JanOne Inc. Quarterly report pursuant to Section 13 or 15(d)


	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

[2]

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]

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


	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]

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


	December 31, 2022
Accrued liability - CA sales tax assessment	$	4,132
Accrued liability - interest on CA sales tax assessment		2,132
Total	$	6,264

[5]

5 The Company's short-term debt consisted of the following:


	December 31, 2022
Gulf Coast Bank and Trust Company	$	4,206
Gulf Coast Bank and Trust Company loan origination fees		(34	)
Total	$	4,172

[6]

6 The Company's long-term debt consisted of the following:


	December 31, 2022
KLC Financial	$	1,781
KLC Financial loan origination fees		(61	)
Total		1,720
Less current portion		(381	)
Total	$	1,339

Related Party ICG Note

On August 28, 2019, ARCA Recycling entered into and delivered to Isaac Capital Group LLC (“ICG”) a secured revolving line of credit promissory note, whereby ICG agreed to provide ARCA Recycling with a $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% per annum and provides for the payment of interest, monthly in arrears. ARCA Recycling will pay a loan fee of 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.

The obligations of ARCA Recycling under the ICG Note are guaranteed by the Company. The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities. As of January 1, 2022, the balance due on ICG Note was $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. The principal amount of the note was $1.0 million, and was to bear interest at 8.75% per annum. Monthly payments on this note were approximately $24,767. ICG is a record and beneficial owner of 13.9% 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.

[7]

7 The Company's related party debt consisted of the following:


	December 31, 2022
Isaac Capital Group LLC	$	838
Total		838
Less current portion		(233	)
Total	$	605