What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-28 compared with 2024-04-08 · 834 added, 627 removed, 639 unchanged (70% of the section changed)

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Reports of Independent Registered Public Accounting Firm

Report of Hudgens CPA , P LLC (PCAOB ID 6849 )

Report of Frazier & Deeter , LLC (PCAOB ID 215 )

Report of Hudgens CPA, PLLC (PCAOB ID 6849 )

Consolidated Financial Statements

Consolidated Balance Sheets as of December 28 , 202 4 and December 3 0 , 202 3

Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal years ended December 30 , 202 3 and December 31 , 2022

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the fiscal years ended December 30 , 202 3 and December 31 , 2022

Consolidated Statements of Operations and Comprehensive Loss for the fiscal years ended December 28 , 202 4 and December 30 , 202 3

Consolidated Statements of Changes in Stockholders’ E q u i t y (Deficit) for the fiscal years ended December 28 , 202 4 and December 3 0 , 202 3

Consolidated Statements of Cash Flows for the fiscal years ended December 28 , 202 4 and December 3 0 , 202 2

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To the Board of Directors

and Stockholders of JanOne, Inc.

and Stockholders of ALT5 Sigma Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of JanOne, Inc.

(the Company) as of December 30, 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the year ended December 30, 2023, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023, and the results of its operations and its cash flows for the year ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

The year ended December 31, 2022 was audited by another auditor that issued an unqualified opinion on April 17, 2023.

We have audited the accompanying consolidated balance sheet of ALT5 Sigma Corporation (the Company) as of December 28, 2024 and December 30, 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the the years in the two-year period ended December 28, 2024, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the years in the two-year period December 28, 2024, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

We have determined that there were no critical audit matters.

Valuation of Intangible Assets associated with the business combination in accordance with ASC 805

Description of the matter:

The Company closed its acquisition of the assets of its ALT5 Subsidiary on May 14, 2024.

The Company accounted for the acquisitions under the acquisition method of accounting for business combination.

Accordingly, the purchase price was primarily allocated to the assets acquired based on their respective fair values, including related intangible assets.

The fair value determination of the intangible assets required management to make significant assumptions related to the forecasted

revenue growth rates and the selection of the discount rates.

We identified the intangible assets for the business combination as a critical audit matter because of the significant assumptions management makes to fair value these assets.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions related to the revenue growth rates and the selection of the discount rates utilized to value these intangible assets.

How we addressed the matter in our audit:

Our audit procedures related to the revenue growth rates and the selection of the assumptions for the intangible assets acquired included the following, among others:

• We assessed the reasonableness of the revenue growth rates by comparing the assumptions used in the projections to external market sources, historical data, and results from other areas of the audit.

• We performed qualitative and quantitative analyses to assess the assumptions that would significantly impact the overall valuation of the intangible assets acquired.

• We evaluated the completeness of the financial statement presentation and disclosure of the acquisitions.

/s/ Hudgens CPA, PLLC

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Houston, Texas

April 8, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Las Vegas, Nevada

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of JanOne Inc.

(the "Company") as of December 31, 2022, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity (deficit) and cash flows for the year then ended, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America ("US GAAP").

Substantial Doubt About the Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has negative working capital, an accumulated deficit, a history of significant operating losses from continuing operations, and a history of negative operating cash flow.

These factors raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Note Receivable

As described in Note 27 to the consolidated financial statements, on May 24, 2022, the Company entered into an Asset Purchase Agreement with SPYR Technologies Inc.

(SPYR), pursuant to which the Company sold SPYR substantially all

the assets of its wholly-owned subsidiary GeoTraq Inc.

SPYR issued shares of its common stock and delivered a five-year promissory note for the acquisition consideration.

We identified the Company's valuation of the promissory note at the transaction date as a critical audit matter because of the significant estimates and assumptions management used in the estimate of the fair value, mainly as it relates to the selection of the discount rate.

Auditing management's selection of the discount rate involved a high degree of auditor judgment and increased audit effort, including the use of our valuation specialists, as changes in this assumption could have a significant impact on the preliminary fair value of the promissory note received.

Our audit procedures related to the Company's fair value estimate of the promissory note received included the following, among others:

• We read the asset purchase agreement to understand and evaluate the terms of the transaction.

• We obtained the Company's third-party expert valuation report to gain an understanding of the processes and key assumptions for estimating the fair value of the promissory note received.

• We utilized our valuation specialists to evaluate the adequacy and appropriateness of the methodologies and assumptions, including the discount rate used by the Company in developing the estimated fair value of the promissory note.

• We performed independent calculations to test the reasonableness and mathematical accuracy of the fair values concluded on by the Company.

• We evaluated the qualifications of the Company's third-party valuation expert based on credentials, reputation, and experience.

• We assessed the appropriateness of the disclosures in the consolidated financial statements.

Valuation of purchase price consideration

As described in Note 3 to the consolidated financial statements, on December 28, 2022, the Company acquired Soin Therapeutics LLC (Soin) through an all-stock transaction.

As part of the consideration of the transaction, the Company issued Soin shares of its Series S preferred convertible stock.

We identified the Company's valuation of the preferred shares issued as a critical audit matter because of the significant estimates and assumptions management used in its fair value estimate, including forecasted product revenues, the expected FDA approval date and the selection of discount rates.

Auditing management's estimates of the forecasted product revenues, the expected FDA approval date and the selection of discount rates involves a high degree of auditor judgment and increased audit effort, including the use of our valuation specialists, as changes in these assumptions could have a significant impact on the acquisition date fair value of the purchase price consideration.

Our audit procedures related to the Company's estimate of the fair value of the preferred Series S shares included the following, among others:

• We read the asset purchase agreement to understand and evaluate the terms of the transaction to determine that the acquisition met the requirements of an asset acquisition, including an understanding of the assets being acquired.

• We obtained the Company's third-party expert valuation report to gain an understanding of the processes and key assumptions for estimating the fair value of the Series S preferred shares issued.

• We utilized our valuation specialists to evaluate the adequacy and appropriateness of the methodologies and assumptions, including the reasonableness of discount rates and volatility estimates used by the Company in developing the estimated fair value of the preferred Series S shares.

• We assessed management's estimates of the projection risk associated with the probability and timing of achieving FDA approval and revenue forecasts.

• We tested the mathematical accuracy of the model used to determine the fair value concluded on by the Company.

• We evaluated the qualifications of the Company's third-party valuation expert based on credentials, reputation, and experience.

• We assessed the appropriateness of the disclosures in the consolidated financial statements.

We served as the Company's auditor in 2023.

/s/ Frazier & Deeter, LLC

Tampa, Florida

April 17, 2023

March 28, 2025

ALT5 SIGMA CORPORATION

CONSOLIDATED BALANCE SHEETS

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Trade and other receivables, net 2,530 266

Digital assets receivable 23,776 —

Prepaid expenses and other current assets 1,518 75

Current assets from discontinued operations — 8,612

Total current assets 35,001 346

Intangible assets-Soin, net 17,842 19,293

Other intangible assets, net 4 4

Note receivable - SPYR, net — 8,974

Property and equipment, net 1,170 —

Right of use assets 121 —

Intangible assets, net 34,430 17,846

Marketable securities — 286

Deposits and other assets — 9

Other assets from discontinued operations — 8,979

Goodwill 11,714 —

Total assets $ 82,436 $ 18,487

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Accounts payable $ 3,231 $ 2,272

Accrued liabilities - other 3,633 1,006

Short term debt — 274

Current liabilities from discontinued operations — 20,382

Accrued liabilities 2,553 3,633

Digital assets payable 30,918 —

Due to Soin 2,850 —

Convertible debentures 563 —

Operating lease liabilities 10 —

Related party notes payable and advances 812 —

Total current liabilities 40,937 5,905

Deferred income taxes, net 1,041 639

Related party note 707 —

Related party notes payable — 707

Notes payable 11,570 —

Operating lease liabilities 113 —

Other noncurrent liabilities 108 34

Noncurrent liabilities from discontinued operations — 5,760

Total liabilities 53,769 7,285

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Mezzanine equity

Convertible preferred stock, series S - par value $ 0.001 per share 200,000 authorized, 100,000 and 100,000 shares issued and outstanding at December 30, 2023 and December 31, 2022, respectively

14,510 14,510

Convertible preferred stock, series S - par value $ 0.001 per share 200,000 authorized, 100,000 shares issued and outstanding at December 28, 2024 and December 30, 2023

Stockholders' equity:

Convertible preferred stock, series A-1 - par value $ 0.001 per share 2,000,000 authorized, 23,480 and 193,730 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Preferred stock, series B - par value $ 0.001 per share, 34,250 authorized, 34,207 and 0 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Convertible preferred stock, series I - par value $ 0.001 per share, 2,000,000 authorized, 17,000 and 0 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Preferred stock, series M - par value $ 0.001 per share, 3,200 authorized, 3,200 and 0 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Convertible Preferred stock, series Q - par value $ 0.001 per share, 2,000,000 authorized, 925,212 and 0 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Convertible preferred stock, series S - par value $ 0.001 per share, 200,000 authorized, 100,000 and 100,000 shares issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Convertible preferred stock, series V - par value $ 0.001 per share, 125,000 authorized, 5,000 shares and 0 issued and outstanding at December 28, 2024 and December 30, 2023, respectively

Common stock, par value $ 0.001 per share, 200,000,000 shares authorized, 15,417,693 and 2,827,410 shares issued and outstanding at December 28, 2024 and at December 30, 2023, respectively

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Accumulated other comprehensive loss ( 2,317 ) —

Equity attributable to ALT5 Sigma Corporation shareholders 20,886 ( 3,308 )

Noncontrolling interest 3,925 —

Total stockholders' equity 24,811 ( 3,308 )

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The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

ALT5 SIGMA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Dollars in thousands, except per share amounts)

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Other income:

Interest income, net 2,250 468

Gain on litigation settlement — 1,950

Gain on reversal of contingent liabilities — 637

Interest (expense) income, net ( 879 ) 2,250

Realized gain on exchange transactions 374 —

Unrealized loss on marketable securities ( 1,058 ) ( 926 )

Other income, net ( 161 ) 998

Total other income, net 2,322 4,548

(Loss) income before benefit from income taxes ( 17,524 ) 1,399

Total other (expense) income, net ( 1,724 ) 2,322

Loss before benefit from income taxes ( 9,286 ) ( 17,524 )

Income tax benefit ( 3,041 ) ( 429 )

Net (loss) income from continuing operations ( 17,095 ) 8,020

Net loss from continuing operations ( 6,245 ) ( 17,095 )

Income from discontinued operations — 10,254

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Net income from discontinued operations — 9,283

Net (loss) income $ ( 7,812 ) $ 10,992

Income (loss) per share:

Net (loss) income per share from continuing operations, basic and diluted $ ( 4.27 ) $ 2.55

Net loss $ ( 6,245 ) $ ( 7,812 )

(Loss) income per share:

Net loss per share from continuing operations, basic and diluted $ ( 0.56 ) $ ( 4.27 )

Net income per share from discontinued operations, basic $ — $ 2.32

Net income per share from discontinued operations, diluted $ — $ 2.09

Net (loss) income per share, basic and diluted $ ( 1.95 ) $ 3.49

Net loss per share, basic and diluted $ ( 0.56 ) $ ( 1.95 )

Weighted average common shares outstanding:

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Diluted 11,148,493 4,444,361

Net income $ ( 7,812 ) $ 10,992

Effect of foreign currency translation adjustments — ( 4 )

Total other comprehensive loss, net of tax — ( 4 )

Comprehensive (loss) income $ ( 7,812 ) $ 10,988

The accompanying notes are an integral part of these consolidated financial statements.

ALT5 SIGMA CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(Dollars in thousands)

Series A Preferred Common Stock Additional

Series A-1 Preferred Series S-1 Preferred Series B Preferred Series I Preferred Series M Preferred Series Q Preferred Series V Preferred Common Stock Additional

Capital Accumulated

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Comprehensive

Deficit Total

Shares Amount Shares Amount

Balance, January 1, 2022 238,729 $ — 2,827,410 $ 2 $ 45,743 $ ( 53,804 ) $ ( 617 ) $ ( 8,676 )

Other comprehensive loss — — — — — ( 10 ) ( 4 ) ( 14 )

Share based compensation — — — — 5 — — 5

Series A-1 preferred converted ( 16,141 ) — 322,820 —

Net income — — — — — 10,992 — 10,992

Deficit Noncontrolling Interest Total

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance, December 31, 2022 222,588 $ — 100,000 $ — — $ — — $ — — $ — — $ — — $ — 3,150,230 $ 2 $ 45,748 $ ( 42,822 ) $ ( 621 ) — $ 2,307

Other comprehensive income — — — — — — 621 621

Other comprehensive loss — — — — — — — — — — — — — — — — — — 621 — 621

Common stock issued for equity financing — — — — — — — — — — — — — — 779,000 1 792 — 793

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Series A-1 preferred forfeited ( 1,505 ) — — — — — — — — — — — — — — — — — — —

Warrants exercised — — 481,348 — 259 — 259

Common stock issued for warrants exercised — — — — — — — — — — — — — — 481,348 — 259 — — — 259

Net loss — — — — — — — — — — — — — — — — — ( 7,812 ) — — ( 7,812 )

Balance, December 30, 2023 193,730 — 100,000 — — — — — — — — — — — 4,957,647 3 47,323 ( 50,634 ) — — ( 3,308 )

Reclassification of Series S S-1 Preferred Stock to liability — — — — — — — — — — — — — — — — ( 339 ) — — — ( 339 )

Reclassification of Series S S-1 Preferred Stock to permanent equity — — — — — — — — — — — — — — — — — — — — 7,993

Share based compensation — — — — — — — — — — — — — — 1,250,027 — 1,656 — — — 1,656

Common stock issued for equity financing — — — — — — — — — — — — — — 1,030,478 2 1,031 — — — 1,033

Common stock issued for consulting agreement — — — — — — — — — — — — — — 477,923 2 1,020 — — — 1,022

Common stock issued in lieu of notes payable obligation — — — — — — — — — — — — — — 2,031,595 2 2,022 — — — 2,024

Common stock issued for acquisition of Alt5 Subsidiary — — — — — — — — — — — — — — 1,799,115 — 7,447 — — — 7,447

Preferred stock issued for acquisition of Alt5 Subsidiary — — — — 34,207 8,552 17,000 — 3,200 — — — — — — — — — — — 8,552

Conversion of Series A-1 Preferred to common stock ( 170,250 ) — — — — — — — — — — — — — 3,055,000 — — — — — —

Preferred stock issued for property and equipment — — — — — — — — — — — — 5,000 — — — — — — — —

Common stock issued for property and equipment — — — — — — — — — — — — — — 300,000 — 1,170 — — — 1,170

Preferred stock issued for Qoden asset acquisition — — — — — — — — — — 925,212 1,321 — — — — — — — — 1,321

Common stock issued for prepaid interest — — — — — — — — — — — — — — 225,000 — 380 — — — 380

Common stock issued for warrants exercised — — — — — — — — — — — — — — 290,908 — 497 — — — 497

Foreign currency adjustment — — — — — — — — — — — — — — — — — — ( 2,317 ) — ( 2,317 )

Net loss — — — — — — — — — — — — — — — — — ( 6,245 ) — 3,925 ( 2,320 )

Balance, December 28, 2024 23,480 $ — 100,000 $ — 34,207 $ 8,552,000 17,000 $ — 3,200 $ — 925,212 $ 1,321,000 5,000 $ — 15,417,693 $ 9 $ 62,207 $ ( 56,879 ) $ ( 2,317 ) $ 3,925 $ 24,811

The accompanying notes are an integral part of these consolidated financial statements.

ALT5 SIGMA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

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OPERATING ACTIVITIES:

Net (loss) income from continuing operations $ ( 17,095 ) $ 8,020

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net loss from continuing operations $ ( 6,245 ) $ ( 17,095 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 3,402 1,452

Change in reserve for uncollectible accounts 254 —

Accretion of note receivable discount — ( 1,223 )

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Bad debt expense — 617

Gain on reversal of contingent liabilities — ( 637 )

Noncash expense for consulting services 271 —

Related party notes issued for shared services 800 —

Write off of VM7 note receivable — 5,320

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Unrealized loss on marketable securities 1,058 926

Amortization of right-of-use assets 32 —

Unrealized gain on digital assets — —

Change in deferred income taxes ( 3,229 ) 444

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Accounts receivable 1,876 ( 367 )

Digital assets receivable ( 14,694 ) —

Prepaid expenses and other current assets 780 320

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Accounts payable and accrued expenses 1,648 ( 1,052 )

Operating cash flows provided by (used in) discontinued operations 2,319 ( 2,501 )

Net cash provided by (used in) operating activities 1,463 ( 3,057 )

Digital assets payable 14,155 —

Operating cash flows provided by discontinued operations — 2,319

Net cash provided by operating activities 1,777 1,463

INVESTING ACTIVITIES:

Cash acquired in ALT5 Subsidiary acquisition 5,853 —

Investing cash flows used in discontinued operations — ( 155 )

Net cash used in investing activities ( 155 ) ( 1,509 )

Net cash provided by (used in) investing activities 5,853 ( 155 )

FINANCING ACTIVITIES:

Proceeds from issuance of notes payable 7,237 —

Payments on related party notes payable ( 248 ) —

Proceeds from the issuance of related party note payable 603 —

Proceeds from equity financings, net 851 792

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Payments on short term notes payable ( 2,847 ) ( 274 )

Financing cash flows (used in) provided by discontinued operations ( 2,212 ) 3,993

Net cash (used in) provided by financing activities ( 1,435 ) 3,979

Financing cash flows used in discontinued operations — ( 2,212 )

Net cash provided by (used in) financing activities 6,093 ( 1,435 )

Effect of changes in exchange rate on cash and cash equivalents ( 6,551 ) 17

DECREASE IN CASH AND CASH EQUIVALENTS ( 110 ) ( 591 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,172 ( 110 )

CASH AND CASH EQUIVALENTS, beginning of period 5 115

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Interest paid $ 296 $ 133

Income taxes paid, net $ — $ 108

Income tax refunds received, net $ 17 $ —

Noncash financing and investing activities:

Stock issued for the acquisition of Alt5 Subsidiary $ 16,000 $ —

Common stock issued for consulting services 853 —

Common stock issued for liability obligations 367 —

Notes payable converted to common stock 1,660 —

Common stock issued for interest obligations 380 —

Common stock issued for property and equipment 1,170 —

Preferred stock issued for intangible assets 1,321 —

The accompanying notes are an integral part of these consolidated financial statements.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Background and Basis of Presentation

The accompanying consolidated financial statements include the accounts of JanOne Inc., a Nevada corporation, and its subsidiaries (collectively, the “Company” or “JanOne”).

The Company had three operating segments – Biotechnology, Recycling, and Technology.

In connection with the sale of GeoTraq, Inc.

(“GeoTraq”) (see Note 5) and the sale of the Recycling segment consisting of the following Recycling Subsidiaries:

(a) ARCA Recycling, Inc., a California corporation, (b) ARCA Canada, a corporation organized under the laws of Ontario, Canada, and (c) Customer Connexx LLC, a Nevada limited liability company (see Note 4), the accounts for the Recycling and Technology segments have been consolidated and presented as discontinued operations in the accompanying consolidated financial statements.

The accompanying consolidated financial statements include the accounts of ALT5 Sigma Corporation, a Nevada corporation, and its subsidiaries (collectively, the “Company” or “ALT5”).

Effective July 15, 2024, the Company changed its corporate name from “JanOne Inc.” to “ALT5 Sigma Corporation,” and also changed its Nasdaq common stock ticker symbol from “JAN” to “ALTS”.

The corporate name change was effected through a parent/subsidiary short-form merger of ALT5 Sigma Corporation, the Company’s wholly-owned Nevada subsidiary formed solely for the purpose of effectuating the name change), whereby it merged with and into the Company, with the Company being the surviving entity, albeit with its new name.

The Company had three operating segments – Fintech, Biotechnology, and Corporate and Other.

In connection with the sale of ARCA Recycling, Inc.

(“ARCA Recycling”), the accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements (See Note 4).

On May 15, 2024, the Company acquired ALT5 Sigma, Inc.

(“ALT5 Subsidiary”).

ALT5 Subsidiary is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm.

ALT5 Subsidiary, through its respective subsidiaries, offers two main platforms to its customers:

“ALT5 Pay” and “ALT5 Prime.” ALT5 Pay is a crypto-currency payment gateway that enables registered and approved global merchants to accept and make crypto-currency payments or to integrate the ALT5 Pay payment platform into their application or operations using the plugin with WooCommerce and or ALT5 Pay’s checkout widgets and APIs.

Merchants have the option to convert to fiat currency (US Dollars, Canadian Dollars, Euros, and British Pounds Sterling) automatically or to receive their payment in digital assets (see Note 3).

Biotechnology

During September 2019, JanOne, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

During September 2019, ALT5 Sigma Corporation, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

Effective December 28, 2022, the Company acquired Soin Therapeutics LLC, a Delaware limited liability company (“STLLC”), and its product, a patent-pending, novel formulation of low-dose naltrexone, (“JAN123”).

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However, there can be no assurance that the product will receive FDA approval or that it will result in material sales.

In that regard, 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 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.

The Recycling Subsidiaries constituted the Company’s Recycling segment and provided turnkey recycling services for electric utility energy efficiency programs in the United States.

ARCA Recycling and ARCA Canada recycle major household appliances in North America by providing turnkey appliance recycling and replacement services for utilities and other sponsors of energy efficiency programs.

ARCA Recycling and ARCA Canada recycled major household appliances in North America by providing turnkey appliance recycling and replacement services for utilities and other sponsors of energy efficiency programs.

Connexx provided call center services for ARCA Recycling and ARCA Canada.

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Johnson, our Chief Financial Officer.

The sale of all of the outstanding equity interests of the Recycling Subsidiaries to VM7 under the Recycling Purchase Agreement was consummated simultaneously with the execution of the Recycling Purchase Agreement.

The Company’s Board of Directors unanimously approved the Recycling Purchase Agreement and the Disposition Transaction.

In connection with the disposition of the Recycling Subsidiaries, accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements.

(“GeoTraq”) was the Company’s Technology segment.

On May 24, 2022, the Company entered into an Asset Purchase Agreement with SPYR Technologies Inc., pursuant to which the Company sold to SPYR substantially all the assets and none of the liabilities of its wholly-owned subsidiary GeoTraq Inc.

The aggregate purchase price for the GeoTraq Assets was $ 13.5 million, payable in cash and shares of SPYR’s common stock.

As of the closing of the transaction on May 24, 2022, SPYR issued to the Company 30,000,000 shares of its common stock at $ 0.03 per share, and delivered a five-year Promissory Note in the principal amount of $ 12.6 million.

The Promissory Note bears simple interest at the rate of 8 % per annum, provides quarterly interest payments due the first day of each calendar quarter, and may be prepaid at any time without penalty.

Quarterly interest payments may be made in cash or in SPYR’s restricted common stock.

The Promissory Note matures on May 23, 2027.

The accounts for the Technology segment have been presented as discontinued operations in the accompanying consolidated financial statements.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Corporate and Other

Our Corporate and Other segment consists of certain corporate general and administrative costs.

The Company reports on a 52- or 53-week fiscal year.

The Company's 2024 fiscal year (“2024”) ended on December 28, 2024, and our fiscal year (“2022”) ended on December 30, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Going concern

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The Company currently faces a challenging competitive environment and is focused on improving its overall profitability, which includes managing expenses.

The Company reported a net loss from continuing operations of approximately $ 17.1 million for the year ended December 30, 2023, and net income from continuing operations of approximately $ 8.0 million for the fiscal year ended December 31, 2022.

Additionally, as of December 30, 2023, the Company has total current assets of approximately $ 346,000 and total current liabilities of approximately $ 5.9 million resulting in a net negative working capital of approximately $ 5.2 million.

Cash used in continuing operations was approximately $ 855,000 .

The Company intends to raise funds to support future development of JAN 123 either through capital raises or structured arrangements.

The Company reported a net loss from continuing operations of approximately $ 6.2 million for the year ended December 28, 2024, and net loss from continuing operations of approximately $ 17.1 million for the fiscal year ended December 30, 2023.

Additionally, as of December 28, 2024, the Company has total current assets of approximately $ 35.0 million and total current liabilities of approximately $ 40.9 million resulting in a net negative working capital of approximately $ 5.9 million.

Cash provided by operations was approximately $ 1.0 million.

The Company intends to raise funds to support future development of JAN 123 and JAN 101 and through a combination of cash flows derived from its acquisition of ALT5 (see Note 3), capital raises, and/or structured arrangements.

However, the success of such funding cannot be assured.

The ability of the Company to continue as a going concern is dependent upon the success of future capital raises or structured settlements to fund the required testing to obtain FDA approval of JAN 123, as well as to fund its day-to-day operations.

Such approval is contingent on several factors and no assurance can be provided that approval will be obtained.

The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

While the Company will actively pursue these additional sources of financing, management cannot make any assurances that such financing will be secured or FDA approvals will be obtained.

We currently expect that the biotechnology subsidiary transaction discussed above will allow us to finance our Phase III clinical trial for JAN123.

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.

The short-term intended result of that transaction 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.

Summary of Significant Accounting Policies

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Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications.

The prior year amounts have also been modified in these financial statements to properly present amounts under continuing and discontinued operations.

Use of Estimates

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The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments.

The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs).

The carrying amounts of long-term debt at December 30, 2023 and December 31, 2022 approximate fair value.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

available (Level 2 inputs).

The carrying amounts of long-term debt at December 28, 2024 and December 30, 2023 approximate fair value.

Cash and Cash Equivalents

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Fair value of cash equivalents approximates carrying value.

Trade and Other Receivables and Allowance for Doubtful Accounts

The Company carries unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts.

Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions.

The Company writes off trade receivables when it deems them to be uncollectible.

The Company records recoveries of trade receivables previously written off when we receive them.

The Company considers a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days.

Digital Assets and other Receivable s

Digital assets and other receivables are the Company’s digital assets and its customer prepayments in the form of digital assets.

The Company holds all digital assets in secure non-custodial wallets through the wallet services from Fireblocks.

As of December 28, 2024, the outstanding balance of digital assets and other receivables was approximately $ 23.8 million.

Other Receivables and Allowance for Doubtful Accounts

The Company carries unsecured other receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts.

Management determines the allowance for doubtful accounts by regularly evaluating receivables based on current economic conditions.

The Company writes off receivables when it deems them to be uncollectible.

The Company records recoveries of receivables previously written off when payment is received.

The Company considers a receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days.

The Company does not charge interest on past due receivables.

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2024 December 30,

2023 December 31, 2022

Other receivables 2,530 266 106

Trade and other receivables, net $ 2,530 $ 266 $ 106

As of December 28, 2024, other receivables includes approximately $ 2.2 million in subscriptions receivable (see Note 18).

Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other .

Under ASC 350, intangible assets subject to amortization, shall be reviewed for impairment in accordance with the Impairment or Disposal of Long-Lived Assets in ASC 360, Property, Plant, and Equipment .

Under ASC 360, long-lived assets are tested for recoverability whenever events or changes in circumstances (‘triggering event’) indicate that the carrying amount may not be recoverable.

In making this determination, triggering events that were considered included:

• A significant decrease in the market price of a long-lived asset (asset group);

• A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

• A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

• An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

• A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group);

• A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The term more likely than not refers to a level of likelihood that is more than 50 percent.

If a triggering event has occurred, for purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

If after identifying a triggering event it is determined that the asset group’s carrying value may not be recoverable, a recoverability test is performed by forecasting the expected cash flows to be derived from the asset group for the remaining useful life of the asset group’s primary asset compared to its carrying value.

The recoverability test relies upon the undiscounted cash flows (excluding interest and taxes) which are derived from the Company’s specific use of those assets (not how a market participant would use those assets);

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

based upon the existing service potential of the current assets (excluding any improvements that would materially enhance the assets).

If the expected undiscounted cash flows exceed the carrying value, the assets are considered recoverable.

The Company’s intangible assets consist of trade names, licenses for the use of internet domain names, Universal Resource Locators, or URL’s, computer software, patent USPTO reference No.

10,182,402, and designs and related manufacturing procedures.

In connection with the Soin merger (see Note 3), intangible assets consist of three patents pending, orphan drug status for Naltrexone, as granted by the FDA, and the formula for Naltrexone.

Upon acquisition, critical estimates are made in valuing acquired intangible assets, which include but are not limited to:

future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed;

The Company’s intangible assets consist of customer relationship intangibles, favorable leases, trade names, licenses for the use of internet domain names, Universal Resource Locators, or URL’s, software, patents, and marketing and technology related intangibles.

Upon acquisition, estimates are made in valuing acquired intangible assets, which include but are not limited to, future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed;

tradename and market position, as well as assumptions about the period of time that customer relationships will continue;

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domain name and marketing – 3 -to- 20 years;

software – 3 to 5 years, technology intangibles – 7 years, customer relationships – 7 to 15 years.

software – 3 -to- 5 years;

technology intangibles – 7 years;

customer relationships – 7 -to- 15 years.

Digital Assets and other Payables

Digital assets and other payables are liabilities that represent the Company’s obligation to deliver the settlement of transactions in the form of digital assets and or cash.

The Company safeguards these digital assets and cash for customers and is obligated to safeguard them from loss, theft, or other misuse.

The Company recognizes digital assets and other payables, on initial recognition and at each reporting date, at fair value of the digital assets.

Any loss, theft, or other misuse would impact the measurement of digital assets and other payables.

As of December 28, 2024, the outstanding balance of digital assets and other payables was approximately $ 30.9 million, of which approximately $ 23.8 million was digital assets and $ 7.1 million was cash deposits.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

Revenue recognition applies to the Company’s Fintech segment only, as the Company’s Biotech segment has not recognized revenue to date.

Revenue is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:

Executed contracts with the Company’s customers that it believes are legally enforceable;

Identification of performance obligations in the respective contract;

Determination of the transaction price for each performance obligation in the respective contract;

Allocation of the transaction price to each performance obligation;

Recognition of revenue only when the Company satisfies each performance obligation.

Fintech Revenue

The five elements above, as applied to each of the Fintech segment's revenue categories, is summarized below:

Product sales – revenue is recognized at the time of sale of equipment to the customer.

Service sales – revenue is recognized based on when the service has been provided to the customer.

The Company’s service is comprised of a single performance obligation to buy and sell or convert digital assets to currencies.

That is, the Company is the counter party to all transactions between customers and liquidity providers and presents revenue for the fees earned on a net basis.

The Company is acting as principal in all transactions, and control the digital assets being provided before it is transferred to the buyer, and has risk related to the digital assets, and is responsible for the fulfillment of the digital asset transactions.

The Company sets the price for the digital assets by aggregating prices from several liquidity providers and displays them on the Company’s platform.

As a result, the Company acts as a price discovery service and acts as a principal facilitating the ability for a customer to purchase or sell digital assets.

The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed.

Contracts with customers are usually open-ended and can be terminated by either party without a termination penalty.

Therefore, contracts are defined at the transaction level and do not extend beyond the service already provided.

The Company charges a fee at the transaction level.

The transaction price, represented by the trading fee, is calculated based on volume and varies depending on payment type and the value of the transaction.

Digital asset purchases or sale transactions executed by a customer on the Company’s platform is based on tiered pricing that is driven primarily by transaction volume processed for a specific historical period.

The Company has concluded that this volume-based pricing approach does not constitute a future material right since the discount is within a range typically offered to a class of customers with similar volume.

The transaction fee is collected from the customer at the time the transaction is executed.

In certain instances, the transaction fee can be collected in digital assets, with revenue measured based on the amount of digital assets received and the fair value of the digital assets at the time of the transaction.

The Company also marks up or down the digital asset prices and earns revenue from the spread between the buying and selling price.

The Company also earns a fee from transfers of currencies and or digital assets.

The transfer fees are nominal and are set to offset the fees associated with banking and or blockchain mining fees.

Biotechnology Revenue

The Company currently generates no revenue from its Biotechnology segment.

Recycling Revenue

Discontinued Operations Revenue

On March 9, 2023, retroactive to March 1, 2023, the Company entered into the Recycling Purchase Agreement with VM7, under which VM7 agreed to acquire all of the outstanding equity interests of the Recycling Subsidiaries.

As discussed previously, the accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements..

Technology Revenue

The Company generates no revenue from its Technology segment.

GeoTraq was the Company’s Technology segment.

The Company suspended all operations for GeoTraq during the year ended December 31, 2022.

On May 24, 2022, the Company sold substantially all of the GeoTraq assets .

GeoTraq is being presented as a discontinued operation.

As discussed previously, the accounts for the Technology segment have been presented as discontinued operations in the accompanying consolidated financial statements.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

previously, the accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements.

Fair Value Measurements

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The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position.

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The management approach model is based on the way a Company’s management organizes segments within the Company for making operating decisions and assessing performance.

The Company determined it had three reportable segments, however the Recycling and Technology segments have been consolidated and presented as discontinued operations.

The Company determined it had three reportable segments.

The Recycling segment has been presented as discontinued operations (see Note 23).

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

The Company maintains cash balances at a bank in Nevada.

The Company maintains cash balances at banks in Nevada and Minnesota.

The account is insured by the Federal Deposit Insurance Corporation up to $250,000.

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The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets.

The amendments in ASU No.

2023-08 are intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income.

The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.

The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.

The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Mergers and Acquisitions

Soin Pharmaceuticals

Effective as of December 28, 2022, the Company acquired Soin Therapeutics LLC, a Delaware limited liability company (“STLLC”), and its product, a patent-pending, novel formulation of low-dose naltrexone.

The product is being developed for the treatment of Complex Regional Pain Syndrome (CRPS), an indication that causes severe, chronic pain generally

On November 8, 2024, the Company acquired the Qodex Cryptocurrency Exchange Software platform and other related assets from Qoden Technologies, LLC, a provider of technology solutions for the blockchain industry.

The purchase price was $ 2.2 million, consisting of $ 2.0 million, or 771,010 shares, of the Company’s Series Q Convertible Preferred Stock and $ 0.2 million in cash.

The Series Q Convertible Stock was valued at $ 2.594 per share on the date issued, and is subject to a mandatory eight-calendar-quarter leak-out, such that no more than twelve-and-one-half percent of the shares may be converted into shares of the Company’s common stock on a trailing quarterly basis over a period of two years , and are subject to vesting provisions.

The $ 0.2 million in cash is payable in increments of $ 10,000 per month for 24 months, commencing on the first day of the month following closing.

The acquisition was determined to be an asset acquisition for accounting purposes.

On May 14, 2024, the Company acquired its ALT5 Subsidiary, which is a fintech company that provides next generation blockchain-powered technologies to enable a migration to a new global financial paradigm.

ALT5 Subsidiary, through its respective subsidiaries, offers two main platforms to its customers:

Merchants have the option to convert to fiat currency (US Dollars, Canadian Dollars, Euros, and British Pounds Sterling) automatically or to receive their payment in digital assets.

As consideration under the acquisition, the Company issued 1,799,100 shares of its common stock to the legacy equity holders of the capital stock of ALT5 Subsidiary.

Those shares represented approximately 19.9 % of the Company's then-issued and outstanding shares of common stock.

Each of the shares of the Company's newly-issued common stock was valued at $ 4.14 , which was the Nasdaq Historical NOCP on Thursday, May 9, 2024, the day immediately prior to the date on which the agreement was executed.

The Company also issued 34,207 shares of its newly-designated Series B Preferred

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

affecting the arms or legs.

At present, there are no truly effective treatments for CRPS.

Because of the relatively small number of patients afflicted with CRPS, the FDA has granted Orphan Drug Designation for any product approved for treatment of CRPS.

This designation will provide the Company with tax credits for its clinical trials, exemption of user fees, and the potential of seven years of market exclusivity following approval.

In addition, development of orphan drugs currently also involves smaller trials and quicker times to approval, given the limited number of patients available to study.

However, there can be no assurance that the product will receive FDA approval or that it will result in material sales.

In anticipation of the closing of the merger, the Company formed a merger subsidiary known as STI Merger Sub, Inc., a Delaware corporation (our “Merger Sub”), and designated a series of 200,000 shares of its preferred stock, stated value of $ 300.00 per share (the “Series S Convertible Preferred Stock” or the “Series S Stock”).

The acquisition was memorialized by an Agreement and Plan of Merger, dated as of December 28, 2022 (the “Merger Agreement”), by and among STLLC, Amol Soin, M.D., the sole stockholder of STLLC (“Dr.

Soin”), the Company's Merger Sub, and us.

For not less than six months after the closing and potentially up to approximately one year from the closing, Dr.

Soin will remain the Company's Chief Medical Officer.

At the closing of the merger, (i) our Merger Sub merged with and into STLLC with STLLC as the surviving entity and (ii) the Company issued 100,000 shares of its Series S Stock to Dr.

This all-stock transaction has an initial value of $ 13,000,000 , potentially increasing by an additional $ 17,000,000 to up to a total value of $ 30,000,000 , depending on revenues generated by the STLLC product.

Soin agreed to certain restrictions on the maximum number of shares of Series S Stock that he may ultimately keep or that he may convert into shares of our common stock or sell into the public markets at any given time:

Soin may not convert shares of Series S Stock into shares of the Company's common stock in an amount such that, upon any such conversion, he beneficially own shares of the Company's common stock in excess of 4.99 % of the Company's then-outstanding common stock and (ii) during the five-year period that commences on the date that Dr.

Soin is first eligible to convert any shares of Series S Stock into shares of the Company's common stock, he will not dispose of any of such shares into the public markets in an amount that exceeds five percent of the daily trading volume of the Company's common stock during any trading day.

Soin may convert up to three million dollars of value of the Series S Stock into shares of the Company's common stock commencing one year from the closing and may convert up to an additional $ 10 million of value of the Series S Stock into shares of the Company's common stock from and after the sooner of (y) the issuance by the FDA of New Drug Approval for low-dose naltrexone for treating pain or (z) 10 years from the closing.

Further, during the 10 -year period following the closing, Dr.

Soin may convert up to an additional $ 17 million of value at a rate of five percent of the gross revenues that the Company receives in connection with sales or license revenue from the product.

At the completion of the merger, the Company performed a screen test, as defined in ASC 805 (“ Business Combinations”) , to determine whether the Soin Pharmaceutical merger was considered a business combination or an asset acquisition.

The results of the screen test revealed that substantially all of the fair value was concentrated in a group of similar assets, and that the assets did not possess the inputs, outputs, nor processes required to be considered a business, as defined in ASC 805.

Consequently, no goodwill was recognized as part of this transaction.

The fair value of the Series S Stock issued in connection with the merger, as valued by a third-party, independent, valuation firm was approximately $ 14.5 million.

The assets acquired by the Company consist of 1) three pending patents related to the methods of using low-dose Naltrexone to treat chronic pain, 2) final formula for Naltrexone, and 3) orphan drug designation as approved by the FDA.

The Company reviewed the assets acquired and determined that no in-process research and development costs were acquired as part of the transaction, and, thus, all assets acquired represent intellectual property and should be capitalized.

Consequently, the Company has recorded the assets as intangible assets on its consolidated balance sheets.

In addition, the Company recognized a deferred tax liability of $ 4.8 million.

The total value of the intangible assets purchased is $ 19.3 million.

The Company will amortize the intangible assets ratably over a 10 -year period.

Because of certain conversion features of the Series S Stock that place redemption of these shares outside the control of the Company, the Series S Stock will be presented as mezzanine equity on the Company's consolidated balance sheets.

As of December 30, 2023, the Soin intangible had a carrying value of approximately $ 17.8 million.

Stock (the “Series B Stock”) to the legacy equity holders of the capital stock of ALT5.

In connection with the closing of the acquisition of ALT5 Subsidiary, the Company also issued 3,200 shares of its newly-designated Series M Preferred Stock (the “Series M Stock”) to two entities that acted as finders for the transaction.

The fair value of the purchase price components outlined above was $ 16.0 million due to fair value adjustments for the shares of Series B Stock and Series M Stock, as detailed below (in $000’s):

Common stock $ 7,448

Series B preferred stock 8,552

Total purchase price $ 16,000

Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $ 11.7 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired.

The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of May 10, 2024, as calculated by an independent third-party firm.

Because the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition will be deductible for tax purposes.

During the thirteen weeks ended September 28, 2024, the Company recorded a noncash fair value adjustment related to deferred tax liabilities and other liabilities acquired in the aggregate amount of approximately $ 7.9 million, which was recorded to goodwill.

The table below outlines the purchase price allocation of the purchase for ALT5 Subsidiary to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):

Total purchase price $ 16,000

Accounts payable 267

Accrued liabilities 7,866

Digital assets payable 16,763

Total liabilities assumed 32,509

Total consideration 48,509

Accounts receivable 2,917

Digital assets receivable 9,082

Intangible assets

Customer relationships $ 13,925

Trade names 2,675

Developed technology 1,850

Subtotal intangible assets 18,450

Total assets acquired 36,795

Total goodwill $ 11,714

Proforma Information

The table below presents selected proforma information for the Company for the years ended December 28, 2024 and December 30, 2023, assuming that the acquisition had occurred on January 1, 2023 (the beginning of the Company’s 2023 fiscal year), pursuant to ASC 805-10-50 (in $000’s).

This proforma information does not purport to represent what the

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.

Fiscal Year Ended

December 28, 2024 As Reported Adjustments Proforma

ALT5 Sigma Corporation (1) ALT5 Subsidiary (2) Adjustments (3) Total

Net revenue $ 12,532 $ 2,918 $ 15,450

Net income $ ( 6,245 ) $ 71 $ ( 1,343 ) $ ( 7,517 )

Earnings per basic common share $ ( 0.56 ) $ ( 0.11 )

Earnings per basic diluted share $ ( 0.56 ) $ ( 0.11 )

Fiscal Year Ended

December 30, 2023 As Reported Adjustments Proforma

ALT5 Sigma Corporation (4) ALT5 Subsidiary (5) Adjustments (3) Total

Net revenue $ — $ 7,145 $ 7,145

Net income $ ( 7,812 ) $ 3,359 $ ( 2,148 ) $ ( 6,601 )

Earnings per basic common share $ ( 1.95 ) $ ( 1.65 )

Earnings per basic diluted share $ ( 1.95 ) $ ( 1.65 )

(1) ALT5 Sigma Corporation for the year ended December 28, 2024.

Includes ALT5 Subsidiary from May 15, 2024 through December 28, 2024.

(2) ALT5 Subsidiary from December 31, 2023 through the acquisition date of May 14, 2024.

(3) Reflects adjustments for amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date..

(4) ALT5 Sigma Corporation for the year ended December 30, 2023.

(5) ALT5 Subsidiary for the year ended December 30, 2023.

Soin Pharmaceuticals

Effective January 24, 2024, the Company, Amol Soin (“Dr.

Soin”), and Soin Therapeutics LLC, a wholly-owned subsidiary of the Company that we had acquired from Dr.

Soin, entered into an amendment (the “Soin Amendment”) to the parties’ Agreement and Plan of Merger that was dated as of December 28, 2022 (the “Soin Agreement”).

With reference to the Soin Agreement, the parties to the Soin Amendment agreed that the $ 3.0 million convertible tranche (the first of the three original conversion tranches under the Soin Agreement) would be payable to Dr.

Soin in cash rather than through his conversion of shares of the Series S Convertible Preferred Stock (the “Soin Preferred”) that constituted the consideration under the Soin Agreement.

We tendered the first $ 0.1 million amended tranche cash payment to Dr.

Soin in March 2024;

the second amended tranche cash payment to Dr.

Soin, also in the amount of $ 0.1 million, was due on July 1, 2024;

and the third amended tranche cash payment to Dr.

Soin, in the amount of $ 2.8 million, was due on December 31, 2024.

During the pendency of the amended cash tranche period, Dr.

Soin agreed that he would not convert any of his shares of Soin Preferred.

After we have tendered the second and third amended tranche cash payments to Dr.

Soin, his conversion rights for the second and third original conversion tranches will remain convertible under the original provisions of the Soin Agreement and the related Certificate of Designation for the Soin Preferred.

If we do not tender the second and third amended tranche cash payments to Dr.

Soin, we agreed that we will transfer to him the membership interests of Soin Therapeutics LLC, and he will transfer to us the shares of Soin Preferred for cancellation.

During the year ended December 28, 2024, we tendered an aggregate of $ 150,000 to Dr.

Soin and during February 2025, we tendered an additional $ 350,000 .

In connection with the Soin Amendment, the Company reclassified the $ 3.0 million convertible tranche, originally valued at approximately $ 2.7 million on our balance sheet, from mezzanine equity to current liabilities, and reclassified the $ 10.0 million convertible tranche, originally valued at approximately $ 8.0 million on our balance sheet, to permanent equity.

As of December 28, 2024, the outstanding balance in mezzanine equity relates to the $ 17.0 million convertible tranche originally valued at approximately $ 3.9 million.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sale of Recycling Subsidiaries

On March 9, 2023, the Company entered into a Stock Purchase Agreement (the “Recycling Purchase Agreement”) with VM7 Corporation, a Delaware corporation (“VM7”), under which it agreed to acquire all of the outstanding equity interests of the Recycling Subsidiaries:

(a) ARCA Recycling, (b) ARCA Canada, and (c) Connexx.

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The Company’s Board of Directors unanimously approved the Recycling Purchase Agreement and the Disposition Transaction.

The Recycling Purchase Agreement is retroactively effective as of March 1, 2023.

The economic aspects of the Disposition Transaction are:

(i) the Company reduced the liabilities on its consolidated balance sheets by approximately $ 17.6 million, and includes those liabilities related to the California Business Fee and Tax Division;

(ii) the Company will receive not less than $ 24.0 million in aggregate monthly payments from VM7, which payments are subject to potential increase due to the Recycling Subsidiaries’ future performance;

and (iii) during the next five years , the Company may request that VM7 prepay aggregate monthly payments in the aggregate amount of $ 1 million.

The Company also received one thousand dollars for the equity of each of the Recycling Subsidiaries at the closing.

Each monthly payment is to be the greater of (a) $ 140,000 (or $ 100,000 for each January and February during the 15-year payment period) or (b) a monthly percentage-based payment, which is an amount calculated as follows:

(i) 5 % of the Recycling Subsidiaries’ aggregate gross revenues up to $ 2,000,000 for the relevant month, plus (ii) 4 % of the Recycling Subsidiaries’ aggregate gross revenues between $ 2,000,000 and $ 3,000,000 for the relevant month, plus (iii) 3 % of the Recycling Subsidiaries aggregate gross revenues over $ 3,000,000 for the relevant month.

VM7 will receive credit toward the payment of the first monthly payment (March of 2023) for any payments, distributions, or cash dividends paid by any of the Recycling Subsidiaries to the Company on or after March 9, 2023.

Additionally, upon settlement of the continuing dispute between ARCA Recycling and the California Business Fee and Tax Division (as to which settlement, there can be no assurance), ARCA Recycling will pay to the Company 50 % of the amount of the reduction between the current assessment and any such settlement.

The minimum consideration to be received by the Company from the Disposition Transaction, as discussed above, is $ 1.6 million per year for 15 years, or $ 24.0 million in the aggregate, plus cash of $ 3,000 paid at close.

In connection with the Disposition Transaction, the Company used a discount rate of 20 % when it valued the aggregate minimum consideration.

Management determined that discount rate appropriately addresses any risk that the minimum payments would not be received.

The valuation, factoring in that discount rate, yielded a present value of approximately $ 6.0 million, which, in addition to the $ 3,000 paid at close, comprises the approximately $ 6.0 million of net consideration.

Additionally, the calculation of the gain on disposition includes the book value in excess of assets disposed of, or approximately $ 9.8 million.

The Recycling Purchase Agreement is retroactive to March 1, 2023 (see Note 4).

The valuation, factoring in the discount rate that the Company used, yielded a present value of approximately $ 6.0 million, which, in addition to the $ 3,000 paid at close, comprised the approximately 6.0 million of net consideration.

The amount of the revised discount amount, or approximately $ 18.0 million, was recorded as an offset to the principal amount of the Note, and was to have been accreted ratably to interest income over the term of the Note.

During the year ended December 30, 2023, approximately $ 720,000 of the discount was recorded as interest income.

During the fourth quarter of fiscal 2023, VM7 determined that, after expending significant amounts of time and resources, it was unable to obtain sufficient equity or debt financing to continue the operations of the Recycling Subsidiaries.

Accordingly, the Company was advised that the operations of the Recycling Subsidiaries were wound down and, ultimately, ceased.

Because the Company did not receive all of the economic benefits of the Disposition Transaction and understand that it will not receive any future benefits of the Disposition Transaction, the Company determined to fully impair the $ 5.3 million carrying value of the Disposition Transaction on our balance sheet.

The Company also determined not to exercise any of its remedies under the Recycling Purchase Agreement so that the Company could maintain its focus on its clinical-stage biopharmaceutical activities.

In connection with the shutdown of the Recycling Subsidiaries, because the Company is a guarantor on the Gulf Coast Bank and Trust credit facility (see Note 6), the Company recorded a liability for approximately $ 1.7 million for estimated liability associated with this facility, which has been offset against the gain on the sale the Recycling Subsidiaries.

Further, the Company has recorded additional liabilities, in the amount of approximately $ 2.0 million, that were originally associated with the sale of the Recycling Subsidiaries and have reverted to the Company, which has been offset against the gain on the sale the Recycling Subsidiaries.

For a variety of related reasons, the Company determined fully to impair the $ 5.3 million carrying value of the Disposition Transaction on its balance sheet and determined not to exercise any of its remedies under the Recycling Purchase Agreement so that it could maintain its focus on its clinical-stage biopharmaceutical activities.

The preliminary calculation of the gain on sale was approximately $ 15.8 million.

The following table details the final calculation of the gain on sale of the Recycling Subsidiaries, as shown on the income statement (in $000’s):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total minimum consideration $ 6,023

15 unchanged sentences

Total gain on sale $ 12,102

Sale of GeoTraq

The aggregate purchase price for the GeoTraq Assets was $ 13.5 million, payable in cash and shares of SPYR’s common stock.

Quarterly interest payments may be remitted in either restricted shares of common stock or restricted shares of Series G Convertible Preferred Stock of SPYR, or in cash.

The Promissory Note matures on May 24, 2027 .

In connection with the Asset Purchase Agreement, the Company employed an independent third-party firm to assess the fair value of the 30,000,000 shares of SPYR stock and the Promissory Note.

The assessment determined that the fair market value of the SPYR common stock was approximately $ 946,000 , or approximately $ 0.032 per share, which was approximately $ 46,000 greater than the amount of the shares received at close.

The Promissory Note was valued at approximately $ 11.3 million, which was approximately $ 1.4 million less than the Note issued.

Consequently, the Company recorded the shares of SPYR stock at fair market value of $ 946,000 , and recorded a discount offsetting the Promissory Note in the amount of $ 1.35 million.

The discount will be accreted ratably over the term of the Promissory Note, and recorded as interest income.

Additionally, approximately $ 105,000 in GeoTraq inventory was transferred as part of the sale, and was, thus, derecognized.

As of December 31, 2022, based on declining financial trends at SPYR, the Company reviewed the original valuation of the Promissory Note to determine whether a revision of the estimate of the original 10.5 % used to discount the note should occur to account for the additional risk the note would not be repaid.

In connection with this review, the Company determined that the discount rate should be revised to 14.5 %.

Consequently, the Company took an additional $ 1.85 million charge against income for the 13 and 26 weeks ended July 2, 2022, and restated its Quarterly Reports on Form 10-Q for the 13 and 26 weeks ended July 2, 2022, and the 13 and 39 weeks ended October 1, 2022.

Additionally, due to the declining financial trends at SPYR, the Company recorded an additional $ 813,000 charge against income for the year ended

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022.

No additional charges against income have been recorded by the Company for the year ended December 30, 2023.

The following table illustrates the calculation of the gain on sale of GeoTraq, including the charges to income referenced above, as shown on the income statement (in $000’s):

Purchase price $ 13,500

Discount on note receivable ( 4,013 )

Premium on shares received 46

Derecognition of GeoTraq inventory ( 105 )

Gain on sale $ 9,428

At December 30, 2023, the Company performed a qualitative analysis of the SPYR note receivable and concluded that, due to a number of triggering factors, it was probable that SPYR would be unable to fulfill its obligation to repay the principal amount under the promissory note on or before the maturity date.

Consequently, as of December 30, 2023, the Company recorded a charge to fully impair the promissory note (see Note 8).

Discontinued Operations

As of December 30, 2023, the Company discontinued operations of its Recycling and Technology segments as follows:

On March 9, 2023, the Company executed a Recycling Purchase Agreement with VM7, under which, as of March 1, 2023, it agreed to acquire all of the outstanding equity interests of the Recycling Subsidiaries, consisting of (a) ARCA Recycling, (b) ARCA Canada, and (c) Connexx.

As of December 30, 2023, the Company discontinued operations of its Recycling segment as follows:

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(b) ARCA Canada, and (c) Connexx.

The principal of VM7 is Virland A.

Johnson, our Chief Financial Officer.

The assets and liabilities for the Recycling Subsidiaries were included in discontinued operations December 31, 2022, but were not included at December 30, 2023.

No GeoTraq assets or liabilities were included in discontinued operations at December 30, 2023 or December 31, 2022.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets.

The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheets as of December 31, 2022, and consist of the following (in $000’s):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Assets from discontinued operations

Cash and cash equivalents $ 53

Trade and other receivables, net 7,816

Inventories 366

Prepaid expenses and other current assets 377

Total current assets from discontinued operations 8,612

Property and equipment, net 1

Right of use asset - operating leases 5,290

Intangible assets, net 2

Deposits and other assets 249

Total other assets from discontinued operations 8,979

Total assets from discontinued operations $ 17,591

Liabilities from discontinued operations

Accounts payable $ 4,423

Accrued liabilities - other 3

Accrued liability - California sales taxes 4

Lease obligation short-term - operating leases 1,631

Short-term debt 5

Current portion of note payable 381

Related party note 233

Total current liabilities from discontinued operations 20,382

Lease obligation long-term - operating leases 3,816

Notes payable - long-term portion 6

Long-term portion related party note payable 7

Total noncurrent liabilities from discontinued operations 5,760

Total liabilities from discontinued operations $ 26,142

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 The Company’s property and equipment consisted of the following (in $000’s):

(Years) December 31, 2022

Buildings and improvements 3 - 30

Equipment 3 - 15

Projects under construction 1,447

Property and equipment 4,072

Less accumulated depreciation ( 1,367 )

Total property and equipment, net, from discontinued operations $ 2,705

Depreciation expense was approximately $ 60,000 and $ 326,000 for the year ended December 30, 2023 and December 31, 2022, respectively.

2 The Company’s intangible assets consisted of the following (in $000’s):

Patent and domains $ 19

Computer software 1,682

Intangible assets 1,701

Less accumulated amortization ( 966 )

Total intangible assets $ 735

Amortization expense was approximately $ 36,000 and $ 229,000 for the year ended December 30, 2023 and December 31, 2022, respectively.

3 The Company’s accrued liabilities consisted of the following (in $000’s):

Compensation and benefits $ 685

Contract liability 290

Accrued incentive and rebate checks 2,037

Accrued taxes 219

Total accrued expenses $ 3,278

Historically the Company operated its recycling business in fourteen states in the U.S.

and in various provinces in Canada.

From time to time, the Company is subject to sales and use tax audits that could result in additional taxes, penalties and interest owed to various taxing authorities.

The California Department of Tax and Fee Administration (formerly known as the California Board of Equalization) (“CDTFA”) conducted a sales and use tax examination covering ARCA Recycling’s California operations for years 2011, 2012, and 2013.

The Company believed it was exempt from collecting sales taxes under service agreements with utility customers that included appliance replacement programs.

During the fourth quarter of 2014, the Company received communication from the CDTFA indicating they were not in agreement with the Company’s interpretation of the law.

As a result, the Company applied for and, as of February 9, 2015, received approval to participate in the CDTFA’s Managed Audit Program.

The period covered under this program included the years 2011, 2012, and 2013 and extended through the nine-month period ended September 30, 2014.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 13, 2017 the Company received the formal CDTFA assessment for sales tax for tax years 2011, 2012, and 2013 in the amount of approximately $ 4.1 million plus applicable interest of $ 500,000 related to the appliance replacement programs that the Company administered on behalf of its customers on which it did not assess, collect, or remit sales tax.

The Company has appealed this assessment to the CDTFA Appeals Bureau.

The appeal remains in process.

Interest has continued to accrue until the matter is resolved.

4 The Company’s accrual relating to the California sales tax assessment consisted of the following (in $000’s):

Accrued liability - CA sales tax assessment $ 4,132

Accrued liability - interest on CA sales tax assessment 2,132

Total $ 6,264

5 The Company’s short-term debt consisted of the following (in $000’s):

Gulf Coast Bank and Trust Company $ 4,206

Gulf Coast Bank and Trust Company loan origination fees $ ( 34 )

Total $ 4,172

6 The Company’s long-term debt consisted of the following (in $000’s):

KLC Financial $ 1,781

KLC Financial loan origination fees ( 61 )

Less current portion ( 381 )

Total $ 1,339

Related Party ICG Note

On August 28, 2019, ARCA Recycling entered into and delivered to Isaac Capital Group LLC (“ICG”) a secured revolving line of credit promissory note, whereby ICG agreed to provide ARCA Recycling with a $ 2.5 million revolving credit facility (the “ICG Note”).

The ICG Note originally matured on August 28, 2020.

On August 25, 2020, the ICG Note was amended to extend the maturity date to December 31, 2020.

On March 30, 2021, ARCA Recycling entered into a Second Amendment and Waiver (the “Second Amendment”) to the ICG Note to further extend the maturity date to August 18, 2021 and waive certain defaults under the ICG Note.

The ICG Note bears interest at 8.75 % per annum and provides for the payment of interest, monthly in arrears.

ARCA Recycling will pay a loan fee of 2.0 % on each borrowing made under the ICG Note.

In connection with entering into the ICG Note, the Borrower also entered into a security agreement in favor of the Lender, pursuant to which ARCA Recycling granted a security interest in all of its assets to the Lender.

The obligations of ARCA Recycling under the ICG Note are guaranteed by the Company.

The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities.

As of January 1, 2022, the balance due on ICG Note was $ 1.0 million.

Beginning in April 2022, the revolving credit facility was converted to a term note that amortized ratably through its maturity date of March 2026.

The principal amount of the note was $ 1.0 million, and was to bear interest at 8.75 % per annum.

Monthly payments on the ICG Note were approximately $ 24,767 .

7 The Company’s related party debt consisted of the following (in $000’s):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Isaac Capital Group LLC $ 838

Less current portion ( 233 )

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the consolidated statements of operations and comprehensive income (loss).

7 unchanged sentences

Gain on sale of ARCA — ( 12,102 )

Gain on sale of GeoTraq — ( 9,428 )

Total operating expenses from discontinued operations — ( 10,635 )

2 unchanged sentences

Interest expense, net — ( 181 )

Loss on litigation settlement — ( 1,008 )

Other expense, net — ( 3 )

5 unchanged sentences

The cash flow activity from discontinued operations for the year ended December 28, 2024 and December 30, 2023 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following (in $000’s):

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

Amortization of debt issuance costs — 11

Loss on litigation settlement — 1,009

Amortization of right-of-use assets — 52

Gain on sale of ARCA, net of cash — ( 12,248 )

Gain on sale of GeoTraq — ( 9,428 )

Changes in assets and liabilities:

4 unchanged sentences

Other assets — 1

Net cash provided by (used in) operating activities from discontinued operations $ 2,319 $ ( 2,501 )

Net cash provided by operating activities from discontinued operations $ — $ 2,319

DISCONTINUED INVESTING ACTIVITIES:

6 unchanged sentences

Payments on notes payable — ( 7,336 )

Net cash used in (provided by) financing activities from discontinued operations $ ( 2,212 ) $ 3,993

Net cash used in financing activities from discontinued operations $ — $ ( 2,212 )

Effect of changes in exchange rate on cash and cash equivalents — ( 5 )

3 unchanged sentences

Prepaids and other current assets

Prepaids and other current assets consist of the following (in $000’s):

Prepaids and other current assets as of December 28, 2024 and December 30, 2023 consist of the following (in $000’s):

December 28, 2024 December 30, 2023

2 unchanged sentences

Total prepaids and other current assets $ 1,518 $ 75

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Property and equipment as of December 28, 2024 and December 30, 2023 consist of the following (in $000’s):

December 28, 2024 December 30, 2023

Projects under construction $ 1,170 $ —

Total property and equipment, net $ 1,170 $ —

The Company recorded no depreciation expense from continuing operations for the years ended December 28, 2024 and December 30, 2023.

In connection with its acquisition of ALT5 Subsidiary (see Note 3), the Company leases commercial office space.

These assets and properties are leased under noncancelable agreements that expire at various future dates.

The agreements, which have been classified as operating leases, provide for minimum rent and require the Company to pay all insurance, taxes, and other maintenance costs.

As a result, the Company recognizes assets and liabilities for leases with lease terms greater than 12 months.

The amounts recognized reflect the present value of remaining lease payments for all leases.

The discount rate used is an estimate of the Company’s blended incremental borrowing rate based on information available associated with each subsidiary’s debt outstanding at lease commencement.

In considering the lease asset value, the Company considers fixed and variable payment terms, prepayments and options to extend, terminate or purchase.

Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.

The following table details the Company’s right of use assets and lease liabilities as of December 28, 2024 and December 30, 2023 (in $000’s):

December 28, 2024 December 30, 2023

Right of use asset - operating leases $ 121 $ —

Lease liabilities:

Current - operating 10 —

Long term - operating 113 —

As of December 28, 2024, the weighted average remaining lease term for operating leases is 4.9 years.

The Company’s weighted average discount rate for operating leases is 12.8 %.

No cash payments for operating leases were made during the years ended December 28, 2024 and December 30, 2023.

Additionally, the Company recognized approximately $ 123,000 in right of use assets and liabilities upon commencement of operating leases during the year ended December 28, 2024.

Total present value of future lease payments of operating leases as of September 28, 2024 (in $000’s):

Twelve months ended:

Less implied interest ( 47 )

Present value of payments $ 123

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes receivable

On May 24, 2022, the Company entered into an Asset Purchase Agreement with SPYR Technologies Inc.

(“SPYR”), pursuant to which the Company sold to SPYR substantially all of the assets and none of the specified liabilities of GeoTraq, as discussed in Note 5.

In connection with the Purchase Agreement, SPYR delivered to the Company a five-year

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Promissory Note in the initial principal amount of $ 12.6 million.

(“SPYR”), pursuant to which the Company sold to SPYR substantially all of the assets and none of the specified liabilities of GeoTraq.

In connection with the Purchase Agreement, SPYR delivered to the Company a five-year Promissory Note in the initial principal amount of $ 12.6 million.

The Promissory Note bears simple interest at the rate of 8.0 % per annum, provides quarterly interest payments due on the first day of each calendar quarter, and may be prepaid at any time without penalty.

1 unchanged sentence

The Promissory Note matures on May 24, 2027.

The Company has received restricted shares of Series G Convertible Preferred Stock of SPYR equivalent to approximately 922,442,000 shares of its common stock during the year ended December 30, 2023, and 30,000,000 shares of SPYR's common stock during the year ended December 31, 2022.

As of December 30, 2023, the Company has accrued receivables of approximately $ 254,000 in interest income related to the Promissory Note.

In connection with the asset sale, the Company engaged a third-party valuation firm to assess the fair value of the consideration received.

Based on the valuation, the Promissory Note (“Note”) was valued at approximately $ 11.3 million.

The amount of the discount, or approximately $ 1.3 million, has been recorded as an offset to the principal amount of the Note, and will be accreted ratably to interest income over the term of the Note.

At December 31, 2022, the Company reviewed the original valuation of the Promissory Note to determine if the original 10.5 % used to discount the Note was appropriate.

In connection with this review, the Company determined that the discount rate should be revised to 14.5 %.

Consequently, the Company took a $ 1.85 million charge against income, and restated the 13 and 26 weeks ended July 2, 2022, as discussed previously.

Further, the Company recorded an additional $ 813,000 charge against income for the year ended December 31, 2022 due to SPYR's declining financial trends.

The Company had received restricted shares of Series G Convertible Preferred Stock of SPYR equivalent to approximately 26,253,900,000 shares of its common stock during the year ended December 28, 2024, and 922,442,000 shares of SPYR's common stock during the year ended December 30, 2023.

As of December 30, 2023, the Company had no accrued receivables related to the Promissory Note.

1 unchanged sentence

During the fiscal years ended December 28, 2024 and December 30, 2023, approximately $ 0 and $ 806,000 , respectively, of the discount was recorded as interest income.

As of December 30, 2023 and December 31, 2022, the net principal balance on the Note was approximately $ 0 and $ 9.0 million, respectively.

As of December 28, 2024 and December 30, 2023, no principal balance on the Note was outstanding.

3 unchanged sentences

The Company’s Board of Directors unanimously approved the Recycling Purchase Agreement and the Disposition Transaction.

The Recycling Purchase Agreement is retroactive to March 1, 2023.

In connection with the Disposition Transaction, the Company used a discount rate of 20.0 % when it valued the aggregate minimum consideration.

Management determined that discount rate appropriately addresses any risk that the minimum payments would not be received.

The amount of the revised discount amount, or approximately $ 18.0 million, was recorded as an offset to the principal amount of the Note, and will be accreted ratably to interest income over the term of the Note.

The Recycling Purchase Agreement is retroactive to March 1, 2023 (see Note 4).

During the year ended December 30, 2023, approximately $ 720,000 of the discount was recorded as interest income.

1 unchanged sentence

Accordingly, the Company was advised that the operations of the Recycling Subsidiaries were wound down and, ultimately, ceased.

The Company also determined not to exercise any of its remedies under the Recycling Purchase Agreement so that the Company could maintain its focus on its clinical-stage biopharmaceutical activities.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

Soin intangibles $ 19,293 $ 19,293

Qoden intangible 1,536 —

Patents and domains 4 4

Computer software — 3,563

Trade names 2,675 —

Customer relationships 13,925 —

Developed technology 1,850 —

Total intangible assets 39,283 19,297

1 unchanged sentence

Total intangible assets, net $ 34,430 $ 17,846

Intangible amortization expense for continuing operations was approximately $ 1.5 million and $ 0 , respectively, for the fiscal years ended December 30, 2023 and December 31, 2022.

Intangible amortization expense for continuing operations was approximately $ 3.4 million and $ 1.5 million, respectively, for the fiscal years ended December 28, 2024 and December 30, 2023.

Qoden Intangible Assets

The Company will amortize the intangible assets over a two-year period (see Note 3).

ALT5 Subsidiary Intangible Assets

As part of the acquisition, the Company acquired trade names, customer relationships, and developed technology, which will be amortized over a period of seven years , 10 years, and five years , respectively (see Note 3).

Soin Intangible Assets

3 unchanged sentences

The Company will amortize the intangible assets ratably over a 10 -year period.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Marketable Securities

1 unchanged sentence

Series G Convertible Preferred Shares Common Shares Equivalent Amount

Beginning balance, January 1, 2022 — $ —

Beginning balance, December 31, 2022 — 30,000,000 $ 315

Securities received 9,224 922,442,000 897

3 unchanged sentences

Mark-to-market — $ ( 370 )

Write-off marketable securities ( 43,100 ) ( 27,206,342,000 ) $ ( 434 )

Ending balance, December 28, 2024 — — $ —

3 unchanged sentences

Shares held are marked to fair market value as of each balance sheet date, with the resulting change recorded as an unrealized gain or loss.

For the year ended December 30, 2023, the Company received 9,224 shares of Series G Convertible Preferred Stock, which are convertible into approximately 922.4 million shares of SPYR’s common stock.

For the year ended December 31, 2022, the Company received 30 million shares of SPYR’s common stock.

Unrealized loss was approximately $ 926,000 and $ 631,000 for the years ended December 30, 2023 and December 31, 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 28, 2024, the Company received 33,876 shares of Series G Convertible Preferred Stock, which are convertible into approximately 26,253,900,000 shares of SPYR’s common stock.

For the year ended December 30, 2023, the Company received 9,224 shares of Series G Convertible Preferred Stock, which are convertible into approximately 922,442,000 shares of SPYR’s common stock.

Unrealized loss was approximately $ 1.1 million and $ 926,000 for the years ended December 28, 2024 and December 30, 2023, respectively.

During the year ended December 28, 2024, the Company was notified that SPYR Technologies, Inc.

(“SPYR”) had ceased operations, and that no future quarterly interest payments on the promissory note, which may be remitted in either restricted shares of common stock or restricted shares of Series G Convertible Preferred Stock of SPYR, or in cash, would be made.

Consequently, the Company recorded a full write-off of approximately $ 434,000 of its Series G Convertible Preferred shares of SPYR.

Deposits and other assets

3 unchanged sentences

Total deposits and other assets $ — $ 9

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued liabilities

4 unchanged sentences

Accrued taxes 362 102

Accrued interest 789 —

Accrued Qoden payments 109 —

Accrued litigation/legal 50 397

Total accrued liabilities $ 2,553 $ 3,633

Short-term debt

Long-term debt and other financing obligations consist of the following (in $000’s):

Debentures outstanding as of December 28, 2024 and December 30, 2023 consisted for the following (in $000’s):

December 28, 2024 December 30, 2023

AFCO Finance $ — $ 274

Total short-term debt $ — $ 274

The Company enters into a financing agreement with AFCO Credit Corporation (“AFCO”) purchased through Marsh Insurance on an annual basis to fund the annual premiums on insurance policies due July 1 of each year.

These policies relate to workers’ compensation and various liability policies including, but not limited to, General, Auto, Umbrella, Property, and Directors’ and Officers’ insurance.

The total amount of the premiums financed in July 2022 was approximately $ 516,000 with an interest rate ranging from approximately 6.0 % over the period.

An initial down payment of approximately $ 129,000 was made on July 21, 2022 with additional monthly payments of approximately $ 59,000 , escalating to approximately $ 69,000 over the term, being made beginning August 1, 2022 and ending on April 1, 2023.

The outstanding principal due AFCO at December 31, 2022 was approximately $ 274,000 .

No such financing agreement was entered into by the Company during fiscal 2023.

Interest rate of 15 %, maturity date of June 30, 2025

Total debentures $ 563 $ —

ALT5 Subsidiary issued 39 debentures over a period from October 2018 through September 2019.

The debentures bear interest at 12 % per annum and mature as of June 30, 2024 or June 30, 2025.

During the year ended December 28, 2024, ALT5 Subsidiary repaid 33 of the debentures in the amount of approximately $ 1.1 million.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

Long-term debt as of December 28, 2024 and December 30, 2023 consisted of the following (in $000’s):

December 28, 2024 December 30, 2023

Legacy subsidiary fixed deposits $ 4,247 $ —

Legacy subsidiary loan 3,782 —

Unaffiliated third-party 3,508 —

Total notes payable, related parties 11,570 —

Less current portion — —

Total long-term notes payable, related parties $ 11,570 $ —

Legacy Subsidiary Fixed Deposits

During the year ended December 28, 2024, ALT5 Subsidiary entered into several Corporate Fixed Deposit Agreements with otherwise unaffiliated third-parties, pursuant to which the Company became obligated for an aggregate of $ 4.7 million, as set forth in the respective agreements.

Each obligation bears interest at a rate of 13 % or 15 % per annum, and has a maturity date range of March 18, 2026 to March 13, 2027.

During the year ended December 28, 2024, several of these unaffiliated third-parties agreed to convert their respective investments into Future Equity Agreements for shares of the Company’s subsidiary, Alyea Therapeutic and, consequently, approximately $ 475,000 of these deposits were reclassified as non-controlling interest.

As of December 28, 2024, the outstanding aggregate obligations totaled approximately $ 4.2 million.

Legacy Subsidiary Loan

On August 10, 2023, ALT5 Subsidiary entered into an extension agreement for a Bitcoin promissory note with an otherwise unaffiliated third-party.

The Bitcoin promissory note is denominated in Bitcoin and, thus, is adjusted to its fair value each period.

Pursuant to the terms of an extension agreement, the maturity date is August 29, 2025.

The promissory note bears interest at 15 % per annum.

As of December 28, 2024, the outstanding balance of the note was approximately $ 3.8 million.

Unaffiliated Third-Party Loans

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “ICG Note”) in favor of Isaac Capital Group LLC (“ICG”) to add a convertibility provision.

In accordance with Nasdaq Rules, the per-share conversion price was set at $ 0.61 , subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions.

The Company’s board of directors provided its approvals of the amendments on February 7, 2024.

On March 6, 2024, ICG entered into a Note Purchase Agreement with an otherwise unaffiliated third party, under which the third party acquired the ICG Note.

The terms and conditions of the ICG Note were not modified in connection with its acquisition by the third party.

The principal amount of the ICG Note on the date of acquisition was approximately $ 1.2 million.

During the year ended December 28, 2024, the third party converted $ 548,900 of the Company’s obligations under the ICG Note into 900,000 shares of the Company’s common stock.

As of December 28, 2024, the amount outstanding on the ICG Note was approximately $ 0.7 million.

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “Live Note”) in favor of Live Ventures Incorporated (“Live”) to add a convertibility provision.

In accordance with Nasdaq Rules, the per-share conversion price for each obligation, as amended, was set at $ 0.61 , subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions.

The Company’s board of directors provided its final approvals of the amendments on February 7, 2024.

On March 6, 2024, Live entered into a Note Purchase Agreement with another otherwise unaffiliated third party, under which the third party acquired the Live Note.

The terms and conditions of the acquired Live Note were not modified in connection with its acquisition by the third party.

The principal amount of the Live Note on the date of acquisition was approximately $ 1.0 million.

During the year ended

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 28, 2024, the third party converted $ 243,900 of the Company’s obligations under the Live Note into 400,000 shares of the Company’s common stock.

As of December 28, 2024, the amount outstanding on the Live Note was approximately $ 0.8 million.

Skybridge Obligation

On April 10, 2024, Skybridge Americas, Inc.

(“SA”) sold its judgment to an otherwise unaffiliated third party for the face value of the judgment and the interest accrued thereon through that date (an aggregate of $ 433,920 ), plus accrued legal fees (in the amount of $ 18,124 ) to which SA was entitled in accordance with the terms of the underlying agreement with the Company and with the judgment.

The purchaser agreed to forbear from enforcing the judgment, subject to the Company’s repayment or his conversion thereof.

In connection with the third-party’s forbearance, the Company issued its promissory note to such person in the initial principal amount of $ 147,956 , which bears interest at the rate of 10 % per annum, and, as with the underlying judgment, is convertible into shares of the Company’s common stock at a fixed per-share conversion price of $ 2.60 (see Note 21).

On December 23, 2024, pursuant to the terms of the agreement, the unaffiliated third party converted the obligation, plus accrued interest under the agreements, in the amount of approximately $ 691,000 , into 265,842 shares of the Company’s common stock (see Note 18).

As of December 28, 2024, there was no balance outstanding.

Big/Small Debentures

On August 20, 2024, the Company entered into three Purchase Agreements with three otherwise unaffiliated third-party investors (the “Investors”), pursuant to which (1) one Investor agreed to purchase a unit (the “Unit”), consisting of (i) a non-convertible debenture in the principal amount of up to approximately $ 1.8 million (the “Big Debenture”), and (ii) a warrant (the “Big Warrant”) for the purchase of up to 400,000 shares of the Company’s Common Stock and (2) the two other Investors each agreed to purchase a Unit, consisting of (i) a non-convertible debenture in the principal amount of up to $ 404,454 (the “Small Debenture”, and, together with the Big Debenture, the “Debentures”) and (ii) a warrant (the “Small Warrant”, and, together with the Big Warrant, the “Warrants”) for the purchase of up 90,909 shares of Common Stock.

The Debentures are unsecured and subordinated to any existing or future debt.

The Debentures bear interest at a rate of (i) 1 % per month from and after August 20, 2024 (“Original Issue Date”) through and including October 31, 2024, (ii) 3 % per month from and after November 1, 2024 through and including January 29, 2025, and (iii) 4 % per month from and after January 30, 2025 through and including the date of repayment.

The Big Debenture was issued with an original issue discount (an “OID”) initially of $ 171,000 , which OID can be expanded with up to two potential additions, the first in the amount of $ 171,000 and, thereafter, in the amount of $ 342,000 , which OIDs will increase the principal amount owing on the Big Debenture.

With the original OID, the initial principal amount owing under the Big Debenture is approximately $ 1.3 million;

if, expanded, the principal amount would increase to approximately $ 1.4 million and, thereafter, potentially to approximately $ 1.8 million.

The first potential increase in the Big Debenture OID would occur if the initial principal amount and interest accrued thereon is not paid in full on or before October 31, 2024.

The second potential increase in the OID would occur if the initial principal amount (including the first potential increase in the OID) and interest accrued thereon is not paid in full on or before January 29, 2025.

The Small Debentures were issued with an OID initially of $ 38,863 , which OID can be expanded with up to two potential additions, the first in the amount of $ 38,863 and, thereafter, in the amount of $ 77,728 , which OIDs will increase the principal amount owing on the Small Debentures.

With the original OID, the initial principal amount owing under a Small Debenture is $ 288,864 ;

if, expanded, the principal amount would increase to $ 327,726 and, thereafter, potentially to $ 404,454 .

The first potential increase in the Small Debenture OID would occur if the initial principal amount and interest accrued thereon is not paid in full on or before October 31, 2024.

As of November 1, 2024, the first of the two additional OIDs was effective.

The final maturity date for each of the Debentures is April 28, 2025.

The Big Warrant is exercisable, at an exercise price of $ 1.71 per share, as follows:

(i) 100,000 shares of Common Stock as of Original Issue Date, (ii) contingently for an additional 100,000 shares of Common Stock as of October 31, 2024, if, as of such date, the Company has not repaid in full its obligations under the Big Debenture, and (iii) contingently for an

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additional 200,000 shares of Common Stock as of January 29, 2025, if, as of such date, the Company has not repaid in full its obligations under the Big Debenture.

The Small Warrant is exercisable, at an exercise price of $ 1.71 per share, as follows:

(i) 22,727 shares of Common Stock as of Original Issue Date, (ii) contingently for an additional 22,727 shares of Common Stock as of October 31, 2024, if, as of such date, the Company has not repaid in full its obligations under the Small Debenture, and (iii) 45,455 shares of Common Stock as of January 29, 2025, if, as of such date, the Company has not repaid in full its obligations under the Small Debenture.

As of November 1, 2024, the contingent second tranche of the Warrants vested.

Each Investor is required to exercise the initial tranche of each Warrant within 15 days of the Original Issue Date.

Upon the vesting of each contingent tranche of a Warrant vest, each Investor shall exercise such vested, contingent tranche within 15 days of the vesting of such contingent tranche.

If the Company consummates any equity or debt financing before satisfying in full its obligations under the Debentures, then 50 % of every net dollar received by the Company from any such financing transaction shall be paid by the Company to the holders of the Debentures, on a pro rata basis, as a mandatory pre-payment thereof.

In the event the Company has repaid all sums owing under a Debenture to the Investor, except for an amount equal to any non-conditional OID, the Company has the right, not the obligation, to exercise the vested portion of the Warrant held by the Debenture holder through a set-off of any or all such unpaid OID, on a dollar-for-dollar basis.

The Warrants also feature a “cashless” exercise provision.

In lieu of making the cash payment otherwise contemplated to be made to the Company upon exercise of a Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in the Warrant.

During the fourth quarter of the year ended December 28, 2024, the non-affiliated Investor exercised the Big Warrant for a total of 200,000 shares of the Company’s common stock, and the other two non-affiliated Investors exercised the Small Warrant for a total of 90,908 shares (see Note 18).

Additionally, during the fourth quarter of the year ended December 28, 2024, these unaffiliated third-parties agreed to convert a portion their respective investment into Future Equity Agreements of the Company’s subsidiary, Alyea Therapeutics and, consequently, approximately $ 1.3 million was reclassified as non-controlling interest.

As of December 28, 2024, the outstanding balance due on the debentures was approximately $ 500,000 , consisting of principal and accrued interest.

Corporate Fixed Deposit Agreement

On September 19, 2024, ALT5 Subsidiary and an investor entered into a 12-month Corporate Fixed Deposit Agreement, pursuant to which ALT5 Subsidiary borrowed $ 1.5 million at an interest rate of 12 % per annum, payable monthly, calculated on the then-unpaid principal amount.

Upon maturity, ALT5 Subsidiary is obligated to repay the principal amount in full and any accrued and unpaid interest.

The principal may be repaid in full, but not in part, with a pre-payment penalty equivalent to three month’s of interest.

As of December 28, 2024, the outstanding balance was $ 1.5 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Debt

Long-term debt payable to related parties (see Note 20) as of December 28, 2024 and December 30, 2023 consisted of the following (in $000’s):

December 28, 2024 December 30, 2023

Isaac Capital Group $ — $ 707

Isaac Capital Group, 10 % interest rate, matures December 31, 2024

Live Ventures Incorporated, 10 % interest rate, matures December 31, 2024

Isaac Capital Group short-term demand advance 48 —

Novalk Apps SAA, LLP short-term demand advance 110 —

Total notes payable, related parties 812 707

Less current portion ( 812 ) —

Total long-term notes payable, related parties $ — $ 707

Total future maturities of long-term debt to related parties is as follows (in $000’s):

Twelve months ending September 30,

Total future maturities of long-term debt, related parties $ 812

Isaac Capital Group LLC

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “ICG Note”) in favor of ICG to add a convertibility provision.

The Company’s board of directors provided its approvals of the amendments on February 7, 2024.

On March 6, 2024, ICG entered into a Note Purchase Agreement with an otherwise unaffiliated third party, under which the third party acquired the ICG Note.

The terms and conditions of the ICG Note were not modified in connection with its acquisition by the third party.

The principal amount of the ICG Note on the date of acquisition was approximately $ 1.2 million.

As of December 28, 2024, the third party converted $ 183,000 of the Company’s obligation under the ICG Note into 300,000 shares of the Company’s common stock.

As of December 28, 2024, the amount outstanding on the ICG Note was approximately $ 0.3 million (see Note 20).

On April 18, 2024, ICG made a short-term demand advance to the Company in the amount of $ 100,000 .

The advance bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the principal amount outstanding was $ 48,000 (see Note 20).

Live Ventures Incorporated

On February 7, 2024, the Company amended its outstanding related party promissory obligations (the “Live Note”) in favor of Live Ventures to add a convertibility provision.

The Company’s board of directors provided its final approvals of the amendments on February 7, 2024.

On March 6, 2024, Live Ventures entered into a Note Purchase Agreement with another otherwise unaffiliated third party, under which under which the third party acquired the Live Note.

The terms and conditions of the acquired Live Note were not modified in connection with its acquisition by the third party.

The principal amount of the Live Note on the date of acquisition was approximately $ 1.0 million.

As of December 28, 2024, the third party converted $ 183,000 of the Company’s obligation under the Live Note into 300,000 shares of the Company’s common stock.

As of December 28, 2024, the amount outstanding on the Live Note was approximately $ 0.3 million (see Note 20).

On March 4, 2024, the Company entered into a two-year Consulting Agreement with Jon Isaac, pursuant to which he will provide to the Company (the “Services”):

(i) strategic financial advice, including growth strategies, capital allocation, and financial restructuring;

(ii) sales and business development advice, including for the acquisition of new clients and new products through networking, referrals, and marketing efforts for our prospective products;

(iii) in-depth research and

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market intelligence on specific industries, sectors, and market trends;

(iv) financial models and financial analysis to support strategic decision-making;

(v) assistance, through site visits, in the preparation of new client offers and bids for proposed projects;

(vi) weekly update calls with management to align on progress of objectives and goals;

(vii) enhanced non-confidential materials;

(viii) business risk management support;

and (ix) other services to which the Company and he may agree that will be memorialized in writing if, when, and as needed during the two-year term.

In connection with the Consulting Agreement, the Company entered into a a two-year , straight 10 % convertible promissory note in the initial principal amount of $ 500,000 , and a per-share conversion price equivalent to the per-share value of the restricted common stock that he was granted ($ 1.16 ).

The maturity date of the promissory note is March 4, 2026.

On December 23, 2024, pursuant to the terms of his Consulting Agreement, Mr.

Isaac converted the principal and accrued interest on the convertible promissory note, in the amount of approximately $ 540,000 , into 465,753 shares of the Company’s common stock.

As of December 28, 2024, there was no principal balance outstanding on the promissory note (see Note 20).

Novalk Apps SAA, LLP

On May 28, 2024 and June 3, 2024, Novalk Apps SAA, LLP (“Novalk”) made short-term demand advances in the amount of $ 120,000 and $ 100,000 , respectively, to the Company.

The advances bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the principal amount outstanding was $ 110,000 (see Note 20).

During June 3, 2024, Tony Isaac made a number of short-term demand advances in the aggregate amount of $ 62,000 to the Company.

The advances bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the principal amount outstanding was fully repaid (see Note 20).

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Preferred Stock

Series A-1 Convertible Preferred Stock

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In connection with this transaction, the Company tendered to the owners of GeoTraq $ 200,000 , issued to them an aggregate of 288,588 shares (number of shares specific – not rounded) of the Company’s Series A Convertible Preferred Stock valued at $ 12.3 million, including the beneficial conversion feature of $ 2.6 million, and entered into one-year unsecured promissory notes in the aggregate principal amount of $ 800,000 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The “Conversion Ratio” per share of the Series A-1 Convertible Preferred Stock in connection with any conversion shall be at a ratio of 20 :1, one share of Series A-1 Convertible Preferred Stock, if and when converted into shares of Common Stock, shall convert into twenty shares Common Stock.

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The holders of Series A-1 Convertible Preferred Stock vote together with all other classes and series of common and preferred stock of the Company as a single class on all actions to be taken by the common stockholders of the Company, except to the extent that voting as a separate class or series is required by law.

The Series A-1 Convertible Preferred Stock has no redemption rights by JanOne, or any other entity.

The Series A-1 Convertible Preferred Stock has no redemption rights by the Company, or any other entity.

Preemptive Rights

Holders of the Series A-1 Convertible Preferred Stock and holders of JanOne common stock are not entitled to any preemptive, subscription, or similar rights in respect of any securities of JanOne, except as set forth in the Amended and Restated Series A-1 Certificate of Designation or in any other document agreed to by JanOne.

Holders of the Series A-1 Convertible Preferred Stock and holders of ALT5 Sigma Corporation’s common stock are not entitled to any preemptive, subscription, or similar rights in respect of any securities of the Company, except as set forth in the Amended and Restated Series A-1 Certificate of Designation or in any other document agreed to by ALT5 Sigma Corporation.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series A-1 Convertible Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A-1 Convertible Preferred Stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of the Series A-1 Convertible Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of the Series A-1 Convertible Preferred Stock, but excluding a stock split or

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reverse stock split or combination of the common stock or preferred stock;

(iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A-1 Convertible Preferred Stock;

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provided, however, that we may, without any vote of the holders of shares of the Series A-1 Convertible Preferred Stock, make technical, corrective, administrative or similar changes to the Amended and Restated Series A-1 Certificate of Designation that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series A-1 Convertible Preferred Stock.

Series B Preferred Stock

On May 15, 2024 the Company acquired acquired its ALT5 Subsidiary by way of merger (see Note 3).

the Company tendered to the owners of ALT5 Subsidiary 34,250 shares of the Company’s Series B Preferred Stock valued at approximately $ 8.6 million.

Series B Preferred Stock are not be convertible into any class or series of capital stock of the Company.

As of the year ended December 28, 2024, 34,207 shares of Series B Preferred Stock were outstanding.

The Company shall not declare, pay, or set aside any dividends on shares of Series B Preferred Stock.

Voting Rights

Except as required by the General Corporation Law of the State of Nevada, the Series B Preferred Stock shall not have any voting rights.

The Series B Preferred Stock has no redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

Holders of Series B Preferred Stock and holders of Common Stock are not be entitled to any preemptive, subscription, or similar rights in respect of any securities of the Company.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series B Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B Preferred Stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of the Series B Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock;

(iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series B Preferred Stock;

(iv) permit the convertibility, whether mandatory or permissible, of some or all of the then-outstanding shares of Series B Preferred Stock, or (v) alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation;

provided, however, that we may, without any vote of the holders of shares of the Series B Preferred Stock,

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make technical, corrective, administrative or similar changes that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series B Preferred Stock.

Series I Convertible Preferred Stock

In connection with its acquisition of ALT5 Subsidiary (see Note 3), on December 2, 2024, the Company tendered 17,000 shares of Series I Convertible Preferred Stock to two consultants of ALT5 Subsidiary.

The Series I Convertible Preferred Stock is subject to a mandatory eight-calendar-quarter leak-out, such that no more than twelve-and-one-half percent of the shares may be converted into shares of the Company’s common stock on a trailing quarterly basis over a period of two years , and are subject to vesting provisions.

The conversion ratio per share of the Series I Convertible Preferred Stock shall be one hundred shares of the Company’s common stock for each share of Series

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I Convertible Preferred Stock subject to certain adjustments.

As of the year ended December 28, 2024, 17,000 shares of Series I Convertible Preferred Stock were outstanding.

Following the Original Issue Date, the holders of this series of Preferred Stock shall be entitled to receive dividends on an as-converted into-Common Stock basis contemporaneously with the declaration and payment to the holders of Common Stock.

Voting Rights

Except as required by the General Corporation Law of the State of Nevada, the Series I Convertible Preferred Stock shall not have any voting rights.

The Certificate of Designation for the Series I Convertible Preferred Stock does not provide any redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

The Certificate of Designation for the Series I Convertible Preferred Stock does not provide the holders thereof with any preemptive, subscription, or similar rights in respect of any securities of the Company.

Protective Provisions

The Certificate of Designation for the Series I Convertible Preferred Stock does not provide the holders thereof with any protective provisions in their favor for so long as shares of such series remain outstanding.

Series M Preferred Stock

In connection with its acquisition of ALT5 Subsidiary (see Note 3), the Company issued 3,200 shares of Series M Preferred Stock to two entities that acted as finders for the transaction.

Series M Preferred Stock shall not be convertible into any class or series of capital stock of the Company.

As of the year ended December 28, 2024, 3,200 shares of Series M Preferred Stock were outstanding.

The Company shall not declare, pay, or set aside any dividends on shares of Series M Preferred Stock.

Voting Rights

Except as required by the General Corporation Law of the State of Nevada, the Series M Preferred Stock shall not have any voting rights.

The Series M Preferred Stock has no redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

Holders of Series M Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription, or similar rights in respect of any securities of the Company.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series M Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series M Preferred Stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of

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the Series M Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock;

(iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series M Preferred Stock;

(iv) permit the convertibility, whether mandatory or permissible, of some or all of the then-outstanding shares of Series M Preferred Stock, or (v) alter or change the rights, preferences or privileges of the shares of Series M Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation;

provided, however, that we may, without any vote of the holders of shares of the Series M Preferred Stock, make technical, corrective, administrative or similar changes that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series M Preferred Stock.

Series Q Convertible Preferred Stock

On November 6, 2024 acquired the Qodex Cryptocurrency Exchange Software platform and other related assets from Qoden Technologies, LLC by way of an asset purchase agreement (see Note 3).

The Company tendered to the owners of Qoden Technologies, LLC 771,010 shares of the Company’s Series Q Convertible Preferred Stock valued at approximately $ 1.3 million.

Additionally, the Company tendered and additional 154,202 shares of the Company’s Series Q Convertible Preferred Stock to a third-party contractor to act as a consultant in implementing and enhancing the platform.

The Series Q Convertible Preferred Stock was valued at $ 2.594 per share on the date issued, and is subject to a mandatory eight-calendar-quarter leak-out, such that no more than twelve-and-one-half percent of the shares may be converted into shares of the Company’s common stock on a trailing quarterly basis over a period of two years, and are subject to vesting provisions.

The conversion ratio per share of the Series Q Convertible Preferred Stock shall be one share of the Company’s common stock for each share of Series Q Convertible Preferred Stock subject to certain adjustments.

As of the year ended December 28, 2024, 925,212 shares of Series Q Convertible Preferred Stock were outstanding.

Following the Original Issue Date, holders of Series Q Convertible Preferred Stock shall not be entitled to receive any dividends.

Voting Rights

Except as required by the General Corporation Law of the State of Nevada, the Series Q Convertible Preferred Stock shall not have any voting rights.

The Series Q Convertible Preferred Stock has no redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

Holders of Series Q Convertible Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription, or similar rights in respect of any securities of the Company.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series Q Convertible Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series Q Convertible Preferred Stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of the Series Q Convertible Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock;

(iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series Q Preferred Stock;

(iv) permit the convertibility, whether mandatory or permissible, of some or all of the then-outstanding shares of Series B Preferred Stock, or (v) alter or change the rights, preferences or privileges of the shares of Series Q Convertible Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation;

provided, however, that we may, without any vote of the holders of shares of the Series Q Convertible Preferred Stock, make technical, corrective, administrative or similar

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changes that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series Q Convertible Preferred Stock.

Series V Convertible Preferred Stock

On May 4, 2024, entered into an Asset Purchase Agreement for the purchase of specified assets of an unaffiliated third-party (see Note 18).

In connection with this transaction, the Company tendered 5,000 shares of the Company's Series V Convertible Preferred Stock.

The conversion ratio per share of the Series V Convertible Preferred Stock in connection with any Conversion shall be at a ratio of 1:1, meaning every one share of Series V Convertible Preferred Stock, if and when converted into shares of Common Stock, shall convert into one share of Common Stock.

Each Holder shall have the right, exercisable at any time and from time to time, unless otherwise prohibited by law, rule, or regulation, to convert any or all of such Holder’s shares of Series V Convertible Preferred Stock into shares of Common Stock at the Conversion Ratio.

As of the year ended December 28, 2024, 5,000 shares of Series Q Convertible Preferred Stock were outstanding.

Shares of Series V Convertible Preferred Stock do not have dividend rights.

Voting Rights

The Holder of each share of Series V Convertible Preferred Stock shall have such number of votes as is determined by multiplying (a) the number of shares of Series V Convertible Preferred Stock held by such Holder by (b) one.

Such voting calculation is hereby authorized by the Company and the Company acknowledges such calculation may result in the total number of possible votes cast by the Series V Convertible Preferred Stock Holders and all other classes of the Company’s Common Stock in any given voting matter exceeding the total aggregate number of shares that this Company shall have authority to issue.

The Series V Convertible Preferred Stock has no redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

Holders of Series V Convertible Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription, or similar rights in respect of any securities of the Company.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series V Convertible Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series V Convertible Preferred Stock;

(ii) effect an exchange, reclassification, or cancellation of all or a part of the Series V Convertible Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock;

(iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series V Preferred Stock;

(iv) permit the convertibility, whether mandatory or permissible, of some or all of the then-outstanding shares of Series V Preferred Stock, or (v) alter or change the rights, preferences or privileges of the shares of Series V Convertible Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation;

provided, however, that we may, without any vote of the holders of shares of the Series V Convertible Preferred Stock, make technical, corrective, administrative or similar

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changes that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series V Convertible Preferred Stock.

Series S Convertible Preferred Stock

On December 28, 2022 the acquired Soin Therapeutics by way of merger.

On December 28, 2022 the Company acquired Soin Therapeutics by way of merger.

In connection with this transaction, with a potential value of up to $ 30 million, the Company tendered 100,000 shares of the Company's Series S Convertible Preferred Stock.

Initially, Dr.

Soin was entitled to convert up to three million dollars of value of the Series S Stock into shares of the Company’s common stock commencing one year from the closing and may also convert up to an additional $ 10 million of value of the Series S Stock into shares of the Company's common stock from and after the sooner of (y) the issuance by the FDA of New Drug Approval for low-dose naltrexone for treating pain or (z) 10 years from the closing.

Further, during the 10 -year period following the closing, Dr.

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Shares of Series S Convertible Preferred Stock are convertible into the Company’s common shares at a ratio of 1:1.

As of December 30, 2023 and December 31, 2022, there were 100,000 of Series S Convertible Preferred Stock outstanding, as reflected in the following (dollars in $000’s).

During the year ended December 28, 2024, in connection with the amended agreement disclosed in Note 3, the Company reclassified approximately $ 2.7 million from mezzanine equity to current liabilities, and approximately $ 8.0 million from mezzanine equity to permanent equity (see Note 3).

As of December 28, 2024 and December 30, 2023, there were 100,000 shares of Series S Convertible Preferred Stock outstanding, as reflected in the following (dollars in $000’s):

Series S Preferred Stock

Shares Amount

Balance, January 1, 2022 — $ —

Series S preferred issued 100,000 14,510

Balance, December 31, 2022 100,000 $ 14,510

Balance, December 30, 2023 100,000 100000 14,510

Reclassification to permanent equity 0 $ ( 7,993 )

Reclassification to current liabilities 0 $ ( 2,661 )

Balance, December 28, 2024 100,000 $ 3,856

Shares of Series S Convertible Preferred Stock do not have dividend rights.

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The Holders of Series S Convertible Preferred Stock shall vote together with all other classes and series of common and preferred stock of the Company as a single class on all actions to be taken by the Common Stock stockholders, except to the extent that voting as a separate class or series is required by law.

The Series S Convertible Preferred Stock has no redemption rights by JanOne, or any other entity.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Series S Convertible Preferred Stock has no redemption rights by ALT5 Sigma Corporation, or any other entity.

Preemptive Rights

Holders of the Series S Convertible Preferred Stock and holders of JanOne common stock are not entitled to any preemptive, subscription, or similar rights in respect of any securities of JanOne, except as set forth in the Amended and Restated Series A-1 Certificate of Designation or in any other document agreed to by JanOne.

Holders of the Series S Convertible Preferred Stock and holders of ALT5 Sigma Corporation common stock are not entitled to any preemptive, subscription, or similar rights in respect of any securities of ALT5 Sigma Corporation, except as set forth in the Amended and Restated Series A-1 Certificate of Designation or in any other document agreed to by ALT5 Sigma Corporation.

Protective Provisions

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The aggregate gross proceeds for the sale of the shares of Common Stock were approximately $ 422,000 , before deducting the placement agent fees and related expenses.

The Company intends to use the net proceeds for working capital and general corporate purposes.

The Company utilized the net proceeds for working capital and general corporate purposes.

On August 18, 2023, the Company entered into a Securities Purchase Agreement with a certain institutional investor for the sale by the Company in a registered direct offering of:

(i) 418,000 shares of the Company’s common stock, par value $ 0.001 per share, at an offering price of $ 0.8811 per share and (ii) pre-funded warrants exercisable for up to 481,348 shares of Common Stock to the Investor at an offering price equal to $ 0.8801 per pre-funded Warrant.

The aggregate gross proceeds from the offering were approximately $ 790,000 , before deducting the placement agent fees and related expenses.

The Company intends to use the net proceeds for working capital and general corporate purposes.

On August 31, 2023, 481,348 of the pre-funded warrants were exercised.

In a concurrent private placement, the Company also granted warrants to purchase up to 899,348 shares of Common Stock.

Each warrant is exercisable immediately following issuance at an exercise price of $ 0.7561 per share and expires August 31, 2023.

As of December 30, 2023, there were 899,348 of the private placement warrants outstanding.

In connection with the Securities Purchase Agreement, during the year ended December 28, 2024, the Company issued 27,738 shares of its common stock to three third-parties in exchange for brokerage services.

On February 23, 2024, the Company entered into Unit Purchase Agreements with two otherwise unaffiliated third-party investors, pursuant to which each Investor agreed to purchase 408,163 units of securities from the Company, at a price per Unit of $ 0.7350 , for an aggregate purchase price of $ 300,000 per investor for an aggregate price of $ 600,000 .

Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of common stock.

The per-Unit price is allocated as follows:

$ 0.61 per share of common stock and $ 0.125 per Warrant.

The Warrant has a three-year term and will be immediately exercisable.

Each Warrant is exercisable at $ 0.61 per share.

The Company utilized the proceeds from the Unit Purchases for its working capital needs.

Further, the Company issued an additional 81,632 shares of its common stock to another party in exchange for brokerage services rendered.

On March 4, 2024, the Company entered into a two-year Consulting Agreement (the “Consulting Agreement”) with Jon Isaac, pursuant to which he will provide a variety of services to the Company.

In connection with the Consulting Agreement, the Company issued to Mr.

Isaac 200,000 restricted shares of its common stock (see Note 20).

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 22, 2024, pursuant to the terms and conditions of a promissory note, the Company converted $ 183,000 of obligations into 300,000 shares of the Company’s common stock (see Note 20).

On March 25, 2024, pursuant to the terms and conditions of a promissory note, the Company converted $ 183,000 of obligations into 300,000 shares of the Company’s common stock (see Note 20).

On April 10, 2024, pursuant to the terms and conditions of a promissory note, the Company converted $ 60,900 of obligations into 100,000 shares of the Company’s common stock (see Note 20).

On April 12, 2024, pursuant to the terms and conditions of a promissory note, the Company converted $ 60,900 of obligations into 100,000 shares of the Company’s common stock (see Note 20).

On May 1, 2024, the Company entered into a Securities Purchase Agreement with two institutional investors for the sale by the Company of 79,782 units of the Company’s securities at a purchase price of $ 3.775 per unit, each unit consisting of one share of the Company’s common stock and one common stock purchase warrant for the purchase of an additional share of Common Stock.

Each three-year warrant is exercisable immediately at an exercise price of $ 3.63 per share.

The gross proceeds were approximately $ 300,000 , before deducting related expenses.

On May 4, 2024, the Company entered into an Asset Purchase Agreement for the purchase of specified assets of an unaffiliated third-party.

For the purchase of the assets, the Company (i) issued 300,000 restricted shares of its common stock, (ii) issued 5,000 shares of its Series V Convertible Preferred Stock, and (iii) granted a three-year warrant for the purchase of up to 125,000 shares of its common stock at an exercise price of $ 1.25 per share.

On May 15, 2024, the Company acquired ALT5 Subsidiary.

As consideration under the acquisition, the Company issued 1,799,100 shares of its common stock to the legacy equity holders of the capital stock of ALT5 (see Note 3).

On June 3, 2024, the Company entered into a six-month marketing agreement with a non-affiliated third-party, pursuant to which the third-party will provide a variety of marketing-related services to the Company.

In connection with the marketing agreement, the Company issued to the third-party 47,923 shares of its common stock.

On June 6, 2024, the Company entered into a one-year consulting agreement with a non-affiliated third-party, pursuant to which the third party will provide a variety of finance and investor-related services to the Company.

In connection with the marketing agreement, the Company issued to the third-party 150,000 shares of its common stock.

On September 18, 2024, the Company entered into a six-month marketing agreement with a non-affiliated third-party, pursuant to which the third-party will provide a variety of marketing-related services to the Company.

In connection with the marketing agreement, the Company issued to the third-party 20,000 shares of its common stock.

During October 2024, the Company issued 225,000 shares of its common stock as prepayment of one year’s interest on its Bitcoin loan.

In connection with the Big/Small Debenture (see Note 15), on October 18, 2024, the Company issued an additional 25,000 shares of its common stock to another party in exchange for brokerage services rendered.

During the fourth quarter of the fiscal year ended December 28, 2024, the Company issued 290,908 shares of its common stock related to the exercise of warrants under Big/Small Debenture (see Note 15).

On July 1, 2024, the Company entered into a one-year consulting agreement with a non-affiliated third-party, pursuant to which the third-party will provide a variety of communication-related consulting services to the Company.

In connection with the marketing agreement, on December 3, 2024 , the Company issued to the third-party 60,000 shares of its common stock.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 23, 2024, pursuant to the terms of his Consulting Agreement, Mr.

Isaac converted the existing obligation on the convertible promissory note, in the amount of approximately $ 540,000 , into 465,753 shares of the Company’s common stock (see Note 16).

On December 23, 2024, pursuant to the terms of the judgment and forbearance agreements, a non-affiliated third-party converted the existing obligation plus accrued interest due under the agreements, in the amount of approximately $ 691,000 , into 265,842 shares of the Company’s common stock (see Note 15).

During the year ended December 28, 2024, the Company issued an aggregate of 341,175 shares of its common stock to four individuals under the Company’s 2023 Equity Incentive Plan.

The aggregate value of the shares at issuance was approximately $ 1.3 million.

Equity Incentives :

The Company’s 2024 Plan, which was adopted by the Board in November 2024 and approved by the stockholders at the 2024 annual meeting of stockholders, replaces the 2023 Plan, which replaced the 2016 Plan, which replaced the 2011 Plan.

Under the 2024 Plan, the maximum aggregate number of shares, which may be subject to or delivered under Awards granted under the Plan is 2,800,000 shares.

Awards may be in the form of a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted in accordance with the terms of the respective Plan.

During the year ended December 28, 2024, there were no grants under the 2024 Plan.

The Company’s 2023 Plan, which was adopted by the Board in August 2023 and approved by the stockholders at the 2023 Annual Meeting of Stockholders, replaces the 2016 Plan, which replaced the 2011 Plan.

1 unchanged sentence

Awards may be in the form of a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted in accordance with the terms of the respective Plan.

During the year ended December 30, 2023, the Company granted $ 345,000 in restricted stock units, or 908,852 underlying shares of the Company's common stock, which were all immediately vested.

As of December 30, 2023, $ 345,000 in restricted stock units, or 908,852 underlying shares of the Company's common stock, were outstanding.

During the year ended December 28, 2024, the Company recognized $ 1.2 million and in share-based compensation expense related to the 908,852 RSU’s that were awarded and immediately vested, as well as 295,000 shares of the Company’s common stock issued (see above).

The Company’s 2016 Plan authorizes the granting of awards in any of the following forms:

(i) incentive stock options, (ii) nonqualified stock options, (iii) restricted stock awards, and (iv) restricted stock units, and expires on the earlier of October 28, 2026, or the date that all shares reserved under the 2016 Plan are issued or no longer available.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 4, 2020, the Company amended the 2016 Plan to increase the issuance of common shares from 400,000 to 800,000 .

On November 4, 2020, the Company amended the 2016 Plan to increase the issuance of common shares from 400,000 to 800,000 .

The vesting period is determined by the Board of Directors at the time of the stock option grant.

As of December 30, 2023 and December 31, 2022, 100,000 and 90,000 options were outstanding under the 2016 Plan.

As of December 28, 2024 and December 30, 2023, 100,000 options were outstanding under the 2016 Plan.

The Company’s 2011 Plan authorizes the granting of awards in any of the following forms:

6 unchanged sentences

Value Weighted

Outstanding at January 1, 2022 117,500 $ 7.16 $ 21 7.0

Cancelled/expired ( 7,500 )

Outstanding at December 31, 2022 110,000 $ 6.27 $ — 6.5

2 unchanged sentences

Outstanding at December 30, 2023 114,000 5.68 — 6.1

Cancelled/expired ( 6,000 ) —

Outstanding at December 28, 2024 108,000 $ 5.03 $ 68 5.5

Exercisable at December 28, 2024 60,000 $ 3.32 $ 68 5.8

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The exercise price for stock options outstanding and exercisable outstanding at December 28, 2024 is as follows:

5 unchanged sentences

50,000 $ 3.54 to $ 5.25

42,000 $ 5.70 to $ 9.90

66,000 $ 3.54 to $ 5.25

108,000 60,000

The following table summarizes information about the Company’s non-vested shares outstanding as of December 30, 2023 and December 31, 2022:

Non-vested Shares Number of

Non-vested at January 1, 2022 7,500

Vested ( 7,500 )

Non-vested at December 31, 2022 —

Granted 10,000

Vested ( 10,000 )

Non-vested at December 30, 2023 —

The Company recognized share-based compensation expense related to equity incentive awards of approximately $ 14,000 and approximately $ 5,000 for the fiscal years ended December 30, 2023, and December 31, 2022, respectively.

As of December 30, 2023, the Company had no unrecognized share-based compensation expense associated with stock option awards.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For fiscal years ended December 30, 2023, and December 31, 2022, the Company recorded an income tax benefit from continuing operations of approximately $ 429,000 and an income tax benefit of $ 6.6 million, respectively, and an income tax provision from discontinued operations of approximately $ 971,000 and $ 2.1 million, respectively, which consisted of the following (in $000’s):

The Company recognized share-based compensation expense related to equity incentive awards of approximately $ 1.7 million and approximately $ 14,000 for the fiscal years ended December 28, 2024, and December 30, 2023, respectively.

As of December 28, 2024, the Company had no unrecognized share-based compensation expense, and there were no non-vested shares associated with stock option awards.

For fiscal years ended December 28, 2024, and December 30, 2023, the Company recorded an income tax benefit from continuing operations of approximately $ 3.0 million and an income tax benefit of $ 0.4 million, respectively, and an income tax provision from discontinued operations of $ 0 and approximately $ 1.0 million, respectively, which consisted of the following (in $000’s):

Fiscal Years Ended

3 unchanged sentences

Federal ( 44 ) 98

Foreign 334 —

Current tax expense 188 98

Deferred tax provision (benefit) - domestic 445 ( 4,589 )

Total provision (benefit) of income taxes $ 542 $ ( 4,512 )

Deferred tax (benefit) provision ( 3,229 ) 444

Total (benefit) provision of income taxes $ ( 3,041 ) $ 542

A reconciliation of the Company's income tax benefit (provision) with the federal statutory tax rate for the fiscal years ended December 28, 2024, and December 30, 2023, respectively, is shown below:

2 unchanged sentences

statutory rate 21.0 % 21.0 %

Federal income tax for installment sale — % 0.6 %

State tax rate 0.9 % 1.5 %

1 unchanged sentence

Permanent differences - 6.7 % - 0.1 %

Change in tax rates — % 2.8 %

Impact of sale of ARCA Recycling and Canada — % - 4.4 %

3 unchanged sentences

Income (loss) before provision of income taxes was derived from the following sources for fiscal years December 28, 2024 and December 30, 2023, respectively, as shown below (in $000’s):

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended

3 unchanged sentences

Total $ ( 9,286 ) $ ( 7,270 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net deferred tax assets (liabilities) as of December 28, 2024 and December 30, 2023, respectively, are as follows (in $000’s):

2 unchanged sentences

Accrued expenses $ 152 $ 7

Allowance for bad debts 53 —

Accrued compensation 35 3

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Intangibles ( 6,909 ) ( 3,747 )

Property and equipment — ( 483 )

Right-of-use assets ( 33 ) —

Installment sale — —

2 unchanged sentences

valuation allowance ( 2,919 ) ( 2,773 )

Net deferred tax assets (liabilities) $ ( 639 ) $ ( 195 )

Net deferred tax liabilities $ ( 1,041 ) $ ( 639 )

As of December 28, 2024, the Company has net operating loss carryforwards of approximately $ 19.5 million for federal income tax purposes, and approximately $ 11.8 million for state income tax purposes, which will be available to offset future taxable income.

4 unchanged sentences

Due to the 2023 sale of ARCA Canada (as part of the Recycling Subsidiaries transaction), the valuation allowance was released.

The Company has recorded a valuation allowance of approximately $ 2.8 million and $ 904,000 as of December 30, 2023, and December 31, 2022, respectfully.

The Company has recorded a valuation allowance of approximately $ 2.9 million as of December 28, 2024, and December 30, 2023.

The Company annually conducts an analysis of its uncertain tax positions and has concluded that it has no uncertain tax positions as of December 28, 2024.

4 unchanged sentences

None of the Company’s income tax returns are currently under audit.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related parties

Tony Isaac, the Company’s Chief Executive Officer, is the father of Jon Isaac, President and Chief Executive Officer of Live Ventures Incorporated (“Live Ventures”) and managing member of ICG.

Tony Isaac, Chief Executive Officer and Richard Butler, Board of Directors member of the Company, are both Board of Directors members of Live Ventures.

Shared Services

Tony Isaac, the Company’s President, is the father of Jon Isaac, President and Chief Executive Officer of Live Ventures and managing member of ICG.

Tony Isaac and Richard Butler, Board of Directors members of the Company, are members of the Board of Directors of Live Ventures.

The Company also shares certain executive, accounting and legal services with Live Ventures.

The total services shared were approximately $ 144,000 and approximately $ 203,000 for fiscal years ending December 28, 2024 and December 30, 2023, respectively.

Connexx rents approximately 9,900 square feet of office space from Live Ventures at its Las Vegas, Nevada office.

Effective August 2023, due to the winding down of operations of the Recycling Subsidiaries, we ceased leasing office space in the Las Vegas, Nevada facility.

Customer Connexx rented approximately 9,900 square feet of office space from Live Ventures in Las Vegas, Nevada.

Effective August 2023, due to the winding down of operations of the Recycling Subsidiaries, the Company ceased leasing office space in the Las Vegas, Nevada facility.

The total rent and common area expenses for Connexx at the Las Vegas, Nevada office were approximately $ 17,000 and approximately $ 103,000 for fiscal years ending December 28, 2024 and December 30, 2023, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During Q4 2023, operations of the Recycling Subsidiaries were wound down and, ultimately, ceased.

1 unchanged sentence

As such, the Company has recorded a liability in the amount of approximately $ 258,000 , which was offset against the gain on sale of the Recycling Subsidiaries.

Notes with Live Ventures and ICG

On February 7, 2024, the Company entered into a promissory notes with each of Live Ventures and ICG.

The initial principal amount of each note is $ 300,000 , with an interest rate of 10 % per annum.

Pursuant to an amendment to each note, $ 100,000 of principal, and accrued interest thereon, is due on September 7, 2024 for each note, and the balance of each note is due on December 31, 2024.

At the Company’s option, the obligation under each note is convertible after the six-month anniversary thereof at a per-share conversion price of $ 0.61 , subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions.

The Company’s board of directors approved the issuance of the two notes on February 7, 2024.

As of December 28, 2024, the principal balances outstanding on each of the promissory notes was $ 327,000 .

Isaac Consulting Agreement

On March 4, 2024, the Company entered into a two-year Consulting Agreement with Jon Isaac, pursuant to which he will provide to the Company (the “Services”):

(i) strategic financial advice, including growth strategies, capital allocation, and financial restructuring;

(ii) sales and business development advice, including for the acquisition of new clients and new products through networking, referrals, and marketing efforts for our prospective products;

(iii) in-depth research and market intelligence on specific industries, sectors, and market trends;

(iv) financial models and financial analysis to support strategic decision-making;

(v) assistance, through site visits, in the preparation of new client offers and bids for proposed projects;

(vi) weekly update calls with management to align on progress of objectives and goals;

(vii) enhanced non-confidential materials;

(viii) business risk management support;

and (ix) other services to which the Company and he may agree that will be memorialized in writing if, when, and as needed during the two-year term.

As compensation for the Services, the Company (i) assigned to him two universal life insurance policies that relate to the life of one of the founders of our now-disposed legacy recycling business (as of March 4, 2024, the first policy had an accumulated value/surrender value of approximately $ 3,854 and the second had an accumulated value/surrender value of approximately $ 468 );

(ii) agreed to tender to him funds in our Canadian counsel’s trust account in the event that the prospective Order of the Court of Appeal for Ontario Canada in the matter styled, Amtim Capital Inc.

and Appliance Recycling Centers of America , Case No.

COA-23-CV-0156, became the final Order of the Court, which amount we received during the reporting period and tendered to Mr.

Isaac $ 220,000 ;

(iii) issued to him 200,000 restricted shares of our common stock with the per-share value being the average of the Nasdaq Historical NOCP closing price during the five trading days prior to our board approving the Consulting Agreement, which shares were awarded from our 2023 Equity Incentive Plan;

and (iv) issued to him a two-year , straight 10.0 % convertible promissory note in the initial principal amount of $ 500,000 , with an interest rate of 10.0 % and a per-share conversion price equivalent to the per-share value of the restricted common stock that he was granted ($ 1.16 ).

The maturity date of the promissory note is March 4, 2026.

The value of the restricted shares was $ 232,000 on the date issued.

As of December 28, 2024, there was no principal balance outstanding on the promissory note.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Short-Term Advances

On April 18, 2024, ICG made a short-term demand advance to the Company in the amount of $ 100,000 .

The advance bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the principal amount outstanding was $ 48,000 .

On May 28, 2024 and June 3, 2024, Novalk made short-term demand advances in the amount of $ 120,000 and $ 100,000 , respectively, to the Company.

Juan Yunis, an employee of Live Ventures, is the managing member of Novalk.

The advances bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the principal amount outstanding was $ 110,000 .

During June 3, 2024, Tony Isaac made a number of short-term demand advances in the aggregate amount of $ 62,000 to the Company.

The advances bears interest at a rate of 10 % per annum until repaid.

As of December 28, 2024, the Company had repaid the advance in full (see Note 20).

Sale of Recycling Subsidiaries

11 unchanged sentences

On August 28, 2019, ARCA Recycling entered into and delivered to ICG a secured revolving line of credit promissory note, whereby ICG agreed to provide ARCA Recycling with a $ 2.5 million revolving credit facility (the “ICG Note”).

Jon Isaac is the manager and sole member of ICG, and the son of Tony Isaac, the Chief Executive Officer of JanOne and, previously, ARCA Recycling.

Jon Isaac is the manager and sole member of ICG, and the son of Tony Isaac, the President of ALT5 Sigma Corporation and, previously, ARCA Recycling.

ICG is a record and beneficial owner of 13.6 % of the outstanding common stock of the Company.

The ICG Note was originally a component of the sale of the Recycling Subsidiaries in March 2023;

however, because of the winding down of operations of the Recycling Subsidiaries during Q4 2023, and because the ICG Note was guaranteed by the Company, it recorded a liability in the amount of approximately $ 690,000 for the principal balance due on the note, which was offset against the gain on sale of the Recycling Subsidiaries.

Additionally, effective February 2024, the ICG Note was amended to reflect the Company as co-maker on the ICG Note.

Additionally, effective February 2024, the ICG Note was amended to reflect the Company as co-maker on the ICG Note (see Note 20).

The ICG Note matures in March 2026, and bears interest at 8.75 % per annum.

Monthly payments on the note are approximately $ 24,767 .

As of December 30, 2023, the balance outstanding was approximately $ 706,000 .

ARCA Recycling Purchasing Agreement

On April 5, 2022, ARCA Recycling entered into a Purchasing Agreement with Live Ventures.

Pursuant to the Purchasing Agreement, Live Ventures agrees to purchase inventory from time to time for ARCA, as set forth in submitted purchase orders.

The inventory is owned by Live Ventures until payment from ARCA Recycling is received.

All purchases made by ARCA Recycling shall be paid back to Live Ventures in full plus an additional five percent surcharge or broker-type fee.

The term of the Purchasing Agreement is one year , and automatically renews if not terminated by either party, as provided for in the Purchasing Agreement.

The liability for the Purchasing Agreement was originally a component of the sale of the Recycling Subsidiaries in March 2023;

however, because of the winding down of operations of the Recycling Subsidiaries during Q4 2023, and because the Purchasing Agreement was guaranteed by the Company, it recorded a liability in the amount of approximately $ 692,000 for the principal balance due under the Purchasing Agreement, which was offset against the gain on sale of the Recycling Subsidiaries.

As of the years ended December 30, 2023 and December 31, 2022, the amount due to Live Ventures was approximately $ 692,000 and $ 624,000 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 28, 2024 and December 30, 2023, the balance outstanding was $ 0 and $ 706,000 , respectively.

Commitments and Contingencies

2 unchanged sentences

Securities and Exchange Commission (“SEC”) filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and one of its executive officers, Virland Johnson, the Company's Chief Financial Officer, as defendants (collectively, the “Defendants”).

The SEC Complaint alleges financial, disclosure and reporting violations against the Company and the executive officer under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.

Pursuant to an agreed-upon Order of the Court, on May 28, 2024, the Company settled its litigation with the SEC.

The Settlement Agreement provided, in pertinent part:

“Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which [the Company] admits), [the Company] hereby consents to the entry of the final Judgment in the form attached hereto (the “Final Judgment”) and

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

incorporated by reference herein, which, among other things:

“(a) permanently restrains and enjoins [the Company] from violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder [15 U.S.C.

§ 78j(b) and 17 C.F.R.

§§ 240.10b-5];

and (c)[sic] orders [the Company] to pay a civil penalty in the amount of $ 250,000 under Section 21(d)(3) of the Exchange Act [15 U.S.C.

§ 78u(d)(3)).” The SEC has agreed to accept four quarterly payments from the Company, each in the amount of $ 62,500 .

The Settlement Agreement is attached to the Order as Exhibit 1, both of which documents may be viewed at https://ecf.nvd.uscourts.gov/doc1/115110470966.

The SEC Complaint's remaining allegations relate to financial, disclosure and reporting violations against the executive officer under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.

The SEC Complaint also alleges various claims against the executive officer under Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13a-14, 13b2-1, and 13b2-2.

The SEC seeks permanent injunctions and civil penalties against the Defendants, and an officer-and-director bar against the executive officer.

The SEC continues to seek a permanent injunction, civil penalties, and an officer-and-director bar against the executive officer.

The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.

The Company continues to assert that the SEC’s pursuit of this matter will not result in any benefit to investors and instead will only serve as a distraction from its core business.

On October 1, 2021, the Company, filed a motion with the court to dismiss the complaint.

The SEC filed its response opposing the motions on November 1, 2021.

On September 7, 2022, the motions to dismiss were denied by the court.

Pursuant to the automatic stay of proceedings under the Private Securities Litigation Reform Act, all discovery was stayed pending the motions to dismiss and the June 23, 2023 mediation to which all of the parties agreed.

As of the date of these financial statements, the Company and the SEC have reached a settlement agreement in principal, the written agreement for which is pending at the SEC.

On December 29, 2016, the Company served a Minnesota state court complaint for breach of contract on Skybridge Americas, Inc.

(“SA”), the Company’s primary call center vendor throughout 2015 and most of 2016.

The Company seeks damages in the millions of dollars as a result of alleged overcharging by SA and lost client contracts.

On January 25, 2017, SA served a counterclaim for unpaid invoices in the amount of approximately $ 460,000 plus interest and attorneys’ fees.

On March 29, 2017, the Hennepin County district court (the “District Court”) dismissed the Company’s breach of contract claim based on SA’s overuse of its Canadian call center but permitted the Company’s remaining claims to proceed.

Following motion practice, on January 8, 2018 the District Court entered judgment in SA’s favor, which was amended as of February 28, 2018, for a total amount of approximately $ 614,000 including interest and attorneys’ fees.

On March 4, 2019, the Minnesota Court of Appeals (the “Court of Appeals”) ruled and (i) reversed the District Court’s judgment in favor of Skybridge on the call center location claim and remanded the issue back to the District Court for further proceedings, (ii) reversed the District Court’s judgment in favor of Skybridge on the net payment issue and remanded the issue to the District Court for further proceedings, and (iii) affirmed the District Court’s judgment in Skybridge’s favor against the Company’s claim that Skybridge breached the contract when it failed to meet the service level agreements.

As a result of the decision by the Court of Appeals, the District Court’s award of interest and attorneys’ fees, etc.

was reversed.

The Company and SA held a mediation session in July 2020.

Trial was held in August 2020 and on February 1, 2021, the District Court assessed damages against the Company in the amount of approximately $ 715,000 , plus interest, fees, and costs and attorneys’ fees of $ 475,000 .

In subsequent proceedings, the Appeals Court affirmed the District Court judgment.

Of the total amount awarded to SA, less the funds that the Company had previously deposited with the District Court, SA remains entitled to approximately $ 422,000 of statutory interest, which obligation has been assumed by VM7 in connection with the Recycling Subsidiaries Disposition transaction.

AMTIM Capital

AMTIM Capital, Inc.

(“AMTIM”) acts as the Company’s representative to market our recycling services in Canada under an arrangement that pays AMTIM for revenues generated by recycling services in Canada as set forth in the agreement between the parties.

A dispute has arisen between AMTIM and the Company with respect to the calculation of amounts due to AMTIM pursuant to the agreement.

In a lawsuit filed by AMTIM in the province of Ontario, AMTIM claims a discrepancy in the calculation of fees due to AMTIM by the Company of approximately $ 2.0 million.

Trial commenced in February 2022, and, on December 12, 2022, a decree was issued by the court dismissing the case.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 10 2024, subsequent to the conclusion of litigation at the trial court and appellate court levels, SA sold its judgment to an otherwise unaffiliated third party for the face value of the judgment and the interest accrued thereon through that date (an aggregate of $ 433,920 ), plus accrued legal fees (in the amount of $ 18,124 ) to which SA was entitled in accordance with the terms of the underlying agreement with the Company and with the judgment.

The purchaser agreed to forbear from enforcing the judgment, subject to the Company’s repayment or his conversion thereof.

As of December 28, 2024, there was no balance outstanding.

On or about April 9, 2021, GeoTraq, Gregg Sullivan, Tony Isaac, and the Company, among others, resolved all of the claims that related to, among other items, the Company's acquisition of GeoTraq in August 2017, all post-acquisition activities, and Mr.

1 unchanged sentence

The resolution was effectuated through the parties’ execution and delivery of a Settlement Agreement and Mutual Agreement of Claims (the “GeoTraq Settlement Agreement”).

Under the terms of the Settlement Agreement, the Company, on its own behalf and on behalf of GeoTraq and Mr.

Isaac, agreed to tender to Mr.

Sullivan an aggregate of $ 1.95 million (the “GeoTraq Settlement Consideration”) in the following manner:

(i) $ 250,000 , which was tendered in cash on or about the date of the Settlement Agreement and (ii) up to 10 quarterly installments of not less than $ 170,000 that commenced on June 1, 2021, and continued not less frequently than every three months thereafter (the “GeoTraq Installments”).

The Company may tender the GeoTraq Installments in cash or in the equivalent value of shares of its common stock (the value of the shares to be determined by a formula set forth in the Settlement Agreement), in either case at the Company's discretion.

The Company may also prepay one or more GeoTraq Installments in full or in part at any time or from time to time either in cash or in shares of its common stock (a “GeoTraq Prepayment”).

If the Company elected to prepay one or more GeoTraq Installments with shares of its common stock, Mr.

Sullivan reserved the right not to consent to a tender thereof in excess of 50 % of the value of that specific GeoTraq Prepayment;

Sullivan was restricted in the reasons for which he can refuse to provide his written consent.

The number of shares of the Company's common stock to be issued upon any GeoTraq Prepayment is determined by a different formula than the one to be utilized for a GeoTraq Installment.

On March 17, 2023, the Company converted 5,185 of Mr.

Sullivan’s Series A-1 Preferred shares and issued 103,707 shares of the Company's common stock as payment for its quarterly installment.

On June 1, 2023, the Company converted 7,697 of Mr.

Sullivan’s Series A-1 Preferred shares into 153,941 shares of the Company’s common stock in payment of its June 30, 2023 quarterly installment.

On September 1, 2023, the Company converted 14,471 of Mr.

Sullivan’s Series A-1 Preferred shares into 289,421 shares of the Company’s common stock in payment of its September 30, 2023 quarterly installment.

As of September 30, 2023, the full balance due under the Settlement Agreement had been repaid and the remaining 1,505 shares of Mr.

Sullivan’s Series A-1 Preferred shares were returned to the Company for cancellation.

The parties to the Settlement Agreement released and forever discharged one another from any and all known and unknown claims that were asserted or could have been asserted arising out of the GeoTraq Litigation Matters.

10 unchanged sentences

2:21-cv-01517-CDS-EJY, styled as Sieggreen, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v.

Live Ventures Incorporated, Jon Isaac, and Virland A.

Live Ventures Incorporated,

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Jon Isaac, and Virland A.

Johnson, Defendants , the Company was added as a defendant on March 6, 2023, and was served on March 23, 2023.

2 unchanged sentences

The Company strongly disputes and denies all of the allegations contained therein and will continue to defend itself vigorously against the claims.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is a defendant in an action filed on April 11, 2022, in the U.S.

25 unchanged sentences

Potential common shares consist of the additional common shares issuable with respect to restricted share awards, stock options and convertible preferred stock.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21 unchanged sentences

The Company operates within targeted markets through three reportable segments for continuing operations:

biotechnology, recycling, and technology.

The biotechnology segment commenced operations in September 2019 and is focused on development of new and innovative solutions for ending the opioid epidemic ranging from digital technologies to educational advocacy.

The recycling segment includes all fees charged and costs incurred for collecting, recycling and installing appliances for utilities and other customers.

The recycling segment also includes byproduct revenue, which is primarily generated through the recycling of appliances.

The technology segment designed wireless modules to connect devices to the Mobile Internet of Things (“IoT”) which contain location-based service (“LBS”) capabilities and can interface to external sensors to allow them to communicate both sensor status and position information.

The nature of products, services and customers for each segment varies significantly.

As such, the segments are managed separately.

Our Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”).

The CODM evaluates performance and allocates resources based on sales and income from operations of each segment.

Operating loss represents revenues less cost of revenues and operating expenses, including certain allocated selling, general and administrative costs.

There are no intersegment sales or transfers.

Fintech, Biotech, and Corporate and Other.

Due the sale of Company’s Recycling segment during March 2023, it is being presented as discontinued operations for the years ended December 28, 2024 and December 30, 2023.

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

December 28, 2024 December 30, 2023

Biotechnology $ — $ —

Fintech $ 12,532 $ —

Corporate and other — —

Discontinued operations — 3,795

Total Revenues $ 12,532 $ 3,795

Biotechnology $ — $ —

Fintech $ 6,294 $ —

Corporate and other — —

Discontinued operations — ( 197 )

Total Gross profit $ 6,294 $ ( 197 )

Operating income

Biotechnology $ ( 19,846 ) $ ( 3,149 )

Operating loss

Fintech $ 905 $ —

Biotech ( 2,148 ) ( 1,531 )

Corporate and other ( 6,319 ) ( 18,315 )

Discontinued operations — 10,438

Total Operating income $ ( 9,408 ) $ 5,246

Total Operating loss $ ( 7,562 ) $ (7,562) $ ( 9,408 )

Depreciation and amortization

Biotechnology $ 1,452 $ 2

Fintech $ 1,316 $ —

Biotech 2,086 1,452

Corporate and other — —

Discontinued operations — 96

Total Depreciation and amortization $ 3,402 $ 1,548

Interest income (expense), net

Biotechnology $ 2,250 $ 468

Interest (expense) income, net

Fintech $ ( 499 ) $ —

Corporate and other ( 380 ) 2,250

Discontinued operations — ( 181 )

Total Interest income (expense), net $ 2,069 $ ( 489 )

Net income after provision for income taxes

Biotechnology $ ( 17,095 ) $ 8,020

Total Interest (expense) income, net $ ( 879 ) $ 2,069

Net loss after provision for income taxes

Fintech $ 469 $ —

Biotech ( 2,086 ) ( 1,532 )

Corporate and other ( 4,628 ) ( 15,563 )

Discontinued operations — 9,283

Total Net income after provision for income taxes $ ( 7,812 ) $ 10,992

Total net loss after provision for income taxes $ ( 6,245 ) $ ( 7,812 )

ALT5 SIGMA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 28, 2024 As of

December 30, 2023

Biotechnology $ 18,487 $ 29,165

Fintech $ 64,217 $ —

Biotech 16,926 17,846

Corporate and other 1,293 641

Discontinue operations — —

Total Assets $ 82,436 $ 18,487

Intangible Assets

Biotechnology $ 17,846 $ 19,297

Goodwill and other intangible Assets

Fintech $ 30,385 $ —

Biotech 15,755 17,846

Corporate and other 4 —

Discontinued operations — —

Total Intangible Assets $ 17,846 $ 20,032

Total goodwill and other intangible Assets $ 46,144 $ 17,846

Subsequent events

The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no events that have occurred that would require adjustments to disclosures in its consolidated financial statements other than as discussed below:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrant Purchase Agreement

On January 12, 2024, the Company entered into a Warrant Purchase Agreement with a certain institutional investor that had purchased a Common Stock Purchase Warrant on August 22, 2023, in connection with such Investor’s purchase of shares of the Company’s common stock.

The Warrant is exercisable from time to time for an aggregate of 899,348 shares of the Company’s common stock with a per-share exercise price of $ 0.7561 .

Pursuant to the terms of the Warrant Purchase Agreement, the Company or assigns agreed to purchase the Warrant for an aggregate price of $ 250,000 , of which $ 200,000 was paid at the closing of the transaction and the remaining $ 50,000 was paid on March 5, 2024.

In connection with the January transaction, the Company assigned the Common Stock Purchase Warrant to an otherwise unaffiliated third party.

Soin Amendment

Effective January 24, 2024, the Company, Amol Soin (“Dr.

Soin”), and Soin Therapeutics LLC, a wholly-owned subsidiary of ours that we had purchased from Dr.

Soin entered into an amendment (the “Soin Amendment”) to the parties’ Agreement and Plan of Merger that was dated as of December 28, 2022 (the “Soin Agreement”).

Soin in cash rather than through his conversion of shares of the Series S Convertible Preferred Stock (the “Soin Preferred”) that constituted the consideration under the Soin Agreement.

We tendered the first $ 100,000 amended tranche cash payment to Dr.

Soin in March 2024;

the second amended tranche cash payment to Dr.

Soin, also in the amount of $ 100,000 , is due on July 1, 2024;

and the third amended tranche cash payment to Dr.

Soin, in the amount of $ 2.8 million, is due on December 31, 2024.

During the pendency of the amended cash tranche period, Dr.

Soin agreed that he would not convert any of his shares of Soin Preferred.

After we have tendered the second and third amended tranche cash payments to Dr.

If we do not tender the second and third amended tranche cash payments to Dr.

Soin, we agreed that we will transfer to him the membership interests of Soin Therapeutics LLC, and he will transfer to us the shares of Soin Preferred for cancellation.

ICG Promissory Obligation

On February 7, 2024, the Company amended its outstanding related party promissory obligations in favor of ICG and in favor of Live Ventures to add convertibility provisions to each.

The per-share conversion price for each obligation, as amended, was set at $ 0.61 , subject to standard adjustments for (i) stock dividends and splits, (ii) subsequent rights offerings, and (iii) pro rata distributions.

The Company’s board of directors provided its final approvals of the amendments on February 7, 2024.

Amended Promissory Note

On February 7, 2024, the Company entered into a promissory note with each of the holders of the amended promissory notes (see above).

The initial principal amount of each note is $ 300,000 , with an interest rate of 10 % per annum.

Pursuant to an amendment to each note, one hundred thousand dollars of principal, and accrued interest thereon, is due on September 7, 2024 for each note, and the balance of each note is due on December 31, 2024.

The Company’s board of directors approved the issuance of the notes on February 7, 2024.

Unit Purchase Agreements

On February 23, 2024, the Company entered into Unit Purchase Agreements with two otherwise unaffiliated third-party investors, pursuant to which each Investor agreed to purchase 408,163 units of securities from the Company, at a price per Unit of $ 0.735 , for an aggregate purchase price of $ 300,000 per investor for an aggregate price of $ 600,000 .

Each Unit consists of one share of the Com pany’s common stock and one warrant to purchase an additional share of common stock.

The per-Unit price is allocated as follows:

$ 0.61 per share of common stock and $ 0.125 per Warrant.

The Warrant has a three-year term and will be immediately exercisable.

Each Warrant is exercisable at $ 0.61 per share.

The Company intends to use the proceeds from the Unit Purchases for its working capital needs.

Isaac Consulting Agreement

On March 4, 2024, we entered into a two-year Consulting Agreement (the “Consulting Agreement”) with Jon Isaac, pursuant to which he will provide to us (the “Services”):

(i) strategic financial advice, including growth strategies, capital

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

allocation, and financial restructuring;

(ii) sales and business development advice, including for the acquisition of new clients and new products through networking, referrals, and marketing efforts for our prospective products;

(iii) in-depth research and market intelligence on specific industries, sectors, and market trends;

(iv) financial models and financial analysis to support strategic decision-making;

(v) assistance, through site visits, in the preparation of new client offers and bids for proposed projects;

(vi) weekly update calls with management to align on progress of objectives and goals;

(vii) enhanced non-confidential materials;

(viii) business risk management support;

and (ix) other services to which we and he may be agree that will be memorialized in writing if, when, and as needed during the two-year term.

Isaac is the son of our Chief Executive Officer, but otherwise does not have a current relationship with us.

As compensation for the Services, we agreed to (i) assign to him two universal life insurance policies that relate to the life of one of the founders of our now-disposed legacy recycling business (the first policy has an accumulated value/surrender value of approximately $ 3,854 and the second has an accumulated value/surrender value of approximately $ 468 );

(ii) contingently tender to him funds in our Canadian counsel’s trust account in the event that the prospective Order of the Court of Appeal for Ontario Canada in the matter styled, Amtim Capital Inc.

and Appliance Recycling Centers of America , Case No.

COA-23-CV-0156, becomes the final Order of the Court, which amount we estimated not to exceed approximately US$ 220,000 ;

(iii) issue to him 200,000 restricted shares of our common stock with the per-share value being the average of the Nasdaq historical NOCP closing price during the five trading days prior to our board approving the Consulting Agreement, which shares were awarded from our 2023 Equity Incentive Plan;

and (iv) a two-year , straight 10 % convertible promissory note in the initial principal amount of $ 500,000 , with a per-share conversion price equivalent to the per-share value of the restricted common stock that he was granted ($ 1.16 ).

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data