Business Context and Reporting Period
Company: AtlasClear Holdings, Inc. (NYSE American: ATCH)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three and six months ended December 31, 2025
Business Overview: A fintech-driven business-to-business platform providing trading, clearing, settlement, and banking services. The company operates primarily through its subsidiary, Wilson-Davis & Co., Inc., a self-clearing correspondent securities broker-dealer focused on microcap securities.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2025 | Six Months Ended Dec 31, 2025 |
|---|---|---|
| Total Revenues | $5,057,094 | $9,307,684 |
| Net Income (Loss) | $6,784,171 | $6,343,877 |
| Loss from Operations | $(2,455,322) | $(3,332,560) |
| Total Assets | $77,615,158 | $77,615,158 |
| Total Liabilities | $55,935,893 | $55,935,893 |
| Stockholders' Equity | $21,679,265 | $21,679,265 |
| Cash and Cash Equivalents | $23,080,646 | $23,080,646 |
| Net Cash Used in Operating Activities | N/A | $(1,001,804) |
| Net Cash Provided by Financing Activities | N/A | $17,673,908 |
Note: The company reported a significant operating loss, offset by substantial non-cash gains from changes in the fair value of financial instruments.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 84% for the three months ended Dec 31, 2025, compared to the prior year period, driven by new stock locate fees and acting as a selling agent for at-the-market offerings.
- Expense Increase: Total expenses rose 93% year-over-year for the quarter, primarily due to increased variable compensation tied to revenue growth and new stock-based compensation expenses ($1.17M) from executive employment agreements.
- Net Income Volatility: Net income for the quarter was $6.78M compared to a net loss of $0.42M in the prior year. This swing is largely attributable to a $10.6M gain from the reduction in the fair value of the earnout liability, resulting from delays in the Commercial Bancorp acquisition.
- Liquidity Improvement: Cash and cash equivalents increased from $7.5M (June 30, 2025) to $23.1M (Dec 31, 2025) following significant financing activities in October 2025.
Guidance, Outlook, and Risks
- Financing & Liquidity: In October 2025, the company completed a $15.85M financing package (including a $10M Restated Secured Convertible Note and a $10M Equity SPA). Management states this alleviates substantial doubt regarding the company's ability to continue as a going concern for the next 12 months.
- Strategic Acquisition: On February 5, 2026 (subsequent event), the company entered a Share Purchase Agreement to acquire Commercial Bancorp (owner of Farmers State Bank). Consideration includes cash and stock based on adjusted book value. This acquisition is critical to the company's strategy of integrating banking and clearing services.
- Key Risks:
- Derivative Volatility: Net income is heavily influenced by non-cash fair value adjustments of warrants, convertible notes, and earnout liabilities.
- Regulatory Compliance: The company experienced a temporary deficit in customer reserve requirements (Rule 15c3-3) in December 2025, which was remediated by January 2, 2026.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of December 31, 2025.
- Legal Proceedings: A FINRA appeal regarding fines for Wilson-Davis violations is pending; the company has accrued $100,000 as a contingent liability.
Investor Verification Checklist
- Quality of Earnings: Verify the sustainability of net income by excluding the $10.6M non-cash gain from the earnout liability revaluation.
- Debt Structure: Review the terms of the $10.1M Restated Secured Convertible Note (11% interest, convertible at $0.75) and the $500K Debenture (10% interest, 100% catch-up provision on future financing).
- Commercial Bancorp Deal: Monitor the progress of the Commercial Bancorp acquisition, including regulatory approvals (Federal Reserve, Wyoming Division of Banking) and the final valuation of the target.
- Capitalization: Note the significant dilution potential from outstanding warrants (approx. 33.9M shares excluded from diluted EPS) and convertible notes.
- Internal Controls: Assess the remediation plan for the ineffective disclosure controls and procedures.