Core Insights - JanOne Inc. has launched a prepaid VISA®️ Card through its subsidiary ALT5 Sigma, enhancing its ALT5 Settlement Platform to provide customers with more efficient ways to access and spend fiat derived from crypto strategies [1][2][10] Company Overview - JanOne Inc. is a multidisciplinary organization listed on Nasdaq, focusing on healthcare and fintech, and is part of the Russell Microcap Index starting June 28, 2024 [5] - The company is also involved in biotech, developing solutions to address the opioid crisis, with drugs in clinical trials targeting pain management [5] ALT5 Sigma and Its Offerings - ALT5 Sigma, a subsidiary of JanOne, has launched a prepaid VISA®️ Card that allows customers to manage multi-currencies, including fiat and crypto, with 24/7 access to fund conversion [2][10] - ALT5 provides blockchain-powered technologies through its platforms, including "ALT5 Pay" and "ALT5 Prime," processing over US$1.2 billion in cryptocurrency transactions in 2023 [3][4] ALT5 Prime Platform - ALT5 Prime is an electronic over-the-counter trading platform for buying and selling digital assets, allowing customers to transact in both fiat and digital currencies [4] - The platform is accessible via a mobile application, "ALT5 Pro," and through various APIs for approved customers [4] Expansion of Digital Fintech Offerings - The introduction of the prepaid VISA®️ Card is part of ALT5's strategy to modernize financial services by bridging traditional financial products with digital currency solutions [10][11] - ALT5 Pay serves as a cryptocurrency payment gateway, enabling global merchants to accept and convert crypto payments into fiat [11][13]

Company Overview - ALT5 Sigma Inc. operates as a fintech company providing blockchain-powered technologies, including the ALT5 Pay payment gateway and ALT5 Prime trading platform [3][15] - ALT5 Pay allows global merchants to accept cryptocurrency payments and offers options for automatic conversion to fiat currency or payment in digital assets [1][3] - ALT5 Prime is an electronic over-the-counter trading platform for buying and selling digital assets, accessible via a mobile application and various APIs [7][15] Financial Performance - In 2023, ALT5 processed over US$1.2 billion in cryptocurrency transactions [3] - For April and May 2024, ALT5 Sigma reported a transaction volume of US$289 million, a significant increase of 91% compared to US$151 million in the same period of 2023 [12] Market Strategy - The company has historically relied on word-of-mouth and client referrals for growth but is now implementing global marketing strategies to enhance its market presence [2] - The acceleration of cryptocurrency adoption across various industries is seen as an opportunity for ALT5's B2B solutions, which can be integrated into business processes from checkout to payouts [2]

Core Insights - JanOne Inc. has launched the ALT5 Settlement Platform to address the needs of the Global Digital Content Creation Market, which is currently valued at $27.3 billion and projected to grow at a rate of 13.3% from 2023 to 2030 [3][4]. Company Overview - JanOne Inc. is a multidisciplinary organization listed on Nasdaq, focusing on healthcare and fintech, and is part of the Russell Microcap Index [8]. - ALT5 Sigma, a wholly-owned subsidiary of JanOne, specializes in blockchain-powered technologies for digital financial transactions [9]. Product Launch and Features - The ALT5 Settlement Platform allows digital platforms to pay content creators instantly in their preferred cryptocurrencies, including Bitcoin, Ether, USDT, and USDC, enhancing efficiency and reducing costs associated with payment settlements [2][3]. - The platform supports automatic loading of prepaid VISA cards for content creators, enabling them to shop globally at 130 million merchant locations or withdraw funds from 14,500 financial institutions [2]. Market Potential - The Global Digital Content Creation Market is characterized by over 200 million content creators, many of whom earn less than $100,000 annually, highlighting the need for efficient payment solutions [3]. - Traditional banking methods for smaller payments are time-consuming and costly, which the ALT5 Settlement Platform aims to resolve [3]. Initial Performance - The ALT5 Settlement Platform began as a pilot project in September 2023, with an initial settlement volume of $1 million, which has since increased to over $7 million per month [4]. Transaction Volume - ALT5 has processed over $1.2 billion in cryptocurrency transactions in 2023, indicating strong market engagement and operational capacity [5].

Core Insights - JanOne Inc. has been added to the Russell Microcap® Index, marking a significant milestone for the company [1][3] - The Russell Microcap® Index includes 1,000 securities and is widely utilized by investment managers and institutional investors [2] - The addition to the index is expected to enhance visibility for JanOne, especially following its recent acquisition of ALT 5 Sigma [3] Company Overview - JanOne is a multidisciplinary organization listed on Nasdaq, focusing on healthcare and fintech [6] - The company is developing solutions aimed at addressing the opioid crisis and has promising drugs in its clinical trial pipeline [6] - JanOne's subsidiary, ALT 5, offers blockchain-powered technologies for trading, clearing, settlement, payment, and custodianship of digital instruments [7] ALT 5 Sigma Overview - ALT 5 Sigma, launched in 2018, provides next-generation blockchain technologies and has two main platforms: ALT 5 Pay and ALT 5 Prime [4][5] - ALT 5 Pay is a cryptocurrency payment gateway that allows merchants to accept and make cryptocurrency payments, with options for automatic conversion to fiat currencies [4] - ALT 5 Prime is an electronic trading platform for buying and selling digital assets, accessible via a mobile application and other platforms [5]

Core Insights - JanOne Inc. announced that its fintech subsidiary, ALT 5 Sigma, will present at the iFX Expo, the largest online trading conference, from June 18 to June 20 in Limassol, Cyprus [1] - The online trading platform market was valued at $9.1 billion in 2022 and is projected to grow to $16.5 billion by 2032, indicating significant growth potential for ALT 5 Pay, which facilitates cryptocurrency payments [1] - The payment processing solutions market is estimated to grow from approximately $100 billion in 2023 at a CAGR of 9.5% from 2023 to 2030, driven by technological advancements such as AI, machine learning, and blockchain [2] Company Overview - ALT 5 Sigma, launched in 2018, provides blockchain-powered technologies aimed at transitioning to a new global financial paradigm, offering two main platforms: "ALT 5 Pay" and "ALT 5 Prime" [3][5] - "ALT 5 Pay" is a cryptocurrency payment gateway that allows global merchants to accept and make cryptocurrency payments, with options to convert to fiat currencies automatically [3] - "ALT 5 Prime" is an electronic over-the-counter trading platform for buying and selling digital assets, accessible via a mobile application and various APIs [4] Market Context - The iFX Expo will facilitate relationship building with existing clients and potential new clients in the online trading platforms market, which is one of the fastest-growing segments for ALT 5 Sigma [2] - The integration of cryptocurrency payment solutions into online trading platforms represents a growing market opportunity for ALT 5 [1][2]

About JanOne Inc. — JanOne is a unique Nasdaq-listed company offering innovative, actionable solutions intended to help end the opioid crisis. JanOne is dedicated to funding resources toward innovation, technology, and education to find a key resolution to the national opioid epidemic, which is one of the deadliest and most widespread in the nation's history. Its drugs in the clinical trial pipeline have shown promise for their innovative targeting of the causes of pain as a strategic option for physicians ...

ALT 5's transactional processing volume exceeded $1.1 billion in calendar 2023, and over $450 million in Q1 2024LAS VEGAS, May 10, 2024 /PRNewswire/ -- JanOne Inc. (Nasdaq: JAN) announced today that it has executed a Definitive Agreement to acquire blockchain financial technology provider, ALT 5 Sigma Inc., a Delaware corporation, and each of its wholly-owned subsidiaries. The transaction is anticipated to close the week of May 13th, 2024 and is subject to customary closing conditions and regulatory require ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) JanOne Inc. transitioned to a clinical-stage biopharmaceutical company, divesting its recycling and technology businesses to focus on non-addictive pain treatments - **JanOne** is a clinical-stage biopharmaceutical company focused on non-opioid, non-addictive therapies for pain and addiction[24](index=24&type=chunk) - The company acquired **Soin Therapeutics** and its **LDN** product, now known as **JAN123**, on December **28**, **2022**[19](index=19&type=chunk) - **JanOne** divested its legacy recycling businesses (**ARCA Recycling**, **ARCA Canada**, and **Customer Connexx**) on March **9**, **2023**, to focus on its biopharmaceutical activities[21](index=21&type=chunk)[188](index=188&type=chunk) [Biotechnology Segment](index=4&type=section&id=Biotechnology) Focuses on developing novel, non-opioid therapies for pain and addiction, with key candidates **JAN101** for **PAD** and **JAN123** for **CRPS** - **JanOne** is a clinical-stage biopharmaceutical company focused on non-opioid, non-addictive therapies for pain and addiction[24](index=24&type=chunk) - **JAN101** (formerly **TV1001SR**) is a potential treatment for Peripheral Artery Disease (**PAD**), with **Phase IIb/III** clinical trials expected to commence in **2025**[24](index=24&type=chunk) - **JAN123** is a novel biphasic formulation of low-dose naltrexone (**LDN**) for Complex Regional Pain Syndrome (**CRPS**), which has received **Orphan Drug Designation**[19](index=19&type=chunk)[88](index=88&type=chunk)[105](index=105&type=chunk) [JAN101 (Peripheral Artery Disease)](index=5&type=section&id=JAN101) **JAN101** is a patented oral, sustained-release sodium nitrite for improving blood flow and treating pain in conditions like **PAD** - **JAN101** is a patented oral, sustained-release pharmaceutical composition of sodium nitrite targeting poor blood flow and pain in extremities, designed to prevent headaches[25](index=25&type=chunk) - Preclinical studies show sodium nitrite promotes angiogenesis, stimulates wound healing, and prevents tissue necrosis, acting specifically in damaged, ischemic tissue[36](index=36&type=chunk)[49](index=49&type=chunk) - A bridging study in diabetic neuropathy subjects showed **JAN101** prevented headaches/dizziness and subjects reported less pain, with improvements in nerve function[25](index=25&type=chunk) [Peripheral Artery Disease (PAD) and Chronic Pain](index=16&type=section&id=Peripheral%20artery%20disease) Chronic pain and **PAD** represent significant public health issues with limited effective, non-addictive treatment options, which **JAN101** aims to address - Chronic pain affects **100 million** individuals in the United States and over **1.5 billion** worldwide, costing society between **$560 billion** and **$635 billion** annually[50](index=50&type=chunk)[62](index=62&type=chunk) - Peripheral Artery Disease (**PAD**) affects **8** to **12 million** people in the United States, with over **24%** of patients at risk of high opioid use[50](index=50&type=chunk)[52](index=52&type=chunk) - Current non-drug treatments for **PAD** include lifestyle changes, exercise, angioplasty, and bypass surgery, while prescription drugs include cholesterol-lowering agents, antiplatelet medications, and antihypertensives. No drugs are specifically indicated for **PAD**-associated pain[55](index=55&type=chunk)[56](index=56&type=chunk) [Company Strategy](index=19&type=section&id=Our%20Strategy) **JanOne**'s strategy is to develop and commercialize non-opioid, non-addictive chronic pain therapies, advancing **JAN101** and building a multi-asset portfolio - Focus on developing and commercializing novel, non-opioid, and non-addictive therapies for chronic pain[58](index=58&type=chunk) - Advance **JAN101** for **PAD** treatment and explore expansion into new indications[58](index=58&type=chunk) - Intends to retain all commercial rights to **JAN101** in the United States and selectively partner outside of the United States[60](index=60&type=chunk) [Limitations of Current Chronic Pain Therapies](index=20&type=section&id=Current%20Therapeutic%20Approaches%20to%20Treating%20Chronic%20Pain%20and%20Their%20Limitations) Existing chronic pain therapies like **NSAIDs**, corticosteroids, and opioids have significant side effects and addiction risks, creating an unmet need - **NSAIDs** have significant side effects including gastrointestinal bleeding, high blood pressure, and heart problems[66](index=66&type=chunk) - Corticosteroids have numerous serious side effects such as increased infection risk, diabetes, hypertension, and bone density loss[67](index=67&type=chunk) - Opioids, despite being widely prescribed, lead to significant side effects, reduced effectiveness with long-term use, and a high propensity for abuse and addiction, contributing to a national public health emergency[68](index=68&type=chunk) [Soin Therapeutics (JAN123)](index=24&type=section&id=Soin%20Therapeutics) **JanOne** acquired **JAN123**, a novel biphasic low-dose naltrexone formulation for **CRPS**, which has **Orphan Drug Designation** and no **FDA**-approved treatments - **JanOne** acquired **Soin Therapeutics** in **2022**, obtaining **JAN123**, a novel biphasic formulation of **2.0 mg** low-dose naltrexone (**LDN**)[88](index=88&type=chunk)[89](index=89&type=chunk) - **JAN123**'s biphasic release is designed to eliminate vivid and lucid unpleasant dreams associated with rapid **LDN** release[89](index=89&type=chunk) - **CRPS** is a rare, chronic neurologic condition affecting approximately **200,000** patients annually in the US, with no currently approved treatments, and **JAN123** has **Orphan Drug Designation**[88](index=88&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk) [Government Regulation and Market Access](index=32&type=section&id=Government%20Regulation) The biotechnology industry faces extensive **FDA** regulation, and market access depends on third-party payor coverage and reimbursement decisions - The **FDA** and comparable foreign regulatory authorities impose substantial requirements on drug development, manufacture, marketing, and distribution[123](index=123&type=chunk) - **JAN101** and **JAN123** are pursuing the **505(b)(2)** regulatory pathway, which leverages existing drug approvals to expedite development[79](index=79&type=chunk)[106](index=106&type=chunk)[155](index=155&type=chunk) - Market exclusivity provisions (e.g., **5**-year for new chemical entities, **3**-year for new indications, **7**-year for **Orphan Drug Designation**) can delay generic competition[160](index=160&type=chunk) - Sales depend on adequate coverage and reimbursement from third-party payors, who increasingly challenge prices and require pharmacoeconomic studies[161](index=161&type=chunk)[162](index=162&type=chunk) [Recycling Business Disposition](index=41&type=section&id=Recycling) **JanOne** sold its legacy recycling business to **VM7 Corporation** in March **2023**, but subsequently impaired the **$5.3 million** carrying value due to **VM7** ceasing operations - The company operated a recycling business since **1976**, providing turnkey appliance recycling and replacement services for utilities in North America[176](index=176&type=chunk)[177](index=177&type=chunk) - On March **9**, **2023**, **JanOne** sold its Recycling Subsidiaries to **VM7 Corporation**, an entity whose principal is **JanOne**'s Chief Financial Officer[179](index=179&type=chunk)[383](index=383&type=chunk) - **VM7** subsequently ceased operations in **Q4 2023** due to inability to obtain financing, leading **JanOne** to fully impair the **$5.3 million** carrying value of the disposition[188](index=188&type=chunk)[425](index=425&type=chunk) [Technology Business Disposition (GeoTraq)](index=43&type=section&id=Technology) **JanOne** sold its **GeoTraq** subsidiary to **SPYR Technologies** for **$13.5 million** in May **2022**, later impairing the **$9.8 million** promissory note due to **SPYR**'s financial decline - On May **24**, **2022**, **JanOne** sold substantially all assets of its **GeoTraq Inc.** subsidiary to **SPYR Technologies Inc.** for an aggregate purchase price of **$13.5 million**[189](index=189&type=chunk)[390](index=390&type=chunk) - The consideration included **30,000,000** shares of **SPYR** common stock and a five-year promissory note in the principal amount of **$12.6 million**[189](index=189&type=chunk)[390](index=390&type=chunk) - Due to **SPYR**'s probable inability to repay, **JanOne** fully impaired the **$9.8 million** carrying value of the **SPYR** promissory note in fiscal **2023**[189](index=189&type=chunk)[394](index=394&type=chunk)[421](index=421&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) **JanOne** faces risks including biopharmaceutical strategy failure, internal control weaknesses, stock volatility, and biotechnology-specific challenges like regulatory approval uncertainty - Failure to successfully implement the biopharmaceutical business strategy or remediate material weaknesses in internal controls could materially and adversely affect financial performance[192](index=192&type=chunk)[193](index=193&type=chunk)[196](index=196&type=chunk) - The biotechnology business has a limited operating history and is entirely dependent on obtaining regulatory approval and successfully commercializing product candidates like **JAN101** and **JAN123**, which is uncertain and costly[197](index=197&type=chunk)[214](index=214&type=chunk)[220](index=220&type=chunk) - The company is completely dependent on third parties for manufacturing **JAN101** and **JAN123**, posing risks of delays, quality issues, and supply interruptions, and faces challenges in protecting its intellectual property rights against competition and off-label use[199](index=199&type=chunk)[203](index=203&type=chunk)[240](index=240&type=chunk)[246](index=246&type=chunk) [Properties](index=54&type=section&id=Item%202.%20Properties) **JanOne Inc.** significantly reduced its leased office space in Las Vegas, Nevada, to approximately **800 square feet**, effective August **2023** - Reduced leased office space in Las Vegas, Nevada, from **11,000 square feet** to **approximately 800 square feet**[252](index=252&type=chunk) - The reduction was effective August **2023**, due to the winding down of operations of the Recycling Subsidiaries[252](index=252&type=chunk) [Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) Information on legal proceedings is detailed in Note **19**, Commitments and Contingencies, to the Consolidated Financial Statements - Information on legal proceedings is included in Note **19**, Commitments and Contingencies, to the Consolidated Financial Statements[253](index=253&type=chunk) [Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) **JanOne Inc.** has no disclosures related to mine safety - No mine safety disclosures[254](index=254&type=chunk) PART II [Market for Common Equity and Shareholder Matters](index=55&type=section&id=Item%205.%20Market%20for%20Our%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) **JanOne**'s common stock trades on Nasdaq under '**JAN**', with approximately **50** stockholders, and the company does not plan to pay dividends - Common stock trades under the symbol '**JAN**' on The Nasdaq Capital Market[257](index=257&type=chunk) - **Approximately 50 stockholders** of record as of April **8**, **2024**[257](index=257&type=chunk) - The company has not paid dividends on its common stock and does not presently plan to pay dividends for the foreseeable future[258](index=258&type=chunk) [Selected Financial Data](index=55&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable for **JanOne Inc** - Not applicable[259](index=259&type=chunk) [Management's Discussion and Analysis (MD&A)](index=56&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The **MD&A** reviews **JanOne**'s financial condition, highlighting its biopharmaceutical transition, net loss, and going concern doubt due to negative working capital - **JanOne** is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties, having sold its Recycling and **GeoTraq** segments[265](index=265&type=chunk) - The company reported a **net loss from continuing operations of approximately $17.1 million** for fiscal year ended December **30**, **2023**, compared to **net income of approximately $8.0 million** for fiscal year ended December **31**, **2022**[270](index=270&type=chunk)[343](index=343&type=chunk) - As of December **30**, **2023**, the company had cash on hand of **approximately $5,000** and a **net negative working capital of approximately $5.2 million**, raising substantial doubt about its ability to continue as a going concern[289](index=289&type=chunk)[294](index=294&type=chunk)[343](index=343&type=chunk) [Results of Operations Summary](index=57&type=section&id=Results%20of%20Operations) Fiscal **2023** saw a net loss from continuing operations due to impairment charges and increased **SG&A**, partially offset by net income from discontinued operations Statement of Operations Data (in $000's) | Statement of Operations Data: | Fiscal Year Ended Dec 30, 2023 | Fiscal Year Ended Dec 31, 2022 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $— | $— | | Cost of revenues | — | — | | Gross profit | — | — | | Selling, general and administrative expenses | 4,746 | 3,149 | | Impairment charges | 15,100 | — | | Operating loss | (19,846) | (3,149) | | Interest income, net | 2,250 | 468 | | Gain on litigation settlement | — | 1,950 | | Unrealized loss on marketable securities | (926) | (631) | | Gain on reversal of contingency loss | — | 637 | | Other income, net | 998 | 2,124 | | Net (loss) income before provision for income taxes | (17,524) | 1,399 | | Income tax benefit | (429) | (6,621) | | Net (loss) income from continuing operations | (17,095) | 8,020 | | Income from discontinued operations | 10,254 | 5,081 | | Income tax provision for discontinued operations | 971 | 2,109 | | Net income from discontinued operations | 9,283 | 2,972 | | Net (loss) income | $(7,812) | $10,992 | [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) **JanOne** faces severe liquidity constraints with minimal cash and negative working capital, requiring future capital raises to continue operations - As of December **30**, **2023**, cash on hand was **approximately $5,000**[289](index=289&type=chunk) - The company has **total current assets of approximately $350,000** and **total current liabilities of approximately $5.6 million**, resulting in a **net negative working capital of approximately $5.2 million**[294](index=294&type=chunk) - The ability to continue as a going concern is dependent upon the success of future capital raises or structured settlements to fund required testing for **FDA** approval of **JAN123** and day-to-day operations[290](index=290&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As of December **30**, **2023**, **JanOne Inc.** did not engage in market risk-sensitive commodity instruments and is not materially exposed to other market risks - As of December **30**, **2023**, **JanOne Inc.** did not participate in any market risk-sensitive commodity instruments[299](index=299&type=chunk) - The company believes it is not subject in any material way to other forms of market risk, such as foreign currency exchange risk or commodity price risk[299](index=299&type=chunk) [Financial Statements and Supplementary Data](index=63&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents **JanOne**'s audited financial statements for **2023** and **2022**, with auditors noting substantial doubt about going concern - The section includes the Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income (Loss), Consolidated Statements of Changes in Stockholders' Equity (Deficit), and Consolidated Statements of Cash Flows[302](index=302&type=chunk) - Independent auditors issued unqualified opinions on the financial statements for both **2023** and **2022**, but noted substantial doubt about the company's ability to continue as a going concern[304](index=304&type=chunk)[305](index=305&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk) - Critical audit matters for **2022** included the valuation of the **SPYR** promissory note and the purchase price consideration for **Soin Therapeutics**[318](index=318&type=chunk)[321](index=321&type=chunk) [Consolidated Balance Sheets](index=68&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows a significant decrease in total assets and a shift to a stockholders' equity deficit in **2023**, driven by dispositions and impairments Consolidated Balance Sheets (Key Figures, in $000's) | | December 30, 2023 | December 31, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $5 | $61 | | Total current assets | $346 | $9,173 | | Intangible assets-Soin, net | $17,842 | $19,293 | | Note receivable - SPYR, net | $— | $8,974 | | Total assets | $18,487 | $46,756 | | Total current liabilities | $5,905 | $23,938 | | Total liabilities | $7,285 | $29,939 | | Convertible preferred stock, series S | $14,510 | $14,510 | | Total stockholders' equity (deficit) | $(3,308) | $2,307 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=69&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company reported a **net loss of $7.812 million** in fiscal **2023**, a substantial decline from net income in **2022**, primarily from continuing operations Consolidated Statements of Operations (Key Figures, in $000's) | | Fiscal Years Ended Dec 30, 2023 | Fiscal Years Ended Dec 31, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | | Revenues | $— | $— | | Gross profit | $— | $— | | Operating loss | $(19,846) | $(3,149) | | Total other income, net | $2,322 | $4,548 | | Net (loss) income from continuing operations | $(17,095) | $8,020 | | Net income from discontinued operations | $9,283 | $2,972 | | Net (loss) income | $(7,812) | $10,992 | | Net (loss) income per share, basic and diluted | $(1.95) | $3.49 | [Consolidated Statements of Cash Flows](index=71&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Fiscal **2023** saw net cash provided by operating activities, but overall a decrease in cash and cash equivalents due to investing and financing activities Consolidated Statements of Cash Flows (Summary, in $000's) | | Fiscal Years Ended Dec 30, 2023 | Fiscal Years Ended Dec 31, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by (used in) operating activities | $1,463 | $(3,057) | | Net cash used in investing activities | $(155) | $(1,509) | | Net cash (used in) provided by financing activities | $(1,435) | $3,979 | | Decrease in cash and cash equivalents | $(110) | $(591) | | Cash and cash equivalents, beginning of period | $115 | $705 | | Cash and cash equivalents, end of period | $5 | $61 | [Notes to Consolidated Financial Statements](index=72&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail financial context, including going concern uncertainty, impairment of notes receivable, related party transactions, and subsequent events - Substantial doubt exists about the company's ability to continue as a going concern due to negative working capital and operating losses, requiring future capital raises[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - The company fully impaired the **$9.8 million SPYR** promissory note and the **$5.3 million VM7** note receivable in fiscal **2023** due to repayment uncertainties following the cessation of operations by the respective counterparties[394](index=394&type=chunk)[421](index=421&type=chunk)[425](index=425&type=chunk) - Related party transactions include shared services with **Live Ventures** and a guaranteed **ICG Note**, with liabilities for these reverting to **JanOne** following the disposition of the Recycling Subsidiaries[473](index=473&type=chunk)[475](index=475&type=chunk)[477](index=477&type=chunk) - Subsequent events include a warrant purchase agreement, an amendment to the **Soin** acquisition agreement to convert a tranche to cash payments, amendments to related party promissory obligations to add convertibility, new promissory notes, unit purchase agreements for equity financing, and a consulting agreement with Jon Isaac[505](index=505&type=chunk)[506](index=506&type=chunk)[507](index=507&type=chunk)[508](index=508&type=chunk)[509](index=509&type=chunk)[510](index=510&type=chunk) [Changes in and Disagreements with Accountants](index=105&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) **JanOne Inc.** reported no changes in or disagreements with accountants on accounting and financial disclosure matters - None[516](index=516&type=chunk) [Controls and Procedures](index=105&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December **30**, **2023**, due to material weaknesses, but financial statements are fairly presented, with remediation underway - Disclosure controls and procedures were not effective as of December **30**, **2023**[517](index=517&type=chunk) - Material weaknesses identified include insufficient written documentation of internal control policies and procedures and inadequate resources for segregation of duties[521](index=521&type=chunk) - Management concluded that the consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash flows[518](index=518&type=chunk) - Remediation plans include improving documentation and developing an internal testing plan, expected to be completed during fiscal year **2024**[521](index=521&type=chunk) [Other Information](index=107&type=section&id=Item%209B.%20Other%20Information) **JanOne Inc.** reported no other information required under this item - None[525](index=525&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=107&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) **JanOne Inc.** has no disclosures regarding foreign jurisdictions that prevent inspections - None[526](index=526&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=108&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) This section outlines **JanOne**'s Board and executive officers, including their backgrounds, and details the company's corporate governance framework - Key executive officers include Tony Isaac (President and **CEO**) and Virland A. Johnson (Chief Financial Officer)[529](index=529&type=chunk) - Virland A. Johnson, the Chief Financial Officer, filed for protection under Chapter **7** of the U.S. Bankruptcy Code in January **2024**[534](index=534&type=chunk) - The company has a Code of Ethics and three key committees (Audit, Compensation, Governance) comprised entirely of independent directors, with Richard D. Butler, Jr. serving as Chair for both Audit and Compensation Committees and identified as an 'audit committee financial expert'[537](index=537&type=chunk)[538](index=538&type=chunk)[539](index=539&type=chunk)[541](index=541&type=chunk) [Executive Compensation](index=111&type=section&id=Item%2011.%20Executive%20Compensation) This section details compensation for **JanOne**'s named executive officers and non-employee directors for fiscal years **2023** and **2022** Summary Compensation Table (Named Executive Officers) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Award ($) | Option Award ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :-------------- | :--------------- | :------------------------- | :-------- | | Tony Isaac | 2023 | 617,709 | — | 200,000 | — | — | 817,709 | | President, Chief Executive Officer, and Secretary | 2022 | 550,324 | 75,000 | — | — | — | 625,324 | | Virland A. Johnson | 2023 | 224,346 | — | 125,000 | — | — | 349,346 | | Chief Financial Officer | 2022 | 250,324 | — | — | — | — | 250,324 | - The company uses stock options, restricted stock awards, and restricted stock units under its **2011**, **2016**, and **2023** Equity Incentive Plans to attract and retain executives, directors, consultants, and key employees[546](index=546&type=chunk) Non-Management Director Compensation for Fiscal Year Ended December 30, 2023 | Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :-------------------- | :------------------------------ | :---------------- | :------------------------- | :-------- | | John Bitar | 18,000 | — | — | 18,000 | | Richard D. Butler, Jr. | 30,000 | — | — | 30,000 | | Nael Hajjar | 14,400 | — | — | 14,400 | [Security Ownership](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) This section details beneficial ownership of **JanOne**'s common and preferred stock by directors, executive officers, and significant shareholders Beneficial Ownership of Common Stock (as of April 8, 2024) | Beneficial Owner | Position with Company | Number of Shares Beneficially Owned | Percent of Outstanding Common | | :---------------- | :-------------------- | :---------------------------------- | :---------------------------- | | Tony Isaac | President, CEO, Secretary | 94,000 | 1.1% | | Virland A. Johnson | CFO | — | * | | Richard D. Butler, Jr. | Director | 18,000 | * | | John Bitar | Director | 2,000 | * | | Nael Hajjar | Director | — | * | | All Executive Officers and Directors as a group (5 persons) | — | 114,000 | 1.3% | | Michael Bigger | — | 361,000 | 4.2% | Beneficial Ownership of Series A-1 Convertible Preferred Stock (as of April 8, 2024) | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage Outstanding Series A Preferred | | :----------------------- | :---------------------------------- | :-------------------------------------- | | Greenfield Investments, LTD. | 137,730 | 100% | Beneficial Ownership of Series S Preferred Stock (as of April 8, 2024) | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Outstanding Series S Preferred | | :----------------------- | :---------------------------------------- | :----------------------------- | | Amol Soin, MD | 100,000 | 100% | [Related Party Transactions and Director Independence](index=114&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section details **JanOne**'s related party transactions, primarily with **Live Ventures** and **Isaac Capital Group**, and the Audit Committee's oversight - **JanOne** shares executive, accounting, and legal services with **Live Ventures**, **totaling approximately $203,000** in fiscal year **2023**[558](index=558&type=chunk) - The **ICG Note**, a secured revolving line of credit from **Isaac Capital Group** (managed by **CEO** Tony Isaac's son), is guaranteed by **JanOne**, with an **outstanding balance of approximately $706,000** as of December **30**, **2023**[562](index=562&type=chunk) - Due to the winding down of the Recycling Subsidiaries, **outstanding liabilities for shared rent and services ($258,000)** and the **ICG Note ($690,000 principal)** reverted to **JanOne**[561](index=561&type=chunk)[562](index=562&type=chunk) - The Audit Committee reviews and recommends for approval all related party transactions[557](index=557&type=chunk) [Principal Accounting Fees and Services](index=116&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section provides a breakdown of fees billed by **JanOne**'s independent registered public accounting firms for audit and other services Accounting Fees and Services (in $) | Description | December 30, 2023 | December 31, 2022 | | :---------------- | :---------------- | :---------------- | | Audit fees | 295,508 | 353,500 | | Audit-related Fees | — | — | | Tax fees | — | 40,800 | | All other fees | — | 4,000 | | Total | 295,508 | 398,300 | - All non-audit services provided by the independent registered public accounting firm were pre-approved by the Audit Committee[568](index=568&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, indicates no schedules, and provides a comprehensive index of exhibits filed with the Form **10**-**K** - The item includes Financial Statements (as per Item **8**) and a comprehensive Index to Exhibits[576](index=576&type=chunk)[577](index=577&type=chunk) - No financial statement schedules are included[576](index=576&type=chunk) [Form 10-K Summary](index=117&type=section&id=Item%2016.%20Form%2010-K%20Summary) **JanOne Inc.** has not provided a summary for its Form **10**-**K** - None[575](index=575&type=chunk) [Signatures](index=128&type=section&id=Signatures) The Form **10**-**K** report is officially signed by **JanOne Inc.**'s **CEO**, **CFO**, and Board of Directors on April **8**, **2024** - The report is signed by Tony Isaac (Chief Executive Officer) and Virland A. Johnson (Chief Financial Officer)[591](index=591&type=chunk)[592](index=592&type=chunk) - Additional signatures include directors Tony Isaac, Richard Butler, John Bitar, and Nael Hajjar[592](index=592&type=chunk) - The report was signed on April **8**, **2024**[591](index=591&type=chunk)

[Company Information](index=1&type=section&id=Company%20Information) [Registrant Details](index=1&type=section&id=Registrant%20Details) JanOne Inc., a Nevada corporation, is listed on the Nasdaq Capital Market under the ticker JAN, classified as a non-accelerated filer and smaller reporting company, with 4,957,647 common shares outstanding as of November 11, 2023 - Company Name: **JANONE INC.**[2](index=2&type=chunk) - Place of Incorporation: **Nevada**[2](index=2&type=chunk) Registrant Details | Metric | Detail | | :--- | :--- | | Ticker Symbol | JAN | | Registered Exchange | Nasdaq Capital Market | | Filing Status | Non-accelerated Filer, Smaller Reporting Company | | Shares Outstanding (As of Nov 11, 2023) | 4,957,647 shares | [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents JanOne Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes covering company background, accounting policies, discontinued operations, notes receivable, intangible assets, liabilities, income taxes, commitments and contingencies, stockholders' equity, earnings per share, segment information, and related party transactions [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (As of September 30, 2023 and December 31, 2022) | Metric (in thousands) | September 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | 413 | 61 | | Trade and other receivables, net | 19 | 106 | | Prepaids and other current assets | 85 | 394 | | Current assets of discontinued operations | — | 8,612 | | **Total current assets** | **517** | **9,173** | | Intangible assets - Soin, net | 18,204 | 19,293 | | Other intangible assets, net | 4 | 4 | | Notes receivable - SPYR, net | 9,578 | 8,974 | | Notes receivable - VM7, net | 5,600 | — | | Marketable securities | 222 | 315 | | Deposits and other assets | 364 | 18 | | Other assets of discontinued operations | — | 8,979 | | **Total assets** | **34,489** | **46,756** | | **Liabilities and Stockholders' Equity:** | | | | Accounts payable | 2,261 | 2,276 | | Accrued liabilities - other | 243 | 1,006 | | Short-term debt | — | 274 | | Current liabilities of discontinued operations | — | 20,382 | | **Total current liabilities** | **2,504** | **23,938** | | Deferred income taxes, net | 2,942 | — | | Other non-current liabilities | 35 | 241 | | Non-current liabilities of discontinued operations | — | 5,760 | | **Total liabilities** | **5,481** | **29,939** | | Mezzanine Equity: | | | | Convertible preferred stock, Series S | 14,510 | 14,510 | | Stockholders' Equity: | | | | Common stock | 3 | 2 | | Additional paid-in capital | 47,323 | 45,748 | | Accumulated deficit | (32,828) | (42,822) | | Accumulated other comprehensive loss | — | (621) | | **Total stockholders' equity** | **14,498** | **2,307** | | **Total liabilities and stockholders' equity** | **34,489** | **46,756** | - As of September 30, 2023, total assets were **$34,489 thousand**, a **26.2% decrease** from **$46,756 thousand** on December 31, 2022, primarily due to reduced current and other assets from discontinued operations[9](index=9&type=chunk) - Total liabilities significantly decreased by **81.7%** to **$5,481 thousand** as of September 30, 2023, from **$29,939 thousand** on December 31, 2022, mainly due to the divestiture of current and non-current liabilities from discontinued operations[9](index=9&type=chunk) - Stockholders' equity increased by **528.4%** to **$14,498 thousand** as of September 30, 2023, from **$2,307 thousand** on December 31, 2022, driven by a reduction in accumulated deficit and an increase in additional paid-in capital[9](index=9&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Condensed Consolidated Statements of Operations and Comprehensive Income (For the 13 and 39 Weeks Ended September 30, 2023 and October 1, 2022) | Metric (in thousands) | 13 Weeks Ended Sep 30, 2023 | 13 Weeks Ended Oct 1, 2022 | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | — | — | — | — | | Selling, general and administrative expenses | 764 | 611 | 2,923 | 1,950 | | Operating loss | (764) | (611) | (2,923) | (1,950) | | Net interest income | 758 | 410 | 1,598 | 575 | | Unrealized loss on marketable securities | (267) | (270) | (514) | (646) | | Other income, net | 6 | 688 | 745 | 2,043 | | Income (loss) from continuing operations before income taxes | (267) | 217 | (1,094) | 2,609 | | Income tax benefit | (25) | — | (269) | — | | Net income (loss) from continuing operations | (242) | 217 | (825) | 2,609 | | Income (loss) from discontinued operations | — | (2,182) | 13,976 | 5,518 | | Income tax provision (benefit) from discontinued operations | (28) | 16 | 3,158 | 23 | | Net income (loss) from discontinued operations | 28 | (2,198) | 10,818 | 5,495 | | **Net income (loss)** | **(214)** | **(1,981)** | **9,993** | **8,104** | | **Net income (loss) per share (Basic):** | | | | | | Continuing operations | (0.06) | 0.07 | (0.22) | 0.83 | | Discontinued operations | 0.01 | (0.70) | 2.93 | 1.74 | | **Total** | **(0.05)** | **(0.63)** | **2.71** | **2.57** | | **Net income (loss) per share (Diluted):** | | | | | | Continuing operations | (0.06) | 0.07 | (0.22) | 0.75 | | Discontinued operations | 0.01 | (0.70) | 2.93 | 1.57 | | **Total** | **(0.05)** | **(0.63)** | **2.71** | **2.32** | - For the 13 weeks ended September 30, 2023, the company's net loss significantly narrowed to **$214 thousand** from a **$1,981 thousand** loss in the prior-year period, primarily due to a shift in net income from discontinued operations from a **$2,198 thousand** loss to a **$28 thousand** gain[10](index=10&type=chunk) - For the 39 weeks ended September 30, 2023, the company achieved a net income of **$9,993 thousand**, a **23.3% increase** from **$8,104 thousand** in the prior-year period, mainly driven by a substantial increase in net income from discontinued operations from **$5,495 thousand** to **$10,818 thousand**[10](index=10&type=chunk) - Operating loss from continuing operations expanded for both the 13-week and 39-week periods, increasing from **$611 thousand** to **$764 thousand** and from **$1,950 thousand** to **$2,923 thousand**, respectively, primarily due to higher selling, general, and administrative expenses[10](index=10&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (For the 39 Weeks Ended September 30, 2023 and October 1, 2022) | Cash Flow Activities (in thousands) | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | (825) | 2,609 | | Operating cash flow from discontinued operations | 2,320 | (2,707) | | **Net cash provided by (used in) operating activities** | **1,872** | **(2,391)** | | Cash flow used in investing activities from discontinued operations | (156) | (950) | | **Net cash used in investing activities** | **(156)** | **(950)** | | Net proceeds from equity financing | 792 | — | | Exercise of warrants | 259 | — | | Financing cash flow from discontinued operations | (2,212) | 3,386 | | **Net cash provided by (used in) financing activities** | **(1,435)** | **3,504** | | Increase in cash and cash equivalents | 298 | 163 | | Cash and cash equivalents at beginning of period | 115 | 705 | | Cash and cash equivalents at end of period | 413 | 434 | - For the 39 weeks ended September 30, 2023, operating activities provided **$1,872 thousand** in cash, compared to using **$2,391 thousand** in the prior-year period, primarily due to **$2,320 thousand** in cash flow from discontinued operations[12](index=12&type=chunk) - Cash outflow from investing activities decreased from **$950 thousand** in the prior-year period to **$156 thousand** for the 39 weeks ended September 30, 2023, mainly related to reduced asset purchases by discontinued operations[12](index=12&type=chunk) - Financing activities shifted from providing **$3,504 thousand** in the prior-year period to using **$1,435 thousand**, primarily due to debt repayment by discontinued operations, partially offset by proceeds from equity financing and warrant exercises[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (As of September 30, 2023 and October 1, 2022) | Metric (in thousands) | Balance as of Dec 31, 2022 | Balance as of Sep 30, 2023 | | :--- | :--- | :--- | | Series A-1 Preferred Stock shares | 222,588 | 193,730 | | Common Stock shares | 3,150,230 | 4,957,647 | | Common Stock amount | 2 | 3 | | Additional Paid-in Capital | 45,748 | 47,323 | | Accumulated Deficit | (42,822) | (32,828) | | Accumulated Other Comprehensive Loss | (621) | — | | **Total Stockholders' Equity** | **2,307** | **14,498** | | Metric (in thousands) | Balance as of Jan 1, 2022 | Balance as of Oct 1, 2022 | | :--- | :--- | :--- | | Series A-1 Preferred Stock shares | 238,729 | 222,588 | | Common Stock shares | 2,827,410 | 3,150,230 | | Common Stock amount | 2 | 3 | | Additional Paid-in Capital | 45,743 | 45,747 | | Accumulated Deficit | (53,804) | (45,708) | | Accumulated Other Comprehensive Loss | (617) | (617) | | **Total Stockholders' Equity** | **(8,676)** | **(575)** | - As of September 30, 2023, total stockholders' equity increased significantly to **$14,498 thousand** from **$2,307 thousand** on December 31, 2022, primarily due to a reduction in accumulated deficit from **($42,822) thousand** to **($32,828) thousand** and an increase in additional paid-in capital[13](index=13&type=chunk) - Outstanding common shares increased to **4,957,647** as of September 30, 2023, from **2,827,410** on December 31, 2022, mainly due to common stock issued through equity financing and warrant exercises[13](index=13&type=chunk)[79](index=79&type=chunk) - A-1 Series Preferred Stock shares decreased from **222,588** on December 31, 2022, to **193,730** on September 30, 2023, primarily due to conversions and forfeitures related to legal settlements[13](index=13&type=chunk)[85](index=85&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1: Background](index=9&type=section&id=Note%201:%20Background) JanOne Inc. has shifted its business focus to biotechnology, developing non-addictive pain medications, particularly JAN123 for Complex Regional Pain Syndrome (CRPS), having divested its recycling and technology business segments which are now reported as discontinued operations, and faces substantial doubt about its ability to continue as a going concern, relying on future financing and FDA approvals to support operations and product development - The company currently operates in three segments: Biotechnology, Recycling, and Technology, with the Recycling and Technology segments reported as discontinued operations[18](index=18&type=chunk) - The Biotechnology segment focuses on developing non-addictive drugs for severe pain, acquiring Soin Therapeutics LLC and its product JAN123 for CRPS, which received FDA orphan drug designation, on December 28, 2022[19](index=19&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern, with a net loss from continuing operations of approximately **$754 thousand** and a working capital deficit of **$1.9 million** as of September 30, 2023, planning to fund operations and JAN123/JAN101 development through existing cash, subsidiary sale proceeds, Employee Retention Credits (ERC), and future financing[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=10&type=section&id=Note%202:%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of the company's financial statement preparation, adhering to U.S. GAAP and Form 10-Q requirements, consolidating wholly-owned subsidiaries, reclassifying prior period balances, and involving management estimates, with the adoption of ASU No. 2016-13 having no material impact to date - Financial statements are prepared in accordance with U.S. GAAP and Form 10-Q instructions, including normal recurring adjustments deemed necessary by management[27](index=27&type=chunk) - The company consolidates its wholly-owned subsidiaries and has reclassified amounts related to discontinued operations[28](index=28&type=chunk)[29](index=29&type=chunk) - Significant estimates include the fair value of the GeoTraq note, Series S convertible preferred stock issued in the Soin merger, receivables related to the ARCA sale, and impairment analysis of intangible and long-lived assets[31](index=31&type=chunk) - The company adopted ASU No. 2016-13 (Financial Instruments – Credit Losses), which had no material impact on the consolidated financial statements as of September 30, 2023[33](index=33&type=chunk) [Note 3: Discontinued Operations](index=11&type=section&id=Note%203:%20Discontinued%20Operations) The company sold its recycling business (ARCA Recycling and subsidiaries) to VM7 Corporation on March 9, 2023 (retroactive to March 1, 2023), and its technology business (GeoTraq) to SPYR Technologies Inc. on May 24, 2022, with the assets, liabilities, operating results, and cash flows of these businesses separately presented as discontinued operations in the financial statements - The company sold its recycling business (ARCA Recycling, Customer Connexx LLC, and ARCA Canada Inc.) to VM7 Corporation on March 9, 2023, retroactive to March 1, 2023[34](index=34&type=chunk) - The company sold substantially all assets of its technology business (GeoTraq Inc.) to SPYR Technologies Inc. on May 24, 2022[35](index=35&type=chunk) Assets and Liabilities of Discontinued Operations (As of December 31, 2022) | Metric (in thousands) | December 31, 2022 | | :--- | :--- | | **Assets of Discontinued Operations:** | | | Cash and cash equivalents | 53 | | Trade and other receivables, net | 7,816 | | Inventory | 366 | | Prepaids and other current assets | 377 | | **Total current assets of discontinued operations** | **8,612** | | Property and equipment, net | 2,705 | | Right-of-use assets - operating leases | 5,290 | | Intangible assets, net | 735 | | Deposits and other assets | 249 | | **Total other assets of discontinued operations** | **8,979** | | **Total assets of discontinued operations** | **17,591** | | **Liabilities of Discontinued Operations:** | | | Accounts payable | 4,423 | | Accrued liabilities - other | 3,278 | | Accrued liabilities - California sales tax | 6,264 | | Lease liabilities short-term - operating leases | 1,631 | | Short-term debt | 4,172 | | Current portion of notes payable | 381 | | Related party notes | 233 | | **Total current liabilities of discontinued operations** | **20,382** | | Lease liabilities long-term - operating leases | 3,816 | | Notes payable - long-term portion | 1,339 | | Long-term portion of related party notes payable | 605 | | **Total non-current liabilities of discontinued operations** | **5,760** | | **Total liabilities of discontinued operations** | **26,142** | Operating Results of Discontinued Operations (For the 13 and 39 Weeks Ended September 30, 2023 and October 1, 2022) | Metric (in thousands) | 13 Weeks Ended Sep 30, 2023 | 13 Weeks Ended Oct 1, 2022 | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | — | 8,587 | 3,795 | 28,449 | | Selling, general and administrative expenses | — | 2,248 | 1,469 | 6,761 | | Gain on sale of GeoTraq | — | — | (15,824) | (10,241) | | Operating income (loss) | — | (1,214) | 14,158 | 8,016 | | Income (loss) before income taxes | — | (2,182) | 13,976 | 5,518 | | Income tax provision (benefit) | (28) | 16 | 3,158 | 23 | | **Net income (loss) from discontinued operations** | **28** | **(2,198)** | **10,818** | **5,495** | Cash Flows of Discontinued Operations (For the 39 Weeks Ended September 30, 2023 and October 1, 2022) | Cash Flow Activities (in thousands) | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 2,320 | (2,707) | | Net cash used in investing activities | (156) | (950) | | Net cash used in financing activities | (2,212) | 3,386 | | Cash and cash equivalents at end of period | — | 433 | [Note 4: Trade and other receivables](index=16&type=section&id=Note%204:%20Trade%20and%20other%20receivables) As of September 30, 2023, the company's net trade and other receivables were **$19 thousand**, a significant decrease from **$7,922 thousand** on December 31, 2022, primarily because receivables from discontinued operations are no longer reported Trade and Other Receivables (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade and other receivables from discontinued operations, net | — | 7,816 | | Other receivables | 19 | 106 | | **Trade and other receivables, net** | **19** | **7,922** | [Note 5: Prepaids and other current assets](index=17&type=section&id=Note%205:%20Prepaids%20and%20other%20current%20assets) As of September 30, 2023, the company's prepaids and other current assets totaled **$85 thousand**, a notable reduction from **$771 thousand** on December 31, 2022, mainly due to the exclusion of prepaid expenses from discontinued operations Prepaids and Other Current Assets (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Prepaid insurance | — | 364 | | Other prepaids | 85 | 30 | | Prepaids from discontinued operations | — | 377 | | **Total prepaids and other current assets** | **85** | **771** | [Note 6: Notes receivable](index=17&type=section&id=Note%206:%20Notes%20receivable) The company holds two notes receivable from SPYR and VM7; the SPYR note, with an initial principal of **$12.6 million**, had a net discounted value of **$9.5 million** and a net carrying value of approximately **$9.6 million** as of September 30, 2023, while the VM7 note, from the sale of ARCA Recycling and subsidiaries with a minimum total consideration of **$24.0 million**, was valued at a present value of **$6.0 million** using a 20% discount rate and had a net carrying value of approximately **$5.6 million** as of September 30, 2023, with discount amortization for both notes recognized as interest income - The SPYR note, originating from the GeoTraq asset sale on May 24, 2022, has an initial principal of **$12.6 million**, an 8% annual interest rate, and matures on May 24, 2027; initially valued at **$9.5 million**, the approximately **$3.2 million** discount is amortized into interest income, with a net carrying value of approximately **$9.6 million** as of September 30, 2023[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - The VM7 note, from the sale of ARCA Recycling and subsidiaries on March 9, 2023, has a minimum total consideration of **$24.0 million** (annual payments of **$1.6 million** over 15 years); the company valued it at a present value of approximately **$6.0 million** using a 20% discount rate, with the approximately **$18.0 million** discount amortized into interest income, and a net carrying value of approximately **$5.6 million** as of September 30, 2023[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) Notes Receivable Discount Amortization Recognized as Interest Income (in thousands) | Note Source | 13 Weeks Ended Sep 30, 2023 | 13 Weeks Ended Oct 1, 2022 | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | SPYR Note Discount Amortization | 201 | 65 | 604 | 65 | | VM7 Note Discount Amortization | 303 | 0 | 417 | 0 | [Note 7: Intangible Assets](index=18&type=section&id=Note%207:%20Intangible%20Assets) As of September 30, 2023, the company's total intangible assets were **$18,208 thousand**, primarily comprising intangible assets acquired in the Soin acquisition, with discontinued operations' intangible assets no longer reported, and amortization expenses for continuing operations significantly increasing in the first three quarters of 2023 Intangible Assets (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Patents and domain names | 4 | 4 | | Soin intangible assets | 19,293 | 19,293 | | Computer software | — | 3,563 | | Intangible assets of discontinued operations | — | 735 | | **Total intangible assets** | **19,297** | **23,595** | | Less: Accumulated amortization | (1,089) | (3,563) | | **Total intangible assets, net** | **18,208** | **20,032** | - Soin intangible assets include three pending patents related to methods of treating chronic pain with low-dose naltrexone, the final naltrexone formulation, and FDA orphan drug designation[58](index=58&type=chunk) Amortization Expense for Intangible Assets from Continuing Operations (in thousands) | Period | Amortization Expense | | :--- | :--- | | 13 Weeks Ended Sep 30, 2023 | 363 | | 13 Weeks Ended Oct 1, 2022 | 0 | | 39 Weeks Ended Sep 30, 2023 | 1,100 | | 39 Weeks Ended Oct 1, 2022 | 0 | [Note 8: Deposits and other assets](index=18&type=section&id=Note%208:%20Deposits%20and%20other%20assets) As of September 30, 2023, the company's deposits and other assets increased to **$364 thousand** from **$267 thousand** on December 31, 2022, primarily due to an increase in other assets Deposits and Other Assets (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Deposits and other assets of discontinued operations | — | 249 | | Other | 364 | 18 | | **Total deposits and other assets** | **364** | **267** | [Note 9: Accrued Liabilities](index=18&type=section&id=Note%209:%20Accrued%20Liabilities) As of September 30, 2023, the company's accrued liabilities significantly decreased to **$243 thousand** from **$4,284 thousand** on December 31, 2022, mainly due to the exclusion of accrued expenses from discontinued operations and a reduction in accrued litigation settlements Accrued Liabilities (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Compensation and benefits | 51 | 81 | | Accrued warranty | — | 130 | | Accrued taxes | 146 | 5 | | Accrued litigation settlement | — | 510 | | Other | 46 | 280 | | Accrued expenses of discontinued operations | — | 3,278 | | **Total accrued expenses** | **243** | **4,284** | [Note 10: Income Taxes](index=19&type=section&id=Note%2010:%20Income%20Taxes) The company recorded an income tax benefit from continuing operations of **$269 thousand** for the first three quarters of 2023, compared to zero in the prior-year period, while discontinued operations recorded an income tax expense of **$3.2 million** for the same period, resulting in an overall effective tax rate of **30.3%** for the first three quarters of 2023 Income Tax Benefit/Expense (in thousands) | Period | Income Tax Benefit from Continuing Operations | Income Tax Benefit/Expense from Discontinued Operations | | :--- | :--- | :--- | | 13 Weeks Ended Sep 30, 2023 | 25 | 28 | | 13 Weeks Ended Oct 1, 2022 | — | (16) | | 39 Weeks Ended Sep 30, 2023 | 269 | (3,158) | | 39 Weeks Ended Oct 1, 2022 | — | (23) | - The company's overall effective tax rate for the first three quarters of 2023 was **30.3%**, compared to **0.23%** in the prior-year period[59](index=59&type=chunk) [Note 11: Short-Term Debt](index=19&type=section&id=Note%2011:%20Short-Term%20Debt) As of September 30, 2023, the company had no short-term debt, a decrease from **$274 thousand** on December 31, 2022, primarily because the AFCO Finance agreement matured in fiscal year 2023 and was not renewed Short-Term Debt (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | AFCO Finance | — | 274 | | **Total short-term debt** | **—** | **274** | - The company entered into a financing agreement with AFCO Credit Corporation in July 2022 to fund insurance premiums totaling approximately **$516 thousand** at an interest rate of approximately **6.0%**, which concluded on April 1, 2023, with no such financing agreements entered into during fiscal year 2023[61](index=61&type=chunk) [Note 12: Commitments and Contingencies](index=19&type=section&id=Note%2012:%20Commitments%20and%20Contingencies) The company faces multiple legal proceedings and commitments, including an SEC complaint, a contract dispute with Skybridge Americas Inc., a GeoTraq-related settlement agreement, the Sieggreen class action lawsuit, Main/270 lease guarantee disputes, and Westerville Square lease disputes, with the GeoTraq settlement agreement fully repaid as of September 30, 2023 - The company and its CFO, Virland Johnson, are defendants in an SEC complaint alleging securities law violations; the company strongly denies the allegations and is actively defending itself, though a motion to dismiss was denied and discovery has resumed[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - A contract dispute with Skybridge Americas Inc. resulted in a judgment against the company for approximately **$715 thousand** plus **$475 thousand** in attorney fees, with approximately **$382 thousand** of the statutory interest obligation assumed by the buyer in the ARCA and subsidiaries disposition transaction[66](index=66&type=chunk) - The GeoTraq-related settlement agreement, totaling **$1.95 million**, was fully repaid as of September 30, 2023, through cash and conversion of Series A-1 Preferred Stock into common stock[68](index=68&type=chunk)[69](index=69&type=chunk) - The company is a defendant in the Sieggreen class action lawsuit alleging securities exchange act violations, for which a motion to dismiss has been filed, and also faces lease guarantee disputes for Main/270 and Westerville Square, with the Westerville Square dispute settled for **$110 thousand** on June 4, 2023[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 13: Stockholders' Equity](index=21&type=section&id=Note%2013:%20Stockholders'%20Equity) This note details changes in the company's common stock, stock options, and Series A-1 Preferred Stock; as of September 30, 2023, common shares outstanding increased to **4,957,647** primarily through registered direct offerings and warrant exercises, **114,000** options are outstanding under the stock option plan, and Series A-1 Preferred Stock decreased due to conversions related to legal settlements - As of September 30, 2023, the company had **4,957,647** common shares outstanding, an increase from **2,827,410** on December 31, 2022[79](index=79&type=chunk) - In the first three quarters of 2023, the company raised approximately **$1.212 million** (before fees) through two registered direct offerings and issued warrants to purchase **899,348** common shares[77](index=77&type=chunk)[78](index=78&type=chunk) Stock Option Activity | Metric | January 1, 2022 | December 31, 2022 | September 30, 2023 | | :--- | :--- | :--- | :--- | | Number of options outstanding | 117,500 | 110,000 | 114,000 | | Weighted average exercise price | $7.16 | $6.27 | $5.68 | | Number of options granted | — | — | 10,000 | | Number of options canceled/expired | (7,500) | — | (6,000) | - As of September 30, 2023, Series A-1 Preferred Stock outstanding decreased to **193,730** shares from **222,588** on December 31, 2022, primarily due to conversions into common stock for legal settlements[85](index=85&type=chunk) [Note 14: Mezzanine Equity](index=23&type=section&id=Note%2014:%20Mezzanine%20Equity) As part of the consideration for acquiring Soin Therapeutics through a merger on December 28, 2022, the company issued **100,000** shares of Series S convertible preferred stock, each convertible into common stock on a 1:1 basis, with **100,000** shares remaining outstanding as of September 30, 2023 - The company issued **100,000** shares of Series S convertible preferred stock, convertible into common stock on a 1:1 basis, for the acquisition of Soin Therapeutics[86](index=86&type=chunk) - As of September 30, 2023, and December 31, 2022, **100,000** shares of Series S convertible preferred stock remained outstanding[86](index=86&type=chunk) [Note 15: Earnings Per Share](index=23&type=section&id=Note%2015:%20Earnings%20Per%20Share) This note provides basic and diluted earnings per share calculations, separately presenting EPS for continuing and discontinued operations; for the 39 weeks ended September 30, 2023, both basic and diluted EPS were **$2.71**, primarily driven by the positive impact of income from discontinued operations Basic and Diluted Earnings Per Share (in thousands, except per share data) | Metric | 13 Weeks Ended Sep 30, 2023 | 13 Weeks Ended Oct 1, 2022 | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | **EPS from Continuing Operations (Basic):** | (0.06) | 0.07 | (0.22) | 0.83 | | **EPS from Continuing Operations (Diluted):** | (0.06) | 0.07 | (0.22) | 0.75 | | **EPS from Discontinued Operations (Basic):** | 0.01 | (0.70) | 2.93 | 1.74 | | **EPS from Discontinued Operations (Diluted):** | 0.01 | (0.70) | 2.93 | 1.57 | | **Total EPS (Basic):** | (0.05) | (0.63) | 2.71 | 2.57 | | **Total EPS (Diluted):** | (0.05) | (0.63) | 2.71 | 2.32 | | **Weighted Average Common Shares Outstanding (Basic):** | 4,198,940 | 3,150,230 | 3,687,896 | 3,150,230 | | **Weighted Average Common Shares Outstanding (Diluted):** | 4,198,940 | 3,150,230 | 3,687,896 | 3,496,003 | - For the 39 weeks ended September 30, 2023, continuing operations reported a loss per share of **$0.22** (basic and diluted), compared to earnings per share of **$0.83** (basic) and **$0.75** (diluted) in the prior-year period[88](index=88&type=chunk) - For the 39 weeks ended September 30, 2023, discontinued operations reported earnings per share of **$2.93** (basic and diluted), a significant increase from **$1.74** (basic) and **$1.57** (diluted) in the prior-year period[88](index=88&type=chunk) - As of September 30, 2023, **114,000** potentially dilutive securities and **193,730** shares of Series A-1 Preferred Stock (convertible into approximately **3.9 million** common shares), along with **100,000** shares of Series S Preferred Stock (convertible into **100,000** common shares), were excluded from diluted EPS calculations due to their anti-dilutive effect or contractual restrictions[89](index=89&type=chunk) [Note 16: Segment Information](index=24&type=section&id=Note%2016:%20Segment%20Information) The company currently conducts continuing operations through its Biotechnology segment, focused on developing non-opioid pain medications, while the Recycling and Technology segments are reported as discontinued operations, with the chief operating decision maker assessing performance and allocating resources based on each segment's sales and operating income - The company's continuing operations are currently conducted through its Biotechnology segment, which began operations in September 2019 and focuses on developing novel solutions for pain treatment[90](index=90&type=chunk) - The Recycling and Technology segments are reported as discontinued operations, with their products, services, and customer base significantly differing from the Biotechnology segment[90](index=90&type=chunk) Segment Operating Income/Loss (in thousands) | Metric | 13 Weeks Ended Sep 30, 2023 | 13 Weeks Ended Oct 1, 2022 | 39 Weeks Ended Sep 30, 2023 | 39 Weeks Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Biotechnology Segment:** | | | | | | Revenue | — | — | — | — | | Operating income (loss) | (764) | (611) | (2,923) | (1,950) | | Depreciation and amortization | 363 | — | 1,090 | — | | Net interest income (expense) | (758) | (410) | (1,598) | (575) | | Net income (loss) before income taxes | (267) | 217 | (1,094) | 2,609 | | **Discontinued Operations:** | | | | | | Revenue | — | 8,587 | 3,795 | 28,449 | | Operating income (loss) | — | (1,214) | 14,158 | 8,016 | | Depreciation and amortization | — | 77 | 96 | 347 | | Net interest income (expense) | — | 280 | 181 | 698 | | Net income (loss) before income taxes | — | (2,182) | 13,976 | 5,518 | [Note 17: Related Parties](index=25&type=section&id=Note%2017:%20Related%20Parties) The company has related party relationships with Live Ventures Incorporated and its subsidiaries, including shared executives, accounting, and legal services, and on March 9, 2023, sold ARCA Recycling and its subsidiaries to VM7 Corporation, whose principal is the company's Chief Financial Officer, Virland A. Johnson - Company CEO Tony Isaac is the father of Jon Isaac, President and CEO of Live Ventures Incorporated, and both Tony Isaac and Richard Butler (company director) serve on Live Ventures' board of directors[93](index=93&type=chunk) - The company shares administrative, accounting, and legal services with Live Ventures, incurring shared service fees of **$28 thousand** and **$121 thousand** for the 13 and 39 weeks ended September 30, 2023, respectively[93](index=93&type=chunk) - On March 9, 2023, the company entered into a stock purchase agreement with VM7 Corporation to sell ARCA Recycling and its subsidiaries, with VM7 Corporation's principal being the company's Chief Financial Officer, Virland A. Johnson[94](index=94&type=chunk)[95](index=95&type=chunk) [Note 18: Sale of ARCA and Subsidiaries](index=26&type=section&id=Note%2018:%20Sale%20of%20ARCA%20and%20Subsidiaries) On March 9, 2023 (retroactive to March 1, 2023), the company sold ARCA Recycling and its subsidiaries to VM7 Corporation, a transaction that reduced consolidated balance sheet liabilities by approximately **$17.6 million** and will generate at least **$24.0 million** in monthly payments from the buyer over 15 years, with the company recognizing a gain on sale of **$15.823 million** - The company sold ARCA Recycling and its subsidiaries to VM7 Corporation on March 9, 2023, retroactive to March 1, 2023[96](index=96&type=chunk) - This disposition reduced the company's liabilities by approximately **$17.6 million** and will result in monthly payments from the buyer totaling at least **$24.0 million** (or **$1.6 million** annually) over 15 years[97](index=97&type=chunk)[98](index=98&type=chunk) - The company valued the minimum consideration using a 20% discount rate, resulting in a present value of approximately **$6.0 million**, and also received **$500 thousand** in Employee Retention Credit (ERC) funds, with **$477 thousand** still outstanding[97](index=97&type=chunk)[98](index=98&type=chunk) Gain on Sale of ARCA and Subsidiaries Calculation (in thousands) | Item | Amount | | :--- | :--- | | Minimum total consideration | 6,023 | | Buyer payments | 3 | | **Net consideration** | **6,026** | | Total liabilities disposed | 24,041 | | **Total consideration** | **30,067** | | Total assets disposed | 14,244 | | **Total gain on sale** | **15,823** | [Note 19: Subsequent event](index=27&type=section&id=Note%2019:%20Subsequent%20event) The company has evaluated subsequent events up to the filing date of this quarterly report and found no material events requiring adjustment or disclosure - The company evaluated subsequent events and found no material events requiring adjustment or disclosure[101](index=101&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, results of operations, and liquidity, highlighting the business shift to biotechnology and the divestiture of recycling and technology segments, discussing operating results for the 13 and 39 weeks ended September 30, 2023, and the company's liquidity and capital resources, emphasizing going concern challenges and financing needs [Overview](index=28&type=section&id=Overview) - The company focuses on discovering non-addictive pain medications for severe pain[106](index=106&type=chunk)[107](index=107&type=chunk) - Divested subsidiaries ARCA Recycling, Connexx, and ARCA Canada previously engaged in major home appliance recycling in North America, while GeoTraq Inc. developed and designed mobile Internet of Things (IoT) wireless transceiver modules[106](index=106&type=chunk)[107](index=107&type=chunk) - The Recycling segment was sold on March 1, 2023, and the Technology segment was sold in May 2022, with both results reported as discontinued operations[107](index=107&type=chunk) [Results of Operations - Thirteen Weeks Ended September 30, 2023 and October 1, 2022](index=29&type=section&id=Results%20of%20Operations%20-%20Thirteen%20Weeks%20Ended%20September%2030,%202023%20and%20October%201,%202022) Summary of Operating Results (For the 13 Weeks Ended September 30, 2023 and October 1, 2022, in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | — | — | — | — | | Selling, general and administrative expenses | 764 | 611 | 153 | 25.0% | | Operating loss | (764) | (611) | (153) | 25.0% | | Net interest income | 758 | 410 | 348 | 84.9% | | Unrealized loss on marketable securities | (267) | (270) | 3 | -1.1% | | Net income (loss) from continuing operations | (242) | 217 | (459) | -211.5% | | Net income (loss) from discontinued operations | 28 | (2,198) | 2,226 | -101.3% | | **Net income (loss)** | **(214)** | **(1,981)** | **1,767** | **-89.2%** | - Revenue and cost of sales both decreased by approximately **$8.6 million** and **$7.6 million**, respectively, for the 13 weeks ended September 30, 2023, due to the disposition of the recycling segment[109](index=109&type=chunk)[110](index=110&type=chunk) - Selling, general, and administrative expenses increased by **$153 thousand** (**25%**), primarily due to higher amortization costs for Soin intangible assets[111](index=111&type=chunk) - Net interest income increased by **$348 thousand**, mainly due to discount amortization on the SPYR note and VM7 receivables, as well as interest income from the SPYR note[112](index=112&type=chunk) [Results of Operations - Thirty-Nine Weeks Ended September 30, 2023 and October 1, 2022](index=31&type=section&id=Results%20of%20Operations%20-%20Thirty-Nine%20Weeks%20Ended%20September%2030,%202023%20and%20October%201,%202022) Summary of Operating Results (For the 39 Weeks Ended September 30, 2023 and October 1, 2022, in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | — | — | — | — | | Selling, general and administrative expenses | 2,923 | 1,950 | 973 | 50.0% | | Operating loss | (2,923) | (1,950) | (973) | 50.0% | | Net interest income | 1,598 | 575 | 1,023 | 177.9% | | Unrealized loss on marketable securities | (514) | (646) | 132 | -20.4% | | Net income (loss) from continuing operations | (825) | 2,609 | (3,434) | -131.6% | | Net income (loss) from discontinued operations | 10,818 | 5,495 | 5,323 | 96.9% | | **Net income (loss)** | **9,993** | **8,104** | **1,889** | **23.3%** | - Revenue decreased by approximately **$25.0 million** (**86.7%**) and cost of sales decreased by approximately **$19.9 million** for the 39 weeks ended September 30, 2023, due to the disposition of the recycling segment[122](index=122&type=chunk)[123](index=123&type=chunk) - Selling, general, and administrative expenses increased by **$973 thousand** (**50.0%**), primarily due to higher amortization costs for Soin intangible assets[124](index=124&type=chunk) - Net interest income increased by **$1.0 million**, mainly due to discount amortization on the SPYR note and VM7 receivables, as well as interest income from the SPYR note[125](index=125&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, the company had **$413 thousand** in cash on hand and plans to fund operations through existing cash, monthly proceeds from subsidiary sales, and approved Employee Retention Credits (ERC)[130](index=130&type=chunk) - The company's ability to continue as a going concern depends on successful future financing or structural arrangements to fund the necessary testing for JAN123 and JAN101 to obtain FDA approval, as well as ongoing daily operations[131](index=131&type=chunk) Summary of Cash Flows (For the 39 Weeks Ended September 30, 2023 and October 1, 2022, in thousands) | Cash Flow Activities | Sep 30, 2023 | Oct 1, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 1,872 | (2,391) | | Net cash used in investing activities | (156) | (950) | | Net cash provided by (used in) financing activities | (1,435) | 3,504 | - As of September 30, 2023, the company reported a net loss from continuing operations of approximately **$825 thousand** and a working capital deficit of **$2.0 million**[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company believes it is not exposed to significant interest rate fluctuation risk on its short-term and long-term fixed-rate debt, and it does not hold any derivative financial instruments or securities for trading or speculative purposes - The company believes it is not exposed to significant interest rate fluctuation risk on its short-term and long-term fixed-rate debt[137](index=137&type=chunk) - The company does not hold any derivative financial instruments or securities for trading or speculative purposes[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2023, company management assessed its disclosure controls and procedures and internal control over financial reporting as ineffective due to material weaknesses, including inadequate information technology general controls and segregation of duties, insufficient design or adequacy of controls over significant accounting processes, inadequate assessment of the impact of potentially material transactions, and insufficient procedures for recording agreements and contracts; nevertheless, management believes the financial statements and other financial information in this report are fairly presented in all material respects - As of September 30, 2023, the company's disclosure controls and procedures were deemed ineffective[139](index=139&type=chunk) - Management assessed the company's internal control over financial reporting as ineffective as of September 30, 2023[142](index=142&type=chunk)[143](index=143&type=chunk) - Identified material weaknesses include inadequate information technology general controls and segregation of duties; insufficient design or adequacy of controls over significant accounting processes; inadequate assessment of the impact of potentially material transactions; and insufficient procedures for recording agreements and contracts[144](index=144&type=chunk) - Despite material weaknesses, management believes the financial statements and other financial information in this annual report are fairly presented in all material respects[140](index=140&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) Detailed information for this item is included in Note 12, 'Commitments and Contingencies,' to the financial statements - Legal proceedings information can be found in Note 12, Commitments and Contingencies, to the financial statements[150](index=150&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company is not required to provide this item's information but has included additional risk factors due to an SEC complaint, which may divert management's attention, incur substantial litigation expenses, and adversely affect its business, reputation, financial condition, or stock price, and the company may also fail to maintain Nasdaq Capital Market listing requirements - The company is subject to an SEC complaint, which may divert management's attention, result in substantial litigation expenses, and adversely affect its business, reputation, financial condition, results of operations, or stock price[152](index=152&type=chunk)[153](index=153&type=chunk) - The company may be unable to maintain compliance with Nasdaq Capital Market's continued listing requirements, such as a minimum closing bid price of **$1.00** per share, which could negatively impact common stock market liquidity, financing capabilities, and operations[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company had no unregistered sales of equity securities during this reporting period - No unregistered sales of equity securities[155](index=155&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company had no defaults upon senior securities during this reporting period - No defaults upon senior securities[156](index=156&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company had no mine safety disclosures during this reporting period - No mine safety disclosures[157](index=157&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company had no other information to disclose during this reporting period - No other information[158](index=158&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q report, including stock purchase agreements, pledge agreements, securities purchase agreements, and certifications from the Chief Executive Officer and Chief Financial Officer Exhibit Index | Exhibit No. | Exhibit Description | Filing Form | File No. | Exhibit No. | Filing Date | | :--- | :--- | :--- | :--- | :--- | :--- | | 10.96 | Stock Purchase Agreement by and between JanOne Inc. and VM7 Corporation dated March 19, 2023 | 8-K | 0-19621 | 10.95 | 3/20/2023 | | 10.97 | Stock and Membership Interest Pledge Agreement by VM7 Corporation and Virland Johnson for the benefit of JanOne Inc. dated March 19, 2023 | 8-K | 0-19621 | 10.96 | 3/20/2023 | | 10.98 | Form of Securities Purchase Agreement dated March 22, 2023 | 8-K | 0-19621 | 10.98 | 3/22/2023 | | 10.99 | Form of Securities Purchase Agreement dated August 18, 2023 | 8-K | 0-19621 | 10.99 | 8/23/2023 | | 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | | 32.1 | Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | 101.INS | Inline XBRL Instance Document | | | | | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | | | | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | [SIGNATURES](index=38&type=section&id=SIGNATURES) [Official Signatures](index=38&type=section&id=Official%20Signatures) This report was officially signed by Tony Isaac, Chief Executive Officer, and Virland A. Johnson, Chief Financial Officer of JanOne Inc., on November 14, 2023 - Chief Executive Officer Tony Isaac and Chief Financial Officer Virland A. Johnson signed this report on November 14, 2023[162](index=162&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No. 000-19621 JANONE INC. (Exact name of registrant as specified in its charter) (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 702- ...