JanOne Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Variable Interest Entity

Variable Interest Entity

12 Months Ended

Dec. 31, 2011

6. Variable Interest Entity

The financial position and results of operations of AAP are consolidated in our financial statements based on our conclusion that AAP is a variable interest entity and because we have the ability to significantly influence the economic performance of the entity through our contractual agreement with GE. The financial position and results of operations for AAP are reported in our recycling segment. In fiscal year 2010, we contributed equity of $2,000 to AAP, which included $475 we loaned to 4301 prior to commencing operations on February 8, 2010.

The following table summarizes the assets and liabilities of AAP as of December 31, 2011 and January 1, 2011:

	December 31, 2011		January 1, 2011
Assets
Current assets	$	1,134	$	439
Property and equipment, net	9,419		8,430
Goodwill	1,082		1,082
Other assets	136		256
Total assets	$	11,771	$	10,207

Liabilities
Accounts payable	$	858	$	737
Accrued expenses	250		304
Current maturities of long-term debt obligations	593		4,000
Long-term debt obligations, net of current maturities	5,022		832
Other long-term liabilities (a)	647		455
Total liabilities	$	7,370	$	6,328

(a) Other long-term liabilities represent outstanding loans from ARCA and are eliminated in consolidation.

The following table summarizes the operating results of AAP for fiscal years 2011 and 2010:

	For the fiscal year ended
	December 31, 2011		January 1, 2011
Revenues	$	11,337	$	7,562
Gross profit	1,373		199
Operating income (loss)	869		(58		)

The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed as a result of consolidating AAP as a variable interest entity.

	February 8, 2010
Assets
Current assets	$	6
Property and equipment	3,123
Goodwill	1,082
Other assets (b)	1,555
Total assets acquired	5,766
Liabilities
Accounts payable	(466			)
Accrued expenses	(97			)
Current maturities of long-term debt obligations	(376			)
Long-term debt obligations, net of current maturities	(827			)
Total liabilities assumed	(1,766			)
Equity contribution from ARCA	(2,000			)
Net assets acquired	$		2,000

(b) Other assets include a receivable of $1,525 from ARCA related to equity contributions made in March 2010 and April 2010, which is eliminated upon consolidation.

- Definition

Entire disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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