Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
Restatement Background
On April 17, 2023, JanOne Inc.'s (the "Company") management and the Audit
Committee of the Company's Board of Directors (the "Audit Committee") reached a
determination that the Company's previously issued unaudited consolidated
financial statements and related disclosures for each of the quarterly periods
ended July 2, 2022 and October 1, 2022, should no longer be relied upon because
of a material misstatement contained in those two quarterly unaudited condensed
consolidated financial statements. The Company's management and the Audit
Committee discussed the matters with Frazier & Deeter, LLC, the Company's
independent registered public accounting firm for the 2022 fiscal year, and with
WSRP, LLC, the Company's independent registered public accounting firm during
the second and third quarters in the 2022 fiscal year and prior fiscal periods
since 2019, and determined to restate the Company's unaudited condensed
consolidated financial statements for the second and third fiscal quarters ended
July 2, 2022, and October 1, 2022.
In connection with the Company's preparation of its unaudited condensed
consolidated financial statements and related disclosures for each of the two
referenced periods, the Company's management and Audit Committee relied upon the
report issued by a third-party valuation firm to determine the carrying value of
the promissory note the Company had received from SPYR Technologies, Inc. (the
"SPYR Note"), in connection with the Company's sale of the assets of its
GeoTraq, Inc. subsidiary to SPYR Technologies, Inc. in the second quarter of the
Company's 2022 fiscal year. The accounting treatment for the SPYR Note had
financial statement implications to (i) two line items in the Company's
Condensed Consolidated Balance Sheets (specifically, Note receivable, net and
Accumulated deficit), (ii) two line items in the Company's Condensed
Consolidated Statements of Operations And Comprehensive Income (Loss)
(specifically, Gain on sale of GeoTraq, and Interest expense, net), resulting in
a decrease in net income of approximately $1.8 million and a decrease in net
loss of approximately $94,000 for the 13 weeks ended July 2, 2022 and October 1,
2022, respectively, and (iii) two line items in the Company's Condensed
Consolidated Statements of Cash Flows (specifically, Gain on sale of GeoTraq and
Accretion of note receivable discount), resulting in decrease in net income of
approximately $1.8 million for the 26 weeks ended July 2, 2022, and $1.7 million
for the 39 weeks ended October 1, 2022. Further, in connection with the
preparation of the Company's Quarterly Reports on Form 10-Q for those two
quarterly periods that included those unaudited condensed consolidated financial
statements and related disclosures, the Company also received guidance from an
additional third-party source in connection with the review of those unaudited
condensed consolidated financial statements and related disclosures. However, in
connection with the Company's 2022 fiscal year-end audit and the preparation of
its consolidated financial statements and related disclosures for that fiscal
year, the Company's management and the Audit Committee concluded that the
carrying value of the SPYR Note, as set forth in the aforementioned Quarterly
Reports, should be restated. The initial carrying value of $11.2 million should
be restated to be $9.4 million and reflect carrying value of $9.5 million as of
July 2, 2022 and $9.6 million as of October 1, 2022. Each of these two quarterly
restatements has an impact on net income (loss), but not on operating cash flows
for any period.
Restatement of Previously Issued Unaudited Condensed Consolidated Financial
Statements
This Annual Report on Form 10-K for the year ended December 31, 2022 includes
audited consolidated financial statements for the years ended December 31, 2022
and January 1, 2022, as well as relevant unaudited interim pro forma financial
information for the quarterly periods ended July 22, 2022 and October 1, 2022.
The Company has not restated any information within that Annual Report on Form
10-K, including the consolidated financial statements at December 31, 2022 and
for the years ended December 31, 2022 and January 1, 2022, but did restate
certain unaudited interim financial information for the quarterly periods ended
July 2, 2022 and October 1, 2022.
See Note 28, Restatement, in Item 8, Financial Statements and Supplementary
Data, in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 (filed on April 17, 2023) for such restated information on the
quarterly unaudited condensed consolidated financial statements for the second
and third quarters of the Company's 2022 fiscal year.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. Description of Exhibit
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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