☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Nevada (State or other jurisdiction of incorporation or organization) | 41-1454591 (I.R.S. Employer Identification No.) | |||||||
|
| |||||||
|
|
702-997-5968
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock, $0.001 par value per share | JAN |
|
Large accelerated filer |
| Accelerated filer |
| |||||||||||
Non-accelerated filer |
| Smaller reporting company |
| |||||||||||
Emerging growth company |
|
o
JANONE INC.
INDEX TO FORM 10-Q
| ||||||||
Page | ||||||||
Unaudited Condensed Consolidated Balance Sheets as of | ||||||||
April 1, December 31, (Unaudited) Assets Cash and cash equivalents $ 353 $ 61 Trade and other receivables, net 15 106 Prepaid expenses and other current assets 269 394 Current assets from discontinued operations — 8,612 Total current assets 637 9,173 Intangible assets - Soin, net 18,930 19,293 Other intangible assets, net 4 4 Note receivable- SPYR, net 9,175 8,974 Note receivable - VM7, net 6,052 — Marketable securities 162 315 Deposits and other assets 16 18 Other assets from discontinued operations — 8,979 Total assets $ 34,976 $ 46,756 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 2,664 $ 2,276 Accrued liabilities - other 744 1,006 Short–term debt 69 274 Current liabilities from discontinued operations — 20,382 Total current liabilities 3,477 23,938 Deferred income taxes, net 3,153 — Other noncurrent liabilities 276 241 Noncurrent liabilities from discontinued operations — 5,760 Total liabilities 6,906 29,939 Commitments and contingencies (Note 12) Mezzanine equity Convertible preferred stock, series S - par value $0.001 per share 200,000 authorized, 14,510 14,510 Stockholders' equity: Preferred stock, series A - par value $0.001 per share 2,000,000 authorized, — — Common stock, par value $0.001 per share, 10,000,000 shares authorized, 3 2 Additional paid-in capital 46,294 45,748 Accumulated deficit (32,737 ) (42,822 ) Accumulated other comprehensive loss — (621 ) Total stockholders' equity 13,560 2,307 Total liabilities and stockholders' equity $ 34,976 $ 46,756 For the Thirteen Weeks Ended April 1, April 2, Revenues $ — $ — Cost of revenues — — Gross profit — — Operating expenses: Selling, general and administrative expenses 1,099 681 Operating loss (1,099 ) (681 ) Other income (expense): Interest income (expense), net 475 (2 ) Gain on litigation settlement, net — 1,950 Unrealized loss on marketable securities (247 ) — Gain on reversal of contingency loss — 637 Other income, net (18 ) 715 Total other income, net 210 3,300 Income (loss) from continuing operations before provision for income taxes (889 ) 2,619 Income tax benefit (227 ) — Net income (loss) from continuing operations (662 ) 2,619 Gain (loss) from discontinued operations (including a $15.8 million gain on sale) 13,976 (1,405 ) Income tax provision for discontinued operations 3,229 3 Net income (loss) from discontinued operations 10,747 (1,408 ) Net income $ 10,085 $ 1,211 Net income (loss) per share: Net income (loss) per share from continuing operations, basic $ (0.21 ) $ 0.93 Net income (loss) per share from continuing operations, diluted $ (0.21 ) $ 0.80 Net income (loss) per share from discontinued operations, basic $ 3.36 $ (0.50 ) Net income (loss) per share from discontinued operations, diluted $ 3.36 $ (0.43 ) Net income per share, basic $ 3.15 $ 0.43 Net income per share, basic $ 3.15 $ 0.37 Weighted average common shares outstanding: Basic 3,199,061 2,827,410 Diluted 3,199,061 3,274,123 For the Thirteen Weeks Ended April 1, 2023 April 2, 2022 OPERATING ACTIVITIES: Net income (loss) from continuing operations $ (662 ) $ 2,619 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating Depreciation and amortization 364 — Stock based compensation expense 8 4 Accretion of note receivable discount (230 ) — Loss on legal settlement — (115 ) Unrealized loss on marketable securities 247 — Gain on reversal of contingent liability — (637 ) Changes in assets and liabilities: Accounts receivable, net of acquisitions and dispositions (3 ) 130 Prepaid expenses and other current assets, net of dispositions 125 173 Accounts payable and accrued expenses, net of dispositions 256 91 Other Assets 1 (3 ) Operating cash flows provided by (used in) discontinued operations 2,320 (207 ) Net cash provided by operating activities 2,426 2,055 INVESTING ACTIVITIES: Investing cash flows used in discontinued operations (156 ) (127 ) Net cash used in investing activities (156 ) (127 ) FINANCING ACTIVITIES: Proceeds from equity financing, net 368 — Payments on short-term notes payable (205 ) (216 ) Financing cash flows from discontinued operations (2,212 ) (63 ) Net cash used in financing activities (2,049 ) (279 ) Effect of changes in exchange rate on cash and cash equivalents 17 (41 ) INCREASE IN CASH AND CASH EQUIVALENTS 238 1,608 CASH AND CASH EQUIVALENTS, beginning of period 115 705 LESS CASH OF DISCONTINUED OPERATIONS, end of period — (266 ) CASH AND CASH EQUIVALENTS, end of period $ 353 $ 2,047 Supplemental cash flow disclosures: Interest paid $ 117 $ 22 Noncash recognition of new leases — 323 Series A Preferred Common Stock Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit Deficit Equity Balance, December 31, 2022 222,588 $ — 3,150,230 $ 2 $ 45,748 $ (42,822 ) $ (621 ) $ 2,307 Share based compensation — — — — 8 — — 8 Common stock issued for equity financing — — 361,000 1 368 — — 369 Common stock issued for legal settlement 103,707 — 170 — — 170 Other comprehensive income — — — — — — 621 621 Net income — — — — — 10,085 — 10,085 Balance, April 1, 2023 222,588 $ — 3,614,937 $ 3 $ 46,294 $ (32,737 ) $ — $ 13,560 Series A Preferred Common Stock Additional Accumulated Accumulated Total Shares Amount Shares Amount Capital Deficit Deficit Deficit Balance, January 1, 2022 238,729 $ — 2,827,410 $ 2 $ 45,743 $ (53,804 ) $ (617 ) $ (8,676 ) Share based compensation — — — — 4 — — 4 Other comprehensive income — — — — — (8 ) (41 ) (49 ) Net Income — — — — — 1,211 — 1,211 Balance, April 2, 2022 238,729 $ — 2,827,410 $ 2 $ 45,747 $ (52,601 ) $ (658 ) $ (7,510 ) 2027. Basis of Presentation Principles of Consolidation Financial Statement Reclassification Use of Estimates Financial Instruments Recently Issued Accounting Pronouncements 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 2,705 Right of use asset - operating leases 5,290 Intangible assets, net 2 735 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 3,278 Accrued liability - California sales taxes 4 6,264 Lease obligation short-term - operating leases 1,631 Short term debt 5 4,172 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 1,339 Long-term portion related party note payable 7 605 Total noncurrent liabilities from discontinued operations 5,760 Total liabilities from discontinued operations $ 26,142 1 The Useful Life December 31, 2022 Buildings and improvements 3-30 $ 85 Equipment 3-15 3,915 Projects under construction 1,447 Property and equipment 5,447 Less accumulated depreciation (2,742 ) Total property and equipment, net, from discontinued operations $ 2,705 December 31, Patent and domains $ 19 Computer software 1,682 Intangible assets 1,701 Less accumulated amortization (966 ) Total intangible assets $ 735 3 The December 31, Compensation and benefits $ 685 Contract liability 290 Accrued incentive and rebate checks 2,037 Accrued taxes 219 Other 47 Total accrued expenses $ 3,278 4 The December 31, Accrued liability - CA sales tax assessment $ 4,132 Accrued liability - interest on CA sales tax assessment 2,132 Total $ 6,264 December 31, Gulf Coast Bank and Trust Company $ 4,206 Gulf Coast Bank and Trust Company loan origination fees (34 ) Total $ 4,172 December 31, KLC Financial $ 1,781 KLC Financial loan origination fees (61 ) Total 1,720 Less current portion (381 ) Total $ 1,339 7 The December 31, Isaac Capital Group LLC $ 838 Total 838 Less current portion (233 ) Total $ 605 13 weeks ended April 1, 2023 April 2, 2022 Revenues $ 3,795 $ 9,324 Cost of revenues 3,992 7,471 Gross profit (197 ) 1,853 Operating expenses from discontinued operations: Selling, general and administrative expenses $ (14,355 ) $ 2,263 Total operating expenses from discontinued operations (14,355 ) 2,263 Operating loss from discontinued operations 14,158 (410 ) Other income (expense) from discontinued operations Interest expense, net (181 ) (190 ) Loss on litigation settlement (115 ) Other expense, net (1 ) (690 ) Total other income (loss), net (182 ) (995 ) Income (loss) before provision for income taxes from discontinued operations 13,976 (1,405 ) Income tax provision 3,229 3 Net income (loss) from discontinued operations $ 10,747 $ (1,408 ) In accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the 13 weeks ended April 1, 2023 April 2, 2022 DISCONTINUED OPERATING ACTIVITIES: Net income (loss) from discontinued operations 10,747 (1,408 ) Depreciation and amortization 96 133 Amortization of debt issuance costs 11 3 Amortization of right-of-use assets 53 (16 ) Change in deferred taxes 3,229 — Gain on sale of ARCA, net of cash (15,967 ) — Changes in assets and liabilities: Accounts receivable 2,932 (740 ) Inventories 299 (40 ) Prepaid expenses and other current assets 55 19 Accounts payable and accrued expenses 866 1,802 Other assets (1 ) 40 Net cash provided by (used in) operating activities from discontinued operations $ 2,320 $ (207 ) DISCONTINUED INVESTING ACTIVITIES: Purchases of property and equipment (123 ) (127 ) Purchase of intangible assets (33 ) — Net cash used in investing activities from discontinued operations $ (156 ) $ (127 ) DISCONTINUED FINANCING ACTIVITIES: Proceeds from note payable 5,162 — Payment on related party note (38 ) — Proceeds from issuance of short term notes payable (7,291 ) — Payments on notes payable (45 ) (63 ) Net cash used in financing activities from discontinued operations $ (2,212 ) $ (63 ) Effect of changes in exchange rate on cash and cash equivalents (5 ) (41 ) DECREASE IN CASH AND CASH EQUIVALENTS (53 ) (438 ) CASH AND CASH EQUIVALENTS, beginning of period 53 704 CASH AND CASH EQUIVALENTS, end of period $ — $ 266 The Company’s trade and other receivables as of April 1, December 31, Trade and other receivables, net, from discontinued operations $ — $ 7,816 Other receivables 15 106 Trade and other receivables, net $ 15 $ 7,922 Prepaids and other current assets as of April 1, December 31, Prepaid insurance $ 87 $ 364 Prepaid other 182 30 Prepaid expenses from discontinued operations — 377 Total prepaid expenses and other current assets $ 269 $ 771 Intangible assets as of April 1, December 31, Patent and domains $ 4 $ 4 Soin intangibles * $ 19,293 $ 19,293 Computer software 3,563 3,563 Intangible assets from discontinued operations — 735 Intangible assets 22,860 23,595 Less accumulated amortization (3,926 ) (3,563 ) Total intangible assets $ 18,934 $ 20,032 Deposits and other assets as of April 1, December 31, Deposits and other assets from discontinued operations $ — $ 249 Other 16 18 Total deposits and other assets $ 16 $ 267 Accrued liabilities as of April 1, December 31, Compensation and benefits $ 101 $ 81 Accrued guarantees 130 130 Accrued taxes 47 5 Accrued litigation settlement 340 510 Other 126 280 Accrued expenses from discontinued operations — 3,278 Total accrued expenses $ 744 $ 4,284 Note 10: Income Taxes April 1, December 31, AFCO Finance $ 69 $ 274 Total short-term debt $ 69 $ 274 As of the date of these financial statements, discovery has recommenced as the mediation did not result in a settlement and the motions to dismiss were denied. been repaid. Additional information relating to all outstanding options is as follows: Weighted Aggregate Weighted Options Exercise Intrinsic Contractual 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 Granted 10,000 1.53 Balance at April 1, 2023 120,000 $ 5.87 $ — 6.5 Exercisable at April 1, 2023 115,000 $ 6.06 $ — 6.4 awards. The following table presents the computation of basic and diluted net income (loss) per share (in $000’s, except share and per–share data): For the Thirteen Weeks Ended April 1, 2023 April 2, 2022 Continuing Operations Basic Net income (loss) from continuing operations $ (662 ) $ 2,619 Weighted average common shares outstanding 3,199,061 2,827,410 Basic income (loss) per share from continuing operations $ (0.21 ) $ 0.93 Diluted Net income (loss) from continuing operations $ (662 ) $ 2,619 Weighted average common shares outstanding 3,199,061 3,274,123 Diluted income (loss) per share from continuing operations $ (0.21 ) $ 0.80 Discontinued Operations Basic Net income (loss) from discontinued operations $ 10,747 $ (1,408 ) Weighted average common shares outstanding 3,199,061 2,827,410 Basic income (loss) per share from discontinued operations $ 3.36 $ (0.50 ) Diluted Net income (loss) from discontinued operations $ 10,747 $ (1,408 ) Weighted average common shares outstanding 3,199,061 3,274,123 Diluted income (loss) per share from discontinued operations $ 3.36 $ (0.43 ) Total Basic Net income $ 10,085 $ 1,211 Weighted average common shares outstanding 3,199,061 2,827,410 Basic income per share $ 3.15 $ 0.43 Diluted Net income $ 10,085 $ 1,211 Weighted average common shares outstanding 3,199,061 3,274,123 Diluted income per share $ 3.15 $ 0.37 The following tables present our segment information for the 13 and 39 weeks ended Thirteen Weeks Ended April 1, 2023 April 2, 2022 Revenues Biotechnology $ — $ — Discontinued operations 3,795 9,324 Total Revenues $ 3,795 $ 9,324 Gross profit Biotechnology $ — $ — Discontinued operations (197 ) 1,853 Total Gross profit $ (197 ) $ 1,853 Operating loss Biotechnology $ (1,099 ) $ (681 ) Discontinued operations 14,158 (410 ) Total Operating loss $ 13,059 $ (1,091 ) Depreciation and amortization Biotechnology $ 364 $ — Discontinued operations 96 133 Total Depreciation and amortization $ 460 $ 133 Interest (income) expense, net Biotechnology $ (475 ) $ 2 Discontinued operations 181 190 Total Interest expense, net $ (294 ) $ 192 Net income (loss) before income taxes Biotechnology $ (867 ) $ 2,619 Discontinued operations 13,976 (1,405 ) Total Net income before income taxes $ 13,109 $ 1,214 $477,000. The following table details the calculation of the gain on sale of ARCA and subsidiaries, as shown on the income statement (in $000's): Total minimum consideration $ 6,023 Payment from buyer 3 Net consideration $ 6,026 Accounts payable 5,323 Accrued liabilities 3,187 Accrued liabilities - California state sales tax 6,320 Lease liabilities 5,285 Debt 4,530 Accumulated other comprehensive loss (604 ) Total disposal of liabilities 24,041 Total consideration 30,067 Cash 145 Accounts receivable 4,884 Inventory 67 Property, plant and equipment 2,767 Intangible assets 732 Right-of-use assets 5,075 Other assets 574 Total disposal of assets 14,244 Total gain on sale $ 15,823 13 Weeks Ended 13 Weeks Ended April 1, 2023 April 2, 2022 Statement of Operations Data: Revenues $ — $ — Cost of revenues — — Gross profit — — Selling, general and administrative expenses 1,099 681 Operating loss (1,099 ) (681 ) Interest income (expense), net 475 (2 ) Gain on litigation settlement — 1,950 Unrealized loss on marketable securities (247 ) — Gain on reversal of contingency loss — 637 Other income, net (18 ) 715 Net income (loss) before provision for income taxes (889 ) 2,619 Income tax benefit (227 ) — Net income (loss) from continuing operations (662 ) 2,619 Income (loss) from discontinued operations 13,976 (1,405 ) Income tax provision for discontinued operations 3,229 3 Net income (loss) from discontinued operations 10,747 (1,408 ) Net income $ 10,085 $ 1,211 13 Weeks Ended 13 Weeks Ended April 1, 2023 April 2, 2022 Net Percent Net Percent Revenue of Total Revenue of Total Revenue Revenue from discontinued operations $ 3,795 100.0 % $ 9,324 100.0 % Biotechnology — 0.0 % — 0.0 % Total Revenue $ 3,795 100.0 % $ 9,324 100.0 % 13 Weeks Ended 13 Weeks Ended April 1, 2023 April 2, 2022 Gross Gross Gross Gross Profit Profit % Profit Profit % Gross Profit Gross profit from discontinued operations $ (197 ) -5.2 % $ 1,853 19.9 % Biotechnology — 0.0 % — 0.0 % Total Gross Profit $ (197 ) -5.2 % $ 1,853 19.9 % 13 Weeks Ended April 1, 2023 13 Weeks Ended April 2, 2022 Biotechnology Discontinued Operations Total Biotechnology Discontinued Operations Total Revenue $ — $ 3,795 $ 3,795 $ — $ 9,324 $ 9,324 Cost of revenue — 3,992 3,992 — 7,471 7,471 Gross profit — (197 ) (197 ) — 1,853 1,853 Selling, general and administrative expense 1,099 (14,355 ) (13,256 ) 681 2,263 2,944 Operating loss (income) $ (1,099 ) $ 14,158 $ 13,059 $ (681 ) $ (410 ) $ (1,091 ) $329,000. Exhibit Number Exhibit Description Form File Number Exhibit Number Filing Date 10.96 8-K 0-19621 10.95 3/20/2023 10.97 8-K 0-19621 10.96 3/20/2023 10.98 8-K 0-19621 10.98 3/22/2023 31.1 * 31.2 * 32.1 * 32.2 * 101.INS * Inline XBRL Instance Document 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) Date: By: /s/ Tony Isaac Tony Isaac Chief Executive Officer (Principal Executive Officer) Date: By: /s/ Virland A. Johnson Virland A. Johnson Chief Financial Officer (Principal Financial and Accounting Officer)
2023
2022
100,000 and 100,000 shares issued and outstanding at April 1, 2023 and
December 31, 2022, respectively
222,588 and 222,588 shares issued and outstanding at April 1, 2023 and
December 31, 2022, respectively
3,614,937 and 2,827,410 shares issued and outstanding at April 1, 2023
and at December 31, 2022, respectivelySeptember 30,
2023December 31,
2022(Unaudited) Assets Cash and cash equivalents $ 413 $ 61 Trade and other receivables, net 19 106 Prepaid expenses and other current assets 85 394 Current assets from discontinued operations — 8,612 Total current assets 517 9,173 Intangible assets - Soin, net 18,204 19,293 Other intangible assets, net 4 4 Note receivable - SPYR, net 9,578 8,974 Note receivable - VM7, net 5,600 — Marketable securities 222 315 Deposits and other assets 364 18 Other assets from discontinued operations — 8,979 Total assets $ 34,489 $ 46,756 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 2,261 $ 2,276 Accrued liabilities - other 243 1,006 Short-term debt — 274 Current liabilities from discontinued operations — 20,382 Total current liabilities 2,504 23,938 Deferred income taxes, net 2,942 — Other noncurrent liabilities 35 241 Noncurrent liabilities from discontinued operations — 5,760 Total liabilities 5,481 29,939 Commitments and contingencies (Note 12) 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 September 30, 2023 and December 31, 2022, respectively 14,510 14,510 Stockholders' equity: Preferred stock, series A-1 - par value $0.001 per share, 2,000,000 authorized, 193,730 and 222,588 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively — — Common stock, par value $0.001 per share, 200,000,000 shares authorized, 4,957,647 and 2,827,410 shares issued and outstanding at September 30, 2023 and at December 31, 2022, respectively 3 2 Additional paid-in capital 47,323 45,748 Accumulated deficit (32,828) (42,822) Accumulated other comprehensive loss — (621) Total stockholders' equity 14,498 2,307 Total liabilities and stockholders' equity $ 34,489 $ 46,756
2023
2022For the Thirteen Weeks Ended For the Thirty-Nine Weeks Ended September 30,
2023October 1,
2022September 30,
2023October 1,
2022Revenues $ — $ — $ — $ — Cost of revenues — — — — Gross profit — — — — Operating expenses: Selling, general and administrative expenses 764 611 2,923 1,950 Operating loss (764) (611) (2,923) (1,950) Other income: Interest income, net 758 410 1,598 575 Gain on litigation settlement, net — — — 1,950 Unrealized loss on marketable securities (267) (270) (514) (646) Gain on reversal of contingency loss — — — 637 Other income, net 6 688 745 2,043 Total other income, net 497 828 1,829 4,559 Income (loss) from continuing operations before provision for income taxes (267) 217 (1,094) 2,609 Income tax benefit (25) — (269) — Net income (loss) from continuing operations (242) 217 (825) 2,609 Gain (loss) from discontinued operations — (2,182) 13,976 5,518 Income tax provision (benefit) for discontinued operations (28) 16 3,158 23 Net income (loss) from discontinued operations 28 (2,198) 10,818 5,495 Net income (loss) $ (214) $ (1,981) $ 9,993 $ 8,104 Net income (loss) per share: Net income (loss) per share from continuing operations, basic $ (0.06) $ 0.07 $ (0.22) $ 0.83 Net income (loss) per share from continuing operations, diluted $ (0.06) $ 0.07 $ (0.22) $ 0.75 Net income (loss) per share from discontinued operations, basic $ 0.01 $ (0.70) $ 2.93 $ 1.74 Net income (loss) per share from discontinued operations, diluted $ 0.01 $ (0.70) $ 2.93 $ 1.57 Net income (loss) per share, basic $ (0.05) $ (0.63) $ 2.71 $ 2.57 Net income (loss) per share, diluted $ (0.05) $ (0.63) $ 2.71 $ 2.32 Weighted average common shares outstanding: Basic 4,198,940 3,150,230 3,687,896 3,150,230 Diluted 4,198,940 3,150,230 3,687,896 3,496,003
activities:For the Thirty-Nine Weeks Ended September 30, 2023 October 1, 2022 OPERATING ACTIVITIES: Net (loss) income from continuing operations $ (825) $ 2,609 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,090 2 Stock based compensation expense 14 4 Accretion of note receivable discount (1,021) (225) Gain on legal settlement — (115) Unrealized loss on marketable securities 514 646 Gain on reversal of contingent liability — (637) Changes in assets and liabilities: Accounts receivable, net of acquisitions and dispositions 506 (1,449) Prepaid expenses and other current assets, net of dispositions 309 (72) Inventories — (210) Accounts payable and accrued expenses, net of dispositions (689) (252) Other Assets (346) 15 Operating cash flows provided by discontinued operations 2,320 (2,707) Net cash provided by (used in) operating activities 1,872 (2,391) INVESTING ACTIVITIES: Investing cash flows used in discontinued operations (156) (950) Net cash used in investing activities (156) (950) FINANCING ACTIVITIES: Proceeds from equity financing, net 792 — Proceeds from notes payable — 648 Warrants exercised 259 — Payments on notes payable — (530) Payments on short-term notes payable (274) — Financing cash flows from discontinued operations (2,212) 3,386 Net cash (used in) provided by financing activities (1,435) 3,504 Effect of changes in exchange rate on cash and cash equivalents 17 — INCREASE IN CASH AND CASH EQUIVALENTS 298 163 CASH AND CASH EQUIVALENTS, beginning of period 115 705 LESS CASH OF DISCONTINUED OPERATIONS, end of period — (434) CASH AND CASH EQUIVALENTS, end of period $ 413 $ 434 Supplemental cash flow disclosures: Interest paid $ 118 $ 235 Income taxes paid — 54 Noncash recognition of new leases — 1,902 Series A-1 Preferred Common Stock Additional
Paid-in
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
DeficitTotal
Stockholders'
EquityShares Amount Shares Amount Balance, December 31, 2022 222,588 $ — 3,150,230 $ 2 $ 45,748 $ (42,822) $ (621) $ 2,307 Share based compensation — — — — 8 — — 8 Common stock issued for equity financing — — 361,000 1 368 — — 369 Series A-1 Preferred converted for legal settlement (5,185) — 103,707 — 170 — — 170 Other comprehensive income — — — — — — 621 621 Net income — — — — — 10,085 — 10,085 Balance, April 1, 2023 217,403 — 3,614,937 3 46,294 (32,737) — 13,560 Share based compensation — — — — 5 — — 5 Net income — — — — — 123 — 123 Balance, July 1, 2023 217,403 $ — 3,614,937 $ 3 $ 46,299 $ (32,614) $ — $ 13,688 Share based compensation — — — — 1 — — 1 Series A-1 Preferred converted for legal settlement (22,168) — 443,362 — 340 — — 340 Series A-1 Preferred forfeited (1,505) — — — — — — — Warrants exercised — — 481,348 — 259 — — 259 Common stock issued for equity financing — — 418,000 — 424 — — 424 Net income — — — — — (214) — (214) Balance, September 30, 2023 193,730 193730 $ — 4,957,647 $ 3 $ 47,323 $ (32,828) $ — $ 14,498
Paid-in
Other
Comprehensive
Stockholders'
Paid-in
Other
Comprehensive
Stockholders'Series A-1 Preferred Common Stock Additional
Paid-in
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
DeficitTotal
Stockholders'
DeficitShares Amount Shares Amount Balance, January 1, 2022 238,729 $ — 2,827,410 $ 2 $ 45,743 $ (53,804) $ (617) $ (8,676) Share based compensation — — — — 4 — — 4 Other comprehensive income — — — — — (8) (41) (49) Net income — — — — — 1,211 — 1,211 Balance, April 2, 2022 238,729 — 2,827,410 2 45,747 (52,601) (658) (7,510) Series A-1 preferred converted (16,141) $ — 322,820 $ 1 $ — $ — $ — 1 Other comprehensive income — $ — — $ — $ — $ — $ 41 41 Net income — $ — — $ — $ — $ 8,874 $ — 8,874 Balance, July 1, 2022 222,588 — 3,150,230 3 45,747 (43,727) (617) 1,406 Net loss $ (1,981) (1,981) Balance, October 1, 2022 222,588 222588 $ — 0 3,150,230 $ 3 $ 45,747 $ (45,708) $ (617) $ (575) 6Company'sCompany’s Board of Directors unanimously approved the Purchase Agreement and the Disposition Transaction. In connection with the disposition of ARCA Recycling, accounts for the Recycling segment have been presented as discontinued operations in the accompanying consolidated financial statements (see Note 3).$13.5$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$0.03 per share, and delivered a five-year Promissory Note in the principal amount of $12.6$12.6 million. The Promissory Note bears simple interest at the rate of 8%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'sSPYR’s restricted common stock. The Promissory Note matures on May 23, 2027.7$640,000$754,000 for the 1339 weeks ended April 1,September 30, 2023. Additionally, as of April 1,September 30, 2023, the Company has total current assets of approximately $637,000$517,000 and total current liabilities of approximately $3.5$2.5 million resulting in a net negative working capital of approximately $2.8$1.9 million. Cash provided byused in operations from continuing operations was approximately $128,000.$500,000. Additionally, stockholders'stockholders’ equity, as of April 1,September 30, 2023, is approximately $13.6$14.5 million. (see Note 18). The Company has approximately $69,000 in debt recorded in associated with the financing of its insurance policies. The Company intends to raise funds to support future development of JAN 123 and JAN 101 either through capital raises or structured arrangements. However, the successavailability of such funding cannot be assured.April 1,September 30, 2023 due to the disposition of ARCA Recycling (see Note 18).April 1,September 30, 2023, there is no material impact on our Consolidated Financial Statements and related disclosures.April 1,September 30, 2023, the Company discontinued operations of its Recycling and Technology segments as follows:liabilities liabilities have been reflected as discontinued operations in the consolidated balance sheets as of December 31, 2022, and consist of the following:9December 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 2,705 Right of use asset - operating leases 5,290 735 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 3,278 6,264 Lease obligation short-term - operating leases 1,631 4,172 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 1,339 605 Total noncurrent liabilities from discontinued operations 5,760 Total liabilities from discontinued operations $ 26,142 Company'sCompany’s property and equipment consisted of the following:
(Years)Useful Life
(Years)December 31, 2022 Buildings and improvements 3-30 $ 85 Equipment 3-15 3,915 Projects under construction 1,447 Property and equipment 5,447 Less accumulated depreciation (2,742) Total property and equipment, net, from discontinued operations $ 2,705 $60,000$0 and $79,000$35,000 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022,, respectively, and $60,000 and $193,000 for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively.Company'sCompany’s intangible assets consisted of the following:
2022December 31,
2022Patent and domains $ 19 Computer software 1,682 Intangible assets 1,701 Less accumulated amortization (966) Total intangible assets $ 735 $36,000$0 and $54,000$42,000 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022,, respectively, and $36,000 and $154,000 for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively.Company'sCompany’s accrued liabilities consisted of the following:10
2022December 31,
2022Compensation and benefits $ 685 Contract liability 290 Accrued incentive and rebate checks 2,037 Accrued taxes 219 Other 47 Total accrued expenses $ 3,278 thethe 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.$4.1$4.1 million plus applicable interest of $500,000$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 settled.resolved.Company'sCompany’s accrual relating to the California sales tax assessment consisted of the following:
2022December 31,
2022Accrued liability - CA sales tax assessment $ 4,132 Accrued liability - interest on CA sales tax assessment 2,132 Total $ 6,264 Company'sCompany’s short-term debt consisted of the following:
2022December 31,
2022Gulf Coast Bank and Trust Company $ 4,206 Gulf Coast Bank and Trust Company loan origination fees (34) Total $ 4,172 Company'sCompany’s long-term debt consisted of the following:
2022December 31,
2022KLC Financial $ 1,781 KLC Financial loan origination fees (61) Total 1,720 Less current portion (381) Total $ 1,339 $2.5$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%8.75% per annum and provides for the payment of interest, monthly in arrears. ARCA Recycling will pay a loan fee of 2.0%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.11$1.0$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 2026.2026. The principal amount of the note was $1.0$1.0 million, and was to bear interest at 8.75%8.75% per annum. Monthly payments on this note were approximately $24,767.$24,767. ICG is a record and beneficial owner of 13.9%13.6% of the outstanding common stock of the Company. 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.Company'sCompany’s related party debt consisted of the following:
2022December 31,
2022Isaac Capital Group LLC $ 838 Total 838 Less current portion (233) Total $ 605 April 1,September 30, 2023 and April 2,October 1, 2022, respectively, have been reflected as discontinued operations in the consolidated statements of operations and comprehensive income (loss) and consist of the following:13 Weeks Ended 39 Weeks Ended September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenues $ — $ 8,587 $ 3,795 $ 28,449 Cost of revenues — 7,553 3,992 23,913 Gross profit — 1,034 (197) 4,536 Operating expenses from discontinued operations: Selling, general and administrative expenses $ — $ 2,248 1,469 6,761 Gain on sale of GeoTraq — — (15,824) (10,241) Total operating expenses from discontinued operations — 2,248 (14,355) (3,480) Operating income from discontinued operations — (1,214) 14,158 8,016 Other income (expense) from discontinued operations Interest expense, net — (280) (181) (698) Loss on litigation settlement — — — (115) Other income (expense), net — (688) (1) (1,685) Total other income (loss), net — (968) $ (182) $ (2,498) Income before provision for income taxes from discontinued operations — (2,182) 13,976 5,518 Income tax provision (benefit) (28) 16 3,158 23 Net income from discontinued operations $ 28 $ (2,198) $ 10,818 $ 5,495 1339 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following:1239 weeks ended September 30, 2023 October 1, 2022 DISCONTINUED OPERATING ACTIVITIES: Net income (loss) from discontinued operations 10,818 5,495 Depreciation and amortization 96 344 Amortization of debt issuance costs 11 10 Amortization of right-of-use assets 53 54 Change in deferred taxes 3,157 — Gain on sale of ARCA, net of cash (15,967) — Gain on sale of GeoTraq Gain on sale of GeoTraq — (10,241) Changes in assets and liabilities: Accounts receivable 2,932 (1,165) Inventories 299 899 Prepaid expenses and other current assets 55 248 Accounts payable and accrued expenses 866 1,692 Other assets — (43) Net cash provided by operating activities from discontinued operations Net cash provided by operating activities from discontinued operations $ 2,320 $ (2,707) DISCONTINUED INVESTING ACTIVITIES: Purchases of property and equipment (123) (736) Purchase of intangible assets (33) (214) Net cash used in investing activities from discontinued operations $ (156) $ (950) DISCONTINUED FINANCING ACTIVITIES: Proceeds from note payable 5,162 4,052 Payment on related party note (38) (107) Proceeds from issuance of short-term notes payable Proceeds from issuance of short-term notes payable (7,291) — Payments on notes payable (45) (559) Net cash used in financing activities from discontinued operations $ (2,212) $ 3,386 Effect of changes in exchange rate on cash and cash equivalents (5) — DECREASE IN CASH AND CASH EQUIVALENTS (53) (271) CASH AND CASH EQUIVALENTS, beginning of period 53 704 CASH AND CASH EQUIVALENTS, end of period $ — $ 433 April 1,September 30, 2023 and December 31, 2022, respectively, were as follows (in $000’s):
2023
2022September 30,
2023December 31,
2022Trade and other receivables, net, from discontinued operations $ — $ 7,816 Other receivables 19 106 Trade and other receivables, net $ 19 $ 7,922 April 1,September 30, 2023 and December 31, 2022 consist of the following (in $000’s):
2023
2022September 30,
2023December 31,
2022Prepaid insurance $ — $ 364 Prepaid other 85 30 Prepaid expenses from discontinued operations — 377 Total prepaid expenses and other current assets $ 85 $ 771 13NoteNotes receivable$12.6$12.6 million. The Promissory Note bears simple interest at the rate of 8%8% per annum, provides quarterly interest payments due on the first day of each calendar quarter, and may be prepaid at any time without penalty. 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. The Company has received restricted shares of Series G Convertible Preferred Stock of SPYR equivalent to approximately 414,000,000 shares of its common stock during the 39 weeks ended September 30, 2023, and 30,000,000 shares of SPYR's common stock during the 39 weeks ended October 1, 2022. As of April 1,September 30, 2023, the Company has accrued receivables of approximately $249,000$254,000 in interest income related to the Promissory Note.$11.3$11.3 million, but was revised to be approximately $9.5$9.5 million upon review of the original valuation by the Company. The amount of the revised discount amount, or approximately $3.2$3.2 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. No charges against income relating to the value of the Note have been recorded for the 13 and 39 weeks ended April 1,September 30, 2023. The Company will continue to review SPYR's financial trends going further to determine whether additional charges against income should occur.April 1,September 30, 2023 and April 2,October 1, 2022, approximately $201,000$201,000 and $0.00,$65,000, respectively, of the discount was recorded as interest income, and during the 39 weeks ended September 30, 2023 and October 1, 2022, approximately $604,000 and $65,000, respectively, of the discount was recorded as interest income. As of April 1,September 30, 2023, the net carrying value of the Note was approximately $9.29.6 million.Company'sCompany’s Board of Directors unanimously approved the Purchase Agreement and the Disposition Transaction. The Stock Purchase Agreement is retroactive to March 1, 2023 (see Note 18).$1.6$1.6 million per year for 15 years, or $24.0$24.0 million in the aggregate, plus cash of $3,000$3,000 paid at close. In connection with the Disposition Transaction, the Company used a discount rate of 20%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$6.0 million, which, in addition to the $3,000$3,000 paid at close, comprises the approximately $6.0$6.0 million of net consideration. The amount of the$18.0$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. During the 13 weeks ended September 30, 2023 and October 1, 2022, approximately $303,000 and $0, respectively, of the discount was recorded as interest income, and during the 39 weeks ended September 30, 2023 and October 1, 2022, approximately $417,000 and $0, respectively, of the discount was recorded as interest income. As of April 1,September 30, 2023, the net carrying value of the note was approximately $6.15.6 million.April 1,September 30, 2023 and December 31, 2022 consist of the following (in $000’s):
2023
2022September 30,
2023December 31,
2022Patent and domains $ 4 $ 4 Soin intangibles * $ 19,293 $ 19,293 Computer software — 3,563 Intangible assets from discontinued operations — 735 Intangible assets 19,297 23,595 Less accumulated amortization (1,089) (3,563) Total intangible assets $ 18,208 $ 20,032 14$363,000$363,000 and $0$0 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022 and $1.1 million and $0 for the 39 weeks ended September 30, 2023 and October 1, 2022.April 1,September 30, 2023 and December 31, 2022 consist of the following (in $000’s):
2023
2022September 30,
2023December 31,
2022Deposits and other assets from discontinued operations $ — $ 249 Other 364 18 Total deposits and other assets $ 364 $ 267 April 1,September 30, 2023 and December 31, 2022 consist of the following (in $000’s):
2023
2022September 30,
2023December 31,
2022Compensation and benefits $ 51 $ 81 Accrued guarantees — 130 Accrued taxes 146 5 Accrued litigation settlement — 510 Other 46 280 Accrued expenses from discontinued operations — 3,278 Total accrued expenses $ 243 $ 4,284 $227,000$25,000 and $0$0 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively, and an income tax benefit from discontinued operations of approximately $28,000 and $0 for the 13 weeks ended September 30, 2023 and October 1, 2022, respectively. The Company recorded an income tax benefit from continuing operations of approximately $269,000 and $0 for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively, and an income tax expense from discontinued operations of approximately $3.2$3.2 million and $3,000$0 for the 1339 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively. The Company’s overall effective tax rate was 22.9%30.3% and 0.2%0.23% for the 1339 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively. The effective tax rates and related provisional tax amounts vary from the U.S. federal statutory rate primarily due to state taxes and certain non-deductible expenses.Short TermShort-Term DebtShort termShort-term debt and other financing obligations as of April 1,September 30, 2023 and December 31, 2022, consist of the following (in $000’s):
2023
2022September 30,
2023December 31,
2022AFCO Finance $ — $ 274 Total short-term debt $ — $ 274 $516,000$516,000 with an interest rate ranging from approximately 6.0%6.0% over the period. An initial down payment of approximately $129,000$129,000 was made on July 21, 2022 with additional monthly payments of approximately $59,000,$59,000, escalating to approximately $69,000$69,000 over the term, being made beginning August 1, 2022 and ending on April 1, 2023.2023. No such financing agreement has been entered into during fiscal 2023.15continues to be stayed pending the June 23, 2023 mediation to which all of the parties have agreed.are vigorouslycontinue to defending themselves vigorously against the claims.16$460,000$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,$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$715,000 plus interest, fees, and costs and attorneys’ fees of $475,000.$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 $382,000$382,000 of statutory interest, which obligation has beenSA continues to attempt to collect from the Company, although that obligation was assumed by the Buyer in connection with the ARCA and Subsidiaries Disposition transaction (see Note 18).$1.95$1.95 million (the “GeoTraq Settlement Consideration”) in the following manner: (i) $250,000,$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$170,000 each that commenced on June 1, 2021, and shall continue 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 elects to prepay one or more GeoTraq Installments with shares of its common stock, Mr. Sullivan reserves the right not to consent to a tender thereof in excess of 50% of the value of that specific GeoTraq Prepayment; however, Mr. Sullivan is restricted in the reasons for which he can refuse to provide his written consent. The number of shares of the Company'sCompany’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. As of AprilOn June 1, 2023, two GeoTraq installments remain to be paid: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 andquarterly 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.Pursuant to2023 quarterly installment. (see Note 13). As of September 30, 2023, the terms offull balance due under the Settlement Agreement Mr. Sullivan provided the Company with his proxy to vote his remaining shares of its Series A-1 Convertible Preferred Stock that the Company had issued to him in connection with its acquisition of GeoTraq in 2017, as well as his proxy for the shares of the Company's common stock into which those shares of preferred stock may be converted. The Company may utilize the proxy in the context of an annual meeting of its stockholders, a special meeting of its stockholders, and a written consent of its stockholders. Subject to the above-described contingent GeoTraq Prepayment tender 50% restriction, Mr. Sullivan provided the Company with the sole ability to determine the time and amount of each conversion of those shares of preferred stock.$340,000$0 and $510,000$510,000 as of April 1,September 30, 2023 and December 31, 2022, respectively.17TheIn June 2023 the Company has not filed a responsive pleadingMotion to Dismiss, regarding which, as of the date of these financial statements, andthe Court has not ruled.The Company strongly disputes and denies all of the allegations contained therein and will vigorouslycontinue to defend itself vigorously against the claims.$90,000$90,000 therefor. Plaintiff also seeks approximately $1,420,000$1,420,000 against ApplianceSmart and the Company on a joint and several basis. The Company does not believe that it is obligated to Plaintiff in that amount and the parties continue to negotiate a potential settlement.is currently seeking $120,000,sought $120,000, which amount iswas disputed by the Company. TheEffective June 4, 2023, the parties are insettled the processmatter, pursuant to which settlement the Company tendered the sum of attempting$110,000 to settle the matter.landlord, the parties entered into a Settlement Agreement and Release, and the case was dismissed with prejudice.$767,000$767,000 which represented amounts guaranteed or which may have been owed under certain lease agreements to three third partythird-party landlords in which the Company either remained the counterparty, was a guarantor, or had agreed to remain contractually liable under the lease (“ApplianceSmart Leases”). A final decree was issued by the court on February 28, 2022, upon the full satisfaction of the Plan, at which time ApplianceSmart emerged from Chapter 11. During the year ended December 31, 2022, the Company reversed approximately $637,000$637,000 of the accrual, as the Company is no longer liable for two of these guarantees upon ApplianceSmart’s emergence from bankruptcy. As of April 1,September 30, 2023, a balance of approximately $130,000$130,000 remains as an accrued liability due to an ongoing dispute concerning one of the leases.April 1,September 30, 2023.April 1,September 30, 2023 and April 2,October 1, 2022, no shares of common stock were issued in lieu of professional services.$0.001$0.001 per share, at a purchase price per share of Common Stock of $1.17.$1.17. The offering closed on March 24, 2023. The aggregate gross proceeds for the sale of the shares of Common Stock were approximately $422,000,$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.April 1,September 30, 2023, there were 899,348 of the private placement warrants outstanding.3,614,9374,957,647 and 2,827,410 shares, respectively, of common stock issued and outstanding., or the date that all shares reserved under the 2016 Plan are issued or no longer available. The 2016 Plan provides for the issuance of up to 800,000 shares of common stock pursuant to awards granted under the 2016 Plan. The vesting period is determined by the Board of Directors at the time of the stock option grant. As of April 1,September 30, 2023, and December 31, 2022, 100,000 and 90,000 options were outstanding under the 2016 Plan, respectively.Company'sCompany’s 2011 Plan, which has expired, authorizes the granting of awards in any of the following forms: (i) stock options, (ii) stock appreciation rights, and (iii) other share-based awards, including but not limited to, restricted stock, restricted stock units or performance shares. As of April 1,September 30, 2023, and December 31, 2022, 14,000 and 20,000 were outstanding under the 2011 Plan. Plan, respectively. No additional awards will be granted under the 2011 Plan.181339 weeks ended April 1,September 30, 2023.
Average
Average
Remaining
Outstanding
Price
Value
LifeOptions
OutstandingWeighted
Average
Exercise
PriceAggregate
Intrinsic
ValueWeighted
Average
Remaining
Contractual
LifeOutstanding 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 Granted 10,000 1.53 Cancelled/expired (6,000) $ 9.45 Balance at September 30, 2023 114,000 $ 5.68 $ — 6.4 Exercisable at September 30, 2023 114,000 $ 5.68 $ — 6.4 $8,000$1,000 and $4,000$4,000 of share-based compensation expense for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively, and approximately $14,000 and $4,000 of share-based compensation expense for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively.April 1, September 30, 2023, the Company has approximately $5,400 ofno unrecognized share-based compensation expense associated with stock option awards which the company expects to recognize as share-based compensation expense through Q3 2023.20. No20. 27,353 shares were converted during the 1339 weeks ended April 1, 2023.September 30, 2023, and 1,505 shares were forfeited. As of April 1,September 30, 2023 and December 31, 2022, there were 193,730 and 222,588 shares of Series A-1 Preferred Stock outstanding.outstanding, respectively.$30$30 million, the Company tendered 100,000 shares of the Company'sCompany’s Series S Convertible Preferred Stock. Shares of Series S Convertible Preferred Stock are convertible into the Company’s common shares at a ratio of 1:1.1. As of April 1,September 30, 2023 and December 31, 2022, there were 100,000 shares of Series S Convertible Preferred Stock outstanding.19For the Thirteen Weeks Ended For the Thirty-Nine Weeks Ended September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Continuing Operations Basic Net income (loss) from continuing operations $ (242) $ 217 $ (825) $ 2,609 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,150,230 Basic income (loss) per share from continuing operations $ (0.06) $ 0.07 $ (0.22) $ 0.83 Diluted Net income (loss) from continuing operations $ (242) $ 217 $ (825) $ 2,609 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,496,003 Diluted income (loss) per share from continuing operations $ (0.06) $ 0.07 $ (0.22) $ 0.75 Discontinued Operations Basic Net income (loss) from discontinued operations $ 28 $ (2,198) $ 10,818 $ 5,495 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,150,230 Basic income (loss) per share from discontinued operations $ 0.01 $ (0.70) $ 2.93 $ 1.74 Diluted Net income (loss) from discontinued operations $ 28 $ (2,198) $ 10,818 $ 5,495 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,496,003 Diluted income (loss) per share from discontinued operations $ 0.01 $ (0.70) $ 2.93 $ 1.57 Total Basic Net income (loss) $ (214) $ (1,981) $ 9,993 $ 8,104 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,150,230 Basic income (loss) per share $ (0.05) $ (0.63) $ 2.71 $ 2.57 Diluted Net income (loss) $ (214) $ (1,981) $ 9,993 $ 8,104 Weighted average common shares outstanding 4,198,940 3,150,230 3,687,896 3,496,003 Diluted income (loss) per share $ (0.05) $ (0.63) $ 2.71 $ 2.32 120,000114,000 and 116,500117,500 were excluded from the calculation of diluted earnings per share for the 1339 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively, because the effects were anti-dilutive based on the application of the treasury stock method. Additionally, 222,588193,730 shares of Series A-1 Preferred Stock, convertible into approximately 4.53.9 million of the Company’s common shares, and 100,000 shares of Series S Preferred Stock, convertible into 100,000 of the Company's commonsCompany’s common shares, were excluded from the calculation of diluted earnings per share as, by agreement, these shares could not be converted as of April 1,September 30, 2023.20April 1,September 30, 2023 and April 2,October 1, 2022. respectively.April 1,September 30, 2023 and April 2,October 1, 2022 (in $000's)$000’s):Thirteen Weeks Ended Thirty-Nine Weeks Ended September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenues Biotechnology $ — $ — $ — $ — Discontinued operations — 8,587 3,795 28,449 Total Revenues $ — $ 8,587 $ 3,795 $ 28,449 Gross profit Biotechnology $ — $ — $ — $ — Discontinued operations — 1,034 (197) 4,536 Total Gross profit $ — $ 1,034 $ (197) $ 4,536 Operating income (loss) Biotechnology $ (764) $ (611) $ (2,923) $ (1,950) Discontinued operations — (1,214) 14,158 8,016 Total Operating income (loss) $ (764) $ (1,825) $ 11,235 $ 6,066 Depreciation and amortization Biotechnology $ 363 $ — $ 1,090 $ — Discontinued operations — 77 96 347 Total Depreciation and amortization $ 363 $ 77 $ 1,186 $ 347 Interest (income) expense, net Biotechnology $ (758) $ (410) $ (1,598) $ (575) Discontinued operations — 280 181 698 Total Interest expense, net $ (758) $ (130) $ (1,417) $ 123 Net income (loss) before income taxes Biotechnology $ (267) $ 217 $ (1,094) $ 2,609 Discontinued operations — (2,182) 13,976 5,518 Total Net income before income taxes $ (267) $ (1,965) $ 12,882 $ 8,127 , a greater than 5% stockholder of the Company.. Tony Isaac, Chief Executive Officer, and Richard Butler, Board of Directors member 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 $32,000$28,000 and $72,000$74,000 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively, and $121,000 and $220,000 for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively. Customer Connexx rents approximately 9,900 square feet of office space from Live Ventures in Las Vegas, Nevada. The total rent and common area expense was approximately $36,000$0 and $62,000$53,000 for the 13 weeks ended April 1,September 30, 2023 and April 2,October 1, 2022, respectively, and approximately $103,000 and $161,000 for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively.21retroactive toretroactively effective as of March 1, 2023 (see Note 18).18.18: Sale of ARCA and SubsidiariesCompany'sCompany’s Board of Directors unanimously approved the Purchase Agreement and the Disposition Transaction. The Stock Purchase Agreement is retroactively effective as of March 1, 2023.$17.6$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$24.0 million in aggregate monthly payments from the Buyer, which payments are subject to potential increase due to the Subsidiaries’ future performance; and (iii) during the next five years, the Company may request that the Buyer 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 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 Subsidiaries’ aggregate gross revenues up to $2,000,000 for the relevant month, plus (ii) 4% of the Subsidiaries’ aggregate gross revenues between $2,000,000 and $3,000,000 for the relevant month, plus (iii) 3% of the Subsidiaries aggregate gross revenues over $3,000,000 for the relevant month. The Buyer 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 Subsidiaries to the Seller on or after March 9, 2023. Additionally, upon settlement of the continuing dispute between ARCA and the California Business Fee and Tax Division (as to which settlement, there can be no assurance), ARCA will pay to the Company 50%50% of the amount of the reduction between the current assessment and any such settlement. Further, ARCA and Connexx are due to receive from the Internal Revenue Service two payments in the aggregate amount of approximately $931,000$977,000 in connection with the Employee Retention Credit provisions of the Coronavirus Aid, Relief, and Economic Security Act and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. ARCA and Connexx have received these two ERC payments and, as of April 1,September 30, 2023, have paid $454,000$500,000 to the Company. The balance of the ERC payments due, as of April 1,September 30, 2023, was $477,000.20%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$6.0 million, which, in addition to the $3,000$3,000 paid at close, comprises the approximately $6.0$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.22Total minimum consideration $ 6,023 Payment from buyer 3 Net consideration $ 6,026 Accounts payable 5,323 Accrued liabilities 3,187 Accrued liabilities - California state sales tax 6,320 Lease liabilities 5,285 Debt 4,530 Accumulated other comprehensive loss (604) Total disposal of liabilities 24,041 Total consideration 30,067 Cash 145 Accounts receivable 4,884 Inventory 67 Property, plant and equipment 2,767 Intangible assets 732 Right-of-use assets 5,075 Other assets 574 Total disposal of assets 14,244 Total gain on sale $ 15,823 2319.19: Subsequent eventApril 1,September 30, 2023 and April 2,October 1, 2022.April 1,September 30, 2023 and April 2,October 1, 2022.April 1,September 30, 2023 and April 2,October 1, 2022$000's)$000’s):2513 Weeks Ended 13 Weeks Ended September 30, 2023 October 1, 2022 Statement of Operations Data: Revenues $ — $ — Cost of revenues — — Gross profit — — Selling, general and administrative expenses 764 611 Operating loss (764) (611) Interest income, net 758 410 Unrealized loss on marketable securities (267) (270) Other income, net 6 688 Net income (loss) before provision of income taxes (267) 217 Income tax benefit (25) — Net income (loss) from continuing operations (242) 217 Income from discontinued operations — (2,182) Income tax provision (benefit) for discontinued operations (28) 16 Net income (loss) from discontinued operations 28 (2,198) Net loss $ (214) $ (1,981) $000's)$000’s):13 Weeks Ended 13 Weeks Ended September 30, 2023 October 1, 2022 Net Revenue Percent of Total Net Revenue Percent of Total Revenue Revenue from discontinued operations $ — — % $ 8,587 100.0 % Biotechnology — — % — — % Total revenue $ — — % $ 8,587 100.0 % 13 Weeks Ended 13 Weeks Ended September 30, 2023 October 1, 2022 Gross Profit Gross Profit Percentage Gross Profit Gross Profit Percentage Gross Profit Gross profit from discontinued operations $ — — % $ 1,034 12.0 % Biotechnology — — % — — % Total gross profit $ — — % $ 1,034 12.0 % $5.5$8.6 million or 59.3%, for the 13 weeks ended April 1,September 30, 2023, as compared to the 13 weeks ended April 2,October 1, 2022. The decrease is primarily due to reduced demand and inventory availability during the 13 weeks ended April 1, 2023, as well as the disposition of our recycling segment as of March 1, 2023.$3.5$7.6 million for the 13 weeks ended April 1,September 30, 2023, as compared to the 13 weeks ended April 2,October 1, 2022. The decrease is primarily due the disposition of our recycling segment as of March 1, 2023.$418,000,$153,000, or 61.5%25%, for the 13 weeks ended April 1,September 30, 2023, as compared to the 13 weeks ended April 2,October 1, 2022, primarily due to increased amortization costs relating to the Soin intangibles. This increase relates only to continuing operations.26$477,000$348,000 for the 13 weeks ended April 1,September 30, 2023, as compared to the 13 weeks ended April 2,October 1, 2022 primarily due to the accretion of discount in connection with the promissory note with SPYR and receivable from VM7 (see Note 18), as well as interest recorded on the note with SPYR.ForAprilSeptember 30, 2023, as compared to the 13 weeks ended October 1, 2023, an2022. An unrealized gain or loss on marketable securities of approximately $247,000 wasis recorded to mark to fair value securities received in connection to the sale of GeoTraq. There were no similar transactions for the 13 weeks ended April 2, 2022.13 Weeks Ended September 30, 2023 13 Weeks Ended October 1, 2022 Biotechnology Discontinued Operations Total Biotechnology Discontinued Operations Total Revenue $ — $ — $ — $ — $ 8,587 $ 8,587 Cost of revenue — — — — 7,553 7,553 Gross profit — — — — 1,034 1,034 Selling, general and administrative expense 764 — 764 611 2,248 2,859 Operating loss $ (764) $ — $ (764) $ (611) $ (1,214) $ (1,825) $1.1 million$764,000 and $681,000$611,000 related to employee costs and professional services related to research, and corporate services, as well as amortization of the Soin intangibles for the 13 weeks ended April 1,September 30, 2023 and the 13 weeks ended April 2,October 1, 2022, respectively.April 1,September 30, 2023, decreased by approximately $5.5$8.6 million or 59.3%, as compared to the prior year period, which was primarily due to the disposition of our Recycling segment as of March 1, 2023.April 1,September 30, 2023, increaseddecreased by approximately $1.3$1.2 million as compared to the prior year period. The increase is primarily due to the disposition of our Recycling segment as of March 1, 2023.39 Weeks Ended 39 Weeks Ended September 30, 2023 October 1, 2022 Statement of Operations Data: Revenues $ — $ — Cost of revenues — — Gross profit — — Selling, general and administrative expenses 2,923 1,950 Operating loss (2,923) (1,950) Interest income, net 1,598 575 Gain on litigation settlement — 1,950 Unrealized loss on marketable securities (514) (646) Gain on reversal of contingency loss — 637 Other income, net 745 2,043 Net income (loss) before provision of income taxes (1,094) 2,609 Income tax benefit (269) — Net income (loss) from continuing operations (825) 2,609 Income from discontinued operations 13,976 5,518 Income tax provision for discontinued operations 3,158 23 Net income from discontinued operations 10,818 5,495 Net income $ 9,993 $ 8,104 39 Weeks Ended 39 Weeks Ended September 30, 2023 October 1, 2022 Net Revenue Percent of Total Net Revenue Percent of Total Revenue Revenue from discontinued operations $ 3,795 100.0 % $ 28,449 100.0 % Biotechnology — — % — — % Total revenue $ 3,795 100.0 % $ 28,449 100.0 % 39 Weeks Ended 39 Weeks Ended September 30, 2023 October 1, 2022 Gross Profit Gross Profit Percentage Gross Profit Gross Profit Percentage Gross Profit Gross profit from discontinued operations $ (197) -5.2 % $ 4,536 15.9 % Biotechnology — — % — — % Total gross profit $ (197) -5.2 % $ 4,536 15.9 % 39 Weeks Ended September 30, 2023 39 Weeks Ended October 1, 2022 Biotechnology Discontinued Operations Total Biotechnology Discontinued Operations Total Revenue $ — $ 3,795 $ 3,795 $ — $ 28,449 $ 28,449 Cost of revenue — 3,992 3,992 — 23,913 23,913 Gross profit — (197) (197) — 4,536 4,536 Selling, general and administrative expense 2,923 1,469 4,392 1,950 6,761 8,711 Gain on sale of GeoTraq — (15,824) (15,824) — (10,241) (10,241) Operating (loss) income $ (2,923) $ 14,158 $ 11,235 $ (1,950) $ 8,016 $ 6,066 April 1,September 30, 2023, our cash on hand was $353,000.$413,000. We intend to fund operations by using cash on hand, monthly revenues from the sale of our Subsidiaries, and funds received from approved ERC’s. We intend to raise funds to support future development of JAN 123 and JAN 101 either through capital raises or structured arrangements.271339 weeks ended April 1,September 30, 2023, cash provided by operations was approximately $2.4$1.9 million, compared to cash provided byused in operations of approximately $2.1$2.4 million during the 1339 weeks ended April 2,October 1, 2022. Cash provided by discontinued operations during the 1339 weeks ended April 1,September 30, 2023 was approximately $2.3 million, while cash provided byused in continuing operations was approximately $106,000.$2.7 million. The increase in cash was primarily due to results of operations as discussed above.$127,000,$950,000, respectively, for the 1339 weeks ended April 1,September 30, 2023 and the 1339 weeks ended April 2,October 1, 2022. Cash used in investing activities for the 1339 weeks ended April 1,September 30, 2023 was all associated with discontinued operations and was related to purchases of property and equipment. Cash used in investing activities for the 1339 weeks ended April 2,October 1, 2022 was all associated with discontinued operations and related to purchases of property and equipment and intangibles.$2.0$1.4 million for the 1339 weeks ended April 1,September 30, 2023. Cash used in financing activities from discontinued operations for the 1339 weeks ended April 1,September 30, 2023 was approximately $2.2 million and was primarily due to the repayment of debt obligations. Cash provided by financing activities from continued operations for the 1339 weeks ended April 1,September 30, 2023 was approximately $163,000$777,000 and was related to $368,000$792,000 in proceeds from equity financing and $259,000 from warrants issued, partially offset by $205,000$274,000 in debt repayments. Cash used in financing activities was approximately $279,000$3.5 million for the 1339 weeks ended April 2,October 1, 2022. Cash used inprovided by financing activities from discontinued operations for the 1339 weeks ended April 2,October 1, 2022 was approximately $63,000 and $216,000 from discontinued and continuing operations, respectively,$3.4 million, and was primarily due to proceeds from the issuance of debt. Cash provided by financing activities from continuing operations for the 39 weeks ended October 1, 2022 was $118,000 and was due to $648,000 in proceeds from issuing notes payable, partially offset by $530,000 in repayment of debt obligations.$662,000$825,000 from continuing operations in for the 1339 weeks ended April 1,September 30, 2023, and net income from continuing operations of approximately $2.6 million for the 1339 weeks ended April 2,October 1, 2022 primarily due to a gain on litigation settlement of approximately $2.0 million, gain on reversal of a contingency loss of $637,000, and other income, net of $715,0000,approximately $2.0 million and interest income, net, of approximately $575,000, partially offset by an operating loss of $681,000.$2.0 million and an unrealized loss on marketable securities of $646,000. Additionally, the Company has total current assets of approximately $637,000$517,000 and total current liabilities of approximately $3.5$2.5 million resulting in a net negative working capital of approximately $2.8$2.0 million. Cash provided by continuing operations was approximately $106,000.April 1,September 30, 2023, the period covered in this report, our disclosure controls and procedures were not effective because of the material weaknesses discussed below.28April 1,September 30, 2023, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this annual report. Accordingly, the Company believes, based on its knowledge, that: (i) this annual report does not contain any untrue statement of a material fact or omit a material fact; and (ii) the financial statements, and other financial information included in this annual report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this annual report.April 1,September 30, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 regarding Internal Control – Integrated Framework. Based on our assessment using thoseApril 1,September 30, 2023.April 1, 2023.September 30, 2023: (1) Insufficient information technology general controls and segregation of duties.duties; (2) inadequate control design or lack of sufficient controls over significant accounting processes; (3) insufficient assessment of the impact of potentially significant transactions; and (4) insufficient processes and procedures related to proper recordkeeping of agreements and contracts.10-K10-Q and management is currently working to remedy these outstanding material weaknesses.fiscal year39 weeks ended April 1,September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.15,12, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.20202022 10-K.management'smanagement’s focus, result in substantial litigation expenses, and have an adverseadverse impact on our business, reputation, financial condition, results of operations or stock price.Complaint. Complaint. Refer to Note 15 to our Consolidated Financial Statements and Part II, Item 1 of this Quarterly Report for additional information regarding this specific matter. We may be subject to additional investigations, arbitration proceedings, audits, regulatory inquiries, and similar actions, including matters related to intellectual property, employment, securities laws, disclosures, tax, accounting, class action and product liability, as well as regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings. We cannot predict the outcome of any particular proceeding, or whether ongoing investigations, will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, bars against serving as an officer or director, or practicing before the SEC, or civil or criminal proceedings against us or members of our senior management.Exhibit
NumberExhibit Description Form File
NumberExhibit
NumberFiling
Date10.96 8-K 0-19621 10.95 3/20/2023 10.97 8-K 0-19621 10.96 3/20/2023 10.98 8-K 0-19621 10.98 3/22/2023 10.99 8-K 0-19621 10.99 8/23/2023 31.1 * 31.2 * 32.1 * 32.2 * 101.INS * Inline XBRL Instance Document 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) JanOne Inc. (Registrant) JanOne Inc.(Registrant)May 22,November 14, 2023May 22,November 14, 202332