What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-04-08 · 73 added, 80 removed, 84 unchanged (65% of the section changed)

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Note about Forward-Looking Statements

This Form 10-K includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.

Specific forward-looking statements contained in this portion of the Form 10-K include, but are not limited to:

(i) statements relating to JAN 101, including statements relating to the commencement of Phase IIb clinical trials for the treatment of PAD and the results of those trials, (ii) statements that are based on current projections and expectations about the markets in which we operate, (iii) statements relating to the sale of our Recycling business, (iv) statements about current projections and expectations of general economic conditions, (v) statements about specific industry projections and expectations of economic activity, (vi) statements relating to our future operations and prospects, (vii) statements about future results and future performance, (viii) statements that the cash on hand, together with potential sources of cash through issuance of debt or equity, will provide the Company with sufficient liquidity for the next 12 months, and (ix) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow, or liquidity.

Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements.

Factors and risks that could affect our results, future performance, and capital requirements and cause them to differ materially from those contained in the forward-looking statements include those identified in this Form 10-K under Item 1A “Risk Factors”, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

This Form 10-K 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.

In addition, the foregoing factors may generally affect our business, results of operations and financial position.

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We do not undertake and specifically decline any obligation to update any forward-looking statements.

Any information contained on our website www.janone.com or any other websites referenced in this Form 10-K are not part of this Form 10-K.

We are 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 now-sold Recycling Subsidiaries (ARCA Recycling, ARCA Canada, and Connexx), we were 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.

Also, through our now-sold GeoTraq Inc.

subsidiary, we were engaged in the development and design of wireless transceiver modules with technology that provides LBS directly from global Mobile IoT networks.

Any information contained on our website www.alt5sigma.com or any other websites referenced in this Form 10-K are not part of this Form 10-K.

Through our Fintech segment, we provide next generation blockchain-powered technologies to enable a migration to a new global financial paradigm, and, through our Biotechnology segment, we are focused on finding treatments for conditions that cause chronic pain and bringing to market drugs with non-addictive and non-sedative pain-relieving properties.

In addition, through our sale of subsidiaries ARCA Recycling, Connexx, and ARCA Canada and the assets of GeoTraq Inc., we have exited these legacy businesses;

Consequently, the results for these businesses are reported as discontinued operations for the years ended December 28, 2024 and December 30, 2023.

We operate three reportable segments:

Our Fintech segment provides next generation blockchain-powered technologies for tokenization, trading, clearing, settlement, payment, and safe-keeping of digital assets

• 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.

On March 19, 2023, the Company entered into a Stock Purchase Agreement with VM7 Corporation under which the it agreed to acquire our recycling segment.

The results for this segment for the years ended December 30, 2023 and December 31, 2022 are reported as discontinued operations below.

• Technology:

We have suspended all operations for GeoTraq, and, on May 24, 2022, sold substantially all of the GeoTraq assets to an otherwise unrelated third party.

The results for this segment for the years ended December 30, 2023 and December 31, 2022 are reported as discontinued operations below.

We have previously announced our intention to capitalize a subsidiary with certain of our biotechnology assets, acquire an additional biotechnology asset, and then engage in a financing of that subsidiary.

The short-term intended result of that series of transactions would be for to decouple it from us so that it would operate on a stand-alone basis.

• Corporate and Other:

Our Corporate and Other segment consists of certain corporate general and administrative costs.

Reporting Period.

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The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities at the date of the financial statements.

Management regularly reviews its estimates and assumptions, which are based on historical factors and other factors believed to be relevant under the circumstances.

Management regularly reviews its estimates and assumptions, which are

based on historical factors and other factors believed to be relevant under the circumstances.

Actual results may differ from these estimates under different assumptions, estimates or conditions.

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Statement of Operations Data:

Revenues $ — $ —

Cost of revenues — —

Revenue $ 12,532 $ —

Cost of revenue 6,238 —

Gross profit 6,294 —

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Operating loss (7,562) (19,846)

Interest income, net 2,250 468

Interest (expense) income, net (879) 2,250

Gain on litigation settlement 374 —

Unrealized loss on marketable securities (1,058) (926)

Gain on reversal of contingency loss — 637

Other income, net (161) 998

Net (loss) income before provision for income taxes (17,524) 1,399

Net loss before provision for income taxes (9,286) (17,524)

Income tax benefit (3,041) (429)

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Net income from discontinued operations — 9,283

Net (loss) income $ (7,812) $ 10,992

Net loss $ (6,245) $ (7,812)

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 (in $000’s):

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Revenue Percent

Revenue from discontinued operations $ 3,795 100 % $ 39,611 100 %

Biotechnology — — % — — %

Fintech $ 12,532 100 % $ — — %

Biotech — — % — — %

Corporate and other — — % — — %

Discontinued operations — — % 3,795 100 %

Total revenue $ 12,532 100 % $ 3,795 100 %

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Profit % Gross

Gross profit from discontinued operations $ (197) (5) % $ 7,619 19 %

Biotechnology — — % — — %

Fintech $ 6,294 50 % $ — — %

Biotech — — % — — %

Corporate and other — — % — — %

Discontinued operations — — % (197) (5) %

Total gross profit $ 6,294 50 % $ (197) (5) %

Revenue decreased by approximately $35.8 million for the fiscal year ended December 30, 2023, as compared to the year ended December 31, 2022.

The decrease is due to the disposition of our recycling segment as of March 1, 2023.

Cost of Revenue

Cost of revenue decreased by approximately $28.0 million for the fiscal year ended December 30, 2023, as compared to the year ended December 31, 2022.

The decrease is due to the disposition of our recycling segment as of March 1, 2023.

Revenue increased by approximately $8.8 million for the fiscal year ended December 28, 2024, as compared to the year ended December 30, 2023.

The increase is due to the acquisition of ALT5 Subsidiary during May 2024, partially offset by no revenue from discontinued operations for the fiscal year ended December 28, 2024.

Gross profit increased by approximately $6.5 million for the fiscal year ended December 28, 2024, as compared to the year ended December 30, 2023.

The increase is due to the acquisition of ALT5 Subsidiary during May 2024, partially offset by no revenue from discontinued operations for the fiscal year ended December 28, 2024.

Selling, General and Administrative Expense

Selling, general and administrative expenses from continuing operations increased by approximately $1.6 million for the fiscal year ended December 30, 2023, as compared to the year ended December 31, 2022, primarily due to increased amortization costs relating to the Soin intangibles.

Selling, general and administrative expenses from discontinued operations decreased by approximately $7.2 million.

The decrease is due to the disposition of our recycling segment as of March 1, 2023.

Selling, general and administrative expenses from continuing operations increased by approximately $7.6 million for the fiscal year ended December 28, 2024, as compared to the year ended December 30, 2023, primarily due to the acquisition of ALT5 Subsidiary during May 2024, increased amortization costs relating to the Soin intangibles in our Biotech segment, and increased stock-based compensation expense related to grants of RSU's, as well as costs for professional services in our Corporate and Other segment.

Impairment Charges

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No impairment charges were recorded during the fiscal year ended December 28, 2024.

Interest Income, net

Interest income, net, increased by approximately $1.8 million for the fiscal year ended December 30, 2023, as compared to the year ended December 31, 2022, primarily due to the accretion of discount in connection with the promissory notes with SPYR and VM7, as well as interest recorded on the note with SPYR.

Interest Income (Expense), net

Interest expense, net, was approximately $880,000 for the fiscal year ended December 28, 2024, as compared to interest income, net, of approximately $2.3 million for the year ended December 30, 2023.

The change was primarily due to no longer accreting the discounts in connection with the promissory note with SPYR and the receivable from VM7,

promissory notes entered into during the year ended December 28, 2024, as well as the acquisition of ALT5 Subsidiary during May 2024.

Gain on Sale of the Recycling Subsidiaries

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See Note 4 of the Consolidated Financial Statements.

Gain on Sale of GeoTraq

During the fiscal year ended December 31, 2022, we recorded a gain on the sale of GeoTraq of approximately $9.4 million from discontinued operations.

See Note 5 of the Consolidated Financial Statements.

Unrealized Loss on Marketable Securities

Unrealized loss on marketable securities for the fiscal year ended December 30, 2023 was approximately $926,000, as compared to a loss of approximately $631,000 for the fiscal year ended December 31, 2022.

Unrealized loss on marketable securities for the fiscal year ended December 28, 2024 was approximately $1.1 million, as compared to a loss of approximately $925,000 for the fiscal year ended December 30, 2023.

An unrealized gain or loss on marketable securities is recorded to mark to fair value securities received in connection to the sale of GeoTraq.

Gain (Loss) on Litigation Settlement, net

For the year ended December 31, 2022, we recorded a gain on litigation settlement from continuing operations of approximately $1.95 million due to the receipt of a payment from Sompo International Companies (“Sompo”) in exchange for a full release in favor of Sompo from liability for both the GeoTraq and SEC-related matters.

We recorded a loss on litigation from discontinued operations of approximately $1.0 million due to an accrual of approximately $894,000 for the Skybridge settlement (see Note 19 of the Consolidated Financial Statements for further discussion of this matter), and an accrual of approximately $115,000 for adjudication of the Blackhawk matter.

Gain on Reversal of Contingency Loss

For the year ended December 31, 2022, we recorded a gain on reversal of contingency liabilities of approximately $637,000 relating to guarantees of ApplianceSmart leases that no longer exist as a result of ApplianceSmart's emergence from bankruptcy.

See Note 19 of the Consolidated Financial Statements.

Other Income, net

Other income, net, from continuing operations was approximately $998,000 for the fiscal year ended December 30, 2023 as compared to income of approximately $2.1 million for the fiscal year ended December 31, 2022.

Other expense, net, from discontinued operations was approximately $180,000 for the fiscal year ended December 30, 2023, as compared to expense of approximately $1.3 million for the fiscal year ended December 31, 2022.

Segment Reporting

We report our business in the following segments:

Biotechnology and discontinued operations.

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 Biotechnology segment.

As discussed above, we sold our Technology segment, GeoTraq, during the fiscal year ended December 31, 2022, and our Recycling segment in March 2023, and detail those results as discontinued operations below.

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

Results of Operations by Segment

The following table sets forth the results of operations by segment (in $000’s):

Fiscal Year Ended December 28, 2024 Fiscal Year Ended December 30, 2023

Biotechnology Discontinued Operations Total Biotechnology Discontinued Operations Total

Fintech Biotech Corporate and other Discontinued Operations Total Fintech Biotech Corporate and other Discontinued Operations Total

Revenue $ 12,532 $ — $ — $ — $ 12,532 $ — $ — $ — $ 3,795 $ 3,795

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Gain on sale of ARCA — — — — — — — — (12,102) (12,102)

Gain on sale of GeoTraq — — — — (9,428) (9,428)

Operating (loss) income 905 (2,148) (6,206) — (7,449) — (1,531) (18,315) 10,438 (9,408)

Biotechnology Segment

For the fiscal years ended December 30, 2023 and December 31, 2022, respectively, our Biotechnology segment incurred operating expenses of approximately $10.1 million and $3.1 million.

The increase is primarily related to the $5.3 million

full impairment of the VM7 note receivable from the Recycling Subsidiaries transaction, as well as increased amortization costs relating to the Soin intangibles.

Fintech Segment

Our Fintech segment consists of ALT5 Subsidiary, which was acquired during May 2024.

Revenue for the fiscal year ended December 28, 2024 was approximately $12.5 million, and gross margin percentage was 50.2%.

Operating income for the fiscal year ended December 28, 2024 was approximately $900,000.

Biotech Segment

Our Biotech segment generated no revenue for the fiscal year ended December 28, 2024.

Selling, general and administrative expenses increased primarily due to increased amortization costs relating to the Soin intangibles.

Corporate and Other Segment

Our Corporate and Other segment generated no revenue for the fiscal year ended December 28, 2024.

Selling, general and administrative expenses increased primarily due to increased stock-based compensation expense related to grants of RSU's, as well as increased costs for professional services.

Discontinued Operations

Discontinued operations consists of our Recycling segment, which was disposed of effective March 1, 2023, and our Technology segment, which was disposed of during May 2022.

Operating income for the fiscal year ended December 30, 2023 increased by approximately $2.0 million, as compared to the fiscal year ended December 31, 2022.

The increase in operating income is primarily due to the gain on sale of the Recycling Subsidiaries of approximately $12.1 million during fiscal 2023, partially offset by the gain on the sale of the GeoTraq intangible, in the amount of approximately $9.4 million during the year ended December 31, 2022, as well as reduced operating expenses for the year ended December 30, 2023 due to the sale of the Recycling Subsidiaries.

Discontinued operations consist of our Recycling segment, which was disposed of effective March 1, 2023.

We had no discontinued operations for the fiscal year ended December 28, 2024.

Liquidity and Capital Resources

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Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

As of December 30, 2023, our cash on hand was approximately $5,000.

We intend to raise funds to support future development of JAN 123 either through capital raises or structured arrangements.

Our ability to continue as a going concern is dependent upon the success of future capital raises or structured settlements to fund the required testing to obtain FDA approval of JAN 123, as well as to fund our day-to-day operations.

As of December 28, 2024, our cash on hand was approximately $7.2 million.

We intend to raise funds to support future development of JAN 123 either through capital raises or structured arrangements, which would include effectuating our previously announced intention to capitalize a subsidiary with certain of our biotechnology assets, acquire an additional biotechnology asset, and then engage in a financing of that subsidiary.

The short-term intended result of that series of

transactions would be for us to own a controlling interest in that subsidiary, but to decouple it from us so that it would operate on a stand-alone basis, although its financial statements would continue to be consolidated with ours for as long as we have a controlling interest.

Our ability to continue as a going concern is dependent upon the success of future capital raises or structured settlements and cash flows from the acquisition of ALT5 Subsidiary to fund the required testing to obtain FDA approval of JAN 123, as well as to fund our day-to-day operations.

The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

While we will actively pursue these additional sources of financing, management cannot make any assurances that such financing will be secured.

During the fiscal year ended December 30, 2023, cash used in operations was approximately $855,000, compared to cash used in operations of approximately $557,000 during the fiscal year ended December 31, 2022.

Cash provided by operating activities from discontinued operations during the fiscal year ended December 30, 2023 was approximately $2.3 million, as compared to cash used in operating activities of approximately $2.5 million for the fiscal year ended December 31, 2022.

The changes in cash was primarily due to results of operations as discussed above.

Cash used in investing activities was approximately $156,000 and $1.5 million, respectively, for the fiscal years ended December 30, 2023 and December 31, 2022.

Cash used in investing activities was all associated with discontinued operations and was related to purchases of property and equipment.

During the fiscal year ended December 28, 2024, cash provided by operations was approximately $1.8 million, compared to cash provided by operations of approximately $855,000 during the fiscal year ended December 30, 2023.

Cash provided by operating activities from discontinued operations during the fiscal year ended December 30, 2023 was approximately $2.3 million.

We had no discontinued operations during the fiscal year ended December 28, 2024.

The change in cash was primarily due to results of operations as discussed above.

Cash provided by investing activities was approximately $5.9 million for the fiscal year ended December 28, 2024, compared to cash used in investing activities of approximately $156,000 for the fiscal year ended December 30, 2023.

Cash provided by investing activities for the fiscal year ended December 28, 2024 was related to cash acquired in the acquisition of ALT5 Subsidiary, while cash used in investing activities for the fiscal year ended December 30, 2023 was all associated with discontinued operations and was related to purchases of property and equipment.

Cash provided by financing activities was approximately $6.1 million for the fiscal year ended December 28, 2024, and relates to proceeds from notes payable, proceeds from equity financing and warrants exercised, and proceeds from related party notes payable, partially offset by payments on notes payable, as well as payments on related party notes payable.

Cash provided by financing activities was approximately $777,000 for the fiscal year ended December 30, 2023.

Cash used in financing activities from discontinued operations for the fiscal year ended December 30, 2023 was approximately $2.2 million and was primarily due to the repayment of debt obligations in the amount of approximately $7.3 million, partially offset by proceeds from the issuance of debt obligations of approximately $5.1 million.

Cash used by financing activities was approximately $14,000 for the fiscal year ended December 31, 2022.

Cash provided by financing activities from discontinued operations for fiscal year ended December 31, 2022 was approximately $4.0 million, and was primarily due to proceeds from the issuance of notes payable of approximately $17.5 million, partially offset by payments on notes payable of approximately $13.4 million, and payment on related party debt of approximately $162,000.

Sources of Liquidity

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 $7.7 million from continuing operations for the fiscal year ended December 30, 2023, and net income from continuing operations of approximately $8.0 million for the fiscal year ended December 31, 2022, for the reasons discussed above.

Additionally, the Company has total current assets of approximately $350,000 and total current liabilities approximately of $5.6 million, resulting in a net negative working capital of approximately $5.2 million.

Cash used in operations was approximately $855,000.

We reported a net loss of approximately $6.2 million for the fiscal year ended December 28, 2024, and net loss from continuing operations of approximately $17.1 million for the fiscal year ended December 30, 2023, for the reasons discussed above.

Additionally, the Company has total current assets of approximately $35.0 million and total current liabilities approximately of $40.9 million, resulting in a net negative working capital of approximately $5.9 million.

Cash provided operations was approximately $1.0 million.

Risk Factors, management has addressed and evaluated the risk factors that could materially and adversely affect the entity’s business, financial condition and results of operations, cash flows, and liquidity.

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New Acquisitions, Products and Services

We will require additional debt financing and/or capital to finance new acquisitions, conduct our Phase IIb clinical trials, or consummate other strategic investments in our business.

No assurance can be given any financing obtained may not further dilute or otherwise impair the ownership interest of our existing stockholders.

We acquired ALT5 Subsidiary during May 2024, as discussed above.

We may require additional debt financing and/or capital to finance new acquisitions or consummate other strategic investments in our business.

We currently expect that the biotechnology subsidiary transaction discussed above will allow us to finance our Phase IIb clinical trials, No assurance can be given any financing obtained may not further dilute or otherwise impair the ownership interest of our existing stockholders or our ownership interest in the to-be-effectuated biotechnology subsidiary.

Off Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis