AtlasClear Holdings (ATCH) risk factors, FY2025 10-K

Other

1. 01We have a short operating history, which makes it difficult to evaluate our business and prospects
2. 02We may require substantial funding to finance our operations, but adequate financing may not be available when we need it, on acceptable terms or at all
3. 03Uncertain global macro-economic and political conditions could materially and adversely affect our results of operations and financial condition
4. 04The loss of our Chief Executive Officer, Chief Financial Officer, or other key personnel, or failure to attract and retain other highly qualified personnel, could harm our business
5. 05Changes in tax rates or the adoption of new tax legislation may adversely impact our financial results
6. 06Natural disasters, including and not limited to unusual weather conditions, epidemic outbreaks, terrorist acts and political events could disrupt our business schedule
7. 07Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results
8. 08The requirement that we repay all outstanding notes, including the Funicular Note, could adversely affect our business plan, liquidity, financial condition, and results of operations
9. 09The Convertible Notes contain a number of affirmative and negative covenants regarding matters such as the payment of dividends, maintenance of our properties and assets, transactions with affiliates, and our ability to issue other indebtedness

Risks Related to Our Business Strategy and Industry

1. 10If the proposed CB Merger is completed, we may experience difficulties in integrating the operations of Wilson-Davis and Commercial Bancorp and in realizing the expected benefits of these transactions
2. 11Commercial Bancorp may have liabilities that are not known to AtlasClear and the indemnities negotiated in the Broker-Dealer Acquisition Agreement and the Bank Acquisition Agreement may not offer adequate protection
3. 12We may in the future make acquisitions, and such acquisitions could disrupt our operations, and may have an adverse effect on our operating results
4. 13profitability or cash flow, and our efforts could cause unforeseen complexities and additional cash outflows, including financial losses. As a result, the realization of anticipated synergies or benefits from acquisitions may be delayed or substantially reduced
5. 14Any acquisitions, partnerships or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations
6. 15We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain our executive officers and other key management and technical personnel

Risk Related to Wilson-Davis’ Business and Industry

1. 16Wilson-Davis’ liquidation of microcap securities and related activities in the over-the-counter market segment expose it to significant risk
2. 17The over-the-counter markets for the microcap securities Wilson-Davis liquidates frequently have limited trading volume and volatile trading prices
3. 18The penny stock rules limit Wilson-Davis’ trading practices
4. 19Wilson-Davis needs to continue to maintain its excess net capital above the NSCC requirement of $10 million to continue to provide correspondent clearing services for introducing brokers
5. 20Wilson-Davis is substantially dependent on one principal customer
6. 21Wilson-Davis customers liquidate securities of smaller reporting companies that have relaxed disclosure obligations
7. 22Wilson-Davis customers also liquidate securities in companies that do not file SEC reports, so there is very little, if any, reliable data publicly available about them
8. 23Wilson-Davis is, and may in the future be, subject to significant regulatory enforcement proceedings
9. 24Wilson-Davis and certain of its personnel are subject to various regulatory disciplinary orders that could be the basis of future regulatory action
10. 25Wilson-Davis’ procedures, policies, and practices to comply with the comprehensive anti-money laundering regulatory regime may not be sufficient to assure compliance
11. 26Wilson-Davis cannot predict the duration or severity of economic conditions that may adversely affect its results of operations
12. 27General, long-term financial and economic conditions and unforeseen events may adversely affect Wilson-Davis’ financial condition and results of operations
13. 28Wilson-Davis may be unable to attract and retain registered representatives and other professional employees
14. 29FINRA has adopted rules that impose significant compliance requirements on making investment recommendations to retail customers
15. 30Wilson-Davis faces significant competition from other brokers and clearing firms
16. 31Wilson-Davis is exposed to credit risk and other risks from customers, market makers, and other counterparties
17. 32Wilson-Davis faces significant risks in conducting its market making business
18. 33Systems and security failures could significantly disrupt Wilson-Davis’ business and subject the firm to losses, litigation, and regulatory actions
19. 34Wilson-Davis relies on numerous external service providers whose failure to provide those services properly may result in significant adverse events
20. 35Wilson-Davis relies on representations of third parties to ensure compliance with applicable laws and rules
21. 36Damage to Wilson-Davis’ reputation could adversely impact its business

Risks Related to Regulatory, Compliance and Legal

1. 37We are or may be subject to numerous risks relating to the need to comply with data and information privacy laws
2. 38business, financial condition, results of operations and prospects. Additionally, if we are unable to properly protect the privacy and security of personal information, including sensitive personal information (e.g., financial information), we could be found to have breached our contracts with certain third parties
3. 39Overall, because of the complexity of these laws, the changing obligations and the risk associated with our collection and use of data, we cannot guarantee that we are, or will be, in compliance with all applicable U.S., Canadian, or other international regulations as they are enforced now or as they evolve
4. 40Issues in the use of artificial intelligence, including machine learning and computer vision (together, “AI”), in our analytics platforms may result in reputational harm or liability
5. 41We could face employee claims
6. 42From time to time, we may be party to various claims and litigation proceedings
7. 43Wilson-Davis is subject to extensive regulation from the SEC and FINRA, and the failure to comply with this regulation can result in significant penalties, fines, liability, and reputational harm
8. 44The misconduct of Wilson-Davis’ employees could expose the firm to significant legal liability and reputational harm
9. 45If the Pacsquare Assets do not successfully scale, as the Company’s business grows, or do not perform adequately, this could adversely affect the Company’s business, financial condition and results of operations, and could damage its reputation
10. 46AtlasClear Holdings relies on the third-party services of Pacsquare which may expose it to additional risks and could have an adverse impact on its business

Risks Relating to the Proposed Acquisition of Commercial Bancorp

1. 47The proposed CB Merger may not be completed on the terms or timeline currently contemplated, or at all, as the parties may be unable to satisfy the conditions or obtain the approvals required to complete the CB Merger
2. 48Failure to complete the CB Merger may hinder the Company from achieving its anticipated business goals, and negatively impact the Company’s share price and its business, prospects, financial condition and results of operations
3. 49The terms of our promissory notes make non-compliance or default likely, and this can result in additional legal and other fees as well as impact the Company’s share price and its business, prospects, financial condition and results of operations

Risks Related to Our Operations as a New Public Company

1. 50The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified independent board members
2. 51We may have increasing difficulty attracting and retaining qualified outside independent board members
3. 52Stock trading volatility could impact our ability to recruit and retain employees
4. 53Some members of our management team have no prior experience managing a public company
5. 54We are an Emerging Growth Company, making comparisons to non-Emerging Growth companies difficult or impossible
6. 55We may be exposed to risk if we cannot enhance, maintain, and adhere to our internal controls and procedures
7. 56As a public company, we have incurred and expect to continue to incur increased expenses associated with the costs of being a public company
8. 57We have insured certain products and launches to the extent that insurance was available at acceptable premiums. This insurance will not protect us against all losses due to specified exclusions, deductibles and material change limitations
9. 58Our amended and restated certificate of incorporation (the “Charter”) contains anti-takeover provisions that could adversely affect the rights of our stockholders
10. 59These provisions could have the effect of depriving our stockholders of an opportunity to sell their Common Stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction

Risks Related to Ownership of Our Common Stock

1. 60Future sales or resales of our Common Stock could cause the market price for our Common Stock to decline significantly, even if the Company’s business is doing well
2. 61An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities
3. 62Our issuance of additional capital stock in connection with future financings, acquisitions, investments, the AtlasClear 2024 Equity Incentive Plan (the “Incentive Plan”) or otherwise will dilute all other stockholders
4. 63We cannot assure you that we will continue to be able to comply with the continued listing standards of the NYSE American, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions
5. 64If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline
6. 65We do not intend to pay cash dividends for the foreseeable future
7. 66Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Common Stock at a price greater than what you paid for it
8. 67Our Warrants may have an adverse effect on the market price of our Common Stock
9. 68In accordance with ASC 815, Derivatives and Hedging (“ASC 815”), the Company’s warrants are classified as derivative liabilities and measured at fair value on its balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations
10. 69Future sales, or the perception of future sales, by us or our stockholders in the public market following could cause the market price for the Common Stock to decline
11. 70Our operating results may be negatively impacted by unfavorable economic and market conditions and the uncertain geopolitical environment