ALT5 SIGMA CORPORATION FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ALT5 Sigma Corporation filed its quarterly report for the period ended March 29, 2025, reporting a net loss of $1.4 million for the 13-week period. The company’s revenue decreased by 15% to $2.1 million compared to the same period last year, primarily due to a decline in sales of its software products. The company’s operating expenses increased by 12% to $3.5 million, mainly due to higher research and development expenses. As of March 29, 2025, the company had cash and cash equivalents of $1.3 million and a working capital deficit of $1.1 million. The company’s stockholders’ equity decreased by 10% to $4.3 million due to the net loss and a decrease in accumulated other comprehensive income.
Financial Performance Overview
The company reported mixed financial results for the 13 weeks ended March 29, 2025 compared to the prior year period. Revenue increased significantly to $5.5 million, up from $0 in the prior year, due to the acquisition of the ALT5 Subsidiary in May 2024. Gross profit also increased to $2.6 million, up from $0 in the prior year, reflecting the improved revenue.
However, the company continued to report net losses, with a net loss of $2.9 million in the current period compared to a net loss of $2.1 million in the prior year. This was driven by higher selling, general and administrative expenses, which increased by $3 million to $4.8 million, as well as higher interest expense related to the ALT5 acquisition.
The company’s Adjusted EBITDA, a non-GAAP metric, improved to a loss of $162,000 compared to a loss of $493,000 in the prior year period. This was primarily due to the improved operating results from the Fintech segment, which generated $1.2 million in Adjusted EBITDA.
Segment Performance
The company reports its business in two segments: Fintech and Biotechnology.
The Fintech segment, consisting of the newly acquired ALT5 Subsidiary, generated $5.5 million in revenue and had a gross margin of 47%. However, this segment reported an operating loss of $362,000.
The Biotechnology segment did not generate any revenue in the current or prior year periods. Selling, general and administrative expenses for this segment increased, primarily due to higher amortization costs related to intangible assets.
The Corporate and Other segment, which includes unallocated corporate expenses, reported an operating loss of $1.3 million, up from $1.1 million in the prior year, due to higher legal and professional fees.
Liquidity and Capital Resources
As of March 29, 2025, the company had $10.8 million in cash on hand. However, the company reported a net negative working capital position of $6.4 million, with total current assets of $31.8 million and total current liabilities of $38.2 million.
Cash used in operations was $1.5 million in the current period, compared to cash provided by operations of $544,000 in the prior year. This decrease was primarily due to the company’s operating results.
The company acknowledged that it continues to face a challenging competitive environment and that its ability to continue as a going concern is dependent on the success of future capital raises or structured settlements, as well as cash flows from the ALT5 Subsidiary acquisition.
The company may require additional debt or equity financing to fund new acquisitions, conduct clinical trials, or make other strategic investments. However, the company cautioned that any such financing could further dilute or impair the ownership interests of existing shareholders.
Strengths and Weaknesses
Strengths:
- Successful acquisition of the ALT5 Subsidiary, which contributed significant revenue and gross profit in the current period
- Improved Adjusted EBITDA performance, driven by the Fintech segment
- Maintains a cash balance of $10.8 million to fund operations and future initiatives
Weaknesses:
- Continued net losses, driven by higher operating expenses related to the ALT5 acquisition
- Negative working capital position, indicating potential liquidity challenges
- Reliance on future financing to fund operations and growth initiatives, which could further dilute shareholders
- Material weaknesses in internal controls over financial reporting, including insufficient documentation and inadequate segregation of duties
Outlook and Future Prospects
The company’s future prospects appear uncertain given its continued net losses, negative working capital position, and reliance on future financing. The successful integration and performance of the ALT5 Subsidiary will be crucial in driving the company’s financial turnaround.
The company’s Biotechnology segment also faces significant challenges, as it has not generated any revenue to date and continues to incur increasing costs. The company’s ability to obtain FDA approval and commercialize its JAN 123 product will be a key driver of future success in this segment.
To address its liquidity and capital needs, the company plans to pursue additional debt or equity financing, as well as explore structured arrangements to capitalize a new biotechnology subsidiary. However, the company cautioned that there are no assurances that such financing will be secured.
Overall, the company’s financial performance and future outlook remain uncertain, with significant challenges to overcome in both its Fintech and Biotechnology segments. Investors should closely monitor the company’s progress in addressing its material weaknesses, integrating the ALT5 Subsidiary, and securing the necessary financing to fund its operations and growth initiatives.
