1.	BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying interim unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of Article 8 of Regulation S-X and the instructions to Form 10-Q of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Janel Corporation (the “Company” or “Janel”) believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full fiscal year, or any other period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Form 10-K as filed with the Securities and Exchange Commission.

~~Business description~~

~~Janel is a holding company with subsidiaries in three business segments: Global Logistics Services, Manufacturing and Life Sciences.~~ A management group at the holding company level focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.

~~Global Logistics Services~~

The Company’s Global Logistics Services segment is comprised of several wholly-owned subsidiaries, collectively known as “Janel Group.” Janel Group is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air-, ocean- and land-based carriers, customs brokerage services, warehousing and distribution services, and other value-added logistics services.

~~On December 31, 2020, we~~ ~~completed a business combination whereby we acquired substantially all of the assets and certain liabilities of a global logistics services provider with two U.S. locations~~. ~~See~~ ~~note 2.~~

~~On July 23, 2020, we completed a business combination whereby we acquired substantially all of the outstanding common stock of a global logistics services provider with two U.S. locations. See~~ ~~note 2.~~

~~Manufacturing~~

The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.

~~Life Sciences~~

The Company’s Life Sciences segment, which is comprised of several wholly-owned subsidiaries, manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences business also produces products for other life science companies on an original equipment manufacturer (“OEM”) basis.

~~Table of Contents~~

On December 4, 2020, the Company, through its wholly owned subsidiary Aves Labs, Inc. (“Aves”), acquired all of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”). See note 2.

~~Basis of consolidation~~

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as Indco, of which Janel owns 90.68%, with a non-controlling interest held by existing Indco management. The Indco non-controlling interest is mandatorily redeemable and is recorded as a liability. All intercompany transactions and balances have been eliminated in consolidation.

~~Uses of estimates in the preparation of financial statements~~

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The most critical estimates made by the Company are those relating to accounts receivables valuation, the useful lives of long-term assets, accrual of cost related to ancillary services the Company provides, accrual of tax expense on an interim basis and potential impairment of goodwill and intangible assets with indefinite lives and long-lived assets impairment.

~~Cash~~

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250. The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.

~~Accounts receivable and allowance for doubtful accounts receivable~~

Accounts receivable are recorded at the contractual amount. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical collection experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions, and other factors that may affect the customers’ ability to pay. The Company writes off accounts receivable balances that have aged significantly once all collection efforts have been exhausted and the receivables are no longer deemed collectible from the customer. The allowance for doubtful accounts as of March 31, 2021 and September 30, 2020 was $415 and $496, respectively.

~~Inventory~~

Inventory is valued at the lower of cost (using the first-in, first-out method) or net realizable value. The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration for its Life Sciences business. The products of the Life Sciences business require the initial manufacture of multiple batches to determine if quality standards can consistently be met. In addition, the Company will produce larger batches of established products than current sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to produce quantities in excess of forecasted usage. The Company values acquired manufactured antibody inventory based on a three-year forecast. Inventory quantities in excess of the forecast are not valued due to uncertainty over salability.

~~Property and equipment and depreciation~~

Property and equipment are recorded at cost. Property and equipment acquired in business combinations are initially recorded at fair value. Depreciation is provided for in amounts sufficient to amortize the costs of the related assets over their estimated useful lives on the straight-line and accelerated methods for both financial reporting and income tax purposes.

~~Maintenance and repairs are recorded as expenses when incurred.~~

~~Table of Contents~~

~~Goodwill~~

The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired in a business combination. Under current authoritative guidance, goodwill is not amortized but is tested for impairment annually (on September 30) as well as when an event or change in circumstance indicates impairment may have occurred. Goodwill is tested for impairment by comparing the fair value of the Company’s individual reporting units to their carrying amount to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than the carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value. The fair value of our reporting units was in excess of carrying value and goodwill was not deemed to be impaired as of September 30, 2020. ~~There were no indicators of impairment of goodwill as of March 31, 2021.~~

If there is a material change in economic conditions, or other circumstances influencing the estimate of future cash flows or significantly affecting the fair value of our reporting units, the Company could be required to recognize impairment charges in the future.

~~Intangibles and long-lived assets~~

Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.

~~If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value.~~

The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management. If there is a material change in economic conditions, or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.

During the fourth quarter ended September 30, 2020, we considered the COVID-19 pandemic as a triggering event in the assessment of recoverability of the indefinite-lived intangibles, and long-lived assets. We performed an impairment test as of September 30, 2020 and concluded that the fair value of intangibles and long-lived assets was not deemed to be impaired as of September 30, 2020.

~~There were no indicators of impairment of long-lived assets as of March 31, 2021.~~

~~Business segment information~~

The Company operates in three reportable segments: Global Logistics Services, Manufacturing and Life Sciences. The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance.

~~Revenues~~Revenue and revenue recognition

~~The Company recognizes revenues in accordance with ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(“ASC Topic 606”).~~Logistics

~~Global Logistics Services~~

~~Revenue Recognition~~

Revenue is recognized upon transfer of control of promised services to customers. With respect to its ~~Global~~ Logistics ~~Services~~ segment, the Company has determined that, in general, each shipment transaction or service order constitutes a separate contract with the customer. When the Company provides multiple services to a customer, different contracts may be present for different services.

~~Table of Contents~~

The Company typically satisfies its performance obligations as services are rendered at a point in time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed at a point in time during the life of a shipment, including services at origin, freight and destination. The Company fulfills nearly all of its performance obligations within a one- to two-month period.

The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally, revenue is recorded on a gross basis when the Company is acting as principal and is primarily responsible for fulfilling the promise to provide the services, when it has discretion in setting the prices for the services to the customers, and the Company has the ability to direct the use of the services provided by the third party. Revenue is recognized on a net basis when the Company is acting as agent and we do not have latitude in carrier selection or in establishing rates with the carrier.

In the ~~Global~~ Logistics ~~Services~~ segment, the Company disaggregates its revenues by its ~~four~~5 primary service categories: ocean freight, air freight, ~~custom~~trucking, customs brokerage, and ~~trucking and~~ other. A summary of the Company’s revenues disaggregated by major service lines for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 was as follows:

	Three Months Ended March 31,		Three Months Ended March 31,		Six Months Ended March 31,		Six Months Ended March 31,		Three Months Ended December 31,		Three Months Ended December 31,
Service Type	2021		2020		2021		2020		2021		2020
Ocean freight	$	11,435	$	5,880	$	20,474	$	11,737	$	32,876	$	9,039
Trucking and other		4,747		2,653		9,111		6,462
Trucking										21,775		4,352
Air freight										13,874		6,202
Other										5,330		12
Customs brokerage		3,320		3,111		5,975		5,305		3,701		2,655
Air freight		4,871		3,684		11,073		7,903
Total	$	24,373	$	15,328	$	46,633	$	31,407	$	77,556	$	22,260

~~Manufacturing~~

~~Revenues from Indco are derived from the engineering, manufacture and delivery~~

Table of specialty mixing equipment and accessories. Indco receives customer product orders via telephone, email, internet or fax. The pricing of each standard product sold is listed in Indco’s print and web-based catalog. Customer specific products are priced by quote. A sales order acknowledgement is sent to every customer for every order to confirm pricing and the specifications of the products ordered. The revenue is recognized at a point in time when the product is shipped to the customer.Contents

Life Sciences

Revenues from the Life Sciences segment are derived from the sale of high-quality monoclonal and polyclonal antibodies, diagnostic reagents and diagnostic kits and other immunoreagents for biomedical research and antibody manufacturing. Revenues are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.

~~Income (loss) per common share~~

Basic net income (loss) per common share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding, excluding unvested restricted stock, during the period. Diluted net income (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options or warrants or the vesting of restricted stock units. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Potentially dilutive shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive.

~~Table of Contents~~

~~Stock-based compensation to employees~~

~~Equity classified share-based awards~~Manufacturing

The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation-Stock Compensation.” For employee stock-based awards, we calculate the fair valueCompany’s Manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the ~~award on~~Company. Revenues from Indco are derived from the ~~date~~engineering, manufacture and delivery of ~~grant using the Black-Scholes method for stock options~~specialty mixing equipment and ~~the quoted price of our common stock for restricted shares; the expense is recognized over the service period for awards expected to vest.~~

~~Stock-based compensation to non-employees~~

~~Liability classified share-based awards~~

The Company maintains other share unit compensation grants for shares of Indco, which vest over a period of up to three years following their grant. The shares contain certain put features where the Company is either required or expects to settle vested awards on a cash basis.

These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in note 11. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vestingaccessories. Revenues are recognized ~~through compensation expense. Compensation expense reflects estimates~~when products are shipped and risk of the number of instruments expected to vest. The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustmentloss is transferred to the settlement liability. Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in non-current liabilities.carrier(s) used.

~~Non-employee share-based awards~~

Nonemployee share-based transactions are measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions.

~~Mandatorily Redeemable Non-Controlling Interests~~

The non-controlling interests that are reflected as mandatorily redeemable non-controlling interests in the consolidated financial statements consist of non-controlling interests related to the Indco acquisition whose owners have certain redemption rights that allow them to require the Company to purchase the non-controlling interests of those owners upon certain events outside the control of the Company, including upon the death of the holder. The Company is required to purchase 20% per year of the mandatorily redeemable non-controlling interest at the option of the holder beginning on the third anniversary of the date of the Indco acquisition, which was March 21, 2019. ~~As of March 31, 2021 and September 30, 2020, the holder had not exercised the redemption rights.~~

~~On November 30, 2020, a minority owner of Indco exercised 7,000 options to purchase~~ Indco’s common stock at an exercise price of $6.48 for an aggregate purchase price of $45. Indco issued a related party promissory note in the amount of $45, which bears interest at 1% per annum; both interest and principal are payable on the maturity date of December 31, 2023. This note is included in security deposits and other long-term assets. The fair value of the 7,000 shares of Indco’s common stock was recorded as an increase in mandatorily redeemable non-controlling interest. As a result of the exercise of 7,000 options to purchase Indco’s stock, the mandatorily redeemable non-controlling interest percentage was 9.32% as of March 31, 2021.

On the date the Company acquires the controlling interest in a business combination, the fair value of the non-controlling interest is recorded in the long-term liabilities section of the consolidated balance sheet under the caption “~~Mandatorily redeemable non-controlling interest~~.” The mandatorily redeemable non-controlling interest is adjusted each reporting period, if required, to its then current redemption value, based on the predetermined formula defined in the respective agreement.

~~Table of Contents~~

The Company reflects any adjustment in the redemption value and any earnings attributable to the mandatorily redeemable non-controlling interest in its consolidated statements of operations by recording the adjustments and earnings to other income and expense in the caption “~~change in fair value of mandatorily redeemable non-controlling interest~~.”

~~Income taxes~~

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those 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 the results of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. The benefit of tax positions taken or expected to be taken in the Company’s income tax returns are recognized in the consolidated financial statements if such positions are more likely than not of being sustained.

~~Recently issued accounting pronouncements not yet adopted~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment~~, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This standard will be effective for us in the first quarter of fiscal year 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and related disclosures.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326)~~, which replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for us in the first quarter of fiscal 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and related disclosures.

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~, as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. This standard removes certain exceptions related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the effects that the adoption of this guidance will have its consolidated financial statements.

~~Table of Contents~~

2.	~~ACQUISITIONS~~ACQUISITION

Fiscal 2021 ~~Acquisitions~~Acquisition

~~Life Sciences~~

Logistics

On ~~December 4, 2020, through Aves,~~September 21, 2021, the Company completed ~~a business combination whereby we acquired~~the acquisition of all of the membership interests of ~~ImmunoChemistry Technologies,~~Expedited Logistics and Freight Services, LLC ~~for an aggregate~~(“ELFS”) and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS. The purchase price for the membership interests was $19,000, subject to certain closing adjustments as set forth in the related purchase agreement. Further earnout payments in an amount not anticipated to exceed $4,500 will be due to the former members of ~~$3,419, net~~ELFS based on the operating profit earned by ELFS. Upon the closing of ~~$105 cash received. At closing, $1,628 was~~the transaction, the former members of ELFS were paid $13,000 in cash and ~~a promissory note in the~~were issued an aggregate amount of ~~$1,850 was issued to the former owner.~~ $6,000 in subordinated promissory notes.

The Company recorded the present value of $1,760 for the promissory note. The Company recorded an aggregate of $1,438 in goodwill and $1,430 in other identifiable intangibles. Subsequent to closing, the Company recorded an additional $30 purchase price adjustment related to an I.R.S Code Section 338(h)(10) election that was made in connection with the ICT acquisition. The ICT acquisition will be treated as an asset purchase for income tax purposes, which will allow for the tax deduction of ICT’s goodwill. The Company is still finalizing the valuation of assets acquired and liabilities assumed, and, as such, the fair value amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are not limited to, intangible assets, fair value of accounts receivable and the goodwill balance. ThisELFS acquisition was funded with cash provided by normal operations, ~~along~~borrowings under the Amended Loan and Security Agreement (the “Santander Loan Agreement”) with ~~a note~~Santander Bank, N.A. (“Santander”) dated September 21, 2021, as well as subordinated promissory notes issued to the former ~~owner. The results~~members of operations of the acquired businesses are included in Janel’s consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. ICT is a developer and manufacturer of cell viability assay kits, ELISA buffers and fluorescent reagents for use in research and diagnostics. ICT was founded in 1994 and is headquartered in Bloomington, Minnesota. The acquisition of ICT was completed to expand our product offerings in our Life Sciences segment.

~~Purchase price allocation~~

In accordance with the acquisition method of accounting, the Company allocated the consideration paid for ICT to the net tangible and identifiable intangible assets based on their estimated fair values. The Company’s preliminary valuation of assets acquired and liabilities assumed, and the fair value amounts noted, are reflected in the table below. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets (in thousands).

Fair Value

Accounts receivable
$
177

Inventory
226

Prepaids and other current assets
3

Property & equipment, net
64

Intangibles - customer relationships
1,360

Intangibles - trademark
70

Goodwill
1,438

Accounts payable & accrued expenses
(24
)
Purchase price, net of cash received
$
3,314

~~Global Logistics Services~~

On December 31, 2020, through Janel Group, the Company completed a business combination whereby we acquired substantially all of the assets and certain liabilities of a global logistics services provider with two U.S. locations. The aggregate purchase price for this acquisition was $1,282. ~~At closing, $1,182 was paid in cash and $100 was placed in escrow for a period of twelve months for the purpose of securing the indemnification obligations of former stockholders.~~ The Company recorded an aggregate of $304 in goodwill and $531 in other identifiable intangibles. The Company is still finalizing the valuation of assets acquired and liabilities assumed, and, as such, the fair value amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are not limited to, intangible assets, fair value of accounts receivable or a change in the goodwill balance. This acquisition was funded with cash provided by normal operations, funds availble under the Santander Credit Facility along with a note to the former owner. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. ELFS. This acquisition was completed to expand our product offerings in our ~~Global~~ Logistics ~~Services~~ segment.

~~Table of Contents~~

~~Purchase price allocation~~

~~In accordance with~~The following table summarizes, on an unaudited pro forma basis, the acquisition method of accounting, the Company allocated the consideration paid for this acquisition to the net tangible and identifiable intangible assets based on their estimated fair values. The Company’s preliminary valuation of assets acquired and liabilities assumed, and the fair value amounts noted, are reflected in the table below. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets (in thousands).

Fair Value

Accounts receivable
$
573

Property & equipment, net
13

Intangibles – customer relationships
480

Intangibles - trademark
20

Intangibles - other
31

Goodwill
304

Accounts payable & accrued expenses
(139
)
Purchase price
$
1,282

~~Fiscal 2020 Acquisition~~

~~Effective July 23, 2020, through Janel Group, the Company acquired all of the outstanding common stock of~~ ~~Atlantic Customs Brokers, Inc. (“ACB”),~~ a global logistics services provider with two U.S. locations for $132, net of $853 cash received. At closing, the former stockholder was paid $300 in cash and $194, $193 and $193 is due to the stockholder as deferred acquisition payments on the first, second and third anniversary of the closing date, respectively, and the Company assumed $135 in the form of a Paycheck Protection Program (PPP) loan. In February 2021, the Company was informed that the PPP loan had been forgiven by the U.S. Small Business Administration. Consistent with the terms of the stock purchase arrangement, the Company paid the former owner $68 upon forgiveness of the PPP loan. The Company recorded an aggregate of $573 in goodwill and $690 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations along with a deferred acquisition payment due to the former stockholder. Thecondensed combined results of operations of the ~~acquired businesses~~Company for the three months ended December 31, 2020 assuming the acquisition of ELFS was made on October 1, 2020. The pro forma unaudited condensed consolidated results give effect to, among other things, amortization of intangible assets and interest expense on acquisition-related debt. The pro forma results are ~~included in~~not necessarily indicative of the ~~Janel’s consolidated~~operating results that would have occurred had the acquisitions been consummated as of the date indicated, nor are they necessarily indicative of future operating results.

	Three Months Ended December 31, 2020
Revenue	$	44,375
Income from Operations	$	630
Net Income	$	245
Net Income Available to Common Stockholders	$	71
Net income per share:
Basic	$	0.26
Diluted	$	0.25
Net income per share attributable to common stockholders:
Basic	$	0.08
Diluted	$	0.07

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations ~~since the date of the acquisition. Supplemental pro forma information has not been provided as~~that might have occurred had the acquisition ~~did not have a significant impact~~occurred on ~~Janel’s consolidated results~~October 1, 2019, nor are they necessarily indicative of ~~operations individually or in aggregate.~~future results.

Table of Contents

INVENTORY

Inventories consisted of the ~~following:~~following (in thousands):

March 31,
2021

September 30,
2020

Finished Goods
$
1,418
$ 1,246
Work-in-Process
1,043

1,406

Raw Materials
1,259

1,039

Gross Inventory
3,720

3,691

Less - Reserve for Inventory Valuation
(31
)

(25
)
Inventory, Net
$
3,689

$
3,666

	December 31, 2021			September 30, 2021
Finished goods	$	860		$	919
Work-in-process		944			968
Raw materials		1,745			1,365
Gross inventory		3,549			3,252
Less – reserve for inventory valuation		(28	)		(25	)
Inventory net	$	3,521		$	3,227

~~Table of Contents~~

4.	~~PROPERTY AND EQUIPMENT~~

~~A summary of property and equipment and the estimated lives used in the computation of depreciation and amortization is as follows:~~

March 31,
2021

September 30,
2020

Life
Building and Improvements
$
3,120
$ 3,096 15-30 Years
Land and Improvements
1,247

1,235
Indefinite
Furniture & Fixtures
232

282
3-7 Years
Computer Equipment
571

385
3-5 Years
Machinery & Equipment
1,207

1,288
3-15 Years
Leasehold Improvements
105

115
3-5 Years

6,482

6,401

Less: Accumulated Depreciation
(1,517
)

(1,424
)

Property and equipment, net
$
4,965

$
4,977

~~Depreciation expense for the six months ended March 31, 2021 and 2020 was $175 and $92, respectively.~~

5.	INTANGIBLE ASSETS

A summary of intangible assets and the estimated useful lives used in the computation of amortization is as ~~follows:~~follows (in thousands):

March 31,
2021

September 30,
2020

Life
Customer Relationships
$
16,232
$ 14,392 15-24 Years
Trademarks / Names
1,840

1,820
1-20 Years
Trademarks / Names
521

451
Indefinite
Other
1,049

1,018
2-5 Years

19,642

17,681

Less: Accumulated Amortization
(4,892
)

(4,348
)

Intangible assets, net
$
14,750

$
13,333

March 31,
2021

September 30,
2020

Global Logistics Services
$
8,174
$ 7,643
Manufacturing
7,700

7,700

Life Sciences
3,768

2,338

19,642

17,681

Less: Accumulated Amortization
(4,892
)

(4,348
)
Intangible assets, net
$
14,750

$
13,333

	December 31, 2021			September 30, 2021			Life
Customer relationships	$	23,482		$	23,482		12-24 Years
Trademarks/names		4,490			4,490		1-20 Years
Trademarks/names		521			521		Indefinite
Other		1,149			1,149		2-22 Years
		29,642			29,642
Less: Accumulated Amortization		(5,978	)		(5,469	)
Intangible assets, net	$	23,664		$	24,173

The composition of the intangible assets balance at December 31, 2021 and September 30, 2021 is as follows (in thousands):

	December 31, 2021			September 30, 2021
Logistics	$	18,174		$	18,174
Life Sciences		3,768			3,768
Manufacturing		7,700			7,700
		29,642			29,642
Less: Accumulated Amortization		(5,978	)		(5,469	)
Intangible assets, net	$	23,664		$	24,173

Amortization expense for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020 was ~~$544~~$509 and ~~$486,~~$251, respectively.

6.5.

GOODWILL

The Company’s goodwill carrying amounts relate to the acquisitions in the ~~Global~~ Logistics, ~~Services, Manufacturing and~~ Life Sciences and Manufacturing businesses.

Table of Contents

The composition of the goodwill balance at ~~March~~December 31, 2021 and September 30, ~~2020~~2021 was as ~~follows:~~follows (in thousands):

March 31,
2021

September 30,
2020

Global Logistics Services
$
6,532
$ 6,161
Manufacturing
5,046

5,046

Life Sciences
4,377

2,939

$
15,955

$
14,146

	December 31, 2021		September 30, 2021
Logistics	$	9,063	$	9,063
Life Sciences		4,377		4,377
Manufacturing		5,046		5,046
Total	$	18,486	$	18,486

~~Table of Contents~~

7.6.	NOTES PAYABLE – BANKS

(A)	Santander Bank Facility

~~On October 17, 2017,~~

The wholly-owned subsidiaries which comprise the ~~Janel Group subsidiaries~~Company’s Logistics segment (collectively, the “Janel Group Borrowers”), with the Company as a guarantor, ~~entered into~~have a Loan and Security Agreement ~~(the “Santander Loan Agreement”)~~ with Santander ~~Bank, N.A. (“Santander”)~~ with respect to a revolving line of credit facility (the “Santander Facility”). As most recently amended in ~~March 2018, November 2018, March 2020, July 2020 and December 2020,~~September 2021, the Santander Facility ~~currently~~ provides that the Janel Group Borrowers can borrow up to ~~$17,000~~$30,000 limited to 85% of the ~~Janel Group Borrowers’ aggregate outstanding~~borrowers’ eligible accounts receivable, borrowing base and reserves, subject to ~~adjustment as~~adjustments set forth in the Santander Loan Agreement. Interest accrues ~~on the Santander Facility~~ at an annual rate equal to ~~at the Janel Group Borrowers’ option, prime plus 0.50%, or~~ LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis ~~points.~~points at close, with a potential LIBOR floor reduction to 25 basis points upon certain conditions. The Company is provided the option of making Series C preferred payments or distributions if specified conditions are met. The Santander Loan Agreement matures on September 21, 2026. The Janel Group Borrowers’ obligations under the Santander Facility are secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants. ~~The Santander Facility matures on October 17, 2022, unless earlier terminated or renewed.~~ As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance sheet.

At ~~September 30, 2020,~~December 31, 2021, outstanding borrowings under the Santander Facility were ~~$8,447,~~$23,842, representing 79.47% of the $30,000 available subject to limitations thereunder, and interest was accruing at an effective interest rate of ~~2.40%~~3.00%.

At ~~March 31,~~September 30, 2021, outstanding borrowings under the Santander Facility were ~~$11,561,~~$29,637, representing 98.8% of the $30,000 available subject to limitations thereunder, and interest was accruing at an effective interest rate of ~~3.0%~~3.00%.

The ~~Janel Group Borrowers were~~Company was in compliance with the covenants ~~contained~~defined in the Santander Loan Agreement at ~~March~~both December 31, 2021 and September 30, ~~2020.~~2021.

(B)	First Merchants Bank Credit Facility

~~On March 21, 2016, as amended in August 2019 and July 2020,~~

Indco ~~executed~~has a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan and a $680 mortgage loan (together, the “First Merchant Facility”). Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1). Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%. Interest accrues on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants ~~Bank~~ Facility are secured by all of Indco’s real property and other assets, and are guaranteed by Janel. Additionally, Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares.

The term loan and revolving loan portions of the First Merchants Facility will expire on August 30, 2024, and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.

As of ~~September 30, 2020,~~December 31, 2021, there were no0 outstanding borrowings under the revolving loan, ~~$4,349~~$2,519 of borrowings under the term loan, and ~~$676~~$649 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of ~~3.66%~~2.85% and 4.19%, respectively.

As of ~~March 31,~~September 30, 2021, there were no0 outstanding borrowings under the revolving loan, ~~$3,875~~$2,713 of borrowings under the term loan, and ~~$665~~$655 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of ~~3.62%~~2.83% and 4.19%, respectively.

Table of Contents

Indco was in compliance with the covenants ~~contained~~defined in the First Merchants Credit Agreement at both ~~March~~December 31, 2021 and September 30, ~~2020.~~2021.

March 31,
2021

September 30,
2020

Long-Term Debt *
$
4,540

$
5,025

Less Current Portion
(808
)

(808
)

$
3,732

$
4,217

	December 31, 2021			September 30, 2021
	(in thousands)
Total Debt*	$	3,168		$	3,368
Less Current Portion		(809	)		(809	)
Long Term Portion	$	2,359		$	2,559

~~Under the First Merchant Credit Agreement, the term loan~~Note: Term Loan is due in monthly installments of $65 plus monthly interest, at LIBOR plus 2.75% to 3.5% per annum, ~~and the~~ mortgage loan is due in monthly installments of $4, including interest at 4.19%. The ~~First Merchant Facility is~~credit facilities are collateralized by all of Indco’s assets and guaranteed by Janel.

~~Table of Contents~~

(C)	First Northern Bank of Dixon

~~On June 21, 2018, as amended November 2019 and October 2, 2020,~~

Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company (by succession), ~~entered into~~has a ~~Business Loan Agreement~~loan agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First Northern”), with respect to a $2,235 term loan (the “First Northern Term Loan”) which bears interest at an annual rate of ~~4.00%~~Prime plus 325 basis points (currently 4.18%) and matures on November 14, 2029. In addition, Antibodies has a ~~$500~~$750 revolving credit facility with First Northern which currently bears interest at the annual rate of ~~4.0%,~~Prime plus 325 basis points (currently 4.18%) and matures on ~~October~~November 5, ~~2021~~2022 (the “First Northern Revolving Loan”). There were 0 outstanding borrowings on the revolving credit facility as of December 31, 2021 or September 30, 2021.

Antibodies also ~~entered into a two~~has 2 separate business loan agreements with First Northern: a $125 term loan in connection with ~~a potential~~the expansion of solar generation capacity on the Antibodies property (“First Northern Solar Loan”) bearing interest at the annual rate of 4.43% (subject to adjustment in five years) and maturing on November 14, 2029; and a $60 term loan in connection with ~~a potential~~the expansion of generator capacity on the Antibodies property (“Generator Loan”) bearing interest at the annual rate of 4.25% and maturing on November 5, 2025. There were no0 outstanding borrowings under the Generator Loan as ~~March~~of December 31, 2021 or September 30, 2021.

As of ~~September 30, 2020,~~December 31, 2021, the total amount outstanding under the First Northern Term Loan was ~~$2,192,~~$2,126, of which ~~$2,139~~$2,070 is included in long-term debt and ~~$53~~$56 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.

As of ~~March 31,~~September 30, 2021, the total amount outstanding under the First Northern Term Loan was ~~$2,166,~~$2,139, of which ~~$2,112~~$2,084 is included in long-term debt and ~~$54~~$55 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.

As of ~~September 30, 2020,~~December 31, 2021, the total amount outstanding under the First Northern Solar Loan was ~~$81,~~$28, of which ~~$76~~$21 is included in long-term debt, and $5$7 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

As of ~~March 31,~~September 30, 2021, the total amount outstanding under the First Northern Solar Loan was ~~$107,~~$105, of which ~~$103~~$101 is included in long-term debt and $4 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

Table of ~~March~~Contents

The Company was in compliance with the covenants defined in the First Northern Loan Agreement at December 31, 2021 and September 30, ~~2020, there were no outstanding borrowings under the First Northern Revolving Loan.~~2021.

	March 31, 2021			September 30, 2020			December 31, 2021			September 30, 2021
Long-Term Debt *	$	2,273		$	2,273
							(in thousands)
Total Debt*							$	2,154		$	2,244
Less Current Portion		(58	)		(58	)		(63	)		(59	)
	$	2,215		$	2,215
Long Term Portion							$	2,091		$	2,185

*	Long-term debt is due in monthly installments of $12 plus monthly interest, at 4.18% per annum. The note is collateralized by real property owned by Antibodies and guaranteed by Janel.

~~The Company was in compliance with the covenants contained in the First Northern Loan Agreement at March 31, 2021 and September 30, 2020.~~

8.7.	SUBORDINATED PROMISSORY NOTES - RELATED PARTY

Antibodies is the obligor on two 4% subordinated promissory notes (together, the “AB HoldCo Subordinated Promissory Notes”) payable to certain former shareholders of Antibodies. Both of the AB HoldCo Subordinated Promissory Notes are guaranteed by the Company, are unsecured and are subordinate to the terms of the Company’s debt to any federal or state bank or other institutional lender.

~~Table~~ Aves Labs, Inc., a wholly-owned subsidiary of ~~Contents~~

~~Interest on~~ the AB HoldCo Subordinated Promissory Notes is payable in arrears on the last business day of each calendar quarter, the full outstanding principal balance and accrued, unpaid interest are due on June 22, 2021 and may be prepaid, in whole or in part, without premium or penalty. As of each of March 31, 2021 and September 30, 2020, the amount outstanding on the two AB HoldCo Subordinated Promissory Notes was $344, which is included in the current portion of subordinated promissory notes.

Janel Group is the obligor on a 6.75% subordinated promissory note (the “Honor Subordinated Promissory Note”) with a former owner of Honor Worldwide Logistics LLC (“Honor”). The Honor Subordinated Promissory Note is guaranteed by the Company. The Honor Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts payable to the Santander Bank Facility and the First Merchants Bank Credit Facility. The Honor Subordinated Promissory Note is payable in twelve equal consecutive quarterly installments of principal and interest of $42 each, on the last day of January, April, July and October beginning in January 2019. The outstanding principal and accrued and unpaid interest are payable on November 20, 2021 and may be repaid, in whole or in part, without premium or penalty. As of March 31, 2021, the total amount outstanding under the Honor Subordinated Promissory Note was $121 which is included in the current portion of subordinated promissory notes. As of September 30, 2020, the total amount outstanding under the Honor Subordinated Promissory Note was $199, of which $160 is included in the current portion of subordinated promissory notes and $39 is included in long-term portion of subordinated promissory notes.

~~Aves~~Company, is the obligor on a 0.5% subordinated promissory note in the amount of $1,850 (the “ICT Subordinated Promissory Note”) issued to the former owner of ~~ICT (the “ICT Subordinated Promissory Note”~~ImmunoChemistry Technologies, LLC (“ICT”)., in connection with a business combination whereby the Company acquired all of the membership interests of ICT. The ICT Subordinated Promissory Note is payable in ~~sixteen~~16 scheduled quarterly installments of principal and interest beginning March 4, 2021, matures on March 21, 2025, and may be prepaid, in whole or in part, without premium or penalty. The ICT Subordinated Promissory Note is guaranteed by the Company and is secured by the membership interests in ICT. The ICT Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts payable to the Santander Bank Facility, First Merchants ~~Bank Credit~~ Facility and the First Northern Bank of Dixon.

As of ~~March~~December 31, 2021, the amount outstanding under the ICT Subordinated Promissory Note was ~~$1,614,~~$1,066, of which ~~$680~~$500 is included in the current portion of subordinated promissory notes and ~~$934~~$566 is included in the long-term portion of subordinated promissory notes.

(In thousands)
March 31,
2021

September 30,
2020

Total Subordinated Promissory Notes-related party
$
2,079

$
543

Less Current Portion of Subordinated Promissory Notes-related party
(1,145
)

(504
)
Long Term Portion of Subordinated Promissory Notes-related party
$
934

$
39

9.	~~SBA PAYCHECK PROTECTION PROGRAM LOANS~~

On April 19, 2020, the Company received a loan (the “Company PPP Loan”) in the aggregate amount of $2,726 from Santander, pursuant to the Paycheck Protection Program (the “PPP”) offered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), Section 7(a)(36) of the Small Business Act, which was enacted March 27, 2020, as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The Company PPP Loan matures on April 19, 2022 and bears interest at a rate of 1.00% per annum. Under the original terms, all principal and interest payments are deferred for six months from the date of the note. The Paycheck Protection Flexibility Act of 2020 P.L. 116-142, extended the deferral period for loan payments to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period. To the extent the Company PPP Loan is not forgiven, principal and interest payments in the amount of $153 are due monthly commencing on September 1, 2021. The Company may prepay the note at any time prior to maturity without penalty. The Company may only use funds from the Company PPP Loan for purposes specified in the CARES Act and related PPP rules, which include payroll costs, costs used to continue group health care benefits, rent, utilities and certain mortgage payments (“qualifying expenses”). The loan and accrued interest are forgivable after eight weeks (or an extended 24-week covered period) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

~~Table of Contents~~

In February 2021, the Company applied for forgiveness of the Company PPP Loan in accordance with the terms of the CARES Act. The forgiveness application is subject to approval by the SBA, and the Company PPP Loan may not be forgiven partially or in full. Accordingly, we have recorded the full amount of the Company PPP Loan as debt.

~~On July 23, 2020, as part of the~~ ~~Atlantic Customs Brokers, Inc. (“ACB”)~~ acquisition, the Company assumed a PPP Loan to ACB in the amount of $135 (the “ACB PPP Loan”). The terms of the ACB PPP Loan are the same as the terms of the Company PPP Loan. In February 2021, the Company was informed that the PPP loan had been forgiven by the SBA. In accounting for the forgiveness of the ACB PPP Loan, the Company is guided by ASC 470 ~~Debt, and ASC 450-30~~ ~~Gain contingency. Accordingly, the Company derecognized the ACB PPP Loan of $135 and recorded it as Other Income, as Gain on Paycheck Protection Program loan forgiveness.~~

As of ~~March~~September 30, 2021, the amount outstanding under the ICT Subordinated Promissory Note was $1,237, of which $550 is included in the current portion of subordinated promissory notes and $687 is included in the long-term portion of subordinated promissory notes.

Janel Group is the obligor on 4 4% subordinated promissory notes totaling $6,000 (together, the “ELFS Subordinated Promissory Notes”) payable to certain former shareholders of ELFS. All of the ELFS Subordinated Promissory Notes are guaranteed by the Company and are subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Facility. The ELFS Subordinated Promissory Notes are payable in 12 equal consecutive quarterly installments of principal together with accrued interest. Beginning October 15, 2021 and on the same day of the next 8 consecutive calendar quarters, thereafter payment of accrued interest and unpaid interest is due to the former shareholders.�� Beginning October 15, 2023 and on the same day of the next 12 consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders. The ELFS Subordinated Promissory Notes totaling $6,000 were recorded net of working capital adjustment of $1,163.

As of both of December 31, 2021 and September 30, ~~2020,~~2021, the ~~total~~ amount outstanding ~~including accrued interest,~~ under the ~~Company PPP Loan~~ELFS Subordinated Promissory Notes was $4,838 and ~~ACB PPP Loan~~ was ~~$2,751 and $2,873, respectively of which $1,683 and $960, respectively, is~~ included in the long-term ~~debt and $1,068 and $1,913, respectively, is included in current~~ portion of ~~long-term debt.~~subordinated promissory notes.

~~10.~~

~~STOCKHOLDERS’ EQUITY~~

Janel is authorized to issue 4,500,000 shares of common stock, par value $0.001. In addition, the Company is authorized to issue 100,000 shares of preferred stock, par value $0.001. The preferred stock is issuable in series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be determined by the Company’s board of directors or a duly authorized committee thereof, without stockholder approval. The board of directors may fix the number of shares constituting each series and increase or decrease the number of shares of any series.

~~(A)~~

~~Preferred Stock~~

~~Series B Convertible Preferred Stock~~

Shares of the Company’s Series B Convertible Preferred Stock (the “Series B Stock”) are convertible into shares of the Company’s $0.001 par value common stock at any time on a one-share (of Series B Stock) for ten-shares (of common stock) basis. On April 23, 2020, a holder of Series B Stock converted 300 shares of Series B Stock into 3,000 shares of the Company’s Common Stock. On September 25, 2020, a holder of Series B Stock converted 300 shares of Series B Stock into 3,000 shares of the Company’s Common Stock. The Company had 31 shares of Series B Stock outstanding as of March 31, 2021.

~~Series C Cumulative Preferred Stock~~

Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) were initially entitled to receive annual dividends at a rate of 7% per annum of the original issuance price of $10, when and if declared by the Company’s board of directors, with such rate to increase by 2% annually beginning on the third anniversary of issuance of such Series C Stock to a maximum rate of 13%. By the filing of the Certificate of Amendment on October 17, 2017, the annual dividend rate decreased to 5% per annum of the original issuance price, when and if declared by the Company’s board of directors, and increased by 1% beginning on January 1, 2019. Such rate is to increase on each January 1 thereafter for four years to a maximum rate of 9%. The dividend rate of the Series C Stock as of March 31, 2021 and September 30, 2020 was 8% and 7%, respectively. In the event of liquidation, holders of Series C Stock shall be paid an amount equal to the original issuance price, plus any accrued but unpaid dividends thereon. Shares of Series C Stock may be redeemed by the Company at any time upon notice and payment of the original issuance price, plus any accrued but unpaid dividends thereon. The liquidation value of Series C Stock was $~~11,911~~ ~~and $11,541 as of March 31, 2021 and September 30, 2020, respectively.~~

	December 31, 2021			September 30, 2021
	(in thousands)
Total subordinated promissory notes	$	5,904		$	6,075
Less current portion of subordinated promissory notes		(500	)		(550	)
Long term portion of subordinated promissory notes	$	5,404		$	5,525

~~Table of Contents~~

Table of Contents

On September 13, 2020, the Company purchased 890 shares of the Series C Stock from an accredited investor at a purchase price of $500 per share, or an aggregate of $445. On September 29, 2020, the Company sold 650 shares of the Series C Stock to an accredited investor at a purchase price of $500 per share, or an aggregate of $325. Such shares issued on September 29, 2020 were sold in a private placement in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. The Company had 19,760 shares of Series C Stock outstanding as of March 31, 2021.

~~For the fiscal year ended September 30, 2020 the Company paid cash dividends of $55 to a holder of Series C Stock.~~ For the six months ended March 31, 2021 and for the fiscal year ended September 30, 2020, the Company declared dividends on Series C Stock of $369 and $675, respectively. At March 31, 2021 and September 30, 2020, the Company had accrued dividends of $2,030~~and $1,661, respectively.~~

~~(B)~~

~~Equity Incentive Plan~~

On May 12, 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”), which was amended on May 8, 2018 as discussed in more detail in note 11. Under the 2017 Plan, as amended, (i) non-statutory stock options, (ii) restricted stock awards and (iii) stock appreciation rights with respect to shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company. Participants and all terms of any awards under the 2017 Plan are at the discretion of the Company’s Compensation Committee of the board of directors.

~~11.~~8.

STOCK-BASED COMPENSATION

On October 30, 2013, the board of directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.

On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company.

On ~~May 8, 2018,~~September 21, 2021, the board of directors of ~~Janel~~the Company adopted the Amended and Restated 2017 ~~Plan. The provisions~~Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and ~~terms~~stock appreciation rights of the Company’s Common Stock, par value $0.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries. The Amended ~~2017~~ Plan ~~are~~increased the ~~same as those in the 2017 Plan, except~~number of shares of Common Stock that may be issued pursuant to the Amended ~~2017~~ Plan ~~removes the ability~~from 100,000 to 200,000 shares of ~~Janel to award incentive stock options and removes the requirement for stockholder approval~~Common Stock of the ~~2017 Plan.~~Company and was updated to reflect certain other non-substantive amendments.

Total stock-based compensation for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020 amounted to ~~$54~~$29 and ~~$149,~~$24, respectively, and ~~was~~is included in selling, general and administrative expense in the Company’s statements of operations.

(A)	Stock Options

The Company uses the Black-Scholes option pricing model to estimate the fair value of our share-based awards. In applying this model, we use the following assumptions:

Risk-free interest rate - We determine the risk-free interest rate by using a weighted average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate.

Expected term - We estimate the expected term of our options on the average of the vesting date and term of the option.

Expected volatility - We estimate expected volatility using daily historical trading data of a peer group.

•	Dividend yield - We have never paid dividends on our common stock and currently have no plans to do so; therefore, no dividend yield is applied.

~~Table of Contents~~

The fair values of our employee option awards were estimated using the assumptions below, which yielded the following weighted average grant date fair values for the periods presented:

		~~Six~~Three Months Ended ~~March~~December 31, 2021
Risk-free ~~Interest Rate~~interest rate		1.10%	~~0.46%~~
Expected ~~Option Term~~option term in ~~Years~~	years		5.5-6.5
Expected ~~Volatility~~volatility		100.3% - 110.3%
Dividend yield		0%	~~103.0% - 105.4%~~
~~Dividend Yield~~			0%
Weighted ~~Average Grant Date Fair Value~~average grant date fair value		$	~~6.90~~17.60 - ~~$7.19~~$19.07

Number of
Options

Weighted
Average Exercise
Price

Weighted
Average
Remaining
Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2020
93,996

$
5.76

5.24

$
304.99

Granted
7,500
$
9.00

9.50
$
—

Exercised
(2,502
)
$
8.58

—
$
—

Outstanding Balance at March 31, 2021
98,994
$
5.93

5.04
$
1,144.91

Exercisable on March 31, 2021
83,998
$
5.42

4.36
$
1,014.32

Options for Employees

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding balance at September 30, 2021		98,994		$	5.93		4.5	$	1,689.38
Granted		10,000		$	23.00		9.8	$	0
Exercised		(17,500	)	$	4.87		—	$	—
Outstanding balance at December 31, 2021		91,494		$	8.00		5.1	$	1,463.60
Exercisable at December 31, 2021		73,998		$	5.88		4.1	$	1,341.14

Table of Contents

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at ~~March~~December 31, 2021 of ~~$17.50~~$24 per share and the exercise price of the stock options that had strike prices below such closing price.

As of ~~March~~December 31, 2021, there was approximately ~~$53~~$153 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted average period of less than one year.

~~There were no non-employee options awarded, exercised or forfeited during the six-month period ended March 31, 2021.~~

Number of
Options

Weighted
Average Exercise
Price

Weighted
Average
Remaining
Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2020
6,053

$
4.13

6.0

$
29.48

Outstanding Balance at March 31, 2021
6,053
$
4.13

5.50
$
80.93

Exercisable on March 31, 2021
6,053
$
4.13

5.50
$
80.93

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of our common stock at March 31, 2021, of $17.50 per share and the exercise price of the stock options that had strike prices below such closing price.

~~As of March 31, 2021, there was no unrecognized compensation expense related to the vested stock options.~~

Liability classified share-based awards

During the ~~six~~three months ended ~~March~~December 31, 2021, ~~6,948~~7,018 options were granted and ~~7,000~~10,372 options were exercised with respect to Indco’s common stock. The Company uses the Black-Scholes option pricing model to estimate the fair value of Indco’s share-based awards. In applying this model, the Company used the following assumptions:

~~Table of Contents~~

	~~Six~~Three Months Ended ~~March~~December 31, 2021
Risk-free ~~Interest Rate~~interest rate		~~0.46%~~1.10%
Expected ~~Option Term~~option term in ~~Years~~years		~~5.5 - 6.5~~5.5-6.5
Expected ~~Volatility~~volatility		~~103.0% - 105.4%~~39%
Dividend ~~Yield~~yield		0%
Weighted ~~Average Grant Date Fair Value~~average grant date fair value	$	~~9.66~~$5.57 - ~~$10.00~~$6.66

Number of
Options

Weighted
Average Exercise
Price

Weighted
Average
Remaining
Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2020
39,013

$
9.24

6.81

$
85.45

Granted
6,948
$
12.29

9.50
$
—

Exercised
(7,000
)
$
6.48

—
$
—

Outstanding Balance at March 31, 2021
38,961
$
10.28

7.12
$
78.16

Exercisable on March 31, 2021
25,153
$
9.16

6.17
$
71.25

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding balance at September 30, 2021		38,961		$	10.28		6.62	$	78.16
Granted		7,018		$	17.16		9.75	$	0
Exercised		(10,372	)	$	8.30		—	$	—
Outstanding balance at December 31, 2021		35,607		$	12.22		7.51	$	175.98
Exercisable at December 31, 2021		21,663		$	10.72		6.49	$	139.47

The aggregate intrinsic value in the above table was calculated as the difference between the valuation price of Indco’s common stock at ~~March~~December 31, 2021 of ~~$12.29~~$17.16 per share and the exercise price of the stock options that had strike prices below such closing price.

The liability classified awards were measured at fair value at each reporting date until the final measurement date, which was the date of completion of services required to earn the option. The accrued compensation cost related to these options was approximately ~~$326~~$279 and ~~$284~~$361 as of ~~March~~December 31, 2021 and September 30, ~~2020,~~2021, respectively, and is included in other liabilities in the condensed consolidated financial statement. The compensation cost related to these options was approximately ~~$32~~$11 and ~~$37~~$15 for the ~~six-month periods~~three months ended ~~March~~December 31, 2021 and 2020, respectively.

The cost associated with the options issued on each grant date is being recognized ratably over the period of service required to earn each tranche of options.

Upon vesting, the options continue to be accounted for as a liability in accordance with ASC 480-10-25-8 and are measured in accordance with ASC 480-10-35 at every reporting period until the options are settled.

On December 13, 2021, minority owners of Indco exercised 7,000 and 3,372 options to purchase Indco’s common stock at an exercise price of $6.48 and $12.07 for an aggregate purchase price of $45 and $41, respectively. Indco issued related party promissory notes in the amount of $45 and $41, respectively which bear interest at 1% per annum; both interest and principal are payable on the maturity date of December 31, 2024. These notes are included in security deposits and other long-term assets. The fair value of the 7,000 and 3,372 shares of Indco’s common stock was recorded as an increase in mandatorily redeemable non-controlling interest. On December 13, 2021, Indco repurchased 7,000 shares of Indco’s stock at a purchase price of $17.16 per share from a minority owner of Indco for the aggregate purchase price of $120. The fair value of the repurchased 7,000 shares of Indco’s common stock was recorded as a decrease in mandatorily redeemable non-controlling interest. As a result of the exercise of 10,372 options and the repurchase of 7,000 shares of Indco’s stock, the mandatorily redeemable non-controlling interest percentage was 9.77% as of December 31, 2021.

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Changes in the fair value of the vested options are recognized in earnings in the consolidated financial statements.

The options are classified as liabilities, and the underlying shares of Indco’s common stock also contain put options which result in their classification as a mandatorily redeemable security. While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death, which is certain to occur at some point in time.

As of ~~March~~December 31, 2021, there was approximately ~~$67~~$70 of total unrecognized compensation expense related to the unvested Indco stock options. This expense is expected to be recognized over a weighted average period of less than one year.

~~(B)~~

~~Restricted Stock~~

During the six months ended March 31, 2021, there were no shares of restricted stock granted. Under the 2017 Plan, each grant of restricted stock vests over a three-year period, and the cost to the recipient is zero. Restricted stock compensation expense, which is a non-cash item, is being recognized in the Company’s financial statements over the vesting period of each restricted stock grant.

~~As of March 31, 2021, there was no unrecognized compensation cost related to non-employee unvested restricted stock.~~

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~~As of March 31, 2021, and September 30, 2020, included in accrued expenses and other current liabilities was $306 which represents 35,000 shares of restricted stock that vested but were not issued.~~

~~12.~~9.

INCOME PER COMMON SHARE

The following table provides a reconciliation of the basic and diluted income ~~(loss)~~ per share (“EPS”) computations for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 (in thousands, except ~~share and~~ per share data):

	For the Three Months Ended March 31,						For the Six Months Ended March 31,						For the three Months Ended December 31,
	2021			2020			2021			2020			2021			2020
Income (loss):
Net income (loss)	$	596		$	(937	)	$	851		$	(1,057	)
Income:
Net income													$	1,688		$	255
Preferred stock dividends		(195	)		(175	)		(369	)		(326	)		(211	)		(174	)
Net Income (loss) available to common stockholders	$	401		$	(1,112	)	$	482		$	(1,383	)
Net income available to common stockholders													$	1,477		$	81

Common Shares:
Basic - weighted average common shares		936,154			865,985			936,045			865,630			959.1			935.9
Effect of dilutive securities:
Stock options		47,320			—			38,973			—			58.7			30.6
Restricted stock		—			—			—			—
Convertible preferred stock		310			—			310			—			0.3			0.3
Diluted - weighted average common stock		983,784			865,985			975,328			865,630			1,018.1			966.8

Income (loss) per Common Share:
Income per Common Share:
Basic -
Net income (loss)	$	0.64		$	(1.08	)	$	0.91		$	(1.22	)
Net income													$	1.76		$	0.27
Preferred stock dividends		(0.22	)		(0.21	)		(0.40	)		(0.38	)		(0.22	)		(0.18	)
Net Income (loss) available to common stockholders	$	0.42		$	(1.29	)	$	0.51		$	(1.60	)
Net income attributable to common stockholders													$	1.54		$	0.09

Diluted -
Net income (loss)	$	0.61		$	(1.08	)	$	0.87		$	(1.22	)
Net income													$	1.66		$	0.26
Preferred stock dividends		(0.20	)		(0.21	)		(0.38	)		(0.38	)		(0.21	)		(0.18	)
Net income (loss) available to common stockholders	$	0.41		$	(1.29	)	$	0.49		$	(1.60	)
Net income available to common stockholders													$	1.45		$	0.08

The computation for the diluted number of shares excludes unvested restricted stock and unexercised stock options that are anti-dilutive. There were ~~39,283 dilutive shares for the six-month periods ended March 31, 2021 and no~~10 anti-dilutive shares for the ~~six-month periods~~three-month period ended ~~March~~December 31, 2021 and 0 anti-dilutive shares for the three-month period ended December 31, 2020.

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Potentially diluted securities as of December 31, 2021 and 2020 ~~respectively.~~

~~Potentially dilutive securities as of March 31, 2021 and 2020 were~~are as follows:

March 31,

2021

2020

Employee Stock Options

98,994

114,496

Non-employee Stock Options

6,053

36,053

Employee Restricted Stock

—

5,000

Non-employee Restricted Stock

—

26,667

Convertible Preferred Stock

310

6,310

105,357

188,526

	December 31,
	2021		2020
Employee stock options		91.5		98.9
Non-employee stock options		0		6.1
Convertible preferred stock		0.3		0.3
		91.8		105.3

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto as of and for the three months ~~and six months~~ ended ~~March~~December 31, 2021, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Amounts presented in this section are in thousands, except share and per share data.

As used throughout this Report, “we,” “us”, “our,” “Janel,” “the Company,” “Registrant” and similar words refer to Janel Corporation and its Subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Report”) contains certain statements that are, or may 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 and that reflect management’s current expectations with respect to our operations, performance, financial condition, and other developments. These ~~forward – looking~~forward-looking statements may generally be identified by the use of the words “may,” “will,” “intends,” “plans,” projects,” “believes,” “should,” “expects,” “predicts,” “anticipates,” “estimates,” and similar expressions or the negative of these terms or other comparable terminology. These statements are necessarily estimates reflecting management’s best judgment based upon current information and involve a number of risks, uncertainties and assumptions. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised that various factors, including, but not limited to, those set forth elsewhere in this Report, could affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, the impact of the coronavirus on the worldwide economic conditions and on our businesses, our strategy of expanding our business through acquisitions of other businesses; the risk that we may fail to realize the expected benefits or strategic objectives of any acquisition, or that we spend resources exploring acquisitions that are not consummated; risks associated with litigation, including contingent auto liability and insurance coverage; indemnification claims and other unforeseen claims and liabilities that may arise from an acquisition; economic and other conditions in the markets in which we operate; the risk that we may not have sufficient working capital to continue operations; instability in the financial markets; ~~the material weaknesses identified in our internal control over financial reporting;~~ our dependence on key employees; impacts from climate change, including the increased focus by third-parties on sustainability issues and our ability to comply therewith; competition from parties who sell their businesses to us and from professionals who cease working for us; terrorist attacks and other acts of violence or war; security breaches or cybersecurity ~~attacks; risks related to~~attacks; our ~~receipt of Paycheck Protection Program funding~~compliance with applicable privacy, security and ~~forgiveness of such loans by the SBA;~~data laws; competition faced by our ~~global~~ logistics services freight carriers with greater financial resources and from companies that operate in areas in which we plan to expand; our dependence on the availability of cargo space from third parties; recessions and other economic developments that reduce freight volumes; other events affecting the volume of international trade and international operations; risks arising from our ~~global~~ logistics services business’ ability to manage staffing needs; competition faced in the freight forwarding, freight brokerage, logistics and supply chain management industry; industry consolidation and our ability to gain sufficient market presence with respect to our ~~global~~ logistics services business; risks arising from our ability to comply with governmental permit and licensing requirements or statutory and regulatory requirements; seasonal trends; competition faced by our manufacturing (Indco) business from competitors with greater financial resources; Indco’s dependence on individual purchase orders to generate revenue; any decrease in the availability, or increase in the cost or supply shortages, of raw materials used by Indco; Indco’s ability to obtain and retain skilled technical personnel; risks associated with product liability claims due to alleged defects in Indco’s products; risks arising from the environmental, health and safety regulations applicable to Indco; the reliance of our Indco and life sciences businesses on a single location to manufacture their products; the ability of our life sciences business to compete effectively; the ability of our life sciences business to introduce new products in a timely manner; product or other liabilities associated with the manufacture and sale of new products and services; changes in governmental regulations applicable to our life sciences business; the ability of our life sciences business to continually produce products that meet high quality standards such as purity, reproducibility and/or absence of cross-reactivity; the controlling influence exerted by our officers and directors and one of our stockholders; our inability to issue dividends in the foreseeable future; and risks related to ownership of our common stock, including volatility and the lack of a guaranteed continued public trading market for our common ~~stock.~~stock, the impact of COVID-19 on our operations and financial results; and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected. You should not place undue reliance on any of our forward-looking statements which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of these factors, see our periodic reports filed with the ~~Securities and Exchange Commission,~~SEC, including our most recent Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021.

2719

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OVERVIEW

Janel Corporation (“Janel,” the “Company” or the “Registrant”) is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Life Sciences and Manufacturing. In the fourth quarter of 2021, our former Global Logistics Services ~~Manufacturing~~segment was renamed “Logistics”; this change related to the name only and ~~Life Sciences.~~ had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level results. The Company strives to create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating ~~Janel~~Janel’s capital at high risk-adjusted rates of return; and attracting and retaining exceptional talent.

~~A management group~~Management at the holding company ~~level~~ focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.

~~Global~~ Logistics ~~Services~~

The Company’s ~~Global~~ Logistics ~~Services~~ segment is comprised of several wholly-owned ~~subsidiaries (collectively, “Janel Group”). Janel Group~~subsidiaries. The Company’s Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via ~~air-, ocean-~~air, ocean and land-based carriers, customs brokerage services, warehousing and distribution services, trucking, and other value-added logistics services. In addition to these revenue streams, the Company earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.

On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC. (“ELFS”) and related subsidiaries which we include in our Logistics segment.

On December 31, 2020, wethe Company completed a business combination whereby weit acquired substantially all of the assets and certain liabilities of ~~a global logistics services provider with two U.S. locations.~~W.R. Zanes & Co. of LA., Inc., (“W.R. Zanes”) which we include in our Logistics segment.

Life Sciences

The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on an original equipment manufacturer (OEM) basis.

On ~~July 23,~~December 4, 2020, the Company completed a business combination whereby it acquired ~~Atlantic Customs Brokers, Inc.~~all of the membership interests of ImmunoChemistry Technologies, LLC. (“~~ACB”~~ICT”)~~, a global logistics services provider with two U.S. locations.~~ which we include in our Life Sciences segment.

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Manufacturing

The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”). Indco is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.

~~Life Sciences~~

~~Table of Contents~~

~~On December 4, 2020, the Company, through its wholly-owned subsidiary Aves, acquired all of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”).~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~Critical~~Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting ~~estimates are those that we believe are both significant and~~principles in the United States. These generally accepted accounting principles require usmanagement to make ~~difficult, subjective, or complex judgments, often because we need to estimate~~estimates and assumptions that affect the ~~effect~~reported amounts of ~~inherently uncertain matters. These estimates are based on historical experience~~assets, liabilities, net sales and ~~various other factors that we believe to be appropriate under~~expenses during the ~~circumstance. Actual amounts and results could differ from these estimates made by management. Certain~~reporting period.

Our senior management has reviewed the critical accounting policies ~~that require~~and estimates with the Audit Committee of our Board of Directors. Our significant ~~management estimates~~accounting policies are described in Note 1, “Summary of Business and ~~are deemed critical~~Significant Accounting Policies,” in the Notes to our ~~results of operations or financial position are discussed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of~~Consolidated Financial ~~Condition and Results of Operations included in Item 7 of our Annual Report on Form 10-K~~Statements for the fiscal year ended September 30, ~~2020.~~

~~The Company’s consolidated~~2021, which are included in our Annual Report on Form 10-K filed with the SEC on December 27, 2021. Critical accounting policies are those that are most important to the portrayal of our financial ~~statements have been prepared in accordance with U.S. GAAP. The preparation~~condition, results of ~~these financial statements requires management~~operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates ~~and assumptions~~ about ~~future events~~the effect of matters that ~~affect~~are inherently uncertain. If actual results were to differ significantly from estimates made, 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 differences may~~ be ~~material~~materially affected. There were no significant changes 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, deferred income taxes, potential impairment of goodwill and intangible assets with indefinite lives and long-lived assets impairment. 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. Note 1 of the notes to consolidated financial statements included herein includes a summary of the significantcritical accounting policies ~~and methods used in~~during the ~~preparation of our consolidated financial statements. The following is a brief discussion of certain accounting policies and estimates.~~

Management believes that the nature of the Company’s business is such that there are few 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.

~~Income taxes~~three months ended December 31, 2021.

The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those 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 the results of operations in the period that includes the enactment date.

~~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 operations:

~~accounts receivable valuation;~~

~~the useful lives of long-term assets;~~

~~the accrual of costs related to ancillary services the Company provides;~~

~~accrual of tax expense on an interim basis;~~

~~inventory valuation; and~~

~~potential impairment of goodwill and intangible assets with indefinite lives, long-lived assets impairment.~~

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Management believes that the methods utilized in these areas are consistent in application. Management further 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.

~~Critical Accounting Policies and Estimates Applicable to the Global Logistics Services Segment~~

~~Revenue Recognition~~

~~Revenues are derived from customs brokerage services and from freight forwarding services.~~

Customs brokerage services include activities required for the clearance of shipments through government customs regimes, such as preparing required documentation, calculating and providing for payment of duties and other charges on behalf of customers, arranging required inspections and arranging final delivery.

Freight forwarding may require multiple services, including long-distance shipment via air, ocean or ground assets, destination handling (“break bulk”), warehousing, distribution and other logistics management activities. As an asset-light business, Janel Group owns none of the assets by which it fulfills its customers’ logistics needs. Rather, it purchases the services its customers need from asset owners, such as airlines and steamship lines, and resells them. By consolidating shipments from multiple customers, Janel Group can negotiate terms of service with asset owners that are more favorable than those the customers could negotiate themselves.

Revenue is recognized upon transfer of control of promised services to customers. With respect to its Global Logistics Services segment, the Company has determined that in general each shipment transaction or service order constitutes a separate contract with the customer. When the Company provides multiple services to a customer, different contracts may be present for different services.

The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally, revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it has discretion in setting the prices for the services to the customers, and the Company has the ability to direct the use of the services provided by the third party. Revenue is recognized on a net basis when we do not have latitude in carrier selection or establish rates with the carrier.

~~In the Global Logistics Services segment, the Company disaggregates its revenues by its four primary service categories: ocean freight, air freight, custom brokerage and trucking and other.~~

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~~Critical Accounting Policies and Estimates Applicable to the Manufacturing and Life Sciences Segments~~

~~Revenue Recognition-Manufacturing~~

Revenues from Indco are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories. Indco receives customer product orders via telephone, email, internet or fax. The pricing of each standard product sold is listed in Indco’s print and web-based catalog. Customer specific products are priced by quote. A sales order acknowledgement is sent to every customer for every order to confirm pricing and the specifications of the products ordered. The revenue is recognized at a point in time when the product is shipped to the customer.

~~Revenue Recognition-Life Sciences~~

NON-GAAP FINANCIAL MEASURES

While we prepare our financial statements in accordance with U.S. GAAP, we also utilize and present certain financial measures, in particular adjusted operating income, which is not based on or included in U.S. GAAP (we refer to these as “non-GAAP financial measures”).

~~Net Revenue~~

Net revenue is a non-GAAP measure calculated as total revenue less forwarding expenses attributable to the Company’s Global Logistics Services segment. Our total revenue represents the total dollar value of services and goods we sell to our customers. Forwarding expenses attributable to the Company’s Global Logistics Services segment refer to purchased transportation and related services including contracted air, ocean, rail, motor carrier and other costs. Total revenue can be influenced greatly by changes in transportation rates or other items, such as fuel prices, which we do not control. Management believes that providing net revenue and its related margin is useful to investors as net revenue is the primary indicator of our ability to source, add value and sell services and products that are provided by third parties, and we consider net revenue to be our primary performance measurement. The difference between the rate billed to our customers (the sell rate) and the rate we pay to the carrier (the buy rate) is termed “net revenue”, “yield” or “margin.” As presented, net revenue matches gross margin.

Organic Growth

Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months. The organic growth presentation provides useful period-to-period comparison of revenue results as it excludes revenue from acquisitions that would not be included in the comparable prior period.

Adjusted Operating Income

As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business as well as other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets such as customer relationships. Because these charges are not indicative of our operations, we believe that adjusted operating income is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business that is more representative of the actual results of our operations.

Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is used by management as a supplemental performance measure to assess our business’s ability to generate cash and economic returns.

Adjusted operating income is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest and taxes.

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We believe that ~~net revenue,~~ organic growth and adjusted operating income provide useful information in understanding and evaluating our operating results in the same manner as management. However, ~~net revenue,~~ organic growth and adjusted operating income are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for total revenue, operating income or any other operating performance measures calculated in accordance with U.S. GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that users of the financial statements may find significant.

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In addition, although other companies in our industry may report measures titled ~~net revenue,~~ organic growth, adjusted operating income or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider ~~net revenue,~~ organic growth and adjusted operating income alongside other financial performance measures, including total revenue, operating income and our other financial results presented in accordance with U.S. GAAP.

Results of Operations – Janel Corporation

Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the notes thereto.

Our ~~condensed~~ consolidated results of operations are as follows:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020			Six Months Ended March 31, 2021		Six Months Ended March 31, 2020			Three Months Ended December 31, 2021		Three Months Ended December 31, 2020
Revenues	$	30,142	$	19,121		$	56,620	$	38,942		$	83,314	$	26,478
Forwarding expenses and cost of revenues		22,593		13,125			42,622		26,659			67,825		20,029
Gross profit		7,549		5,996			13,998		12,283			15,489		6,449
Operating expenses		6,708		6,827			12,668		13,155			12,847		5,960
Operating income (loss)		841		(831	)		1,330		(872	)
Net income (loss)		596		(937	)		851		(1,057	)
Adjusted operating income (loss)	$	1,455	$	(286	)	$	2,433	$	210
Operating income											$	2,642	$	489
Net income											$	1,688	$	255
Adjusted operating income											$	3,362	$	978

Consolidated revenues for the three months ended ~~March~~December 31, 2021 were ~~$30,142,~~$83,314, or ~~57.6%~~214.7% higher than the prior year period. Revenues increased across all three segments due to a recovery from the impact of the COVID-19 pandemic experienced in the prior fiscal year as well as the impact of acquisitions, which accounted for $24,840 of additional revenue compared to the prior year. Operating income for the three months ended ~~March~~December 31, ~~2020 as revenue at all three businesses increased and acquisitions, to a smaller extent, contributed to the increase~~2021 was $2,642 compared towith $489 in the prior year period as a result of the economic recovery experienced across all of our segments, partially offset by higher spending in the corporate segment. Adjusted operating income for the three months ended December 31, 2021 increased to $3,362 versus $978 in the prior year period.

The Company’s net income for the three months ended ~~March~~December 31, 2021 totaled approximately ~~$596~~$1,688 or ~~$0.61~~$1.66 per diluted share, compared to a net ~~loss~~income of ~~approximately ($937)~~$255 or ~~($1.08)~~$0.26 per diluted share for the three months ended ~~March~~December 31, 2020.

Consolidated revenues for the six months ended March 31, 2021 were $56,620, or 45.4% higher than for the six months ended March 31, 2020 as revenue at all three businesses increased and acquisitions, to a smaller extent, contributed to the increase compared to the prior year period.

The Company’s net income for the six months ended March 31, 2021 totaled approximately $851 or $0.87 per diluted share, compared to a net loss of approximately ($1,057) or ($1.22) per diluted share for the six months ended March 31, 2020.

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The following table sets forth a reconciliation of operating income to adjusted operating ~~income (loss):~~income:

(in thousands)
Three Months
Ended March 31,
2021

Three Months
Ended March 31,
2020

Six Months
Ended March 31,
2021

Six Months
Ended March 31,
2020

Operating income (loss)
$
841

$
(831
)

$
1,330

$
(872
)
Amortization of intangible assets⁽¹⁾

293

243

544

486

Stock-based compensation⁽²⁾

30

75

54

149

Cost recognized on sale of acquired inventory ⁽³⁾

291

227

505

447

Adjusted operating income (loss)
$
1,455

$
(286
)

$
2,433

$
210

	Three Months Ended December 31,
	2021		2020
Operating income	$	2,642	$	489
Amortization of intangible assets		509		251
Stock-based compensation		40		24
Cost recognized on sale of acquired inventory		171		214
Adjusted operating income	$	3,362	$	978

Table of Contents

~~(1)~~

Amortization of intangible assets represents non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets, including any portion that is allocated to noncontrolling interests. Management believes that making this adjustment aids in comparing the Company’s operating results with other companies in our industry that have not engaged in acquisitions.

~~(2)~~

The Company eliminates the impact of stock-based compensation because it does not consider such non-cash expenses to be indicative of the Company’s core operating performance. The exclusion of stock-based compensation expenses also facilitates comparisons of the Company’s underlying operating performance on a period-to-period basis.

~~(3)~~

The Company has excluded the impact of cost on the sale of acquired inventory in connection with acquisitions as such adjustments represent non-cash items, are not consistent in amount and frequency and are significantly impacted by the timing and size of the Company’s acquisitions.

Results of Operations ~~- Global~~– Logistics ~~Services~~ – Three ~~and Six~~ Months Ended ~~March~~December 31, 2021 and 2020

Our ~~Global~~ Logistics ~~Services~~ business helps its clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include customs entry filing, arrangement of freight forwarding by air, ocean and ground, warehousing, cargo insurance procurement, logistics planning, product repackaging and online shipment tracking.

	Three Months Ended December 31,
	2021			2020
Revenue	$	77,556		$	22,260
Forwarding expense		65,610			18,395
Gross profit	$	11,946		$	3,865
Gross profit margin		15.4	%		17.4	%
Selling, general and administrative expenses	$	9,349		$	3,374
Income from operations	$	2,597		$	491

~~Global Logistics Services – Selected Financial Information:~~

Three Months Ended
March 31,

Six Months Ended
March 31,

2021

2020

2021

2020

(in thousands)
Revenue
$
24,373

$
15,328

$
46,633

$
31,407

Forwarding expenses
20,250

11,615

38,645

23,702

Net revenue
4,123

3,713

7,988

7,705

Net revenue margin
16.9
%

24.2
%

17.1
%

24.5
%
Selling, general & administrative
3,743

3,952

7,117

7,590

Income (loss) from operations
$
380

$
(239
)

$
871

$
115

Revenue

Total revenue for the three months ended ~~March~~December 31, 2021 was ~~$24,373,~~$77,556 as compared to ~~$15,328~~$22,260 for the three months ended ~~March~~December 31, 2020, an increase of ~~$9,045~~$55,296 or ~~51.0%~~248.4%. ~~Of the $9,045~~The increase in revenue ~~85.2% represented growth~~was primarily ~~due to~~driven by the rise in transportation rates ~~due to~~as a result of capacity issues globally and ~~14.8% contributions from~~a recovery in business compared with the depressed levels in the prior year period, while two ~~acquisitions. Total~~acquisitions accounted for $24,840 of additional revenue for the six months ended March 31, 2021 and 2020 was $46,633 and $31,407 respectively, an increase of $15,226 or 48.9%. Of the $15,226 increase in revenue 88.5% represented organic growth primarily duecompared to the ~~rise in transportation rates due to capacity issues globally and 11.5% represented contributions from two acquisitions.~~prior year.

Gross Profit

~~Forwarding Expenses~~

~~Forwarding expenses~~Gross profit for the three months ended ~~March~~December 31, 2021 ~~increased by $8,635,~~was $11,946, an increase of $8,081, or ~~74.3%~~209.1%, ~~to $20,250~~ as compared to ~~$11,615~~$3,865 for the three months ended ~~March~~December 31, 2020. ~~Forwarding expenses as a percentage~~Two acquisitions accounted for $5,834 of ~~revenue were 83.1% and 75.8%~~additional gross profit compared to the prior year period. A recovery in business accounted for the ~~three months ended March 31, 2021~~balance of the gross profit increase compared with the depressed levels in the prior fiscal year and ~~March 31, 2020, respectively. Similar to the revenue increase, the increase in forwarding expenses and forwarding expense as a percentage~~drove organic gross profit growth of ~~revenue reflected higher transportation rates and increased expenses related to acquisitions.~~

~~Table of Contents~~

Forwarding expenses for the six months ended March 31, 2021 increased by $14,943, or 63.1%, to $38,645 as compared to $23,702 for the six months ended March 31, 2020. Forwarding expenses as a percentage of revenue were 82.9% and 75.5% for the six months ended March 31, 2021 and March 31, 2020, respectively. Similar to the revenue increase, the increase in forwarding expenses and forwarding expense as a percentage of revenue reflected higher transportation rates and increased expenses related to acquisitions.

~~Net Revenue and Net Revenue Margin~~

~~Net revenue for the three months ended March 31, 2021 was $4,123, an increase of $410, or 11.1%, as compared to $3,713 for the three months ended March 31, 2020~~58%. This increase was mainly the result of increased revenue from two acquisitions partially offset by an approximately mid-single digit organic decline for the quarter in our base business due to a global trade shift due to COVID. ~~Net revenue~~Gross margin as a percentage of revenue decreased to ~~16.9%~~15.4% for the three months ended December 31, 2021 compared to ~~24.2%~~17.4% for the prior year period due to the increase in transportation rates, ~~versus the prior year period.~~

Net revenue for the six months ended March 31, 2021 was $7,988, an increase of $283, or 3.7%, as compared to $7,705 for the six months ended March 31, 2020. This increase was mainly the result of two acquisitions partially offset by a high single-digit organic decline in our base business due to COVID-related shifts in global trade. Net revenue as a percentage of revenue decreased to 17.1% compared to 24.5% for the prior year period due to the increase in transportation rates versus the prior year period.higher gross profit margins at an acquired business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended ~~March~~December 31, 2021 were ~~$3,743,~~$9,349, as compared to ~~$3,952~~$3,374 for the three months ended ~~March~~December 31, 2020. This ~~decrease~~increase of ~~$209,~~$5,975, or ~~5.3%~~177.1%, was ~~largely attributed~~mainly due to ~~cost reductions partially offset by the~~ additional expenses from ~~businesses~~ acquired ~~versus the prior year period.~~businesses. As a percentage of revenue, selling, general and administrative expenses were ~~15.4%~~12.1% and ~~25.8%~~15.2% of revenue for the three months ended ~~March~~December 31, 2021 and 2020, respectively.

Selling, general and administrative expenses for the six months ended March 31, 2021 were $7,117, as compared to $7,590 for the six months ended March 31, 2020. This decrease of $493, or 6.2%, was largely attributed to cost reductions partially offset by the additional expenses from businesses acquired versus the prior year period. As a percentage of revenue, The decline in selling, general and administrative expenses ~~were 15.3% and 24.2%~~as a percentage of revenue ~~for~~largely reflected the ~~six months ended March 31, 2021 and 2020, respectively.~~

~~Income (loss) from Operations~~

Income from operations increased to $380 for the three months ended March 31, 2021, as compared to a loss of ($239) for the three months ended March 31, 2020, an increase of $619. Income from operations increased during the three months ended March 31, 2021rise in transportation rates as a result of cost reductions and, to a lesser extent, the contribution from an acquisition versus the prior year period. Our operating margin as a percentage of net revenue for the three months ended March 31, 2021 was 9.2% compared to (6.4%) in the prior year period.

Income from operations increased to $871 for the six months ended March 31, 2021, as compared to $115 for the six months ended March 31, 2020, an increase of $756, or 657.4%. Income from operations increased during the six months ended March 31, 2021 as a result of cost reductions and, to a lesser extent, the contribution from an acquisition versus the prior year period. Our operating margin as a percentage of net revenue for the six months ended March 31, 2021 was 10.9% compared to 1.5% in the prior year period.

~~Table of Contents~~

~~Results of Operations - Manufacturing – Three and Six Months Ended March 31, 2021 and 2020~~

~~The Company’s Manufacturing segment includes its majority-owned Indco subsidiary, which manufactures and distributes industrial mixing equipment.~~

~~Manufacturing – Selected Financial Information:~~

Three Months Ended
March 31,

Six Months Ended
March 31,

2021

2020

2021

2020

(in thousands)
Revenue
$
2,529

$
2,056

$
4,398

$
3,926

Cost of sales
1,163

908

2,041

1,753

Gross profit
1,366

1,148

2,357

2,173

Gross profit margin
54.0
%

55.8
%

53.6
%

55.3
%
Selling, general and administrative
683

701

1,325

1,383

Income from Operations
$
683

$
447

$
1,032

$
790

~~Revenue~~

Total revenue was $2,529 and $2,056 for the three months ended March 31, 2021 and 2020, respectively, an increase of $473, or 23.0%. Total revenue was $4,398 and $3,926 for the six months ended March 31, 2021 and 2020, respectively, an increase of $472, or 12.0%. The revenue increase in both periods reflected a broad increase across the business relative to the COVID-19 related slowdown in the respective prior year periods.

~~Cost of Sales~~

Cost of sales was $1,163 and $908 for the three months ended March 31, 2021 and 2020, respectively, an increase of $255, or 28.1%, due to product mix. Cost of sales was $2,041 and $1,753 for the six months ended March 31, 2021 and 2020, respectively, an increase of $288, or 16.4%. The cost of sales increases in both periods was consistent with the revenue increase in both periods and reflected relatively stable product mix.

~~Gross Profit and Gross Profit Margin~~

Gross profit was $1,366 and $1,148 for the three months ended March 31, 2021 and 2020, respectively, an increase of $218, or 19.0%. Gross profit margin for the three months ended March 31, 2021 and 2020 was 54.0% and 55.8%, respectively. Gross profit was $2,357 and $2,173 for the six months ended March 31, 2021 and 2020, respectively, an increase of $184, or 8.5%. Gross profit margin for the six months ended March 31, 2021 and 2020 was 53.6% and 55.3%, respectively. The gross profit in both periods increased proportionately with the revenue of the business at relatively stable gross profit margins.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses were $683 and $701 for the three months ended March 31, 2021 and 2020, respectively, a decrease of $18 or 5.9%. Selling, general and administrative expenses were $1,325 and $1,383 for the six months ended March 31, 2021 and 2020, respectively, a decrease of $58 or 4.2%. The relatively stable selling, general and administrative expenses in both periods reflect a reduction in rent expenses related to the purchase of Indco’s building.capacity issues globally.

Income from Operations

Income from operations ~~was $683~~increased to $2,597 for the three months ended ~~March~~December 31, 2021, as compared to ~~$447~~income from operations of $491 for the three months ended ~~March~~December 31, 2020, ~~representing~~an increase of $2,106. Income from operations increased as a ~~52.8% increase~~result of the economic recovery from the COVID-19 pandemic compared to the prior fiscal year and contributions from two acquisitions. Operating margin as a percentage of gross profit for the three months ended December 31, 2021 was 21.7% compared to 12.7% in the prior year ~~period. Income~~period largely due to operating leverage from ~~operations was $1,032 for~~significantly higher gross profit as business recovered compared with the ~~six months ended March 31, 2021 compared to $790 for the six months ended March 31, 2020, representing a 30.6% increase from~~depressed levels in the prior year period. Operating profit increased in both periods as the business benefited from management’s decision a year ago not to reduce staffing levels which resulted in favorable operating leverage as revenue recovered.

3523

~~Table of Contents~~

Table of Contents

Results of Operations – Life Sciences – Three ~~and Six~~ Months Ended ~~March~~December 31, 2021 and 2020

The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences business also produces products for other life science companies on an OEM basis.

Life Sciences – Selected Financial Information:

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020			Three Months Ended December 31,
	(in thousands)												2021			2020
Revenue	$	3,240		$	1,737		$	5,589		$	3,609		$	3,244		$	2,349
Cost of sales		889			375			1,431			757			830			542
Cost recognized upon sales of acquired inventory		291			227			505			447
Cost recognized upon sale of acquired inventory														171			214
Gross profit		2,060			1,135			3,653			2,405		$	2,243		$	1,593
Gross profit margin		63.6	%		65.3	%		65.4	%		66.6	%		69.1	%		67.8	%
Selling, general and administrative		1,213			1,071			2,189			2,051
Income from Operations	$	847		$	64		$	1,464		$	354
Selling, general and administrative expenses													$	1,250		$	976
Income from operations													$	993		$	617

Revenue

Total revenue was ~~$3,240~~$3,244 and ~~$1,737~~$2,349 for the three months ended ~~March~~December 31, 2021 and 2020, respectively, an increase of ~~$1,503~~$895 or ~~86.5%~~38.1%. OfAn acquisition accounted for $404 of the ~~$1,503~~revenue increase in ~~revenue 74.9% represented~~the quarter, while organic growth asof 21% accounted for the ~~Life Sciences business experienced a recovery~~balance of revenue growth as academic research recovered from the ~~COVID-led slowdown~~impacts of the COVID-19 pandemic.

Gross Profit

Gross profit was $2,243 and ~~26.1% represented contributions from an acquisition as well as the introduction of new products and services. Total revenue was $5,589 and $3,609~~$1,593 for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020, respectively, an increase of ~~$1,980~~$650 or ~~54.9%~~40.8%. OfDuring the ~~$1,980 increase in revenue 76.7% represented organic growth~~three months ended December 31, 2021 and 2020, gross profit margin was 69.1% and 67.8%, respectively, as favorable product mix and lower cost recognized upon sale of acquired inventory benefited gross profit margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the Life Sciences ~~business experienced a recovery from the COVID-led slowdown~~segment were $1,250 and ~~23.3% contributions from an acquisition as well as the introduction of new products and services.~~

~~Cost of Sales and Cost Recognized Upon Sale of Acquired Inventory~~

~~Cost of sales was $889 and $375~~$976 for the three months ended ~~March~~December 31, 2021 and 2020, respectively. The year-over-year increase was largely due to an acquired business.

Income from Operations

Income from operations for the three months ended December 31, 2021 and 2020 was $993 and $617, an increase of $376 or 60.9%, largely due to positive operating leverage from the increase in revenue as a result of the recovery from the impact of the COVID-19-related shut downs experienced in the prior fiscal year and, to a lesser extent, a contribution from an acquisition.

Results of Operations - Manufacturing – Three Months Ended December 31, 2021 and 2020

The Company’s Manufacturing segment reflects its majority-owned Indco subsidiary, which manufactures and distributes industrial mixing equipment.

Table of Contents

Manufacturing – Selected Financial Information:

	Three Months Ended December 31,
	2021			2020
Revenue	$	2,514		$	1,869
Cost of revenues		1,214			878
Gross profit	$	1,300		$	991
Gross profit margin		51.7	%		53.0	%
Selling, general and administrative expenses	$	729		$	642
Income from operations	$	571		$	349

Revenue

Total revenue was $2,514 and $1,869 for the three months ended December 31, 2021 and 2020, respectively, an increase of ~~$514~~$645, or ~~137.1%, primarily as~~34.5%. The revenue increase reflected a ~~result of~~broad increase across the business ~~growth~~relative to the COVID-19 related slowdown in the prior fiscal year.

Gross Profit

Gross profit was $1,300 and ~~to a smaller degree, increased expenses from an acquisition. Cost recognized upon sale of acquired inventory was $291 and $227~~$991 for the three months ended ~~March~~December 31, 2021 and 2020, respectively, an increase of ~~$64~~$309, or ~~28.2%, due to some acquired inventory from an acquisition partially offset by some inventory being fully amortized.~~

Cost of sales was $1,431 and $757 for the six months ended March 31, 2021 and 2020, respectively, an increase of $674 or 89.0%, primarily as a result of business growth. Cost recognized upon sale of acquired inventory was $505 and $447 for the six months ended March 31, 2021 and 2020, respectively, an increase of $58 or 13.0%, due to acquired inventory from an acquisition partially offset by some inventory being fully amortized.

~~Gross Profit and Gross Profit Margin~~

31.2%. Gross profit ~~was $2,060 and $1,135~~margin for the three months ended ~~March~~December 31, 2021 and 2020 ~~respectively, an increase of $578 or 96.0%. In~~ ~~the three months ended March 31, 2021~~was 51.7% and ~~2020, the Life Sciences segment had a~~53.0%, respectively. The year-over-year decrease in gross profit margin of ~~63.6% and 65.3%, respectively, as~~ ~~business improved compared~~was generally due to the ~~prior year period; contributions from an acquisition and product~~ mix ~~was consistent period to period.~~of business.

~~Gross profit was $3,653 and $2,405 for the six months ended March~~ ~~31, 2021~~ ~~and 2020, respectively, an increase~~ of $1,248 or 51.9%. In the six months ended March 31, 2021 and 2020, the Life Sciences segment had a gross profit margin of 65.4% and 66.5%, respectively. Gross profit margin for both periods increased in line with revenue with consistent product mix period to period and ~~contributions from an acquisition.~~

~~Table of Contents~~

Selling, General and Administrative Expenses

Selling, general and administrative expenses were ~~$1,213~~$729 and ~~$1,071~~$642 for the three months ended ~~March~~December 31, 2021 and 2020, respectively, an increase of ~~$142,~~$87 or ~~13.3%. Selling, general and administrative expenses were $2,189 and $2,051 for the six months ended March 31, 2021 and 2020, respectively, an increase of $138 or 6.7%~~13.6%. The ~~increased~~increase in expenses ~~in both periods reflects leverage of fixed costs and some expenses from an acquired business~~ relative to ~~prior year period.~~revenue reflected positive operating leverage on higher volumes.

Income from Operations

Income from operations was $571 for the three months ended ~~March~~December 31, 2021 ~~and 2020 was $847 and $64, an increase of $783 or 1,223.4%. Income from operations~~compared to $349 for the ~~six~~three months ended ~~March~~December 31, ~~2021 and~~ 2020, representing a 63.6% increase from the prior year period. The increase was ~~$1,464 and $354, an increase of $1,110 or 313.6%. The growth in both periods reflects strong organic growth,~~due to favorable operating leverage ~~and, to a smaller extent, contribution from an acquisition.~~as revenue recovered.

Results of Operations – Corporate and ~~other~~Other – Three ~~and Six~~ Months Ended ~~March~~December 31, 2021 and 2020

Below is a reconciliation of income from ~~operations~~operating segments to net income (loss) available to common ~~stockholders~~stockholders.

	Three Months Ended December 31,
	2021			2020
	(In thousands)
Total income from operating segments	$	4,161		$	1,457
Administrative expenses		(1,000	)		(707	)
Amortization expense		(509	)		(251	)
Stock-based compensation		(10	)		(10	)
Total Corporate expenses		(1,519	)		(968	)
Interest expense		(279	)		(119	)
Net income before taxes		2,363			370
Income tax expense		(675	)		(115	)
Net income		1,688			255
Preferred stock dividends		(211	)		(174	)
Net income Available to Common Stockholders	$	1,477		$	81

Three Months Ended
March 31,

Six Months Ended
March 31,

(in thousands)
2021

2020

2021

2020

Total income from operating segments
$
1,910

$
272

$
3,367

$
1,259

Administrative expenses
(764
)

(804
)

(1,471
)

(1,534
)
Amortization expense
(293
)

(243
)

(544
)

(486
)
Stock-based compensation
(12
)

(56
)

(22
)

(111
)
Total Corporate expenses
(1,069
)

(1,103
)

(2,037
)

(2,131
)
Interest expense
(158
)

(141
)

(277
)

(304
)
Gain on Paycheck Protection Program loan forgiveness
135

—

135

—

Net income (loss) before taxes
818

(972
)

1,188

(1,176
)
Income tax (expense) benefit
(222
)

35

(337
)

119

Net income (loss)
596

(937
)

851

(1,057
)
Preferred stock dividends
(195
)

(175
)

(369
)

(326
)
Net Income (Loss) Available to Common Stockholders
$
401

$
(1,112
)

$
482

$
(1,383
)

Table of Contents

Total Corporate Expenses

Total corporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, ~~decreased~~increased by ~~$34,~~$551, or ~~by 3.1%~~56.9%, to ~~$1,069 in~~$1,519 for the three months ended ~~March~~December 31, 2021 as compared to ~~$1,103~~$968 for the three months ended ~~March~~December 31, 2020. The ~~decrease~~increase was due primarily ~~due~~ to ~~lower~~higher accounting related professional ~~expenses and stock-based compensation, partially offset by higher amortization of intangible asset~~ expense, ~~related to three acquisitions versus the prior year period.~~

~~Total corporate expenses, which include amortization of intangible assets, stock-based compensation and~~increased merger and acquisition expenses ~~decreased by $94, or by 4.4%, to $2,037~~and increases in the six months ended March 31, 2021 as compared to $2,131 for the six months ended March 31, 2020. The decrease was primarily due to lower professional expenses and stock-based compensation, partially offset by higher amortization of intangible ~~asset expense related to three acquisitions versus~~expenses. We incur merger and acquisition deal-related expenses and intangible amortization at the ~~prior year period.~~corporate level rather than at the segment level.

~~Table of Contents~~

Interest Expense

Interest expense for the consolidated company increased ~~$17,~~$160, or ~~12.1%~~134.5%, to ~~$158~~$279 for the three months ended ~~March~~December 31, 2021 from ~~$141~~$119 for the three months ended ~~March~~December 31,2020 ~~as a result of a higher debt level~~primarily due to ~~acquisitions~~higher average debt balances to support our acquisition efforts and higher working capital within Logistics to support business growth partially offset by lower interest ~~rates versus the prior year period.~~

Interest expense for the consolidated company decreased $27, or 8.9%, to $277 for the six months ended March 31, 2021 from $304 for the six months ended March 31, 2020 as a result of lower rates partially offset by higher borrowing to support acquisitions.rates.

Income Taxes Expense

On a consolidated basis, the Company recorded an income tax expense of ~~$222~~$675 for the three months ended ~~March~~December 31, 2021, as compared to an income tax ~~benefit~~expense of ~~$35~~$115 for the three months ended ~~March~~December 31,2020. The increase in expense was primarily due to ~~the~~an increase in pretax income.In 2016, a deferred tax asset was established to reflect a net operating loss carryforward, which the Company has begun using, and ~~is expected~~expects to continue to use, through ongoing profitability.

On a consolidated basis, the Company recorded an income tax expense of $337 for the three months ended March 31, 2021, as compared to an income tax benefit of $119 for the three months ended March 31, 2020. The increase in expense was primarily due to the increase in pretax income. In 2016, a deferred tax asset was established to reflect a net operating loss carryforward, which the Company has begun using, and is expected to continue to use, through ongoing profitability.

Preferred Stock Dividends

Preferred stock dividends include any dividends accrued but not paid on the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”). For the three months ended ~~March~~December 31, 2021 and 2020, preferred stock dividends were ~~$195~~$211 and ~~$175,~~$174, respectively, representing an increase of ~~$20,~~$37, or ~~11.4%~~21.3%. The increase in preferred stock dividends was the result of ~~the~~a higher number of shares of Series C Stock outstanding and an increase in dividend rate as of January 1, 2021 to 8% ~~from 7%, partially offset by a lower number of shares of Series C Stock outstanding. See note 10 to the consolidated financial statements for additional information.~~.

For the six months ended March 31, 2021 and 2020, preferred stock dividends were $369 and $326, respectively, representing an increase of $43, or 13.2%. The increase in preferred stock dividends was the result of the increase in dividend rate as of January 1, 2021 to 8% from 7%, partially offset by a lower number of shares of Series C Stock outstanding. See note 10 to the consolidated financial statements for additional information.

Net Income ~~(Loss)~~

Net income was ~~$596,~~$1,688, or ~~$0.61~~$1.66 per diluted share, for the three months ended ~~March~~December 31, 2021 compared to net ~~loss~~income of ~~($937),~~$255, or ~~($1.08)~~$0.26 per diluted share, for the three months ended ~~March~~December 31, 2020. The increase was primarily due to higher revenues and gross profit, ~~and lower~~partially offset by higher selling, general and administrative expenses across our operating ~~segments.~~

Net income was $851, or $0.87 per diluted share, for the six months ended March 31, 2021 compared to net loss of ($1,057), or ($1.22) per diluted share, for the six months ended March 31, 2020. The increase was primarily due to higher revenuessegments and ~~gross profit and lower selling, general and administrative expenses across our operating segments.~~at corporate.

Income ~~(Loss)~~ Available to Common Shareholders

Income available to holders of common shares was ~~$401,~~$1,477, or ~~$0.41~~$1.45 per diluted share, for the three months ended ~~March~~December 31, ~~2020~~2021 compared to ~~loss~~income available to holders of common shares of ~~($1,112),~~$81, or ~~($1.29)~~$0.08 per diluted share, for the three months ended ~~March~~December 31,2020. The increase in net income was primarily ~~was~~ due to higher ~~gross profit and lower~~revenues, partially offset by higher selling, general and administrative expenses across our ~~operating segments.~~

Income available to holders of common shares was $482, or $0.49 per diluted share, for the six months ended March 31, 2020 compared to loss available to holders of common shares of ($1,383), or ($1.60) per diluted share, for the three months ended March 31, 2020. Thebusinesses and corporate in both periods and an increase in ~~income primarily was due~~the dividend rate with respect to ~~higher gross profit and lower selling, general and administrative expenses across our operating segments.~~the Series C Stock as of January 1, 2021 to 8%.

~~Table of Contents~~

LIQUIDITY AND CAPITAL RESOURCES

General

Our ability to satisfy liquidity requirements, including satisfying debt obligations and fund working capital, day-to-day operating expenses and capital expenditures, depends upon future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond Janel’s control. Our ~~Global~~ Logistics ~~Services~~ segment depends on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors.

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As a customs broker, our ~~Global~~ Logistics ~~Services~~ segment makes significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities primarily in the United States. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a “pass through” and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. These “pass through” billings can influence our traditional credit collection metrics. For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures and has historically experienced relatively insignificant collection problems.

The COVID-19 pandemic has negatively impacted our liquidity and cash flows. ~~As discussed in greater detail in note 9 to the consolidated financial statements, on~~On April 19, 2020, we entered into a loan agreement with Santander and executed a U.S. Small Business Administration note pursuant to which we borrowed $2,726 from Santander pursuant to the ~~PPP~~Paycheck Protection Program (“PPP”) under ~~the Cares~~The Coronavirus Aid, Relief and Economic Security Act, Section 7(a)(36) of the Small Business Act in order to be able to continue to cover our payroll costs, group health care benefits, mortgage payments, rent and utilities. The duration and magnitude of the pandemic is not reasonably estimable at this point, and if the pandemic persists, our liquidity and capital resources could be further negatively impacted. During fiscal 2021, the Company applied for and received forgiveness for its PPP Loan.

Our subsidiaries depend on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors. Generally, we do not make significant capital expenditures.

Janel’s cash flow performance for the ~~2021~~2022 fiscal year ismay not necessarily be indicative of future cash flow performance.

As of ~~March~~December 31, 2021, the Company’s cash and working capital deficiency (current assets minus current liabilities) were ~~$3,509~~$5,186 and ~~$11,714, respectively.~~$13,444, respectively. As of September 30, ~~2020,~~2021, the Company’s cash and working capital deficiency were ~~$3,349~~$6,234 and ~~$10,372, respectively.~~$14,784. Compared with the prior ~~year~~ period, the Company’s cash ~~and cash equivalents increased $160,~~decreased $1,048, or ~~4.8%~~17%, and its working capital deficiency ~~increased $1,800,~~(current assets minus current liabilities) decreased $1,340, or ~~17.4%~~9%. The decrease in cash and ~~increase in~~ working capital deficiency was primarily the result of ~~acquisitions and slower~~an increase in accounts receivables ~~collections.~~collections offset by decreases in accounts payables and accrued expense payments.

Cash flows from operating activities

Net cash provided by operating activities was $5,291 for the ~~six~~three months ended ~~March~~December 31, 2021, ~~and 2020 was $714 and $1,209, respectively.~~versus ($812) used in operating activities for the three months ended December 31, 2020. The ~~decrease~~increase in cash provided by operations for the ~~six~~three months ended ~~March~~December 31, 2021 compared to the prior year period was driven principallyby higher profits, timing of cash payments for accounts payables and accrued expenses, partially offset by the timing of cash collections for accounts ~~receivables and cash payments on accounts payables.~~receivables.

Cash flows from investing activities

Net cash used in investing activities totaled ~~$2,959~~$169 for the ~~six~~three months ended ~~March~~December 31, 2021, versus ~~$247~~$2,861 for ~~six~~three months ended ~~March~~December 31, 2020. The Company used ~~$2,814 for the acquisition of two businesses and $85~~$169 for the acquisition of property and equipment for the ~~six~~three months ended ~~March~~December 31, 2021 compared to ~~$116~~ $2,806 for ~~final purchase price adjustments related to an~~the acquisition of two businesses and ~~$131~~ $55 for the acquisition of property and equipment for the ~~six~~three months ended ~~March~~December 31, 2020.

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Cash flows from financing activities

Net cash used in financing activities was $6,170 for the three months ended December 31, 2021, versus net cash provided by financing activities ~~was $2,405~~of $2,156 for the ~~six~~three months ended ~~March~~December 31, ~~2021, versus ($1,197)~~2020. Net cash used in financing activities for the ~~six~~three months ended ~~March~~December 31, ~~2020.~~2021 primarily included repayment of funds from our line of credit partially, term loan and notes payable related party. Net cash provided by financing activities for the ~~six~~three months ended ~~March~~December 31, ~~2021~~2020 primarily included ~~funds~~proceeds from our line of credit partially offset by repayments ofon term ~~loans.~~loan and notes payable related party.

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Off-Balance Sheet Arrangements

As of ~~March~~December 31, 2021, we had no off-balance sheet arrangements or obligations.

ITEM 4.

CONTROLS AND PROCEDURES

~~Evaluation of Disclosure Controls and Procedures~~

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer and ~~Chief~~Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and our ~~Chief~~Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, ~~2020~~,2021, the end of the period covered by this Quarterly Report on Form 10-Q. Consistent with guidance issued by the SEC that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management’s evaluation of disclosure controls and procedures, management is excluding an assessment of such internal controls of ELFS from its evaluation of the effectiveness of the Company’s disclosure controls and procedures. ELFS, which the Company acquired on September 21, 2021, constituted 15 percent of the Company’s total assets and 34 percent of income before income taxes of the Company as of and for the quarter ended December 31, 2021. Based on this evaluation, the Company’s Chief Executive Officer and ~~Chief~~Principal Financial Officer have concluded that ~~because a material weaknesses~~ as of the end of such period, the Company’s disclosure controls and procedures were effective.

As referenced above, the Company acquired ELFS on September 21, 2021. The Company is in the process of reviewing the internal control structure of ELFS and, if necessary, will make appropriate changes as it integrates ELFS into the Company’s overall internal control over financial reporting process. Other than as described above, there have been no changes in the Company’s internal control over financial reporting ~~existed at September 30, 2018~~(as such term is defined in Rules 13a-15(f) and ~~had not been remediated by~~15d-15(f) under the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q. These material weaknesses in the Company’s internal control over financial reporting and the Company’s remediation efforts are described below.

~~Material Weaknesses in Internal Control Over Financial Reporting~~

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, have identified material weaknesses in the Company’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

~~Life Sciences~~

In connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020, management identified certain material weaknesses as of September 30, 2020 related to our Life Sciences segment. In particular, the Company had inadequate controls over the following:

~~The Life Science Segment had a lack of documentation and/or controls over the following:~~

order entry, invoicing, collections and timeliness of revenue recognition in accordance with ASC Topic 606, Revenue from Contracts with Customers – Principal Agent Consideration (“ASC Topic 606”),

~~financial close process,~~

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~~inventory management and valuation of inventory,~~

~~information technology controls,~~

accounting manager’s administrative access to financial accounting software and banking portal, roles and responsibilities around significant processes including financial close without independent review or back-up results in segregation of duties issue,

lack of formal evidence pertaining to month-end closing activities (i.e., journal entry review, account reconciliations, closing checklists, budget to actual analysis, review of financial package, inventory account analysis, etc.), and

~~lack of review of sales orders including pricing, lack of revenue cut off procedures and lack of inventory valuation controls, inventory counts and reconciliation to general ledger.~~

In addition, a number of deficiencies were identified related to the design, implementation and effectiveness of certain information technology general controls, including segregation of duties, user access, change management, data back-ups and review of SOC 1 and 2 reports from critical vendors, some of which could have a direct impact on the Company’s financial reporting.

~~Global Logistics Services~~

In connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020, management identified certain material weaknesses as of September 30, 2020 related to our Global Logistics Services segment. In particular, the Company had inadequate controls over the following:

• no formal management review controls in place to ensure correct revenue file types and charge codes are used for all jobs and are designed specifically to address ASC Topic 606,

• management did not have an effective process or control in place to perform an assessment of gross versus net revenue recognition criteria in accordance with ASC Topic 606, and

• during the three months ended June 30, 2020, management identified an additional material weakness related to the prevention and timely detection of funds transfers to an unauthorized account, for which remediation actions have been undertaken as more fully described below.

~~Corporate~~

In connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020, management identified certain material weaknesses as of September 30, 2020 related to our Corporate office. In particular, the Company had inadequate controls over a lack of segregation of duties between chief financial officer and corporate accountant regarding:

~~• administrative access to financial accounting software and banking portal and~~

~~• the financial close process.~~

~~Remediation Plan~~

We have engaged an external consultant to assist in the development and execution of a plan to remediate the material weaknesses noted related to our Life Sciences segment noted above. This process includes review of our controls and implementation of a new enterprise resource planning system which commenced during the first quarter of fiscal 2021 and is expected to be fully implemented by the third quarter of fiscal 2021.

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In addition, we have developed and are executing on our plan to remediate our material weaknesses in connection with the information technology controls and have expanded our in-house expertise on information technology general controls, as well as continuing to consult with external third parties. We have implemented improved information technology general controls, including segregation of duties, user access, change management, data back-ups and review of SOC 1 and 2 reports from critical vendors on a consistent basis. This process commenced during the fourth quarter of fiscal 2020 and is ongoing.

With respect to material weaknesses in our Global Logistics Services segment, we have engaged an external consultant to assist in the development and execution of a plan to remediate the material weaknesses noted above related to our Global Logistics Services segment. As part of this plan, we have implemented a new system triggered revenue recognition process based on target dates (e.g., delivery date, file transfer date, etc.) for specific file types. Through this technology and reporting improvement, we have enhanced our ability to timely monitor revenue recognition in accordance with GAAP. Moreover, in response to the material weakness related to the prevention and timely detection of funds transfers to unauthorized accounts, we have updated company policies and controls to provide for multifactor authentication, implemented a new payment processing validation procedure, updated internal firewall protocols related to e-mails and conducted updated training on finance-related internal controls policies.

With respect to material weaknesses noted at Corporate, we have developed a general IT policy which includes access provisioning and deprovisioning and user access reviews that would involve knowing and evaluating which staff have user privileges to mitigate any lack of segregation of duties.

Our management believes that the foregoing efforts will effectively remediate the material weaknesses. That said, the new and enhanced controls have not operated for a sufficient amount of time to conclude that the material weaknesses have been remediated. As we continue to evaluate and work to improve our internal control over financial reporting, our management may decide to take additional measures to address the material weaknesses or modify the remediation plan described above.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those controls determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation.

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 executive management team, together with our board of directors, is committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity.~~

Based on the nature and interrelationship of the noted deficiencies, management concluded that these additional deficiencies, in the aggregate, resulted in a reasonable possibility that a material misstatement in our interim or annual financial statements would not be prevented or detected on a timely basis, and as such, constituted a material weakness.

~~Changes in Internal Control over Financial Reporting~~

~~Other than the ongoing remediation efforts described above, there was no change in our internal control over financial reporting~~Exchange Act) that occurred during the quarter ended ~~March~~December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Janel is occasionally subject to claims and lawsuits which typically arise in the normal course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.

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ITEM 1A.

RISK FACTORS

For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s ~~2020~~2021 Annual Report.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the three months ended ~~March~~December 31, 2021. In addition, there were no shares of common stock purchased by us during the three months ended ~~March~~December 31, 2021.

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ITEM 6.

EXHIBIT INDEX

31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith)

31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (filed herewith)

32.1	Section 1350 Certification of Principal Executive Officer (filed herewith)

32.2	Section 1350 Certification of Principal Financial Officer (filed herewith)

101	Interactive data files providing financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March~~December 31, 2021 for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 in Inline XBRL ~~(Extensible~~(eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2021 and September 30, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Operations for the three months ended ~~March~~December 31, 2021 and 2020, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020, and (v) Notes to Condensed Consolidated Financial Statements.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith)

4329

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: ~~May 10, 2021~~February 9, 2022	JANEL CORPORATION
	Registrant

	/s/ Dominique Schulte
	Dominique Schulte
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

Dated: ~~May~~ ~~10, 2021~~February 9, 2022	JANEL CORPORATION
	Registrant

	/s/ Vincent A. Verde
	Vincent A. Verde
	Principal Financial Officer, Treasurer and Secretary

4430

Nevada		86-1005291
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

80 Eighth Avenue
New York, New York		10011
(Address of principal executive offices)		(Zip Code)

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

			Page

Part I - Financial Information			3

	Item 1.	Financial Statements	3

		Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2021 (unaudited) and September 30, ~~2020 (unaudited)~~2021	3

		Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 (unaudited)	4

		Condensed Consolidated Statement of ~~Changes in~~ Stockholders’ Equity for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~March~~December 31, 2021 and 2020 (unaudited)	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2719

	Item 4.	Controls and Procedures	4028

Part II - Other Information			4228

	Item 1.	Legal Proceedings	4228

	Item 1A.	Risk Factors	4328

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4328

	Item 6.	Exhibit Index	4329

		Signatures	4430

	(Unaudited) December 31, 2021			September 30, 2021
ASSETS
Current Assets:
Cash	$	5,186		$	6,234
Accounts receivable, net of allowance for doubtful accounts of $945 and $812, respectively		57,161			52,312
Inventory, net		3,521			3,227
Prepaid expenses and other current assets		2,318			3,002
Total current assets		68,186			64,775
Property and Equipment, net		5,038			4,977
Other Assets:
Intangible assets, net		23,664			24,173
Goodwill		18,486			18,486
Operating lease right of use asset		6,353			2,936
Security deposits and other long-term assets		510			577
Total other assets		49,013			46,172
Total assets	$	122,237		$	115,924
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit	$	23,842		$	29,637
Accounts payable – trade		45,851			37,243
Accrued expenses and other current liabilities		4,886			6,311
Dividends payable		2,638			2,427
Current portion of earnout		1,054			1,054
Current portion of deferred acquisition payments		190			188
Current portion of subordinated promissory note-related party		500			550
Current portion of long-term debt		872			868
Current portion of operating lease liabilities		1,797			1,281
Total current liabilities		81,630			79,559
Other Liabilities:
Long-term debt		4,450			4,744
Long-term portion of earnout		2,546			2,546
Subordinated promissory notes-related party		5,404			5,525
Long-term portion of deferred acquisition payments		185			183
Mandatorily redeemable non-controlling interest		841			783
Deferred income taxes		2,432			2,299
Long-term operating lease liabilities		4,708			1,751
Other liabilities		331			415
Total other liabilities		20,897			18,246
Total liabilities		102,527			97,805
Stockholders' Equity:
Preferred Stock, $0.001 par value; 100,000 shares authorized
Series B 5,700 shares authorized, 31 shares issued and outstanding		0			0
Series C 30,000 shares authorized and 20,960 shares issued and 20,960 outstanding at December 31, 2021 and September 30, 2021, liquidation value of $13,118 and $12,907 at December 31, 2021 and September 30, 2021, respectively		0			0
Common stock, $0.001 par value; 4,500,000 shares authorized, 979,707 issued and 959,707 outstanding as of December 31, 2021 and 962,207 issued and 942,207 outstanding as of September 30, 2021		1			1
Paid-in capital		14,741			14,838
Common Treasury stock, at cost, 20,000 shares		(240	)		(240	)
Accumulated earnings		5,208			3,520
Total stockholders' equity		19,710			18,119
Total liabilities and stockholders' equity	$	122,237		$	115,924

Title of each class		Trading symbols(s)		Name of each exchange on which registered
None		None		None

	PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY			PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			COMMON TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY
																							SHARES		$		SHARES		$		$			SHARES		$			$			$
Balance - September 30, 2021																								20,991	$	0		962,207	$	1	$	14,838			20,000	$	(240	)	$	3,520		$	18,119
Net Income																								—		0		—		0		0			—		0			1,688			1,688
Dividends to preferred stockholders																								—		0		—		0		(211	)		—		0			0			(211	)
Stock-based compensation																								—		0		—		0		29			—		0			0			29
Stock options exercise																								0		0		17,500		0		85			0		0			0			85
Balance - December 31, 2021																								20,991	$	0		979,707	$	1	$	14,741			20,000	$	(240	)	$	5,208		$	19,710
	SHARES		$		SHARES		$		$			SHARES		$			$			$
Balance - September 30, 2020		19,791	$	-		918,652	$	1	$	14,604			20,000	$	(240	)	$	(1,683	)	$	12,682			19,791		0		918,652	$	1	$	14,604			20,000	$	(240	)	$	(1,683	)	$	12,682
Net Income		-		-		-		-		-			-		-			255			255			—		0		—		0		0			—		0			255			255
Dividends to preferred stockholders		-		-		-		-		(174	)		-		-			-			(174	)		—		0		—		0		(174	)		—		0			0			(174	)
Stock-based compensation		-		-		-		-		10			-		-			-			10			—		0		—		0		10			—		0			0			10
Stock option exercise		-		-		2,502		-		21			-		-			-			21
Balance - December 31, 2020		19,791	$	-		921,154	$	1	$	14,461			20,000	$	(240	)	$	(1,428	)	$	12,794
Net Income		-		-		-		-		-			-		-			596			596
Dividends to preferred stockholders		-		-		-		-		(195	)		-		-			-			(195	)
Stock-based compensation		-		-		-		-		12			-		-			-			12
Balance - March 31, 2021		19,791	$	-		921,154	$	1	$	14,278			20,000	$	(240	)	$	(832	)	$	13,207
Stock options exercise																								0		0		2,502		0		21			0		0			0			21
Balance – December 31, 2020																								19,791	$	0		921,154	$	1	$	14,461			20,000	$	(240	)	$	(1,428	)	$	12,794

	Fair Value
Accounts receivable	$	177
Inventory		226
Prepaids and other current assets		3
Property & equipment, net		64
Intangibles - customer relationships		1,360
Intangibles - trademark		70
Goodwill		1,438
Accounts payable & accrued expenses		(24	)
Purchase price, net of cash received	$	3,314

	March 31, 2021			September 30, 2020
Global Logistics Services	$	8,174		$	7,643
Manufacturing		7,700			7,700
Life Sciences		3,768			2,338
		19,642			17,681
Less: Accumulated Amortization		(4,892	)		(4,348	)
Intangible assets, net	$	14,750		$	13,333

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding Balance at September 30, 2020		93,996		$	5.76		5.24	$	304.99
Granted		7,500		$	9.00		9.50	$	—
Exercised		(2,502	)	$	8.58		—	$	—
Outstanding Balance at March 31, 2021		98,994		$	5.93		5.04	$	1,144.91
Exercisable on March 31, 2021		83,998		$	5.42		4.36	$	1,014.32

	March 31,
	2021		2020
Employee Stock Options		98,994		114,496
Non-employee Stock Options		6,053		36,053
Employee Restricted Stock		—		5,000
Non-employee Restricted Stock		—		26,667
Convertible Preferred Stock		310		6,310
		105,357		188,526

	For the Six Months Ended March 31, 2021			For the Six Months Ended March 31, 2020
Federal taxes at statutory rates	$	(250	)	$	247
Permanent differences		7			(28	)
Other		-			(63	)
State and local taxes		(94	)		(37	)
	$	(337	)	$	119

	��	December 31, 2021		December 31, 2020
Federal taxes at statutory rates		$	496	$	78
Permanent differences			10		3
State and local taxes, net of Federal benefit			169		34
Total		$	675	$	115

For the three months ended March 31, 2021	Consolidated		Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	30,142	$	24,373	$	2,529	$	3,240	$	—
For the three months ended December 31, 2021 (in thousands)												Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenues												$	83,314	$	77,556	$	3,244	$	2,514	$	0
Forwarding expenses and cost of revenues		22,593		20,250		1,163		1,180		—			67,825		65,610		1,001		1,214		0
Gross profit		7,549		4,123		1,366		2,060		—
Gross margin													15,489		11,946		2,243		1,300		0
Selling, general and administrative		6,415		3,743		683		1,213		776			12,338		9,349		1,250		729		1,010
Amortization of intangible assets		293		—		—		—		293			509		0		0		0		509
Operating income (loss)		841		380		683		847		(1,069	)
Income (loss) from operations													2,642		2,597		993		571		(1,519	)
Interest expense		158		81		43		27		7			279		224		29		26		0
Identifiable assets		70,381		23,743		4,078		10,557		32,003			122,237		64,899		10,083		4,017		43,238
Capital expenditures	$	30	$	24	$	3	$	3	$	—		$	169	$	65	$	102	$	2	$	0

For the six months ended March 31, 2021	Consolidated		Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	56,620	$	46,633	$	4,398	$	5,589	$	—
For the three months ended December 31, 2020 (in thousands)												Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenues												$	26,478	$	22,260	$	2,349	$	1,869	$	0
Forwarding expenses and cost of revenues		42,622		38,645		2,041		1,936		—			20,029		18,395		756		878		0
Gross profit		13,998		7,988		2,357		3,653		—
Gross margin													6,449		3,865		1,593		991		0
Selling, general and administrative		12,124		7,117		1,325		2,189		1,493			5,709		3,374		976		642		717
Amortization of intangible assets		544		—		—		—		544			251		0		0		0		251
Operating income (loss)		1,330		871		1,032		1,464		(2,037	)		489		491		617		349		(968	)
Interest expense		277		118		90		55		14			119		37		28		47		7
Identifiable assets		70,381		23,743		4,078		10,557		32,003			68,224		22,418		10,252		3,501		32,053
Capital expenditures	$	85	$	43	$	15	$	27	$	—		$	55	$	19	$	24	$	12	$	0

Level 3	December 31, 2021		September 30, 2021
Contingent earnout liabilities	$	3,600	$	3,600
Level 3 Liabilities	$	3,600	$	3,600

For the six months ended March 31, 2020	Consolidated			Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	38,942		$	31,407	$	3,926	$	3,609	$	—
Forwarding expenses and cost of revenues		26,659			23,702		1,753		1,204		—
Gross profit		12,283			7,705		2,173		2,405		—
Selling, general and administrative		12,669			7,590		1,383		2,051		1,645
Amortization of intangible assets		486			—		—		—		486
Operating (loss) income		(872	)		115		790		354		(2,131	)
Interest expense		304			120		138		51		(5	)
Identifiable assets		52,868			14,012		2,425		9,650		26,781
Capital expenditures	$	131		$	64	$	23	$	44	$	—

	December 31, 2021		September 30, 2021
Balance at beginning of period	$	3,600	$	0
Fair value of contingent consideration recorded in connection with business combinations		0		3,600
Change in fair value of contingent consideration		0		0
Balance at end of period	$	3,600	$	3,600

	Six Months Ended March 31, 2021		Six Months Ended March 31, 2020
Operating lease cost	$	486	$	353
Short-term lease cost		14		68
Total lease cost	$	500	$	421

2021	$	809
				Year End December 31, 2021
2022		730		$	1,798
2023		512			1,441
2024		496			1,147
2025		123			853
Total undiscounted lease payments		2,670
2026					620
Thereafter					1,168
Total undiscounted loan payments					7,027
Less: Imputed interest		(191	)		(522	)
Total lease obligations	$	2,479
Total lease obligation				$	6,505

(in thousands)	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020			Six Months Ended March 31, 2021		Six Months Ended March 31, 2020
Operating income (loss)	$	841	$	(831	)	$	1,330	$	(872	)
Amortization of intangible assets⁽¹⁾		293		243			544		486
Stock-based compensation⁽²⁾		30		75			54		149
Cost recognized on sale of acquired inventory ⁽³⁾		291		227			505		447
Adjusted operating income (loss)	$	1,455	$	(286	)	$	2,433	$	210