AIFC 10-K & 10-Q changes, risk factors and insider trading
AI Financial Corp · Nasdaq · Commodity Contracts Brokers & Dealers · CIK 862861 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Adverse economic conditions and volatility in crypto asset markets could reduce transaction volumes, customer activity, and access to banking and capital, which could adversely affect our business.”
New heading “Our operations in multiple foreign jurisdictions expose us to political, regulatory, legal, and currency risks that could adversely affect our business.”
New heading “The loss or destruction of private keys required to access our digital assets or those of our customers could result in permanent, irrecoverable loss.”
New heading “The potential classification of certain crypto assets as securities by the SEC or other regulators could materially impact our business operations and require significant restructuring.”
New heading “Evolving tax treatment of digital assets creates uncertainty in our tax obligations and potential retroactive liabilities.”
New heading “We are exposed to risks from blockchain forks and from the decentralized and open-source nature of blockchain protocols, which could disrupt our platform operations, compromise network integrity, and create uncertainty regarding supported digital assets.”
New heading “Our platform is exposed to chargeback, fraud, and unauthorized transaction losses, particularly in connection with our payment card and fiat-linked services.”
New heading “Customer crypto assets held on our platform are not insured by the FDIC or SIPC, and customers could suffer losses in the event of platform failure.”
New heading “Our banking and financial institution relationships may be disrupted, which could have a material adverse effect on our ability to operate.”
New heading “We are subject to extensive anti-money laundering, counter-terrorism financing, know-your-customer and economic sanctions obligations, and our failure to comply with these requirements, including those administered by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”), could subject us to significant penalties and adversely affect our business.”
New heading “Regulatory, investor and market focus on climate-related risks and the environmental impact of digital asset networks may impose additional compliance costs and reputational risks on our business.”
New heading “We face intense competition from larger crypto platforms, decentralized networks, traditional financial institutions and payment providers, which could reduce our market share, compress margins and increase customer acquisition costs.”
New heading “We are subject to risks associated with our compliance and risk management methods.”
New heading “We obtain, process, and store a large amount of sensitive personal and financial data and are subject to evolving data privacy, data protection, and information security laws and regulations, and any failure to protect such data or comply with applicable requirements could adversely affect our business.”
New heading “Our acquisition of Fortress II Holdings and its Mswipe payment card operations exposes us to integration, compliance, and operational risks specific to the payments industry.”
New heading “We may be unable to effectuate the planned formal separation of our biotechnology segment, which could adversely affect our financial condition and strategic objectives.”
New heading “Effectuating a formal separation of our biotechnology segment is complex and may divert management’s attention and consume significant resources, which could adversely affect both the biotechnology segment and our remaining operations.”
New heading “The biotechnology segment, if formally separated, may be unable to raise sufficient capital to fund its operations and development programs as a standalone entity, which could impair its viability and the value realized by our stockholders.”
New heading “If effectuating the formal separation results in Alyea becoming a stand-alone publicly traded entity, it may not qualify for or maintain a listing on a national securities exchange, which could impair the liquidity and value of its securities owned by us or, prospectively, by our stockholders.”
New heading “Effectuating the formal separation of the biotechnology segment in a spinoff transaction may have adverse tax consequences for our stockholders and for us.”
New heading “Unlike currently, following a formal separation of our biotechnology segment, it will operate without our financial support and may face challenges in establishing itself as a fully independent company.”
New heading “Risks Relating to Ownership of Our Common Stock”
Removed heading “Adverse economic conditions could adversely affect our business.”
Removed heading “Our operating expenses may increase in the future and we may not be successful in increasing our revenue to sufficiently offset these higher expenses, which could impact our ability to achieve profitability or positive cash flow from operations on a consistent basis and cause our business, operating results, and financial condition to be adversely affected.”
Removed heading “If we do not effectively manage our growth, including by maintaining and improving our systems and processes, our business, operating results, and financial condition could be adversely affected.”
Removed heading “Due to our limited fintech operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period.”
Removed heading “Any acquisitions and investments that we make could require significant management attention, disrupt our business, result in dilution to our stockholders, and could adversely affect our business, operating results, and financial condition.”
Removed heading “If we fail to develop, maintain, and enhance our brand and reputation, our business, operating results, and financial condition could be adversely affected.”
Removed heading “Internal key business metrics and other estimates are subject to inherent challenges in measurement and change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.”
Removed heading “Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams. If our platform is used to further such illegal activities, our business, operating results, and financial condition could be adversely affected.”
Removed heading “Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results, and financial condition.”
Removed heading “The crypto-economy is novel. As a result, policymakers are just beginning to consider what a regulatory regime for crypto would look like and the elements that would serve as the foundation for such a regime. This less developed consideration of crypto may harm our ability to effectively react to proposed legislation and regulation of crypto assets or crypto asset platforms adverse to our business.”
Removed heading “We obtain and process a large amount of sensitive customer data. Any real or perceived improper use of, disclosure of, or access to such data could harm our reputation, as well as adversely affect our business, operating results, and financial condition.”
Removed heading “We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection where we conduct our business, and industry requirements and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business.”
Removed heading “If we fail to implement our biopharmaceutical business strategy or if our biopharmaceutical business strategy is ineffective, our financial performance could be materially and adversely affected.”
Removed heading “Our biotechnology business has a limited operating history.”
Removed heading “Our business model is partially dependent on certain patent rights licensed to us from the Licensors (as defined below), and the loss of those license rights would, in all likelihood, cause our business, as presently contemplated, to fail.”
Removed heading “We will be completely dependent on third parties to manufacture JAN101 and JAN123, and their commercialization could be halted, delayed, or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of JAN101 or JAN123, or fail to do so at acceptable quality levels or prices.”
Removed heading “Pharmacies may be able to compound LDN in competition with us, but the economic impact may not be material.”
Removed heading “If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our initial or subsequent product candidates.”
Removed heading “The success of our biotechnology business is entirely dependent on our ability to obtain the marketing approval for our product candidates by the FDA and the regulatory authorities in foreign jurisdictions in which we intend to market them, of which there can be no assurance.”
Removed heading “Clinical testing is expensive, is difficult to design and implement, can take many years to complete, and is uncertain as to outcome.”
Removed heading “Even if we receive regulatory approval for JAN101 or JAN123, we may not be able to commercialize it successfully and the revenue that we generate from its sales, if any, may be limited.”
Removed heading “Even if we obtain marketing approval for our product candidate, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidate could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidate.”
Removed heading “Obtaining and maintaining regulatory approval of JAN101 or JAN123 in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of JAN101 or JAN123 in other jurisdictions.”
Removed heading “Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our initial or subsequent product candidates and affect the prices we may obtain.”
Removed heading “Any termination or suspension of, or delays in the commencement or completion of, any necessary studies of any of our product candidate for any indications could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.”
Removed heading “Third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.”
Removed heading “It is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.”
Removed heading “It is difficult and costly to block others from developing similar products for other indications, and we cannot ensure that these products will not be less expensive and thus be prescribed off-label by physicians for use in our indications.”
Removed heading “JAN101 or JAN123 may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts.”
Removed heading “GENERAL RISK FACTORS”
Largest changes
“There is a risk that as we expand, we may assume liabilities for breaches experienced by the companies that we may acquire. Additionally, there are potentially inconsistent world-wide government regulations pertaining to data protection and privacy. Despite our efforts to comply with applicable laws, regulations, and other obligations relating to privacy, data protection, and information security, it is possible that our practices, offerings, or platform could fail, or be alleged to fail to meet applicable requirements. …”see in full comparison
“We have administrative, technical, and physical security measures and controls in place and maintain a robust information security program. …”see in full comparison
“Our future success depends on the reliability and security of our platform. To the extent that the measures we, any companies we acquire, or our third-party service providers, vendors, or business partners have taken prove to be insufficient or inadequate, or to the extent we discover a security breach suffered by a company we acquire following the closing of such acquisition, we may become subject to litigation, breach notification obligations, or regulatory or administrative sanctions, which could result in significant fines, penalties, damages, harm to our reputation, or loss of customers. …”see in full comparison
“These laws include, among others, the California Consumer Privacy Act (the “CCPA”), the General Data Protection Regulation (“GDPR”) in the European Union, and other international data protection laws. Privacy and data protection laws continue to evolve and may be interpreted and applied in a manner that is inconsistent with our current data handling safeguards and practices, which could result in fines, penalties, litigation, or regulatory enforcement actions.. …”see in full comparison
“In addition, if JAN101 or JAN123 is approved for a particular indication, our product labeling, advertising, and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. …”see in full comparison
“Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams. We or our partners may be specifically targeted by individuals seeking to conduct fraudulent transfers, and it may be difficult or impossible for us to detect and avoid such transactions in certain circumstances. …”see in full comparison
Full comparison: every changed paragraph (253)
We
have identified and disclosed in this Form 10-K material weaknesses in our internal control over financial reporting. If we are not able to remediate these
material weaknesses and maintain an effective system of internal controls, we may not be able to accurately or timely report our financial
results, which could cause our stock price to fall orand resultcould inadversely affect investor confidence and our stockability beingto
maintain delisted.compliance with Nasdaq listing requirements.
We
need to devote significant resources and time to comply with the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”)
with respect to internal control over financial reporting. In addition, Section 404 under Sarbanes-Oxley requires that we assess the design and operating
effectiveness of our controls over financial reporting, which are necessary for us to provide reliable and accurate financial reports.
As
reported in Part II –— Item 9A, Controls and Procedures, there were material weaknesses in our internal controls over financial reporting at January 1, 2022.
reporting. Specifically, management noted the following material weaknesses in internal control when conducting their evaluation of internal control as of January 1, 2022: (1) insufficient information technology
general controls and segregation of duties.duties, Itwhere was noted that people who wereindividuals negotiating a contractcontracts were also involved in approving invoices without
proper oversight. Additional controls and procedures are necessary and are being implemented to have checks and balances on significant transactions and governance with those charged with governance authorityoversight; (2) inadequate control design or lack of sufficient controls over significant accounting processes;processes, theincluding ineffective
cutoff and reconciliation procedures werewith notrespect effective withto certain accrued and deferred expenses; (3) insufficient assessment of the impact
of potentially significant transactions; and (4) insufficient processes and procedures related to proper recordkeeping of agreements
and contracts.contracts, Inincluding addition,ineffective contract-to-invoice reconciliation was not effective with certain transportation service providers. As part of its remediation plan,Remediation processes and procedures
have been implemented to help ensure accruals and invoices are reviewed for accuracy and properly recorded in the appropriate period.
We
expect our systems and controls to become increasingly complex to the extent that we integrate acquisitions and if and as our business grows. To effectively manage our Company today and this anticipated complexity, we need to remediate these material weaknesses and continue to improve our operational, financial, and management controls and our reporting systems and procedures.
Any failure to remediate these material weaknesses and implement required new or improved controls, or difficulties encountered in the
implementation or operation of these controls, could harm our operating results or cause us to fail to meet our financial reporting obligations,
which could adversely affect our business and jeopardize our listing on the Nasdaq Capital Market,Market. eitherIneffective disclosure controls and
procedures or internal control over financial reporting may adversely affect investor confidence and, as a result, negatively impact
the price of whichour wouldCommon harmStock and have a material and adverse effect on our stockbusiness, price.operating results, and financial condition.
The
preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management
to make estimates and assumptions that affect the amounts reported in theour Consolidatedconsolidated Financialfinancial Statementsstatements and accompanying notes. We
base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies” in Part II, Item 7 of this Annual Report on Form 10-K. circumstances.
The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and
the amount of expenses that are not readily apparent from other sources. Significant estimates and judgments that comprise our critical
accounting estimates involve the valuation of assets acquired and liabilities assumed in business combinations, valuationthe recoverability of strategic investments, evaluation of tax positions,
goodwill and evaluationlong-lived ofassets, legalrevenue recognition, and otheraccounting contingencies.for Ourdigital business,assets. operatingIf results,the assumptions underlying our accounting
estimates prove to be incorrect, actual results may differ materially from what we have projected, resulting in material adjustments
to our financial statements and financialadverse conditionimpacts could be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could causeto our operating results to differ from the expectations of analysts and investors, resulting in a decline in the trading price of our Common Stock.results.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, with the participation of the Company’s principal executive officer and principal financial officer, conducted an evaluation of the design and effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective due to the existence of material weaknesses.
Adverse economic conditions and volatility in crypto asset markets could reduce transaction volumes, customer activity, and access to banking and capital, which could adversely affect our business.
Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that are required to be included in our periodic reports filed with the SEC. Ineffective disclosure controls and procedures or internal control over financial reporting may adversely affect investor confidence in us and, as a result, negatively impact the price of our Common Stock and have a material and adverse effect on our business, operating results, and financial condition.
Adverse economic conditions could adversely affect our business.
Our
performance is subject to general economic conditions,conditions and their impact on the crypto asset markets and our customers. TheAdverse Unitedgeneral
economic Statesconditions, including recessions, inflation, rising interest rates, supply chain disruptions, bank failures, and other key international economies have experienced cyclical downturns from time to time in which economic activity declined resulting in lower consumption rates, restricted credit, reduced profitability, weaknesses in financial markets, bankruptcies, and overall uncertainty with respect to the economy. Adverse general economic conditionsgeopolitical
instability, have impacted in the past, and may impact in the future,future impact the crypto-economy,crypto-economy. although theThe extent of such impacts remains uncertain and dependent
on a variety of factors, including market adoption of crypto assets, global trends in the crypto-economy, central bank monetary policies,
and instability in the global banking system, volatility and disruptions in the capital and credit markets, and other events beyond our control.system. Geopolitical developments, such as trade and tariff warsconflicts and foreign exchange limitations,
can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and crypto asset markets.market For example, in the past the capital and credit markets have experienced extreme volatility and disruptions, resulting in steep declines in the value of crypto assets.volatility. To the extent general economic
conditions and crypto assetsasset markets materially deteriorate or decline for a prolonged period, our ability to generate revenue and to attract
and retain customers could suffer and our business, operating resultsresults, and financial condition could be adversely affected. Moreover,
even if general economic conditions were to improve following any such deterioration,improve, there is no guarantee that the crypto-economy would similarly improve.
Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, or the financial services industry generally, or concerns or rumors about any such events or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
We have funded our operations since inception primarily through equity financings, debt, and cash flows generated from operations. We cannot be certain that our operations will continue to fund our ongoing operations or the growth of our business. We intend to continue to make investments in our business, which investments may require us to secure additional funds. Additional financing may not be available on terms favorable to us, if at all, including due to general macroeconomic conditions, crypto market conditions and any disruptions in the crypto market, instability in the global banking system, increasing regulatory uncertainty and scrutiny, or other unforeseen factors.
If we incur additional debt, the debt holders would have rights senior to holders of our Common Stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our Common Stock. If we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued Common Stock. The trading prices for our Common Stock may be highly volatile, which may reduce our ability to access capital on favorable terms or at all. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Common Stock and diluting their interests.
We have funded our operations since inception primarily through equity financings, debt, and cash flows generated from operations. We cannot be certain that our operations will continue to fund our ongoing operations or the growth of our business. We intend to continue to make investments in our business, which investments may require us to secure additional funds. Additional financing may not be available on terms favorable to us, if at all, including due to general macroeconomic conditions, crypto market conditions and any disruptions in the crypto market, instability in the global banking system, increasing regulatory uncertainty and scrutiny or other unforeseen factors. In the event of a downgrade of our credit rating, our ability to raise additional financing may be adversely affected and any future debt offerings or credit arrangements we propose to enter into may be on less favorable terms or terms that may not be acceptable to us. In addition, even if debt financing is available, the cost of additional financing may be significantly higher than our current debt. If we incur additional debt, the debt holders would have rights senior to holders of our Common Stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our Common Stock. Furthermore, we have authorized the issuance of “blank check” preferred stock and Common Stock that our board of directors could use to, among other things, issue shares of our capital stock in the form of blockchain tokens, implement a stockholder rights plan, or issue other shares of preferred stock or Common Stock. We may issue shares of capital stock, including in the form of blockchain tokens, to our customers in connection with customer reward or loyalty programs. If we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued Common Stock. The trading prices for our Common Stock may be highly volatile, which may reduce our ability to access capital on favorable terms or at all. In addition, a slowdown or other sustained adverse downturn in the general economic or crypto asset markets could adversely affect our business and the value of our Common Stock. Because our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Common Stock and diluting their interests.
Natural
disasters or other catastrophic events may also cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating results, and financial condition.
economy. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics, and other events
beyond our control. In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer. For example, the COVID-19 pandemic and the related precautionary measures that we adopted have in the past resulted, and could in the future result, in difficulties or changes to our customer support, or create operational or other challenges, any of which could adversely affect our business, operating results, and financial condition. Further, actsActs of terrorism, labor activism or unrest, and other geopolitical unrest, including ongoing regional conflicts around the world,
could cause disruptions into our business or the businesses of our partners or the economy as a whole.partners. In the event of a major natural disaster, including a major earthquake, blizzard,disaster or hurricane, or a catastrophic event
such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions,
reputational harm, delays in development of our platform, lengthy interruptions in service, breaches of data security, and loss of critical
data, all of which could have an adverse effect on our future operating results. We do not maintain insurance sufficient to compensate
us for the potentially significant losses that could result from disruptions to our services. Additionally, all the aforementioned risks may be further increased if we do not implement a disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate. To the extent natural disasters or other catastrophic
events concurrently impact data centers we rely on in connection with private key restoration, customers will experience significant
delays in withdrawing funds, or in the extremeextreme, we may suffer loss of customer funds.
Our operations in multiple foreign jurisdictions expose us to political, regulatory, legal, and currency risks that could adversely affect our business.
We operate subsidiaries and conduct business activities in multiple foreign jurisdictions, including Lithuania, the Czech Republic, Canada, and Saint Vincent and the Grenadines. Operating in these jurisdictions exposes us to risks that are different from and incremental to those we face in the United States, including: (i) differing and evolving legal, regulatory, and licensing requirements for financial services, money transmission, and digital asset activities; (ii) political instability, currency controls, and changes in governmental policy; (iii) foreign currency exchange rate fluctuations that could affect our results of operations when translated back to U.S. dollars; (iv) varying data privacy and cybersecurity laws that may be inconsistent with our global practices; and (v) tax laws and treaty arrangements that may be subject to change, creating retroactive or unexpected tax liabilities. Any adverse developments in these jurisdictions, including regulatory actions that restrict our ability to operate, could have a material adverse effect on our business, financial condition, and results of operations.
Our
operating results have and will continue to significantly fluctuate, including due to the highly volatile nature of crypto.crypto assets.
•crypto asset trading activity, including trading volume and the prevailing trading prices for crypto assets, which can be highly volatile;
•our ability to attract, maintain, grow, and engage our customer base;
•changes in the legislative or regulatory environment, or actions by Common Stock or foreign governments or regulators, including fines, orders, or consent decrees;
•regulatory changes or scrutiny that impact our ability to offer certain products or services;
•pricing for or temporary suspensions of our products and services;
•our ability to establish and maintain partnerships, collaborations, joint ventures, or strategic alliances with third parties;
•market conditions of, and overall sentiment towards, the crypto-economy;
•macroeconomic conditions, including interest rates, inflation, and instability in the global banking system;
•adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceedings, and enforcement-related costs;
•the development and introduction of existing and new products and services by us or our competitors;
•the amount and timing of our operating expenses related to the maintenance and expansion of our business and operations, including investments we make in the development of products and services;
•system failures, outages, or interruptions, including with respect to our platform and third-party crypto networks;
•our lack of control over decentralized or third-party blockchains and networks that may experience downtime, cyberattacks, critical failures, errors, bugs, corrupted files, data losses, or other similar software failures, outages, breaches, and losses;
•breaches of security or privacy;
•inaccessibility of our platform due to our or third-party actions;
•our ability to attract and retain talent; and
•our ability to compete with our competitors.
As a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term. Therefore, our operating results could fluctuate significantly as a result of changes in the demand for our subscription and service offerings, in interest rates, and to our ongoing relationships with third parties.
As
a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult
to evaluate, particularly in the short term. In view of the rapidly evolving nature of our business and the crypto-economy, period-to-period
comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. Quarterly and annual expenses reflected in our financial statements may be significantly different from historical or projected rates.
Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors. As a result,
the trading price of our Common Stock may increase or decrease significantly.
Our
total fintech revenue is substantially dependent on the volume of transactions conducted on our platform. If volume declines, our business,
operating results, and financial condition would be adversely affected and the price of our Common Stock could decline.affected.
We
generate a large portion of our total fintech (and corporate) revenue from transaction fees on our platform. Transaction revenue is based on transaction
fees, fees.and Suchsuch revenue has grown over time. Declines in the volume of crypto asset transactions, among other reasons,transactions may result in lower total revenuerevenue. The
price of crypto assets and associated demand for buying, selling, and trading crypto assets have historically been subject to us.significant
volatility. The transaction volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of
factors, including:
The price of crypto assets and associated demand for buying, selling, and trading crypto assets and conversions back and forth with fiat have historically been subject to significant volatility. If the volume of such transactions declines in the future, our ability to generate revenue, which could adversely affect our business, operating results, and financial condition and cause the price of our Common Stock to decline. The transaction volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of factors, including:
•market conditions of, and overall sentiment towards, crypto assets and the crypto-economy, including, but not limited to, as a result of actions taken by or developments of other companies in the crypto-economy;
•trading activities on other crypto platforms worldwide, many of which may be unregulated, and may include manipulative activities;
•investment and trading activities of highly active consumer and institutional users, speculators, miners, and investors;
•the speed and rate at which crypto is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial assets worldwide, if at all;
•decreased user and investor confidence in crypto assets and crypto platforms;
•negative publicity and events relating to the crypto-economy;
•unpredictable social media coverage or “trending” of, or other rumors and market speculation regarding, crypto assets;
•the ability for crypto assets to meet user and investor demands;
•the functionality and utility of crypto assets and their associated ecosystems and networks, including crypto assets designed for use in various applications;
•consumer preferences and perceived value of crypto assets and crypto asset markets;
•increased competition from other payment services or other crypto assets that may exhibit better speed, security, scalability, or other characteristics;
•adverse legal proceedings or regulatory enforcement actions, judgments, or settlements impacting crypto-economy participants;
•regulatory or legislative changes, scrutiny, and updates affecting the crypto-economy;
•the characterization of crypto assets under the laws of various jurisdictions around the world;
•the adoption of unfavorable taxation policies on crypto asset investments by governmental entities;
•ongoing technological viability and security of crypto assets and their associated smart contracts, applications, and networks, including vulnerabilities against hacks and scalability;
•speed and fees associated with processing crypto asset transactions, including on the underlying blockchain networks and on crypto platforms;
•financial strength of market participants;
•the availability and cost of funding and capital;
•the liquidity and credit risk of other crypto platforms and other participants of the crypto-economy;
Management's Discussion & Analysis (MD&A)
New heading “Corporate and Other”
New heading “Adjusted EBITDA”
New heading “Unrealized Loss on Cryptocurrency Assets”
New heading “Segment Performance”
New heading “Adjusted EBITDA (Non-GAAP) Reconciliation”
Removed heading “Impairment Charges”
Removed heading “Gain on Sale of the Recycling Subsidiaries”
Removed heading “Biotech Segment”
Largest changes
“In Item 1A. Risk Factors, management has addressed and evaluated the risk factors that could materially and adversely affect the entity’s business, financial condition and results of operations, cash flows, and liquidity. The Company has determined that the risk factors do not materially affect the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.”see in full comparison
“Our ability to continue as a going concern is dependent upon the success of future capital raises or structured settlements and cash flows from the acquisition of ALT5 Subsidiary to fund the required testing to obtain FDA approval of JAN 123, as well as to fund our day-to-day operations. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. While we will actively pursue these additional sources of financing, management cannot make any assurances that such financing will be secured.”see in full comparison
“The accompanying financial statements have been prepared under the assumption that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.”see in full comparison
“Based on the above, management has concluded that the Company is not aware and did not identify any other conditions or events that would cause the Company to not be able to continue business as a going concern for the next 12 months.”see in full comparison
“We evaluate the performance of our operations based on financial measures such as “Adjusted EBITDA”, which is a non-U.S. GAAP financial measure. We define Adjusted EBITDA as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business’s ability to fund acquisitions and other capital expenditures, and to service its debt. …”see in full comparison
Full comparison: every changed paragraph (55)
Through
our Fintech segment, we provide next generation blockchain-powered technologies to enable a migration to a new global financial paradigm,
and, through our Biotechnology segment, we are focused on finding treatments for conditions that cause chronic pain and bringing to market
drugs with non-addictive and non-sedative pain-relieving properties. In addition, through our sale of subsidiaries ARCA Recycling, Connexx, and ARCA Canada and the assets of GeoTraq Inc., we have exited these legacy businesses; Consequently, the results for these businesses are reported as discontinued operations for the years ended December 28, 2024 and December 30, 2023.
During the periods disclosed in this Annual Report, we operated three segments:
Fintech
We operate three reportable segments:
•Fintech: Our
Fintech segment provides next generationnext-generation blockchain-powered technologies for tokenization, trading, clearing, settlement, payment, and
safe-keeping of digital assetsassets.
Biotechnology
•Biotechnology: Our
Biotechnology segment is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive
pain-relieving properties. We have previously announced our intention to capitalize a subsidiary with certain of our biotechnology assets,
acquire an additional biotechnology asset, and then engage in athe financing of that subsidiary. The short-term intended result of that
series of transactions would be for to decouple it from us so that it would operate on a stand-alone basis.
The Biotech segment is being presented as a discontinued operation for the years ended December 27, 2025 and December 28, 2024
(see Note 4 of our Condensed Consolidated Financial Statements).
Corporate and Other
In August 2025, the Company closed a $1.5 billion registered direct offering and concurrent private placement – led by World Liberty Financial, Inc. – to support our WLFI Treasury Strategy. As a result, the Company acquired a significant position in WLFI, the native governance token of the World Liberty Financial ecosystem.
WLFI is a digital asset that is designed to provide governance functions within the World Liberty Financial ecosystem. With a fixed maximum supply of 100 billion tokens, WLFI powers decentralized lending, borrowing, staking, and governance within a rapidly growing DeFi platform.
A core driver of WLFI’s value is its economic linkage to USD1, the ecosystem’s flagship U.S. dollar-pegged stablecoin. USD1 is issued on a basis intended to be fully reserved, audited, and redeemable. USD1 aims to establish itself as a primary medium of exchange for institutions and consumers alike. Increased adoption of USD1 directly accrues value to WLFI holders through protocol fees, governance rights, and ecosystem growth.
We currently intend to integrate WLFI into our existing payment and trading infrastructure, which serves clients in North America, Europe, and Asia. Our vision includes collaborating with WLFI to help enable everyday commerce – such as retailers accepting WLFI or USD1, with instant fiat conversion, cross-border B2B settlements, and tokenized assets settled using WLFI and/or USD1 as the medium of exchange.
Our policy remains a committed long-term approach, with future acquisitions funded through operating cash flows, structured debt, and selective capital raises. Sales are restricted to liquidity requirements or material portfolio rebalancing events.
Our Corporate and Other segment consists of WLFI assets, including any additions, redemptions, or mark-to-market changes in value, which are recorded within the Company’s Corporate and Other segment.
•Corporate and Other: Our
Corporate and Other segment also consists of certain corporate general and administrative costs.
Critical
accounting policies are defined as those that are reflective of significant judgments and uncertainties and potentially result in materially
different results under different assumptions and conditions. Critical accounting policies include intangible impairment under ASC 350,
and revenue recognition under ASC 606, and going concern under ASC 205.606.
Adjusted EBITDA
We evaluate the performance of our operations based on financial measures such as “Adjusted EBITDA”, which is a non-U.S. GAAP financial measure. We define Adjusted EBITDA as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business’s ability to fund acquisitions and other capital expenditures, and to service its debt. Additionally, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate a company’s financial performance, subject to certain adjustments. Adjusted EBITDA does not represent cash flows from operations, as defined by U.S. GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all our cash needs. It is, however, a measurement that we believe is useful to investors in analyzing our operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities, and other measures of financial performance prepared in accordance with U.S. GAAP. As companies often define non-U.S. GAAP financial measures differently, Adjusted EBITDA, as calculated by the Company, should not be compared to any similarly titled measures reported by other companies.
Revenue
Revenue
increased by approximately $8.8$13.0 million for the fiscal year ended December 28,27, 2024,2025, as compared to the year ended December 30,28, 2023. 2024.
The increase is due to the acquisition of ALT5 Subsidiary during May 2024, partiallyas offsetwell by no revenue from discontinued operations foras the fiscalacquisition yearof endedMswipe Decemberduring 28,May 2024.2025.
Gross
profit increased by approximately $6.5$4.6 million for the fiscal year ended December 28,27, 2024,2025, as compared to the year ended December 30, 2023.28,
2024. The increase is due to the acquisition of ALT5 Subsidiary during May 2024, partiallyas offsetwell by no revenue from discontinued operations foras the fiscalacquisition yearof endedMswipe Decemberduring 28,May 2024.2025.
Selling,
general and administrative expenses from continuing operations increased by approximately $7.6$20.5 million for the fiscal year ended December
27, 28, 2024,2025, as compared to the year ended December 30,28, 2023,2024, primarily due to the acquisitionacquisitions of ALT5 Subsidiary duringin May 2024,2024 increased amortization costs relating to the Soin intangiblesand
Mswipe in ourMay Biotech2025, segment,as well as higher bad debt and legal expenses and increased stock-based compensation expensefrom relatedRSU to grants of RSU's, as well as costs for professional services in our Corporate and Other segment.grants.
Impairment Charges
Impairment charges recorded during the fiscal year ended December 30, 2023 were approximately $15.1 million. These charges relate to the full impairment of the VM7 and SPYR notes receivable of approximately $5.3 million and $9.8 million, respectively (See Note 9 of the Consolidated Financial Statements). No impairment charges were recorded during the fiscal year ended December 28, 2024.
Interest Income (Expense),
Expense, net
Interest
expense, net, was approximately $880,000$3.9 million for the fiscal year ended December 28,27, 2024,2025, as compared to interest income, net, of approximately $2.3$1.2 million for the year ended December 30, 2023. The change was primarily due to no longer accreting the discounts in connection with the promissory note with SPYR and the receivable from VM7, promissory notes entered into during
the year ended December 28, 2024,2024. asThe wellchange aswas primarily driven by the acquisition of ALT5 Subsidiary duringin May 2024.2024, as well as
higher average debt balances during the period.
Gain on Sale of the Recycling Subsidiaries
During the fiscal year ended December 30, 2023, we recorded a gain on the sale of the Recycling Subsidiaries of approximately $12.1 million from discontinued operations. See Note 4 of the Consolidated Financial Statements.
Unrealized
loss on marketable securities for the fiscal year ended December 28, 2024 was approximately $1.1$1.2 million,million. asUnrealized comparedgains toor alosses
on lossmarketable securities reflect the mark-to-fair-value adjustment for securities received in connection with the sale of approximatelyGeoTraq. $925,000No
such fortransactions occurred during the fiscal year ended December 30,27, 2023. An unrealized gain or loss on marketable securities is recorded to mark to fair value securities received in connection to the sale of GeoTraq.2025.
Unrealized Loss on Cryptocurrency Assets
Unrealized loss on cryptocurrency assets for the fiscal year ended December 27, 2025 was approximately $402.0 million. An unrealized loss was recorded to mark our WLFI tokens to fair value. No such unrealized gain or loss was recorded during the fiscal year ended December 28, 2024.
Segment Performance
We report our business in the following segments: Fintech, Biotechnology and Corporate and Other. During fiscal 2025, the Company announced its intent formally to separate its Biotechnology segment, also known as Alyea. As a result, the Biotechnology segment is presented as discontinued operations for the fiscal years ended December 27, 2025 and December 28, 2024.
Our
Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024.2024, as well as Mswipe, which was acquired during May 2025.
Revenue for the fiscal year ended December 28,27, 20242025 was approximately $12.5$24.8 million, and gross margin percentage was 50.2%.41.0%. Operating income
loss for the fiscal year ended December 28,27, 20242025 was approximately $900,000.$6.2 million.
Biotech Segment
Our Biotech segment generated no revenue for the fiscal year ended December 28, 2024. Selling, general and administrative expenses increased primarily due to increased amortization costs relating to the Soin intangibles.
Our
Corporate and Other segment generated no revenue for the fiscal year ended December 28,27, 2024.2025. Selling, general and administrative expenses
increased increasedby approximately $9.6 million primarily due to increased costs for stock-based compensation expenseand relatedlegal to grants of RSU's,expenses, as well as increased costs for
other professional services.
Biotech Segment (Discontinued Operations)
During fiscal 2025, the Company announced its intent formally to separate its Biotechnology segment, also known as Alyea. As a result, the Biotechnology segment is presented as discontinued operations for the fiscal year ended December 27, 2025. Selling, general and administrative expenses increased over the prior year period primarily due to increases in professional fees and research and development costs.
Adjusted EBITDA (Non-GAAP) Reconciliation
The following table presents a reconciliation of net income to Adjusted EBITDA for the fiscal years ended December 27, 2025 and December 28, 2024 (in $000’s):
Adjusted EBITDA decreased by approximately $13.9 million for the fiscal year ended December 27, 2025, as compared to the prior year period. The decrease was primarily due to the results of operations, as discussed above.
Discontinued operations consist of our Recycling segment, which was disposed of effective March 1, 2023. We had no discontinued operations for the fiscal year ended December 28, 2024.
Overview
The accompanying financial statements have been prepared under the assumption that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
As
of December 28,27, 2024,2025, our cash on hand was approximately $7.2$6.2 million. Approximately $3.5 million of cash has been fully reserved in
connection with the legal matter, further described in Note 20 to the consolidated financial statements. We intend to raise funds
to support future development of JAN 123JAN123 either through capital raises or structured arrangements, which would include effectuating our
previously announced intention to capitalize a subsidiary with certain of our biotechnology assets, acquire an additional biotechnology
asset, and then engage in a financing of that subsidiary. The short-term intended result of that series of transactions would be for
us to own a controlling interest in that subsidiary, but to decouple it from us so that it would operate on a stand-alone basis, although
its financial statements would continue to be consolidated with ours for as long as we have a controlling interest.
Our ability to continue as a going concern is dependent upon the success of future capital raises or structured settlements and cash flows from the acquisition of ALT5 Subsidiary to fund the required testing to obtain FDA approval of JAN 123, as well as to fund our day-to-day operations. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. While we will actively pursue these additional sources of financing, management cannot make any assurances that such financing will be secured.
During
the fiscal year ended December 28,27, 2024,2025, cash providedused byin operations was approximately $1.8$7.2 million, compared to cash provided by operations
of approximately $855,000$1.8 during the fiscal year ended December 30, 2023. Cash provided by operating activities from discontinued operations during the fiscal year ended December 30, 2023 was approximately $2.3 million. We had no discontinued operationsmillion during the fiscal year ended December 28, 2024. The changedecrease in cash was primarily due to results of operations
as discussed above. There was no cash used in operating activities for discontinued operations during the fiscal years ended December
27, 2025 or December 28, 2024.
Cash used in investing activities was approximately $706.6 million for the fiscal year ended December 27, 2025, compared to cash provided by investing activities of approximately $5.9 million for the fiscal year ended December 28, 2024. Cash used in investing activities for the fiscal year ended December 27, 2025 was primarily the purchase of WLFI tokens, partially offset by tokens redeemed during the period, while cash provided by investing activities for the fiscal year ended December 28, 2024 was related to cash acquired in the acquisition of ALT5 Subsidiary. There was no cash used in investing activities for discontinued operations during the fiscal years ended December 27, 2025 or December 28, 2024 Cash provided by financing activities was approximately $716.8 million for the fiscal year ended December 27, 2025, and primarily relates to proceeds received from equity financing and the issuance of notes payable, partially offset by cash paid for fees related to the equity financing, cash paid for notes payable and related party notes payable. Cash provided by financing activities was approximately $6.1 million for the fiscal year ended December 28, 2024, and relates to proceeds from notes payable, proceeds from equity financing and warrants exercised, and proceeds from related party notes payable, partially offset by payments on notes payable, as well as payments on related party notes payable. There was no cash used in financing activities for discontinued operations during the fiscal years ended December 27, 2025 or December 28, 2024
Cash provided by investing activities was approximately $5.9 million for the fiscal year ended December 28, 2024, compared to cash used in investing activities of approximately $156,000 for the fiscal year ended December 30, 2023. Cash provided by investing activities for the fiscal year ended December 28, 2024 was related to cash acquired in the acquisition of ALT5 Subsidiary, while cash used in investing activities for the fiscal year ended December 30, 2023 was all associated with discontinued operations and was related to purchases of property and equipment.
Cash provided by financing activities was approximately $6.1 million for the fiscal year ended December 28, 2024, and relates to proceeds from notes payable, proceeds from equity financing and warrants exercised, and proceeds from related party notes payable, partially offset by payments on notes payable, as well as payments on related party notes payable. Cash provided by financing activities was approximately $777,000 for the fiscal year ended December 30, 2023. Cash used in financing activities from discontinued operations for the fiscal year ended December 30, 2023 was approximately $2.2 million and was primarily due to the repayment of debt obligations in the amount of approximately $7.3 million, partially offset by proceeds from the issuance of debt obligations of approximately $5.1 million.
We
acknowledge that we continue to face a challenging competitive environment as we continue to focus on our overall profitability, including
managing expenses. We reported a net loss from continuing operations of approximately $6.2$341.5 million for the fiscal year ended December
27, 2025, and net loss from continuing operations of approximately $8.3 million for the fiscal year ended December 28, 2024, and net loss from continuing operations of approximately $17.1 million for the fiscal year ended December 30, 2023, for the
reasons discussed above. Additionally, the Company has total current assets of approximately $35.0$29.5 million and total current liabilities
approximately of $40.9$51.4 million, resulting in a net negative working capital of approximately $5.9$21.9 million. Cash providedused in operations was
approximately $1.0$7.2 million.
In Item 1A. Risk Factors, management has addressed and evaluated the risk factors that could materially and adversely affect the entity’s business, financial condition and results of operations, cash flows, and liquidity. The Company has determined that the risk factors do not materially affect the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Based on the above, management has concluded that the Company is not aware and did not identify any other conditions or events that would cause the Company to not be able to continue business as a going concern for the next 12 months.
We acquired ALT5 Subsidiary during May 2024, as discussed above. We
may require additional debt financing and/or capital to finance new acquisitionsacquisitions, conduct our Phase IIb clinical trials for our Biotechnology
segment, or consummate other strategic investments in our business. We currently expect that the biotechnology subsidiary transaction discussed above will allow us to finance our Phase IIb clinical trials, No assurance can be given any financing obtained may not further
dilute or otherwise impair the ownership interest of our existing stockholders or our ownership interest in the to-be-effectuated biotechnology subsidiary.stockholders.
What changed in the latest 10-Q
Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Full comparison: every changed paragraph (1)
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Management's Discussion & Analysis (MD&A)
New heading “For the Twenty-six Weeks Ended June 27, 2026 and June 28, 2025”
New heading “Results of Operations”
New heading “Selling, General and Administrative Expense”
New heading “Unrealized Loss on Cryptocurrency Assets”
New heading “Segment Performance”
New heading “Fintech Segment”
New heading “Corporate and Other Segment”
New heading “Biotechnology Segment”
Removed heading “Sources of Liquidity”
Largest changes
Full comparison: every changed paragraph (43)
We
undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise,
except as otherwise required by law. Our MD&A should be read in conjunction with our Annual Report on Form 10-K (including the information presented
presented therein under the caption Risk Factors), together with our Quarterly Reports on Forms 10-Q and other publicly available information.
information. All amounts herein are unaudited.
Our
Biotechnology segment is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive
pain-relieving properties. We have previously announced our intention to capitalize a subsidiary with certain of our biotechnology assets,
acquire an additional biotechnology asset, and then engage in a financing of that subsidiary. The short-term intended result of that
series of transactions would be for to decouple it from us so that it would operate on a stand-alone basis. The Biotech segment is being
presented as discontinued operations for the 13 and 26 weeks ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 (see Note 4 of our Condensed Consolidated
Financial Statements).2025.
In
August 2025, the Companywe closed a $1.5 billion registered direct offering and concurrent private placement to launch our WLFI Treasury
Strategy. This “capital with a purpose” financing positioned the Company as one of the most significant institutional holders
of WLFI, securing a meaningful stake in the native governance token of the World Liberty Financial ecosystem.
Our
Corporate and Other segment also consists of certain corporate general and administrative costs.
For
the Thirteen Weeks Ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025
Revenue
Revenue
decreased by approximately $0.1$4.0 million for the 13 weeks ended MarchJune 28,27, 2026, as compared to the 13 weeks ended MarchJune 29,28, 2025. The decrease
decrease is due to volumethe loss of transactionsa processedlarge for customers.customer.
Gross
profit increaseddecreased by approximately $1.6$0.4 million for the 13 weeks ended MarchJune 28,27, 2026, as compared to the 13 weeks ended MarchJune 29,28, 2025.
The increasedecrease is primarily due to the loss of a large low margin customer.
Selling,
general and administrative expenses increaseddecreased by approximately $2.4$1.8 million for the 13 weeks ended MarchJune 28,27, 2026, as compared to the
13 weeks ended MarchJune 29,28, 2025, primarily due increasedto professionallower fees.labor costs and the higher costs due to the acquisition of Mswipe in
2025.
Interest
expense, net decreased by approximately $0.3 million for the 13 weeks ended March 28, 2026, as compared to the 13 weeks ended March 29,
2025 primarily due to reduction in debt.
Unrealized
gainloss on cryptocurrency assets for the 13 weeks ended MarchJune 28,27, 2026 was approximately $348.3$285.1 million. An unrealized gain or loss on cryptocryptocurrency tokens
assets was recorded to mark tothe fair value of the WLFI tokens purchased in August of 2025.tokens.
We
report our business in the following segments: Fintech, Biotechnology and Corporate and Other. During fiscal 2025, the Company announced
its intent to formally separate its Biotechnology segment, also known as Alyea. As a result,Consequently, the BiotechnologyBiotech segment is being presented
as as
discontinued operations for the 13 weeks ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025.
Our
Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024.2024, as well as Mswipe, which was acquired during May 2025.
Revenue for the 13 weeks ended MarchJune 28, 2026 was approximately
$4.7 $2.4 million, and gross margin percentage was 75.8%.97.6%. Operating lossincome for
the fiscal quarteryear ended 13 weeks ended MarchJune 28,27, 2026 was approximately
$1.6 $2.6 million.
Our
Corporate and Other segment generated no revenue for the for the 13 weeks ended MarchJune 28,27, 2026 and the 13 weeks ended MarchJune 29,28, 2025.
Selling, general and administrative expenses increased primarily due to increased costslabor for legal and other professional services.costs.
During
fiscal 2025, the Company announced its intent
to formally separate its Biotechnology segment, also known as Alyea. As a result,Consequently, the Biotechnology
Biotech segment is being presented as discontinued
operations for the 13 weeks ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025. Our Biotech segment generated
no revenue for the for the 13 weeks ended
June March 28,27, 2026 and the 13 weeks ended MarchJune 29,28, 2025. Selling, general and administrative expenses
increased primarily$0.5 million due to increased
research and development expenses.
For the Twenty-six Weeks Ended June 27, 2026 and June 28, 2025
Results of Operations
The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated (in $000’s):
The following tables set forth revenues for key product and service categories, percentages of total revenue and gross profits earned by key product and service categories and gross profit percent as compared to revenues for each key product category indicated (in $000’s):
Revenue decreased by approximately $4.8 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025. The decrease is due to the loss of a major customer.
Gross Profit
Gross profit increased by approximately $0.6 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025. The increase is due to the loss of a large low margin customer.
Selling, General and Administrative Expense
Selling, general and administrative expenses increased by approximately $0.3 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025, the decrease is due an increase in professional fees in 2026 and due to higher costs due to the acquisition of Mswipe in 2025.
Interest expense, net decreased by approximately $0.2 million for the 26 weeks ended June 27, 2026, as compared to the 26 weeks ended June 28, 2025 primarily due to pay down of debt.
Unrealized Loss on Cryptocurrency Assets
Unrealized loss on cryptocurrency assets for the 26 weeks ended June 27, 2026 was approximately $633.5 million. An unrealized gain or loss on cryptocurrency assets was recorded to mark the fair value of the WLFI tokens.
Segment Performance
We report our business in the following segments: Fintech, Biotechnology and Corporate and Other. During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. As a result, the Biotech segment is being presented as discontinued operations for the 26 weeks ended June 27, 2026 and June 28, 2025.
Operating loss by operating segment, is defined as loss before net interest expense, other income and expense, provision for income taxes ($000’s).
Fintech Segment
Our Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024, as well as Mswipe, which was acquired during May 2025. Revenue for the 26 weeks ended June 27, 2026 was approximately $7.1 million, and gross margin percentage was 83.2%. Operating income for the fiscal year ended 26 weeks ended June 28, 2025 was approximately $1.0 million.
Corporate and Other Segment
Our Corporate and Other segment generated no revenue for the for the 26 weeks ended June 27, 2026 and the 26 weeks ended June 28, 2025. Selling, general and administrative expenses increased primarily due to increased costs for labor, accounting and public company expenses.
Biotechnology Segment
During fiscal 2025, the Company announced its intent to formally separate its Biotechnology segment, also known as Alyea. As a result, the Biotech segment is being presented as discontinued operations for the 26 weeks ended June 27, 2026 and June 28, 2025. Our Biotech segment generated no revenue for the for the 26 weeks ended June 27, 2026 and the 26 weeks ended June 28, 2025. Selling, general and administrative expenses were primarily due to research and development expenses.
As
of MarchJune 28,27, 2026, our cash on hand net of reserve, was $10.5$3.1 million. Approximately $3.5 million of cash has been fully reserved in
connection with
the legal matter, further described in Note 2015 to the consolidated financial statements. We intend to raise
funds either through
capital raises or structured arrangements, which would include effectuating our previously announced intention
to capitalize a subsidiary
with certain of our biotechnology assets, acquire an additional biotechnology asset, and then engage in a
financing of that subsidiary.
The short-term intended result of that series of transactions would be for us to own a controlling
interest in that subsidiary, but to
decouple it from us so that it would operate on a stand-alone basis, although its financial
statements would continue to be consolidated
with ours for as long as we have a controlling interest.
During
the 1326 weeks ended MarchJune 28,27, 2026, cash used in continuing operations was approximately $12.3$18.5 million, compared to cash providedused byin continuing
operations of
approximately $1.5$6.7 million during the 1326 weeks ended MarchJune 29,28, 2025. The increasedecrease in cash was primarily due toan resultsunrealized ofloss operations
ason discussedcrypto above.currency assets offset by a change in deferred tax liability.
Cash used in investing activities for continued operations was $0.5 million for the 26 weeks ended June 27, 2026, compared to cash provided by investing activities of $0.1 million for the 26 weeks ended June 28, 2025. Cash provided by investing activities for the 26 weeks ended June 28, 2025 was related to the purchase of treasury shares offset by the acquisition of Mswipe, in 2025. There was no cash used in investing activities for discontinued operations during the 26 weeks ended June 27, 2026 or June 28, 2025.
Cash
provided by investing activities was $0 million for the 13 weeks ended March 28, 2026 and $0 for the 13 weeks ended March 29, 2025.
Cash
provided by financing activities was $8.5 $10.7
million for the 1326 weeks ended MarchJune 28,27, 2026, and relates primarily to theproceeds newfrom WLFInotes loan.payable, partially offset by purchases of
short-term certificates of deposits and cash paid for notes payable. Cash usedprovided inby financing activities was approximately $1.5 $3.7
million for the 1326 weeks ended MarchJune 29,28, 2025, and relates to proceeds received
from the issuance of notes payable, as well as
warrants converted to our common stock, partially offset by cash paid for notes payable and related party notes payable. There was
no cash provided by financing activities for discontinued operations during the 26 weeks ended June 27, 2026 or June 28, 2025.
Sources
of Liquidity
We
acknowledge that we continue to face a challenging competitive environment as we continue to focus on our overall profitability, including
managing expenses. We reported a net loss from continuing operations of approximately $271.3 million for the 13 weeks ended March 28,
2026, and a net loss from continuing operations of approximately $1.9 million for the 13 weeks ended March 29, 2025. Additionally, the
Company has total current assets of approximately $32.2 million and total current liabilities of approximately $39.1 million resulting
in a net negative working capital of approximately $6.9 million. Cash used in operations was approximately $12.3 million.
AIFC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding AIFC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 345,419 | $202.1K | 0.0% | Reduced 77% |