Note 18: Series A-1 Convertible Preferred Stock.

History

On August 18, 2017, the Company acquired GeoTraq by way of merger. In connection with this transaction, the Company tendered to the owners of GeoTraq $200,000, issued to them an aggregate of 288,588 shares (number of shares specific – not rounded) of the Company’s Series A Convertible Preferred Stock valued at $12.3 million, including the beneficial conversion feature of $2.6 million, and entered into one-year unsecured promissory notes in the aggregate principal amount of $800,000.

Conversion

The “Conversion Ratio” per share of the Series A-1 Convertible Preferred Stock in connection with any conversion shall be at a ratio of 20:1, one share of Series A-1 Convertible Preferred Stock, if and when converted into shares of Common Stock, shall convert into twenty shares Common Stock. Each holder shall have the right, exercisable at any time and from time to time (unless otherwise prohibited by law, rule, or regulation, or as restricted below), to convert any or all of such holder’s shares of Series A-1 Convertible Preferred Stock into shares of Common Stock at the Conversion Ratio.

Shares of Series A-1 Convertible Preferred Stock are convertible into the Company’s common shares at a ratio of 1:20. During the years ended December 31, 2022 and January 1, 2022, 16,141 and 21,000 shares of the Company’s Series A-1 Convertible Preferred Stock were converted into 322,820 and 420,000 shares, respectively, of the Company’s common stock. As of December 31, 2022 and January 1, 2022, there were 222,588 and 238,729 shares, respectively, of Series A-1 Convertible Preferred Stock outstanding.

Dividends

The Company cannot declare, pay or set aside any dividends on shares of any other class or series of our capital stock unless (in addition to the obtaining of any consents required by our Articles of Incorporation) the holders of the Series A Convertible Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend in the aggregate amount of one dollar, regardless of the number of then-issued and outstanding shares of Series A Convertible Preferred Stock. Any remaining dividends allocated by the Board of Directors shall be distributed in an equal amount per share to the holders of outstanding common stock and Series A-1 Convertible Preferred Stock (on an as-if-converted to common stock basis pursuant to the Conversion Ratio as defined below).

Voting Rights

Each holder of a share of Series A Convertible Preferred Stock has a number of votes as is determined by multiplying (i) the number of shares of Series A Preferred Stock held by such holder, and (ii) 17. The holders of Series A-1 Convertible Preferred Stock vote together with all other classes and series of common and preferred stock of the Company as a single class on all actions to be taken by the common stockholders of the Company, except to the extent that voting as a separate class or series is required by law.

Redemption

The Series A-1 Convertible Preferred Stock has no redemption rights by JanOne, or any other entity.

Preemptive Rights

Holders of the Series A-1 Convertible Preferred Stock and holders of JanOne common stock are not entitled to any preemptive, subscription, or similar rights in respect of any securities of JanOne, except as set forth in the Amended and Restated Series A-1 Certificate of Designation or in any other document agreed to by JanOne.

Protective Provisions

Without first obtaining the affirmative approval of a majority of the holders of the shares of Series A-1 Convertible Preferred Stock, the Company may not directly or indirectly (i) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A-1 Convertible Preferred Stock; (ii) effect an exchange, reclassification, or cancellation of all or a part of the Series A-1 Convertible Preferred Stock, but excluding a stock split or reverse stock split or combination of the common stock or preferred stock; (iii) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A-1 Convertible Preferred

Stock; or (iv) alter or change the rights, preferences or privileges of the shares of Series A-1 Convertible Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation; provided, however, that we may, without any vote of the holders of shares of the Series A-1 Convertible Preferred Stock, make technical, corrective, administrative or similar changes to the Amended and Restated Series A-1 Certificate of Designation that do not, individually or in the aggregate, materially adversely affect the rights or preferences of the holders of shares of the Series A-1 Convertible Preferred Stock.