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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 3, 2021

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-19621

JANONE INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of

incorporation or organization)

 

41-1454591

(I.R.S. Employer

Identification No.)

 

 

 

325 E. Warm Springs Road, Suite 102

Las Vegas, Nevada

(Address of principal executive offices)

 

89119

(Zip Code)

 

702-997-5968

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

JAN

 

The NASDAQ Stock Market LLC

(The NASDAQ Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒ Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes   ☒ No

As of August 10, 2021, there were 2,407,410 outstanding shares of the registrant’s common stock, with a par value of $0.001.

 


JANONE INC.

 

INDEX TO FORM 10-Q

 

 

 

Page

PART I.  FINANCIAL INFORMATION

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

3

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020

4

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the 26 weeks ended July 3, 2021 and June 27, 2020

5

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the 26 weeks ended July 3, 2021 and June 27, 2020

6

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

35

 

 

 

Item 1A.

Risk Factors

35

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

 

 

 

Item 3.

Defaults Upon Senior Securities

35

 

 

 

Item 4.

Mine Safety Disclosures

35

 

 

 

Item 5

Other Information

35

 

 

 

Item 6.

Exhibits

37

 

 

 

SIGNATURES

39

 

2


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Condensed Consolidated Financial Statements

 

JANONE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

 

 

 

July 3,
2021

 

 

January 2,
2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,710

 

 

$

379

 

Trade and other receivables, net

 

 

3,804

 

 

 

3,600

 

Income taxes receivable

 

 

23

 

 

 

196

 

Inventories

 

 

1,327

 

 

 

1,630

 

Prepaid expenses and other current assets

 

 

1,026

 

 

 

1,136

 

Total current assets

 

 

9,890

 

 

 

6,941

 

Property and equipment, net

 

 

2,111

 

 

 

732

 

Right to use asset - operating leases

 

 

3,139

 

 

 

2,458

 

Intangible assets, net

 

 

12,043

 

 

 

13,989

 

Deposits and other assets

 

 

273

 

 

 

231

 

Total assets

 

$

27,456

 

 

$

24,351

 

Liabilities and Stockholders' Equity

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,025

 

 

$

4,701

 

Accrued liabilities - other

 

 

5,073

 

 

 

4,888

 

Accrued liability - California Sales Taxes

 

 

5,895

 

 

 

5,769

 

Lease obligation short term - operating leases

 

 

1,333

 

 

 

1,197

 

Short term debt

 

 

85

 

 

 

3,042

 

Current portion of note payable

 

 

252

 

 

 

 

Related party note

 

 

1,000

 

 

 

1,000

 

Total current liabilities

 

 

19,663

 

 

 

20,597

 

Lease obligation long term - operating leases

 

 

1,902

 

 

 

1,388

 

Note payable

 

 

1,443

 

 

 

 

Other noncurrent liabilities

 

 

850

 

 

 

 

Total liabilities

 

 

23,858

 

 

 

21,985

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, series A-1 - par value $0.001 per share 2,000,000 authorized,
   
259,729  shares issued and outstanding at July 3, 2021 and
   January 2, 2021, respectively

 

 

 

 

 

 

Common stock, par value $0.001 per share, 200,000,000 shares authorized,
   
2,407,410 and 1,829,982 shares issued and outstanding at July 3, 2021
   and at January 2, 2021, respectively

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

45,620

 

 

 

39,869

 

Accumulated other comprehensive loss

 

 

(630

)

 

 

(588

)

Accumulated deficit

 

 

(41,394

)

 

 

(36,917

)

Total stockholders' equity

 

 

3,598

 

 

 

2,366

 

Total liabilities and stockholders' equity

 

$

27,456

 

 

$

24,351

 

 

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

3


 

JANONE INC.

CONDENSED CON SOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Dollars in thousands, except per share)

 

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty Six Weeks Ended

 

 

 

July 3,
2021

 

 

June 27,
2020

 

 

July 3,
2021

 

 

June 27,
2020

 

Revenues

 

$

8,606

 

 

$

4,007

 

 

$

17,278

 

 

$

12,457

 

Cost of revenues

 

 

6,863

 

 

 

2,962

 

 

 

14,114

 

 

 

9,938

 

Gross profit

 

 

1,743

 

 

 

1,045

 

 

 

3,164

 

 

 

2,519

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

4,595

 

 

 

3,363

 

 

 

8,125

 

 

 

8,236

 

Operating loss

 

 

(2,852

)

 

 

(2,318

)

 

 

(4,961

)

 

 

(5,717

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(125

)

 

 

(54

)

 

 

(198

)

 

 

(167

)

Gain on Payroll Protection Program loan forgiveness

 

 

 

 

 

 

 

 

1,872

 

 

 

 

Gain on settlement of vendor advance payments

 

 

131

 

 

 

 

 

 

941

 

 

 

 

Loss on litigation settlement

 

 

(1,950

)

 

 

 

 

 

(1,950

)

 

 

 

Other income (expense), net

 

 

22

 

 

 

(8

)

 

 

22

 

 

 

810

 

Total other income (expense), net

 

 

(1,922

)

 

 

(62

)

 

 

687

 

 

 

643

 

Loss from operations before benefit from income taxes

 

 

(4,774

)

 

 

(2,380

)

 

 

(4,274

)

 

 

(5,074

)

Income tax benefit (expense)

 

 

(205

)

 

 

(62

)

 

 

(203

)

 

 

349

 

Net loss

 

$

(4,979

)

 

$

(2,442

)

 

$

(4,477

)

 

$

(4,725

)

Dividends declared - Series A-1 preferred stock

 

$

 

 

$

 

 

$

 

 

$

 

Dividends declared - Common stock

 

$

 

 

$

 

 

$

 

 

$

 

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per share

 

$

(2.07

)

 

$

(1.22

)

 

$

(1.94

)

 

$

(2.41

)

Diluted loss per share

 

$

(2.07

)

 

$

(1.22

)

 

$

(1.94

)

 

$

(2.41

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

2,405,410

 

 

 

1,993,578

 

 

 

2,312,024

 

 

 

1,961,210

 

Diluted

 

 

2,405,410

 

 

 

1,993,578

 

 

 

2,312,024

 

 

 

1,961,210

 

Net loss

 

$

(4,979

)

 

$

(2,442

)

 

$

(4,477

)

 

$

(4,725

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency translation adjustments

 

 

 

 

 

(34

)

 

 

(42

)

 

 

(28

)

Total other comprehensive loss, net of tax

 

 

 

 

 

(34

)

 

 

(42

)

 

 

(28

)

Comprehensive income loss

 

$

(4,979

)

 

$

(2,476

)

 

$

(4,519

)

 

$

(4,753

)

 

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

4


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

 

For the Twenty Six Weeks Ended

 

 

 

July 3, 2021

 

 

June 27, 2020

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(4,477

)

 

$

(4,725

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,090

 

 

 

2,044

 

Amortization of debt issuance costs

 

 

 

 

 

20

 

Stock based compensation expense

 

 

180

 

 

 

511

 

Gain on Payroll Protection Program loan forgiveness

 

 

(1,872

)

 

 

 

Gain on settlement of vendor advance payments

 

 

(941

)

 

 

 

Change in deferred income taxes

 

 

 

 

 

(473

)

Other

 

 

(123

)

 

 

29

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(204

)

 

 

3,304

 

Income taxes receivable

 

 

173

 

 

 

33

 

Prepaid expenses and other current assets

 

 

110

 

 

 

(489

)

Inventories

 

 

303

 

 

 

(481

)

Right of use assets

 

 

(681

)

 

 

102

 

Lease liability

 

 

650

 

 

 

 

Accounts payable and accrued expenses

 

 

2,485

 

 

 

(1,497

)

Net cash used in operating activities

 

 

(2,307

)

 

 

(1,622

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,458

)

 

 

(21

)

Purchases of intangibles

 

 

(65

)

 

 

(114

)

Net cash used in investing activities

 

 

(1,523

)

 

 

(135

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of short term debt

 

 

 

 

 

3,469

 

Proceeds from equity financing, net

 

 

5,544

 

 

 

 

Proceeds from stock option exercise

 

 

27

 

 

 

 

Proceeds from note payable

 

 

1,835

 

 

 

 

Payment on note payable

 

 

(59

)

 

 

 

Payment on related party note

 

 

 

 

 

(1,000

)

Payments on short term notes payable

 

 

(144

)

 

 

(280

)

Net cash provided by financing activities

 

 

7,203

 

 

 

2,189

 

Effect of changes in exchange rate on cash and cash equivalents

 

 

(42

)

 

 

(30

)

INCREASE IN CASH AND CASH EQUIVALENTS

 

 

3,331

 

 

 

402

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

379

 

 

 

481

 

CASH AND CASH EQUIVALENTS, end of period

 

$

3,710

 

 

$

883

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Interest paid

 

$

84

 

 

$

103

 

Income taxes paid

 

 

28

 

 

 

 

Right to use asset - operating leases capitalized

 

 

1,244

 

 

 

930

 

 

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

5


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(Dollars in thousands)

 

 

 

 

 

Series A-1 Preferred

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Equity

 

Balance, January 2, 2021

 

 

259,729

 

 

$

 

 

 

1,829,982

 

 

$

2

 

 

$

39,869

 

 

$

(36,917

)

 

$

(588

)

 

$

2,366

 

Shares issued

 

 

 

 

 

 

 

 

571,428

 

 

 

 

 

 

5,544

 

 

 

 

 

 

 

 

 

5,544

 

Share based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

180

 

 

 

 

 

 

 

 

 

180

 

Stock option exercise

 

 

 

 

 

 

 

 

6,000

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

(42

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,477

)

 

 

 

 

 

(4,477

)

Balance, July 3, 2021

 

 

259,729

 

 

$

 

 

 

2,407,410

 

 

$

2

 

 

$

45,620

 

 

$

(41,394

)

 

$

(630

)

 

$

3,598

 

 

 

 

Series A-1 Preferred

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Equity

 

Balance, December 28, 2019

 

 

259,729

 

 

$

 

 

 

1,919,048

 

 

$

2

 

 

$

39,291

 

 

$

(28,419

)

 

$

(533

)

 

$

10,341

 

Share based compensation

 

 

 

 

 

 

 

 

74,530

 

 

 

 

 

 

511

 

 

 

 

 

 

 

 

 

511

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,725

)

 

 

 

 

 

(4,725

)

Balance, June 27, 2020

 

 

259,729

 

 

$

 

 

 

1,993,578

 

 

$

2

 

 

$

39,802

 

 

$

(33,144

)

 

$

(561

)

 

$

6,099

 

 

 

 

Series A-1 Preferred

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Equity

 

Balance, April 3, 2021

 

 

259,729

 

 

$

 

 

 

2,403,410

 

 

$

2

 

 

$

45,533

 

 

$

(36,415

)

 

$

(630

)

 

$

8,490

 

Share based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

71

 

 

 

 

 

 

 

 

 

71

 

Stock option exercise

 

 

 

 

 

 

 

 

4,000

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,979

)

 

 

 

 

 

(4,979

)

Balance, July 3, 2021

 

 

259,729

 

 

$

 

 

 

2,407,410

 

 

$

2

 

 

$

45,620

 

 

$

(41,394

)

 

$

(630

)

 

$

3,598

 

 

 

 

Series A-1 Preferred

 

 

Common Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Equity

 

Balance, March 28, 2020

 

 

259,729

 

 

$

 

 

 

1,993,578

 

 

$

2

 

 

$

39,667

 

 

$

(30,702

)

 

$

(527

)

 

$

8,440

 

Share based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135

 

 

 

 

 

 

 

 

 

135

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

(34

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,442

)

 

 

 

 

 

(2,442

)

Balance, June 27, 2020

 

 

259,729

 

 

$

 

 

 

1,993,578

 

 

$

2

 

 

$

39,802

 

 

$

(33,144

)

 

$

(561

)

 

$

6,099

 

 

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

6


 

Note 1: Background

The accompanying consolidated financial statements include the accounts of JanOne Inc., a Nevada corporation, and its subsidiaries (collectively the “Company” or “JanOne”). On September 10, 2019, Appliance Recycling Centers of America, Inc. changed its name to JanOne Inc.