Business Context and Reporting Period
Company: AtlasClear Holdings, Inc. (formerly Calculator New Pubco, Inc.)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended September 30, 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 entered into an agreement to acquire a proprietary trading platform from Pacsquare Technologies, LLC.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2024 | Three Months Ended Sept 30, 2023 |
|---|---|---|
| Total Revenues | $2,804,082 | $0 |
| Total Expenses | $3,745,184 | $640,813 |
| Loss from Operations | $(941,102) | $(640,813) |
| Net Income (Loss) | $10,748,033 | $(255,978) |
| Cash and Cash Equivalents | $6,817,398 | $27,307,886 (Beginning of period) |
| Total Assets | $55,994,817 | $57,466,554 (June 30, 2024) |
| Total Liabilities | $79,156,852 | $95,575,437 (June 30, 2024) |
| Stockholders' Deficit | $(23,162,035) | $(38,108,883) (June 30, 2024) |
| Working Capital Deficit | $(7,068,848) | N/A |
Note: Net income for the current period is primarily driven by non-cash gains from changes in the fair value of derivative liabilities, not core operating profitability.
Material Changes vs. Prior Period
- Revenue Generation: The company transitioned from a non-operational SPAC to an operating entity. Revenue of $2.8 million was generated in Q3 2024 compared to $0 in Q3 2023, derived from commissions, vetting fees, and clearing fees from the Wilson-Davis acquisition.
- Operating Loss: Operating loss increased to $941,102 from $640,813 due to the integration of Wilson-Davis operations, including increased compensation, data processing, and regulatory fees.
- Net Income Volatility: Net income swung from a loss of $255,978 to a gain of $10.7 million. This is almost entirely attributable to a $12.6 million non-cash gain from the change in fair value of convertible note derivatives and other financial instruments, driven by a decrease in the company's stock price and a change in valuation models (from Black-Scholes to Monte Carlo) due to insufficient authorized shares.
- Debt and Liabilities: Significant derivative liabilities exist, including earnout liabilities ($12.6 million) and convertible note derivatives ($2.1 million). Total liabilities decreased from $95.6 million to $79.2 million, largely due to the reclassification and settlement of certain contingent guarantees.
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 of $7.1 million and reliance on raising additional capital.
- Unusual Items: The reported net income is non-recurring and non-cash. It results from the fair value remeasurement of complex financial instruments (convertible notes, warrants, earnouts) rather than operational success.
- Legal Proceedings: A dispute with Chardan Capital Markets regarding registration rights was settled on October 23, 2024. The original note was exchanged for an amended non-interest-bearing convertible note of $5.2 million.
- Future Acquisitions: The company is pursuing the acquisition of Commercial Bancorp. The termination date for this agreement was extended to May 14, 2025, pending a new agreement.
- Capital Structure: The company lacks sufficient authorized shares to satisfy current conversion obligations, forcing the use of Monte Carlo valuation models which significantly impact reported earnings. A proposal to increase authorized shares was voted on in October 2024 but had not been filed as of the report date.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional financing to cover the $7.1 million working capital deficit.
- Derivative Liability Exposure: Assess the risk of future losses if stock prices rise, which would increase the fair value of derivative liabilities and reduce net income.
- Authorized Share Count: Confirm the status of the proposal to increase authorized shares from 100 million to 500 million to resolve conversion constraints.
- Commercial Bancorp Acquisition: Monitor the progress of the new agreement required to finalize the bank acquisition.
- Excise Tax Liability: Note the accrued excise tax payable of $2.1 million related to prior redemptions, which remains unpaid.