Inflation

We do not believe that the relatively moderate rates of inflation in the United States in recent years have had a significant effect on our operations.

Seasonality and Shipping Patterns

Our operations are subject to various state, local, federal and foreign statutes and regulations prohibiting various activities that in many instances require permits and licenses. Our failure to maintain compliance with applicable law and regulations, required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our operating authorities. Moreover, government deregulation efforts, “modernization” of the regulations governing customs clearance and changes in the international trade and tariff environment could require material expenditures or otherwise adversely affect us.

On April 27, 2012, the Company’s subsidiary, Janel Group of Illinois, Inc. (“Janel Illinois”), filed a law suit in the Circuit Court for Cook County, Illinois (Case No. 2012 L 4574) against Q Marketing Group, Ltd. and its principals, Eduardo and Marie Gordon, for non-payment of invoices for freight services, and on September 14, 2012 obtained a default judgment against the defendants.  In an effort to collect on the judgment, Janel Illinois filed to register the Illinois default judgment with the New York Supreme Court, and on August 1, 2013, subsequent to the period covered by this Quarterly report on Form 10-Q, the defendants filed an answer with unspecified counterclaims against Janel Illinois (Supreme Court of New York for Queens County, Index No. 702364/13) seeking damages of $500,000, punitive damages of $1,000,000 and sanctions of $10,000.  On December 13, 2013 the Company filed a motion for summary judgment with the Supreme Court of New York for Queens County on its claims. The Company believes that the defendants have no meritorious defenses or counterclaims against the Illinois judgment and will vigorously continue to pursue payment from the defendants.

PART II

The Company’sJanel Corporation’s Common Stock is traded on the Over-The-Counter (OTC) market under the symbol JLWT.“JANL.”

The following table sets forth the high and low prices for the Common Stock for each full quarterly period during the fiscal years indicated. The prices reflect the high and low bid prices as available through the OTC market and represent prices between dealers and do not reflect the retailer markups, markdowns or commissions, and may not represent actual transactions. There have been no dividends declared.

On April 15, 2015, the Company filed with the Nevada Secretary of State a Certificate of Change providing for a one-for-fifty reverse stock split (“Reverse Stock Split”). This change took effect April 21, 2015. The Company issued one share of Common Stock for every fifty shares of Common Stock held as of the close of business on April 20, 2015. To avoid the issuance of fractional shares in connection with the Reverse Stock Split, if a shareholder would be entitled to receive a fractional share, such shareholder instead received a whole share.

As a result of the above, all relevant information relating to the number of shares, options and per share information have been retrospectively adjusted within these consolidated financial statements to reflect the Reverse Stock Split for all periods presented.

On December 17, 2014,18, 2016, the Company had 59 holders of record and approximately 364 beneficial56 holders of its shares of Common Stock. The closing price of the Common Stock on that date was $0.09$8.00 per share.

Not applicable.

Forward-Looking Statements

The statements contained in all parts of this document that are not historical facts are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this document, the words “anticipate,” “estimate,” “expect,” “may,” “plans,” “project,” and similar expressions are intended to be among the statements that identify forward-looking statements. Janel’s results may differ significantly from the results discussed in the forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the Company’sJanel’s dependence on its ability to attract and retain skilled managers and other personnel; the intense competition within the freight industry; the uncertainty of the Company’sJanel’s ability to manage and continue its growth and implement its business strategy; the Company’sJanel’s dependence on the availability of cargo space to serve its customers; effects of regulation; its vulnerability to general economic conditions and dependence on its principal customers; accuracy of accounting and other estimates; risk of international operations; risks relating to acquisitions; the Company’sJanel’s future financial and operating results, cash needs and demand for its services; and the Company’sJanel’s ability to maintain and comply with permits and licenses; as well as other risk factors described in this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.

Introduction

The following discussion and analysis addresses the results of operations for our business subsidiaries, Janel Group and INDCO, as well as for Janel Corporation as a whole, for the fiscal year ended September 30, 2014, as compared2016. The discussion with respect to Janel and Janel Group includes comparison to the results of operations for the fiscal year ended September 30, 2013.2015. Janel acquired a majority interest in INDCO in March 2016, and, therefore, only the results of INDCO operations since March 1, 2016 are included in this discussion. The discussion and analysis then addresses the liquidity and financial condition of Janel Group and INDCO and the Company as a whole, and other matters.

The Company’s global logistics services segment comprises several wholly-owned subsidiaries, collectively known as “Janel Group.” Janel Corporation completed the acquisition of all the equity of Liberty International, Inc. (“Liberty”), a Rhode Island-based global logistics services company, on August 14, 2015. Therefore, included in the fiscal year ended September 30, 2015 results are the operations of Liberty beginning August 14, 2015.

The Company’s manufacturing segment comprises its majority-owned INDCO subsidiary, which manufactures and distributes industrial mixing equipment.

Certain amounts included in the 2015 financial statements have been reclassified to conform to 2016 presentation.

Results of Operations

Janel is a non-asset based third party logistics services company, engaged in full-service cargo transportation logistics management, including freight forwarding – via air, ocean and land-based carriers, customs brokerage services, and warehousing and distribution services. From April 2011 until June 2012, we operated a vertical sales and supply chain food industry business segment including supplier selection, manufacturing, transportation, import, distribution, marketing and sales within the food industry. During the June 2012 quarter the Company divested itself of and discontinued the food industry segment and now operates as one reportable business segment.

Effective with our Annual Report on Form 10-K for the fiscal year ended September 30, 2013, the Company changed its accounting principle with regard to customs duty and no longer includes customs duty as a component of revenue or forwarding expense. The net effect of this change is a reduction to revenue with a corresponding equal reduction to forwarding expense.

On September 10, 2014, the Company completed the acquisition of all of the equity interests of Alpha. Therefore, included in the fiscal year ended September 30, 2014 results are the operations of Alpha beginning September 10, 2014.

Global Logistics Services - Years ended September 30, 20142016 and 20132015

Revenue.Total revenue from continuing operations for fiscal 20142016 was $47,940,095,$70,596,132, as compared to $44,744,518$74,740,145 for the same period of fiscal 2013, an increase2015, a decrease of $3,195,577($4,144,013) or 7.1%.5.5% decrease. This increasedecrease is mainly the result of higher ocean import shipping activity when compared to the prior yearloss of certain high revenue, lower margin customers partially offset by the acquired Liberty business and $541,383 of revenue from Alpha.other organic growth. Net revenue (revenue minus forwarding expense) from continuing operations in fiscal 20142016 was $6,549,474,$13,149,015, an increase of $284,930$1,550,145 or 4.7%13.4% as compared to net revenue of $6,264,544$11,598,870 for fiscal 2013.2015. This increase is mainly the result of net revenue infrom the amountacquisition of $218,970Liberty partially offset by losses from Alpha.certain lower margin customers.

Forwarding Expense.Forwarding expense from continuing operations is primarily comprised of theincludes fees paid by Janel Group directly to cargo carriers to handle and transport its actual freight shipments on behalf of its customers between initial and final terminal points, and includesincluding any trucking and warehousing charges related to the shipments.

For fiscal 2014,2016, forwarding expense from continuing operations increaseddecreased by $2,910,647,$5,694,158, or 7.6%9.0%, to $41,390,621$57,447,117 as compared to $38,479,974$63,141,275 for fiscal 20132015 and as a percentage of revenue increaseddecreased to 86.3%81.4% for fiscal 2014,2016, from 86.0%84.5% for fiscal 2013,2015, a 0.33.1 percentage point increase.decrease. This percentage increasedecrease is principally the result of higher forwarding expense on ocean import shipping activity when compared to the prior year. Forwarding expenses associated with Alpha were $322,413.losses of low margin customers as well as other net organic margin increases.

Selling, General and Administrative Expense.For fiscal 20142016, certain items have been categorized as “corporate” expenses attributable to overall management of Janel and 2013,other non-segment specific activities. As such, these expenses, and the corresponding 2015 items, are discussed under Janel Corporation’s “Corporate Selling, General and Administrative Expenses”, below. The following discussion of transportation selling, general and administrative expenses excludes those same “Corporate” items from the 2015 figures discussed.

Selling, general and administrative expenses from continuing operations for 2016 and 2015 were $6,646,604$10,747,590 and $6,452,913,$9,238,974, respectively, an increase for 2016 of $193,691,$1,508,616, or 3.0%16.3%, when compared to the prior year. The current yearly includes an expense inincrease was mainly from the amountfull year impact of $239,850 for the issuanceaddition of stock options (refer to Note 9D to the Consolidated Financial Statements) and $157,540 of expenses associated with the acquisition of Alpha, which wereLiberty business, partially, offset by reductions in selling, general and administrative expenses, mainlyand staff and payroll cost reductions.costs across the rest of the logistics business. As a percentage of revenue, selling, general and administrative expenses were 13.8%15.2% and 14.4%12.4% of revenue for fiscal 20142016 and 2013,2015, respectively, a 0.62.8 percentage point decreaseincrease, which is mainly a function of the increasedecrease in low margin revenue for fiscal 2014 when compared toand the prioraddition of a full year of the Liberty business offset by certain full year impact of cost reduction initiatives successfully implemented in 2015 and expenses which do not rise as revenue increases.2016.

Interest Expense. For fiscal 20142015 and 2013,2014, interest expense from continuing operations was $144,239$505,175 and $121,021,$504,445, respectively, an increase of $23,218. This increase is primarily$730. Increased borrowings to the result of higher interest costs due to increased borrowings underline associated with the Liberty acquisition were mostly offset by improved bank credit facilities during fiscal 2014 versus 2013.facility terms.

Loss FromIncome from Continuing Operations Beforebefore Income Taxes.For the reasons stated above, the Company incurred a lossJanel Group earned income before taxes from continuing operations of ($241,369) and ($314,106)$1,896,250, for fiscal 2016, as compared to $1,855,451 for the fiscal yearsyear ended 2014 and 2013, respectively.2015.

Income Taxes.The company Janel Group recorded a net income tax provision of $22,000$73,840 and $17,000$150,000 for fiscal 20142016 and 2013,2015, respectively. BothFor fiscal years reflect applicableyear 2015, the tax provision reflects only state income taxes only as we have fully provided for a valuation allowance against the corporate deferred tax asset. Of the $150,000 income tax provision for fiscal 2015, $81,000 was due to the reversal of a previous under-accrual to the balance sheet.

Net Income.Janel Group earned net income of $1,822,450 for fiscal year ended 2016 as compared to net income of $1,705,451 for the fiscal year ended 2015.

Manufacturing – For seven months ended September 30, 2016

Revenue.Total revenue from continuing operations for fiscal 2016 was $4,740,671, representing seven months of operations from March 1 through September 30, 2016, the period of Janel ownership. Gross profit in fiscal 2016 was $2,648,645.

Cost of Sales - Manufacturing.Cost of sales for manufacturing for fiscal 2016 was $2,092,026, representing seven months of operations from March 1 through September 30, 2016, the period of Janel ownership.

Selling, General and Administrative Expense. For the period March 1 through September 30, 2016, selling, general and administrative expense for the Manufacturing segment was $1,432,788.

Interest Expense. For the seven month period of operations from March 1 through September 30, 2016, interest expense was $169,402 representing servicing of the term loan described in Note 5 to the Consolidated Financial Statements included in this Report.

Income From Operations before Income Taxes. For the reasons stated above, INDCO earned $1,040,622 in income before taxes for the seven-months of fiscal 2016 under Janel ownership.

Income Taxes. INDCO recorded an income tax provision for fiscal year 2016 of $412,500, representing seven months of operations from March 1 through September 30, 2016, the period of Janel ownership.

Net IncomeINDCO earned income of $628,122, representing seven months of operations from March 1 through September 30, 2016, the period of Janel ownership

Janel Corporation - Years ended September 30, 2016 and 2015

Corporate Selling, General and Administrative Expenses. The expenses for 2016 and 2015 include an expense in the amount of $119,639 and $82,225, respectively, for the issuance of stock options (refer to Note 8C of the Consolidated Financial Statements) and $206,267 and $63,080 of acquisition related expenses in 2016 and 2015, respectively. Also included in 2016 are increased expenses associated with the expansion of the Board of Directors, corporate management team and non-segment specific resources. Corporate selling, general and administrative expenses were $975,709 and $516,151 or 1.3% and 0.7% of total Company revenue respectively for fiscal 2016 and 2015.

Amortization of Intangibles.For 2016 and 2015, corporate amortization expenses associated with intangible assets from acquisitions, were $588,748 and $305,541, respectively. These amounts do not include the amortization associated with the INDCO term loan origination fee. This is an increase of $283,207, or 92.7%, the result of increased amortization expense associated with intangible assets in connection with the Liberty and INDCO acquisitions, as well as other fixed assets obtained and depreciated from the Liberty and INDCO acquisitions (refer to Notes 3 and 4 to the Consolidated Financial Statements).

Loss Fromfrom Discontinued Operations.On August 28, 2013, the Company sold its New Jersey freight forwarding and logistics operations, and in June 2012 discontinued its food segment business. As a result, the New Jersey operations and some ongoing expenses associated with the food segment are included in discontinued operations. Fiscal 20142016 and 20132015 reflect a loss from discontinued operations of ($71,824)202,340) and ($1,827,128)244,039), respectively. Refer to Note 87 to the Consolidated Financial Statements.

Net Loss.IncomeFor. Janel earned income of $3,195,750 as compared to net income of $639,720, for the fiscal 2014years ended 2016 and 2013, the Company incurred a net loss of ($335,193) and ($2,158,234),2015, respectively. Net lossincome available to common shareholders for fiscal 20142016 and 20132015 was ($362,455)$2,800,569 or ($0.01)$4.47 per diluted share and ($2,173,234)$397,845 or ($0.09)$0.67 per diluted share, respectively.

In 2016, a deferred tax asset was established to reflect the Net Operating Loss carryforward, which is expected to be used through ongoing profitability. The amount of net income attributable to this tax asset establishment is $2,595,000.

The remaining increase to net income is primarily due to the addition of the INDCO and Liberty profitability as well as full year realization from 2015 and 2016 cost initiatives as compared to prior year, offset by certain lower-margin customer losses and corporate cost increases associated with the expansion of Janel Corporation as a holding company.

Liquidity and Capital Resources

General.Our The ability of Janel subsidiaries to satisfy our liquidity requirements, which include satisfying ourincluding to satisfy debt obligations and fundingfund working capital, day-to-day operating expenses and capital expenditures, depends upon our future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond ourJanel’s control. We dependSubsidiaries depends on our commercial credit facilities to fund our day-to-day operations as there is a timing difference between ourthe timing of collection cycles and the timing of our payments to vendors. Generally, we doJanel does not have a need formake significant capital expenditure as we are a non-asset based freight forwarder.expenditures.

Janel’s cash flow performance for the 20142016 fiscal year is not necessarily indicative of future cash flow performance.

As of September 30, 2014,2016, and compared with the prior fiscal year, the Company’s cash and cash equivalentsincreased by $39,036,$22,367, or 6.2%2.4%, to $664,620$965,115 from $625,584, respectively.$942,748. During the fiscal year ended September 30, 2014,2016, Janel’s net working capital deficiency (current assets minus current liabilities) decreasedincreased by ($3,189,550)$110,004, from a negative ($183,338)5,012,290) at September 30, 2013,2015, to a negative ($3,372,888)5,122,295) at September 30, 2014.2016. This decreaseincrease is primarily due to ($1,800,000)considered nominal, representing stable collections from customers and payments of additional borrowing on September 10, 2014 under our bank line of credit by leveraging the Alpha balance sheet to acquire Alpha, negative net working capital of ($906,473) within the Alpha subsidiaries resulting from the cash distribution of all book cash on the Alpha balance sheet to the Alpha principals prior to the acquisition, the recording of the current portion of contingent consideration net of imputed interest (the potential first year earn out)vendors in the amount of ($467,068) and the net loss of ($335,193) for the fiscal year ended September 30, 2014; which were offset by the sale on October 30, 2013 of 7,692,308 of the Company’s common stock for $500,000.2016.

Cash flows from continuing operating activities.Net cash used inprovided by continuing operating activities for fiscal 20142016 and 20132015 was ($1,560,733)$1,278,027 and ($283,267)$1,047,122, respectively. The change was driven principally driven by a decrease in the collection of outstanding accounts receivable andoperating income, an increase in payments for prepaid expenses and other sundry assets, which were offset by a decrease in payments of outstanding accounts payable and a reduction in the net loss and changes in non cash related items mainly the issuance of stock options and changes in the allowance for doubtful accounts when compared to the prior year.receivable.

Cash flows from discontinued operating activities. Net cash provided byused in discontinued operating activities was $160,645$202,340 for fiscal 2014 and net2016. Net cash used in discontinued operating activities was $97,818$244,039 for fiscal 2013.2015. The net cash used in 2016 primarily related to legal fees and the settlement of the legal matter.

Cash flows fromused in investing activities. Net cash used for investing activities, mainly the acquisition of Alpha,subsidiaries, was ($4,358,773)$10,874,130 for fiscal 2014. Net cash provided by investing activities, primarily the sale of the assets of our New Jersey operations2016, and marketable securities, was $528,065$2,535,181 for fiscal 2013.year 2015.

Cash flows from financing activities. Net cash provided by financing activities was $5,807,049$9,820,810 for fiscal 20142016 and net cash used in financing activities was ($490,900)$2,010,226 for fiscal 2013.2015. The cash provided by financing activities for fiscal 2014 consisted ofwas primarily from debt issued by First Merchants Bank (“First Merchants”) in conjunction with the INDCO acquisition as well as the sale on September 10, 2014of preferred series C shares, offset by lower average borrowings and September 24, 2014loan servicing of 250,000both the ABL and 25,000, respectively, shares of the Company’s Series C Cumulative Preferred Stock for $2,750,000 (Refer to Note 10B to the Consolidated Financial Statements), the sale on October 30, 2013 of 7,692,308 shares of the Company’s common stock for $500,000 (Refer to Note 9C to the Consolidated Financial Statements) and a net increase of $2,572,049 in borrowings under our bank line of credit. The cash used in financing activities for fiscal 2013 consisted primarily of the repayment of long-term debt of ($305,900) and a net decrease of ($170,000) under our bank line of credit.Term loans.

Global Logistics Services

Presidential Financial Borrowing Facility. On March 27, 2014, the CompanyJanel Corporation and several of its wholly-owned subsidiaries, The Janel Group Of New York, Inc., The Janel Group of Illinois, Inc., The Janel Group of Georgia, Inc., The Janel Group of Los Angeles, Inc., and Janel Ferrara Logistics, LLCsubsidiaries (collectively, the “Janel Borrowers”), entered into a Loan and Security Agreement with Presidential Financial Corporation (“Presidential”) with respect to a three year $3.5 million (limited to the borrowing base and reserves) revolving line of credit facility (the “Presidential Facility”). TheAs currently amended, the Presidential Facility replaced The Janel Group of New York’s previous line of credit agreement with Community National Bank (“CNB”). On September 10, 2014 after completion of the Alpha acquisition,now provides that the Janel Borrowers and Alpha entered into a First Amendment to the Presidential Facility (“Loan Amendment”), with Presidential, which Loan Amendment among other things, (1) added Alpha as co-borrowers, (2) increased the line of credit available to the Janel Borrowers (including Alpha) from $3.5 million to $5.0 million and (3) increased the advance rate from 70% to 85%. On September 25, 2014 there was a Second Amendment and the Presidential Facility was temporarily increased to $5.5 million and on October 9, 2014, subsequent to the period covered by this report, there was a Third Amendment whereby the Presidential Facility was increased to $7.0 million. The Janel Borrowers can now borrow up to $7.0$10.0 million limited to 85% of the Janel Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Loan and Security Agreement. Interest will accrue at an annual rate equal to five percent above the greater of (a) the prime rate of interest quoted in The Wall Street Journal from time to time, or (b) 3.25%. The Janel Borrowers’ obligations under the Presidential facility are secured by all of the assets of the Janel Borrowers. The agreement requires, among other things, that the Company, on a monthly basis, maintain a “minimum fixed charge covenant ratio” and “tangible net worth,” both as defined. The Presidential Facility will expire on March 26, 201727, 2018 (subject to earlier termination as provided in the Loan and Security Agreement) unless renewed. On March 31, 2014, $1,282,673 of the Presidential Facility was used to pay off the outstanding balances under the line of credit facility with CNB. On September 10, 2014, $1,800,000 of the Presidential Facility was used to acquire Alpha. As of September 30, 2014,2016, there were outstanding borrowings of $4,003,385$6,498,403 under the Presidential Facility (which represented 72.8%65.0% of the amount available thereunder) out of a total amount available for borrowing under the Presidential Facility of approximately $5,500,000.$10,000,000.

Working Capital Requirements.The Company’sJanel Group’s cash needs are currently met by the Presidential Facility and cash on hand. As of September 30, 2014,2016, the Company had $1,496,615subject to collateral availability $3,501,597 available under its $5.5$10.0 million Presidential Facility and $664,620$717,339 in cash from operations and cash on hand. On October 9, 2014, subsequent to the period covered by this report, the Presidential Facility was increased to $7.0 million. On September 10, 2014 the Company sold 250,000 shares of the Company’s Series C Cumulative Preferred Stock for $2,500,000 (Refer to Note 9B to the Consolidated Financial Statements) and used the proceeds to acquire Alpha. On September 24, 2014 the Company sold 25,000 shares of the Company’s Series C Cumulative Preferred Stock for $250,000 (Refer to Note 9B to the Consolidated Financial Statements) and used the proceeds for general working capital purposes. On October 30, 2013, the Company raised $500,000 (Refer to Note 9C to the Consolidated Financial Statements) from the sale of newly issued shares of the Company’s Common Stock at a price of $0.065 per share and used the proceeds for general working capital purposes.cash. The Company also issued five-year warrants tobelieves that the investor for up to an additional $1,000,000 investment upon exercise for additional newly issued shares of the Company’s common stock at a price of $0.08. We believe that our current financial resources will be sufficient to finance ourJanel Group operations and obligations (current and long-term liabilities) for the long and short terms. However, ourJanel Group’s actual working capital needs for the long and short terms will depend upon numerous factors, including our operating results, the cost associated with growing the CompanyJanel Group, either internally or through acquisition, competition, and the availability under ourthe revolving credit facility, none of which can be predicted with certainty. If our cash flow and available credit are not sufficient to fund our working capital, the Company’sJanel Group’s operations will be materially negatively impacted.

Manufacturing

First Merchants Bank.On March 21, 2016, INDCO executed a Credit Agreement with First Merchants with respect to a $6 million Term Loan and $1.5 million (limited to the borrowing base and reserves) Revolving Loan. Interest will accrue on the Term Loan at an annual rate equal to the one month LIBOR plus either 3.75% (if INDCO’s cash flow leverage ratio is less than or equal to 2:1) or 4.75% (if INDCO’s cash flow leverage ratio is greater than 2:1). Interest will accrue on the Revolving Loan at an annual rate equal to the one month LIBOR plus 2.75%. INDCO’s obligations under the First Merchants credit facilities are secured by all of INDCO’s assets, and are guaranteed by the Company. The First Merchants credit facilities will expire on the fifth anniversary of the loans (subject to earlier termination as provided in the Credit Agreement) unless renewed.

Working Capital Requirements.INDCO’s cash needs are currently met by the First Merchant’s Bank term loan and revolving credit facility and cash on hand. As of September 30, 2016, INDCO had $1.5 million, available under its $1.5 million revolving facility subject to collateral availability and $247,776 in cash. The Company believes that the current financial resources will be sufficient to finance INDCO operations and obligations (current and long-term liabilities) for the long and short terms. However, actual working capital needs for the long and short terms will depend upon numerous factors, including operating results, the cost associated with growing INDCO either internally or through acquisition, competition, and the availability under the revolving credit facility, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, INDCO’s operations will be materially negatively impacted.

Current Outlook

OurThe results of operations in both the global logistics services and manufacturing segments are affected by the general economic cycle, particularly as it influences global trade levels and specifically the import and export activities of Janel’sour Janel Group business’s various current and prospective customers. Historically, the Company’s quarterly results of operations have been subject to seasonal trends which have been the result of, or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions, the growth and diversification of itsJanel Group’s international network and service offerings, and other similar and subtle forces. WeThe Company cannot accurately forecast many of these factors, nor can weit estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.

Janel is progressing with the implementation of itsThe Company’s subsidiaries are implementing business plan and strategystrategies to grow its revenue and profitability for fiscal 20152017 and beyond through several avenues. The Company’sbeyond. Janel Group’s strategy calls for further growth includes plans to: open, as warranted, additional branch offices, domestically and/or outside the continental United States; introduce additionalintroduction of new revenue streams for its existing headquarters and branch locations; expand its existinglocations, sales force by hiringexpansion, additional commission-only sales representatives with established customer bases; increase itsacquisitions, and a continued focus on growing revenue relatedimplementing lean methodologies to export activities; evaluate direct entry intocontain operating expenses. INDCO’s strategy calls for introduction of new product lines and wider distribution and promotion of its print and web-based catalog.

In addition to supporting its subsidiaries’ growth plans, the trucking and warehouse distributionCompany may seek to grow Janel by entering new business as a complement to the services already provided to existing customers; seek out and pursue privately held transportation-related firms which may ultimately lead to their acquisition by the Company; and continue its focus on containing current and prospective overhead and operating expenses, particularly with regard to the efficient integration of any additional offices or acquisitions.segments through acquisition.

Certain elements of our profitability and growth strategy, principally proposals for acquisition and accelerating our revenue growth, are contingent upon the availability of adequate financing on terms acceptable to the Company.  On October 30, 2013, the Company raised $500,000 (Refer to Note 9C to the Consolidated Financial Statements) from the sale of newly issued shares of the Company’s Common Stock at a price of $0.065 per share and used the proceeds for general working capital purposes. The Company also issued five-year warrants to the investor for up to an additional $1,000,000 investment upon exercise for additional newly issued shares of the company’s common stock at a price of $0.08. On September 10, 2014 the Company sold 250,000 shares of the Company’s Series C Cumulative Preferred Stock for $2,500,000 (Refer to Note 9B to the Consolidated Financial Statements) and used the proceeds to acquire Alpha. On September 24, 2014 the Company sold 25,000 shares of the Company’s Series C Cumulative Preferred Stock for $250,000 (Refer to Note 9B to the Consolidated Financial Statements) and used the proceeds for general working capital purposes.  Without adequate equity and/or debt financing, the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated timing, and the Company’s operations will be materially negatively impacted.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such difference may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to revenue recognition, the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily allowance for doubtful accounts, accruals for transportation and other direct costs, accruals for cargo insurance, and deferred income taxes. Management bases its estimates on historical experience and on various assumptions which are believed to be reasonable under the circumstances. We reevaluate these significant factors as facts and circumstances change. Historically, actual results have not differed significantly from our estimates. These accounting policies are more fully described in Note 1 of the Notes to the Consolidated Financial Statements.

Management believes that the nature of the Company’s business is such that there are few, if any, complex challenges in accounting for operations. Revenue recognition is considered the critical accounting policy due to the complexity of arranging and managing global logistics and supply-chain management transactions.

Revenue Recognition

A. Full-Service Cargo TransportationGlobal Logistics ManagementServices

Revenues are derived from airfreight, ocean freight and custom brokerage services. The CompanyCompany’s Janel Group business is a non-asset-based carrier and accordingly does not own transportation assets. The CompanyJanel Group generates the major portion of its air and ocean freight revenues by purchasing transportation services from direct carriers (airlines, steam ship lines, etc.) and reselling those services to its customers. By consolidating shipments from multiple customers and availing itself of its buying power, the CompanyJanel Group is able to negotiate favorable rates from the direct carriers, while offering to its customers lower rates than the customers could obtain themselves.

Airfreight revenues include the charges for carrying the shipments when the CompanyJanel Group acts as a freight consolidator. Ocean freight revenues include the charges for carrying the shipments when the CompanyJanel Group acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case, the CompanyJanel Group is acting as an indirect carrier. When acting as an indirect carrier, the CompanyJanel Group will issue a House Airway Bill (HAWB) or a House Ocean Bill of Lading (HOBL) to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, the CompanyJanel Group receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. At this point the risk of loss passes to the carrier, however, in order to claim for any such loss, the customer is first obligated to pay the freight charges.

Based upon the terms in the contract of carriage, revenues related to shipments where the CompanyJanel Group issues a HAWB or a HOBL are recognized at the time the freight is tendered to the direct carrier. Costs related to the shipments are recognized at the same time.

Revenues realized when the CompanyJanel Group acts as an agent for the shipper and does not issue a HAWB or a HOBL include only the commission and fees earned for the services performed. These revenues are recognized upon completion of the services.

Customs brokerage and other services involves provide multiple services at destination including clearing shipments through customs by preparing required documentation, calculating and providing for payment of duties and other charges on behalf of the customers, arranging for any required inspections, and arranging for final delivery. These revenues are recognized upon completion of the services. Effective with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, the Company changed its accounting principle and no longer includes customs duty as a component of revenue.

The movement of freight may require multiple services. In most instances the CompanyJanel Group may perform multiple services including destination break bulk and value added services such as local transportation, distribution services and logistics management. Each of these services has separate fee that is recognized as revenue upon completion of the service.

Customers will frequently request an all-inclusive rate for a set of services that is known in the industry as “door-to-door services.” In these cases, the customer is billed a single rate for all services from pickup at origin to delivery. The allocation of revenue and expense among the components of services when provided under an all inclusiveall-inclusive rate are done in an objective manner on a fair value basis in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables.”

Manufacturing

Revenues are derived from the engineering, manufacture, and delivery of specialty mixing equipment. Payments are made by either credit card acceptance or invoice billing by the company. A significant portion of sales comes from its web-based catalog. Such online sales are generally credit card purchases. Revenue is recognized when products are delivered and risk of loss transfers to the carrier(s) used.

Estimates

While judgments and estimates are a necessary component of any system of accounting, the Company’s use of estimates is limited primarily to the following areas that in the aggregate are not a major component of the Company’s consolidated statements of comprehensive loss:operations:

Management believes that the methods utilized in all of these areas are non-aggressive in approach and consistent in application. Management believes that there are limited, if any, alternative accounting principles or methods which could be applied to the Company’s transactions. While the use of estimates means that actual future results may be different from those contemplated by the estimates, the Company believes that alternative principles and methods used for making such estimates would not produce materially different results than those reported.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

The financial statements and supplementary data required by this Item 8 are included in ourthe Company’s Consolidated Financial Statements and set forth in the pages indicated in Item 15(a) of this Annual Report.

None.

Evaluation of Disclosure Controls and Procedures

We maintainJanel maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed by us in the reports that we fileit files or submitsubmits under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to management in a timely manner. OurThe Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer have evaluated this system of disclosure controls and procedures as of the end of the period covered by this annual report, and have concluded that the system is effective.

Management’s Annual Report on Internal Control over Financial Reporting

OurCompany management, including ourthe Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internalInternal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. 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 policies or procedures may deteriorate.

OurThe Chief Executive Officer, Chief Operating Officer and Chief Financial Officer conducted an evaluation of the effectiveness of ourthe Company’s internal control over financial reporting based on the framework inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2014.2016.

This annual report does not include an attestation report of ourthe Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Changes in Internal Control Over Financial Reporting

There have been no changes in ourthe Company’s internal control over financial reporting during the fourth quarter of fiscal 20142016 that have materially affected, or are reasonably likely to materially affect, ourits internal control over financial reporting.

None.

PART III

Directors and Executive Officers

The executive officers and directors of the RegistrantCompany are as follows:

WilliamBrendan J. LallyKillackey was elected to the Board in September 2014 and appointed CEO in February 2015. Mr. Killackey previously owned Progressive Technology Partners, LLC, a technology consultancy, which he founded in 2001. Given Janel’s and its subsidiaries’ reliance on technology, Mr. Killackey’s background and experience are valuable to the Company, and, therefore, he is well-qualified to serve as a member of the Company’s Board.

Brian Aronson has served as Chief Financial Officer since September 2015. Since February 2011, Mr. Aronson has been Principal of Brian Aronson, LLC, a financial advisory and consulting firm specializing in change management and continuous improvement. From 2006 until 2011, Mr. Aronson was a Director of Capstone Advisory Group. Mr. Aronson’s experience spans 24 years in various financial and operational management functions. Mr. Aronson has advised the President and Chief Executive OfficerCompany since March 2015.

Dominique Schulte has served as a Director of Janel since August 15, 2013. PriorNovember 2015. From 1999 through 2009, Ms. Schulte practiced law at Simpson Thacher & Bartlett LLP in New York, where she specialized in corporate and securities law. Ms. Schulte is the managing member of Oaxaca Group, LLC (“Oaxaca”). Pursuant to that, Mr. Lallythe terms of the Securities Purchase Agreement dated October 6, 2013, entered into between the Company and Oaxaca (the “Securities Purchase Agreement”), the Company agreed to appoint up to two candidates nominated by Oaxaca to become members of the Company’s Board of Directors. Ms. Schulte was appointed to the President and Chief Operating OfficerBoard in accordance with the terms of the Securities Purchase Agreement. Ms. Schulte is well-qualified to serve as a member of the Company’s Board based on her extensive experience.

Gerard van Kesteren has served as a Director of Janel since May 2009.November 2015. From 1999 until 2014, Mr. Lally’s principal function isvan Kesteren served as the overseeingChief Financial Officer of allKuehne + Nagel Group, an international freight forwarder and leading global provider of the Company’s operations,innovative and sales and marketing efforts.fully integrated supply chain solutions. Mr. Lally has been employed by Janel since 1975, first in New York and later in Chicago, Illinois. Since 1979, Mr. Lallyvan Kesteren has served as the President of the Janel Group of Illinois, Inc. Mr. Lally became a director of the Company in July 2002.

Gategroup Holding AG since April 2015. Mr. Lallyvan Kesteren is well qualifiedwell-qualified to serve as a member of the Company’s Board based on his extensive experience in the freight forwarding business and his management positions within the Company since 1975.logistics industry.

Vincent IacopellaJohn J. Gonzalez, II has been the Vice President and Chief Operating Officerserved as a Director of Janel since August 15, 2013.June 2016. Prior to that, Mr. Iacopellahe was the Vice President of Janel and thea Senior Managing Director of The Janel Group, following the August 2014 purchase by the Company of Los Angeles since 2004. Mr. Iacopella is principally engaged in sales and marketing and also manages the Company’s Los Angeles office. Prior to joining Janel, Mr. Iacopella was the Managing DirectorAlpha International and President ofContainer Lines (“Alpha/PCL”), which he co-founded in 1979. Mr. Gonzalez has been involved in the California subsidiary of Delmar Logistics, Inc.transportation business since 1969. Mr. IacopellaGonzalez is a member of the board of directors of Los Angeles Customs Brokers Freight Forwarders Association, and is the Secretary of The Pacific Coast Council of Customs Brokers and Freight Forwarders Associations, Inc. Mr. Iacopella attended New York University, and is a licensed customs broker.

Mr. Iacopella was a member of the Board of Directors of the Company from 2004 until he resigned in April 2013 of this year to focus his full attention on his operational responsibilities for the Company as Managing Director of The Janel Group of Los Angeles. On December 15, 2013, Mr. Iacopella agreed to return to the Board.

Mr. Iacopella is well qualifiedwell-qualified to serve as a member of the Company’s Board based on his extensive experience in the freight forwarding business and leadership positions within thelogistics industry.

Brendan Killackey was elected to the Board in September 2014. Since 2001, Mr. Killackey has been the owner of Progressive Technology Partners, LLC, a technology consultancy based in New York City specializing in website services.

Janel’s increasing reliance on technology within the logistics industry and interface with clients makes Mr. Killackey’s background and experience very valuable to the Company, and therefore he is well qualified to serve as a member of the Company’s Board.

Noel J. Jannello has been employed by Janel since 1995, and has been a Vice President and operations executive since 2003. His principal function is the overseeing of the Company’s import operations. Mr. Jannello is a graduate of Bradley University (B.A., Advertising & Marketing, 1993).

Directors hold office until the next annual meeting of shareholders and thereafter until their successors have been duly elected and qualified. The executive officers are elected by the Board of Directors on an annual basis and serve under the direction of the board.Board. Executive officers devote all of their business time to the Company’s affairs.

Board of Directors

Board of Directors. During the fiscal year ended September 30, 2014,2016, the Board of Directors met threeten times. No incumbent director attended fewer than 75% of the total number of meetings of the Board of Directors of the Company held during the year.

Director Independence. We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.” Our Board of Directors has considered the independence of its directors in reference to the definition of “independent director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board of Directors has reviewed all commercial and other relationships of each director in making its determination as to the independence of its directors. After such review, the Board of Directors has determined that Brendan Killackey qualifies as independent under the requirements of the Nasdaq listing standards.

Committees. Our Board of Directors has not established any committees. There is no Audit Committee, Compensation Committee, or Nominating Committee, or any committee performing similar functions, and no charters have been adopted with respect to these functions. The functions which would have been assigned to those committees are undertaken by the entire board as a whole.

Audit Function. In its audit function, the Board oversees the Company’s accounting, financial reporting and internal control functions and the audit of the Company’s financial statements. The audit responsibilities include, among others, direct responsibility for hiring, firing, overseeing the work of and determining the compensation for the Company’s independent auditors. The Board does not include an “audit committee financial expert” (as defined in applicable Securities and Exchange Commission (SEC) rules), because the Board believes that the benefits provided by the addition to the Board of an individual who meets the SEC criteria at this time do not justify the cost of retaining such an individual.

Nominating Function.The Company’s full Board of Directors acts as a nominating committee for the annual selection of its nominees for election as directors. The Board of Directors held one meeting during the past fiscal year in order to make nominations for directors. The Board believes that the interests of the Company’s stockholders are served by relegating the nominations process to the full Board. While the Board of Directors will consider nominees recommended by stockholders, it has not actively solicited recommendations from the Company’s stockholders for nominees, nor established any procedures for this purpose. In considering prospective nominees, the Board of Directors will consider the prospect’s relevant financial and business experience, familiarity with and participation in the Company’s industry and market area, the integrity and dedication of the prospect and other factors the Board deems relevant. The Board of Directors will apply the same criteria to nominees recommended by stockholders as those recommended by the full Board.

Compensation Function. The Company’s full Board of Directors acts as a compensation committee for the Company. The Board believes that, due to the size of the Company and its management team, the interests of the Company’s stockholders are served by relegating the compensation process to the full Board.

The primary objective of our compensation and benefits program is to attract, motivate and retain our quality executive talent, and support our business goals within the limits arising out of the Company’s revenue and profitability. Our executive compensation structure is comprised of and limited to a small group of only five executives,individuals, and the amount of their compensation is principally based on the available funds and the achievement of our goals for growth and profitability.

Our compensation approach is necessarily tied to our stage of development as a company. Historically, our Company is one of the smaller freight logistics businesses whose securities are traded in the public market, with the result that our compensation program is limited to cash compensation depending upon the funds available, and is lower than the level of compensation of the public companies in our business group. Our Board of Directors reviews and approves executive compensation, bonus, and benefits policies on a case-by-case basis, often based on the recommendation of our Chief Executive Officer’s subjective assessment of the funding reasonably available for executive compensation.

Director Compensation

Our directorsDuring the Company’s fiscal year ended September 30, 2016, neither Mr. Killackey, the Company’s President and Chief Executive Officer, nor Mr. Gonzalez, the Vice President of Mergers and Acquisitions at Janel Group, received additional compensation for serving as a director. All Board members are reimbursed for their reasonable expenses as members of the Board of Directors, but they doDirectors. The following table summarizes the compensation paid to outside directors for their services during the Company’s fiscal year ended September 30, 2016: