Q1false0000862861--12-31April 30, 2022March 31, 20262022-070.050000862861jan:GeoTraqIncMember2021-06-012021-06-010000862861jan:GeoTraqIncMember2023-01-012023-04-010000862861jan:SkyBridgeAmericasMember2018-02-282018-02-280000862861us-gaap:AdditionalPaidInCapitalMember2022-04-020000862861jan:PatentsAndDomainsMember2023-04-010000862861jan:ApplianceSmartIncMember2023-04-0100008628612022-01-022022-04-020000862861us-gaap:SegmentDiscontinuedOperationsMember2022-04-020000862861us-gaap:RevolvingCreditFacilityMember2019-08-280000862861us-gaap:CommonStockMember2023-01-012023-04-010000862861jan:SeriesSMember2022-12-310000862861jan:BusinessSegmentMember2022-01-022022-04-020000862861jan:AFCOCreditCorpMember2022-12-310000862861us-gaap:EmployeeStockOptionMember2023-01-012023-04-010000862861us-gaap:SegmentDiscontinuedOperationsMemberus-gaap:ConstructionMember2022-12-310000862861jan:StockPurchaseAgreementMember2023-03-090000862861us-gaap:PreferredStockMember2022-12-310000862861us-gaap:SegmentContinuingOperationsMember2022-01-022022-04-020000862861jan:Plan2011Member2022-12-310000862861jan:BusinessSegmentMember2023-01-012023-04-010000862861us-gaap:RetainedEarningsMember2022-01-022022-04-020000862861srt:MinimumMemberjan:LiveVenturesIncorporatedMember2023-01-012023-04-010000862861jan:GeoTraqIncMember2022-01-022022-04-020000862861jan:ComputerSoftwareMember2022-12-310000862861us-gaap:CommonStockMember2022-12-310000862861jan:SecuritiesPurchaseAgreementMember2023-03-220000862861jan:BiotechnologyMember2023-01-012023-04-010000862861us-gaap:AdditionalPaidInCapitalMember2022-12-310000862861us-gaap:RetainedEarningsMember2023-04-010000862861srt:MinimumMemberjan:BuildingsAndImprovementsMemberus-gaap:SegmentDiscontinuedOperationsMember2023-01-012023-04-010000862861us-gaap:CommonStockMember2023-04-010000862861jan:SeriesSConvertiblePreferredStockMember2022-12-280000862861jan:GeoTraqIncMember2022-05-240000862861us-gaap:SegmentDiscontinuedOperationsMemberjan:KlcFinancialMember2022-12-310000862861us-gaap:AdditionalPaidInCapitalMember2023-01-012023-04-010000862861us-gaap:PreferredStockMemberjan:SeriesSPreferredStocksMember2023-04-010000862861us-gaap:SegmentContinuingOperationsMember2023-01-012023-04-010000862861jan:ComputerSoftwareMember2023-04-010000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-010000862861us-gaap:PreferredStockMember2022-04-020000862861jan:AssetPurchaseAgreementMemberjan:SpyrTechnologiesIncMember2022-05-240000862861jan:SkyBridgeAmericasMember2017-01-252017-01-250000862861jan:Plan2011Member2023-01-012023-04-010000862861jan:ContractorMember2023-01-012023-04-010000862861jan:SeriesSConvertiblePreferredStockMember2022-12-310000862861jan:PatentsAndDomainsMember2022-12-310000862861us-gaap:CommonStockMember2023-03-172023-03-170000862861jan:AFCOCreditCorporationFinancingAgreementMembersrt:MinimumMemberjan:AFCOCreditCorpMember2022-07-310000862861jan:TrusteesMain270LlcMemberjan:ApplianceSmartIncMember2023-01-012023-04-010000862861jan:SeriesSConvertiblePreferredStockMember2023-04-010000862861jan:GeoTraqIncMember2023-04-010000862861jan:IcgNoteMemberjan:RecordAndBeneficialOwnerMember2019-08-280000862861us-gaap:PreferredStockMemberus-gaap:SeriesAPreferredStockMember2023-04-010000862861jan:Plan2016Member2023-01-012023-04-010000862861jan:Plan2016Member2022-12-310000862861us-gaap:RetainedEarningsMember2022-01-010000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-010000862861jan:IcgNoteMemberus-gaap:SegmentDiscontinuedOperationsMember2022-12-310000862861us-gaap:EmployeeStockOptionMember2023-04-010000862861jan:ArticlesOfIncorporationMember2023-04-010000862861us-gaap:RetainedEarningsMember2023-01-012023-04-010000862861jan:ContractorMember2022-01-022022-04-020000862861jan:TrusteesMain270LlcMember2023-01-012023-04-010000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-022022-04-020000862861us-gaap:EmployeeStockOptionMember2022-01-022022-04-020000862861srt:MaximumMemberjan:BuildingsAndImprovementsMemberus-gaap:SegmentDiscontinuedOperationsMember2023-01-012023-04-010000862861us-gaap:SegmentDiscontinuedOperationsMember2022-12-310000862861us-gaap:SegmentDiscontinuedOperationsMember2023-04-010000862861srt:MinimumMemberus-gaap:EquipmentMemberus-gaap:SegmentDiscontinuedOperationsMember2023-01-012023-04-010000862861us-gaap:SegmentDiscontinuedOperationsMemberus-gaap:ComputerSoftwareIntangibleAssetMember2022-12-310000862861us-gaap:SegmentDiscontinuedOperationsMember2023-01-012023-04-010000862861us-gaap:AdditionalPaidInCapitalMember2023-04-010000862861jan:SkyBridgeAmericasMember2021-02-012021-02-010000862861srt:MaximumMemberjan:SeriesSConvertiblePreferredStockMember2022-12-280000862861srt:MaximumMemberus-gaap:EquipmentMemberus-gaap:SegmentDiscontinuedOperationsMember2023-01-012023-04-010000862861jan:SoinIntangiblesMember2023-04-010000862861jan:WestervilleSquareMember2023-01-012023-04-0100008628612022-01-010000862861us-gaap:CommonStockMember2022-01-010000862861jan:BiotechnologyMember2022-01-022022-04-020000862861us-gaap:SegmentDiscontinuedOperationsMember2022-01-022022-04-020000862861jan:AFCOCreditCorporationFinancingAgreementMemberjan:AFCOCreditCorpMember2022-07-212022-07-210000862861us-gaap:AdditionalPaidInCapitalMember2022-01-010000862861jan:ARCARecyclingIncAndCustomerConnexxLLCMemberus-gaap:InternalRevenueServiceIRSMember2023-04-010000862861jan:IcgNoteMember2022-01-010000862861us-gaap:SegmentDiscontinuedOperationsMemberjan:GulfCoastBankAndTrustCompanyMember2022-12-310000862861jan:SoinIntangiblesMember2022-12-310000862861jan:SecuritiesPurchaseAgreementMember2023-03-222023-03-220000862861us-gaap:SegmentDiscontinuedOperationsMember2022-01-010000862861jan:IcgNoteMember2023-01-012023-04-0100008628612023-05-190000862861us-gaap:PreferredStockMember2022-01-0100008628612021-01-032022-01-010000862861jan:ARCARecyclingIncAndCustomerConnexxLLCMemberus-gaap:InternalRevenueServiceIRSMember2023-01-012023-04-010000862861jan:AFCOCreditCorporationFinancingAgreementMemberjan:AFCOCreditCorpMember2022-01-022022-12-310000862861jan:GeoTraqIncMemberjan:MrSullivanMember2023-04-0100008628612022-01-022022-12-310000862861jan:IcgNoteMember2023-04-010000862861jan:LiveVenturesIncorporatedMember2023-04-010000862861jan:Plan2011Member2023-04-0100008628612023-04-010000862861jan:AFCOCreditCorporationFinancingAgreementMemberjan:AFCOCreditCorpMember2022-07-310000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-0100008628612017-04-130000862861us-gaap:RetainedEarningsMember2022-04-0200008628612023-01-012023-04-010000862861jan:StockPurchaseAgreementMember2023-01-012023-04-010000862861jan:StockPurchaseAgreementMember2023-03-012023-03-090000862861jan:Plan2016Member2023-04-010000862861jan:SeriesA1ConvertiblePreferredStockMember2023-01-012023-04-010000862861jan:AssetPurchaseAgreementMemberjan:SpyrTechnologiesIncMember2023-01-012023-04-010000862861us-gaap:PreferredStockMember2023-04-010000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000862861us-gaap:RetainedEarningsMember2022-12-310000862861jan:AFCOCreditCorpMember2023-04-0100008628612022-04-020000862861us-gaap:SegmentDiscontinuedOperationsMemberus-gaap:PatentsMember2022-12-310000862861jan:SoinTherapeuticsLLCMember2023-04-010000862861us-gaap:EquipmentMemberus-gaap:SegmentDiscontinuedOperationsMember2022-12-310000862861jan:SeriesSMember2023-04-010000862861us-gaap:AdditionalPaidInCapitalMember2022-01-022022-04-0200008628612022-12-310000862861jan:SeriesSConvertiblePreferredStockMember2022-12-282022-12-280000862861jan:SkyBridgeAmericasMember2023-04-010000862861jan:SoinTherapeuticsLLCMember2022-12-310000862861jan:ApplianceSmartIncMember2022-12-310000862861us-gaap:CommonStockMember2022-04-020000862861jan:GeoTraqIncMember2021-04-092021-04-090000862861jan:IcgNoteMember2019-08-282019-08-280000862861us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-020000862861jan:BuildingsAndImprovementsMemberus-gaap:SegmentDiscontinuedOperationsMember2022-12-310000862861jan:GeoTraqIncMemberjan:MrSullivanMember2022-12-31xbrli:pureutr:sqftxbrli:sharesjan:Segmentiso4217:USDxbrli:sharesiso4217:USDjan:Quarterly

 

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 April 1, 2023

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 May 19, 2023, there were 3,614,937 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 April 1, 2023 and December 31, 2022

3

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the 13 weeks ended April 1, 2023 and April 2, 2022

4

 

Unaudited Condensed Consolidated Statements of Cash Flows for the 13 weeks ended April 1, 2023 and April 2, 2022

5

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the 13 weeks ended April 1, 2023 and April 2, 2022

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

Item 2.

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

25

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

Item 4.

Controls and Procedures

28

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

30

 

Item 1A.

Risk Factors

30

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

Item 3.

Defaults Upon Senior Securities

30

 

Item 4.

Mine Safety Disclosures

30

 

Item 5

Other Information

30

 

Item 6.

Exhibits

31

 

SIGNATURES

32

2


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Condensed Consolidated Financial Statements

 

JANONE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per-share amounts)

 

 

 

April 1,
2023

 

 

December 31,
2022

 

 

 

(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

 

Shortterm 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,
   
100,000 and 100,000 shares issued and outstanding at April 1, 2023 and
   December 31, 2022, respectively

 

 

14,510

 

 

 

14,510

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, series A - par value $0.001 per share 2,000,000 authorized,
   
222,588 and 222,588 shares issued and outstanding at April 1, 2023 and
   December 31, 2022, respectively

 

 

 

 

 

 

Common stock, par value $0.001 per share, 10,000,000 shares authorized,
  
3,614,937 and 2,827,410 shares issued and outstanding at April 1, 2023
   and at December 31, 2022, respectively

 

 

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

 

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

3


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

(Dollars in thousands, except per-share)

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 1,
2023

 

 

April 2,
2022

 

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

 

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 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
   activities:

 

 

 

 

 

 

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

 

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 (DEFICIT)

(UNAUDITED)

(Dollars in thousands)

 

 

 

Series A Preferred

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

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
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

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

)

 

 

 

 

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”).

The Company had three operating segments – Biotechnology, Recycling, and Technology. In connection with the sale of GeoTraq, Inc. (“GeoTraq”) and the sale of ARCA Recycling, Inc. (“ARCA Recycling”) (see Note 18), the accounts for the Recycling and Technology segments have been presented as discontinued operations in the accompanying consolidated financial statements (see Note 3).

Biotechnology

During September 2019, JanOne, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties. Effective December 28, 2022, the Company acquired Soin Therapeutics LLC, a Delaware limited liability company (“STLLC”), and its product, a patent-pending, novel formulation of low-dose naltrexone, (“JAN123”). The product is being developed for the treatment of Complex Regional Pain Syndrome (CRPS), an indication that causes severe, chronic pain generally affecting the arms or legs. At present, there are no truly effective treatments for CRPS. Because of the relatively small number of patients afflicted with CRPS, the FDA has granted Orphan Drug Designation for any product approved for treatment of CRPS. This designation will provide the Company with tax credits for its clinical trials, exemption of user fees, and the potential of seven years of market exclusivity following approval. In addition, development of orphan drugs currently also involves smaller trials and quicker times to approval, given the limited number of patients available to study. However, there can be no assurance that the product will receive FDA approval or that it will result in material sales.

Recycling

ARCA Recycling was the Company’s Recycling segment and provides turnkey recycling services for electric utility energy efficiency programs in the United States. ARCA Canada Inc. (“ARCA Canada”) provides turnkey recycling services for electric utility energy efficiency programs in Canada. Customer Connexx, LLC (“Connexx”) provides call center services for ARCA Recycling and ARCA Canada. On March 9, 2023, retroactive to March 1, 2023, the Company entered into a Stock Purchase Agreement with VM7 Corporation, a Delaware corporation, under which the Buyer agreed to acquire all of the outstanding equity interests of (a) ARCA Recycling, Inc., a California corporation, (b) Customer Connexx LLC, a Nevada limited liability company, and (c) ARCA Canada Inc., a corporation organized under the laws of Ontario, Canada (“ARCA Canada”; and, together with ARCA and Connexx, the “Subsidiaries”). The principal of the Buyer is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Subsidiaries to the Buyer under the Purchase Agreement was consummated simultaneously with the execution of the Purchase Agreement (see Note 17). The Company'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).

Technology

GeoTraq Inc. (“GeoTraq”) was the Company’s Technology segment. On May 24, 2022, the Company entered into an Asset Purchase Agreement with SPYR Technologies Inc., pursuant to which the Company sold to SPYR substantially all the assets and none of the liabilities of its wholly-owned subsidiary GeoTraq Inc. The aggregate purchase price for the GeoTraq Assets was $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 per share, and delivered a five-year Promissory Note in the principal amount of $12.6 million. The Promissory Note bears simple interest at the rate of 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's restricted common stock. The Promissory Note matures on May 23, 2027.

The Company reports on a 52- or 53-week fiscal year. The Company’s 2022 fiscal year (“2022”) ended on December 31, 2022, and the current fiscal year (“2023”) will end on December 30, 2023.

Going concern

The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business, however, the issues described below raise substantial doubt about the Company’s ability to do so.

7


 

The Company currently faces a challenging competitive environment and is focused on improving its overall profitability, which includes managing expenses. The Company reported a net loss from continuing operations of approximately $640,000 for the 13 weeks ended April 1, 2023. Additionally, as of April 1, 2023, the Company has total current assets of approximately $637,000 and total current liabilities of approximately $3.5 million resulting in a net negative working capital of approximately $2.8 million. Cash provided by operations from continuing operations was approximately $128,000. Additionally, stockholders' equity, as of April 1, 2023, is approximately $13.6 million.

The Company intends to fund operations by using cash on hand and monthly receipts in connection with the sale of its Subsidiaries and funds received from approved Employee Retention Credits (“ERC’s”) (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 success of such funding cannot be assured.

The ability of the Company to continue as a going concern is dependent upon the success of future capital raises or structured settlements to fund the required testing to obtain FDA approval of JAN 123 and JAN 101, as well as to fund its day-to-day operations. Such approval is contingent on several factors and no assurance can be provided that approval will be obtained. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. While the Company will actively pursue these additional sources of financing, management cannot make any assurances that such financing will be secured or FDA approvals will be obtained.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, the Company’s results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2022.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Financial Statement Reclassification

Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications. The prior year amounts have also been modified in these financial statements to properly report amounts under current operations and discontinued operations (see Note 3).

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumption that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates made in connection with the accompanying consolidated financial statements include the fair values in connection with the GeoTraq promissory note, Series S convertible preferred stock issued in the Soin merger, and the receivable in connection with the sale of ARCA, analysis of other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets, lease terminations, and estimated useful lives for intangible assets and property and equipment.

8


 

Financial Instruments

Financial instruments consist primarily of cash equivalents, trade and other receivables, notes receivable, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments. The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs). The carrying amounts of long-term debt at December 31, 2022 approximate fair value. The Company has no long-term debt as of April 1, 2023 due to the disposition of ARCA Recycling (see Note 18).

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company has adopted this new accounting standard, however, as of 13 weeks ended April 1, 2023, there is no material impact on our Consolidated Financial Statements and related disclosures.

Note 3: Discontinued Operations

As of April 1, 2023, the Company discontinued operations of its Recycling and Technology segments as follows:

On March 9, 2023, the Company executed a Stock Purchase Agreement with VM7 Corporation, a Delaware corporation, under which, as of March 1, 2023, the Buyer agreed to acquire all of the outstanding equity interests of (a) ARCA Recycling, Inc., a California corporation, (b) Customer Connexx LLC, a Nevada limited liability company, and (c) ARCA Canada Inc., a corporation organized under the laws of Ontario, Canada (“ARCA Canada”; and, together with ARCA and Connexx, the “Subsidiaries”). The principal of the Buyer is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Subsidiaries to the Buyer under the Purchase Agreement was consummated simultaneously with the execution of the Purchase Agreement (see Note 18).

On May 24, 2022, the Company entered into an Asset Purchase Agreement with SPYR Technologies Inc., pursuant to which the Company sold to SPYR substantially all the assets and none of the liabilities of its wholly-owned subsidiary GeoTraq Inc. No GeoTraq assets or liabilities were included in discontinued operations at December 31, 2022.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheets as of December 31, 2022, and consist of the following:

 

9


 

 

 

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 Company's property and equipment consisted of the following:

 

 

 

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

 

 

Depreciation expense was $60,000 and $79,000 for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively.

2 The Company's intangible assets consisted of the following:

 

 

December 31,
2022

 

Patent and domains

 

$

19

 

Computer software

 

 

1,682

 

Intangible assets

 

 

1,701

 

Less accumulated amortization

 

 

(966

)

Total intangible assets

 

$

735

 

Amortization expense was $36,000 and $54,000 for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively.

3 The Company's accrued liabilities consisted of the following:

10


 

 

 

December 31,
2022

 

Compensation and benefits

 

$

685

 

Contract liability

 

 

290

 

Accrued incentive and rebate checks

 

 

2,037

 

Accrued taxes

 

 

219

 

Other

 

 

47

 

Total accrued expenses

 

$

3,278

 

Historically the 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.

The California Department of Tax and Fee Administration (formerly known as the California Board of Equalization) (“CDTFA”) conducted a sales and use tax examination covering ARCA Recycling’s California operations for years 2011, 2012, and 2013. The Company believed it was exempt from collecting sales taxes under service agreements with utility customers that included appliance replacement programs. During the fourth quarter of 2014, the Company received communication from the CDTFA indicating they were not in agreement with the Company’s interpretation of the law. As a result, the Company applied for and, as of February 9, 2015, received approval to participate in the CDTFA’s Managed Audit Program. The period covered under this program included the years 2011, 2012, and 2013 and extended through the nine-month period ended September 30, 2014.

On April 13, 2017 the Company received the formal CDTFA assessment for sales tax for tax years 2011, 2012, and 2013 in the amount of approximately $4.1 million plus applicable interest of $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.

4 The Company's accrual relating to the California sales tax assessment consisted of the following: