Business Context and Reporting Period
Company: AtlasClear Holdings, Inc. (formerly Calculator New Pubco, Inc.)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended December 31, 2024
Business Overview: A fintech-driven business-to-business platform focused on trading, clearing, settlement, and banking. The company consummated a business combination on February 9, 2024, acquiring Wilson-Davis & Co., Inc., a self-clearing correspondent securities broker-dealer. The company also acquired the AtlasClear Platform from Pacsquare Technologies, LLC.
Key Financial Metrics
| Metric | Six Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2024 |
|---|---|---|
| Total Revenues | $5,550,581 | $2,746,499 |
| Net Income (Loss) | $10,328,343 | $(419,690) |
| Loss from Operations | $(2,090,251) | $(1,149,149) |
| Total Other Income/(Expense) | $12,354,978 | $644,091 |
| Cash and Cash Equivalents | $6,879,552 (as of Dec 31, 2024) | |
| Total Assets | $56,014,642 (as of Dec 31, 2024) | |
| Total Liabilities | $79,211,367 (as of Dec 31, 2024) | |
| Stockholders' Deficit | $(23,196,725) (as of Dec 31, 2024) | |
| Working Capital Deficit | $(7,441,131) (as of Dec 31, 2024) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased from $0 in the prior year periods to $5.55 million for the six months ended Dec 31, 2024, driven by the acquisition of Wilson-Davis operations (commissions, vetting fees, and clearing fees).
- Net Income Volatility: The company reported a net income of $10.33 million for the six-month period, compared to $117,022 in the prior year. This significant increase is primarily due to non-cash gains totaling approximately $15.4 million from changes in the fair value of derivative liabilities (convertible notes, earnout liabilities, and merger financing), offsetting an operating loss of $2.09 million and interest expense of $4.12 million.
- Operating Loss: Operating loss increased to $2.09 million for the six months ended Dec 31, 2024, compared to $1.25 million in the prior year, reflecting the integration costs and operational expenses of Wilson-Davis.
- Reverse Stock Split: On December 31, 2024, the company effected a 1-for-60 reverse stock split to regain compliance with stock exchange listing requirements. All share and per-share data have been adjusted retroactively.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: Management has raised substantial doubt about the company's ability to continue as a going concern for the next twelve months due to a working capital deficit and reliance on additional financing. No adjustments have been made to asset or liability carrying amounts.
- Unusual Items (Fair Value Adjustments): The reported net income is heavily influenced by non-cash accounting adjustments. The company changed its valuation model from Black-Scholes to Monte Carlo for certain convertible notes due to insufficient authorized shares to satisfy conversion obligations, resulting in significant gains on the change in fair value of derivatives.
- Debt and Financing:
- Funicular Note: A secured convertible note with a principal balance of $8.51 million (including fees and accrued interest) as of Dec 31, 2024. Interest rate increased to 20% due to registration statement delays. Maturity extended to Jan 31, 2028 via amendment.
- Chardan Note: Settled a legal dispute by exchanging the original note for an amended non-interest bearing convertible note of $5.21 million.
- Hanire Agreement: Entered into a securities purchase agreement on Dec 31, 2024, for up to $40 million in convertible notes and equity, contingent on closing conditions (not yet closed).
- ELOC Agreements: Entered into an At-The-Market (ATM) agreement with Tau Investment Partners for up to $10 million (original) and a second agreement for up to $12.25 million (Feb 2025).
- Legal Proceedings: Settled a claim with Chardan Capital Markets LLC regarding registration rights. Wilson-Davis faces a potential FINRA fine (estimated low end $100,000 accrued) related to short sales and AML violations, though the SEC remanded the case for reconsideration of sanctions.
- Controls and Procedures: Management concluded that disclosure controls and procedures were not effective as of December 31, 2024.
Investor Verification Checklist
- Quality of Earnings: Verify the sustainability of the $10.3 million net income, which is driven almost entirely by non-cash fair value adjustments on derivatives rather than core operating profitability.
- Liquidity Position: Assess the company's ability to service its significant debt load (approx. $20M+ in various notes) and meet the working capital deficit without immediate dilution or default.
- Share Dilution: Review the impact of the 1-for-60 reverse split and the potential issuance of shares under the Hanire agreement, ELOC facilities, and conversion of existing convertible notes.
- Regulatory Compliance: Monitor the status of the FINRA proceedings against Wilson-Davis and the effectiveness of the company's internal controls over financial reporting.
- Acquisition Integration: Evaluate the progress of the Commercial Bancorp acquisition and the Pacsquare platform implementation, which are critical to the company's long-term strategy.