Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this section of the annual report to “we,” “us” or the “Company” refer to AtlasClear Holdings, Inc., a Delaware corporation. References to our “management” or our “management team” refer to our officers and directors. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the sections entitled “Risk Factors”,” “Business” and the audited financial statements, including the related notes, appearing elsewhere in this annual report. All references to years, unless otherwise noted, refer to our fiscal years, which end on June 30.
Overview
Our goal is to build a cutting-edge technology enabled financial services firm that would create a more efficient platform for trading, clearing, settlement and banking, with evolving and innovative financial products such as crypto that focus on financial services firms. We are a fintech driven business-to-business platform that expects to power innovation in fintech, investing, underwriting and trading. We believe we are positioned to provide a modern, mission-critical suite of solutions to our clients, enabling them to reduce their transactions costs and compete more effectively in their businesses.
Our target client base for our prime banking and prime brokerage services includes financial services firms, generally with annual revenues up to $1 billion, including brokerage firms, hedge funds, pension plans, and family offices that are not adequately served by today’s larger correspondent clearing firms and banks.
Through the acquisition of Wilson-Davis, a correspondent clearing company, and the anticipated CB Merger, we expect to acquire the capabilities to provide specialized clearing and banking services to financial services firms, with an emphasis on global markets currently underserviced by larger vendors. Once properly integrated, anticipated synergies between Commercial Bancorp, if acquired, and Wilson-Davis are expected to allow for lower cost of capital, higher net interest margins, expanded product development and greater credit extension.
In addition, we believe the AtlasClear Platform, is cutting-edge, flexible and scalable.
On August 9, 2024, the Company changed its fiscal year-end from December 31 to June 30. As a result, the prior year reflects a transition period of six months, from January 1, 2024 to June 30, 2024, as previously reported in our Form 10-KT filed with the SEC on October 16, 2024.
The current fiscal year covers the twelve-month period from July 1, 2024 to June 30, 2025. As such, the periods presented in this Form 10-K are not directly comparable due to the difference in reporting periods.
Where appropriate, we have included supplemental unaudited pro forma information and comparative commentary to aid in understanding period-over-period performance trends. See note 19 for further details.
Wilson-Davis
Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC, licensed in 50 states, District of Columbia, and Puerto Rico, and is a member in good standing of FINRA. Wilson-Davis derives revenue principally from commissions charged on the liquidation of restricted and control microcap securities, vetting, and clearing service fees charged to introducing brokers for which Wilson-Davis clears transactions on a fully disclosed basis, and other financial service fees. Commissions are earned by executing transactions for customers. Vetting fee revenues are earned when Wilson-Davis vests stock the customers want to bring into their accounts. Clearing fees are earned by clearing transactions for Glendale Securities, as introducing broker on a fully disclosed basis, pursuant to a clearing agreement with Glendale Securities.
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Key Factors Impacting Wilson-Davis’ Business
Wilson-Davis’ business and results of operations have been, and will continue to be, affected by numerous factors and trends, which Wilson-Davis believes include those discussed in the section titled “Risk Factors” of the Annual Report.
● Liquidity . As a clearing broker-dealer in the U.S., Wilson-Davis is subject to cash deposit requirements with clearing organizations, brokers, and banks that may be large in relation to its total liquid assets.
● Growth of Customer Base . Wilson-Davis’ growth requires continued use of its services by new customers.
● Expanding Wilson-Davis’ Relationship with Existing Customers . Wilson-Davis’ ability to expand its relationship with its existing customers will be an important contributor to its long-term growth.
● Market Trends . As financial markets grow and contract, Wilson-Davis’ customers’ behaviors are affected. Wilson-Davis’ revenue and profitability can be affected by general downturns in the securities markets, resulting from factors such as increased inflation, increased interest rates and other factors.
Reverse Stock Split and Authorized Share Increase
On December 31, 2024, the Company effected a 1-for-60 reverse stock split of its common stock. As a result of the reverse stock split, every 60 shares of the Company’s issued and outstanding common stock were automatically combined into one share of common stock, with any fractional shares rounded up to the nearest whole share. The reverse stock split did not change the par value of the common stock however the Company increased the number of authorized shares to 525,000,000 shares, consisting of 500,000,000 shares of Common Stock and 25,000,000 shares of Preferred Stock.
The reverse stock split has been applied retroactively in the accompanying consolidated financial statements and related disclosures for all periods presented. All share and per-share amounts, including earnings per share (“EPS”), have been adjusted accordingly to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented.
The impact of the reverse stock split is summarized as follows:
● The total number of issued and outstanding shares of common stock decreased from 12,455,157 to 207,585 as of June 30, 2024.
● Earnings per share and other per-share data were adjusted proportionally to reflect the reverse stock split.
● The reverse stock split had no impact on the Company’s total stockholders’ equity, net income, or overall financial condition.
Management believes that the reverse stock split was necessary to regain compliance with stock exchange listing requirements and improve marketability of the stock.
Agreements Related to Business Combination
Amendments to Broker-Dealer Acquisition Agreement
Prior to the Closing, AtlasClear and AltasClear Holdings entered into two amendments to the Broker-Dealer Acquisition Agreement (as defined in the with Wilson-Davis and the then-owners of Wilson-Davis (the “Wilson-Davis Sellers”), (the “Amendments”). Among other things, the Amendments reduced the total purchase price payable under the Broker- Dealer Acquisition Agreement by $5 million and reduced the cash payable at the Wilson-Davis Closing as part of the purchase price to $8 million, with the balance of the purchase price paid in the form of convertible promissory notes issued by AtlasClear to the Wilson-Davis Sellers, as follows: (i) $5,000,000 in aggregate principal amount of notes due 90 days after the Closing Date (the “Short-Term Notes”) and (ii) $7,971,000 in aggregate principal amount of notes due 24 months after the Closing Date (the “Long-Term Notes” and, together with the Short-Term Notes, the “Seller Notes”). The Short-Term Notes accrued interest at a rate of 9% per annum, payable quarterly in arrears, in shares of Common Stock at a rate equal to 90% of the trailing seven-trading day VWAP prior to payment (or, at the Company’s option, cash), and were convertible at the option of the holder at any time during the continuance of an event of default, at a rate equal to 90% of the trailing seven-trading day VWAP prior to conversion. The Long-Term Notes accrued interest at a rate of 13% per annum, payable quarterly in arrears, in shares of Common Stock at a rate equal to 90% of the trailing seven-trading day VWAP prior to payment (or, at the Company’s option, in cash), and were convertible at the option of the holder at any time commencing six months after the Closing Date, at a rate equal to 90% of the trailing seven-trading day VWAP prior to conversion (or 85% if an event of default occurs and is continuing).
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During the year ended June 30, 2025, the Company received conversion notice for a total $5,000,000 of principal related to the Short-Term Notes and $366,979 of interest related to the Short-Term Notes, and $6,995,624 of principal related to the Long-Term Notes and $1,036,256 of interest related to the Long-Term Notes. In addition, the Company received conversion notices for a total of $1,439,586 in Merger Financing as discussed below and $256,091 of Merger Financing interest receiving a total of approximately 34,931,855 shares of Common Stock. As of September 19, 2025, all of the Seller Notes have been paid in full.
For more information about the Amendments to Broker-Dealer Acquisition Agreement, see Note 9 and Note 10.
Contingent Guarantee
In connection with the acquisition of Wilson-Davis, Quantum Ventures and AtlasFinTech transferred 14,750 common stock shares to cover a cash deficit of $4,000,000. The share has a make-whole provision where the Company had to issue shares to allow the seller to recover the cash deficit, as such it was required to be accounted for under ASC 480. The Company valued the obligation as of June 30, 2024 of $3,256,863 based on the cash value that would need to be renumerated by the Company. The value of the cash that would be paid was deemed to be the fair value of the contingent guarantee. The Company analyzed the public sales of the shares transferred to determine the amount of cash recovered less the $4,000,000 contingent guarantee resulting in a liability due of $3,256,863. As of February 9, 2024 the 885,010 shares transferred were valued at $8,850,100 which was greater than the $4,000,000 guaranteed value. As such the value of the guarantee was deemed to be zero on February 9, 2024. As a result of the decrease in stock prices through June 30, 2024 the Sellers have recovered $743,137 in cash through sales of the shares transferred resulting in the value of the liability as of June 30, 2024 of $3,256,863.
During the year ended June 30, 2025, the Atlas FinTech agreed to transfer 20,583 in registered shares to the sellers under the contingent guarantee, resulting in a reduction in the contingent guarantee of $1,210,290 based on the fair value of the shares transferred on the transfer date.
On August 9, 2024, the Company entered into an agreement to modify the terms of the contingent guarantee where the Company agreed to enter into a convertible note on the amount that has not yet been recovered through share issuances of $2,886,347 plus a 5% convenience fee applied resulting in the Company issuing a convertible note of $3,030,665 due February 9, 2026. This Convertible Promissory Note (this “Merger Financing”) was issued pursuant to that certain Post-Closing Agreement dated effective August 9, 2024 (the “Agreement”), by and between the Company and the former stockholders of Wilson-Davis, to address the remaining Gross Proceeds Shortfall that cannot be remedied by the transfer of Additional Shares. Capitalized terms used but not defined herein shall have the meanings given to them in the Stock Purchase Agreement, as defined in the Agreement. The note was analyzed under ASC 480 and ASC 815, as a result of the Company not having sufficient shares authorized to settle the convertible note, the Merger Financing note falls under ASC 815.
During the year ended June 30, 2025, the Company received notice to convert $1,439,586 and $256,091 in interest, see Sellers Note above for total shares issued to convert principal and interest on all conversion notices received from the Sellers. Subsequent to June 30, 2025, and through of September 25, 2025 the Company received notices to convert $1,590,358 in principal and $69,501 in interest. As of September 25, 2025, the Merger Financing was settled in full.
For more information about the Contingent Guarantee and Merger Financing, see Note 9 and Note 17.
Funicular Purchase Agreement
On February 9, 2024, AtlasClear Holdings and Quantum entered into a securities purchase agreement (the “Funicular Purchase Agreement”) with Funicular, pursuant to which AtlasClear Holdings sold and issued to Funicular, on that date, a secured convertible promissory note (the “Funicular Note”) in the principal amount of $6,000,000 for a purchase price of $6,000,000, in a private placement (the “Note Financing”). The proceeds raised in the Note Financing were used to pay a portion of the purchase price paid at Closing to the Wilson-Davis sellers. The Funicular Note has a stated maturity date of November 9, 2025. Interest accrues at a rate per annum equal to 12.5%, and is payable semi-annually on each June 30 and December 31. On each interest payment date, the accrued and unpaid interest shall, at the election of the Company in its sole discretion, be either paid in cash or paid in-kind by increasing the principal amount of the Funicular Note. In the event of an Event of Default (as defined in the Funicular Note), in addition to Funicular’s other rights and remedies, the interest rate would increase to 20% per annum. The Funicular Note is convertible, in whole or in part, into shares of Common Stock at the election of the holder at any time at an initial conversion price of $10.00 per share (the “Conversion Price”). The Conversion Price is subject to adjustment monthly to a price equal to the trailing five-day VWAP, subject to a floor of $2.00 per share (provided that if the Company sells stock at an effective price below $2.00 per share, such floor would be reduced to such effective price), and is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. The Company had the right to redeem the Funicular Note upon 30 days’ notice after the earlier of August 7, 2024 and the effectiveness of
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the Registration Statement (as defined in the Funicular Note), and Funicular would have the right to require the Company to redeem the Note in connection with a Change of Control (as defined in the Note), in each case for a price equal to 101% of the outstanding principal amount of the Note plus accrued and unpaid interest.
For more information about the Note Financing, see Notes 9 and 17.
Pacsquare Software Development and License Agreement
On June 10, 2025, the Company and Pacsquare entered into a Software Development and License Agreement, where the parties agreed to supersede and replace the Pacsquare Purchase Agreement and to fully release one another from any and all obligations or claims arising from or pursuant to the prior agreement. As a result of entering into the agreement the parties agreed to a 36 month term software development and licensing service where Pacsquare will continue to develop the Online Account Application (“OLA”), provide updates, bug fixes, patches or other error corrections and ongoing maintenance and support throughout the term of the agreement. Pacsquare will deliver the existing source code and provide up to 80 hours of developer-to developer support for knowledge transfer to new developers of the Company for a six month period. The OLA license shall be held by the Company perpetually, can be transferred, and will be royalty free to modify and develop the platform for internal use or for white-label deployment, to charge correspondents a fee for use and transfer and assign such license in connection with the sale of Wilson-Davis or AtlasClear. Payment shall be $375,000 payable over the 36 month term as follows: $20,000 upon effective date of agreement, $15,000 first month payment and $10,000 for the remaining 34 months.
Amendment to Bank Acquisition Agreement
On February 26, 2024, AtlasClear and Commercial Bancorp entered into an amendment (the “Amendment”) to the Amended and Restated Agreement and Plan of Merger, dated as of November 16, 2022, by and between AtlasClear and Commercial Bancorp (the “Bank Acquisition Agreement”), pursuant to which, among other things, Commercial Bancorp is expected to merge with and into a subsidiary of AtlasClear. Pursuant to the Amendment, Commercial Bancorp received 40,000 shares of Common Stock in lieu of a nonrefundable escrow deposit. On November 14, 2024, the Company and Commercial Bancorp agreed to amend the agreement and plan of merger, dated November 16, 2022 (as amended, the “Bank Acquisition Agreement”), to extend the termination date of the Bank Acquisition Agreement from November 16, 2024, to May 14, 2025. Pursuant to the amendment, the parties expect to enter into a new and mutually agreed agreement for the Company to acquire the shares held by such shareholders of Commercial Bancorp. No Commercial Bancorp shareholder is required to agree to such amended or new agreement. Failure to enter into a new agreement or amendment to the Bank Acquisition Agreement shall constitute termination of the Bank Acquisition Agreement without liability. The Company was issue to the shareholders of Commercial Bancorp, without additional compensation, 500,000 pre reverse split or 8,333 post reverse split shares of common stock and the previously issued 40,000 pre reverse split or 667 post reverse split shares to the Commercial Bancorp shareholders were to be cancelled. The shares were not issued timely and as a result the Company agreed to issue 36,070 shares due to the drop in stock value during the delay. The 36,070 shares were issued on March 13, 2025 and were valued at $43,645 based on the trading price of the Common Stock of $1.21 on March 13, 2025. The value of the shares issued was recorded as a deposit towards the acquisition of Commercial Bancorp. The extension period terminated on May 14, 2025, as such the Company has agreed to pay $5,000 cash payment for each two-week extension. As of June 30, 2025, the Company paid $20,000 in cash and extended the agreement until July 9, 2025. As of the date of filing the Company has paid an additional $30,000 to extend until October 1, 2025.
Chardan Settlement
In connection with the Closing, AtlasClear Holdings and Chardan agreed that the fee, in the amount of $7,043,750, payable by Quantum to Chardan upon the Closing pursuant to the terms of the business combination marketing agreement entered into in connection with Quantum’s IPO, would be waived in exchange for the issuance by AtlasClear Holdings to Chardan of a convertible promissory note in the aggregate principal amount of $4,150,000. The Chardan Note was issued by AtlasClear Holdings at the Closing. Additionally, the Company entered into a settlement and mutual release with Chardan which amended the original note to a principal amount of $5,209,764, which as of September 19, 2025, has been paid in full.
For more information about the Chardan settlement, see Note 9.
Expense Settlements
The Company entered into the following settlements for certain accrued expenses and other obligations to third parties through the issuance of Common Stock and/or convertible promissory notes as follows:
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● Carriage House Capital, Inc. – up to 350,000 pre reverse split or 5,833 post reverse split shares of Common Stock that were issued, or may become issuable, to Carriage House Capital, Inc. (“Carriage”), pursuant to the Consulting Agreement, dated as of February 19, 2024, between Carriage and the Company (the “Carriage Agreement”), as partial consideration for consulting services rendered to the Company, at the price per share of $4.98 pre reverse split or $298.80 post reverse split on the day of issuance. The total consideration due under the Consulting Agreement is 350,000 shares of Common Stock, 100,007 shares of which were due upon signing of the contract and 27,777 shares of which are due in months four through twelve from the date of signing. On February 9, 2024, 100,000 pre reverse split or 1,667 post reverse split shares were issued, and were valued at $4.98 pre reverse split or $298.80 post reverse split per share as agreed upon consideration. On January 15, 2025 the Company issued the remaining 4,166 shares under the agreement and valued at the closing price on the date of issuance of $6.50 per share resulting in settlement of the stock payable at $27,100, resulting in the change in fair value of the stock payable of $232,793.
● Interest Solutions, LLC – 144,454 pre reverse split or 2,408 post reverse split shares of Common Stock that may become issuable to Interest Solutions, LLC (“Interest Solutions”), pursuant to a convertible promissory note, dated as of February 9, 2024, in the aggregate principal amount of $275,000 (the “Interest Solutions Note”) at a price per share of $2.00 pre reverse split or $120 post reverse split. Accrued interest on the Interest Solutions Note is payable monthly, beginning on June 30, 2024, at a rate of 13% per annum. Until all payments have been made to the Wilson-Davis Sellers, interest on the Interest Solutions Note may be paid in cash or shares of Common Stock valued at the then-current conversion price. Thereafter, all accrued interest must be paid in cash. During the year ended June 30, 2025, the company recognized $35,652 in interest expenses. Quantum Ventures transferred 4,457 pre reverse split or 74 post reverse split registered shares to pay for $9,011 in accrued interest. As of June 30, 2025 and June 30, 2024, there is $315,549 and $288,908 included in Promissory note payable.
● JonesTrading Institutional Services LLC – up to 196,983 pre reverse split or 3,283 post reverse split shares of Common Stock that may become issuable to JonesTrading Institutional Services LLC (“JonesTrading”), pursuant to a convertible promissory note, dated as of February 9, 2024, in the aggregate principal amount of $375,000 (the “JonesTrading Note”) at a price per share of $2.00 pre reverse split or $120 post reverse split. Accrued interest on the JonesTrading Note is payable monthly, beginning on June 30, 2024, at a rate of 13% per annum. Until all payments have been made to the Wilson-Davis Sellers, interest on the Interest Solutions Note may be paid in cash or shares of Common Stock valued at the then-current conversion price. Thereafter, all accrued interest must be paid in cash. During the year ended June 30, 2025 the Company recognized $48,617 in interest expenses and the Quantum Ventures transferred 6,077 pre reverse split or 101 post reverse split registered shares to pay for $12,288 in accrued interest. As of June 30, 2025 and June 30, 2024, there is $430,295 and $393,966 included in Promissory note payable. On September 16, 2025, the Company and JonesTrading entered into an amendment to the Promissory note agreement, whereas the conversion price floor of $2.00 was amended to $0.75. As a result, on September 16, 2025, the Company issued 585,229 shares of Common Stock at a conversion price of $0.75, in full settlement of $375,000 in principal and $63,922 of accrued interest.
● Toppan Merrill LLC – the Company issued to Toppan Merrill LLC (“Toppan”) a promissory note, dated as of February 9, 2024, in the aggregate principal amount of $160,025 (the “Toppan Note”). The maturity date of the Toppan Note is February 8, 2026 and the note accrues interest at a rate of 13% per annum. The principal and interest payments due under the note is not payable in shares of Common Stock. During the year ended June 30, 2025 the Company recognized $15,694 in interest expenses. As of June 30, 2025 and June 30, 2024, there was $185,788 and $170,094, respectively, included in Promissory note payable.
● Winston & Strawn LLP – up to $2,500,000 in shares of Common Stock that may become issuable to Winston & Strawn LLP (“Winston & Strawn”), pursuant to a subscription agreement, dated as of February 9, 2024, between Winston & Strawn and the Company (the “Winston & Strawn Agreement”). Pursuant to the Winston & Strawn Agreement, the Company may issue $2,500,000 worth of shares of Common Stock as payment for legal services, in three equal installments of $833,333 beginning on August 9, 2024. As of June 30, 2025 and June 30, 2024, the amount is included in Subscription agreement as a liability of $2,489,945 and $2,425,647, respectively. Due to the nature of the settlement terms, the Winston & Strawn Agreement was deemed to be a derivative liability to the Company as of June 30, 2024 under ASC 480. Change in fair value of the subscription agreement are measured at each reporting period with change reported in earnings. See valuation approach and further disclosure on Note 17.
● Outside The Box Capital Inc. – 6,919 shares of Common Stock that were issued to Outside The Box Capital Inc. (“OTB”), pursuant to a Marketing Services Agreement, as payment in shares for services rendered to the Company the shares were valued at the closing price on the date of issuance of $5.70 per share resulting in compensation expense of $39,404.
● Locbox Technologies, Inc. – 203,425 shares of Common Stock that were issued to Lockbox Holdings (“LCBX”), pursuant to a Software As A Services License Agreement, as payment in shares for services rendered through June 30, 2025 were
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paid the shares valued at the closing price on the date of issuance of $0.2053 per share resulting in compensation expense of $41,763. As payment in shares for services rendered through September 16, 2025 356,901 shares of Common Stock were issued to Lockbox Holdings (“LCBX”), pursuant to a Software As A Services License Agreement, valued at the closing price on the date of issuance of $0.2053 per share resulting in compensation expense of $57,747. The Company shall pay LCBX $20,000 per month of which the Company has the option to pay in cash or stock. If paid in stock the company shall use 90% of the five day VWAP of the last trading of the preceding month. The parties agreed to a 9.9% blocker for maximum equity ownership, if LCBX is blocked from receiving shares as payment cash must be paid. In the event cash is not paid timely a 13% interest charge will apply on the mount outstanding. At the end of the twelve month term, the Company shall have the right to acquire 5% of LCBX at a $10,000,000 valuation, approximately a $500,000 investment by the Company. LCBX agrees to credit 50% of the total license fees paid by ATCH through the term towards the acquisition.
● Stock Promotion Agreement – 100,000 shares of Common Stock that were issued to an individual third party pursuant to a Stock Promotion Agreement as payment in shares for marketing and outreach services. The shares were valued at the closing price on the date of issuance of $0.1905 per share resulting in value of $19,050 which was recorded as a prepaid and will be expensed over the six monthterm of the agreement. There are no performance obligations and upon termination of agreement compensation remains due as such the valuation date was deemed to be the date of issuance.
● Longside Ventures LLC – 200,000 shares of Common Stock that were issued or to be issued to Longside Ventures LLC. (“Longside”), pursuant to a Services Agreement, dated as of August 29, 2025 as payment in shares for strategic communications, and corporate advisory services to be rendered to the Company. 100,000 shares were issued upon execution of the agreement and the other 100,000 will be paid on the one-month anniversary thereof.
Results of Operations
Comparison of the Year Ended June 30, 2025 and the Six Months Ended June 30, 2024
The Company did not have operations until the acquisition of Wilson-Davis in connection with the Business Combination which closed on February 9, 2024. Therefore, the period-to-period comparison below primarily reflects financial results of Wilson-Davis since February 9, 2024 in the six months transition period ended June 30, 2024.
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Year Ended
Six Months Ended
June 30,
June 30,
2025
2024
Changes
REVENUES
Commissions
$
5,937,532
$
2,679,673
$
3,257,859
Vetting fees
1,459,321
499,125
960,196
Clearing fees
3,165,714
756,393
2,409,321
Net gain/(loss) on firm trading accounts
6,580
10,046
(3,466)
Other revenue
287,465
56,246
231,219
TOTAL REVENUES
10,856,612
4,001,483
6,855,129
EXPENSES
Compensation, payroll taxes and benefits
6,150,257
2,386,837
3,763,420
Data processing and clearing costs
2,104,107
1,299,527
804,580
Regulatory, professional fees and related expenses
4,137,631
11,649,470
(7,511,839)
Stock compensation - founder share transfer
—
1,462,650
(1,462,650)
Communications
650,560
254,608
395,952
Occupancy and equipment
211,347
76,324
135,023
Transfer fees
210,423
75,425
134,998
Bank charges
223,938
88,253
135,685
Intangible assets amortization
1,362,446
791,375
571,071
Other
324,358
185,840
138,518
Bad debt
398,826
—
398,826
TOTAL EXPENSES
15,773,893
18,270,309
(2,496,416)
LOSS FROM OPERATIONS
(4,917,281)
(14,268,826)
9,351,545
OTHER INCOME/(EXPENSE)
Interest income
1,996,399
1,195,081
801,318
Net gain on settlement
—
146,706
(146,706)
Loss on AtlasClear asset acquisition
—
(86,392,769)
86,392,769
Change in fair value, warrant liability derivative
184,594
—
184,594
Change in fair value, convertible note derivative
3,990,385
(3,585,902)
7,576,287
Change in fair value, long-term and short-term note derivative
12,369,120
(11,208,055)
23,577,175
Change in fair value, contingent guarantee
(839,775)
(3,256,863)
2,417,088
Change in fair value, non-redemption agreement
—
(164,626)
164,626
Change in fair value, WDCO sellers convertible notes
49,348
—
49,348
Change in fair value, earnout liability
929,000
(1,335,000)
2,264,000
Change in fair value, subscription agreement
(64,298)
(38,796)
(25,502)
Change in fair value, stock payable
232,793
985,072
(752,279)
Change in fair value, Tau agreement
(357,435)
—
(357,435)
Extinguishment of accrued expenses
—
879,473
(879,473)
Interest expense
(8,081,938)
(3,732,178)
(4,349,760)
TOTAL OTHER INCOME/(EXPENSE)
10,408,193
(106,507,857)
116,916,050
Income before provision for income taxes
5,490,912
(120,776,683)
126,267,595
Benefit (provision) for income taxes
259,381
569,736
(310,355)
Net income (loss)
$
5,750,293
$
(120,206,947)
$
125,957,240
Revenues of $10,856,612 for the year ended June 30, 2025, represent a 171% increase from revenues of $4,001,483 for the six months transition period ended June 30, 2024. The increase is primarily as a result of a full year ended June 30, 2025 versus a six month transition period ended June 30, 2024. Once the transition period is annualized, the increase is approximately 71% which is primarily due to the increase in clearing fees revenue. Wilson-Davis is a self-clearing correspondent securities broker-dealer registered with the SEC and a member in good standing of FINRA. Wilson-Davis is engaged principally in the over-the-counter, or “OTC,” markets in microcap securities. Microcap securities generally are issued by companies with low or “micro” capitalizations, meaning the total market capitalization value of the company’s stock is less than $250 million, which includes low-priced securities, or penny stocks, that trade for less than $5.00 per share and have a market capitalization of less than $50 million. Wilson-Davis also executes transactions in exchange-traded securities. It derives its revenue from the liquidation of restricted and control microcap securities; clearing transactions on behalf of an introducing broker-dealer on a fully disclosed basis; and trading in equity securities for its own account. It receives limited revenues from fully paid stock lending and margin accounts. During its history, Wilson-Davis has underwritten at-the-market offerings for publicly traded companies, placed private offerings, sold mutual funds, introduced margin accounts cleared by other firms on a fully disclosed basis, and provided ancillary financial services.
Total expenses of $15,773,893 for the year ended June 30, 2025 represent a decrease of $2,496,416 from total expenses for the six months transition period ended June 30, 2024. The decrease was primarily due to the Business Combination and related transaction expenses during the six months transition period which were no longer incurred in the year ended June 30, 2025 of approximately $9 million.
Compensation, payroll taxes and benefits increased to $6,150,257 for the year ended June 30, 2025. The increase is primarily as a result of a full year in 2025 versus a six month transition period in 2024. Once the transition period is annualized, the increase is approximately 58%, which is primarily due to compensation related to compensation of employees of the combined company whereas the prior period only included compensation of employees of Wilson-Davis.
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Regulatory, professional fees and related expenses decreased to $4,137,631 for the year ended June 30, 2025. The decrease was due to the Business Combination and related transactions primarily consisting of $9,008,053 in transaction related cost that were not incurred during the year ended June 30, 2025.
Stock compensation – founder share transfer of $1,462,650 was incurred for the six months transition period ended June 30, 2024 which was a one time expense. During the year ended June 30, 2025, the Company did not grant or issue stock based compensation to its employees.
Intangible asset amortization increased $571,071 for the year ended June 30, 2025. The increase was due to the intangible assets, such as the customer list and technologies acquired in the Business Combination amortized for a full year ended June 30, 2025 versus a six months transition period ended June 30, 2024.
Other expenses, which includes, Communications, Occupancy and equipment, Transfer fees, Bank charges, Bad debt and Other, increased to an aggregate of $2,019,452 for the year ended June 30, 2025. The increase was due to a full year ended June 30, 2025 versus a six month transition period ended June 30, 2024. In addition during the year ended June 30, 2025 the Company recognized bad debt expense of $398,826.
Loss from operations was $4,917,281 for the year ended June 30, 2025. Loss from operations was $14,268,826 in the prior period. The decrease in operation loss was primarily due to the approximately $9 million in transaction cost incurred at the closing of the Business Combination that were not incurred in the year ended June 30, 2025 and the one time stock based compensation recognized in the six months transition period ended June 30, 2024.
Other income/expense of $10,408,193 for the year ended June 30, 2025, represents an increase from expense of $106,507,857 when compared to the prior six month transition period ended June 30, 2024. The increase was due to the $86,392,769 loss on AtlasClear acquisition which was a one time charge during the six month transition period ended June 30, 2024 as well as the recovery of approximately $16 million in income due to change in fair value of convertible debt instruments. The recovery of $16 million was primarily due to the change in derivative related to the Sellers Notes and convertible notes that were converted and settled during the year ended June 30, 2025.
Interest income of $1,996,399 for the year ended June 30, 2024, represents an approximate 67% increase from $1,195,081 when compared to the prior period. The increase was primarily due to the prior six months transition period ended June 30, 2024 versus a full year of interest income.
The year ended June 30, 2025 did not reflect the $86,392,769 loss on AtlasClear technology acquired that was incurred in the six month transition period ended June 30, 2024 due to the Business Combination and asset purchase transactions with AtlasClear. ASC 350 prohibits the recognition of goodwill in an asset purchase. As such the difference between the purchase price net of the technology acquired of $68.55 million was expensed on acquisition date. Further, due to limited capital contributions from Quantum’s trust account,
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management views timelines for revenue recognition from the FinTech Assets to be unknowable and therefore has decided to write down in full, resulting in a loss on AtlasClear technology acquired of $86,392,769. Refer to Note 11 for further detail.
Total Purchase Price
$
44,400,000
Fair value of Software Product Earn Out Shares
10,963,000
Fair value of Earn Out Shares
31,347,000
Purchase price allocated to Contribution Agreement
$
86,710,000
SURFACExchange
$
381,461
Bond Quantum
32,284
Atlas
7,749,299
Rubicon
10,000,000
Total Developed Technology acquired
$
18,163,044
Transaction cost
$
68,546,956
Technology acquired
$
18,163,044
Amortization recognized
(317,231)
Carrying balance of Technology acquired written off
17,845,813
Total loss on AtlasClear technology acquired
$
86,392,769
The Company recognized a total of $16,493,732 gain in change in fair value of financial instruments for the year ended June 30, 2025. The Company entered into the following financial instruments which are required to be accounted for at fair value under ASC 815 or ASC 480. As a result of the Sellers Notes, Merger Financing, and Convertible Notes holders’ request to convert the debt into shares the Company recognized a gain as the derivatives were significantly reduced due to approximately $16 million in debt was converted to equity.
Interest expense increased to $8,081,938 for the year ended June 30, 2025 compared to $3,732,178 in the prior six-month transition period ended June 30, 2024. The increase was due to convertible secured notes, the Seller Notes, the Convertible Notes and Promissory Notes whose interest rates ranged from 8% to 13% over twelve months in the current year versus six months in the prior transition period.
Benefit from income taxes of $259,908 for the year ended June 30, 2025 decreased by $309,828, from $569,736 in income tax provision in the prior six-month period ended June 30, 2024, primarily due to the Business Combination resulting in deferred tax liabilities and assets assumed in the prior period.
The foregoing factors resulted in net income of $5,750,293 for the year ended June 30, 2025, compared to net loss of $120,206,947 during the prior six month period ended June 30, 2024. The increase was primarily due to the loss on AtlasClear acquisition of $86,392,769 and the Business Combination transaction costs of $9,008,053 which were incurred during the six months transition period ended June 30, 2024 as one time charges that did not carry over to the year ended June 30, 2025.
Liquidity and Capital Resources
Cash provided by operating activities for the year ended June 30, 2025 was $822,027 as compared cash used in operating activities of $11,227,227 for the six month period ended June 30, 2024. This was primarily affected by $1,718,757 in changes in operational assets. Adjustment to net income primarily consisted of change in fair value related to convertible note to Chardan which required the conversion element to be accounted for as a derivative resulting in a gain of $3,990,385. The Seller Notes required the conversion element to be accounted for as a derivative resulting in income of $12,369,120 as well as a Commitment guarantee resulting in a loss of $839,775 and a gain of $49,348 related to the change in fair value of the Wilson-Davis Sellers’ convertible note derivative. The Company granted earnout shares as part of the consideration paid to AtlasClear which resulted in a gain of $929,000. The Winston & Strawn Agreement required fair value accounting under ASC 480 creating a loss of $64,298. Further adjusted for non-cash interest expense on convertible notes of $7,276,092. The change in fair value related to the warrants liability resulted in a gain of $184,594 and a gain from the change in the fair value of stock payable settled of $232,793. In addition, the ELOC Agreement generated loss from the change in fair value of $357,435.
Cash used for investing activities for year ended June 30, 2025 was $145,000 as compared to $79,792,355 for the six month period ended June 30, 2024. This is primarily due to the redemptions of cash held in trust of $53,947,064 and cash paid to Wilson-Davis Sellers of $8,092,568 at closing of the Business Combination and the acquisition of $33,333,876 in cash from the closing of the Business Combination, payment of $500,000 in to Pacsquare and $1,195,565 of funds released from trust as a result of the closing of the Business
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Combination during the six months transition period ended June 30, 2024. During the year ended June 30, 2025 the Company paid an additional $125,000 to Pacsquare and $20,000 towards the extension of the Bank Acquisition Agreement.
Cash provided by financing activities from the year ended June 30, 2025 was $1,624,306 as compared to cash used in financing activities of $41,891,796 for the six month period ended June 30, 2024. This is primarily due to the redemptions of $53,947,064, the financing of transaction costs of $5,002,968 and financing from Funicular totaling $6,000,000 and advances from related party of $1,052,300 during the six month transition period ended June 30 2024. During the year ended June 30, 2025 the Company paid $226,075 on promissory notes and $20,000 on subordinated debt.
Financing Arrangements
Line of Credit
The Company has a $10,000,000 revolving line of credit with BMO Harris Bank N.A. The interest rate is determined at the time of borrowing as agreed by the Company and the bank. The line of credit currently provides for interest at the bank’s overnight rate plus 1.5% and is secured by Wilson-Davis’ assets. In addition, the line of credit carries an interest rate of 0.5% on its unused portion. The line of credit agreement requires Wilson-Davis to maintain line of credit collateral with value, as determined by the bank, in an amount at least equal to a percentage of the loan amount as specified by the bank. Advances on the line of credit are payable on demand. The entire amount of this credit facility is available to be drawn and used to meet Wilson-Davis’ liquidity requirements for NSCC clearing margin deposits. Wilson-Davis did not draw on its line of credit during the year ended or period ended June 30, 2025 or June 30, 2024,. As of June 30, 2025, Wilson-Davis was in compliance with all financial covenants contained in its revolving line of credit agreement.
ELOC Agreement
On July 31, 2024, Tau Investment Partners LLC (“Tau”) and the Company entered into an at-the-market agreement (the “ELOC Agreement”). Pursuant to the ELOC Agreement, Tau has committed to purchase, upon the terms thereof and subject to the satisfaction of certain conditions, up to $10 million of shares of Common Stock, at a price per share equal to 97% of the lowest VWAP of the Common Stock during a pricing period of three consecutive trading days following Tau’s receipt of the applicable advance notice sent by the Company from time to time, over the course of 24 months from the date of the ELOC Agreement. Each advance may be up to the greater of 100,000 shares or 50% of the average daily volume traded of the shares during the 30 trading days immediately prior to the date the Company requests each advance. Tau is an underwriter within the meaning of Section 2(a)(11) of the Securities Act. As of December 31, 2024, the Company has issued 2,475,000 shares under the ELOC for $546,100 of which $533,383 in cash was received.
Second ELOC Agreement
On February 5, 2025, Tau and the Company entered into a second at-the-market agreement (the “Second ELOC Agreement”). Pursuant to the Second ELOC Agreement, Tau has committed to purchase, upon the terms thereof and subject to the satisfaction of certain conditions, up to $12.25 million (the “Aggregate Limit”), over the 24-month term of the Second ELOC Agreement. We may request, on dates determined by us, individual advances up to the greater of 2,000 shares or such amount as is equal to 50% of the average daily volume traded of the Common Stock during the 30 trading days immediately prior to the date we request each advance, subject to the Aggregate Limit. Any such advance will reduce amounts that we can request for future advances and draw downs. The purchase price payable for the shares sold pursuant to any advance will be equal to 97% of the lowest VWAP of the Common Stock during a pricing period of three consecutive trading days following Tau’s receipt of the applicable advance notice. Tau’s obligation to purchase the shares we request to sell pursuant to any advance is conditioned upon, in addition to certain other customary closing conditions, the continued effectiveness of a registration statement pursuant to which Tau may freely sell the shares to be received. The Company registered the resale by Tau of up to 3,500,000 shares of Common Stock.
Funicular Convertible Note Financing
On February 9, 2024, AtlasClear Holdings and Quantum entered into the Funicular Purchase Agreement with Funicular, pursuant to which AtlasClear Holdings sold and issued to Funicular, on that date, a secured convertible promissory note (the “Funicular Note”) in the principal amount of $6,000,000 for a purchase price of $6,000,000, in a private placement (the “Note Financing”). See “Convertible Note Financing” above for more details. On January 7, 2025, the Company and Funicular entered into an Amendment, Waiver and Consent (the “Funicular Amendment”). Pursuant to the Funicular Amendment, the Company and Funicular agreed to certain amendments to the Funicular Note, and the registration rights agreement (the “Funicular RRA”), including an extension of the maturity date of the Funicular Note from November 9, 2025 to January 31, 2028. In addition, Funicular agreed to waive certain defaults by the Company under the Secured Note and the Funicular RRA and consented to the transactions contemplated by the Funicular Purchase Agreement.
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Hanire Purchase Agreement
On December 31, 2024, the Company and Hanire, LLC (“Hanire”) entered into a securities purchase agreement (the “Hanire Purchase Agreement”) for the purchase and sale, in a private placement, of (i) up to 333,333 shares (the “Shares”) of Common Stock, at a purchase price of $15.00 per share (after giving effect to the 1-for-60 reverse stock split), and (ii) a convertible promissory note (the “Hanire Note”) in the principal amount of up to $40 million (plus any amount by which the aggregate purchase price paid by Hanire for the Shares is less than $5 million as a result of the Share Limit, as defined below). To the extent the number of Shares to be purchased by Hanire at the Hanire Closing would cause Hanire to own more than 19.9% of the Company’s outstanding voting stock, the number of Shares will be reduced such that the number of Shares is equal to 19.9% of the total outstanding voting stock (the “Share Limit”). The consummation of the issuance and sale of the Shares and the Hanire Note (the “Hanire Closing”) was to occur at such time as agreed to by the Company and Hanire on or before January 31, 2025 (subject to extension by up to 15 days by Hanire), subject to customary closing conditions.The Hanire Note will provide for Hanire to loan funds, up to the aggregate maximum principal amount of the Hanire Note, in tranches, as follows: (i) $5 million (plus any amount by which the aggregate purchase price paid by Hanire for the Shares is less than $5 million as a result of the Share Limit) at the Hanire Closing, (ii) $12.5 million upon the Company securing a settlement of amounts outstanding to the principal owners of Wilson-Davis, (iii) $7.5 million at such time as the Company files a quarterly report on Form 10-Q or annual report on Form 10-K that shows that the Company has achieved positive net income on a consolidated basis in the most recent reporting period, and (iv) $15.0 million at such time as the Company receives approval from all regulatory authorities to acquire Commercial Bancorp. Unpaid principal amounts under the Hanire Note will accrue simple interest at a rate of 12.0% per annum, payable commencing three months after the initial draw and thereafter quarterly until the maturity date of January 31, 2028. The unpaid principal amount and all accrued interest under the Hanire Note is convertible at any time after certain conditions are met (including receipt of stockholder approval for the issuance of shares upon conversion), at the option of Hanire, into shares of Common Stock (the “Conversion Shares”) at a conversion rate equal to 60% of the volume-weighted average price of the Common Stock for the 20-consecutive trading day period immediately prior to the conversion date. The Company registered the resale by Hanire of up to 333,333 shares of Common Stock. On September 12, 2025, the Company received $100,000 as a good faith deposit towards the Hanire Purchase Agreement. An amendment to the Hanire Purchase Agreement is currently being negotiated.
August 2025 Securities Purchase Agreement
On August 4, 2025, the Company entered into a securities purchase agreement ( “August Securities Purchase Agreement”) with an institutional investor under which the Company agreed to issue and sell, in a private placement, Series A convertible debentures (a “Debenture”) for an aggregate principal amount of $500,000, for a gross purchase price of $490,000, net of legal fees. The Debenture bears a 10% interest and matures on August 3, 2026. The holder is entitled to convert the unpaid face amount of this Debenture, plus accrued interest and penalties, any time following a closing date, at $0.15 per share. If, at any time after closing, the Company receives financing from a third party (excluding the holder), the Company is required to pay to the holder, in the form of cash, equity, or a combination of the two, solely at the discretion of the holder, 100% of the proceeds raised from the third party in excess of an aggregate amount of $10,000,000 until such time as the face amount of the Debenture has been paid in full. The Company agreed that, within sixty (60) calendar days after the closing date, the company will file a registration statement registering the resale of the conversion shares underlying the Debenture.
September 2025 Securities Purchase Agreement
On September 16, 2025, September 19, 2025 and September 23, 2025, the Company entered into separate “Securities Purchase Agreements with certain institutional Investors under which the Company agreed to issue and sell, in a private placement, convertible promissory Notes for an aggregate principal amount of $6,000,000, for a gross purchase price of $5,000,000, reflecting a 20% original issue discount, before fees and other expenses. The Notes do not bear interest, and mature on the earlier of six months from issuance or the date that the Company completes a Qualified Financing (meaning an issuance and sale of capital stock raising gross proceeds of at least $10 million, as defined in the Notes). The Notes may be converted into equity, at each holder’s option, at the closing of a Qualified Financing, at the same per share price as the securities sold in the Qualified Financing. The Company intends to use the proceeds from the sale of the Notes for general corporate purposes and working capital. The Notes are subject to customary events of default and related remedies.
Subject to the provisions of the Securities Purchase Agreements, if, during the 12-month period commencing on the date of the Closing, the Company carries out one or more Future Offerings (as defined in the Securities Purchase Agreements), each Investor will have the right to participate in an amount up to 100% of such Investor’s investment amount under the Securities Purchase Agreement in any such securities offered by the Company, subject to certain exceptions.
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Going Concern
In connection with AtlasClear Holdings’ assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the liquidity of the Company raises substantial doubt about the Company’s ability to continue as a going concern through the twelve months following the issuance of the financial statements. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. No adjustments have been made to the carrying amounts of assets or liabilities as a result of this uncertainty.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2025.
Contractual Obligations
The Company holds several long-term debt obligations with outside vendors and investors, with loans maturing between 2025 and 2028 (see Note 9, and 17). Additionally, the Company leases office space under several operating leases (see Note 13). The Company has no capital lease obligations. Further, there are no other outstanding long-term liabilities contractually obligated by the Company.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. We evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could materially differ from those estimates.
Revenue Recognition
The Company, through its subsidiary Wilson-Davis, recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers . Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be received. The Company applies the five-step model under ASC 606: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) each performance obligation is satisfied.
Brokerage Commissions. Wilson-Davis earns commissions from executing securities transactions for customers. The Company acts as an agent in these arrangements. Commission revenue is recognized on the trade date, which is the point in time when the performance obligation is satisfied, as the security is selected, the price is determined, the trade is executed, and the risks and rewards of ownership have transferred to/from the customer.
Mutual Fund Commissions. Wilson-Davis earns commissions from sales of mutual funds. The Company recognizes revenue at the point in time when the mutual fund is purchased by the customer and the performance obligation has been satisfied.
Other Transaction-Based Fees. The Company earns revenues from vetting services for customers converting restricted stock to eligible trading stock, as well as from clearing fees charged to another broker-dealer for which it clears trades. These revenues are recognized as the related performance obligations are satisfied.
Service Fees. Wilson-Davis charges customers for various services including wires, transfer agent services, corporate actions, blue sheet filings, and Automated Customer Account Transfer Service (ACATS) fees. These fees are recognized as revenue at the point in time the related service is provided.
Interest Income. Wilson-Davis also earns interest on balances held with financial institutions, which is recognized in the period earned.
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Judgments and Estimates. The recognition of revenue involves judgment, particularly in identifying performance obligations, determining the timing of satisfaction of those obligations, and estimating variable consideration (e.g., contingent fees). Changes in these judgments could have a material impact on the timing and amount of revenue recognized.
Goodwill and Long-Lived Asset Impairments
We assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. The determination of fair value involves significant judgment, including the selection of appropriate valuation methodologies, discount rates, and assumptions about future cash flows. Changes in these estimates or in market conditions could result in impairment charges that may be material to our financial statements.
Derivative Liabilities
We account for derivative instruments as either equity-classified or liability-classified instruments based on an assessment of the derivative instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the derivative instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the derivative instruments meet all of the requirements for equity classification under ASC 815, including whether the derivative instruments are indexed to our own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance and as of each subsequent quarterly period end date while the warrants and the PIPE derivatives are outstanding. We have concluded that the public warrants should be classified as equity instruments, and the PIPE derivatives and the private warrants should be classified as liability instruments.
For issued or modified derivatives that meet all of the criteria for equity classification, the derivatives are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified derivatives that do not meet all the criteria for equity classification, the derivatives are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the derivatives are recognized as a non-cash gain or loss on the statements of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.