company will be subject to liquidated damages if it fails to meet certain conditions set forth in the Registration Rights Agreement.
The Company evaluated the classification of the 2025 Warrants, Common Stock, and the Registration Rights Agreement issued or entered into pursuant to the Equity SPA. The assessment was performed under the relevant guidance in ASC 480-10, ASC 815-10, ASC 815-40, and ASC 825-20, to determine whether these instruments should be accounted for as freestanding or embedded financial instruments, and whether they meet the criteria for equity or liability classification. The 2025 Warrants are classified as freestanding derivative financial liabilities within the scope of ASC 815-10 and ASC 815-40, measured initially and subsequently at fair value through earnings. The issued shares of Common Stock are freestanding equity instruments. The Registration Rights Agreement is a freestanding contingent obligation within the scope of ASC 825-20, with potential liability recognition contingent on probability and estimability under ASC 450-20. See Note 12 for additional disclosure regarding fair value of the 2025 Warrants.
NOTE 9. INTANGIBLE ASSETS
Amortization
expense was $
Intangible Assets of the company at December 31, 2025 and June 30, 2025 are summarized as follows:
| December 31, 2025 | ||||||||||||||||||
| Est useful | Accumulated | Impairment | ||||||||||||||||
| life | Cost | Amortization | of Asset | Net | ||||||||||||||
| Goodwill | Indefinite | $ | $ | — | $ | — | $ | |||||||||||
| Pacsquare assets – Proprietary Software | ( | ) | ||||||||||||||||
| Customer Lists | ( | ) | ||||||||||||||||
| Intangible Assets | $ | $ | ( | ) | $ | $ | ||||||||||||
| 24 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| June 30, 2025 | ||||||||||||||||||
| Est useful | Accumulated | Impairment | ||||||||||||||||
| life | Cost | Amortization | of Asset | Net | ||||||||||||||
| Goodwill | Indefinite | $ | $ | — | $ | — | $ | |||||||||||
| Developed technology | ( | ) | ||||||||||||||||
| Customer Lists | ( | ) | ||||||||||||||||
| Intangible Assets | $ | $ | ( | ) | $ | $ | ||||||||||||
Below is a summary of the amortization of intangible assets for the next five years:
| Fiscal Year | Amount | |||
| June 30, 2026 | $ | |||
| June 30, 2027 | ||||
| June 30, 2028 | ||||
| June 30, 2029 | ||||
| June 30, 2030 | ||||
| Thereafter | ||||
NOTE 10. STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue shares of Preferred Stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2025 and June 30, 2025, there were shares of Preferred Stock issued or outstanding.
Common
stock — The Company is authorized to issue shares of Common Stock. Holders of the Company’s Common Stock
are entitled to
The Common Stock commenced trading on the NYSE American LLC (“NYSE American”) under the symbol “ATCH” on February 12, 2024. AtlasClear Holdings’ public warrants (the “Public Warrants”) commenced trading on the over-the-counter market (the “OTC”) under the symbol “ATCH WS” on February 12, 2024.
On
July 17, 2025, the Company issued shares of Common Stock to Sandip I. Patel, P.A., a law firm that is wholly owned by Sandip
I. Patel, the Company’s General Counsel, Chief Financial Officer and a member of the Company’s board of directors, as consideration
for legal and consulting services provided to the Company prior to his employment. The shares were valued based on the closing price
of the date of issuance of $ for a total value of $
On
August 11, 2025, the Company issued shares of Common Stock as consideration for $
Pursuant
to a Software As A Services License Agreement, as payment in shares for services rendered during the six-months period ended December
31, 2025, the Company issued shares of Common Stock valued at the closing price on the date of issuance of $ per share,
resulting in compensation expense of $
On
October 1, 2025, the Company and Interest Solutions entered into an amendment to the Interest Solutions Note whereby the conversion price
floor of $
| 25 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
On
October 13, 2025, the Company and a vendor entered into a settlement agreement and release, whereas the Company agreed to issue
shares of Common Stock in settlement of $
On
October 13, 2025, the Company issued shares of Common Stock to consultants for services rendered. The shares were valued based
on the date the date shares were issued for total compensation expenses of $
In connection with the Equity SPA discussed in Note 8 above, the closings of the issuance and sale of the Units occurred on October 9 through October 14, 2025, and the Company issued an aggregate of shares of Common Stock.
Refer to Notes 6 and 8 for details regarding shares issued during the three and six-months ended December 31, 2025 and 2024.
Warrants—In connection with the Equity SPA, on October 8, 2025, the Company issued the 2025 Warrants as discussed in Note 8above. The warrants were issued to investors as an equity-linked incentive and to the placement agent as part of transaction compensation. The warrants entitle holders to purchase fully paid and non-assessable shares of common stock, subject to the terms summarized below.
Instruments Issued and Outstanding
| · | Investor Warrants: warrants issued on October 8, 2025 |
| · | Placement Agent Warrants: warrants issued on October 8, 2025 |
| · | Public Warrants: warrants issued on February 9, 2024 |
| · | Private Warrants: warrants issued on February 9, 2024 |
| · | Secured Convertible Note Warrants: issued February 9, 2024 |
| · | All warrants were outstanding as of December 31, 2025. There were no exercises or modifications during the period. |
The warrants are freestanding financial instruments within the scope of ASC 815-10 and ASC 815-40. Although indexed to the Company’s own stock, the warrants do not qualify for equity classification because they contain provisions that could require net cash settlement (e.g., cash payout upon certain fundamental transactions and cash penalties for delayed share delivery). Accordingly, the warrants are classified as derivative financial liabilities and recorded at fair value on the balance sheet, with subsequent changes in fair value recognized in earnings. Refer to Note 12 for discussion regarding the fair value disclosures.
Executive Employment Agreements and Equity Awards
In September 2025, the Company entered into the Schaible Employment Agreement, the Ridenhour Employment Agreement and the Patel Employment Agreement, each as discussed in Note 7.
Under
the terms of these agreements, the executives are entitled to annual base salaries ranging from $
Time-Based Stock Awards
Each of Messrs. Schaible and Ridenhour received a one-time grant of shares of Common Stock upon execution of their respective agreements and are entitled to receive an additional shares on July 1, 2026, in each case subject to stockholder approval of an amendment to the Company’s equity incentive plan to increase the number of shares authorized for issuance thereunder. Each such grant vests on June 30 of the year following the grant date, subject to continued employment.
The grant-date fair value of the time-based awards was measured based on the closing price of the Company’s Common Stock determined to be $ each for total of $, on the respective grant dates and is recognized as compensation expense on a straight-line basis over the vesting period.
Schedule of Nonvested Stock Awards
(Shares in units; weighted-average grant-date fair value in $)
| Activity | Shares | Weighted-Average Grant-Date Fair Value | ||||||
| Nonvested at July 1, 2025 | ||||||||
| Granted | $ | |||||||
| Vested | ||||||||
| Forfeited/Expired | ||||||||
| Nonvested at Dec 31, 2025 | $ | |||||||
Performance-Based (Market Condition) Stock Awards
Each of Messrs. Schaible and Ridenhour is eligible to receive up to performance-based stock awards, each equal to % of the Company’s total outstanding shares at the time of grant, and Mr. Patel is eligible to receive up to performance-based stock awards, each equal to % of the Company’s total outstanding shares, upon achievement of specified stock price milestones, in each case subject to stockholder approval of an amendment to the Company’s equity incentive plan to increase the number of shares authorized for issuance thereunder.
These milestones are based on the Company’s Common Stock achieving a 10-day volume-weighted average price (“VWAP”) of $, $, $, $, and $, respectively. Each award vests over following achievement of the applicable stock price target, subject to continued employment.
| Tranche | VWAP Milestone | Grant-Date FV/Share | Nonvested at Jul 1, 2025 | Granted | Vested | Forfeited/Expired | Nonvested at Dec 31, 2025 | |||||||||||||||||||||
| 1 | $ | |||||||||||||||||||||||||||
| 2 | $ | |||||||||||||||||||||||||||
| 3 | $ | |||||||||||||||||||||||||||
| 4 | $ | |||||||||||||||||||||||||||
| 5 | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| 26 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Because these awards include market conditions, the Company estimated their grant-date fair value using a Monte Carlo simulation model. The following table summarizes the key assumptions used in the valuation of these awards:
| Assumption | September 2025 Grants | |||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected term | years | |||
| Expected dividend yield | % | |||
| Fair value per share (Tranche 1) | $ | |||
| Fair value per share (Tranche 2) | $ | |||
| Fair value per share (Tranche 3) | $ | |||
| Fair value per share (Tranche 4) | $ | |||
| Fair value per share (Trance 5) | $ | |||
Compensation cost for these awards will be recognized over the derived service period, regardless of whether the market condition is ultimately achieved, provided the requisite service is rendered. Expense is not reversed solely because the market condition is not satisfied.
Forfeiture Policy
The Company accounts for forfeitures of share-based awards as they occur. Previously recognized compensation cost is reversed in the period an unvested award is forfeited.
Stock-Based Compensation Expense
As of December 31, 2025, none of the stock price milestones had been achieved and shares had vested under the performance-based awards.
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Time-based stock awards | $ | $ | ||||||
| Market-based stock awards | $ | $ | ||||||
| Total stock-based compensation expense | $ | $ | ||||||
| Six Months Ended | Six Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Time-based stock awards | $ | $ | ||||||
| Market-based stock awards | $ | $ | ||||||
| Total stock-based compensation expense | $ | $ | ||||||
As of December 31, 2025, total unrecognized compensation cost related to unvested time- and market-based stock awards was approximately $, which is expected to be recognized over a weighted-average period of years.
NOTE 12. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
| 27 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2025 and June 30, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| December 31, | June 30, | |||||||||
| Description | Level | 2025 | 2025 | |||||||
| Assets: | ||||||||||
| Trading securities | 1 | $ | $ | |||||||
| Liabilities: | ||||||||||
| Winston & Strawn agreement | 3 | $ | $ | |||||||
| Warrant liability – Private Warrants | 3 | $ | $ | |||||||
| Earnout liability | 3 | $ | $ | |||||||
| Convertible notes Chardan derivative | 3 | $ | $ | |||||||
| Merger financing derivative | 3 | $ | $ | |||||||
| Tau agreement | 3 | $ | $ | |||||||
| Debentures – derivative | 3 | $ | $ | |||||||
| Convertible Notes – derivative | 3 | $ | $ | |||||||
| Secured Convertible Note | 3 | $ | $ | |||||||
| Warrant liability – Equity SPA | 3 | $ | $ | |||||||
Winston & Strawn Agreement
On February 9, 2024, the Company entered into the Winston & Strawn Agreement, as described in Note 8.
The Winston & Strawn Agreement is considered a variable-share obligation under ASC Topic 480 (“Distinguishing Liabilities from Equity”). The Winston & Strawn Agreement meets the requirements for classification under ASC 480 and as a result is required to be accounted for as a liability under ASC 480 and is presented as such on the Condensed Consolidated Balance Sheets. The Company will record a change in fair value on each reporting period until settlement in its Condensed Consolidated Statement of Operations. See Note 8 for further discussion.
As
of December 31, 2025 the Company had not issued the shares as stipulated under the Winston & Strawn Agreement and, as such, the Company
determined that utilizing a Monte Carlo model was no longer appropriate considering the economic nature of the contract. The Company
anticipated making cash payments to settled the obligations. As such, the Winston & Strawn Agreement was valued using the discounted
cash flow approach to better determine the fair value of the Winston & Strawn Agreement. The agreement did not have any specific
provision regarding default. The key valuation input under the discounted cash flow approach was
The key inputs into the Monte Carlo model for the Winston & Strawn Agreement were as follows:
| June 30, | ||||
| Input | 2025 | |||
| Market price of public shares | $ | |||
| Equity volatility | % | |||
| Risk-free rate | % | |||
| 28 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Warrant Liability
The private placement warrants originally issued by Quantum and assumed by the Company in connection with the Business Combination (the “Private Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the consolidated statements of operations.
The Private Warrants were, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the Company’s Common Stock. The expected volatility of the Company’s Common Stock was determined based on the implied volatility of the publicly traded Public Warrants.
The key inputs into the Black-Scholes model for the Private Warrants were as follows:
| December 31, | June 30, | |||||||
| Input | 2025 | 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Effective expiration date | ||||||||
Earnout Liability
The liability associated with the Earnout Shares was, initially as of February 9, 2024, valued using a Monte Carlo simulation to determine if and when the revenue hurdles would be achieved. The revenue volatility and revenue to equity correlation was based upon the same guideline public companies. As of December 31, 2025, the Company revised when revenue hurdles would be achieved, as a result of the delay in financing and implementation of the Commercial Bancorp acquisition. Revenue targets were deemed less likely to be reached and as such, this resulted in a significant decrease in the value of the Earnout liability. The Monte Carlo simulation was performed simultaneously on both the share price and revenue to account for the correlation between revenue and equity.
The key inputs into the Monte Carlo model for the Earnout liability were as follows:
| December 31, | June 30, | |||||||
| Input | 2025 | 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Revenue volatility | % | % | ||||||
| Discount factor for revenue | % | % | ||||||
Convertible Note Derivatives
The
conversion derivatives associated with Short-Term Notes, Long-Term Notes and the Chardan Note were accounted for as a liability in accordance
with ASC 815-40. The conversion derivative liabilities were measured at fair value at inception and on a recurring basis, with changes
in fair value presented within change in fair value of conversion derivative liability in the consolidated statements of operations.
The convertible note derivatives are made up of the fair value of the embedded conversion option included in the Long-Term Notes and
the Chardan Note, which each had fair value as of December 31, 2025 of $
| 29 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Long-Term Notes
As
of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included
in the Long-Term Notes at $
The key inputs into the Monte-Carlo model for the conversion derivative as of June 30, 2025 were as follows:
| June 30, | ||||
| Input | 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
Chardan Note
As
of June 30, 2025, the conversion feature of the Chardan Note was valued using Monte Carlo model resulting in the fair value of the conversion
option at $
The key inputs into the Monte-Carlo model for the conversion derivative as of June 30, 2025 were as follows:
| June 30, | ||||
| Input | 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Effective expiration date | ||||
Secured Convertible Note
As
a result of the changes in stock price and the limitation on authorized shares to comply with the conversion option, the Company determined
that as of June 30, 2025 valuation of the Secured Convertible Note conversion feature now was required to be bifurcated under ASC 815
and, as such, the Company fair valued the embedded derivative. As of June 30, 2025, the conversion feature was valued using the Monte
Carlo model resulting in the fair value of the conversion option included in the Secured Convertible Note at $
| 30 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
The key inputs into the Monte-Carlo model for the conversion derivative as of June 30, 2025 were as follows:
| June 30, | ||||
| Input | 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
On
October 8, 2025, the Company entered into the Restated SPA with Funicular. The Restated Note issued pursuant to the Restated SPA is convertible,
in whole or in part, into shares of the Company’s Common Stock at the election of the holder at any time at an initial Conversion
price of $
As
of December 31, 2025 and October 8, 2025, the Restated Note was valued using Black-Scholes model combined with the discounted cash flow
model, resulting in the fair value of the Restated Note of $
The key inputs into the Black-Scholes model for the conversion derivative as of December 31, 2025 and October 8, 2025 were as follows:
| December 31, | October 8, | |||||||
| Input | 2025 | 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Conversion Price | $ | $ | ||||||
| Principal and interest balance at valuation date | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Discount rate | % | % | ||||||
| Volatility | % | % | ||||||
| Effective expiration date | ||||||||
| Term | ||||||||
Merger Financing Note
As
of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included
in the Merger Financing Note of $
| June 30, | ||||
| Input | 2025 | |||
| Market price of public shares | $ | |||
| Risk-free rate | % | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
| 31 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
Tau Agreement
As
discussed in Note 8 the Tau Agreement no longer has shares available to utilize and management does not intend to utilize the ELOC.
As such as of December 31, 2025 the fair value of the Tau Agreement was deemed to be zero.
As of June 30, 2025 the Tau Agreement was valued using Monte Carlo model resulting in the fair value of $
The key inputs into the Monte-Carlo model for the Commitment Amount as of issuance date of June 30, 2025 was as follows:
| June 30, | ||||
| Input | 2025 | |||
| Anticipated Monthly Advance Amounts | $ | |||
| Risk-free rate | % | |||
| Volatility | % | |||
| Effective expiration date | ||||
Debenture Derivative
On
August 4, 2025 the Company issued the Debenture as discussed in Note 8. The Company determined that the conversion feature was
required to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of December 31, 2025 the
Debenture was valued using a Black-Scholes model and as of August 4, 2025, the issuance date, the Debenture was valued using
Scenario Based Methodology model resulting in the fair value of the conversion option included in the Debenture embedded derivative
at $
The key inputs into the Black-Scholes for the conversion derivative as of December 31, 2025 and Scenario Based Methodology model August 4, 2025 were as follows:
| December 31, | August 4, | |||||||
| Input | 2025 | 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Discount rate | % | % | ||||||
| Volatility | % | % | ||||||
| Effective expiration date | ||||||||
Convertible Note Derivative
On
September 16, 2025 the Company issued Convertible Notes as discussed in Note 8. The Company determined that the conversion feature
was required to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of September 16, 2025,
the issuance date, the Convertible Notes derivative was valued using a Scenario Based methodology model resulting in the fair value
of the embedded derivatives included in the Convertible Notes of $
The key inputs into Scenario Based Method for the conversion derivative as of September 16, 2025 were as follows:
| September 16, | ||||
| Input | 2025 | |||
| Discount rate | % | |||
| Probability of default | % | |||
| Recovery rate | % | |||
| Effective expiration date | ||||
| 32 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
2025 Warrant Liability- Equity SPA
On
October 8, 2025, the Company entered into the Equity SPA pursuant to which the Company agreed to issue and sell, in a private
placement,
Units for a purchase price of $
per Unit. Each Unit consists of one share of the Company’s Common Stock and one 2025 Warrant. In addition,
of 2025 Warrants were issued to the placement agent as transaction cost. The 2025 Warrants were accounted for as liabilities in
accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities
are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value
of warrant liability in the consolidated statements of operations. The fair value of all 2025 Warrants issued at issuance was $
The 2025 Warrants were, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the 2025 Warrants is the expected volatility of the Company’s Common Stock.
The key inputs into the Black-Scholes model for the 2025 Warrants were as follows:
| December 31, | October 8, | |||||||
| Input | 2025 | 2025 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Term | ||||||||
| Effective expiration date | ||||||||
The following table presents the changes in the fair value of the following:
| Private | Tau | |||||||
| Placement | Agreement | |||||||
| Warrants | Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Write of receivable | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of September 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value as of December 31, 2025 | $ | $ | ||||||
| Private | Tau | |||||||
| Placement | Agreement | |||||||
| Warrants | Liability | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Initial measurement | ||||||||
| Transferred to equity | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of September 30, 2024 | $ | $ | ||||||
| Transfer to equity | ||||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value as of December 31, 2024 | $ | $ | ||||||
| 33 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| Conversion | Earnout | |||||||
| Derivative | Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of September 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of December 31, 2025 | $ | $ | ||||||
| Conversion | Earnout | |||||||
| Derivative | Liability | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of September 30, 2024 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of December 31, 2024 | $ | $ | ||||||
| Winston & Strawn | Merger Financing | |||||||
| Agreement | Derivative | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value liability as of September 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value liability as of December 31, 2025 | $ | $ | ||||||
| Winston & Strawn | Merger Financing | |||||||
| Agreement | Derivative | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Initial measurement | ||||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value liability as of September 30, 2024 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value liability as of December 31, 2024 | $ | $ | ||||||
| Secured | ||||||||
| Contingent | Convertible | |||||||
| Guarantee | Derivative | |||||||
| Fair value as of June 30, 2024 | $ | $ | ||||||
| Shares issued as partial payment | ( | ) | ||||||
| Change in valuation inputs or other assumptions | ||||||||
| Exchange to Merger financing note | ( | ) | ||||||
| Fair value as of September 30, 2024 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value liability as of December 31, 2024 | $ | $ | ||||||
| 34 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| Convertible | ||||||||
| Debenture | Notes | |||||||
| Derivative | Derivative | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
| Initial measurement | ||||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value as of September 30, 2025 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of December 31, 2025 | $ | $ | ||||||
| Secured | 2025 | |||||||
| Convertible | Warrant | |||||||
| Note | Liability | |||||||
| Fair value as of June 30, 2025 | $ | $ | ||||||
Principal amount | ||||||||
Day 1 fair value charge to earnings | ||||||||
| Initial measurement October 8, 2025 | ||||||||
| Accrued interest through December 31, 2025 | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of December 31, 2025 | $ | $ | ||||||
There
were
NOTE 13. SEGMENT REPORTING
The
Company operates as
The Chief Operating Decision Maker (CODM), identified as the Chief Financial Officer, who reviews financial performance and allocates resources on a consolidated basis. The Company’s internal reporting is prepared and reviewed as a single operating unit, without disaggregated information by product line, region, or customer type. Accordingly, the Company has determined that it operates in a single reportable segment.
The following table presents revenue and operating income (loss) for the periods presented:
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Commissions | $ | $ | ||||||
| Vetting fees | ||||||||
| Clearing fees | ||||||||
| Net gain/(loss) on firm trading accounts | ||||||||
| Other revenue | ||||||||
| Total revenue | $ | $ | ||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
| 35 |
ATLASCLEAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
(Unaudited)
| Six Months Ended | Six Months Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Commissions | $ | $ | ||||||
| Vetting fees | ||||||||
| Clearing fees | ||||||||
| Net gain/(loss) on firm trading accounts | ||||||||
| Other revenue | ||||||||
| Total revenue | $ | $ | ||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
| Total assets | $ | $ | ||||||
Corporate general and administrative expenses are not allocated to any specific operating component and are included within total operating income.
Segment Assets
The Company does not report separate asset information by segment to the CODM. However, in accordance with ASC 280-10-50-30, the Company has elected to disclose total segment assets, which are equal to consolidated total assets. The table above summarizes total assets.
NOTE 14. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, other than as described below.
On January 12, 2026, the Company received a cashless exercise notice in respect of warrants from the 2025 Warrants held by Funicular, resulting in the issuance of shares of Common Stock.
On February 9, 2026, the Company received a cashless exercise notice in respect of warrants from the 2025 Warrants held by Funicular, resulting in the issuance of shares of Common Stock.
On
January 26, 2026, the Company and Winston & Strawn, entered into a settlement agreement. The Company agreed to provide Winston
& Strawn with cash and shares of the Company’s Common Stock. The Company paid $
Commercial Bancorp Share Purchase Agreement
On February 5, 2026, the Company entered into a share purchase agreement (the “Purchase Agreement”) with Commercial Bancorp, a Wyoming corporation (“Commercial Bancorp”), and each of the shareholders of Commercial Bancorp (collectively, the “Sellers”). The Purchase Agreement provides for the Company to acquire (the “Acquisition”) from the Sellers all of the outstanding shares (the “Shares”) of common stock of Commercial Bancorp, which is the owner of all of the outstanding stock of Farmers State Bank, a Wyoming state-chartered member bank (the “Bank”), subject to the terms and conditions set forth in the Purchase Agreement. As previously disclosed, the Company had previously entered into an agreement and plan of merger, as amended, to acquire Commercial Bancorp, which agreement has expired in accordance with its terms.
Pursuant to the terms of the
Purchase Agreement, the Company has agreed to purchase the Shares from the Sellers for consideration consisting of a combination of cash
and shares of the Company’s common stock (“Common Stock”), with the total amount of consideration to be determined based
on (i) each Seller’s election to receive cash, shares of Common Stock, or a combination thereof, (ii) the adjusted book value of
the operational potion of the equity capital of Commercial Bancorp as of the closing of the Acquisition (the “Closing”), determined
in accordance with the provisions of the Purchase Agreement (the “ABV”), (iii) the value of the existing building and land
comprising the physical location of the Bank (the “Premises”), and (iv) Commercial Bancorp’s net operating loss as reflected
on its most recent tax return prior to the Closing, multiplied by the maximum corporate federal income tax rate in effect as of the date
of the Closing (the “NOL Tax Benefit”). Each Seller may elect (the “Election”) to receive an amount equal to any
of the following three options: (i) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion
of the value of the Premises and the NOL Tax Benefit, payable one-third in cash and two-thirds in shares of Common Stock; (ii) two times
such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax
Benefit, payable entirely in cash; or (iii) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro
rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in shares of Common Stock. The Company has made an
earnest money deposit payment in the amount of $
The shares of Common Stock to be issued pursuant to the Purchase Agreement will be valued based on either the closing price of the Common Stock on the date of execution of the Purchase Agreement ($0.23), or on the business day immediately preceding the date of the Closing, at each Seller’s option. The Company has agreed to file with the Securities Exchange Commission (the “SEC”), by the later of 90 days following the date of the Purchase Agreement and ten business days following the deadline for each Seller to make an Election, a resale registration statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement (the “Resale Registration Statement”).
The obligations of each of the Sellers and the Company under the Purchase Agreement are subject to specified conditions, including, among other matters: (i) the receipt of all required regulatory approvals, (ii) the Resale Registration Statement having been declared effective by the SEC, such that all shares of Common Stock to be issued pursuant to the Purchase Agreement shall be registered for resale and freely tradeable, (iii) the receipt of certain specified third-party consents, and (iv) the absence of any injunctions being entered into or law being adopted that would make the Transaction illegal.
The Purchase Agreement contains customary representations and warranties of Commercial Bancorp and the Bank, the Sellers and the Company. It also contains customary covenants, including (i) covenants providing for each of the parties to use reasonable best efforts to cause the Acquisition to be consummated and to receive all required regulatory approvals, including from the Federal Reserve Board and the Wyoming Division of Banking, (ii) covenants providing for Commercial Bancorp and the Bank to carry on their respective businesses in the ordinary course of business, and to refrain from taking certain actions, during the period between the execution of the Purchase Agreement and the Closing, and (ii) granting the Company observation rights with respect to meetings of the boards of directors of Commercial Bancorp and the Bank during the between the execution of the Purchase Agreement and the Closing. Commercial Bancorp, the Bank and the Sellers have also agreed not to initiate, solicit, encourage or otherwise facilitate the making of any proposal or offer relating to alternate transactions or, engage in any discussions or negotiations with respect to alternate transactions.
The Purchase Agreement contains termination rights for each of the Sellers and the Company, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order denying approval of the Acquisition; (ii) the Transaction is not consummated within two years of the execution of the Purchase, subject to extension under certain circumstances; or (iii) the other party breaches its representations, warranties or covenants under the Purchase Agreement which would give rise to the failure of a closing condition and such breach is not cured with 30-days of receipt of written notice of such breach.
| 36 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us,” “AtlasClear Holdings,” or the “Company” refer to AtlasClear Holdings, Inc. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Certain defined terms used herein have the meaning ascribed to them in the notes to the financial statements.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy, plans and objectives of management for future operations, including planned acquisition of Commercial Bancorp, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.
Forward-looking statements are not guarantees of performance, and the absence of these words does not mean that a statement is not forward looking. You should understand that the following important factors could affect our future results, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements herein:
| ● | our ability to realize the benefits expected from the Business Combination (as defined herein); | |
| ● | our ability complete the acquisition of Commercial Bancorp of Wyoming (“Commercial Bancorp”); | |
| ● | our ability to successfully integrate our recent and proposed acquisitions, including the acquisition of Commercial Bancorp, and to realize the synergies and benefits of such acquisitions; | |
| ● | our ability to successfully implement the AtlasClear Platform (as defined herein); | |
| ● | our significant indebtedness and our ability to service such indebtedness; | |
| ● | the volatility of the price of our Common Stock, par value $0.0001 per share (the “Common Stock”) and the possibility that stockholders could incur substantial losses; | |
| ● | potential dilution of our stockholder interests resulting from our issuance of equity securities; | |
| ● | the ability to maintain the listing of our Common Stock on the NYSE American LLC (“NYSE American”), and the potential liquidity and trading of such securities; | |
| ● | our ability to grow and manage growth profitably; | |
| ● | our ability to raise financing in the future, if and when needed; | |
| ● | our success in retaining or recruiting, or adapting to changes in, our officers, key employees, or directors following the Business Combination; | |
| ● | our ability to attract and retain our senior management and other highly qualified personnel; | |
| ● | our ability to achieve or maintain profitability; | |
| ● | the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements; | |
| ● | our ability to successfully protect against cybersecurity attacks or breaches, ransomware attacks, and other disruptions to our information technology structure; | |
| ● | our ability to successfully compete against other companies; | |
| ● | our estimates regarding expenses, future revenue, and needs for additional financing; and | |
| ● | the effect of economic downturns and political and market conditions beyond our control. |
| 37 |
For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2025 (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 30, 2025. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are building a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products that focus on financial services firms. We are a fintech driven business-to-business platform that seeks to power innovation in fintech, investing, underwriting and trading. We believe we are positioned to provide a modern, mission-critical suite of solutions to our clients, enabling them to reduce their transactions costs and compete more effectively in their businesses.
Our target client base for our prime banking and prime brokerage services includes financial services firms, generally with annual revenues up to $1 billion, including brokerage firms, hedge funds, pension plans, and family offices that are not adequately served by today’s larger correspondent clearing firms and banks.
On February 9, 2024 (the “Closing Date”), the Company consummated the previously announced transactions pursuant to that certain Business Combination Agreement dated November 16, 2022 (as amended, the “Business Combination Agreement”), among the Company, Quantum, Atlas FinTech Holdings Corp. (“Atlas FinTech”) and certain other parties. The transactions consummated as a result of the Business Combination Agreement are hereinafter referred to as the “Business Combination.” In connection with the consummation of the Business Combination (the “Closing”), the Company changed its name from “Calculator New Pubco, Inc.” to “AtlasClear Holdings, Inc.” As a result, the operation history of Quantum survived the merger. Pursuant to the Business Combination Agreement, AtlasClear received certain assets from Atlas FinTech and Atlas Financial Technologies Corp., a Delaware corporation, and completed the acquisition of broker-dealer Wilson-Davis & Co., Inc. (“Wilson-Davis”).
Through the acquisition of Wilson-Davis, a correspondent clearing company, and the anticipated acquisition of Commercial Bancorp, we expect to acquire the capabilities to provide specialized clearing and banking services to financial services firms, with an emphasis on global markets currently underserviced by larger vendors. Once properly integrated, anticipated synergies between Commercial Bancorp, if acquired, and Wilson-Davis are expected to allow for lower cost of capital, higher net interest margins, expanded product development and greater credit extension.
On February 16, 2024, AtlasClear and Pacsquare Technologies, LLC (“Pacsquare”) entered into a Source Code Purchase and Master Services Agreement (the “Pacsquare Purchase Agreement”), pursuant to which AtlasClear purchased a proprietary trading platform with clearing and settlement capabilities that will be developed by Pacsquare, including certain software and source code (the “AtlasClear Platform”). On June 10, 2025, the Company and Pacsquare entered into a Software Development and License Agreement which supersedes and amends the terms under the Purchase Agreement. Under the Software Development and License Agreement, Pacquare agreed to develop and provide services for a period of 36 months, commencing on the date of execution of the Software Development and License Agreement.
We believe that our proprietary trading platform with clearing and settlement capabilities along with the software products and intellectual property assets, are cutting-edge, flexible and scalable.
Wilson-Davis
Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC, licensed in 50 states, District of Columbia, and Puerto Rico, and is a member in good standing of FINRA. 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 vests stock the customers want to bring into their accounts. Clearing fees are earned by clearing transactions for Glendale Securities, as introducing broker on a fully disclosed basis, pursuant to a clearing agreement with Glendale Securities.
| 38 |
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 in the section titled “Risk Factors” of the Transition Report. Some key factors impacting Wilson-Davis’ business include:
| ● | 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’ revenue and profitability can be affected by general downturns in the securities markets, resulting from factors such as increased inflation, increased interest rates and other factors. |
Debenture
On August 4, 2025, the Company entered into a securities purchase agreement (“August-Securities Purchase Agreement”) with an institutional investor under which the Company agreed to issue and sell, in a private placement, Series A convertible debentures (the “Debenture”) for an aggregate principal amount of $500,000, for a gross purchase price of $490,000, net of legal fees. The Debenture bears 10% interest and matures on August 3, 2026. The holder is entitled to convert the unpaid principal amount of the Debenture, plus accrued interest and penalties, any time, at $0.15 per share. If, at any time after Closing, the Company receives financing from third party (excluding the Holder), the Company is required to pay to the Holder, in the form of cash, equity, or a combination of the two, solely at the discretion of the Holder, one hundred percent (100%) of the proceeds raised from the third party in excess of an aggregate amount of $10,000,000 (the “Threshold Amount”) until such time as the Face Amount of the Debenture has been paid in full. The Company agreed that, within 60 days after the sale of the Debenture, the Company would file with the Securities and Exchange Commission (the “SEC”) a registration statement, or an amendment to a previously-filed registration statement registering the resale of the shares of Common Stock underlying the Debenture.
Convertible Notes
On September 16, 2025, September 19, 2025 and September 23, 2025, the Company entered into separate securities purchase agreements (each, a “September-Securities Purchase Agreement”) with certain institutional investors under which the Company agreed to issue and sell, in a private placement, convertible promissory notes (each, a “Convertible Note” and collectively, the “Convertible Notes”) for an aggregate principal amount of $6,000,000, for a gross purchase price of $5,000,000, reflecting a 20% original issue discount, before fees and other expenses. The Notes did not bear interest, and were to mature on the earlier of six-months from issuance or the date that the Company completes a Qualified Financing (meaning an issuance and sale of capital stock raising gross proceeds of at least $10 million, as defined in the Notes). The Convertible Notes were convertible into equity, at each holder’s option, at the closing of a Qualified Financing, at the same per share price as the securities sold in the Qualified Financing. The Notes were subject to customary events of default and related remedies. In October 2025, upon the consummation of the transactions contemplated by the Equity SPA (as defined below), $4.15 million payable by the Company under the Convertible Notes was converted into Units (as defined below), and the remaining balance of the Convertible Notes was paid in full.
Convertible Note Financing
On October 8, 2025, the Company entered into an amended and restated securities purchase agreement (the “Restated SPA”) with Funicular Funds, LP (“Funicular”), which amended and restated in its entirety the securities purchase agreement, dated February 9, 2024, pursuant to which the Company had issued and sold to Funicular, in a private placement, a million secured convertible note in the original principal amount of $6,000,000 (the “Funicular Note”). Pursuant to the Restated SPA, the Company issued and sold to Funicular, for a purchase price of $10,000,000, an amended and restated convertible promissory note, dated October 8, 2025 (the “Restated Note”), which amends and restates the Funicular Note in its entirety. The principal amount of the Restated Note is $10,097,782, consisting of the $10,000,000 purchase price plus $97,782 in remaining outstanding principal under the Funicular Note.
The Restated Note has a stated maturity date of October 8, 2030. Interest accrues at a rate per annum equal to 11%, and is payable semi-annually on each June 30 and December 31. On each interest payment date, the accrued and unpaid interest shall, at the election of the Company in its sole discretion, be either paid in cash or paid in-kind by increasing the principal amount of the Restated Note. In the event of an Event of Default (as defined in the Restated Note), in addition to Funicular’s other rights and remedies, the interest rate would increase to 14% per annum. The Restated Note is convertible, in whole or in part, into shares of the Company’s Common Stock at the election of the holder at any time at an initial conversion price of $0.75 per share (the “Conversion Price”). The Conversion Price is subject to adjustment if the Company issues or is deemed to issue shares of Common Stock at a price below the then-current conversion price (subject to certain exceptions), and is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. The Restated Note contains covenants which, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness, incur additional liens and sell its assets or properties.
The Restated Note is secured by a perfected security interest in substantially all of the existing and future assets of the Company and each Grantor (as defined in the Security Agreement, as defined below), including a pledge of all of the capital stock of each of the Grantors, subject to certain exceptions, as evidenced by (i) the security agreement, dated as of February 9, 2024 (the “Security Agreement”), among the Company, each of the Company’s subsidiaries and Funicular, and (ii) the guaranty, dated as of February 9, 2024 (the “Guaranty”), executed by each of the Company’s subsidiaries pursuant to which each of them has agreed to guaranty the obligations of the Company under the Restated Note and the other Loan Documents (as defined in the Restated Note), each of which was entered into in connection with the Funicular Note.
Pursuant to the Restated SPA, the Company agreed, among other things, that if the Restated Note becomes convertible into a number of shares of Common Stock in excess of 19.9% of the Company’s total number of shares of Common Stock outstanding, to seek the approval of its stockholders for the issuance of all shares of Common Stock issuable upon conversion of the Restated Note in excess of that amount, in accordance with the rules of the NYSE American.
| 39 |
Equity Financing
On October 8, 2025, the Company entered into a securities purchase agreement (the “Equity SPA”) with certain institutional investors (each, an “Investor”), including Funicular, pursuant to which the Company agreed to issue and sell, in a private placement, an aggregate of 16,666,666 units of securities (each, a “Unit”), for a purchase price of $0.60 per Unit. Each Unit consists of one share of Common Stock and one warrant (each, a “2025 Warrant”) to purchase Common Stock. Of the total investment amount of $10,000,000, $5,850,000 of proceeds were received and $4,150,000 were converted from the Convertible Notes discussed above.
The 2025 Warrants are immediately exercisable on a cash basis or exchangeable on a cashless basis and will expire five years from the date of issuance. Each 2025 Warrant will be initially exercisable for one share of Common Stock at an initial exercise price of $0.75 per share, subject to adjustment for stock splits, distributions and the like (the “Initial Exercise Price”). The Initial Exercise Price is also subject to potential increase if the Company completes certain subsequent offerings at a price greater than the Initial Exercise Price while the 2025 Warrants remain outstanding. At any time after the issuance of the 2025 Warrants, the holder of the 2025 Warrants may exchange the 2025 Warrants on a cashless basis for a number of shares of Common Stock determined by multiplying the total number of shares with respect to which the 2025 Warrant is then being exercised by the Black Scholes Value (as defined in the 2025 Warrant) divided by the lower of the two closing bid prices of the Common Stock in the two days prior the time of such exercise.
In the event of a Fundamental Transaction (as defined in the 2025 Warrants), the holders of the 2025 Warrants will be entitled to receive upon exercise of the 2025 Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the 2025 Warrants immediately prior to such Fundamental Transaction. Additionally, as more fully described in the 2025 Warrants, the holders of the 2025 Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the 2025 Warrant in connection with a Fundamental Transaction. If the Company fails to timely deliver the shares of Common Stock issuable upon exercise of the 2025 Warrants, the Company will be subject to liquidated damages.
Subject to the provisions of the Equity SPA, if, during the 12-month period commencing on the date of the closing, the Company carries out one or more Subsequent Financings (as defined in the Equity SPA), each Investor that purchases $50,000 or more of Units will have the right to participate in an amount up to 100% of such Investor’s investment amount under the Equity SPA in any such securities offered by the Company, subject to certain exceptions.
The Company engaged Dawson James Securities, Inc. as the placement agent (the “Placement Agent”) with respect to the offering of the Restated Note and the Units. The Company agreed to pay the Placement Agent’s fees totaling (i) 4.5% of the aggregate gross from the sale of the Restated Note, (ii) 6% of the aggregate gross proceeds from the sale of the Units to current or previous investors not introduced to the Company by the Placement Agent and (iii) 7% of the aggregate gross proceeds from the sale of the Units to investors introduced to the Company by the Placement Agent, and to reimburse the Placement Agent’s expenses (subject to a cap), resulting in total transaction cost paid of $1,228,500. The Company also agreed to issue warrants to purchase up to an aggregate of 1,005,000 shares of Common Stock with a fair value of $334,062 to the Placement Agent and its designees, resulting in total transaction cost of $1,562,562. The fair value of the warrants issued to the Placement Agent was included in the transaction cost and allocated between the 2025 Warrant in the amount of $865,659 and the Common Stock in the amount of $696,903 on a pro rated basis.
$500,000 of the Units sold pursuant to the Equity SPA were purchased by Sixth Borough Capital Fund, LP, an entity controlled by Robert D. Keyser, Jr., who is a member of the Company’s board of directors and the Chief Executive Officer of the Placement Agent.
The closings of the issuance and sale of the Restated Note and the Units occurred on October 9 through October 14, 2025.
At the closings, the Company entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file one or more registration statements covering the resale of the shares of Common Stock included as part of the Units, as well as the shares issuable upon conversion of the Restated Note or exercise of the Warrants. The Company will be subject to liquidated damages if it fails to meet certain conditions set forth in the Registration Rights Agreement.
Commercial Bancorp Share Purchase Agreement
On February 5, 2026, the Company entered into a share purchase agreement (the “Purchase Agreement”) with Commercial Bancorp, a Wyoming corporation (“Commercial Bancorp”), and each of the shareholders of Commercial Bancorp (collectively, the “Sellers”). The Purchase Agreement provides for the Company to acquire (the “Acquisition”) from the Sellers all of the outstanding shares (the “Shares”) of common stock of Commercial Bancorp, which is the owner of all of the outstanding stock of Farmers State Bank, a Wyoming state-chartered member bank (the “Bank”), subject to the terms and conditions set forth in the Purchase Agreement. As previously disclosed, the Company had previously entered into an agreement and plan of merger, as amended, to acquire Commercial Bancorp, which agreement has expired in accordance with its terms.
Pursuant to the terms of the Purchase Agreement, the Company has agreed to purchase the Shares from the Sellers for consideration consisting of a combination of cash and shares of the Company’s common stock (“Common Stock”), with the total amount of consideration to be determined based on (i) each Seller’s election to receive cash, shares of Common Stock, or a combination thereof, (ii) the adjusted book value of the operational potion of the equity capital of Commercial Bancorp as of the closing of the Acquisition (the “Closing”), determined in accordance with the provisions of the Purchase Agreement (the “ABV”), (iii) the value of the existing building and land comprising the physical location of the Bank (the “Premises”), and (iv) Commercial Bancorp’s net operating loss as reflected on its most recent tax return prior to the Closing, multiplied by the maximum corporate federal income tax rate in effect as of the date of the Closing (the “NOL Tax Benefit”). Each Seller may elect (the “Election”) to receive an amount equal to any of the following three options: (i) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable one-third in cash and two-thirds in shares of Common Stock; (ii) two times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in cash; or (iii) three times such Seller’s pro rata portion of the ABV, plus such Seller’s pro rata portion of the value of the Premises and the NOL Tax Benefit, payable entirely in shares of Common Stock. The Company has made an earnest money deposit payment in the amount of $100,000 to Commercial Bancorp, which deposit will be applied to the cash portion of the consideration payable at the Closing or, if the Closing does not occur under certain circumstances, retained by Commercial Bancorp.
The shares of Common Stock to be issued pursuant to the Purchase Agreement will be valued based on either the closing price of the Common Stock on the date of execution of the Purchase Agreement ($0.23), or on the business day immediately preceding the date of the Closing, at each Seller’s option. The Company has agreed to file with the Securities Exchange Commission (the “SEC”), by the later of 90 days following the date of the Purchase Agreement and ten business days following the deadline for each Seller to make an Election, a resale registration statement with respect to the shares of Common Stock issuable pursuant to the Purchase Agreement (the “Resale Registration Statement”).
The obligations of each of the Sellers and the Company under the Purchase Agreement are subject to specified conditions, including, among other matters: (i) the receipt of all required regulatory approvals, (ii) the Resale Registration Statement having been declared effective by the SEC, such that all shares of Common Stock to be issued pursuant to the Purchase Agreement shall be registered for resale and freely tradeable, (iii) the receipt of certain specified third-party consents, and (iv) the absence of any injunctions being entered into or law being adopted that would make the Transaction illegal.
The Purchase Agreement contains customary representations and warranties of Commercial Bancorp and the Bank, the Sellers and the Company. It also contains customary covenants, including (i) covenants providing for each of the parties to use reasonable best efforts to cause the Acquisition to be consummated and to receive all required regulatory approvals, including from the Federal Reserve Board and the Wyoming Division of Banking, (ii) covenants providing for Commercial Bancorp and the Bank to carry on their respective businesses in the ordinary course of business, and to refrain from taking certain actions, during the period between the execution of the Purchase Agreement and the Closing, and (ii) granting the Company observation rights with respect to meetings of the boards of directors of Commercial Bancorp and the Bank during the between the execution of the Purchase Agreement and the Closing. Commercial Bancorp, the Bank and the Sellers have also agreed not to initiate, solicit, encourage or otherwise facilitate the making of any proposal or offer relating to alternate transactions or, engage in any discussions or negotiations with respect to alternate transactions.
The Purchase Agreement contains termination rights for each of the Sellers and the Company, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order denying approval of the Acquisition; (ii) the Transaction is not consummated within two years of the execution of the Purchase, subject to extension under certain circumstances; or (iii) the other party breaches its representations, warranties or covenants under the Purchase Agreement which would give rise to the failure of a closing condition and such breach is not cured with 30-days of receipt of written notice of such breach.
| 40 |
Results of Operations
Comparison of the Three Months Ended December 31, 2025 Compared to the Three Months Ended December 31, 2024
| Three Months Ended | Three Months | |||||||||||
| December 31, | Ended | |||||||||||
| 2025 | 2024 | Changes | ||||||||||
| REVENUES | ||||||||||||
| Commissions | $ | 3,097,701 | $ | 1,598,153 | 1,499,548 | |||||||
| Vetting fees | 351,850 | 357,601 | (5,751 | ) | ||||||||
| Clearing fees | 582,148 | 785,227 | (203,079 | ) | ||||||||
| Net gain/(loss) on firm trading accounts | 205,569 | 2,245 | 203,324 | |||||||||
| Other revenue | 819,826 | 3,273 | 816,553 | |||||||||
| TOTAL REVENUES | 5,057,094 | 2,746,499 | 2,310,595 | |||||||||
| EXPENSES | ||||||||||||
| Compensation, payroll taxes and benefits | 2,790,561 | 1,580,182 | 1,210,379 | |||||||||
| Data processing and clearing costs | 967,778 | 629,733 | 338,045 | |||||||||
| Regulatory, professional fees and related expenses | 1,508,774 | 1,107,762 | 401,012 | |||||||||
| Stock compensation expense | 1,173,360 | — | 1,173,360 | |||||||||
| Communications | 190,253 | 126,089 | 64,164 | |||||||||
| Occupancy and equipment | 45,950 | 54,428 | (8,478 | ) | ||||||||
| Transfer fees | 40,339 | 39,917 | 422 | |||||||||
| Bank charges | 58,486 | 53,425 | 5,061 | |||||||||
| Bad debt | (1,847 | ) | — | (1,847 | ) | |||||||
| Intangible assets amortization | 355,795 | 355,268 | 527 | |||||||||
| Other | 382,967 | (51,156 | ) | 434,123 | ||||||||
| TOTAL EXPENSES | 7,512,416 | 3,895,648 | 3,616,768 | |||||||||
| LOSS FROM OPERATIONS | (2,455,322 | ) | (1,149,149 | ) | (1,306,173 | ) | ||||||
| OTHER INCOME/(EXPENSE) | ||||||||||||
| Interest income | 493,359 | 460,315 | 33,044 | |||||||||
| Change in fair value of warrant liability derivative | 1,849,662 | (61,531 | ) | 1,911,193 | ||||||||
| Change in fair value, convertible note derivative | 435,027 | 823,076 | (388,049 | ) | ||||||||
| Change in fair value, long-term and short-term note derivative | — | 294,729 | (294,729 | ) | ||||||||
| Change in fair value of secured convertible note | (1,796,432 | ) | 89,535 | (1,885,967 | ) | |||||||
| Change in fair value of Merger financing | — | 25,749 | (25,749 | ) | ||||||||
| Change in fair value of earnout liability | 10,624,000 | 1,594,000 | 9,030,000 | |||||||||
| Change in fair value of Winston & Strawn agreement | 921 | (13,041 | ) | 13,962 | ||||||||
| Change in fair value stock payable | — | 25,260 | (25,260 | ) | ||||||||
| Change in fair value of debenture derivative | 606,886 | — | 606,886 | |||||||||
| Change in fair value of Tau agreement | — | 73,284 | (73,284 | ) | ||||||||
| Interest expense | (2,777,916 | ) | (2,667,285 | ) | (110,631 | ) | ||||||
| TOTAL OTHER INCOME/(EXPENSE) | 9,435,507 | 644,091 | 8,791,416 | |||||||||
| Income before provision for income taxes | 6,980,185 | (505,058 | ) | 7,485,243 | ||||||||
| Benefit (provision) for income taxes | (196,014 | ) | 85,368 | (281,382 | ) | |||||||
| Net income (loss) | $ | 6,784,171 | $ | (419,690 | ) | 7,203,861 | ||||||
| 41 |
Revenues of $5,057,094 for the three-months ended December 31, 2025, represent a 84% increase from revenues of $2,746,499 for the three-month period ended December 31, 2024. The increase was primarily attributable to the addition of stock locate fees which is a new revenue source and the participation in an at the market offering as a selling agent. Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC and a member in good standing of FINRA. Wilson-Davis is engaged principally in the over-the-counter, or “OTC,” markets in microcap securities. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade for less than $5.00 per share and have a market capitalization of less than $50 million. Wilson-Davis also executes transactions in exchange-traded securities. It derives its revenue from the liquidation of restricted and control microcap securities; clearing transactions on behalf of an introducing broker-dealer on a fully disclosed basis; and trading in equity securities for its own account. It receives limited revenues from fully paid stock lending, stock locates and margin accounts. During its history, Wilson-Davis has underwritten at-the-market offerings for publicly traded companies, placed private offerings, sold mutual funds, introduced margin accounts cleared by other firms on a fully disclosed basis, and provided ancillary financial services.
Total expenses of $7,512,416 for the three-months ended December 31, 2025, represent a 93% increase of $3,616,768 from total expenses of $3,895,648 for the three-month period ended December 31, 2024. The increase was primarily due to an increase in variable compensation related to the increase in revenue.
Compensation, payroll taxes and benefits increased to $2,790,561 for the three-month period ended December 31, 2025, an increase of $1,210,379 from total expenses of $1,580,182 for the three-month period ended December 31, 2024. The increase was primarily due to increase in variable compensation related to the increase in revenue.
Data processing and clearing costs increased to $967,778 for the three-month period ended December 31, 2025 compared to $629,733 for the three-month period ending December 31, 2024. The increase was additional expenses related to the stock locate revenue.
Regulatory, professional fees and related expenses increased to $1,508,774 for the three-months ended December 31, 2025 compared to $1,107,762 in the three-month period ended December 31, 2024. The increase was primarily due a the approval of board compensation of $743,997 which was no present in the comparative three-month period ending December 31, 2024.
Stock based compensation increased to $1,173,360 for the three-months ended December 31, 2025 as a result of the new employment agreement entered into with the executive officers. The expense incurred in the quarter ended December 31, 2025 is the portion over the service period of the granted stock based compensation. No such expense was present in the three-months period ended December 31, 2024.
Other income of $9,435,507 for the three-month period ended December 31, 2025, represents a significant increase from $644,091 for the three-month period ended December 31, 2024. The increase was due to the changes in fair value of various financial instruments, which were settled in the three-month period ended December 31, 2025.The primary decrease is for $10,624,000 related to the change in the fair value of the earnout liability as a result of the delay in financing and closing of the Commercial Bancorp acquisition resulting in a reduction in the anticipated revenue, therefore reducing the estimated fair value of the earnout liability.
Income tax of $196,014 for the three-months period ended December 31, 2025 increased from an income taxes benefit of $85,368 for the three-month period ended December 31, 2024. The increased tax of $281,382 is primarily due to changes in deferred tax liabilities and assets.
The foregoing factors resulted in a net income of $6,784,171 for the three-month period ended December 31, 2025, compared to net loss of $419,690 for the three-month period ended December 31, 2024. The decrease was primarily due to the gain recognized from changes in fair value of the convertible notes that resulted from a change is valuation model as a result of the Company’s delay in financing and closing of the acquisition of Commercial Bancorp which resulted in the decrease in expected revenue, therefore reducing the value of the earnout liability by $10,624,000 during the three-month period ended December 31, 2025.
| 42 |
Comparison of the Six Months Ended December 31, 2025 Compared to the Six Months Ended December 31, 2024
| Six Months Ended | Six Months | |||||||||||
| December 31, | Ended | |||||||||||
| 2025 | 2024 | Changes | ||||||||||
| REVENUES | ||||||||||||
| Commissions | $ | 5,432,090 | $ | 2,981,981 | 2,450,109 | |||||||
| Vetting fees | 723,550 | 722,984 | 566 | |||||||||
| Clearing fees | 1,296,497 | 1,832,939 | (536,442 | ) | ||||||||
| Net gain/(loss) on firm trading accounts | 205,458 | 3,956 | 201,502 | |||||||||
| Other revenue | 1,650,089 | 8,721 | 1,641,368 | |||||||||
| TOTAL REVENUES | 9,307,684 | 5,550,581 | 3,757,103 | |||||||||
| EXPENSES | ||||||||||||
| Compensation, payroll taxes and benefits | 5,914,191 | 2,859,486 | 3,054,705 | |||||||||
| Data processing and clearing costs | 1,552,028 | 1,241,379 | 310,649 | |||||||||
| Regulatory, professional fees and related expenses | 1,759,347 | 2,203,581 | (444,234 | ) | ||||||||
| Stock compensation expense | 1,328,771 | — | 1,328,771 | |||||||||
| Communications | 409,122 | 278,843 | 130,279 | |||||||||
| Occupancy and equipment | 82,701 | 108,432 | (25,731 | ) | ||||||||
| Transfer fees | 88,499 | 91,507 | (3,008 | ) | ||||||||
| Bank charges | 117,204 | 109,326 | 7,878 | |||||||||
| Bad debt | (1,807 | ) | — | (1,807 | ) | |||||||
| Intangible assets amortization | 711,590 | 662,459 | 49,131 | |||||||||
| Other | 678,598 | 85,819 | 592,779 | |||||||||
| TOTAL EXPENSES | 12,640,244 | 7,640,832 | 4,999,412 | |||||||||
| LOSS FROM OPERATIONS | (3,332,560 | ) | (2,090,251 | ) | (1,242,309 | ) | ||||||
| OTHER INCOME/(EXPENSE) | ||||||||||||
| Interest income | 979,716 | 1,067,073 | (87,357 | ) | ||||||||
| Change in fair value of warrant liability derivative | 1,788,131 | 184,594 | 1,603,537 | |||||||||
| Change in fair value, convertible note derivative | 382,154 | 3,990,385 | (3,608,231 | ) | ||||||||
| Change in fair value, long-term and short-term note derivative | 103,185 | 11,447,599 | (11,344,414 | ) | ||||||||
| Change in fair value of contingent guarantee | — | (839,775 | ) | 839,775 | ||||||||
| Change in fair value of secured convertible note | (1,796,432 | ) | — | (1,796,432 | ) | |||||||
| Change in fair value of Merger financing | 63,696 | (37,446 | ) | 101,142 | ||||||||
| Change in fair value of earnout liability | 10,508,000 | 1,254,000 | 9,254,000 | |||||||||
| Change in fair value of Winston & Strawn agreement | 1,799,545 | (47,882 | ) | 1,847,427 | ||||||||
| Change in fair value of debenture derivative | (231,002 | ) | 221,410 | (452,412 | ) | |||||||
| Change in fair value of Tau agreement | 334,549 | (760,699 | ) | 1,095,248 | ||||||||
| Interest expense | (4,212,126 | ) | (4,124,281 | ) | (87,845 | ) | ||||||
| TOTAL OTHER INCOME/(EXPENSE) | 9,719,416 | 12,354,978 | (2,635,562 | ) | ||||||||
| Income before provision for income taxes | 6,386,856 | 10,264,727 | (3,877,871 | ) | ||||||||
| Benefit (provision) for income taxes | (42,979 | ) | 63,616 | (106,595 | ) | |||||||
| Net income (loss) | $ | 6,343,877 | $ | 10,328,343 | (3,984,466 | ) | ||||||
| 43 |
Revenues of $9,307,684 for the six-months ended December 31, 2025, represent a 68% increase from revenues of $5,550,581 for the six-month period ended December 31, 2024. The increase in revenue is primarily due to the addition of stock locate revenue and Wilson-Davis acting as a selling agent for an at the market offering. Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC and a member in good standing of FINRA. Wilson-Davis is engaged principally in the over-the-counter, or “OTC,” markets in microcap securities. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade for less than $5.00 per share and have a market capitalization of less than $50 million. Wilson-Davis also executes transactions in exchange-traded securities. It derives its revenue from the liquidation of restricted and control microcap securities; clearing transactions on behalf of an introducing broker-dealer on a fully disclosed basis; and trading in equity securities for its own account. It receives limited revenues from fully paid stock lending, stock locates and margin accounts. During its history, Wilson-Davis has underwritten at-the-market offerings for publicly traded companies, placed private offerings, sold mutual funds, introduced margin accounts cleared by other firms on a fully disclosed basis, and provided ancillary financial services.
Total expenses of $12,640,244 for the six-months ended December 31, 2025, represent a 65% increase of $4,999,412 from total expenses from $7,640,832 for the six-month period ended December 31, 2024. The increase was primarily due to an increase in variable compensation related to the increase in revenue.
Compensation, payroll taxes and benefits increased to $5,914,191 for the six-month period ended December 31, 2025, an increase of $3,054,705 from total expenses of $2,859,486 for the six-month period ended December 31, 2024. The increase was primarily due to increase in variable compensation related to the increase in revenue.
Data processing and clearing costs increased to $1,552,028 for the six-month period ended December 31, 2025 compared to $1,241,379 for the six-month period ending December 31, 2024. The increase was due to additional expenses related to the stock locate line of business.
Regulatory, professional fees and related expenses decreased to $1,759,347 for the six-months ended December 31, 2025 compared to $2,203,581 in the six-month period ended December 31, 2024. The decrease was primarily due a reduction in legal fees in the period ending December 31, 2025.
Stock based compensation increased to $1,328,771 for the six-months ended December 31, 2025 as a result of the new employment agreement entered into with the executive officers. The expense incurred in the quarter ended December 31, 2025 is the pro rata portion over the service period of the granted stock based compensation. No such expense was present in the six-months period ended December 31, 2024.
Other income of $9,719,416 for the six-month period ended December 31, 2025, represents a significant decrease from $12,354,978 for the six-month period ended December 31, 2024. The decrease was due to the changes in fair value of various financial instruments, which were settled in the six-month period ended December 31, 2025. The primary decrease is for $11,344,414 related to the change in the fair value of the short term and long term notes issued to the sellers of Wilson-Davis during the six-months ended December 31, 2024. During the year ended June 30,2025 the Company settled a substantial balance of the sellers’ notes, resulting in a significant decrease in the carrying balance of the derivative embedded in the sellers notes. In addition, during the six-months ended December 31, 2025 the remaining balance were converted into shares, resulting in the change in fair value of $103,185.
Income tax of $42,979 for the six-months period ended December 31, 2025 increased from a from income tax benefit of $63,616 for the six-month period ended December 31, 2024. The increased income tax of $106,595 is primarily due to changes in deferred tax liabilities and assets.
The foregoing factors resulted in a net income of $6,343,877 for the six-month period ended December 31, 2025, compared to net income of $10,328,343 for the six-month period ended December 31, 2024. The decrease was primarily due to the gain recognized from changes in fair value of the convertible notes that resulted from a change is valuation model as a result of the Company settled a substantial balance of the sellers’ notes, resulting in a significant decrease in the carrying balance of the derivative embedded in the sellers notes obligations during the six-month period ended December 31, 2025.
| 44 |
Liquidity and Capital Resources
Cash used in operating activities for the six-month period ended December 31, 2025 was $1,001,804 as compared to cash provided by operating activities for the six-month period ended December 31, 2024 of $761,406. This was primarily affected by $998,924 in changes in operational assets and liabilities. Adjustment to net income primarily consisted of change in fair value related to various financial instruments as discussed above, resulting in an adjustment of $12,951,826, where the largest change in fair value was related to the revised revenue projection qualified under the Earnout liability, resulting in a decrease of $10,508,000. Further adjustments for the income was non-cash interest expense on convertible notes and other financial instruments of $4,132,383, amortization of intangible assets of $711,590 and stock based compensation of $1,328,771.
Cash used for investing activities for the three-month period ended December 31, 2025 was $65,000 as compared to $125,000 for the six-month period ended December 31, 2024. This is primarily due to $65,000 in deposits made to extend the Commercial Bancorp acquisition agreement. The $125,000 of cash used for investing activities in the period ended December 31, 2024 represents cash payment towards the AtlasClear Platform.
Cash provided by financing activities for the six-month period ended December 31, 2025 was $17,673,908 as compared to $513,381 for the six-month period ended December 31, 2024. This was primarily due to the $5,850,000 in cash proceed from the Equity SPA, $9,975,000 in cash proceeds under the restated SPA Secured Convertible Note, $4,700,000 in cash proceeds from the Convertible Notes, $490,000 in cash proceeds from the Debenture and $200,000 of good faith advance from Hanire Purchase Agreement less repayments of promissory notes of $462,592, repayment of Convertible Notes of $1,850,000 and payment of transaction cost under the Equity SPA of $1,228,500. During the six-month period ended December 31, 2024, the Company received $533,381 under the ELOC Agreement and repaid $20,000 in subordinated debt.
Going Concern Consideration
Historically, the Company has funded its operations primarily through the issuance of equity and debt securities. As of December 31, 2025, the Company had cash and cash equivalents of $23,080,646 and had experienced recurring operating losses. These factors previously raised substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of these financial statements.
On October 8, 2025, the Company entered into (i) the Restated SPA with Funicular Funds, LP, pursuant to which the Company issued and sold the Restated Note for gross proceeds of $10.0 million, and (ii) the Equity SPA with certain institutional investors, including Funicular, pursuant to which the Company issued and sold Units at $0.60 per Unit for an aggregate sales price of $10.0 million (including $4.15 million converted from the Convertible Notes). The closings of these financings occurred between October 9 and October 14, 2025.
Management believes that the total net proceeds from these financings, together with expected cash inflows from operations, will provide adequate liquidity to support the Company’s operating plan and meet its obligations for at least the next twelve months following the date of this filing. As a result, management has determined that substantial doubt about the Company’s ability to continue as a going concern has been alleviated.
Management continues to evaluate its operating plan, monitor cash flow requirements, and assess potential financing alternatives to support the Company’s long-term growth initiatives and capital requirements.
Off-Balance Sheet Arrangements
The Company has no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025.
Contractual Obligations
The Company holds several long-term debt obligations with outside vendors and investors, with loans maturing between 2025 and 2026 (see Notes 8 and 12 in the accompanying condensed consolidated financial statements). Additionally, the Company leases office space under several operating leases. The Company has no capital lease obligations. Further, there are no other outstanding long-term liabilities contractually obligated by the Company.
| 45 |
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Derivative Liabilities
We account for derivative instruments as either equity-classified or liability-classified instruments based on an assessment of the derivative instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the derivative instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the derivative instruments meet all of the requirements for equity classification under ASC 815, including whether the derivative instruments are indexed to our own Common Stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance and as of each subsequent quarterly period end date while financial instruments are outstanding.
For issued or modified derivatives that meet all of the criteria for equity classification, the derivatives are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified derivatives that do not meet all the criteria for equity classification, the derivatives are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the derivatives are recognized as a non-cash gain or loss on the statements of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As of December 31, 2025, an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) was carried out by our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based upon that evaluation, the CEO and CFO have concluded that as of the end of that fiscal quarter, our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
As a result of the business combination, the Company has incorporated changes in internal controls as it relates to the controls and procedures of Wilson-Davis. The Company has incorporated additional controls as necessary to enhance our control environment, such as continue to engage consultants or outside accounting firms in order to ensure proper accounting for our consolidated financial statements and ensure proper communication is maintained between officers and accountants. Except as discussed, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 46 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, party to various legal proceedings arising in the ordinary course of business. We are currently not party to any litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material and adverse effect on our business, financial position or results of operations.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
Other than as previously disclosed in a current report on Form 8-K, none.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
| 47 |
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
* Filed herewith.
** Furnished herewith.
| 48 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ATLASCLEAR HOLDINGS, INC. | ||
| Date: February 13, 2026 | By: | /s/ John Schaible |
| Name: | John Schaible | |
| Title: | Executive Chairman | |
| (Principal Executive Officer) | ||
| Date: February 13, 2026 | By: | /s/ Sandip Patel |
| Name: | Sandip Patel | |
| Title: | General Counsel and Chief Financial Officer | |
| (Principal Financial Officer) | ||
| 49 |