10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended October 2, 2021

or

 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-19621

JANONE INC.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	41-1454591 (I.R.S. Employer Identification No.)
325 E. Warm Springs Road, Suite 102 Las Vegas, Nevada (Address of principal executive offices)	89119 (Zip Code)

702-997-5968

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	JAN	The NASDAQ Stock Market LLC (The NASDAQ Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer		Accelerated filer	
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☒ No

As of November 12, 2021, there were 2,827,410 outstanding shares of the registrant’s common stock, with a par value of $0.001.

JANONE INC.

INDEX TO FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of October 2, 2021 and January 2, 2021	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the 39 weeks ended October 2, 2021 and September 26, 2020	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the 39 weeks ended October 2, 2021 and September 26, 2020	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6.	Exhibits	39
SIGNATURES		41

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

JANONE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	October 2, 2021			January 2, 2021
	(Unaudited)
Assets
Cash and cash equivalents	$	2,820		$	379
Trade and other receivables, net		5,531			3,600
Income taxes receivable		—			196
Inventories		1,152			1,630
Prepaid expenses and other current assets		1,207			1,136
Total current assets		10,710			6,941
Property and equipment, net		2,134			732
Right of use asset - operating leases		3,453			2,458
Intangible assets, net		11,046			13,989
Deposits and other assets		267			231
Total assets	$	27,610		$	24,351
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable	$	5,433		$	4,701
Accrued liabilities - other		6,127			4,888
Accrued liability - California Sales Taxes		5,958			5,769
Lease obligation short term - operating leases		1,320			1,197
Short term debt		494			3,042
Current portion of note payable		257			—
Related party note		1,000			1,000
Total current liabilities		20,589			20,597
Lease obligation long term - operating leases		2,236			1,388
Note payable		1,381			—
Other noncurrent liabilities		680			—
Total liabilities		24,886			21,985
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, series A-1 - par value $0.001 per share 2,000,000 authorized,    238,729 and 259,729  shares issued and outstanding at October 2, 2021 and    January 2, 2021, respectively		—			—
Common stock, par value $0.001 per share, 200,000,000 shares authorized,    2,827,410 and 1,829,982 shares issued and outstanding at October 2, 2021    and at January 2, 2021, respectively		2			2
Additional paid in capital		45,714			39,869
Accumulated other comprehensive loss		(630	)		(588	)
Accumulated deficit		(42,362	)		(36,917	)
Total stockholders' equity		2,724			2,366
Total liabilities and stockholders' equity	$	27,610		$	24,351

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

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JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Dollars in thousands, except per share)

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Revenues	$	12,113		$	12,266		$	29,391		$	24,723
Cost of revenues		9,032			8,549			23,146			18,487
Gross profit		3,081			3,717			6,245			6,236
Operating expenses:
Selling, general and administrative expenses		3,925			4,540			12,050			12,776
Operating loss		(844	)		(823	)		(5,805	)		(6,540	)
Other income (expense):
Interest expense, net		(125	)		(88	)		(323	)		(255	)
Gain on Payroll Protection Program loan forgiveness		—			—			1,872			—
Gain on settlement of vendor advance payments		11			—			952			—
Loss on litigation settlement		—			—			(1,950	)		—
Other income, net		23			2			45			812
Total other income (expense), net		(91	)		(86	)		596			557
Loss from operations before benefit from income taxes		(935	)		(909	)		(5,209	)		(5,983	)
Income tax benefit (expense)		(33	)		99			(236	)		448
Net loss	$	(968	)	$	(810	)	$	(5,445	)	$	(5,535	)
Dividends declared - Series A-1 preferred stock	$	—		$	—		$	—		$	—
Dividends declared - Common stock	$	—		$	—		$	—		$	—
Loss per share:
Basic loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Diluted loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding:
Basic		2,827,410			1,871,321			2,601,827			1,860,270
Diluted		2,827,410			1,871,321			2,601,827			1,860,270
Net loss	$	(968	)	$	(810	)	$	(5,445	)	$	(5,535	)
Other comprehensive loss, net of tax:
Effect of foreign currency translation adjustments		—			(27	)		(42	)		(55	)
Total other comprehensive loss, net of tax		—			(27	)		(42	)		(55	)
Comprehensive income loss	$	(968	)	$	(837	)	$	(5,487	)	$	(5,590	)

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

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JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	For the Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020
OPERATING ACTIVITIES:
Net loss	$	(5,445	)	$	(5,535	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,136			3,104
Amortization of debt issuance costs		—			27
Stock based compensation expense		274			523
Noncash lease expense		—			137
Gain on Payroll Protection Program loan forgiveness		(1,872	)		—
Gain on settlement of vendor advance payments		(952	)		—
Change in deferred income taxes		—			(270	)
Other		(114	)		40
Changes in assets and liabilities:
Accounts receivable		(1,931	)		1,561
Income taxes receivable		196			(254	)
Prepaid expenses and other current assets		(71	)		(575	)
Inventories		478			277
Right of use assets		(995	)		—
Lease liability		971			—
Accounts payable and accrued expenses		2,840			(77	)
Net cash used in operating activities		(3,485	)		(1,042	)
INVESTING ACTIVITIES:
Purchases of property and equipment		(1,530	)		(12	)
Purchases of intangibles		(65	)		(281	)
Net cash used in investing activities		(1,595	)		(293	)
FINANCING ACTIVITIES:
Proceeds from issuance of short term debt		538			3,469
Payment on short term debt		(61	)		(422	)
Proceeds from equity financing, net		5,544			—
Proceeds from stock option exercise		27			—
Proceeds from note payable		1,835			—
Payment on note payable		(58	)		—
Payment on related party note		—			(1,500	)
Payments on short term notes payable		(262	)		—
Net cash provided by financing activities		7,563			1,547
Effect of changes in exchange rate on cash and cash equivalents		(42	)		(55	)
INCREASE IN CASH AND CASH EQUIVALENTS		2,441			157
CASH AND CASH EQUIVALENTS, beginning of period		379			481
CASH AND CASH EQUIVALENTS, end of period	$	2,820		$	638
Supplemental cash flow disclosures:
Interest paid	$	146		$	126
Income taxes paid		28			76
Right of use asset - operating leases capitalized		1,815			1,037

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

5

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(Dollars in thousands)

	Series A-1 Preferred					Common Stock				Additional Paid in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Shares		Amount		Capital		Deficit			Deficit			Equity
Balance, January 2, 2021		259,729		$	—		1,829,982	$	2	$	39,869	$	(36,917	)	$	(588	)	$	2,366
Shares issued		—			—		571,428		—		5,544		—			—			5,544
Share based compensation		—			—		—		—		274		—			—			274
Stock option exercise		—			—		6,000		—		27		—			—			27
Series A-1 preferred converted		(21,000	)		—		420,000		—		—		—			—			—
Other comprehensive loss		—			—		—		—		—		—			(42	)		(42	)
Net loss		—			—		—		—		—		(5,445	)		—			(5,445	)
Balance, October 2, 2021		238,729		$	—		2,827,410	$	2	$	45,714	$	(42,362	)	$	(630	)	$	2,724

	Series A-1 Preferred				Common Stock					Additional Paid in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital		Deficit			Deficit			Equity
Balance, December 28, 2019		259,729	$	—		1,919,048		$	2	$	39,291	$	(28,419	)	$	(533	)	$	10,341
Shares cancelled		—		—		(122,257	)		—		—		—			—			—
Share based compensation		—		—		33,191			—		523		—			—			523
Effect of foreign currency translation adjustments		—		—		—			—		—		—			(55	)		(55	)
Net loss		—		—		—			—		—		(5,535	)		—			(5,535	)
Balance, September 26, 2020		259,729	$	—		1,829,982		$	2	$	39,814	$	(33,954	)	$	(588	)	$	5,274

	Series A-1 Preferred				Common Stock				Additional Paid in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit			Equity
Balance, July 3, 2021		238,729	$	—		2,827,410	$	2	$	45,620	$	(41,394	)	$	(630	)	$	3,598
Share based compensation		—		—		—		—		94		—			—			94
Net loss		—		—		—		—		—		(968	)		—			(968	)
Balance, October 2, 2021		238,729	$	—		2,827,410	$	2	$	45,714	$	(42,362	)	$	(630	)	$	2,724

	Series A-1 Preferred				Common Stock					Additional Paid in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital		Deficit			Deficit			Equity
Balance, June 27, 2020		259,729	$	—		1,871,321		$	2	$	39,802	$	(33,144	)	$	(561	)	$	6,099
Share based compensation		—		—		(41,339	)		—		12		—			—			12
Effect of foreign currency translation adjustments		—		—		—			—		—		—			(27	)		(27	)
Net loss		—		—		—			—		—		(810	)		—			(810	)
Balance, September 26, 2020		259,729	$	—		1,829,982		$	2	$	39,814	$	(33,954	)	$	(588	)	$	5,274

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

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Note 1: Background

The accompanying consolidated financial statements include the accounts of JanOne Inc., a Nevada corporation, and its subsidiaries (collectively the “Company” or “JanOne”). On September 10, 2019, Appliance Recycling Centers of America, Inc. changed its name to JanOne Inc.

The Company has three operating segments – Biotechnology, Recycling, and Technology.

During September 2019, JanOne, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

ARCA Recycling, Inc. (“ARCA Recycling”) provides turnkey recycling services for electric utility energy efficiency programs in the United States. ARCA Canada Inc. (“ARCA Canada”) provides turnkey recycling services for electric utility energy efficiency programs in Canada. Customer Connexx, LLC (“Connexx”) provides call center services for ARCA Recycling and ARCA Canada. On February 19, 2021, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA Recycling and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction is expected to be consummated no later than July 15, 2022.

GeoTraq Inc. (“GeoTraq”) is engaged in the development, design and, ultimately, the Company expects, the sale of cellular transceiver modules, also known as Mobile IoT modules, and associated wireless services.

The Company reports on a 52- or 53-week fiscal year. The Company's 2020 fiscal year (“2020”) ended on January 2, 2021, and the current fiscal year (“2021”) will end on January 1, 2022.

Going concern

The Company currently faces a challenging competitive environment and is focused on improving its overall profitability, which includes managing expenses. The Company reported a net loss of approximately $968,000 and $810,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $5.4 million and $5.5 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. In addition, as of October 2, 2021, the Company has total current assets of approximately $10.7 million and total current liabilities of approximately $20.6 million resulting in a net negative working capital of approximately $9.9 million.

The Company has available cash balances and funds available under an accounts receivable factoring program with Prestige Capital Finance, LLC (“Prestige Capital”) to provide sufficient liquidity to fund the entity’s operations and remodeling activities for at least the next twelve months. The Company expects to generate cash from operations for the remainder of fiscal year 2021 given its cost cutting measures in response to the revenue reductions resulting from the Coronavirus. However, depending on continued U.S. restrictions related to the coronavirus public health crisis, the Company cannot be certain its efforts will suffice. The agreement with Prestige Capital allows the Company to obtain advanced funding of 80% of an unpaid customer’s invoice amount within two days and the balance, less a mutually agreed upon fee, upon ultimate collection in cash of the invoice. The Company expects that it will be able to utilize the available funds under the accounts receivable factoring agreement to provide liquidity and to pursue acquisitions and other strategic transactions to expand and grow the business to enhance shareholder value. Management also regularly monitors capital market conditions to ensure no other conditions or events exist that may materially affect the Company’s financial conditions and liquidity and the Company may raise additional funds through borrowings or public or private sales of debt or equity securities, if necessary.

Based on the above, management has concluded that at October 2, 2021 the Company is not aware of, and did not identify, any other conditions or events that would cause the Company to not be able to continue business as a going concern for the next twelve months.

Coronavirus

In December 2019, the 2019 novel coronavirus (COVID-19) surfaced in Wuhan, China. The World Health Organization declared a global emergency on January 30, 2020, and most countries have initiated travel restrictions limiting travel to other countries and lock-downs within their borders. While various vaccines have recently been introduced into the marketplace, the impacts of variant strains of the COVID-19 virus are still unknown. The widespread health crisis has adversely affected the global economy, resulting in an economic downturn that could impact demand for our products. To date, the outbreak had a material adverse impact on our operations. For example, several customers in our appliance recycling and appliance replacement business have previously suspended our ability to

7

pick up and or replace their customers’ appliances resulting in decreased revenues for both recycling and replacement business. The future impact of the outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not have another material adverse impact on the future results of the Company. The extent of the impact, if any, will depend on future developments, including actions taken to contain the coronavirus. A key task for the Company in 2021 is to begin late-stage clinical development with its pharmaceutical product, JAN101. However, the COVID-19 pandemic significantly impacted clinical trials in 2020 and 2021, delaying recruitment in most non-COVID-19 clinical trials and even eliminating recruitment in some trials. While clinical sites have largely resumed conducting non-COVID-19 clinical trials, the backlog of subjects may adversely affect our ability to recruit for its trial, leading to longer and more expensive trials. In addition, the unknown effectiveness of the COVID-19 vaccines, particularly concerning variant strains of COVID-19, could lead to clinical sites terminating patient recruitment again during the course of the study.

During April 2020, as a result of the COVID-19 pandemic, the Company entered into an amendment to its contract services agreement with certain customers, whereby those customers agreed to advance the Company approximately $1.2 million against the provision of future services. The advanced payment may only be utilized for the costs associated with labor and sustaining ARCA Recycling’s workforce. The advance agreement provides for partial loan forgiveness if certain conditions are met. See Note 14 for a complete discussion of these advances.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, the Company's results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended January 2, 2021.

Principles of Consolidation

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

Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the previously reported net loss or stockholders’ equity.

Use of Estimates

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

Significant estimates made in connection with the accompanying consolidated financial statements include the estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete inventory, estimated fair value and forfeiture rates for stock-based compensation, fair values in connection with the analysis of other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets and estimated useful lives for intangible assets and property and equipment.

Financial Instruments

Financial instruments consist primarily of cash equivalents, trade and other receivables, notes receivable, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments. The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs). The carrying amounts of short-term debt at October 2, 2021 and January 2, 2021 approximate fair value.

8

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less at the time of purchase. Fair value of cash equivalents approximates carrying value.

Trade Receivables and Allowance for Doubtful Accounts

The Company carries unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company writes off trade receivables when deemed uncollectible. The Company records recoveries of trade receivables previously written off when payment is received. The Company considers a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days. The Company does not charge interest on past due receivables. The Company has no allowance for doubtful accounts as of October 2, 2021 or January 2, 2021.

Inventories

Inventories, consisting primarily of appliances, are stated at the lower of cost, determined on a specific identification basis, or net realizable value. The Company provides estimated provisions for the obsolescence of appliance inventories, including adjustment to market, based on various factors, including the age of such inventory and management’s assessment of the need for such provisions. We look at historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. The Company has no reserve for excess or obsolete inventory as of October 2, 2021 or January 2, 2021.

Property and Equipment

Property and Equipment are stated at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred and additions and improvements that significantly extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of building and improvements is 3 to 30 years, transportation equipment is 3 to 15 years, machinery and equipment is 5 to 10 years, furnishings and fixtures is 3 to 5 years and office and computer equipment is 3 to 5 years.

The Company periodically reviews property and equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with respect to maintaining our facilities and projected discounted cash flows from operations. An impairment loss would be recognized for the amount by which the carrying amount of the assets exceeds their fair value, as approximated by the present value of their projected discounted cash flows.

Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Under ASC 350, intangible assets subject to amortization, shall be reviewed for impairment in accordance with the Impairment or Disposal of Long-Lived Assets in ASC 360, Property, Plant, and Equipment.

Under ASC 360, long-lived assets are tested for recoverability whenever events or changes in circumstances (‘triggering event’) indicate that the carrying amount may not be recoverable. In making this determination, triggering events that were considered included:

A significant decrease in the market price of a long-lived asset (asset group);

A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and,

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A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

If a triggering event has occurred, for purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If after identifying a triggering event it is determined that the asset group’s carrying value may not be recoverable, a recoverability test is performed by forecasting the expected cash flows to be derived from the asset group for the remaining useful life of the asset group’s primary asset compared to its carrying value. The recoverability test relies upon the undiscounted cash flows (excluding interest and taxes) which are derived from the Company’s specific use of those assets (not how a market participant would use those assets); and are based upon the existing service potential of the current assets (excluding any improvements that would materially enhance the assets). If the expected undiscounted cash flows exceed the carrying value, the assets are considered recoverable.

There was no impairment of intangibles as of October 2, 2021 or January 2, 2021 based on the intangible asset impairment review performed as of those dates.

The Company’s intangible assets consist of customer relationship intangibles, trade names, licenses for the use of internet domain names, Universal Resource Locators, or URL’s, software, patent USPTO reference No. 10,182,402, and historical know-how, designs and related manufacturing procedures. Upon acquisition, critical estimates are made in valuing acquired intangible assets, which include but are not limited to: future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the period of time that customer relationships will continue; and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from the assumptions used in determining the fair values. All intangible assets are capitalized at their original cost and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 3 to 5 years, technology intangibles – 7 years, customer relationships – 7 to 15 years.

Revenue Recognition

Biotechnology Revenue

The Company is currently generating no revenue from its Biotechnology segment.

Recycling Revenue

The Company provides replacement appliances and provides appliance pickup and recycling services for consumers (“end users”) of public utilities, our customers. As part of the Company's de-manufacturing and recycling process, it receives revenue from scrap dealers for refrigerant, steel, plastic, glass, copper and other residual items.

The Company accounts for revenue in accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers.

Under the revenue standard, the Company determines revenue recognition through the following steps:

a.Identification of the contract, or contracts, with a customer,

b.Identification of the performance obligations in the contract,

c.Determination of the transaction price,

d.Allocation of the transaction price to the performance obligations in the contract, and

e.Recognition of revenue when, or as, the performance obligation(s) is satisfied.

As part of our assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. For each contract, the Company considers the promise to transfer products or services, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the price stated on the contract is typically fixed and represents the net consideration to which the Company expects to be entitled per order, and therefore there is no variable consideration. As the Company’s standard payment terms are less than 90 days, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product or service based on its relative standalone selling price. The product or service price, as specified on the contract, is considered the standalone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.

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Replacement Product Revenue

The Company generates revenue by providing replacement appliances. Revenue is recognized at the point in time when control of the replacement product is transferred to the end user and when performance obligations are satisfied, which typically occurs upon delivery from the Company's center facility and installation at the end user’s home.

Recycling Services Revenue

The Company generates revenue by providing pickup and recycling services. Revenue is recognized at the point in time when a to-be recycled appliance has been picked up and transfer of ownership has occurred, thereby satisfying the performance obligation.

Byproduct Revenue

The Company generates other recycling byproduct revenue (the sale of copper, steel, plastic, and other recoverable non-refrigerant byproducts) as part of a de-manufacturing process. The Company recognizes byproduct revenue upon delivery and transfer of control of the byproduct to a third-party recycling customer having mutually agreed upon a price per pound, and that collection is reasonably assured. Transfer of control occurs at the time the customer assumes possession of the byproduct material. Revenue recognized is a function of byproduct weight, type and, in some cases, volume of the byproduct delivered multiplied by the market rate as quoted.

Contract Liability

Receivables are recognized in the period the Company ships the product or provides the service. Payment terms on invoiced amounts are based on contractual terms with each customer. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, they are recorded as deferred revenue, which represents a contract liability. The Company recognizes a contract liability as net sales once control of goods and/or services have been transferred to the customer and all revenue recognition criteria have been met, and any constraints have been resolved. The Company defers product costs until recognition of the related revenue occurs.

Assets Recognized from Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has concluded that no material costs have been incurred to obtain and fulfill our FASB Accounting Standards Codification, or ASC 606 contracts, meet the capitalization criteria, and as such, there are no material costs deferred and recognized as assets on the consolidated balance sheet at October 2, 2021 or January 2, 2021.

Other:

a.Taxes collected from customers and remitted to government authorities and that are related to sales of the Company's products are excluded from revenues.

b.Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, General and Administrative expense.

c.The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

The majority of the Company's revenue recognized is derived from contracts with customers.

Technology Revenue

The Company is currently generating no revenue from its Technology segment.

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Shipping and Handling

The Company classifies shipping and handling charged to customers as revenues and classifies costs relating to shipping and handling as cost of revenues.

Advertising Expense

Advertising expense is charged to operations as incurred. Advertising expense totaled approximately $6,000 and $162,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $6,000 and $284,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2 – to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Income Taxes

The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Condensed Consolidated Statements of Operations and Other Comprehensive Loss.

Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.

Lease Accounting

The Company accounts for leases in accordance with ASC 842 - Leases. This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset (“ROU”) and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement.

In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company uses an estimate of its incremental borrowing rate based on information available at lease commencement in determining present value of lease payments.

The Company leases warehouse facilities and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates through 2025 with various renewal options for additional periods. The agreements, which have and continue to be classified as operating leases, generally provide for base rent and require us to pay all insurance, taxes and other maintenance costs. The Company’s operating leases are exclusively for building space in the different cities we have operations. The lease terms typically last from 2-3 years with some being longer or shorter depending on needs of the business and the lease partners. The Company has also engages in month-to-month leases for parking spaces that the Company has elected to expense as incurred. Our

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lease agreements do not include variable lease payments. The Company's lessors offer options to extend lease terms as leases expire, and management evaluates current rental markets and other strategic factors in making the decision whether to renew. When leases are within six months of renewal, management will estimate probabilities of renewing for an additional term based on market and strategic factors, and if the probability is more likely than not that the lease will be renewed, the financials will assume the lease is renewed under the lease renewal option.

The Company's operating leases contain no residual value guarantees or contain restrictive covenants.

Lease amounts accounted for under ASC 842 were determined based on analysis of the lease contracts using lease payments and timing as documented in the contract. Non-lease contracts were also evaluated to determine if the contract terms provided an asset that was controlled by the Company, and provided it with substantially all relevant economic benefits. The Company is not a party to any contracts containing embedded leases. All lease contracts were reviewed, and distinctions made between lease and non-lease payments. Only payments related to the lease of the asset were included in lease payment calculations. Management uses an estimation of its incremental borrowing rate at lease commencement over similar terms as the lease contracts in determining the present value of its lease obligations.

Stock-Based Compensation

The Company from time to time grants stock awards, restricted stock awards, and options to employees (including executives), non-employees, and members of the Board of Directors. Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is recognized over the vesting period.

Foreign Currency

The financial statements of the Company’s non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-U.S. functional currencies other than the U.S. dollar, they are translated at rates of exchange at year end. Revenue and expense items are translated at the average monthly exchange rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive loss.

Earnings Per Share

Earnings per share is calculated in accordance with ASC 260, “Earnings Per Share”. Under ASC 260 basic earnings per share is computed using the weighted average number of common shares outstanding during the period except that it does not include unvested restricted stock subject to cancellation. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of warrants, options, restricted shares and convertible preferred stock. The dilutive effect of outstanding restricted shares, options and warrants is reflected in diluted earnings per share by application of the treasury stock method. Convertible preferred stock is reflected on an if-converted basis.

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has determined it has three reportable segments.

Concentration of Credit Risk

The Company maintains cash balances at several banks in several states including, California, Minnesota, and Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of October 2, 2021. At times, balances may exceed federally insured limits. 

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Note 3: Trade and other receivables

	October 2, 2021			January 2, 2021
Trade receivables, net	$	7,433		$	4,174
Factored accounts receivable		(2,527	)		(891	)
Prestige Capital reserve receivable		460			162
Other receivables		165			155
Trade and other receivables, net	$	5,531		$	3,600
Trade accounts receivable	$	5,148		$	2,698
Un-billed trade receivables		2,285			1,476
Total trade receivables, net	$	7,433		$	4,174

Note 4: Inventory

Appliances held for sale are stated at the lower of cost, determined on a specific identification basis, or net realizable value. Inventory raw material - chips, are stated at the lower of average cost or net realizable value. Total inventory consists of the following as of October 2, 2021 and January 2, 2021:

	October 2, 2021		January 2, 2021
Appliances held for resale	$	1,047	$	1,430
Inventory - raw material - chips		105		200
Total inventory	$	1,152	$	1,630

The Company provides estimated provisions for the obsolescence of inventories, including adjustments to net realizable value, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. The Company reviews historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. As of October 2, 2021 and January 2, 2021, the Company has recorded no inventory reserve.

Note 5: Prepaids and other current assets

Prepaids and other current assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Prepaid insurance	$	621	$	371
Prepaid rent		175		95
Prepaid purchase orders		—		366
Prepaid other		411		304
Total prepaid expenses and other current assets	$	1,207	$	1,136

Note 6: Note receivable

On December 30, 2017, the Company sold its retail appliance segment, ApplianceSmart, Inc. (“ApplianceSmart”) to ApplianceSmart Holdings LLC (the “Purchaser”), a wholly owned subsidiary of Live Ventures Incorporated, pursuant to a Stock Purchase Agreement (the “Agreement”). Pursuant to the Agreement, the Purchaser purchased from the Company all of the issued and outstanding shares of capital stock (the “Stock”) of ApplianceSmart in exchange for $6.5 million (the “Purchase Price”). Per the Agreement, the Purchase Price was due and payable on or before March 31, 2018.

Between March 31, 2018 and April 24, 2018, the Purchaser and the Company negotiated in good faith the method of payment of the remaining outstanding balance of the Purchase Price. On April 25, 2018, the Purchaser delivered to the Company a promissory note (the “ApplianceSmart Note”) in the original principal amount of approximately $3.9 million (the “Original Principal Amount”), as such amount may be adjusted per the terms of the ApplianceSmart Note. The ApplianceSmart Note is effective as of April 1, 2018 and matured on April 1, 2021 (the “Maturity Date”). The ApplianceSmart Note bears interest at 5% per annum with interest and principal payable at the Maturity Date. ApplianceSmart provided the Company a guaranty of repayment of the ApplianceSmart Note. The

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remaining approximately $2.6 million of the Purchase Price was paid in cash by the Purchaser to the Company. The Purchaser may reborrow funds, and pay interest on such re-borrowings, from the Company up to the Original Principal Amount.

On December 26, 2018, the ApplianceSmart Note was amended and restated to grant the Company a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayment terms to provide for payment in full of all principal and accrued interest on April 1, 2021, the maturity date of the ApplianceSmart Note.

On March 15, 2019, the Company entered into agreements with third parties pursuant to which it agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Company’s security interest in the assets of ApplianceSmart in exchange for a prepayment of up to $1.2 million.

On December 9, 2019, ApplianceSmart filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code. As a result, the Company has recorded an impairment charge of approximately $3.0 million for the amount owed by ApplianceSmart to the Company as of December 28, 2019. The outstanding balance of the ApplianceSmart Note as of October 2, 2021 and January 2, 2021 was approximately $3.0 million and $3.0 million, respectively, exclusive of impairment charges.

On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future.

Note 7: Property and Equipment

Property and equipment as of October 2, 2021 and January 2, 2021 consist of the following:

	Useful Life (Years)	October 2, 2021			January 2, 2021
Buildings and improvements	3-30	$	80		$	75
Equipment	3-15		2,993			2,528
Projects under construction			1,447			387
Property and equipment			4,520			2,990
Less accumulated depreciation and amortization			(2,386	)		(2,258	)
Total property and equipment, net		$	2,134		$	732

Depreciation expense was approximately $53,000 and $27,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. Depreciation expense was approximately $128,000 and $68,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Equipment Financing Agreement

On March 25, 2021, ARCA Recycling entered into a Master Equipment Finance Agreement (collectively, the “Equipment Finance Agreement”) with KLC Financial, Inc. (“KLC”). Under the terms of the Equipment Finance Agreement, KLC has agreed to make loans to ARCA Recycling secured by certain equipment purchased or to be purchased by ARCA Recycling on terms set forth or to be set forth in schedules to the Equipment Finance Agreement. Under the terms of Schedule No. 01 (the “Initial Loan”), KLC has agreed to loan ARCA Recycling approximately $1.8 million secured by existing equipment of and new equipment to be purchased by ARCA Recycling. ARCA Recycling will make monthly payments of $31,000, inclusive of principal and interest, over a period of five years, at which time it is intended that the Initial Loan will be repaid in full. The Initial Loan bears interest at 7.59% per annum. KLC will have a first priority security interest over, among other things, all equipment identified in the schedules. The Initial Loan is guaranteed by Virland Johnson, the Chief Financial Officer of JanOne and Chief Financial Officer and Secretary of ARCA Recycling. The Equipment Finance Agreement contains customary affirmative and negative covenants, representations and warranties, and events of default for transactions of this nature.

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Note 8: Intangible Assets

Intangible assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021			January 2, 2021
Intangible assets GeoTraq	$	26,096		$	26,096
Patent and domains		23			23
Computer software		4,559			4,494
Intangible assets		30,678			30,613
Less accumulated amortization		(19,632	)		(16,624	)
Total intangible assets	$	11,046		$	13,989

The useful life and amortization period of the GeoTraq intangible acquired is seven years from the acquisition date of August 18, 2017. Intangible amortization expense was approximately $998,000 and $1.0 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. Intangible amortization expense was approximately $3.0 million and $3.0 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Note 9: Deposits and other assets

Deposits and other assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Deposits	$	217	$	169
Other		50		62
Total deposits and other assets	$	267	$	231

Deposits are primarily refundable security deposits incurred as a result of property leases.

Note 10: Leases

The Company accounts for leases in accordance with ASC 842. The amount recorded is the present value of all remaining lease payments for leases with terms greater than 12 months. The right of use asset is offset by a corresponding liability. The discount rate is based on an estimate of our incremental borrowing rate for terms similar to our lease terms at the time of lease commencement. The asset will be amortized over remaining lease terms. See Lease Accounting in Note 2.

Total present value of lease payments as of October 2, 2021:

Remainder 2021	$	442
2022		1,390
2023		953
2024		684
2025		362
2026		210
Total		4,041
Less Interest		(485	)
Present Value of Payments	$	3,556

During the 39 weeks ended October 2, 2021 and September 26, 2020, approximately $1.1 million and $965,000, respectively, was included in operating cash flow for amounts paid for operating leases.

Additionally, the Company obtained right-of-use assets in exchange for lease liabilities of approximately $1.8 million upon commencement of new and renewed operating leases during the 39 weeks ended October 2, 2021. The weighted average lease term for operating leases is 3.2 years and the weighted average discount rate is 8%.

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Note 11: Accrued Liabilities

Accrued liabilities as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Compensation and benefits	$	860	$	604
Contract liability		32		292
Accrued incentive and rebate checks		1,625		1,220
Accrued transportation costs*		1,388		662
Accrued guarantees		767		767
Accrued purchase orders		—		177
Accrued taxes		508		299
Accrued litigation settlement		680		—
Other		267		867
Total accrued expenses	$	6,127	$	4,888

*Accrued transportation costs are related to delayed billing from certain vendors.

Contract liabilities rollforward

The following table summarizes the contract liability activity for the 13 weeks ended October 2, 2021:

Beginning balance, January 2, 2021	$	292
Accrued		165
Settled		(425	)
Ending balance, October 2, 2021	$	32

Note 12: Accrued Liability – California Sales Tax

The Company operates in fourteen states in the U.S. and in various provinces in Canada. From time to time, the Company is subject to sales and use tax audits that could result in additional taxes, penalties and interest owed to various taxing authorities.

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

On April 13, 2017 the Company received the formal CDTFA assessment for sales tax for tax years 2011, 2012 and 2013 in the amount of approximately $4.1 million plus applicable interest of $500,000 related to the appliance replacement programs that the Company administered on behalf of its customers on which it did not assess, collect or remit sales tax. The Company has appealed this assessment to the CDTFA Appeals Bureau. The appeal remains in process. Interest continues to accrue until the matter is settled.

As of October 2, 2021, and January 2, 2021, the Company's accrued liability for California sales tax was approximately $6.0 million and $5.8 million respectively.

Note 13: Income Taxes

The Company's overall effective tax rate was 4.5% for the 39 weeks ended October 2, 2021, and a tax provision expense of approximately $236,000 was recorded against a pre-provision loss of approximately $5.2 million. The Company's overall effective tax rate was 7.5% for the 39 weeks ended September 26, 2020, and it had a tax benefit of approximately $448,000 against a pre-provision loss of approximately $6.0 million. The effective tax rates and related provisional tax amounts vary from the U.S. federal statutory rate due to state taxes, foreign taxes, share-based compensation, valuation allowance, and certain non-deductible expenses.

The Company regularly evaluates both positive and negative evidence related to retaining a valuation allowance against certain deferred tax assets. The realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible

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temporary differences and carryforwards are expected to be available to reduce taxable income. The Company has concluded, based on the weight of evidence, that a valuation allowance should be maintained against deferred tax assets that are not expected to be utilized in the near future. The Company continues to recognize a full valuation allowance against its Canadian operations.

Note 14: Short Term Debt

Short term debt and other financing obligations as of October 2, 2021 and January 2, 2021, consist of the following:

	October 2, 2021		January 2, 2021
AFCO Finance	$	419	$	144
Payroll protection program		—		1,872
Vendor advance payments		75		1,026
Total short term debt	$	494	$	3,042

AFCO Finance

The Company has entered into a financing agreement with AFCO Credit Corporation (“AFCO”) purchased through Marsh Insurance on an annual basis to fund the annual premiums on insurance policies due July 1 of each year. These policies relate to workers’ compensation and various liability policies including, but not limited to, General, Auto, Umbrella, Property, and Directors’ and Officers’ insurance. The total amount of the premiums financed during July 2021 was approximately $538,000 with an interest rate of 3.3%. An initial down payment of approximately $134,000 was due on July 1, 2021 with additional monthly payments of approximately $61,000 made beginning August 1, 2021 and ending on April 1, 2022.

The outstanding principal due AFCO at October 2, 2021 and January 2, 2021 was approximately $419,000 and $144,000, respectively.

Payroll Protection Program

On May 1, 2020, the Company entered into a promissory note (the “Promissory Note”) with Texas Capital Bank, N.A. that provides for a loan in the amount of approximately $1.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 27, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of the PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The PPP Loan was forgiven during the first quarter of fiscal 2021.

Customer Advance Payments

As of the period ending June 27, 2020, the Company received advance payments authorized by the California Public Utilities Commission and processed through two California utilities for the purposes of sustaining the workforce during the COVID-19 pandemic shutdown. The use of these funds was limited to labor and labor benefits for impacted employees. Portions of these advances are forgivable if certain conditions are met, the specifics which have not yet been finalized. Advance payments that are not forgiven will need to be paid back in full by December 31, 2021. Total funding received under this program as of September 2020 amounted to approximately $1.2 million. As of October 2, 2021, approximately $1.1 million was settled, and a balance of approximately $75,000 remaining outstanding.

Note 15: Commitments and Contingencies

Litigation

SEC Complaint

On August 2, 2021, the U.S. Securities and Exchange Commission (“SEC”) filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and one of its executive officers, Virland Johnson, the Company's Chief Financial Officer, as defendants (collectively, the "Defendants").

The SEC Complaint alleges financial, disclosure and reporting violations against the Company and the executive officer under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5. The SEC Complaint also alleges various claims against the executive officer under Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20,

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13a-1, 13a-13, 13a-14, 13b2-1, and 13b2-2. The SEC seeks permanent injunctions and civil penalties against the Defendants, and an officer-and-director bar against the executive officer. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.

The Company continues to assert that the SEC’s pursuit of this matter will not result in any benefit to investors and instead will only serve as a distraction from core business. Live Ventures enlisted the representation of highly experienced and respected attorney John Hueston of the law firm Hueston Hennigan; on October 1, 2021, Mr. Hueston, on behalf of the Company, filed a motion with the court to dismiss the complaint.

The Defendants strongly dispute and deny the allegations and are vigorously defending themselves against the claims.

Skybridge

On December 29, 2016, the Company served a Minnesota state court complaint for breach of contract on Skybridge Americas, Inc. (“SA”), the Company’s primary call center vendor throughout 2015 and most of 2016. The Company seeks damages in the millions of dollars as a result of alleged overcharging by SA and lost client contracts. On January 25, 2017, SA served a counterclaim for unpaid invoices in the amount of approximately $460,000 plus interest and attorneys’ fees. On March 29, 2017, the Hennepin County district court (the “District Court”) dismissed the Company’s breach of contract claim based on SA’s overuse of its Canadian call center but permitted the Company’s remaining claims to proceed. Following motion practice, on January 8, 2018 the District Court entered judgment in SA’s favor, which was amended as of February 28, 2018, for a total amount of approximately $614,000 including interest and attorneys’ fees. On March 4, 2019, the Minnesota Court of Appeals (the “Court of Appeals”) ruled and (i) reversed the District Court’s judgment in favor of Skybridge on the call center location claim and remanded the issue back to the District Court for further proceedings, (ii) reversed the District Court’s judgment in favor of Skybridge on the net payment issue and remanded the issue to the District Court for further proceedings, and (iii) affirmed the District Court’s judgment in Skybridge’s favor against the Company’s claim that Skybridge breached the contract when it failed to meet the service level agreements. As a result of the decision by the Court of Appeals, the District Court’s award of interest and attorneys’ fees, etc. was reversed. The Company and SA held a mediation session in July 2020. Trial was held in August 2020 and on February 1, 2021, the District Court assessed damages against the Company in the amount of approximately $715,000 plus interest, fees, and costs. The Company filed a motion for a new trial and is waiting for the District Court to rule.

AMTIM Capital

AMTIM Capital, Inc. (“AMTIM”) acts as the Company’s representative to market our recycling services in Canada under an arrangement that pays AMTIM for revenues generated by recycling services in Canada as set forth in the agreement between the parties. A dispute has arisen between AMTIM and the Company with respect to the calculation of amounts due to AMTIM pursuant to the agreement. In a lawsuit filed in the province of Ontario, AMTIM claims a discrepancy in the calculation of fees due to AMTIM by the Company of approximately $2.0 million. Although the outcome of this claim is uncertain, the Company believes that no further amounts are due under the terms of the agreement and that it will continue to defend its position relative to this lawsuit. Trial is currently scheduled for late Fall 2021.

GeoTraq

On or about April 9, 2021, GeoTraq, Gregg Sullivan, Tony Isaac, and we, among others, resolved all of their claims that related to, among other items, the Company's acquisition of GeoTraq in August 2017, all post-acquisition activities, and Mr. Sullivan’s post-acquisition employment relationship with GeoTraq (all of such claims, the “GeoTraq Matters”). The resolution was effectuated through the parties’ execution and delivery of a Settlement Agreement and Mutual Agreement of Claims (the “GeoTraq Settlement Agreement”).

Under the terms of the Settlement Agreement, the Company, on its own behalf and on behalf of GeoTraq and Mr. Isaac, agreed to tender to Mr. Sullivan an aggregate of $1.95 million (the “GeoTraq Settlement Consideration”) in the following manner: (i) $250,000, which was tendered in cash on or about the date of the Settlement Agreement and (ii) up to 10 quarterly installments of not less than $170,000 that commenced on June 1, 2021, and shall continue not less frequently than every three months thereafter (the “GeoTraq Installments”). The Company may tender the GeoTraq Installments in cash or in the equivalent value of shares of its common stock (the value of the shares to be determined by a formula set forth in the Settlement Agreement), in either case at the Company's discretion. The Company may also prepay one or more GeoTraq Installments in full or in part at any time or from time to time either in cash or in shares of its common stock (a “GeoTraq Prepayment”). If the Company elects to prepay one or more GeoTraq Installments with shares of its common stock, Mr. Sullivan reserves the right not to consent to a tender thereof in excess of 50% of the value of that specific GeoTraq Prepayment; however, Mr. Sullivan is restricted in the reasons for which he can refuse to provide his written consent. The number of shares of our common stock to be issued upon any GeoTraq Prepayment is determined by a different formula than the one to be utilized for a GeoTraq Installment. As of October 2, 2021, the balance due under the settlement agreement was approximately $1.4 million.

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Pursuant to the terms of the Settlement Agreement, Mr. Sullivan provided the Company with his proxy to vote his remaining shares of its Series A-1 Preferred Stock that the Company had issued to him in connection with its acquisition of GeoTraq in 2017, as well as his proxy for the shares of the Company's common stock into which those shares of preferred stock may be converted. The Company may utilize the proxy in the context of an annual meeting of its stockholders, a special meeting of its stockholders, and a written consent of its stockholders. Subject to the above-described contingent GeoTraq Prepayment tender 50% restriction, Mr. Sullivan provided the Company with the sole ability to determine the time and amount of each conversion of those shares of preferred stock.

The parties to the Settlement Agreement released and forever discharged one another from any and all known and unknown claims that were asserted or could have been asserted arising out of the GeoTraq Litigation Matters.

Other Commitments

As previously disclosed and as discussed in Note 6: Note receivable, on December 30, 2017, the Company disposed of its retail appliance segment and sold ApplianceSmart to the Purchaser. In connection with that sale, as of December 28, 2019 the Company has an aggregate amount of future real property lease payments of approximately $767,000 which represents amounts guaranteed or which may be owed under certain lease agreements to third party landlords in which the Company either remains the counterparty, is a guarantor, or has agreed to remain contractually liable under the lease (“ApplianceSmart Leases”).

The Company evaluated the fair value of its potential obligation under the guidance of ASC 450: Contingencies and ASC 460: Guarantees. As a result, the Company accrued the amount of liability associated with these future guaranteed lease payments. The fair value was calculated based on the amounts reported as part of the bankruptcy proceedings as ApplianceSmart terminated the leases prior to the lease termination date. The fair value was calculated based on the undiscounted lease payments, a discount rate equivalent to current interest rates associated with the leased real estate and a remote probability weighting of 1%.

The ApplianceSmart Leases either have the Company as the contract tenant only, or in the contract reflects a joint tenancy with ApplianceSmart. ApplianceSmart is the occupant of the ApplianceSmart Leases. The Company does not have the right to use the ApplianceSmart lease assets nor is the Company the primary obligor of the lease payments, hence capitalization under ASC 840 is not required. The ApplianceSmart Leases have historically been used by ApplianceSmart for their operations and the consideration has and is being paid by ApplianceSmart historically and in the future.

Any potential amounts paid out for the Company obligations and or guarantees under ApplianceSmart Leases would be recoverable to the extent there are assets available from ApplianceSmart. ApplianceSmart Leases are related party transactions. The Company divested itself of the ApplianceSmart Leases and leaseholds with the sale to Purchaser on December 30, 2017.

The Company is party from time to time to other ordinary course disputes that we do not believe to be material to our financial condition as of October 2, 2021.

Note 16: Shareholders’ Equity

Common Stock: Our Articles of Incorporation authorize 200,000,000 shares of common stock that may be issued from time to time having such rights, powers, preferences and designations as the Board of Directors may determine. During the 39 weeks ended September 26, 2020, 104,798 shares of common stock were granted and issued in lieu of professional services at a fair value of approximately $351,000. Additionally, the Company was amortizing the fair value of 223,214 common shares granted during September 2019, but not vested, in lieu of professional services at a fair value of $1.0 million. This agreement terminated during August 2020. As such, 71,607 common shares were returned to the Company and the related stock-based compensation was reversed. There were no similar transactions for the 39 weeks ended October 2, 2021.

As of October 2, 2021, and January 2, 2021, there were 2,827,410, and 1,829,982 shares, respectively, of common stock issued and outstanding.

Equity Offering

On January 29, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”) for the sale by the Company in a registered direct offering (the “Offering”) of 571,428 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price per share of Common Stock of $10.50. The Offering closed on February 2, 2021 with gross proceeds to the Company of approximately $6.0 million before deducting placement agent fees and other offering expenses. The Company is utilizing the net proceeds for general working capital.

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The Purchase Agreement contains customary representations, warranties and agreements by the Company and the Purchasers and customary indemnification rights and obligations of the parties.

A.G.P./Alliance Global Partners acted as the sole placement agent (the “Placement Agent”) for the Company on a “reasonable best efforts” basis in connection with the Offering. The Company entered into a Placement Agency Agreement, dated as of January 29, 2021, by and between the Company and the Placement Agent (the “Placement Agency Agreement”). Pursuant to the Placement Agency Agreement, the Placement Agent was paid a cash fee of 7% of the gross proceeds paid to the Company for the securities or $420,000, and reimbursement for accountable legal expenses incurred by it in connection with the Offering of $35,000.

The shares of Common Stock sold in the Offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-251645) (the “Registration Statement”), which was initially filed with the Securities and Exchange Commission on December 23, 2020 and was declared effective on December 29, 2020.

The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement. In addition, such representations, warranties, and covenants (i) are intended as a way of allocating the risk between the parties to the Purchase Agreement and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the Purchase Agreement incorporated by reference in this filing only to provide investors with information regarding the terms of the transaction, and not to provide investors with any other factual information regarding the Company. Stockholders should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.

The foregoing descriptions of the Purchase Agreement and the Placement Agency Agreement are not complete and are qualified in their entireties by reference to the full text of the Purchase Agreement and the Placement Agency Agreement, a copy of each of which is filed as Exhibit 10.1 and Exhibit 1.1, respectively, to the Company’s Current Report on Form 8-K as field on January 29, 2021 and each is incorporated by reference herein.

Stock options: The 2016 Plan, which replaces the 2011 Plan, authorizes the granting of awards in any of the following forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) restricted stock awards, and (iv) restricted stock units, and expires on the earlier of October 28, 2026, or the date that all shares reserved under the 2016 Plan are issued or no longer available. The 2016 Plan provides for the issuance of up to 800,000 shares of common stock pursuant to awards granted under the Plan. The vesting period is determined by the Board of Directors at the time of the stock option grant. As of October 2, 2021, and January 2, 2021, 90,000 and 78,000 options were outstanding under the 2016 Plan, respectively.

The Company's 2011 Plan authorizes the granting of awards in any of the following forms: (i) stock options, (ii) stock appreciation rights, and (iii) other share-based awards, including but not limited to, restricted stock, restricted stock units or performance shares, and expires on the earlier of May 12 2021, or the date that all shares reserved under the 2011 Plan are issued or no longer available. As of October 2, 2021, and January 2, 2021, 30,500 and 35,900 options, respectively, were outstanding under the 2011 Plan. No additional awards will be granted under the 2011 Plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. 38,000 options were granted during the 39 weeks ended October 2, 2021.

Additional information relating to all outstanding options is as follows:

				Weighted Average		Aggregate		Weighted Average Remaining
	Options Outstanding			Exercise Price		Intrinsic Value		Contractual Life
Outstanding at December 28, 2019		44,400		$	13.31	$	—		3.0
Granted		74,000		3.84
Cancelled/expired		(4,500	)		9.45
Outstanding at January 2, 2021		113,900		$	11.97	$	78		7.0
Granted		38,000			8.16
Exercised		(6,000	)	4.32
Cancelled/expired/forfeited		(25,400	)		8.28
Balance at October 2, 2021		120,500		$	7.52	$	180		7.1

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The Company recognized approximately $49,000 and $46,000 share-based compensation expense related to option grants for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. The Company recognized approximately $275,000 and $118,000 share-based compensation expense related to option grants for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

As of October 2, 2021 the Company has approximately $34,000 of unrecognized share-based compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects to recognize as share-based compensation expense through Q2 2022.

Series A-1 Preferred Stock:

During April 2021, 21,000 shares of the Company’s Series A-1 Preferred Stock were converted into 420,000 shares of the Company’s common stock. Shares of Series A-1 Preferred Stock are convertible into the Company’s common shares at a ratio of 1:20. As of October 2, 2021 and January 2, 2021, there were 238,729 and 258,729 shares, respectively, of Series A-1 Preferred Stock outstanding.

Warrants:

As of October 2, 2021, and January 2, 2021, there were 33,363 warrants outstanding to purchase 33,363 shares of common stock at a price of $3.40 per share, which expire in November 2021.

Note 17: Loss Per Share

Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company’s Consolidated Balance Sheet. Diluted net loss per share is computed using the weighted average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares consist of the additional common shares issuable in respect of restricted share awards, stock options and convertible preferred stock.

The following table presents the computation of basic and diluted net loss per share:

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net loss	$	(968	)	$	(810	)	$	(5,445	)	$	(5,535	)
Basic
Basic loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270
Diluted
Diluted loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270

Potentially dilutive securities totaling 66,000 and 135,263 were excluded from the calculation of diluted net loss per share for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively, because the effects were anti-dilutive based on the application of the treasury stock method.

Note 18: Major Customers and Suppliers

For the 13 weeks ended October 2, 2021, one customer represented approximately 13% of the Company's total revenue. For the 39 weeks ended October 2, 2021, one customer represented approximately 15% of the Company's total revenue. For the 13 weeks ended September 26, 2020, one customer represented approximately 30% of the Company's total revenue. For the 39 weeks ended September 26, 2020, two customers represented a combined 32% of the Company's total revenue.

As of October 2, 2021, three customers represented a combined 34% of the Company's total trade receivables. As of January 2, 2021, three customers represented more than 10% of the Company's total trade receivables, and representing 37% of the Company's trade receivables in aggregate.

During the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020, the Company purchased appliances for resale from four suppliers. The Company has, and is continuing to, secure other vendors from which to purchase appliances. However, the curtailment or loss of one of these suppliers or any appliance supplier could adversely affect our operations.

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Note 19: Defined Contribution Plan

The Company has a defined contribution salary deferral plan covering substantially all employees under Section 401(k) of the Internal Revenue Code. The Company contributes an amount equal to 10 cents for each dollar contributed by each employee up to a maximum of 5% of each employee’s compensation. The Company recognized expense for contributions to the plans of approximately $16,000 and $8,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $22,000 and $20,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Note 20: Segment Information

The Company operates within targeted markets through three reportable segments for continuing operations: biotechnology, recycling, and technology. The biotechnology segment commenced operations in September 2019 and is focused on development of new and innovative solutions for ending the opioid epidemic ranging from digital technologies to educational advocacy. The recycling segment includes all fees charged and costs incurred for collecting, recycling and installing appliances for utilities and other customers. The recycling segment also includes byproduct revenue, which is primarily generated through the recycling of appliances. The technology segment designs wireless modules to connect devices to the Mobile Internet of Things (“IoT”) which contain location-based service (“LBS”) capabilities and can interface to external sensors to allow them to communicate both sensor status and position information. The nature of products, services and customers for each segment varies significantly. As such, the segments are managed separately. Our Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM evaluates performance and allocates resources based on sales and income from operations of each segment. Operating loss represents revenues less cost of revenues and operating expenses, including certain allocated selling, general and administrative costs. There are no intersegment sales or transfers.

The following tables present our segment information for the 13 weeks ended October 2, 2021 and September 26, 2020 and the 39 weeks ended October 2, 2021 and September 26, 2020:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Revenues
Biotechnology	$	—		$	—		$	—		$	—
Recycling		12,113			12,266			29,391			24,723
Technology		—			—			—			—
Total Revenues	$	12,113		$	12,266		$	29,391		$	24,723
Gross profit
Biotechnology	$	—		$	—		$	—		$	—
Recycling		3,081			3,717			6,245			6,236
Technology		—			—			—			—
Total Gross profit	$	3,081		$	3,717		$	6,245		$	6,236
Operating loss
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		274			1,249			(1,753	)		(1,526	)
Technology		(936	)		(1,227	)		(2,820	)		(3,362	)
Total Operating loss	$	(844	)	$	(823	)	$	(5,805	)	$	(6,540	)
Depreciation and amortization
Biotechnology	$	—		$	—		$	—		$	—
Recycling		109			124			327			295
Technology		937			936			2,809			2,809
Total Depreciation and amortization	$	1,046		$	1,060		$	3,136		$	3,104
Interest expense, net
Biotechnology	$	—		$	—		$	—		$	—
Recycling		125			88			323			255
Technology		—			—			—			—
Total Interest expense, net	$	125		$	88		$	323		$	255
Net loss before benefit from income taxes
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		208			1,193			(1,145	)		(879	)
Technology		(961	)		(1,257	)		(2,832	)		(3,452	)
Total Net loss before benefit from income taxes	$	(935	)	$	(909	)	$	(5,209	)	$	(5,983	)

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	As of October 2, 2021		As of January 2, 2021
Assets
Biotechnology	$	—	$	—
Recycling		16,777		10,614
Technology		10,833		13,737
Total Assets	$	27,610	$	24,351
Intangible assets
Biotechnology	$	—	$	—
Recycling		327		470
Technology		10,719		13,519
Total Intangible assets	$	11,046	$	13,989

Note 21: Related Parties

Shared Services

Tony Isaac, the Company’s Chief Executive Officer, is the father of Jon Isaac, President and Chief Executive Officer of Live Ventures Incorporated (“Live Ventures”) and managing member of ICG, a greater than 5% stockholder of the Company. Tony Isaac, Chief Executive Officer, and Richard Butler, Board of Directors member of the Company, are Board of Directors members of Live Ventures. The Company also shares certain executive, accounting and legal services with Live Ventures. The total services shared were approximately $86,000 and $61,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $220,000 and $186,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. Customer Connexx rents approximately 9,900 square feet of office space from Live Ventures in Las Vegas, Nevada. The total rent and common area expense was approximately $62,000 and $54,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $168,000 and $144,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

ApplianceSmart Note

On December 30, 2017, Purchaser entered into the Agreement and purchased from the Company all of the Stock of ApplianceSmart in exchange for the Purchase Price. Effective April 1, 2018, the Purchaser issued the ApplianceSmart Note with a three-year term in the original principal amount of approximately $3.9 million for the balance of the purchase price. ApplianceSmart is guaranteeing the repayment of the ApplianceSmart Note.

On December 30, 2017, Purchaser entered into the Agreement with the Company and ApplianceSmart. Pursuant to the Agreement, the Purchaser purchased from the Company all of the Stock of ApplianceSmart in exchange for the Purchase Price. Effective April 1, 2018, the Purchaser issued the ApplianceSmart Note with a three-year term in the original principal amount of approximately $3.9 million for the balance of the purchase price. ApplianceSmart is guaranteeing the repayment of the ApplianceSmart Note.

On December 26, 2018, the ApplianceSmart Note was amended and restated to grant the Company a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayment terms to provide for the payment in full of all accrued interest and principal on April 1, 2021, the maturity date of the ApplianceSmart Note.

On March 15, 2019, the Company entered into subordination agreements with third parties pursuant to which it agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Company’s security interest in the assets of ApplianceSmart and other related parties in exchange for up to $1.2 million payable within 15 days of the agreement. ApplianceSmart can re-borrow up to the principal amount of the Note, or approximately $3.9 million.

On December 9, 2019, ApplianceSmart filed a voluntary petition (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). ApplianceSmart is seeking to confirm a plan of reorganization under which it would pay the Company $25 in full satisfaction of the Company’s claim on the guaranty. The Company would release its junior security interest in ApplianceSmart’s assets. Based on its evaluation of the alternative possible remedies and its reasonable business judgment, the Company is willing to accept this proposal if the plan is confirmed by the Bankruptcy Court.

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On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future.

For discussion related to potential obligations and or guarantees under ApplianceSmart Leases, see Note 15.

Related Party ICG Group Note

On August 28, 2019, ARCA Recycling entered into and delivered to ICG a secured revolving line of credit promissory note, whereby ICG agreed to provide ARCA Recycling with a $2.5 million revolving credit facility (the “ICG Note”). The ICG Note originally matured on August 28, 2020. On August 25, 2020, the ICG Note was amended to extend the maturity date to December 31, 2020. On March 30, 2021, ARCA Recycling entered into a Second Amendment and Waiver (the “Second Amendment”) to the ICG Note to further extend the maturity date to August 18, 2021 and waive certain defaults under the ICG Note. The ICG Note bears interest at 8.75% per annum and provides for the payment of interest, monthly in arrears. ARCA Recycling will pay a loan fee of 2.0% on each borrowing made under the ICG Note. In connection with entering into the ICG Note, the Borrower also entered into a security agreement in favor of the Lender, pursuant to which ARCA Recycling granted a security interest in all of its assets to the Lender. The obligations of ARCA Recycling under the ICG Note are guaranteed by the Company. The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities. ICG is a record and beneficial owner of approximately 16% of the outstanding common stock of the Company. Jon Isaac is the manager and sole member of ICG, and the son of Tony Isaac, the Chief Executive Officer of JanOne and ARCA Recycling.

Note 22. Sale of ARCA and Connexx

On February 19, 2021, the Company, together with its subsidiaries (a) ARCA Recycling, Inc., a California corporation (“ARCA”), and (b) Customer Connexx LLC, a Nevada limited liability company (“Connexx”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction was previously expected to be consummated on or before August 18, 2021 (the "Outside Date"). On August 12, 2021, the parties entered into an Amendment No. One to Asset Purchase Agreement (the “Recycling Sale Amendment”) to extend the Outside Date to September 30, 2021. In the event the Disposition Transaction is not closed by such date, the Purchase Agreement may be terminated and, in accordance with its terms, the Buyers may be required to pay to us a “break fee” of $250,000. On November 14, 2021, the parties entered into an Amendment No. Two to the Asset Purchase Agreement, which provided for the immediate termination of the transactions proposed by the Purchase Agreement, as amended by the Recycling Sale Amendment, and for an amendment to the Buyers to pay to us a “break fee.” The break fee was amended to an aggregate of $100,000, payable in two $50,000 installments: (i) the first of which is due to be paid not later than August 12, 2022 (the one-year anniversary of the Recycling Sale Agreement) and (ii) the second of which is due to be paid not later than the last day of our next fiscal year. However, if, prior to the date on which either installment of the amended break fee is payable, we sell ARCA and Connexx to an otherwise unaffiliated third party for an aggregate amount less than $25 million, then the Buyers will be relieved of their obligation to pay to us any not-yet-then-due installment of the break fee. Additionally, if, prior to the date on which the second installment of the amended break fee is payable, we have not sold ARCA and Connexx to any third party, then the Buyers will be relieved of their obligation to pay to us the second installment of the break fee. Finally, if, prior to a date on which either installment of the amended break fee is due, we sell ARCA and Connexx to the Buyers, then, the purchase price therefore will be reduced by an amount equivalent to any break fee that had been previously paid to us by the Buyers and the Buyers shall also be relieved of their obligation to pay to us any not-yet-due installment of the break fee.

The Purchase Agreement and the Disposition Transaction were unanimously approved by our Board of Directors at a meeting during the portion of which the Purchase Agreement and Disposition Transaction were considered and voted on Mr. Johnson was not present.

The purchase price that the Buyers have agreed to pay to us in the Disposition Transaction is $25 million, subject to certain adjustments, including a potential increase in the purchase price due to an earnout, the assumption of certain debt of ARCA, Connexx, or us, and potential indemnification claims (collectively, the “Initial Aggregate Consideration”). At closing, $7.5 million of the Aggregate Consideration will be paid in immediately available funds, and $17.5 million of the Initial Aggregate Consideration will be paid pursuant to the terms of the Buyers’ promissory note in our favor (the “Note”), which Note will bear interest at the rate of 6% per annum on the unpaid balance thereof. The Buyers’ payment obligations under the Note will be subordinated to the Buyers’ obligations to their Disposition Transaction lender(s), with the terms of such subordination to be determined upon Buyers’ identification of their lender(s). The parties have made customary representations, warranties, covenants, and indemnities in connection with the Disposition Transaction.

Commencing on February 19, 2021, (i) the Buyers will seek financing for the balance of the Initial Aggregate Consideration and (ii) the parties will prepare and negotiate the terms and conditions of certain ancillary documentation, including, without limitation, disclosure

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schedules, bills of sale, assignment and assumption agreements, the Note, and any related subordination documentation with Buyers’ Disposition Transaction lender(s).

The Purchase Agreement contains certain representations and warranties that the parties made to each other as of the date of the Purchase Agreement or such other date as specifically referenced therein. The representations and warranties were made solely for purposes of the Purchase Agreement and (i) are subject to limitations agreed by the parties in negotiating the terms and conditions thereof, (ii) may not be accurate or complete as of any specified date, (iii) will be qualified by the underlying disclosure schedules, (iv) may be subject to a contractual standard of materiality different from those generally applicable to investors, and (v) may have been used for the purpose of allocating risk among the parties thereto, rather than for establishing any matters as facts. Information concerning the subject matter of the representations and warranties may change after July 15, 2022, which subsequent information may or may not be fully reflected in JanOne’s public disclosures. For the foregoing reasons, the representations and warranties contained in the Purchase Agreement should not be relied upon as statements of factual information.

The foregoing descriptions of the Purchase Agreement, as amended, and the Disposition Transaction do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement, a copy of which is filed with the Current Report on Form 8‑K as filed on February 25, 2021 as Exhibit 10.1, and the Amendment, a copy of which is filed as Exhibit 10.4 to this Form 10-Q, and each of which is incorporated herein by reference.

See Note 15 for additional information.

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Note 23. Subsequent event

Amendment to Terms of Sale of Recycling Business

As previously disclosed, on February 19, 2021, the Company together with its subsidiaries (a) ARCA Recycling, Inc., a California corporation (“ARCA”), and (b) Customer Connexx LLC, a Nevada limited liability company (“Connexx”), entered into an Asset Purchase Agreement (the “Recycling Sale Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction was previously expected to be consummated on or before August 18, 2021 (the "Outside Date"). On August 12, 2021, the parties entered into an Amendment No. One to Asset Purchase Agreement (the “Recycling Sale Amendment”) to extend the Outside Date to September 30, 2021. Except as amended by the Recycling Sale Amendment, the terms and conditions of the Recycling Sale Purchase Agreement remain unchanged. On November 14, 2021, the parties entered into an Amendment No. Two to the Asset Purchase Agreement, which provided for the immediate termination of the transactions proposed by the Purchase Agreement, as amended by the Recycling Sale Amendment, and for an amendment to the Buyers’ requirement to pay to us a “break fee.” The break fee was amended to an aggregate of $100,000, payable in two $50,000 installments: (i) the first of which is due to be paid not later than August 12, 2022 (the one-year anniversary of the Recycling Sale Agreement) and (ii) the second of which is due to be paid not later than the last day of our next fiscal year. However, if, prior to the date on which either installment of the amended break fee is payable, we sell ARCA and Connexx to an otherwise unaffiliated third party for an aggregate amount less than $25 million, then the Buyers will be relieved of their obligation to pay to us any not-yet-then-due installment of the break fee. Additionally, if, prior to the date on which the second installment of the amended break fee is payable, we have not sold ARCA and Connexx to any third party, then the Buyers will be relieved of their obligation to pay to us the second installment of the break fee. Finally, if, prior to a date on which either installment of the amended break fee is due, we sell ARCA and Connexx to the Buyers, then, the purchase price therefor will be reduced by an amount equivalent to any break fee that had been previously paid to us by the Buyers and the Buyers shall also be relieved of their obligation to pay to us any not-yet-due installment of the break fee.

The foregoing description of the Recycling Sale Amendment is not complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.4 to this Form 10-Q and is incorporated herein by reference.

ApplianceSmart Note

On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future. For discussion related to potential obligations and or guarantees under ApplianceSmart Leases, see Note 15.

SEC Complaint

The SEC filed its complaint against the Defendants on August 2, 2021. The Defendants strongly dispute and deny the allegations and are vigorously defending themselves against the claims. To that end, the Defendants filed a motion to dismiss the SEC’s complaint on October 1, 2021 in the Federal District Court of Nevada, see Note 15.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Dollars stated in thousands, except per share amounts.

Forward-Looking and Cautionary Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as ‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates’’ or ‘‘anticipates’’ or similar expressions that concern our strategy, plans or intentions. Any statements we make relating to our future operations, performance and results, and anticipated liquidity are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q, are disclosed in “Item 1-Business, Item 1A – Risk Factors” of our Form 10-K and Part II, Item 1A of this Form 10-Q. Some of the factors that we believe could affect our results include:

the continued effect on the U.S. economy of the coronavirus public health crisis;

our ability to secure additional financing to execute our biotechnology business plan;

our ability to obtain the marketing approval for JAN101, our initial drug product candidate;

the effect that the SEC Complaint has on the Company, if any;

the strength of energy conservation recycling programs;

our continued ability to purchase product from our suppliers at acceptable prices;

costs and expenses being realized at higher-than-expected levels;

our ability to secure an adequate supply of special-buy appliances for resale;

the ability to secure appliance recycling and replacement contracts with sponsors of energy efficiency programs;

the ability of customers to supply units under their recycling contracts with us;

the outcome of the sales and use tax examination in California; and

general economic conditions affecting consumer demand for appliances.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Our MD&A should be read in conjunction with our Form 10-K (including the information presented therein under the caption Risk Factors), together with our Quarterly Reports on Forms 10-Q and other publicly available information. All amounts herein are unaudited.

Overview

JanOne is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties. In addition, through our subsidiaries ARCA Recycling, Inc., Customer Connexx LLC, and ARCA Canada Inc., JanOne is engaged in the business of recycling major household appliances in North America by providing turnkey appliance recycling and replacement services for utilities and other sponsors of energy efficiency programs. In addition, through its GeoTraq Inc. (“GeoTraq”) subsidiary, we are engaged in the development, design and, ultimately, we expect the sale of wireless transceiver modules with technology that provides LBS directly from global Mobile IoT networks.

We operate three reportable segments:

Biotechnology: Our biotechnology segment is focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

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Recycling: Our recycling segment is a turnkey appliance recycling program. We receive fees charged for recycling, replacement and additional services for utility energy efficiency programs and have established 18 Regional Processing Centers (“RPCs”) for this segment throughout the United States and Canada.

Technology: GeoTraq is engaged in the process of developing technology to enable low cost, location-based products and services.

For the Thirteen Weeks Ended October 2, 2021 and September 26, 2020

Results of Operations

The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated:

	13 Weeks Ended					13 Weeks Ended
	October 2, 2021					September 26, 2020
Statement of Operations Data:
Revenue	$	12,113		100.0	%	$	12,266		100.0	%
Cost of revenue		9,032		74.6	%		8,549		69.7	%
Gross profit		3,081		25.4	%		3,717		30.3	%
Selling, general and administrative expense		3,925		32.4	%		4,540		37.0	%
Operating loss		(844	)	-7.0	%		(823	)	-6.7	%
Interest expense, net		(125	)	-1.0	%		(88	)	-0.7	%
Gain on settlement of vendor advance payments		11		0.1	%		—		0.0	%
Loss on litigation settlement		—		0.0	%		—		0.0	%
Other income (expense)		23		0.2	%		2		0.0	%
Net loss before income taxes		(935	)	-7.7	%		(909	)	-7.4	%
Benefit of income taxes		(33	)	-0.3	%		99		0.8	%
Net loss	$	(968	)	-8.0	%	$	(810	)	-6.6	%

The following tables set forth revenues for key product and service categories, percentages of total revenue and gross profits earned by key product and service categories and gross profit percent as compared to revenues for each key product category indicated:

	13 Weeks Ended					13 Weeks Ended
	October 2, 2021					September 26, 2020
	Net		Percent			Net		Percent
	Revenue		of Total			Revenue		of Total
Revenue
Recycling and Byproducts	$	6,714		55.4	%	$	6,005		49.0	%
Replacement Appliances		5,399		44.6	%		6,261		51.0	%
Total Revenue	$	12,113		100.0	%	$	12,266		100.0	%

	13 Weeks Ended					13 Weeks Ended
	October 2, 2021					September 26, 2020
	Gross		Gross			Gross		Gross
	Profit		Profit %			Profit		Profit %
Gross Profit
Recycling and Byproducts	$	1,277		19.0	%	$	444		7.4	%
Replacement Appliances		1,804		33.4	%		3,273		52.3	%
Total Gross Profit	$	3,081		25.4	%	$	3,717		30.3	%

Revenue

Revenue decreased by approximately $153,000, or 1%, for the 13 weeks ended October 2, 2021, as compared to the 13 weeks ended September 26, 2020. Replacement Appliance revenue decreased by approximately $862,000, or 14%, due to the completion of a project for New York City producing higher volumes and greater margins during 2020. Recycling and Byproducts revenue increased by approximately $709,000, or 12%, due to higher volumes from customers and an increase in commodity prices. The Company experienced lower volumes overall during 2020 due to COVID-19 closures.

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Cost of Revenue

Cost of revenue increased by approximately $483,000, or $6%, for the 13 weeks ended October 2, 2021, as compared to the 13 weeks ended September 26, 2020, due to the factors described above.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased by approximately $615,000, or 14%, for the 13 weeks ended October 2, 2021, as compared to the 13 weeks ended September 26, 2020, due to decreases in stock-based compensation and other corporate expenses.

Interest Expense, net

Interest expense, net increased by approximately $37,000 for the 13 weeks ended October 2, 2021, as compared to the 13 weeks ended September 26, 2020 primarily due to an increase in related party debt and notes payable.

Gain on Settlement of Vendor Advance Payments

During the third quarter of fiscal 2021, a portion of the vendor advance payments were settled which resulted in a gain of approximately $11,000. There were no similar transactions during the second quarter of fiscal 2020.

Segment Performance

We report our business in the following segments: Biotechnology, Recycling, and Technology. We identified these segments based on a combination of business type, customers serviced and how we divide management responsibility. Our revenues and profits are driven through our recycling centers, e-commerce, individual sales reps and our internet services for our recycling and technology segment. We expect revenues and profits for our biotechnology segment to be driven by the development of pharmaceuticals that treat the root cause of pain but are non-opioid painkillers. We include Corporate expenses within the Recycling segment.

Operating loss by operating segment, is defined as loss before net interest expense, other income and expense, provision for income taxes.

	13 Weeks Ended October 2, 2021											13 Weeks Ended September 26, 2020
	Biotechnology			Recycling		Technology			Total			Biotechnology			Recycling		Technology			Total
Revenue	$	—		$	12,113	$	—		$	12,113		$	—		$	12,266	$	—		$	12,266
Cost of revenue		—			9,032		—			9,032			—			8,549		—			8,549
Gross profit		—			3,081		—			3,081			—			3,717		—			3,717
Selling, general and administrative    expense		182			2,807		936			3,925			845			2,468		1,227			4,540
Operating loss	$	(182	)	$	274	$	(936	)	$	(844	)	$	(845	)	$	1,249	$	(1,227	)	$	(823	)

Biotechnology Segment

Our biotechnology segment incurred expenses of approximately $182,000 and $845,000 related to employee costs and professional services related to research for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively.

Recycling Segment

The recycling segment consists of ARCA Recycling, Customer Connexx, and ARCA Canada. Revenue for the 13 weeks ended October 2, 2021, decreased by approximately $153,000, or 1%, as compared to the prior year period. Replacement Appliance revenue decreased by approximately $862,000, or 14%, due to the completion of a project for New York City producing higher volumes and greater margins during 2020. Recycling and Byproducts revenue increased by approximately $709,000, or 12%, due to higher volumes from customers.

Cost of revenue for the 13 weeks ended October 2, 2021, increased by approximately $483,000, or 6%, as compared to the prior year period, due to the factors described above.

Operating profit for the 13 weeks ended October 2, 2021, decreased by approximately $975,000, or 78%, as compared to the prior year period. This this is due to a decrease in gross profit of approximately $636,000 and an increase in selling, general and administrative expenses of approximately $339,000.

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Technology Segment

The technology segment consists of GeoTraq. Results for the 13 weeks ended October 2, 2021 include a loss of approximately $936,000 which represents a decrease of approximately $291,000 compared to the 13 weeks ended September 26, 2020 loss of approximately $1.2 million. The loss represents intangible asset amortization expense and other selling general and administrative expense for each period.

For the Twenty-Six Weeks Ended October 2, 2021 and September 26, 2020

Results of Operations

The following table sets forth certain statement of operations items and as a percentage of revenue, for the periods indicated:

	39 Weeks Ended					39 Weeks Ended
	October 2, 2021					September 26, 2020
Statement of Operations Data:
Revenue	$	29,391		100.0	%	$	24,723		100.0	%
Cost of revenue		23,146		78.8	%		18,487		74.8	%
Gross profit		6,245		21.2	%		6,236		25.2	%
Selling, general and administrative expense		12,050		41.0	%		12,776		51.7	%
Operating loss		(5,805	)	-19.8	%		(6,540	)	-26.5	%
Interest expense, net		(323	)	-1.1	%		(255	)	-1.0	%
Gain on Payroll Protection Program loan forgiveness		1,872		6.4	%		—		—
Gain on settlement of vendor advance payments		952		3.2	%		—		—
Loss on litigation settlement		(1,950	)	-6.6	%		—		—
Other income		45		0.2	%		812		3.3	%
Net loss before income taxes		(5,209	)	-17.7	%		(5,983	)	-24.2	%
Income tax benefit (expense)		(236	)	-0.8	%		448		1.8	%
Net loss	$	(5,445	)	-18.5	%	$	(5,535	)	-22.4	%

The following tables set forth revenues for key product and service categories, percentages of total revenue and gross profits earned by key product and service categories and gross profit percent as compared to revenues for each key product category indicated:

	39 Weeks Ended					39 Weeks Ended
	October 2, 2021					September 26, 2020
	Net		Percent			Net		Percent
	Revenue		of Total			Revenue		of Total
Revenue
Recycling and Byproducts	$	15,580		53.0	%	$	12,445		50.3	%
Replacement Appliances		13,811		47.0	%		12,278		49.7	%
Total Revenue	$	29,391		100.0	%	$	24,723		100.0	%

	39 Weeks Ended					39 Weeks Ended
	October 2, 2021					September 26, 2020
	Gross		Gross			Gross		Gross
	Profit		Profit %			Profit		Profit %
Gross Profit
Recycling and Byproducts		1,739		11.2	%		588		4.7	%
Replacement Appliances		4,506		32.6	%		5,648		46.0	%
Total Gross Profit	$	6,245		21.2	%	$	6,236		25.2	%

Revenue

Revenue increased by approximately $4.7 million, or 19%, for the 39 weeks ended October 2, 2021, as compared to the 39 weeks ended September 26, 2020. Replacement Appliance revenue increased by approximately $1.5 million, or 12%, due to higher volumes from customers. Recycling and Byproducts revenue also increased by approximately $3.1 million, or 25%, due to higher volumes from customers and an increase in commodity prices. The Company experienced lower volumes during 2020 due to COVID-19 closures.

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Cost of Revenue

Cost of revenue increased by approximately $4.7 million, or 25%, for the 39 weeks ended October 2, 2021, as compared to the 39 weeks ended September 26, 2020, with the increase in revenue described above.

Selling, General and Administrative Expense

Selling, general and administrative expense remained relatively constant for the 39 weeks ended October 2, 2021, as compared to the 39 weeks ended September 26, 2020.

Interest Expense, net

Interest expense, net increased slightly for the 39 weeks ended October 2, 2021, as compared to the 39 weeks ended September 26, 2020 primarily due to the increase in related party debt and the note payable.

Gain on Payroll Protection Program Loan Forgiveness

During the 39 weeks ended October 2, 2021, the PPP Loan was forgiven which resulted in a gain of $1,872. There were no similar transactions during the 39 weeks ended September 26, 2020.

Gain on Settlement of Vendor Advance Payments

During the 39 weeks ended October 2, 2021, a portion of the vendor advance payments were settled which resulted in a gain of approximately $952,000. There were no similar transactions during the 39 weeks ended September 26, 2020.

Loss on litigation settlement

During the second quarter of fiscal 2021, the Company recorded a loss on ligation settlement of $1,950 related to litigation with a former employee. There were no similar transactions during the second quarter of fiscal 2020.

Other Income

Other income of approximately $810,000 for the 39 weeks ended September 26, 2020, was primarily attributable to an increase in gains on the litigation settlement received. There were no similar transactions for the 39 weeks ended October 2, 2021.

Segment Performance

We report our business in the following segments: Biotechnology, Recycling and Technology. We identified these segments based on a combination of business type, customers serviced and how we divide management responsibility. Our revenues and profits are driven through our recycling centers, e-commerce, individual sales reps and our internet services for our recycling and technology segment. We expect revenues and profits for our biotechnology segment to be driven by the development of pharmaceuticals that treat the root cause of pain but are non-opioid painkillers. We include Corporate expenses within the Recycling segment.

Operating loss by operating segment, is defined as loss before net interest expense, other income and expense, provision for income taxes.

	39 Weeks Ended October 2, 2021												39 Weeks Ended September 26, 2020
	Biotechnology			Recycling			Technology			Total			Biotechnology			Recycling			Technology			Total
Revenue	$	—		$	29,391		$	—		$	29,391		$	—		$	24,723		$	—		$	24,723
Cost of revenue		—			23,146			—			23,146			—			18,487			—			18,487
Gross profit		—			6,245			—			6,245			—			6,236			—			6,236
Selling, general and administrative    expense		1,232			7,998			2,820			12,050			1,652			7,762			3,362			12,776
Operating loss	$	(1,232	)	$	(1,753	)	$	(2,820	)	$	(5,805	)	$	(1,652	)	$	(1,526	)	$	(3,362	)	$	(6,540	)

Biotechnology Segment

Our biotechnology segment incurred expenses of approximately $1.2 million and $1.7 million, respectively, related to employee costs and professional services related to research for the 39 weeks ended October 2, 2021 and September 26, 2020.

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Recycling Segment

The recycling segment consists of ARCA Recycling, Customer Connexx, and ARCA Canada. Revenue for the 39 weeks ended October 2, 2021, increased by approximately $4.7 million, or 19%, as compared to the prior year period. Replacement Appliance revenue increased by approximately $1.5 million, or 12%, due to higher volumes from customers. Recycling and Byproducts revenue also increased by approximately $3.1 million, or 25%, due to higher volumes from customers.

Cost of revenue for the 39 weeks ended October 2, 2021, increased by approximately $4.7 million, or 25%, as compared to the prior year period, with revenue as described above.

Operating loss for the 39 weeks ended October 2, 2021, increased by approximately $227,000, or 15%, as compared to the prior year period based on the discussion above and an increase in selling, general and administrative expense of approximately $236,000.

Technology Segment

The technology segment consists of GeoTraq. Results for the 39 weeks ended October 2, 2021 include a loss of approximately $2.8 million, which represents a decrease of approximately $542,000 compared to the 39 weeks ended September 26, 2020 loss of approximately $3.4 million. The loss represents intangible asset amortization expense and other selling general and administrative expense for each period.

Liquidity and Capital Resources

Overview

As of October 2, 2021, we had total cash on hand of approximately $2.8 million. As we continue to prepare to begin late-stage clinical development with our pharmaceutical product, JAN101, and potentially pursue strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities. The amount, nature and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.

In December 2019, the 2019 novel coronavirus (COVID-19) surfaced in Wuhan, China. The World Health Organization declared a global emergency on January 30, 2020, and most countries have initiated travel restrictions limiting travel to other countries and lock-downs within their borders. While various vaccines have recently been introduced into the marketplace, the impacts of variant strains of the COVID-19 virus are still unknown. The widespread health crisis has adversely affected the global economy, resulting in an economic downturn that could impact demand for our products. To date, the outbreak had a material adverse impact on our operations. For example, several customers in our appliance recycling and appliance replacement business have previously suspended our ability to pick up and or replace their customers’ appliances resulting in decreased revenues for both recycling and replacement business. The future impact of the outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not have another material adverse impact on the future results of the Company. The extent of the impact, if any, will depend on future developments, including actions taken to contain the coronavirus. A key task for the Company in 2021 is to begin late-stage clinical development with its pharmaceutical product, JAN101. However, the COVID-19 pandemic significantly impacted clinical trials in 2020, delaying recruitment in most non-COVID-19 clinical trials and even eliminating recruitment in some trials. While clinical sites have largely resumed conducting non-COVID-19 clinical trials, the backlog of subjects may adversely affect our ability to recruit for its trial, leading to longer and more expensive trials. In addition, the unknown effectiveness of the COVID-19 vaccines, particularly concerning variant strains of COVID-19, could lead to clinical sites terminating patient recruitment again during the course of the study.

On May 1, 2020, the Company entered into a promissory note (the “Promissory Note”) with Texas Capital Bank, N.A. that provides for a loan in the amount of approximately $1.9 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 27, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The PPP Loan was forgiven during the first fiscal quarter of 2021.

As of the period ending September 26, 2020, the Company received advance payments authorized by the California Public Utilities Commission and processed through two California utilities for the purposes of sustaining the workforce during the COVID 19 pandemic shutdown. The use of these funds was limited to labor and labor benefits for impacted employees. Portions of these advances are forgivable if certain conditions are met the specifics which have not been finalized. Advance payments that are not forgiven will need to be paid back in full by December 31, 2021. Total funding received under this program as of September 26, 2020 amounted to

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approximately $1.2 million. As of October 2, 2021, approximately $1.1 million was settled, leaving a balance remaining of approximately $75,000.

On January 29, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”) for the sale by the Company in a registered direct offering (the “Offering”) of 571,428 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price per share of Common Stock of $10.50.

On February 2, 2021, the Offering closed and the Company received gross proceeds of approximately $6.0 million before deducting placement agent fees and other offering expenses. The Company is utilizing the net proceeds for general working capital.

Based on our current operating plans, we believe that available cash balances, funds available under our factoring agreement with Prestige Capital Finance, LLC (“Prestige Capital”), and or other refinancing of existing indebtedness will provide sufficient liquidity to fund our operations, our continued investments in store openings and remodeling activities for at least the next 12 months.

Cash Flows

During the 39 weeks ended October 2, 2021, cash used in operations was approximately $3.5 million, compared to cash used in operations of approximately $1.0 million during the 39 weeks ended September 26, 2020. The increase in cash used in operations was primarily due to results of operations, as discussed above.

Cash used in investing activities was approximately $1.6 million and $293,000, respectively, for the 39 weeks ended October 2, 2021 and the 39 weeks ended September 26, 2020, primarily related to purchases of property and equipment and intangibles.

Cash provided by financing activities was approximately $7.6 million for the 39 weeks ended October 2, 2021, and was primarily due to net proceeds of approximately $5.5 million from an equity financing and approximately $1.8 million in proceeds from notes payable. Cash provided by financing activities was approximately $1.5 million for the 39 weeks ended September 26, 2020. During fiscal 2020, the Company received proceeds from short term debt of $3,469 primarily associated with the Payroll Protection Program and advances from certain customers for future services and paid $1.5 million on its related party note

Sources of Liquidity

We utilize cash on hand and factor certain accounts receivable invoices to cover normal and seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash equivalents are carried at cost and consist primarily of demand deposits with commercial banks. On March 26, 2018, the Company entered into a purchase and sale agreement with Prestige Capital, whereby from time to time the Company can factor certain accounts receivable to Prestige Capital up to a maximum advance and outstanding balance of $11 million. Discount fees ultimately paid depend upon how long an invoice and related amount is outstanding from ARCA Recycling’s customer. Prestige Capital has been granted a security interest in all ARCA Recycling’s accounts receivable. The current purchase and sale agreement with Prestige Capital automatically renews every six months unless terminated by the parties.

We acknowledge that we continue to face a challenging competitive environment as we continue to focus on our overall profitability, including managing expenses. We reported a net loss of approximately $5.4 million and $5.5 million, respectively, for the 39 weeks ended October 2, 2021 and September 26, 2020. In addition, the Company has total current assets of approximately $10.7 million and total current liabilities of approximately $20.6 million resulting in a net negative working capital of approximately $9.9 million as of October 2, 2021.

Based on the above, management has concluded that the Company is not aware and did not identify any other conditions or events that would cause the Company to not be able to continue business as a going concern for the next twelve months

Future Sources of Cash; Phase 2b Trials, New Acquisitions, Products, and Services

We may require additional debt financing and/or capital to finance new acquisitions, refinance existing indebtedness, conduct our Phase 2b clinical trials, or consummate other strategic investments in our business. Any financing obtained may further dilute or otherwise impair the ownership interest of our existing stockholders.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk and Impact of Inflation

Interest Rate Risk. We do not believe there is any significant risk related to interest rate fluctuations on our short and long-term fixed rate debt.

Foreign Currency Exchange Rate Risk. We currently generate revenues in Canada. The reporting currency for our consolidated financial statements is U.S. dollars. It is not possible to determine the exact impact of foreign currency exchange rate changes; however, the effect on reported revenue and net earnings can be estimated. We estimate that the overall strength of the U.S. dollar against the Canadian dollar had an immaterial impact on the revenues and net income for the fiscal year ended January 2, 2021. We do not currently hedge foreign currency fluctuations and do not intend to do so for the foreseeable future.

We do not hold any derivative financial instruments, nor do we hold any securities for trading or speculative purposes.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure control and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of October 2, 2021, the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting during the quarter ended October 2, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of April 3, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 regarding Internal Control – Integrated Framework. Based on our assessment using those criteria, our management concluded that our internal control over financial reporting was not effective as of October 2, 2021.

Management noted material weaknesses in internal control when conducting their evaluation of internal control as of January 2, 2021. (1) Insufficient information technology general controls (“ITGC”) and segregation of duties. It was noted that people who were negotiating a contract, were also involved in approving invoices without proper oversight. Additional controls and procedures are necessary and are being implemented to have check and balance on significant transactions and governance with those charged with governance authority. (2) Inadequate control design or lack of sufficient controls over significant accounting processes. The cutoff and reconciliation procedures were not effective with certain accrued and deferred expenses. (3) Insufficient assessment of the impact of potentially significant transactions, and (4) Insufficient processes and procedures related to proper recordkeeping of agreements and contracts. In addition, contract to invoice reconciliation was not effective with certain transportation service providers. As part of its remediation plan, processes and procedures have been implemented to help ensure accruals and invoices are reviewed for accuracy and properly recorded in the appropriate period. These material weaknesses remained outstanding as of the filing date of this quarterly report on Form 10-Q and management is currently working to remedy these outstanding material weaknesses.

The Company’s management, including the Company’s CEO and CFO, do not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting will prevent or detect all error and all fraud. A control system, regardless of how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following: judgements in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes, controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override, the design of any system of controls is based in part on certain assumptions about

35

the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

36

PART II. Other Information

Item 1. Legal Proceedings

The information in response to this item is included in Note 15, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. However, in light of the SEC Complaint, the Company provides the following additional risk factor, which supplements the risk factors previously disclosed by the Company in Part I, Item 1A, Risk Factors, of the 2020 10-K.

We are the subject of an SEC Complaint, which could divert management's focus, result in substantial litigation expenses and have an adverse impact on our business, reputation, financial condition, results of operations or stock price.

We are currently subject to an SEC Complaint. Refer to Note 15 to our Consolidated Financial Statements and Part II, Item 1 of this Quarterly Report for additional information regarding this specific matter. We may be subject to additional investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to intellectual property, employment, securities laws, disclosures, tax, accounting, class action and product liability, as well as regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings. We cannot predict the outcome of any particular proceeding, or whether ongoing investigations, will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, bars against serving as an officer or director, or practicing before the SEC, or civil or criminal proceedings against us or members of our senior management.

Legal proceedings in general, and securities and class action litigation and regulatory investigations in particular, can be expensive and disruptive. Our insurance may not cover all claims that may be asserted against us, and we are unable to predict how long the legal proceedings to which we are currently subject will continue. An unfavorable outcome of any legal proceeding may have an adverse impact on our business, financial condition and results of operations or our stock price. Any proceeding could negatively impact our reputation among our stakeholders. Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our image.

Item 2. Unregistered Sales of Equity Securities and Use of funds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information.

Item 1.01 Entry into a Material Definitive Agreement.

Amendment to Terms of Sale of Recycling Business

As previously disclosed, on February 19, 2021, the Company together with its subsidiaries (a) ARCA Recycling, Inc., a California corporation (“ARCA”), and (b) Customer Connexx LLC, a Nevada limited liability company (“Connexx”), entered into an Asset Purchase Agreement (the “Recycling Sale Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction was previously expected to be consummated on or before August 18, 2021 (the "Outside Date"). On August 12, 2021, the parties entered into an Amendment No. One to Asset Purchase Agreement (the “Recycling Sale Amendment”) to extend the Outside Date to September 30, 2021. Except as amended by the Recycling Sale Amendment, the terms and conditions of the Recycling Sale Purchase Agreement remain unchanged. On November 14, 2021, the parties entered into an Amendment No. Two to the

37

Asset Purchase Agreement, which provided for the immediate termination of the transactions proposed by the Purchase Agreement, as amended by the Recycling Sale Amendment, and for an amendment to the Buyers’ requirement to pay to us a “break fee.” The break fee was amended to an aggregate of $100,000, payable in two $50,000 installments: (i) the first of which is due to be paid not later than August 12, 2022 (the one-year anniversary of the Recycling Sale Agreement) and (ii) the second of which is due to be paid not later than the last day of our next fiscal year. However, if, prior to the date on which either installment of the amended break fee is payable, we sell ARCA and Connexx to an otherwise unaffiliated third party for an aggregate amount less than $25 million, then the Buyers will be relieved of their obligation to pay to us any not-yet-then-due installment of the break fee. Additionally, if, prior to the date on which the second installment of the amended break fee is payable, we have not sold ARCA and Connexx to any third party, then the Buyers will be relieved of their obligation to pay to us the second installment of the break fee. Finally, if, prior to a date on which either installment of the amended break fee is due, we sell ARCA and Connexx to the Buyers, then, the purchase price therefor will be reduced by an amount equivalent to any break fee that had been previously paid to us by the Buyers and the Buyers shall also be relieved of their obligation to pay to us any not-yet-due installment of the break fee.

The foregoing description of the Recycling Sale Amendment is not complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.4 to this Form 10-Q and is incorporated herein by reference.

38

Item 6. Exhibits.

Index to Exhibits

Exhibit Number		Exhibit Description	Form	File Number	Exhibit Number	Filing Date
3.1		Articles of Incorporation of Appliance Recycling Centers of America, Inc.	8-K	0-19621	3.3	03/13/2018
3.2		Articles of Conversion	8-K	0-19621	3.1	03/13/2018
3.3		Articles of Conversion	8-K	0-19621	3.2	03/13/2018
3.4		Certificate of Correction	10-Q	0-19621	3.1	08/14/2018
3.5		Certificate of Change	8-K	0-19621	3.1	04/22/2019
3.6		Certificate of Correction	8-K	0-19621	3.7	06/24/2019
3.7		Certificate of Designation of Powers, Preferences, and Rights of Series A-1 Convertible Preferred Stock of JanOne Inc. (formerly known as Appliance Recycling Centers of America, Inc.)	8-K	0-19621	3.8	06/24/2019
3.8		Amended and Restated Certificate of Designation of the Preferences, Rights, and Limitations of the Series A-1 Convertible Preferred Stock of JanOne Inc., dated October 1, 2020	8-K	0-19621	3.8(a)	10/02/2020
3.9		Second Amended and Restated Certificate of Designation of the Preferences, Rights, and Limitations of the Series A-1 Convertible Preferred Stock of JanOne Inc., dated April 13, 2021	8-K	0-19621	3.8(b)	04/16/2021
3.10		Articles of Merger for JanOne Inc. into Appliance Recycling Centers of America, Inc., filed with the Secretary of the State of Nevada on September 9, 2019, and effective on September 10, 2019	8-K	0-19621	3.10	09/13/2019
3.10		Bylaws of Appliance Recycling Centers of America, Inc.	8-K	0-19621	3.4	03/13/2018
3.11		First Amendment to Bylaws of Appliance Recycling Centers of America, Inc.	8-K	0-19621	3.1	12/31/2018
10.1		Addendum to Master Equipment Finance Agreement dated as of April 14, 2021 between KLC Financial, LLC and ARCA Recycling, Inc.	10-Q	0-19621	10.2	05/17/2021
10.2	†	Settlement Agreement and Mutual Release of Claims dated April 9, 2021 by and among JanOne Inc. (f/k/a Appliance Recycling Centers of America, Inc.); GeoTraq, Inc.; Antonios Isaac; and Gregg Sullivan	10-Q	0-19621	10.2	08/16/2021
10.3		Amendment No. One to Asset Purchase Agreement among JanOne Inc., ARCA Recycling, Inc. and Customer Connexx LLC, on the one hand, and ARCA Affiliated Holdings Corporation, ARCA Services Inc., and Connexx Services Inc., on the other hand	10-Q	0-19621	10.3	08/16/2021
31.1	*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

39

31.2	*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	*	Certification of the 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 in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

† Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).

40

SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on our behalf by the undersigned, thereunto duly authorized.

		JanOne Inc.
		(Registrant)
Date:	November 16, 2021	By:	/s/ Tony Isaac
			Tony Isaac
			Chief Executive Officer
			(Principal Executive Officer)

Date:	November 16, 2021	By:	/s/ Virland A. Johnson
			Virland A. Johnson
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

41

EX-31.1

Exhibit 31.1

CERTIFICATIONS:

I, Tony Isaac, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of JanOne Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2021	/s/ Tony Isaac
	Tony Isaac
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS:

I, Virland A. Johnson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of JanOne Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2021	/s/ Virland A. Johnson
	Virland A. Johnson
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), the undersigned Chief Executive Officer of JanOne Inc. (the “Company”) hereby certifies that the Quarterly Report on Form 10-Q of the Company for the period ended October 2, 2021 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2021	/s/ Tony Isaac
	Tony Isaac
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), the undersigned Chief Financial Officer of JanOne Inc. (the “Company”) hereby certifies that the Quarterly Report on Form 10-Q of the Company for the period ended October 2, 2021 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2021	/s/ Virland A. Johnson
	Virland A. Johnson
	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 02, 2021	Nov. 12, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 02, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Trading Symbol	JAN
Title of 12(b) Security	Common Stock, $0.001 par value per share
Security Exchange Name	NASDAQ
Entity Registrant Name	JANONE INC.
Entity Central Index Key	0000862861
Current Fiscal Year End Date	--01-02
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		2,827,410
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-19621
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	41-1454591
Entity Address, Address Line One	325 E. Warm Springs Road
Entity Address, Address Line Two	Suite 102
Entity Address, City or Town	Las Vegas
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89119
City Area Code	702
Local Phone Number	997-5968

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Assets
Cash and cash equivalents	$ 2,820	$ 379
Trade and other receivables, net	5,531	3,600
Income taxes receivable	0	196
Inventories	1,152	1,630
Prepaid expenses and other current assets	1,207	1,136
Total current assets	10,710	6,941
Property and equipment, net	2,134	732
Right of use asset - operating leases	3,453	2,458
Intangible assets, net	11,046	13,989
Deposits and other assets	267	231
Total assets	27,610	24,351
Liabilities:
Accounts payable	5,433	4,701
Accrued liabilities - other	6,127	4,888
Accrued liability - California Sales Taxes	5,958	5,769
Lease obligation short term - operating leases	1,320	1,197
Short term debt	494	3,042
Current portion of note payable	257	0
Related party note	1,000	1,000
Total current liabilities	20,589	20,597
Lease obligation long term - operating leases	2,236	1,388
Note payable	1,381	0
Other noncurrent liabilities	680	0
Total liabilities	24,886	21,985
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, series A-1 par value $0.001 per share 2,000,000 authorized, 238,729 and 259,729 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively	0	0
Common stock, par value $0.001 per share, 200,000,000 shares authorized, 2,827,410 and 1,829,982 shares issued and outstanding at October 2, 2021 and at January 2, 2021, respectively	2	2
Additional paid in capital	45,714	39,869
Accumulated other comprehensive loss	(630)	(588)
Accumulated deficit	(42,362)	(36,917)
Total stockholders' equity	2,724	2,366
Total liabilities and stockholders' equity	$ 27,610	$ 24,351

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Oct. 02, 2021	Jan. 02, 2021
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	238,729	259,729
Preferred stock, outstanding shares (in shares)	238,729	259,729
Common Stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, issued shares (in shares)	2,827,410	1,829,982
Common stock, outstanding shares (in shares)	2,827,410	1,829,982

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Income Statement [Abstract]
Revenues	$ 12,113,000	$ 12,266,000	$ 29,391,000	$ 24,723,000
Cost of revenues	9,032,000	8,549,000	23,146,000	18,487,000
Gross profit	3,081,000	3,717,000	6,245,000	6,236,000
Operating expenses:
Selling, general and administrative expenses	3,925,000	4,540,000	12,050,000	12,776,000
Operating loss	(844,000)	(823,000)	(5,805,000)	(6,540,000)
Other income (expense):
Interest expense, net	(125,000)	(88,000)	(323,000)	(255,000)
Gain on Payroll Protection Program loan forgiveness	0	0	1,872,000	0
Gain on settlement of vendor advance payments	11,000	0	952,000	0
Loss on litigation settlement	0	0	(1,950,000)	0
Other income, net	23,000	2,000	45,000	812,000
Total other income (expense), net	(91,000)	(86,000)	596,000	557,000
Loss from operations before benefit from income taxes	(935,000)	(909,000)	(5,209,000)	(5,983,000)
Income tax benefit (expense)	(33,000)	99,000	(236,000)	448,000
Net loss	$ (968,000)	$ (810,000)	$ (5,445,000)	$ (5,535,000)
Dividends declared - Series A-1 preferred stock	$ 0	$ 0	$ 0	$ 0
Dividends declared - Common stock	0	0	0	0
Loss per share:
Basic loss per share	(0.34)	(0.43)	(2.09)	(2.98)
Diluted loss per share	$ (0.34)	$ (0.43)	$ (2.09)	$ (2.98)
Weighted average common shares outstanding:
Basic	2,827,410	1,871,321	2,601,827	1,860,270
Diluted	2,827,410	1,871,321	2,601,827	1,860,270
Net loss	$ (968,000)	$ (810,000)	$ (5,445,000)	$ (5,535,000)
Other comprehensive loss, net of tax:
Effect of foreign currency translation adjustments	0	(27,000)	(42,000)	(55,000)
Total other comprehensive loss, net of tax	0	(27,000)	(42,000)	(55,000)
Comprehensive income loss	$ (968,000)	$ (837,000)	$ (5,487,000)	$ (5,590,000)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020
OPERATING ACTIVITIES:
Net loss	$ (5,445)	$ (5,535)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,136	3,104
Amortization of debt issuance costs	0	27
Stock based compensation expense	274	523
Noncash lease expense	0	137
Gain on Payroll Protection Program loan forgiveness	(1,872)	0
Gain on settlement of vendor advance payments	(952)	0
Change in deferred income taxes	0	(270)
Other	(114)	40
Changes in assets and liabilities:
Accounts receivable	(1,931)	1,561
Income taxes receivable	196	(254)
Prepaid expenses and other current assets	(71)	(575)
Inventories	478	277
Right of use assets	(995)	0
Lease liability	971	0
Accounts payable and accrued expenses	2,840	(77)
Net cash used in operating activities	(3,485)	(1,042)
INVESTING ACTIVITIES:
Purchases of property and equipment	(1,530)	(12)
Purchases of intangibles	(65)	(281)
Net cash used in investing activities	(1,595)	(293)
FINANCING ACTIVITIES:
Proceeds from issuance of short term debt	538	3,469
Payment on short term debt	(61)	(422)
Proceeds from equity financing, net	5,544	0
Proceeds from stock option exercise	27	0
Proceeds from note payable	1,835	0
Payments on notes payable	(58)	0
Payment on related party note	0	(1,500)
Payments on short term notes payable	(262)	0
Net cash provided by financing activities	7,563	1,547
Effect of changes in exchange rate on cash and cash equivalents	(42)	(55)
INCREASE IN CASH AND CASH EQUIVALENTS	2,441	157
CASH AND CASH EQUIVALENTS, beginning of period	379	481
CASH AND CASH EQUIVALENTS, end of period	2,820	638
Supplemental cash flow disclosures:
Interest paid	146	126
Income taxes paid	28	76
Right of use asset - operating leases capitalized	$ 1,815	$ 1,037

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Series A Preferred	Common Stock	Additional Paid in Capital	Accumulated Deficit	Accumulated Other Comprehensive Deficit
Beginning balance at Dec. 28, 2019	$ 10,341	$ 0	$ 2	$ 39,291	$ (28,419)	$ (533)
Beginning balance, shares at Dec. 28, 2019		259,729,000	1,919,048,000
Shares cancelled			(122,257,000)
Share based compensation	523			523
Share-based compensation, shares			33,191,000
Effect of foreign currency translation adjustments	(55)					(55)
Other comprehensive income (loss)	(55)
Net income (loss)	(5,535)				(5,535)
Ending balance at Sep. 26, 2020	5,274	$ 0	$ 2	39,814	(33,954)	(588)
Ending balance, shares at Sep. 26, 2020		259,729,000	1,829,982,000
Beginning balance at Jun. 27, 2020	6,099	$ 0	$ 2	39,802	(33,144)	(561)
Beginning balance, shares at Jun. 27, 2020		259,729,000	1,871,321,000
Share based compensation	12			12
Share-based compensation, shares			(41,339,000)
Effect of foreign currency translation adjustments	(27)					(27)
Other comprehensive income (loss)	(27)
Net income (loss)	(810)				(810)
Ending balance at Sep. 26, 2020	5,274	$ 0	$ 2	39,814	(33,954)	(588)
Ending balance, shares at Sep. 26, 2020		259,729,000	1,829,982,000
Beginning balance at Jan. 02, 2021	2,366	$ 0	$ 2	39,869	(36,917)	(588)
Beginning balance, shares at Jan. 02, 2021		259,729,000	1,829,982,000
Shares issued	5,544			5,544
Shares issued, shares			571,428,000
Share based compensation	274			274
Stock option exercise	$ 27			27
Stock option exercise, shares	6,000		6,000,000
Series A-1 preferred converted		(21,000,000)	420,000,000
Effect of foreign currency translation adjustments	$ (42)
Other comprehensive income (loss)	(42)					(42)
Net income (loss)	(5,445)				(5,445)
Ending balance at Oct. 02, 2021	2,724	$ 0	$ 2	45,714	(42,362)	(630)
Ending balance, shares at Oct. 02, 2021		238,729,000	2,827,410,000
Beginning balance at Jul. 03, 2021	3,598	$ 0	$ 2	45,620	(41,394)	(630)
Beginning balance, shares at Jul. 03, 2021		238,729,000	2,827,410,000
Share based compensation	94			94
Net income (loss)	(968)				(968)
Ending balance at Oct. 02, 2021	$ 2,724	$ 0	$ 2	$ 45,714	$ (42,362)	$ (630)
Ending balance, shares at Oct. 02, 2021		238,729,000	2,827,410,000

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Background

9 Months Ended

Oct. 02, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background

Note 1: Background

The accompanying consolidated financial statements include the accounts of JanOne Inc., a Nevada corporation, and its subsidiaries (collectively the “Company” or “JanOne”). On September 10, 2019, Appliance Recycling Centers of America, Inc. changed its name to JanOne Inc.

The Company has three operating segments – Biotechnology, Recycling, and Technology.

During September 2019, JanOne, through its biotechnology segment, broadened its business perspectives to become a pharmaceutical company focused on finding treatments for conditions that cause severe pain and bringing to market drugs with non-addictive pain-relieving properties.

ARCA Recycling, Inc. (“ARCA Recycling”) provides turnkey recycling services for electric utility energy efficiency programs in the United States. ARCA Canada Inc. (“ARCA Canada”) provides turnkey recycling services for electric utility energy efficiency programs in Canada. Customer Connexx, LLC (“Connexx”) provides call center services for ARCA Recycling and ARCA Canada. On February 19, 2021, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA Recycling and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction is expected to be consummated no later than July 15, 2022.

GeoTraq Inc. (“GeoTraq”) is engaged in the development, design and, ultimately, the Company expects, the sale of cellular transceiver modules, also known as Mobile IoT modules, and associated wireless services.

The Company reports on a 52- or 53-week fiscal year. The Company's 2020 fiscal year (“2020”) ended on January 2, 2021, and the current fiscal year (“2021”) will end on January 1, 2022.

Going concern

The Company currently faces a challenging competitive environment and is focused on improving its overall profitability, which includes managing expenses. The Company reported a net loss of approximately $968,000 and $810,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $5.4 million and $5.5 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. In addition, as of October 2, 2021, the Company has total current assets of approximately $10.7 million and total current liabilities of approximately $20.6 million resulting in a net negative working capital of approximately $9.9 million.

The Company has available cash balances and funds available under an accounts receivable factoring program with Prestige Capital Finance, LLC (“Prestige Capital”) to provide sufficient liquidity to fund the entity’s operations and remodeling activities for at least the next twelve months. The Company expects to generate cash from operations for the remainder of fiscal year 2021 given its cost cutting measures in response to the revenue reductions resulting from the Coronavirus. However, depending on continued U.S. restrictions related to the coronavirus public health crisis, the Company cannot be certain its efforts will suffice. The agreement with Prestige Capital allows the Company to obtain advanced funding of 80% of an unpaid customer’s invoice amount within two days and the balance, less a mutually agreed upon fee, upon ultimate collection in cash of the invoice. The Company expects that it will be able to utilize the available funds under the accounts receivable factoring agreement to provide liquidity and to pursue acquisitions and other strategic transactions to expand and grow the business to enhance shareholder value. Management also regularly monitors capital market conditions to ensure no other conditions or events exist that may materially affect the Company’s financial conditions and liquidity and the Company may raise additional funds through borrowings or public or private sales of debt or equity securities, if necessary.

Based on the above, management has concluded that at October 2, 2021 the Company is not aware of, and did not identify, any other conditions or events that would cause the Company to not be able to continue business as a going concern for the next twelve months.

Coronavirus

In December 2019, the 2019 novel coronavirus (COVID-19) surfaced in Wuhan, China. The World Health Organization declared a global emergency on January 30, 2020, and most countries have initiated travel restrictions limiting travel to other countries and lock-downs within their borders. While various vaccines have recently been introduced into the marketplace, the impacts of variant strains of the COVID-19 virus are still unknown. The widespread health crisis has adversely affected the global economy, resulting in an economic downturn that could impact demand for our products. To date, the outbreak had a material adverse impact on our operations. For example, several customers in our appliance recycling and appliance replacement business have previously suspended our ability to

pick up and or replace their customers’ appliances resulting in decreased revenues for both recycling and replacement business. The future impact of the outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not have another material adverse impact on the future results of the Company. The extent of the impact, if any, will depend on future developments, including actions taken to contain the coronavirus. A key task for the Company in 2021 is to begin late-stage clinical development with its pharmaceutical product, JAN101. However, the COVID-19 pandemic significantly impacted clinical trials in 2020 and 2021, delaying recruitment in most non-COVID-19 clinical trials and even eliminating recruitment in some trials. While clinical sites have largely resumed conducting non-COVID-19 clinical trials, the backlog of subjects may adversely affect our ability to recruit for its trial, leading to longer and more expensive trials. In addition, the unknown effectiveness of the COVID-19 vaccines, particularly concerning variant strains of COVID-19, could lead to clinical sites terminating patient recruitment again during the course of the study.

During April 2020, as a result of the COVID-19 pandemic, the Company entered into an amendment to its contract services agreement with certain customers, whereby those customers agreed to advance the Company approximately $1.2 million against the provision of future services. The advanced payment may only be utilized for the costs associated with labor and sustaining ARCA Recycling’s workforce. The advance agreement provides for partial loan forgiveness if certain conditions are met. See Note 14 for a complete discussion of these advances.

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Summary of Significant Accounting Policies

9 Months Ended

Oct. 02, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, the Company's results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended January 2, 2021.

Principles of Consolidation

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

Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the previously reported net loss or stockholders’ equity.

Use of Estimates

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

Significant estimates made in connection with the accompanying consolidated financial statements include the estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete inventory, estimated fair value and forfeiture rates for stock-based compensation, fair values in connection with the analysis of other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets and estimated useful lives for intangible assets and property and equipment.

Financial Instruments

Financial instruments consist primarily of cash equivalents, trade and other receivables, notes receivable, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments. The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs). The carrying amounts of short-term debt at October 2, 2021 and January 2, 2021 approximate fair value.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less at the time of purchase. Fair value of cash equivalents approximates carrying value.

Trade Receivables and Allowance for Doubtful Accounts

The Company carries unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company writes off trade receivables when deemed uncollectible. The Company records recoveries of trade receivables previously written off when payment is received. The Company considers a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days. The Company does not charge interest on past due receivables. The Company has no allowance for doubtful accounts as of October 2, 2021 or January 2, 2021.

Inventories

Inventories, consisting primarily of appliances, are stated at the lower of cost, determined on a specific identification basis, or net realizable value. The Company provides estimated provisions for the obsolescence of appliance inventories, including adjustment to market, based on various factors, including the age of such inventory and management’s assessment of the need for such provisions. We look at historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. The Company has no reserve for excess or obsolete inventory as of October 2, 2021 or January 2, 2021.

Property and Equipment

Property and Equipment are stated at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred and additions and improvements that significantly extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of building and improvements is 3 to 30 years, transportation equipment is 3 to 15 years, machinery and equipment is 5 to 10 years, furnishings and fixtures is 3 to 5 years and office and computer equipment is 3 to 5 years.

The Company periodically reviews property and equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with respect to maintaining our facilities and projected discounted cash flows from operations. An impairment loss would be recognized for the amount by which the carrying amount of the assets exceeds their fair value, as approximated by the present value of their projected discounted cash flows.

Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Under ASC 350, intangible assets subject to amortization, shall be reviewed for impairment in accordance with the Impairment or Disposal of Long-Lived Assets in ASC 360, Property, Plant, and Equipment.

Under ASC 360, long-lived assets are tested for recoverability whenever events or changes in circumstances (‘triggering event’) indicate that the carrying amount may not be recoverable. In making this determination, triggering events that were considered included:

A significant decrease in the market price of a long-lived asset (asset group);

A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and,

A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

If a triggering event has occurred, for purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If after identifying a triggering event it is determined that the asset group’s carrying value may not be recoverable, a recoverability test is performed by forecasting the expected cash flows to be derived from the asset group for the remaining useful life of the asset group’s primary asset compared to its carrying value. The recoverability test relies upon the undiscounted cash flows (excluding interest and taxes) which are derived from the Company’s specific use of those assets (not how a market participant would use those assets); and are based upon the existing service potential of the current assets (excluding any improvements that would materially enhance the assets). If the expected undiscounted cash flows exceed the carrying value, the assets are considered recoverable.

There was no impairment of intangibles as of October 2, 2021 or January 2, 2021 based on the intangible asset impairment review performed as of those dates.

The Company’s intangible assets consist of customer relationship intangibles, trade names, licenses for the use of internet domain names, Universal Resource Locators, or URL’s, software, patent USPTO reference No. 10,182,402, and historical know-how, designs and related manufacturing procedures. Upon acquisition, critical estimates are made in valuing acquired intangible assets, which include but are not limited to: future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the period of time that customer relationships will continue; and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from the assumptions used in determining the fair values. All intangible assets are capitalized at their original cost and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 3 to 5 years, technology intangibles – 7 years, customer relationships – 7 to 15 years.

Revenue Recognition

Biotechnology Revenue

The Company is currently generating no revenue from its Biotechnology segment.

Recycling Revenue

The Company provides replacement appliances and provides appliance pickup and recycling services for consumers (“end users”) of public utilities, our customers. As part of the Company's de-manufacturing and recycling process, it receives revenue from scrap dealers for refrigerant, steel, plastic, glass, copper and other residual items.

The Company accounts for revenue in accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers.

Under the revenue standard, the Company determines revenue recognition through the following steps:

a.Identification of the contract, or contracts, with a customer,

b.Identification of the performance obligations in the contract,

c.Determination of the transaction price,

d.Allocation of the transaction price to the performance obligations in the contract, and

e.Recognition of revenue when, or as, the performance obligation(s) is satisfied.

As part of our assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. For each contract, the Company considers the promise to transfer products or services, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the price stated on the contract is typically fixed and represents the net consideration to which the Company expects to be entitled per order, and therefore there is no variable consideration. As the Company’s standard payment terms are less than 90 days, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product or service based on its relative standalone selling price. The product or service price, as specified on the contract, is considered the standalone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.

Replacement Product Revenue

The Company generates revenue by providing replacement appliances. Revenue is recognized at the point in time when control of the replacement product is transferred to the end user and when performance obligations are satisfied, which typically occurs upon delivery from the Company's center facility and installation at the end user’s home.

Recycling Services Revenue

The Company generates revenue by providing pickup and recycling services. Revenue is recognized at the point in time when a to-be recycled appliance has been picked up and transfer of ownership has occurred, thereby satisfying the performance obligation.

Byproduct Revenue

The Company generates other recycling byproduct revenue (the sale of copper, steel, plastic, and other recoverable non-refrigerant byproducts) as part of a de-manufacturing process. The Company recognizes byproduct revenue upon delivery and transfer of control of the byproduct to a third-party recycling customer having mutually agreed upon a price per pound, and that collection is reasonably assured. Transfer of control occurs at the time the customer assumes possession of the byproduct material. Revenue recognized is a function of byproduct weight, type and, in some cases, volume of the byproduct delivered multiplied by the market rate as quoted.

Contract Liability

Receivables are recognized in the period the Company ships the product or provides the service. Payment terms on invoiced amounts are based on contractual terms with each customer. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, they are recorded as deferred revenue, which represents a contract liability. The Company recognizes a contract liability as net sales once control of goods and/or services have been transferred to the customer and all revenue recognition criteria have been met, and any constraints have been resolved. The Company defers product costs until recognition of the related revenue occurs.

Assets Recognized from Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has concluded that no material costs have been incurred to obtain and fulfill our FASB Accounting Standards Codification, or ASC 606 contracts, meet the capitalization criteria, and as such, there are no material costs deferred and recognized as assets on the consolidated balance sheet at October 2, 2021 or January 2, 2021.

Other:

a.Taxes collected from customers and remitted to government authorities and that are related to sales of the Company's products are excluded from revenues.

b.Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, General and Administrative expense.

c.The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

The majority of the Company's revenue recognized is derived from contracts with customers.

Technology Revenue

The Company is currently generating no revenue from its Technology segment.

Shipping and Handling

The Company classifies shipping and handling charged to customers as revenues and classifies costs relating to shipping and handling as cost of revenues.

Advertising Expense

Advertising expense is charged to operations as incurred. Advertising expense totaled approximately $6,000 and $162,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $6,000 and $284,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2 – to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Income Taxes

The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Condensed Consolidated Statements of Operations and Other Comprehensive Loss.

Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.

Lease Accounting

The Company accounts for leases in accordance with ASC 842 - Leases. This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset (“ROU”) and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement.

In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company uses an estimate of its incremental borrowing rate based on information available at lease commencement in determining present value of lease payments.

The Company leases warehouse facilities and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates through 2025 with various renewal options for additional periods. The agreements, which have and continue to be classified as operating leases, generally provide for base rent and require us to pay all insurance, taxes and other maintenance costs. The Company’s operating leases are exclusively for building space in the different cities we have operations. The lease terms typically last from 2-3 years with some being longer or shorter depending on needs of the business and the lease partners. The Company has also engages in month-to-month leases for parking spaces that the Company has elected to expense as incurred. Our

lease agreements do not include variable lease payments. The Company's lessors offer options to extend lease terms as leases expire, and management evaluates current rental markets and other strategic factors in making the decision whether to renew. When leases are within six months of renewal, management will estimate probabilities of renewing for an additional term based on market and strategic factors, and if the probability is more likely than not that the lease will be renewed, the financials will assume the lease is renewed under the lease renewal option.

The Company's operating leases contain no residual value guarantees or contain restrictive covenants.

Lease amounts accounted for under ASC 842 were determined based on analysis of the lease contracts using lease payments and timing as documented in the contract. Non-lease contracts were also evaluated to determine if the contract terms provided an asset that was controlled by the Company, and provided it with substantially all relevant economic benefits. The Company is not a party to any contracts containing embedded leases. All lease contracts were reviewed, and distinctions made between lease and non-lease payments. Only payments related to the lease of the asset were included in lease payment calculations. Management uses an estimation of its incremental borrowing rate at lease commencement over similar terms as the lease contracts in determining the present value of its lease obligations.

Stock-Based Compensation

The Company from time to time grants stock awards, restricted stock awards, and options to employees (including executives), non-employees, and members of the Board of Directors. Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is recognized over the vesting period.

Foreign Currency

The financial statements of the Company’s non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-U.S. functional currencies other than the U.S. dollar, they are translated at rates of exchange at year end. Revenue and expense items are translated at the average monthly exchange rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive loss.

Earnings Per Share

Earnings per share is calculated in accordance with ASC 260, “Earnings Per Share”. Under ASC 260 basic earnings per share is computed using the weighted average number of common shares outstanding during the period except that it does not include unvested restricted stock subject to cancellation. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of warrants, options, restricted shares and convertible preferred stock. The dilutive effect of outstanding restricted shares, options and warrants is reflected in diluted earnings per share by application of the treasury stock method. Convertible preferred stock is reflected on an if-converted basis.

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has determined it has three reportable segments.

Concentration of Credit Risk

The Company maintains cash balances at several banks in several states including, California, Minnesota, and Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of October 2, 2021. At times, balances may exceed federally insured limits. 

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Trade and Other Receivables

9 Months Ended

Oct. 02, 2021

Receivables [Abstract]

Trade and Other Receivables

Note 3: Trade and other receivables

	October 2, 2021			January 2, 2021
Trade receivables, net	$	7,433		$	4,174
Factored accounts receivable		(2,527	)		(891	)
Prestige Capital reserve receivable		460			162
Other receivables		165			155
Trade and other receivables, net	$	5,531		$	3,600
Trade accounts receivable	$	5,148		$	2,698
Un-billed trade receivables		2,285			1,476
Total trade receivables, net	$	7,433		$	4,174

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Inventory

9 Months Ended

Oct. 02, 2021

Inventory Disclosure [Abstract]

Inventory

Note 4: Inventory

Appliances held for sale are stated at the lower of cost, determined on a specific identification basis, or net realizable value. Inventory raw material - chips, are stated at the lower of average cost or net realizable value. Total inventory consists of the following as of October 2, 2021 and January 2, 2021:

	October 2, 2021		January 2, 2021
Appliances held for resale	$	1,047	$	1,430
Inventory - raw material - chips		105		200
Total inventory	$	1,152	$	1,630

The Company provides estimated provisions for the obsolescence of inventories, including adjustments to net realizable value, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. The Company reviews historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. As of October 2, 2021 and January 2, 2021, the Company has recorded no inventory reserve.

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Prepaids and Other Current Assets

9 Months Ended

Oct. 02, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaids and Other Current Assets

Note 5: Prepaids and other current assets

Prepaids and other current assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Prepaid insurance	$	621	$	371
Prepaid rent		175		95
Prepaid purchase orders		—		366
Prepaid other		411		304
Total prepaid expenses and other current assets	$	1,207	$	1,136

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Note Receivable

9 Months Ended

Oct. 02, 2021

Discontinued Operations and Disposal Groups [Abstract]

Note Receivable

Note 6: Note receivable

On December 30, 2017, the Company sold its retail appliance segment, ApplianceSmart, Inc. (“ApplianceSmart”) to ApplianceSmart Holdings LLC (the “Purchaser”), a wholly owned subsidiary of Live Ventures Incorporated, pursuant to a Stock Purchase Agreement (the “Agreement”). Pursuant to the Agreement, the Purchaser purchased from the Company all of the issued and outstanding shares of capital stock (the “Stock”) of ApplianceSmart in exchange for $6.5 million (the “Purchase Price”). Per the Agreement, the Purchase Price was due and payable on or before March 31, 2018.

Between March 31, 2018 and April 24, 2018, the Purchaser and the Company negotiated in good faith the method of payment of the remaining outstanding balance of the Purchase Price. On April 25, 2018, the Purchaser delivered to the Company a promissory note (the “ApplianceSmart Note”) in the original principal amount of approximately $3.9 million (the “Original Principal Amount”), as such amount may be adjusted per the terms of the ApplianceSmart Note. The ApplianceSmart Note is effective as of April 1, 2018 and matured on April 1, 2021 (the “Maturity Date”). The ApplianceSmart Note bears interest at 5% per annum with interest and principal payable at the Maturity Date. ApplianceSmart provided the Company a guaranty of repayment of the ApplianceSmart Note. The

remaining approximately $2.6 million of the Purchase Price was paid in cash by the Purchaser to the Company. The Purchaser may reborrow funds, and pay interest on such re-borrowings, from the Company up to the Original Principal Amount.

On December 26, 2018, the ApplianceSmart Note was amended and restated to grant the Company a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayment terms to provide for payment in full of all principal and accrued interest on April 1, 2021, the maturity date of the ApplianceSmart Note.

On March 15, 2019, the Company entered into agreements with third parties pursuant to which it agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Company’s security interest in the assets of ApplianceSmart in exchange for a prepayment of up to $1.2 million.

On December 9, 2019, ApplianceSmart filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code. As a result, the Company has recorded an impairment charge of approximately $3.0 million for the amount owed by ApplianceSmart to the Company as of December 28, 2019. The outstanding balance of the ApplianceSmart Note as of October 2, 2021 and January 2, 2021 was approximately $3.0 million and $3.0 million, respectively, exclusive of impairment charges.

On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future.

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Property and Equipment

9 Months Ended

Oct. 02, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 7: Property and Equipment

Property and equipment as of October 2, 2021 and January 2, 2021 consist of the following:

	Useful Life (Years)	October 2, 2021			January 2, 2021
Buildings and improvements	3-30	$	80		$	75
Equipment	3-15		2,993			2,528
Projects under construction			1,447			387
Property and equipment			4,520			2,990
Less accumulated depreciation and amortization			(2,386	)		(2,258	)
Total property and equipment, net		$	2,134		$	732

Depreciation expense was approximately $53,000 and $27,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. Depreciation expense was approximately $128,000 and $68,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Equipment Financing Agreement

On March 25, 2021, ARCA Recycling entered into a Master Equipment Finance Agreement (collectively, the “Equipment Finance Agreement”) with KLC Financial, Inc. (“KLC”). Under the terms of the Equipment Finance Agreement, KLC has agreed to make loans to ARCA Recycling secured by certain equipment purchased or to be purchased by ARCA Recycling on terms set forth or to be set forth in schedules to the Equipment Finance Agreement. Under the terms of Schedule No. 01 (the “Initial Loan”), KLC has agreed to loan ARCA Recycling approximately $1.8 million secured by existing equipment of and new equipment to be purchased by ARCA Recycling. ARCA Recycling will make monthly payments of $31,000, inclusive of principal and interest, over a period of five years, at which time it is intended that the Initial Loan will be repaid in full. The Initial Loan bears interest at 7.59% per annum. KLC will have a first priority security interest over, among other things, all equipment identified in the schedules. The Initial Loan is guaranteed by Virland Johnson, the Chief Financial Officer of JanOne and Chief Financial Officer and Secretary of ARCA Recycling. The Equipment Finance Agreement contains customary affirmative and negative covenants, representations and warranties, and events of default for transactions of this nature.

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Intangible Assets

9 Months Ended

Oct. 02, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 8: Intangible Assets

Intangible assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021			January 2, 2021
Intangible assets GeoTraq	$	26,096		$	26,096
Patent and domains		23			23
Computer software		4,559			4,494
Intangible assets		30,678			30,613
Less accumulated amortization		(19,632	)		(16,624	)
Total intangible assets	$	11,046		$	13,989

The useful life and amortization period of the GeoTraq intangible acquired is seven years from the acquisition date of August 18, 2017. Intangible amortization expense was approximately $998,000 and $1.0 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. Intangible amortization expense was approximately $3.0 million and $3.0 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

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Deposits and Other Assets

9 Months Ended

Oct. 02, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deposits and Other Assets

Note 9: Deposits and other assets

Deposits and other assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Deposits	$	217	$	169
Other		50		62
Total deposits and other assets	$	267	$	231

Deposits are primarily refundable security deposits incurred as a result of property leases.

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Leases

9 Months Ended

Oct. 02, 2021

Leases [Abstract]

Leases

Note 10: Leases

The Company accounts for leases in accordance with ASC 842. The amount recorded is the present value of all remaining lease payments for leases with terms greater than 12 months. The right of use asset is offset by a corresponding liability. The discount rate is based on an estimate of our incremental borrowing rate for terms similar to our lease terms at the time of lease commencement. The asset will be amortized over remaining lease terms. See Lease Accounting in Note 2.

Total present value of lease payments as of October 2, 2021:

Remainder 2021	$	442
2022		1,390
2023		953
2024		684
2025		362
2026		210
Total		4,041
Less Interest		(485	)
Present Value of Payments	$	3,556

During the 39 weeks ended October 2, 2021 and September 26, 2020, approximately $1.1 million and $965,000, respectively, was included in operating cash flow for amounts paid for operating leases.

Additionally, the Company obtained right-of-use assets in exchange for lease liabilities of approximately $1.8 million upon commencement of new and renewed operating leases during the 39 weeks ended October 2, 2021. The weighted average lease term for operating leases is 3.2 years and the weighted average discount rate is 8%.

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Accrued Liabilities

9 Months Ended

Oct. 02, 2021

Payables and Accruals [Abstract]

Accrued Liabilities

Note 11: Accrued Liabilities

Accrued liabilities as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Compensation and benefits	$	860	$	604
Contract liability		32		292
Accrued incentive and rebate checks		1,625		1,220
Accrued transportation costs*		1,388		662
Accrued guarantees		767		767
Accrued purchase orders		—		177
Accrued taxes		508		299
Accrued litigation settlement		680		—
Other		267		867
Total accrued expenses	$	6,127	$	4,888

*Accrued transportation costs are related to delayed billing from certain vendors.

Contract liabilities rollforward

The following table summarizes the contract liability activity for the 13 weeks ended October 2, 2021:

Beginning balance, January 2, 2021	$	292
Accrued		165
Settled		(425	)
Ending balance, October 2, 2021	$	32

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Accrued Liability - California Sales Tax

9 Months Ended

Oct. 02, 2021

Payables and Accruals [Abstract]

Accrued Liability - California Sales Tax

Note 12: Accrued Liability – California Sales Tax

The Company operates in fourteen states in the U.S. and in various provinces in Canada. From time to time, the Company is subject to sales and use tax audits that could result in additional taxes, penalties and interest owed to various taxing authorities.

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

On April 13, 2017 the Company received the formal CDTFA assessment for sales tax for tax years 2011, 2012 and 2013 in the amount of approximately $4.1 million plus applicable interest of $500,000 related to the appliance replacement programs that the Company administered on behalf of its customers on which it did not assess, collect or remit sales tax. The Company has appealed this assessment to the CDTFA Appeals Bureau. The appeal remains in process. Interest continues to accrue until the matter is settled.

As of October 2, 2021, and January 2, 2021, the Company's accrued liability for California sales tax was approximately $6.0 million and $5.8 million respectively.

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Income Taxes

9 Months Ended

Oct. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 13: Income Taxes

The Company's overall effective tax rate was 4.5% for the 39 weeks ended October 2, 2021, and a tax provision expense of approximately $236,000 was recorded against a pre-provision loss of approximately $5.2 million. The Company's overall effective tax rate was 7.5% for the 39 weeks ended September 26, 2020, and it had a tax benefit of approximately $448,000 against a pre-provision loss of approximately $6.0 million. The effective tax rates and related provisional tax amounts vary from the U.S. federal statutory rate due to state taxes, foreign taxes, share-based compensation, valuation allowance, and certain non-deductible expenses.

The Company regularly evaluates both positive and negative evidence related to retaining a valuation allowance against certain deferred tax assets. The realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible

temporary differences and carryforwards are expected to be available to reduce taxable income. The Company has concluded, based on the weight of evidence, that a valuation allowance should be maintained against deferred tax assets that are not expected to be utilized in the near future. The Company continues to recognize a full valuation allowance against its Canadian operations.

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Short Term Debt

9 Months Ended

Oct. 02, 2021

Debt Disclosure [Abstract]

Short Term Debt

Note 14: Short Term Debt

Short term debt and other financing obligations as of October 2, 2021 and January 2, 2021, consist of the following:

	October 2, 2021		January 2, 2021
AFCO Finance	$	419	$	144
Payroll protection program		—		1,872
Vendor advance payments		75		1,026
Total short term debt	$	494	$	3,042

AFCO Finance

The Company has entered into a financing agreement with AFCO Credit Corporation (“AFCO”) purchased through Marsh Insurance on an annual basis to fund the annual premiums on insurance policies due July 1 of each year. These policies relate to workers’ compensation and various liability policies including, but not limited to, General, Auto, Umbrella, Property, and Directors’ and Officers’ insurance. The total amount of the premiums financed during July 2021 was approximately $538,000 with an interest rate of 3.3%. An initial down payment of approximately $134,000 was due on July 1, 2021 with additional monthly payments of approximately $61,000 made beginning August 1, 2021 and ending on April 1, 2022.

The outstanding principal due AFCO at October 2, 2021 and January 2, 2021 was approximately $419,000 and $144,000, respectively.

Payroll Protection Program

On May 1, 2020, the Company entered into a promissory note (the “Promissory Note”) with Texas Capital Bank, N.A. that provides for a loan in the amount of approximately $1.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 27, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of the PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The PPP Loan was forgiven during the first quarter of fiscal 2021.

Customer Advance Payments

As of the period ending June 27, 2020, the Company received advance payments authorized by the California Public Utilities Commission and processed through two California utilities for the purposes of sustaining the workforce during the COVID-19 pandemic shutdown. The use of these funds was limited to labor and labor benefits for impacted employees. Portions of these advances are forgivable if certain conditions are met, the specifics which have not yet been finalized. Advance payments that are not forgiven will need to be paid back in full by December 31, 2021. Total funding received under this program as of September 2020 amounted to approximately $1.2 million. As of October 2, 2021, approximately $1.1 million was settled, and a balance of approximately $75,000 remaining outstanding.

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Commitments and Contingencies

9 Months Ended

Oct. 02, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 15: Commitments and Contingencies

Litigation

SEC Complaint

On August 2, 2021, the U.S. Securities and Exchange Commission (“SEC”) filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and one of its executive officers, Virland Johnson, the Company's Chief Financial Officer, as defendants (collectively, the "Defendants").

The SEC Complaint alleges financial, disclosure and reporting violations against the Company and the executive officer under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5. The SEC Complaint also alleges various claims against the executive officer under Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20,

13a-1, 13a-13, 13a-14, 13b2-1, and 13b2-2. The SEC seeks permanent injunctions and civil penalties against the Defendants, and an officer-and-director bar against the executive officer. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.

The Company continues to assert that the SEC’s pursuit of this matter will not result in any benefit to investors and instead will only serve as a distraction from core business. Live Ventures enlisted the representation of highly experienced and respected attorney John Hueston of the law firm Hueston Hennigan; on October 1, 2021, Mr. Hueston, on behalf of the Company, filed a motion with the court to dismiss the complaint.

The Defendants strongly dispute and deny the allegations and are vigorously defending themselves against the claims.

Skybridge

On December 29, 2016, the Company served a Minnesota state court complaint for breach of contract on Skybridge Americas, Inc. (“SA”), the Company’s primary call center vendor throughout 2015 and most of 2016. The Company seeks damages in the millions of dollars as a result of alleged overcharging by SA and lost client contracts. On January 25, 2017, SA served a counterclaim for unpaid invoices in the amount of approximately $460,000 plus interest and attorneys’ fees. On March 29, 2017, the Hennepin County district court (the “District Court”) dismissed the Company’s breach of contract claim based on SA’s overuse of its Canadian call center but permitted the Company’s remaining claims to proceed. Following motion practice, on January 8, 2018 the District Court entered judgment in SA’s favor, which was amended as of February 28, 2018, for a total amount of approximately $614,000 including interest and attorneys’ fees. On March 4, 2019, the Minnesota Court of Appeals (the “Court of Appeals”) ruled and (i) reversed the District Court’s judgment in favor of Skybridge on the call center location claim and remanded the issue back to the District Court for further proceedings, (ii) reversed the District Court’s judgment in favor of Skybridge on the net payment issue and remanded the issue to the District Court for further proceedings, and (iii) affirmed the District Court’s judgment in Skybridge’s favor against the Company’s claim that Skybridge breached the contract when it failed to meet the service level agreements. As a result of the decision by the Court of Appeals, the District Court’s award of interest and attorneys’ fees, etc. was reversed. The Company and SA held a mediation session in July 2020. Trial was held in August 2020 and on February 1, 2021, the District Court assessed damages against the Company in the amount of approximately $715,000 plus interest, fees, and costs. The Company filed a motion for a new trial and is waiting for the District Court to rule.

AMTIM Capital

AMTIM Capital, Inc. (“AMTIM”) acts as the Company’s representative to market our recycling services in Canada under an arrangement that pays AMTIM for revenues generated by recycling services in Canada as set forth in the agreement between the parties. A dispute has arisen between AMTIM and the Company with respect to the calculation of amounts due to AMTIM pursuant to the agreement. In a lawsuit filed in the province of Ontario, AMTIM claims a discrepancy in the calculation of fees due to AMTIM by the Company of approximately $2.0 million. Although the outcome of this claim is uncertain, the Company believes that no further amounts are due under the terms of the agreement and that it will continue to defend its position relative to this lawsuit. Trial is currently scheduled for late Fall 2021.

GeoTraq

On or about April 9, 2021, GeoTraq, Gregg Sullivan, Tony Isaac, and we, among others, resolved all of their claims that related to, among other items, the Company's acquisition of GeoTraq in August 2017, all post-acquisition activities, and Mr. Sullivan’s post-acquisition employment relationship with GeoTraq (all of such claims, the “GeoTraq Matters”). The resolution was effectuated through the parties’ execution and delivery of a Settlement Agreement and Mutual Agreement of Claims (the “GeoTraq Settlement Agreement”).

Under the terms of the Settlement Agreement, the Company, on its own behalf and on behalf of GeoTraq and Mr. Isaac, agreed to tender to Mr. Sullivan an aggregate of $1.95 million (the “GeoTraq Settlement Consideration”) in the following manner: (i) $250,000, which was tendered in cash on or about the date of the Settlement Agreement and (ii) up to 10 quarterly installments of not less than $170,000 that commenced on June 1, 2021, and shall continue not less frequently than every three months thereafter (the “GeoTraq Installments”). The Company may tender the GeoTraq Installments in cash or in the equivalent value of shares of its common stock (the value of the shares to be determined by a formula set forth in the Settlement Agreement), in either case at the Company's discretion. The Company may also prepay one or more GeoTraq Installments in full or in part at any time or from time to time either in cash or in shares of its common stock (a “GeoTraq Prepayment”). If the Company elects to prepay one or more GeoTraq Installments with shares of its common stock, Mr. Sullivan reserves the right not to consent to a tender thereof in excess of 50% of the value of that specific GeoTraq Prepayment; however, Mr. Sullivan is restricted in the reasons for which he can refuse to provide his written consent. The number of shares of our common stock to be issued upon any GeoTraq Prepayment is determined by a different formula than the one to be utilized for a GeoTraq Installment. As of October 2, 2021, the balance due under the settlement agreement was approximately $1.4 million.

Pursuant to the terms of the Settlement Agreement, Mr. Sullivan provided the Company with his proxy to vote his remaining shares of its Series A-1 Preferred Stock that the Company had issued to him in connection with its acquisition of GeoTraq in 2017, as well as his proxy for the shares of the Company's common stock into which those shares of preferred stock may be converted. The Company may utilize the proxy in the context of an annual meeting of its stockholders, a special meeting of its stockholders, and a written consent of its stockholders. Subject to the above-described contingent GeoTraq Prepayment tender 50% restriction, Mr. Sullivan provided the Company with the sole ability to determine the time and amount of each conversion of those shares of preferred stock.

The parties to the Settlement Agreement released and forever discharged one another from any and all known and unknown claims that were asserted or could have been asserted arising out of the GeoTraq Litigation Matters.

Other Commitments

As previously disclosed and as discussed in Note 6: Note receivable, on December 30, 2017, the Company disposed of its retail appliance segment and sold ApplianceSmart to the Purchaser. In connection with that sale, as of December 28, 2019 the Company has an aggregate amount of future real property lease payments of approximately $767,000 which represents amounts guaranteed or which may be owed under certain lease agreements to third party landlords in which the Company either remains the counterparty, is a guarantor, or has agreed to remain contractually liable under the lease (“ApplianceSmart Leases”).

The Company evaluated the fair value of its potential obligation under the guidance of ASC 450: Contingencies and ASC 460: Guarantees. As a result, the Company accrued the amount of liability associated with these future guaranteed lease payments. The fair value was calculated based on the amounts reported as part of the bankruptcy proceedings as ApplianceSmart terminated the leases prior to the lease termination date. The fair value was calculated based on the undiscounted lease payments, a discount rate equivalent to current interest rates associated with the leased real estate and a remote probability weighting of 1%.

The ApplianceSmart Leases either have the Company as the contract tenant only, or in the contract reflects a joint tenancy with ApplianceSmart. ApplianceSmart is the occupant of the ApplianceSmart Leases. The Company does not have the right to use the ApplianceSmart lease assets nor is the Company the primary obligor of the lease payments, hence capitalization under ASC 840 is not required. The ApplianceSmart Leases have historically been used by ApplianceSmart for their operations and the consideration has and is being paid by ApplianceSmart historically and in the future.

Any potential amounts paid out for the Company obligations and or guarantees under ApplianceSmart Leases would be recoverable to the extent there are assets available from ApplianceSmart. ApplianceSmart Leases are related party transactions. The Company divested itself of the ApplianceSmart Leases and leaseholds with the sale to Purchaser on December 30, 2017.

The Company is party from time to time to other ordinary course disputes that we do not believe to be material to our financial condition as of October 2, 2021.

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Shareholders' Equity

9 Months Ended

Oct. 02, 2021

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Note 16: Shareholders’ Equity

Common Stock: Our Articles of Incorporation authorize 200,000,000 shares of common stock that may be issued from time to time having such rights, powers, preferences and designations as the Board of Directors may determine. During the 39 weeks ended September 26, 2020, 104,798 shares of common stock were granted and issued in lieu of professional services at a fair value of approximately $351,000. Additionally, the Company was amortizing the fair value of 223,214 common shares granted during September 2019, but not vested, in lieu of professional services at a fair value of $1.0 million. This agreement terminated during August 2020. As such, 71,607 common shares were returned to the Company and the related stock-based compensation was reversed. There were no similar transactions for the 39 weeks ended October 2, 2021.

As of October 2, 2021, and January 2, 2021, there were 2,827,410, and 1,829,982 shares, respectively, of common stock issued and outstanding.

Equity Offering

On January 29, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”) for the sale by the Company in a registered direct offering (the “Offering”) of 571,428 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price per share of Common Stock of $10.50. The Offering closed on February 2, 2021 with gross proceeds to the Company of approximately $6.0 million before deducting placement agent fees and other offering expenses. The Company is utilizing the net proceeds for general working capital.

The Purchase Agreement contains customary representations, warranties and agreements by the Company and the Purchasers and customary indemnification rights and obligations of the parties.

A.G.P./Alliance Global Partners acted as the sole placement agent (the “Placement Agent”) for the Company on a “reasonable best efforts” basis in connection with the Offering. The Company entered into a Placement Agency Agreement, dated as of January 29, 2021, by and between the Company and the Placement Agent (the “Placement Agency Agreement”). Pursuant to the Placement Agency Agreement, the Placement Agent was paid a cash fee of 7% of the gross proceeds paid to the Company for the securities or $420,000, and reimbursement for accountable legal expenses incurred by it in connection with the Offering of $35,000.

The shares of Common Stock sold in the Offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-251645) (the “Registration Statement”), which was initially filed with the Securities and Exchange Commission on December 23, 2020 and was declared effective on December 29, 2020.

The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement. In addition, such representations, warranties, and covenants (i) are intended as a way of allocating the risk between the parties to the Purchase Agreement and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the Purchase Agreement incorporated by reference in this filing only to provide investors with information regarding the terms of the transaction, and not to provide investors with any other factual information regarding the Company. Stockholders should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.

The foregoing descriptions of the Purchase Agreement and the Placement Agency Agreement are not complete and are qualified in their entireties by reference to the full text of the Purchase Agreement and the Placement Agency Agreement, a copy of each of which is filed as Exhibit 10.1 and Exhibit 1.1, respectively, to the Company’s Current Report on Form 8-K as field on January 29, 2021 and each is incorporated by reference herein.

Stock options: The 2016 Plan, which replaces the 2011 Plan, authorizes the granting of awards in any of the following forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) restricted stock awards, and (iv) restricted stock units, and expires on the earlier of October 28, 2026, or the date that all shares reserved under the 2016 Plan are issued or no longer available. The 2016 Plan provides for the issuance of up to 800,000 shares of common stock pursuant to awards granted under the Plan. The vesting period is determined by the Board of Directors at the time of the stock option grant. As of October 2, 2021, and January 2, 2021, 90,000 and 78,000 options were outstanding under the 2016 Plan, respectively.

The Company's 2011 Plan authorizes the granting of awards in any of the following forms: (i) stock options, (ii) stock appreciation rights, and (iii) other share-based awards, including but not limited to, restricted stock, restricted stock units or performance shares, and expires on the earlier of May 12 2021, or the date that all shares reserved under the 2011 Plan are issued or no longer available. As of October 2, 2021, and January 2, 2021, 30,500 and 35,900 options, respectively, were outstanding under the 2011 Plan. No additional awards will be granted under the 2011 Plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. 38,000 options were granted during the 39 weeks ended October 2, 2021.

Additional information relating to all outstanding options is as follows:

				Weighted Average		Aggregate		Weighted Average Remaining
	Options Outstanding			Exercise Price		Intrinsic Value		Contractual Life
Outstanding at December 28, 2019		44,400		$	13.31	$	—		3.0
Granted		74,000		3.84
Cancelled/expired		(4,500	)		9.45
Outstanding at January 2, 2021		113,900		$	11.97	$	78		7.0
Granted		38,000			8.16
Exercised		(6,000	)	4.32
Cancelled/expired/forfeited		(25,400	)		8.28
Balance at October 2, 2021		120,500		$	7.52	$	180		7.1

The Company recognized approximately $49,000 and $46,000 share-based compensation expense related to option grants for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively. The Company recognized approximately $275,000 and $118,000 share-based compensation expense related to option grants for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

As of October 2, 2021 the Company has approximately $34,000 of unrecognized share-based compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects to recognize as share-based compensation expense through Q2 2022.

Series A-1 Preferred Stock:

During April 2021, 21,000 shares of the Company’s Series A-1 Preferred Stock were converted into 420,000 shares of the Company’s common stock. Shares of Series A-1 Preferred Stock are convertible into the Company’s common shares at a ratio of 1:20. As of October 2, 2021 and January 2, 2021, there were 238,729 and 258,729 shares, respectively, of Series A-1 Preferred Stock outstanding.

Warrants:

As of October 2, 2021, and January 2, 2021, there were 33,363 warrants outstanding to purchase 33,363 shares of common stock at a price of $3.40 per share, which expire in November 2021.

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Loss Per Share

9 Months Ended

Oct. 02, 2021

Earnings Per Share [Abstract]

Loss Per Share

Note 17: Loss Per Share

Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company’s Consolidated Balance Sheet. Diluted net loss per share is computed using the weighted average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares consist of the additional common shares issuable in respect of restricted share awards, stock options and convertible preferred stock.

The following table presents the computation of basic and diluted net loss per share:

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net loss	$	(968	)	$	(810	)	$	(5,445	)	$	(5,535	)
Basic
Basic loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270
Diluted
Diluted loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270

Potentially dilutive securities totaling 66,000 and 135,263 were excluded from the calculation of diluted net loss per share for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively, because the effects were anti-dilutive based on the application of the treasury stock method.

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Major Customers and Suppliers

9 Months Ended

Oct. 02, 2021

Risks and Uncertainties [Abstract]

Major Customers and Suppliers

Note 18: Major Customers and Suppliers

For the 13 weeks ended October 2, 2021, one customer represented approximately 13% of the Company's total revenue. For the 39 weeks ended October 2, 2021, one customer represented approximately 15% of the Company's total revenue. For the 13 weeks ended September 26, 2020, one customer represented approximately 30% of the Company's total revenue. For the 39 weeks ended September 26, 2020, two customers represented a combined 32% of the Company's total revenue.

As of October 2, 2021, three customers represented a combined 34% of the Company's total trade receivables. As of January 2, 2021, three customers represented more than 10% of the Company's total trade receivables, and representing 37% of the Company's trade receivables in aggregate.

During the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020, the Company purchased appliances for resale from four suppliers. The Company has, and is continuing to, secure other vendors from which to purchase appliances. However, the curtailment or loss of one of these suppliers or any appliance supplier could adversely affect our operations.

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Defined Contribution Plan

9 Months Ended

Oct. 02, 2021

Retirement Benefits [Abstract]

Defined Contribution Plan

Note 19: Defined Contribution Plan

The Company has a defined contribution salary deferral plan covering substantially all employees under Section 401(k) of the Internal Revenue Code. The Company contributes an amount equal to 10 cents for each dollar contributed by each employee up to a maximum of 5% of each employee’s compensation. The Company recognized expense for contributions to the plans of approximately $16,000 and $8,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $22,000 and $20,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

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Segment Information

9 Months Ended

Oct. 02, 2021

Segment Reporting [Abstract]

Segment Information

Note 20: Segment Information

The Company operates within targeted markets through three reportable segments for continuing operations: biotechnology, recycling, and technology. The biotechnology segment commenced operations in September 2019 and is focused on development of new and innovative solutions for ending the opioid epidemic ranging from digital technologies to educational advocacy. The recycling segment includes all fees charged and costs incurred for collecting, recycling and installing appliances for utilities and other customers. The recycling segment also includes byproduct revenue, which is primarily generated through the recycling of appliances. The technology segment designs wireless modules to connect devices to the Mobile Internet of Things (“IoT”) which contain location-based service (“LBS”) capabilities and can interface to external sensors to allow them to communicate both sensor status and position information. The nature of products, services and customers for each segment varies significantly. As such, the segments are managed separately. Our Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM evaluates performance and allocates resources based on sales and income from operations of each segment. Operating loss represents revenues less cost of revenues and operating expenses, including certain allocated selling, general and administrative costs. There are no intersegment sales or transfers.

The following tables present our segment information for the 13 weeks ended October 2, 2021 and September 26, 2020 and the 39 weeks ended October 2, 2021 and September 26, 2020:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Revenues
Biotechnology	$	—		$	—		$	—		$	—
Recycling		12,113			12,266			29,391			24,723
Technology		—			—			—			—
Total Revenues	$	12,113		$	12,266		$	29,391		$	24,723
Gross profit
Biotechnology	$	—		$	—		$	—		$	—
Recycling		3,081			3,717			6,245			6,236
Technology		—			—			—			—
Total Gross profit	$	3,081		$	3,717		$	6,245		$	6,236
Operating loss
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		274			1,249			(1,753	)		(1,526	)
Technology		(936	)		(1,227	)		(2,820	)		(3,362	)
Total Operating loss	$	(844	)	$	(823	)	$	(5,805	)	$	(6,540	)
Depreciation and amortization
Biotechnology	$	—		$	—		$	—		$	—
Recycling		109			124			327			295
Technology		937			936			2,809			2,809
Total Depreciation and amortization	$	1,046		$	1,060		$	3,136		$	3,104
Interest expense, net
Biotechnology	$	—		$	—		$	—		$	—
Recycling		125			88			323			255
Technology		—			—			—			—
Total Interest expense, net	$	125		$	88		$	323		$	255
Net loss before benefit from income taxes
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		208			1,193			(1,145	)		(879	)
Technology		(961	)		(1,257	)		(2,832	)		(3,452	)
Total Net loss before benefit from income taxes	$	(935	)	$	(909	)	$	(5,209	)	$	(5,983	)

	As of October 2, 2021		As of January 2, 2021
Assets
Biotechnology	$	—	$	—
Recycling		16,777		10,614
Technology		10,833		13,737
Total Assets	$	27,610	$	24,351
Intangible assets
Biotechnology	$	—	$	—
Recycling		327		470
Technology		10,719		13,519
Total Intangible assets	$	11,046	$	13,989

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Related Parties

9 Months Ended

Oct. 02, 2021

Related Party Transactions [Abstract]

Related Parties

Note 21: Related Parties

Shared Services

Tony Isaac, the Company’s Chief Executive Officer, is the father of Jon Isaac, President and Chief Executive Officer of Live Ventures Incorporated (“Live Ventures”) and managing member of ICG, a greater than 5% stockholder of the Company. Tony Isaac, Chief Executive Officer, and Richard Butler, Board of Directors member of the Company, are Board of Directors members of Live Ventures. The Company also shares certain executive, accounting and legal services with Live Ventures. The total services shared were approximately $86,000 and $61,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $220,000 and $186,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. Customer Connexx rents approximately 9,900 square feet of office space from Live Ventures in Las Vegas, Nevada. The total rent and common area expense was approximately $62,000 and $54,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $168,000 and $144,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

ApplianceSmart Note

On December 30, 2017, Purchaser entered into the Agreement and purchased from the Company all of the Stock of ApplianceSmart in exchange for the Purchase Price. Effective April 1, 2018, the Purchaser issued the ApplianceSmart Note with a three-year term in the original principal amount of approximately $3.9 million for the balance of the purchase price. ApplianceSmart is guaranteeing the repayment of the ApplianceSmart Note.

On December 30, 2017, Purchaser entered into the Agreement with the Company and ApplianceSmart. Pursuant to the Agreement, the Purchaser purchased from the Company all of the Stock of ApplianceSmart in exchange for the Purchase Price. Effective April 1, 2018, the Purchaser issued the ApplianceSmart Note with a three-year term in the original principal amount of approximately $3.9 million for the balance of the purchase price. ApplianceSmart is guaranteeing the repayment of the ApplianceSmart Note.

On December 26, 2018, the ApplianceSmart Note was amended and restated to grant the Company a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayment terms to provide for the payment in full of all accrued interest and principal on April 1, 2021, the maturity date of the ApplianceSmart Note.

On March 15, 2019, the Company entered into subordination agreements with third parties pursuant to which it agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Company’s security interest in the assets of ApplianceSmart and other related parties in exchange for up to $1.2 million payable within 15 days of the agreement. ApplianceSmart can re-borrow up to the principal amount of the Note, or approximately $3.9 million.

On December 9, 2019, ApplianceSmart filed a voluntary petition (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). ApplianceSmart is seeking to confirm a plan of reorganization under which it would pay the Company $25 in full satisfaction of the Company’s claim on the guaranty. The Company would release its junior security interest in ApplianceSmart’s assets. Based on its evaluation of the alternative possible remedies and its reasonable business judgment, the Company is willing to accept this proposal if the plan is confirmed by the Bankruptcy Court.

On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future.

For discussion related to potential obligations and or guarantees under ApplianceSmart Leases, see Note 15.

Related Party ICG Group Note

On August 28, 2019, ARCA Recycling entered into and delivered to ICG a secured revolving line of credit promissory note, whereby ICG agreed to provide ARCA Recycling with a $2.5 million revolving credit facility (the “ICG Note”). The ICG Note originally matured on August 28, 2020. On August 25, 2020, the ICG Note was amended to extend the maturity date to December 31, 2020. On March 30, 2021, ARCA Recycling entered into a Second Amendment and Waiver (the “Second Amendment”) to the ICG Note to further extend the maturity date to August 18, 2021 and waive certain defaults under the ICG Note. The ICG Note bears interest at 8.75% per annum and provides for the payment of interest, monthly in arrears. ARCA Recycling will pay a loan fee of 2.0% on each borrowing made under the ICG Note. In connection with entering into the ICG Note, the Borrower also entered into a security agreement in favor of the Lender, pursuant to which ARCA Recycling granted a security interest in all of its assets to the Lender. The obligations of ARCA Recycling under the ICG Note are guaranteed by the Company. The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities. ICG is a record and beneficial owner of approximately 16% of the outstanding common stock of the Company. Jon Isaac is the manager and sole member of ICG, and the son of Tony Isaac, the Chief Executive Officer of JanOne and ARCA Recycling.

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Sale of ARCA and Connexx

9 Months Ended

Oct. 02, 2021

Asset Purchase Agreement | ARCA and Connexx Sale

Sale of ARCA and Connexx

Note 22. Sale of ARCA and Connexx

On February 19, 2021, the Company, together with its subsidiaries (a) ARCA Recycling, Inc., a California corporation (“ARCA”), and (b) Customer Connexx LLC, a Nevada limited liability company (“Connexx”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction was previously expected to be consummated on or before August 18, 2021 (the "Outside Date"). On August 12, 2021, the parties entered into an Amendment No. One to Asset Purchase Agreement (the “Recycling Sale Amendment”) to extend the Outside Date to September 30, 2021. In the event the Disposition Transaction is not closed by such date, the Purchase Agreement may be terminated and, in accordance with its terms, the Buyers may be required to pay to us a “break fee” of $250,000. On November 14, 2021, the parties entered into an Amendment No. Two to the Asset Purchase Agreement, which provided for the immediate termination of the transactions proposed by the Purchase Agreement, as amended by the Recycling Sale Amendment, and for an amendment to the Buyers to pay to us a “break fee.” The break fee was amended to an aggregate of $100,000, payable in two $50,000 installments: (i) the first of which is due to be paid not later than August 12, 2022 (the one-year anniversary of the Recycling Sale Agreement) and (ii) the second of which is due to be paid not later than the last day of our next fiscal year. However, if, prior to the date on which either installment of the amended break fee is payable, we sell ARCA and Connexx to an otherwise unaffiliated third party for an aggregate amount less than $25 million, then the Buyers will be relieved of their obligation to pay to us any not-yet-then-due installment of the break fee. Additionally, if, prior to the date on which the second installment of the amended break fee is payable, we have not sold ARCA and Connexx to any third party, then the Buyers will be relieved of their obligation to pay to us the second installment of the break fee. Finally, if, prior to a date on which either installment of the amended break fee is due, we sell ARCA and Connexx to the Buyers, then, the purchase price therefore will be reduced by an amount equivalent to any break fee that had been previously paid to us by the Buyers and the Buyers shall also be relieved of their obligation to pay to us any not-yet-due installment of the break fee.

The Purchase Agreement and the Disposition Transaction were unanimously approved by our Board of Directors at a meeting during the portion of which the Purchase Agreement and Disposition Transaction were considered and voted on Mr. Johnson was not present.

The purchase price that the Buyers have agreed to pay to us in the Disposition Transaction is $25 million, subject to certain adjustments, including a potential increase in the purchase price due to an earnout, the assumption of certain debt of ARCA, Connexx, or us, and potential indemnification claims (collectively, the “Initial Aggregate Consideration”). At closing, $7.5 million of the Aggregate Consideration will be paid in immediately available funds, and $17.5 million of the Initial Aggregate Consideration will be paid pursuant to the terms of the Buyers’ promissory note in our favor (the “Note”), which Note will bear interest at the rate of 6% per annum on the unpaid balance thereof. The Buyers’ payment obligations under the Note will be subordinated to the Buyers’ obligations to their Disposition Transaction lender(s), with the terms of such subordination to be determined upon Buyers’ identification of their lender(s). The parties have made customary representations, warranties, covenants, and indemnities in connection with the Disposition Transaction.

Commencing on February 19, 2021, (i) the Buyers will seek financing for the balance of the Initial Aggregate Consideration and (ii) the parties will prepare and negotiate the terms and conditions of certain ancillary documentation, including, without limitation, disclosure

schedules, bills of sale, assignment and assumption agreements, the Note, and any related subordination documentation with Buyers’ Disposition Transaction lender(s).

The Purchase Agreement contains certain representations and warranties that the parties made to each other as of the date of the Purchase Agreement or such other date as specifically referenced therein. The representations and warranties were made solely for purposes of the Purchase Agreement and (i) are subject to limitations agreed by the parties in negotiating the terms and conditions thereof, (ii) may not be accurate or complete as of any specified date, (iii) will be qualified by the underlying disclosure schedules, (iv) may be subject to a contractual standard of materiality different from those generally applicable to investors, and (v) may have been used for the purpose of allocating risk among the parties thereto, rather than for establishing any matters as facts. Information concerning the subject matter of the representations and warranties may change after July 15, 2022, which subsequent information may or may not be fully reflected in JanOne’s public disclosures. For the foregoing reasons, the representations and warranties contained in the Purchase Agreement should not be relied upon as statements of factual information.

The foregoing descriptions of the Purchase Agreement, as amended, and the Disposition Transaction do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement, a copy of which is filed with the Current Report on Form 8‑K as filed on February 25, 2021 as Exhibit 10.1, and the Amendment, a copy of which is filed as Exhibit 10.4 to this Form 10-Q, and each of which is incorporated herein by reference.

See Note 15 for additional information.

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Subsequent Event

9 Months Ended

Oct. 02, 2021

Subsequent Events [Abstract]

Subsequent Event

Note 23. Subsequent event

Amendment to Terms of Sale of Recycling Business

As previously disclosed, on February 19, 2021, the Company together with its subsidiaries (a) ARCA Recycling, Inc., a California corporation (“ARCA”), and (b) Customer Connexx LLC, a Nevada limited liability company (“Connexx”), entered into an Asset Purchase Agreement (the “Recycling Sale Purchase Agreement”) with (i) ARCA Affiliated Holdings Corporation, a Delaware corporation, (ii) ARCA Services Inc., a Delaware corporation, and (iii) Connexx Services Inc, a Delaware corporation (collectively, the “Buyers”), pursuant to which the Buyers agreed to acquire substantially all of the assets, and assume certain liabilities, of ARCA and Connexx (the “Disposition Transaction”). The principal of the Buyers is Virland A. Johnson, our Chief Financial Officer. The Disposition Transaction was previously expected to be consummated on or before August 18, 2021 (the "Outside Date"). On August 12, 2021, the parties entered into an Amendment No. One to Asset Purchase Agreement (the “Recycling Sale Amendment”) to extend the Outside Date to September 30, 2021. Except as amended by the Recycling Sale Amendment, the terms and conditions of the Recycling Sale Purchase Agreement remain unchanged. On November 14, 2021, the parties entered into an Amendment No. Two to the Asset Purchase Agreement, which provided for the immediate termination of the transactions proposed by the Purchase Agreement, as amended by the Recycling Sale Amendment, and for an amendment to the Buyers’ requirement to pay to us a “break fee.” The break fee was amended to an aggregate of $100,000, payable in two $50,000 installments: (i) the first of which is due to be paid not later than August 12, 2022 (the one-year anniversary of the Recycling Sale Agreement) and (ii) the second of which is due to be paid not later than the last day of our next fiscal year. However, if, prior to the date on which either installment of the amended break fee is payable, we sell ARCA and Connexx to an otherwise unaffiliated third party for an aggregate amount less than $25 million, then the Buyers will be relieved of their obligation to pay to us any not-yet-then-due installment of the break fee. Additionally, if, prior to the date on which the second installment of the amended break fee is payable, we have not sold ARCA and Connexx to any third party, then the Buyers will be relieved of their obligation to pay to us the second installment of the break fee. Finally, if, prior to a date on which either installment of the amended break fee is due, we sell ARCA and Connexx to the Buyers, then, the purchase price therefor will be reduced by an amount equivalent to any break fee that had been previously paid to us by the Buyers and the Buyers shall also be relieved of their obligation to pay to us any not-yet-due installment of the break fee.

The foregoing description of the Recycling Sale Amendment is not complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.4 to this Form 10-Q and is incorporated herein by reference.

ApplianceSmart Note

On October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings. The Disclosure Statement was approved by the court, subject to minor amendment, and a directive issued that an order for a final confirmation hearing be drafted and scheduled in the foreseeable future. For discussion related to potential obligations and or guarantees under ApplianceSmart Leases, see Note 15.

SEC Complaint

The SEC filed its complaint against the Defendants on August 2, 2021. The Defendants strongly dispute and deny the allegations and are vigorously defending themselves against the claims. To that end, the Defendants filed a motion to dismiss the SEC’s complaint on October 1, 2021 in the Federal District Court of Nevada, see Note 15.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Oct. 02, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, the Company's results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended January 2, 2021.

Principles of Consolidation

Principles of Consolidation

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

Reclassifications

Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the previously reported net loss or stockholders’ equity.

Use of Estimates

Use of Estimates

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

Significant estimates made in connection with the accompanying consolidated financial statements include the estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete inventory, estimated fair value and forfeiture rates for stock-based compensation, fair values in connection with the analysis of other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets and estimated useful lives for intangible assets and property and equipment.

Financial Instruments

Financial Instruments

Financial instruments consist primarily of cash equivalents, trade and other receivables, notes receivable, and obligations under accounts payable, accrued expenses and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued expenses and short-term notes payable approximate fair value because of the short maturity of these instruments. The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs). The carrying amounts of short-term debt at October 2, 2021 and January 2, 2021 approximate fair value.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with a maturity of three months or less at the time of purchase. Fair value of cash equivalents approximates carrying value.

Trade Receivables and Allowance for Doubtful Accounts

Trade Receivables and Allowance for Doubtful Accounts

The Company carries unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company writes off trade receivables when deemed uncollectible. The Company records recoveries of trade receivables previously written off when payment is received. The Company considers a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days. The Company does not charge interest on past due receivables. The Company has no allowance for doubtful accounts as of October 2, 2021 or January 2, 2021.

Inventories

Inventories

Inventories, consisting primarily of appliances, are stated at the lower of cost, determined on a specific identification basis, or net realizable value. The Company provides estimated provisions for the obsolescence of appliance inventories, including adjustment to market, based on various factors, including the age of such inventory and management’s assessment of the need for such provisions. We look at historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. The Company has no reserve for excess or obsolete inventory as of October 2, 2021 or January 2, 2021.

Property and Equipment

Property and Equipment

Property and Equipment are stated at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred and additions and improvements that significantly extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of building and improvements is 3 to 30 years, transportation equipment is 3 to 15 years, machinery and equipment is 5 to 10 years, furnishings and fixtures is 3 to 5 years and office and computer equipment is 3 to 5 years.

The Company periodically reviews property and equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with respect to maintaining our facilities and projected discounted cash flows from operations. An impairment loss would be recognized for the amount by which the carrying amount of the assets exceeds their fair value, as approximated by the present value of their projected discounted cash flows.

Intangible Assets

Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Under ASC 350, intangible assets subject to amortization, shall be reviewed for impairment in accordance with the Impairment or Disposal of Long-Lived Assets in ASC 360, Property, Plant, and Equipment.

Under ASC 360, long-lived assets are tested for recoverability whenever events or changes in circumstances (‘triggering event’) indicate that the carrying amount may not be recoverable. In making this determination, triggering events that were considered included:

A significant decrease in the market price of a long-lived asset (asset group);

A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and,

A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

If a triggering event has occurred, for purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If after identifying a triggering event it is determined that the asset group’s carrying value may not be recoverable, a recoverability test is performed by forecasting the expected cash flows to be derived from the asset group for the remaining useful life of the asset group’s primary asset compared to its carrying value. The recoverability test relies upon the undiscounted cash flows (excluding interest and taxes) which are derived from the Company’s specific use of those assets (not how a market participant would use those assets); and are based upon the existing service potential of the current assets (excluding any improvements that would materially enhance the assets). If the expected undiscounted cash flows exceed the carrying value, the assets are considered recoverable.

There was no impairment of intangibles as of October 2, 2021 or January 2, 2021 based on the intangible asset impairment review performed as of those dates.

The Company’s intangible assets consist of customer relationship intangibles, trade names, licenses for the use of internet domain names, Universal Resource Locators, or URL’s, software, patent USPTO reference No. 10,182,402, and historical know-how, designs and related manufacturing procedures. Upon acquisition, critical estimates are made in valuing acquired intangible assets, which include but are not limited to: future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the period of time that customer relationships will continue; and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from the assumptions used in determining the fair values. All intangible assets are capitalized at their original cost and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 3 to 5 years, technology intangibles – 7 years, customer relationships – 7 to 15 years.

Revenue Recognition

Revenue Recognition

Biotechnology Revenue

The Company is currently generating no revenue from its Biotechnology segment.

Recycling Revenue

The Company provides replacement appliances and provides appliance pickup and recycling services for consumers (“end users”) of public utilities, our customers. As part of the Company's de-manufacturing and recycling process, it receives revenue from scrap dealers for refrigerant, steel, plastic, glass, copper and other residual items.

The Company accounts for revenue in accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers.

Under the revenue standard, the Company determines revenue recognition through the following steps:

a.Identification of the contract, or contracts, with a customer,

b.Identification of the performance obligations in the contract,

c.Determination of the transaction price,

d.Allocation of the transaction price to the performance obligations in the contract, and

e.Recognition of revenue when, or as, the performance obligation(s) is satisfied.

As part of our assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. For each contract, the Company considers the promise to transfer products or services, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the price stated on the contract is typically fixed and represents the net consideration to which the Company expects to be entitled per order, and therefore there is no variable consideration. As the Company’s standard payment terms are less than 90 days, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product or service based on its relative standalone selling price. The product or service price, as specified on the contract, is considered the standalone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.

Replacement Product Revenue

The Company generates revenue by providing replacement appliances. Revenue is recognized at the point in time when control of the replacement product is transferred to the end user and when performance obligations are satisfied, which typically occurs upon delivery from the Company's center facility and installation at the end user’s home.

Recycling Services Revenue

The Company generates revenue by providing pickup and recycling services. Revenue is recognized at the point in time when a to-be recycled appliance has been picked up and transfer of ownership has occurred, thereby satisfying the performance obligation.

Byproduct Revenue

The Company generates other recycling byproduct revenue (the sale of copper, steel, plastic, and other recoverable non-refrigerant byproducts) as part of a de-manufacturing process. The Company recognizes byproduct revenue upon delivery and transfer of control of the byproduct to a third-party recycling customer having mutually agreed upon a price per pound, and that collection is reasonably assured. Transfer of control occurs at the time the customer assumes possession of the byproduct material. Revenue recognized is a function of byproduct weight, type and, in some cases, volume of the byproduct delivered multiplied by the market rate as quoted.

Contract Liability

Receivables are recognized in the period the Company ships the product or provides the service. Payment terms on invoiced amounts are based on contractual terms with each customer. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, they are recorded as deferred revenue, which represents a contract liability. The Company recognizes a contract liability as net sales once control of goods and/or services have been transferred to the customer and all revenue recognition criteria have been met, and any constraints have been resolved. The Company defers product costs until recognition of the related revenue occurs.

Assets Recognized from Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has concluded that no material costs have been incurred to obtain and fulfill our FASB Accounting Standards Codification, or ASC 606 contracts, meet the capitalization criteria, and as such, there are no material costs deferred and recognized as assets on the consolidated balance sheet at October 2, 2021 or January 2, 2021.

Other:

a.Taxes collected from customers and remitted to government authorities and that are related to sales of the Company's products are excluded from revenues.

b.Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, General and Administrative expense.

c.The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

The majority of the Company's revenue recognized is derived from contracts with customers.

Technology Revenue

The Company is currently generating no revenue from its Technology segment.

Shipping and Handling

Shipping and Handling

The Company classifies shipping and handling charged to customers as revenues and classifies costs relating to shipping and handling as cost of revenues.

Advertising Expense

Advertising Expense

Advertising expense is charged to operations as incurred. Advertising expense totaled approximately $6,000 and $162,000 for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and approximately $6,000 and $284,000 for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Fair Value Measurements

Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2 – to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Income Taxes

Income Taxes

The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Condensed Consolidated Statements of Operations and Other Comprehensive Loss.

Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.

Lease Accounting

Lease Accounting

The Company accounts for leases in accordance with ASC 842 - Leases. This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset (“ROU”) and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement.

In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company uses an estimate of its incremental borrowing rate based on information available at lease commencement in determining present value of lease payments.

The Company leases warehouse facilities and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates through 2025 with various renewal options for additional periods. The agreements, which have and continue to be classified as operating leases, generally provide for base rent and require us to pay all insurance, taxes and other maintenance costs. The Company’s operating leases are exclusively for building space in the different cities we have operations. The lease terms typically last from 2-3 years with some being longer or shorter depending on needs of the business and the lease partners. The Company has also engages in month-to-month leases for parking spaces that the Company has elected to expense as incurred. Our

lease agreements do not include variable lease payments. The Company's lessors offer options to extend lease terms as leases expire, and management evaluates current rental markets and other strategic factors in making the decision whether to renew. When leases are within six months of renewal, management will estimate probabilities of renewing for an additional term based on market and strategic factors, and if the probability is more likely than not that the lease will be renewed, the financials will assume the lease is renewed under the lease renewal option.

The Company's operating leases contain no residual value guarantees or contain restrictive covenants.

Lease amounts accounted for under ASC 842 were determined based on analysis of the lease contracts using lease payments and timing as documented in the contract. Non-lease contracts were also evaluated to determine if the contract terms provided an asset that was controlled by the Company, and provided it with substantially all relevant economic benefits. The Company is not a party to any contracts containing embedded leases. All lease contracts were reviewed, and distinctions made between lease and non-lease payments. Only payments related to the lease of the asset were included in lease payment calculations. Management uses an estimation of its incremental borrowing rate at lease commencement over similar terms as the lease contracts in determining the present value of its lease obligations.

Stock-Based Compensation

Stock-Based Compensation

The Company from time to time grants stock awards, restricted stock awards, and options to employees (including executives), non-employees, and members of the Board of Directors. Such awards are valued based on the grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is recognized over the vesting period.

Foreign Currency

Foreign Currency

The financial statements of the Company’s non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-U.S. functional currencies other than the U.S. dollar, they are translated at rates of exchange at year end. Revenue and expense items are translated at the average monthly exchange rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive loss.

Earnings Per Share

Earnings Per Share

Earnings per share is calculated in accordance with ASC 260, “Earnings Per Share”. Under ASC 260 basic earnings per share is computed using the weighted average number of common shares outstanding during the period except that it does not include unvested restricted stock subject to cancellation. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of warrants, options, restricted shares and convertible preferred stock. The dilutive effect of outstanding restricted shares, options and warrants is reflected in diluted earnings per share by application of the treasury stock method. Convertible preferred stock is reflected on an if-converted basis.

Segment Reporting

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has determined it has three reportable segments.

Concentration of Credit Risk

Concentration of Credit Risk

The Company maintains cash balances at several banks in several states including, California, Minnesota, and Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of October 2, 2021. At times, balances may exceed federally insured limits. 

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Trade and Other Receivables (Tables)

9 Months Ended

Oct. 02, 2021

Receivables [Abstract]

Schedule of Trade and Other Receivables

	October 2, 2021			January 2, 2021
Trade receivables, net	$	7,433		$	4,174
Factored accounts receivable		(2,527	)		(891	)
Prestige Capital reserve receivable		460			162
Other receivables		165			155
Trade and other receivables, net	$	5,531		$	3,600
Trade accounts receivable	$	5,148		$	2,698
Un-billed trade receivables		2,285			1,476
Total trade receivables, net	$	7,433		$	4,174

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Inventory (Tables)

9 Months Ended

Oct. 02, 2021

Inventory Disclosure [Abstract]

Schedule of Inventory

Total inventory consists of the following as of October 2, 2021 and January 2, 2021:

	October 2, 2021		January 2, 2021
Appliances held for resale	$	1,047	$	1,430
Inventory - raw material - chips		105		200
Total inventory	$	1,152	$	1,630

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Prepaids and Other Current Assets (Tables)

9 Months Ended

Oct. 02, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaids and Other Current Assets

Prepaids and other current assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Prepaid insurance	$	621	$	371
Prepaid rent		175		95
Prepaid purchase orders		—		366
Prepaid other		411		304
Total prepaid expenses and other current assets	$	1,207	$	1,136

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Property and Equipment (Tables)

9 Months Ended

Oct. 02, 2021

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment as of October 2, 2021 and January 2, 2021 consist of the following:

	Useful Life (Years)	October 2, 2021			January 2, 2021
Buildings and improvements	3-30	$	80		$	75
Equipment	3-15		2,993			2,528
Projects under construction			1,447			387
Property and equipment			4,520			2,990
Less accumulated depreciation and amortization			(2,386	)		(2,258	)
Total property and equipment, net		$	2,134		$	732

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Intangible Assets (Tables)

9 Months Ended

Oct. 02, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021			January 2, 2021
Intangible assets GeoTraq	$	26,096		$	26,096
Patent and domains		23			23
Computer software		4,559			4,494
Intangible assets		30,678			30,613
Less accumulated amortization		(19,632	)		(16,624	)
Total intangible assets	$	11,046		$	13,989

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Deposits and Other Assets (Tables)

9 Months Ended

Oct. 02, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Deposits and Other Assets

Deposits and other assets as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Deposits	$	217	$	169
Other		50		62
Total deposits and other assets	$	267	$	231

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Leases (Tables)

9 Months Ended

Oct. 02, 2021

Leases [Abstract]

Schedule of Present Value of Lease Payments

Total present value of lease payments as of October 2, 2021:

Remainder 2021	$	442
2022		1,390
2023		953
2024		684
2025		362
2026		210
Total		4,041
Less Interest		(485	)
Present Value of Payments	$	3,556

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Accrued Liabilities (Tables)

9 Months Ended

Oct. 02, 2021

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities as of October 2, 2021 and January 2, 2021 consist of the following:

	October 2, 2021		January 2, 2021
Compensation and benefits	$	860	$	604
Contract liability		32		292
Accrued incentive and rebate checks		1,625		1,220
Accrued transportation costs*		1,388		662
Accrued guarantees		767		767
Accrued purchase orders		—		177
Accrued taxes		508		299
Accrued litigation settlement		680		—
Other		267		867
Total accrued expenses	$	6,127	$	4,888

*Accrued transportation costs are related to delayed billing from certain vendors.

Schedule of Contract Liability Activity

The following table summarizes the contract liability activity for the 13 weeks ended October 2, 2021:

Beginning balance, January 2, 2021	$	292
Accrued		165
Settled		(425	)
Ending balance, October 2, 2021	$	32

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Short Term Debt (Tables)

9 Months Ended

Oct. 02, 2021

Debt Disclosure [Abstract]

Schedule of Short Term Debt and Other Financing Obligations

Short term debt and other financing obligations as of October 2, 2021 and January 2, 2021, consist of the following:

	October 2, 2021		January 2, 2021
AFCO Finance	$	419	$	144
Payroll protection program		—		1,872
Vendor advance payments		75		1,026
Total short term debt	$	494	$	3,042

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Shareholders' Equity (Tables)

9 Months Ended

Oct. 02, 2021

Stockholders' Equity Note [Abstract]

Schedule of All Outstanding Options Activity

Additional information relating to all outstanding options is as follows:

				Weighted Average		Aggregate		Weighted Average Remaining
	Options Outstanding			Exercise Price		Intrinsic Value		Contractual Life
Outstanding at December 28, 2019		44,400		$	13.31	$	—		3.0
Granted		74,000		3.84
Cancelled/expired		(4,500	)		9.45
Outstanding at January 2, 2021		113,900		$	11.97	$	78		7.0
Granted		38,000			8.16
Exercised		(6,000	)	4.32
Cancelled/expired/forfeited		(25,400	)		8.28
Balance at October 2, 2021		120,500		$	7.52	$	180		7.1

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Loss Per Share (Tables)

9 Months Ended

Oct. 02, 2021

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Net Earnings per Share

The following table presents the computation of basic and diluted net loss per share:

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net loss	$	(968	)	$	(810	)	$	(5,445	)	$	(5,535	)
Basic
Basic loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270
Diluted
Diluted loss per share	$	(0.34	)	$	(0.43	)	$	(2.09	)	$	(2.98	)
Weighted average common shares outstanding		2,827,410			1,871,321			2,601,827			1,860,270

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Segment Information (Tables)

9 Months Ended

Oct. 02, 2021

Segment Reporting [Abstract]

Schedule of Segment Information

The following tables present our segment information for the 13 weeks ended October 2, 2021 and September 26, 2020 and the 39 weeks ended October 2, 2021 and September 26, 2020:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Revenues
Biotechnology	$	—		$	—		$	—		$	—
Recycling		12,113			12,266			29,391			24,723
Technology		—			—			—			—
Total Revenues	$	12,113		$	12,266		$	29,391		$	24,723
Gross profit
Biotechnology	$	—		$	—		$	—		$	—
Recycling		3,081			3,717			6,245			6,236
Technology		—			—			—			—
Total Gross profit	$	3,081		$	3,717		$	6,245		$	6,236
Operating loss
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		274			1,249			(1,753	)		(1,526	)
Technology		(936	)		(1,227	)		(2,820	)		(3,362	)
Total Operating loss	$	(844	)	$	(823	)	$	(5,805	)	$	(6,540	)
Depreciation and amortization
Biotechnology	$	—		$	—		$	—		$	—
Recycling		109			124			327			295
Technology		937			936			2,809			2,809
Total Depreciation and amortization	$	1,046		$	1,060		$	3,136		$	3,104
Interest expense, net
Biotechnology	$	—		$	—		$	—		$	—
Recycling		125			88			323			255
Technology		—			—			—			—
Total Interest expense, net	$	125		$	88		$	323		$	255
Net loss before benefit from income taxes
Biotechnology	$	(182	)	$	(845	)	$	(1,232	)	$	(1,652	)
Recycling		208			1,193			(1,145	)		(879	)
Technology		(961	)		(1,257	)		(2,832	)		(3,452	)
Total Net loss before benefit from income taxes	$	(935	)	$	(909	)	$	(5,209	)	$	(5,983	)

	As of October 2, 2021		As of January 2, 2021
Assets
Biotechnology	$	—	$	—
Recycling		16,777		10,614
Technology		10,833		13,737
Total Assets	$	27,610	$	24,351
Intangible assets
Biotechnology	$	—	$	—
Recycling		327		470
Technology		10,719		13,519
Total Intangible assets	$	11,046	$	13,989

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Background - Additional Information (Details)		3 Months Ended		9 Months Ended
	Apr. 30, 2020 USD ($)	Oct. 02, 2021 USD ($)	Sep. 26, 2020 USD ($)	Oct. 02, 2021 USD ($) Segment	Sep. 26, 2020 USD ($)	Jan. 02, 2021 USD ($)
Number of operating segments | Segment				3
Net loss		$ (968,000)	$ (810,000)	$ (5,445,000)	$ (5,535,000)
Current assets		10,710,000		10,710,000		$ 6,941,000
Current liabilities		$ 20,589,000		20,589,000		$ 20,597,000
Working capital				9,900,000
Customer Advance Payments
Advance received against provision of future services	$ 1,200,000			$ 1,200,000
Prestige Capital
Percentage of advance funding on unpaid customer's invoice				80.00%

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Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 02, 2021 USD ($)	Sep. 26, 2020 USD ($)	Oct. 02, 2021 USD ($) Segment	Sep. 26, 2020 USD ($)	Jan. 02, 2021 USD ($)	Jan. 02, 2020 USD ($)
Allowance for doubtful accounts	$ 0		$ 0		$ 0
Reserve for obsolete inventory	0		0		0
Impairment of intangible asset			0		$ 0
Deferred costs	0		0			$ 0
Advertising expense	$ 6,000	$ 162,000	$ 6,000	$ 284,000
Operating lease, lease expire year			2025
Operating lease, lease renewal term	6 months		6 months
Number of reportable segments | Segment			3
Technology Intangibles
Estimated useful life of intangible assets			7 years
Minimum
Operating lease, lease term	2 years		2 years
Minimum | Domain Name and Marketing
Estimated useful life of intangible assets			3 years
Minimum | Software
Estimated useful life of intangible assets			3 years
Minimum | Customer Relationships
Estimated useful life of intangible assets			7 years
Minimum | Building and Improvements
Estimated useful life of property and equipment			3 years
Minimum | Transportation Equipment
Estimated useful life of property and equipment			3 years
Minimum | Machinery and Equipment
Estimated useful life of property and equipment			5 years
Minimum | Furnishings and Fixtures
Estimated useful life of property and equipment			3 years
Minimum | Office and Computer Equipment
Estimated useful life of property and equipment			3 years
Maximum
Operating lease, lease term	3 years		3 years
Federal Deposit Insurance Corporation insured per institution			$ 250,000
Maximum | Domain Name and Marketing
Estimated useful life of intangible assets			20 years
Maximum | Software
Estimated useful life of intangible assets			5 years
Maximum | Customer Relationships
Estimated useful life of intangible assets			15 years
Maximum | Building and Improvements
Estimated useful life of property and equipment			30 years
Maximum | Transportation Equipment
Estimated useful life of property and equipment			15 years
Maximum | Machinery and Equipment
Estimated useful life of property and equipment			10 years
Maximum | Furnishings and Fixtures
Estimated useful life of property and equipment			5 years
Maximum | Office and Computer Equipment
Estimated useful life of property and equipment			5 years

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Trade and Other Receivables - Schedule of Trade and Other Receivables (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Receivables [Abstract]
Total trade receivables, net	$ 7,433	$ 4,174
Factored accounts receivable	(2,527)	(891)
Prestige Capital reserve receivable	460	162
Other receivables	165	155
Trade and other receivables, net	5,531	3,600
Trade accounts receivable	5,148	2,698
Un-billed trade receivables	$ 2,285	$ 1,476

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Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Inventory Disclosure [Abstract]
Appliances held for resale	$ 1,047	$ 1,430
Inventory - raw material - chips	105	200
Total inventory	$ 1,152	$ 1,630

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Inventory - Additional Information (Details) - USD ($)	Oct. 02, 2021	Jan. 02, 2021
Inventory Disclosure [Abstract]
Reserve for obsolete inventory	$ 0	$ 0

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Prepaids and Other Current Assets - Schedule of Prepaids and Other Current Assets (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid insurance	$ 621	$ 371
Prepaid rent	175	95
Prepaid purchase orders	0	366
Prepaid other	411	304
Total prepaid expenses and other current assets	$ 1,207	$ 1,136

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Note Receivable - Additional Information (Details) - ApplianceSmart Holdings LLC - USD ($) $ in Millions		3 Months Ended	12 Months Ended
	Apr. 25, 2018	Apr. 02, 2021	Dec. 28, 2019	Dec. 30, 2017	Jul. 02, 2021	Jan. 02, 2021	Mar. 15, 2019
Purchase price				$ 6.5
Note receivable face amount	$ 3.9
Note receivable maturity date	Apr. 01, 2021
Note receivable interest rate	5.00%
Proceeds from disposal of business		$ 2.6
Impairment charges			$ 3.0
Note receivable balance outstanding					$ 3.0	$ 3.0
Maximum
Agreed prepayment amount							$ 1.2

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2021	Jan. 02, 2021
Property Plant And Equipment [Line Items]
Property plant and equipment, gross	$ 4,520	$ 2,990
Less accumulated depreciation and amortization	(2,386)	(2,258)
Total property and equipment, net	2,134	732
Building and Improvements
Property Plant And Equipment [Line Items]
Property plant and equipment, gross	$ 80	75
Building and Improvements | Minimum
Property Plant And Equipment [Line Items]
Estimated useful life	3 years
Building and Improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful life	30 years
Equipment
Property Plant And Equipment [Line Items]
Property plant and equipment, gross	$ 2,993	2,528
Equipment | Minimum
Property Plant And Equipment [Line Items]
Estimated useful life	3 years
Equipment | Maximum
Property Plant And Equipment [Line Items]
Estimated useful life	15 years
Projects Under Construction
Property Plant And Equipment [Line Items]
Property plant and equipment, gross	$ 1,447	$ 387

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Property and Equipment - Additional Information (Details) - USD ($)		3 Months Ended		9 Months Ended
	Mar. 25, 2021	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Property Plant And Equipment [Line Items]
Depreciation expense		$ 53,000	$ 27,000	$ 128,000	$ 68,000
Equipment Finance Agreement | KLC Financial, Inc. | ARCA Recycling, Inc.
Property Plant And Equipment [Line Items]
Credit Facility, payments and terms description				ARCA Recycling will make monthly payments of $31,000, inclusive of principal and interest, over a period of five years
Credit facility monthly payments	$ 31,000
Credit facility interest rate	7.59%
Initial loan amount, secured by existing equipment and new equipment	$ 1,800,000
Credit facility payment terms	5 years

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Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Finite Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 30,678	$ 30,613
Less accumulated amortization	(19,632)	(16,624)
Total intangible assets	11,046	13,989
Patent | GeoTraq Inc.
Finite Lived Intangible Assets [Line Items]
Intangible assets, gross	26,096	26,096
Patents and Domains
Finite Lived Intangible Assets [Line Items]
Intangible assets, gross	23	23
Computer Software
Finite Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 4,559	$ 4,494

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Intangible Assets - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Finite Lived Intangible Assets [Line Items]
Intangible amortization expense	$ 998,000	$ 1,000,000.0	$ 3,000,000.0	$ 3,000,000.0
GeoTraq Inc.
Finite Lived Intangible Assets [Line Items]
Estimated useful life of intangible assets			7 years

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Deposits and Other Assets - Schedule of Deposits and Other Assets (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Deposits	$ 217	$ 169
Other	50	62
Total deposits and other assets	$ 267	$ 231

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Leases - Schedule of Present Value of Lease Payments (Details) $ in Thousands	Oct. 02, 2021 USD ($)
Leases [Abstract]
Remainder 2021	$ 442
2022	1,390
2023	953
2024	684
2025	362
2026	210
Total	4,041
Less Interest	(485)
Present Value of Payments	$ 3,556

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Leases - Additional Information (Details) - USD ($)	9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020
Leases [Abstract]
Payment for operating leases	$ 1,100,000	$ 965,000
Right-of-use assets in exchange for lease liabilities	$ 1,800,000
Weighted average lease term for operating leases	3 years 2 months 12 days
Weighted average discount term	8.00%

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Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands		Oct. 02, 2021	Jan. 02, 2021
Payables and Accruals [Abstract]
Compensation and benefits		$ 860	$ 604
Contract liability		32	292
Accrued incentive and rebate checks		1,625	1,220
Accrued transportation costs	[1]	1,388	662
Accrued guarantees		767	767
Accrued purchase orders		0	177
Accrued taxes		508	299
Accrued litigation settlement		680	0
Other		267	867
Total accrued expenses		$ 6,127	$ 4,888

[1] Accrued transportation costs are related to delayed billing from certain vendors.

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Accrued Liabilities - Schedule of Contract Liability Activity (Details) $ in Thousands	9 Months Ended
	Oct. 02, 2021 USD ($)
Payables and Accruals [Abstract]
Beginning balance, January 2, 2021	$ 292
Accrued	165
Settled	(425)
Ending balance, July 3, 2021	$ 32

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Accrued Liability - California Sales Tax - Additional Information (Details) - USD ($)	Oct. 02, 2021	Jan. 02, 2021	Apr. 13, 2017
Payables and Accruals [Abstract]
Sales and excise tax payable, current	$ 5,958,000	$ 5,769,000	$ 4,100,000
Interest payable, current			$ 500,000

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Income Tax Disclosure [Abstract]
Effective tax rate			4.50%	7.50%
Benefit (provision) for income taxes	$ (33,000)	$ 99,000	$ (236,000)	$ 448,000
Pre-provision income (loss)	$ (935,000)	$ (909,000)	$ (5,209,000)	$ (5,983,000)

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Short Term Debt - Summary of Short Term Debt and Other Financing Obligations (Details) - USD ($)	Oct. 02, 2021	Jan. 02, 2021
Short Term Debt [Line Items]
Total short term debt	$ 494,000	$ 3,042,000
AFCO Finance
Short Term Debt [Line Items]
Total short term debt	419,000	144,000
Payroll Protection Program
Short Term Debt [Line Items]
Total short term debt	0	1,872,000
Vendor advance payments
Short Term Debt [Line Items]
Total short term debt	$ 75,000	$ 1,026,000

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Short Term Debt - Additional Information (Details) - USD ($)				9 Months Ended
	Jul. 01, 2021	May 01, 2020	Apr. 30, 2020	Oct. 02, 2021	Jul. 03, 2021	Jan. 02, 2021
Short Term Debt [Line Items]
Short term debt				$ 494,000		$ 3,042,000
Customer Advance Payments
Short Term Debt [Line Items]
Short term debt				$ 75,000		1,026,000
Debt maturity date				Dec. 31, 2021
Total funding received			$ 1,200,000	$ 1,200,000
Amount of debt forgiven				$ 1,100,000
Promissory Note | PPP Loan
Short Term Debt [Line Items]
Loan amount		$ 1,800,000
Debt maturity date		Apr. 27, 2022
Credit facility interest rate		1.00%
AFCO Financing Agreement | AFCO Credit Corporation
Short Term Debt [Line Items]
Debt face amount					$ 538,000
Debt interest rate					3.30%
Initial down payment	$ 134,000
Frequency of periodic payment				monthly
Monthly principal payments				$ 61,000
Short term debt				$ 419,000		$ 144,000
Debt instrument, redemption period, start date				Aug. 01, 2021
Debt instrument, redemption period, end date				Apr. 01, 2022

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Commitments and Contingencies - Additional Information (Details)						3 Months Ended	9 Months Ended
	Jun. 01, 2021 USD ($)	Apr. 09, 2021	Feb. 01, 2021 USD ($)	Feb. 28, 2018 USD ($)	Jan. 25, 2017 USD ($)	Oct. 02, 2021 USD ($)	Oct. 02, 2021 USD ($) Quarterly	Dec. 28, 2019 USD ($)
Offsetting Assets [Line Items]
Number of installments | Quarterly							10
GeoTraq Inc.
Offsetting Assets [Line Items]
Damages sought value						$ 1,950,000
Payments for Legal Settlements	$ 170,000						$ 250,000
Percent of prepayment tender restrictions		50.00%
Amount owed by company						$ 1,400,000	1,400,000
Appliance Smart, Inc.
Offsetting Assets [Line Items]
Future lease payments								$ 767,000
SA
Offsetting Assets [Line Items]
Damages sought value					$ 460,000
Damages assessed plus interest and attorney fees			$ 715,000	$ 614,000
AMTIM Capital Inc
Offsetting Assets [Line Items]
Claims a discrepancy in the calculation of fees							$ 2,000,000.0

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Shareholders' Equity - Additional Information (Details)			1 Months Ended		3 Months Ended			9 Months Ended		12 Months Ended
	Feb. 02, 2021 USD ($)	Jan. 29, 2021 USD ($) $ / shares shares	Aug. 31, 2020 shares	Sep. 30, 2019 USD ($) shares	Oct. 02, 2021 USD ($) $ / shares shares	Sep. 26, 2020 USD ($) shares	Mar. 28, 2020 shares	Oct. 02, 2021 USD ($) $ / shares shares	Sep. 26, 2020 USD ($) shares	Jan. 02, 2021 $ / shares shares	Apr. 30, 2021 shares	Dec. 28, 2019 shares
Shareholders Equity [Line Items]
Common stock, shares authorized (in shares)					200,000,000			200,000,000		200,000,000
Number of common stock returned to the company			71,607
Common stock, issued shares (in shares)					2,827,410			2,827,410		1,829,982
Common stock, outstanding shares (in shares)					2,827,410			2,827,410		1,829,982
Common stock par value | $ / shares					$ 0.001			$ 0.001		$ 0.001
Options outstanding					120,500			120,500		113,900		44,400
Options granted								38,000		74,000
Share-based compensation expense | $					$ 49,000			$ 275,000
Preferred Stock outstanding					238,729			238,729		259,729
Warrants outstanding					33,363			33,363		33,363
Warrant exercise price | $ / shares					$ 3.40			$ 3.40		$ 3.40
Warrant expiration date								2021-11		2021-11
Stock Options
Shareholders Equity [Line Items]
Share-based compensation expense | $						$ 46,000			$ 118,000
Unrecognized compensation expense, net of estimated forfeitures | $					$ 34,000			$ 34,000
Unrecognized compensation expense, net of estimated forfeitures, period for recognition								2022-07
2016 Plan
Shareholders Equity [Line Items]
Options expiration date								Oct. 28, 2026
Options authorized for issuance					800,000			800,000
Options outstanding					90,000			90,000		78,000
2011 Plan
Shareholders Equity [Line Items]
Options expiration date							May 12, 2021
Options outstanding					30,500			30,500		35,900
Additional awards to be granted after adoption of 2016 plan							0
Common Stock
Shareholders Equity [Line Items]
Number of shares converted to Common Stock											420,000
Preferred Stock, Convertible, Conversion Ratio											0.05
Common Stock | Equity Offering
Shareholders Equity [Line Items]
Common stock, shares authorized (in shares)		571,428
Common stock par value | $ / shares		$ 0.001
Common stock purchase price per share | $ / shares		$ 10.50
Common stock gross proceeds before deducting placement agent fees and offering expenses | $	$ 6,000,000.0
Common Stock | Equity Offering | Placement Agency Agreement
Shareholders Equity [Line Items]
Percentage of cash fee gross proceeds		7.00%
Common Stock | Equity Offering | Maximum | Placement Agency Agreement
Shareholders Equity [Line Items]
Gross proceeds reimbursement for accountable legal expenses | $		$ 35,000
Series A Preferred
Shareholders Equity [Line Items]
Number of shares converted											21,000
Preferred Stock outstanding					238,729			238,729		258,729
Contractor
Shareholders Equity [Line Items]
Stock issued for services, shares				223,214					104,798
Stock issued for services, value | $				$ 1,000,000.0					$ 351,000
Articles of Incorporation
Shareholders Equity [Line Items]
Common stock, shares authorized (in shares)						200,000,000			200,000,000

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Shareholders' Equity - Schedule of All Outstanding Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Oct. 02, 2021	Jan. 02, 2021	Dec. 28, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options Outstanding, Beginning Balance	113,900	44,400
Options Outstanding, Granted	38,000	74,000
Options Outstanding, Exercised	(6,000)
Options Outstanding, Cancelled/expired/forfeited	(25,400)	(4,500)
Options Outstanding, Ending Balance	120,500	113,900	44,400
Weighted Average Exercise Price
Weighted Average Exercise Price, Beginning Balance	$ 11.97	$ 13.31
Weighted Average Exercise Price, Granted	8.16	3.84
Weighted Average Exercise Price, Exercised	4.32
Weighted Average Exercise Price, cancelled/expired/forfeited	8.28	9.45
Weighted Average Exercise Price, Ending Balance	$ 7.52	$ 11.97	$ 13.31
Aggregate Intrinsic Value, Options Outstanding	$ 180	$ 78	$ 0
Weighted Average Remaining Contractual Life	7 years 1 month 6 days	7 years	3 years

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Loss Per Share - Schedule of Computation of Basic and Diluted Net Loss Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Earnings Per Share [Abstract]
Net loss	$ (968,000)	$ (810,000)	$ (5,445,000)	$ (5,535,000)
Basic
Basic loss per share	$ (0.34)	$ (0.43)	$ (2.09)	$ (2.98)
Weighted average common shares outstanding	2,827,410	1,871,321	2,601,827	1,860,270
Diluted
Diluted loss per share	$ (0.34)	$ (0.43)	$ (2.09)	$ (2.98)
Weighted average common shares outstanding	2,827,410	1,871,321	2,601,827	1,860,270

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Loss Per Share - Additional Information (Details) - shares	9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020
Earnings Per Share [Abstract]
Potentially dilutive shares excluded from earnings per share calculation	66,000	135,263

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Major Customers and Suppliers - Additional Information (Details) - Customer Concentration Risk [Member]	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020	Jan. 02, 2021
Revenue | One Customer
Concentration Risk [Line Items]
Concentration risk percentage	13.00%	30.00%	15.00%
Revenue | Two Customers
Concentration Risk [Line Items]
Concentration risk percentage				32.00%
Accounts Receivable | Three Customers
Concentration Risk [Line Items]
Concentration risk percentage			34.00%		37.00%

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Defined Contribution Plan - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Deferred Compensation Arrangement With Individual Postretirement Benefits [Line Items]
Employer contributions to employee compensation plan	$ 16,000	$ 8,000	$ 22,000	$ 20,000
Maximum
Deferred Compensation Arrangement With Individual Postretirement Benefits [Line Items]
Defined contribution plan, employer matching contribution, percent			5.00%

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Segment Information - Additional Information (Details)	9 Months Ended
	Oct. 02, 2021 Segment
Segment Reporting [Abstract]
Number of reportable segments	3

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Segment Information - Schedule of Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2021	Sep. 26, 2020	Oct. 02, 2021	Sep. 26, 2020
Segment Reporting Information [Line Items]
Revenues	$ 12,113	$ 12,266	$ 29,391	$ 24,723
Gross profit	3,081	3,717	6,245	6,236
Operating loss	(844)	(823)	(5,805)	(6,540)
Depreciation and amortization	1,046	1,060	3,136	3,104
Interest expense, net	125	88	323	255
Net loss before benefit from income taxes	(935)	(909)	(5,209)	(5,983)
Recycling
Segment Reporting Information [Line Items]
Revenues	12,113	12,266	29,391	24,723
Gross profit	3,081	3,717	6,245	6,236
Operating loss	274	1,249	(1,753)	(1,526)
Depreciation and amortization	109	124	327	295
Interest expense, net	125	88	323	255
Net loss before benefit from income taxes	208	1,193	(1,145)	(879)
Biotechnology
Segment Reporting Information [Line Items]
Revenues	(0)	0		0
Gross profit	(0)	0		0
Operating loss	(182)	(845)	(1,232)	(1,652)
Depreciation and amortization	0	0		0
Interest expense, net	0	0		0
Net loss before benefit from income taxes	(182)	(845)	(1,232)	(1,652)
Technology
Segment Reporting Information [Line Items]
Revenues	0	0		0
Gross profit	0	0		0
Operating loss	(936)	(1,227)	(2,820)	(3,362)
Depreciation and amortization	937	936	2,809	2,809
Interest expense, net	0	0		0
Net loss before benefit from income taxes	$ (961)	$ (1,257)	$ (2,832)	$ (3,452)

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Segment Information - Schedule of Balance Sheet Information (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Jan. 02, 2021
Segment Reporting Information [Line Items]
Assets	$ 27,610	$ 24,351
Intangible Assets	11,046	13,989
Recycling
Segment Reporting Information [Line Items]
Assets	16,777	10,614
Intangible Assets	327	470
Technology
Segment Reporting Information [Line Items]
Assets	10,833	13,737
Intangible Assets	$ 10,719	$ 13,519

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Related Parties - Additional Information (Details) $ in Thousands				3 Months Ended		9 Months Ended
	Mar. 30, 2021	Aug. 25, 2020 USD ($)	Mar. 15, 2019 USD ($)	Oct. 02, 2021 USD ($) ft²	Sep. 26, 2020 USD ($)	Oct. 02, 2021 USD ($) ft²	Sep. 26, 2020 USD ($)	Dec. 09, 2019 USD ($)	Apr. 01, 2018 USD ($)
Related Party Transaction [Line Items]
Amount to be paid under guaranty under bankruptcy								$ 25
Revolving Credit Facility | Isaac Capital Group, LLC
Related Party Transaction [Line Items]
Credit facility initiation date		Aug. 28, 2019
Amount of revolving line of credit		$ 2,500
Credit facility maturity date	Aug. 18, 2021	Dec. 31, 2020
Credit facility interest rate		8.75%
Percentage of loan fee on each borrowings		2.00%
Percentage of outstanding common stock		16.00%
Appliance Smart, Inc.
Related Party Transaction [Line Items]
Terms and manner of settlement						Purchaser issued the ApplianceSmart Note with a three-year term in the original principal amount
Note receivable face amount									$ 3,900
Effects of any change in method of establishing terms						On December 26, 2018, the ApplianceSmart Note was amended and restated to grant the Company a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayment terms to provide for the payment in full of all accrued interest and principal on April 1, 2021, the maturity date of the ApplianceSmart Note.
Minimum | Appliance Smart, Inc.
Related Party Transaction [Line Items]
Related party receivables, repayment term			15 days
Maximum | Appliance Smart, Inc.
Related Party Transaction [Line Items]
Note receivable balance outstanding			$ 1,200
Live Ventures Incorporated
Related Party Transaction [Line Items]
Shared expenses with another company				$ 86,000	$ 61,000	$ 220,000	$ 186,000
Rented office space | ft²				9,900		9,900
Total rent and common area expense				$ 62,000	$ 54,000	$ 168,000	$ 144,000
Live Ventures Incorporated | Minimum
Related Party Transaction [Line Items]
Related party transaction, rate						5.00%

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Sale of ARCA and Connexx - Additional Information (Details) - Asset Purchase Agreement - ARCA and Connexx Sale - USD ($)	Nov. 14, 2021	Feb. 19, 2021
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Potential break fee receivable upon agreement termination		$ 250,000
Purchase price consideration receivable		25,000,000
Purchase price consideration receivable upon closing transaction with available funds		7,500,000
Purchase price consideration receivable upon closing transaction as promissory note		$ 17,500,000
Percentage of interest receivable on unpaid principal balance of promissory note		6.00%
Subsequent Event
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Break fee	$ 100,000
Installment	50,000
Maximum | Subsequent Event
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Sale of subsidiaries	$ 25,000,000

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Subsequent event - Additional Information (Details) - Subsequent Event - Asset Purchase Agreement - ARCA and Connexx Sale	Nov. 14, 2021 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Break fee	$ 100,000
Installment	50,000
Maximum
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sale of subsidiaries	$ 25,000,000