JANEL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For Quarterly Period Ended ~~December 31, 2021~~June 30, 2022

TABLE OF CONTENTS

			Page

Part I - Financial Information			3

	Item 1.	Financial Statements	3

		Condensed Consolidated Balance Sheets as of ~~December 31, 2021~~June 30, 2022 (unaudited) and September 30, 2021	3

		Condensed Consolidated Statements of Operations for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)	4

		Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 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	1923

	Item 4.	Controls and Procedures	28 34

Part II - Other Information			28 35

	Item 1.	Legal Proceedings	28 35

	Item 1A.	Risk Factors	28 35

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2835

	Item 5.	Other Information	35

	Item 6.	Exhibit Index	29 36

		Signatures	30 36

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

JANEL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)

(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

	June 30, 2022			September 30, 2021
ASSETS
Current Assets:
Cash	$	3,836		$	6,234
Accounts receivable, net of allowance for doubtful accounts		61,984			52,312
Inventory, net		4,133			3,227
Prepaid expenses and other current assets		3,726			3,002
Total current assets		73,679			64,775
Property and Equipment, net		5,103			4,977
Other Assets:
Intangible assets, net		22,689			24,173
Goodwill		18,598			18,486
Operating lease right of use asset		5,505			2,936
Security deposits and other long-term assets		532			577
Total other assets		47,324			46,172
Total assets	$	126,106		$	115,924
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Line of credit	$	22,920		$	29,637
Accounts payable – trade		47,585			37,243
Accrued expenses and other current liabilities		8,276			6,311
Dividends payable		1,673			2,427
Current portion of earnout		1,054			1,054
Current portion of deferred acquisition payments		192			188
Current portion of subordinated promissory note-related party		450			550
Current portion of long-term debt		874			868
Current portion of operating lease liabilities		1,623			1,281
Total current liabilities		84,647			79,559
Other Liabilities:
Long-term debt		4,017			4,744
Long-term portion of earnout		2,546			2,546
Subordinated promissory notes-related party		5,475			5,525
Long-term portion of deferred acquisition payments		187			183
Mandatorily redeemable non-controlling interest		841			783
Deferred income taxes		2,114			2,299
Long-term operating lease liabilities		4,047			1,751
Other liabilities		371			415
Total other liabilities		19,598			18,246
Total liabilities		104,245			97,805
Stockholders’ Equity:
Preferred Stock, $0.001 par value; 100,000 shares authorized
Series B 5,700 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and 31 shares issued and outstanding as of September 30, 2021		0			0
Series C 30,000 shares authorized and 11,368 and 20,960 shares issued and outstanding at June 30, 2022 and September 30, 2021, liquidation value of $7,357 and $12,907 at June 30, 2022 and September 30, 2021, respectively		0			0
Common stock, $0.001 par value; 4,500,000 shares authorized, 1,077,718 issued and 1,057,718 outstanding as of June 30, 2022 and 962,207 issued and 942,207 outstanding as of September 30, 2021		1			1
Paid-in capital		13,461			14,838
Common Treasury stock, at cost, 20,000 shares		(240	)		(240	)
Accumulated earnings		8,639			3,520
Total stockholders’ equity		21,861			18,119
Total liabilities and stockholders’ equity	$	126,106		$	115,924

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

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JANEL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	Three Months Ended December 31,						Three Months Ended June 30,						Nine Months Ended June 30,
	2021			2020			2022			2021			2022			2021
Revenue	$	83,314		$	26,478		$	78,984		$	34,826		$	243,149		$	91,446
Forwarding expenses and cost of revenues		67,825			20,029			61,819			26,058			193,986			68,680
Gross profit		15,489			6,449			17,165			8,768			49,163			22,766
Cost and Expenses:
Selling, general and administrative		12,338			5,709			13,505			7,158			39,718			19,282
Amortization of intangible assets		509			251			489			288			1,485			832
Total Costs and Expenses		12,847			5,960			13,994			7,446			41,203			20,114
Income from Operations		2,642			489			3,171			1,322			7,960			2,652
Other Items:
Interest expense		(279	)		(119	)		(299	)		(141	)		(847	)		(418	)
Gain on Paycheck Protection Program loan forgiveness								0			0			0			135
Income Before Income Taxes		2,363			370			2,872			1,181			7,113			2,369
Income tax expense		(675	)		(115	)		(714	)		(311	)		(1,994	)		(648	)
Net Income		1,688			255			2,158			870			5,119			1,721
Preferred stock dividends		(211	)		(174	)		(71	)		(197	)		(515	)		(566	)
Non-controlling interest dividends								0			0			(61	)		0
Net Income Available to Common Stockholders	$	1,477		$	81		$	2,087		$	673		$	4,543		$	1,155

Net income per share
Basic	$	1.76		$	0.27		$	2.04		$	0.93		$	5.13		$	1.84
Diluted	$	1.66		$	0.26		$	1.93		$	0.88		$	4.85		$	1.75
Net income per share attributable to common stockholders:
Basic	$	1.54		$	0.09		$	1.97		$	0.73		$	4.56		$	1.24
Diluted	$	1.45		$	0.08		$	1.87		$	0.68		$	4.31		$	1.17
Weighted average number of shares outstanding:
Basic		959.1			935.9			1,057.7			939.6			996.9			937.2
Diluted		1,018.1			966.8			1,116.6			994.8			1,055.0			981.8

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

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JANEL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SSTOCKHOLDERS’ ~~TOCKHOLDERS’~~ EQUITY

(in thousands, except share and per share data)

(Unaudited)

	PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			COMMON TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY			PREFERRED STOCK					COMMON STOCK				PAID-IN CAPITAL			COMMON TREASURY STOCK					ACCUMULATED EARNINGS		TOTAL EQUITY
	SHARES		$		SHARES		$		$			SHARES		$			$			$			SHARES				$	SHARES		$			$		SHARES			$		$			$
Balance - September 30, 2021		20,991	$	0		962,207	$	1	$	14,838			20,000	$	(240	)	$	3,520		$	18,119			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			—			0		—		0		0			—		0			1,688		1,688
Dividends to preferred stockholders		—		0		—		0		(211	)		—		0			0			(211	)		—			0		—		0		(211	)		—		0			0		(211	)
Stock-based compensation		—		0		—		0		29			—		0			0			29			—			0		—		0		29			—		0			0		29
Stock options exercise		0		0		17,500		0		85			0		0			0			85
Stock option 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			20,991			0		979,707		1		14,741			20,000		(240	)		5,208		19,710

Balance - September 30, 2020		19,791		0		918,652	$	1	$	14,604			20,000	$	(240	)	$	(1,683	)	$	12,682
Net Income		—		0		—		0		0			—		0			255			255			—			0		—		0		0			—		0			1,273		1,273
Dividends to preferred stockholders		—		0		—		0		(174	)		—		0			0			(174	)		—			0		—		0		(233	)		—		0			0		(233	)
Stock-based compensation		—		0		—		0		10			—		0			0			10
Dividends to non-controlling interest																								—			0		—		0		(61	)		—		0			0		(61	)
Preferred C shares purchased																								(4,687	)		0		0		0		(1,731	)		—		—			0		(1,731	)
Preferred C shares converted																								(4,905	)		0		65,205		0		0			—		—			0		0
Preferred B shares converted																								(31	)		0		306		0		0			—		—			0		0
Stock based compensation																								0			0		15,000		—		718			0		0			0		718
Stock options exercise		0		0		2,502		0		21			0		0			0			21			0			0		17,500		0		76			0		0			0		76
Balance – December 31, 2020		19,791	$	0		921,154	$	1	$	14,461			20,000	$	(240	)	$	(1,428	)	$	12,794
Balance - March 31, 2022																								11,368		$	0		1,077,718	$	1	$	13,510			20,000	$	(240	)	$	6,481	$	19,752
Net Income																								—			0		—		0		0			—		0			2,158		2,158
Dividends to preferred stockholders																								—			0		—		0		(71	)		—		0			0		(71	)
Stock based compensation																								—			0		—		0		22			—		0			0		22
Balance – June 30, 2022																								11,368		$	0		1,077,718	$	1	$	13,461			20,000	$	(240	)	$	8,639	$	21,861

	PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			COMMON TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY
	SHARES			$	SHARES		$			$		SHARES			$		$				$
Balance - September 30, 2020		19,791		0		918,652	$	1	$	14,604			20,000	$	(240	)	$	(1,683	)	$	12,682
Net Income		—		0		—		0		0			—		0			255			255
Dividends to preferred stockholders		—		0		—		0		(174	)		—		0			0			(174	)
Stock-based compensation		—		0		—		0		10			—		0			0			10
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
Net Income		—		0		—		0		0			—		0			596			596
Dividends to preferred stockholders		—		0		—		0		(195	)		—		0			0			(195	)
Stock based compensation		—		0		—		0		12			—		0			0			12
Balance - March 31, 2021		19,791	$	0		921,154	$	1	$	14,278			20,000	$	(240	)	$	(832	)	$	13,207
Net Income		—		0		—		0		0			—		0			870			870
Dividends to preferred stockholders		—		0		—		0		(197	)		—		0			0			(197	)
Stock based compensation		—		0		—		0		13			—		0			0			13
Stock options exercise		0		0		6,053		0		25			0		0			0			25
Balance – June 30, 2021		19,791	$	0		927,207	$	1	$	14,119			20,000	$	(240	)	$	38		$	13,918

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

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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.

Revenue and revenue recognition

Logistics

Revenue is recognized upon transfer of control of promised services to customers. With respect to its Logistics 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 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.

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In the Logistics segment, the Company disaggregates its revenues by its 5 primary service categories: ocean freight, trucking, air freight, ~~trucking,~~ customs brokerage, and ~~other.~~ other. A summary of the Company’s revenues disaggregated by major service lines for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ was as ~~follows:~~follows (in thousands):

Three Months
Ended
December 31,

Three Months
Ended
December 31,

Service Type
2021

2020

Ocean freight $ 32,876 $ 9,039
Trucking 21,775 4,352
Air freight
13,874 6,202
Other
5,330 12
Customs brokerage

3,701

2,655

Total
$
77,556

$
22,260

	Three Months Ended June 30,		Three Months Ended June 30,		Nine Months Ended June 30,		Nine Months Ended June 30,
	2022		2021		2022		2021
Service Type
Ocean freight	$	28,633	$	13,082	$	93,794	$	33,556
Trucking		24,920		5,051		70,234		14,104
Air freight		13,716		7,735		40,653		18,808
Other		3,619		25		12,064		83
Customs brokerage		2,796		3,476		9,568		9,451
Total	$	73,684	$	29,369	$	226,313	$	76,002

~~Table of Contents~~

Life Sciences and Manufacturing

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~~from the ~~carrier(s) used.~~

~~Manufacturing~~

~~The~~ Company’s Manufacturing segment, which is comprised of Indco, ~~Inc. (“Indco”),~~ a majority-owned subsidiary of the ~~Company. Revenues from Indco~~Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries (“Indco”), are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories. Revenues for Life Sciences and Manufacturing are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.

2.	ACQUISITION

Fiscal 2021 Acquisition

Logistics

On September 21, 2021, the Company completed the acquisition of all of the membership interests of Expedited Logistics and Freight Services, LLC (“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 ELFS based on the operating profit earned by ELFS. Upon the closing of the transaction, the former members of ELFS were paid $13,000 in cash and were issued an aggregate amount of $6,000 in subordinated promissory notes. Refer to Note 7 to the Condensed Consolidated Financial Statements for ELFS subordinated promissory notes information.

The ELFS acquisition was funded with cash provided by normal operations, borrowings under the Amended Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) dated September 21, 2021, as well as subordinated promissory notes issued to the former members of ELFS. This acquisition was completed to expand our product offerings in our Logistics segment. The preliminary fair value of the consideration transferred of $21,437 was valued as of the date of the acquisition as follows: cash - $13,000; earnout payments - $3,600; and subordinated promissory notes - $4,837 (preliminary net of working capital adjustment of $1,163). In March 2022, the fair value of the consideration transferred was adjusted to $21,700, and the fair value of the subordinated promissory notes was adjusted to $5,100, in each case due to a change in the net working capital adjustment of $263.

~~The~~The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Company for the three and nine months ended ~~December 31, 2020~~June 30, 2021 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.

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The pro forma results are not necessarily indicative of the 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
(in thousands, except per share data)			Three Months ended June 30, 2021		Nine Months ended June 30, 2021
Revenue	$	44,375	$	54,207	$	146,098
Income from Operations	$	630	$	2,263	$	4,313
Net Income	$	245	$	1,046	$	2,658
Net Income Available to Common Stockholders	$	71	$	849	$	2,092
Net income per share:
Net Income per share:
Basic	$	0.26	$	1.12	$	2.84
Diluted	$	0.25	$	1.06	$	2.71
Net income per share attributable to common stockholders:
Net Income per share attributable to Common Stockholders:
Basic	$	0.08	$	0.90	$	2.23
Diluted	$	0.07	$	0.86	$	2.13

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition occurred on October 1, ~~2019,~~2020, nor are they necessarily indicative of future results.

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INVENTORY

Inventories consisted of the following (in thousands):

	December 31, 2021			September 30, 2021			June 30, 2022			September 30, 2021
Finished goods	$	860		$	919		$	1,097		$	919
Work-in-process		944			968			777			968
Raw materials		1,745			1,365			2,329			1,365
Gross inventory		3,549			3,252			4,203			3,252
Less – reserve for inventory valuation		(28	)		(25	)		(70	)		(25	)
Inventory net	$	3,521		$	3,227		$	4,133		$	3,227

4.	INTANGIBLE ASSETS

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

	June 30, 2022			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		(6,953	)		(5,469	)
Intangible assets, net	$	22,689		$	24,173

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

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The composition of the intangible assets balance at ~~December 31, 2021~~June 30, 2022 and September 30, 2021 is as follows (in thousands):

	December 31, 2021			September 30, 2021			June 30, 2022			September 30, 2021
Logistics	$	18,174		$	18,174		$	18,174		$	18,174
Life Sciences		3,768			3,768			3,768			3,768
Manufacturing		7,700			7,700			7,700			7,700
		29,642			29,642			29,642			29,642
Less: Accumulated Amortization		(5,978	)		(5,469	)		(6,953	)		(5,469	)
Intangible assets, net	$	23,664		$	24,173		$	22,689		$	24,173

Amortization expense for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021 was $1,485 and ~~2020 was $509 and $251,~~$832, respectively.

GOODWILL

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

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The composition of the goodwill balance at ~~December 31, 2021~~June 30, 2022 and September 30, 2021 was as follows (in thousands):

	December 31, 2021		September 30, 2021		June 30, 2022		September 30, 2021
Logistics	$	9,063	$	9,063	$	9,175	$	9,063
Life Sciences		4,377		4,377		4,377		4,377
Manufacturing		5,046		5,046		5,046		5,046
Total	$	18,486	$	18,486	$	18,598	$	18,486

6.	NOTES PAYABLE – BANKS

(A)	Santander Bank Facility

The wholly-owned subsidiaries which comprise the Company’s Logistics segment (collectively, the “Janel Group Borrowers”), with the Company as a guarantor, have a Loan and Security Agreement (the “Santander Loan Agreement”) with Santander with respect to a revolving line of credit facility (the “Santander Facility”). ~~As most recently~~The Santander Loan Agreement was amended ~~in September 2021,~~on March 31, 2022 to provide for, among other changes, certain updates: (i) the ~~Santander Facility provides that the Janel Group Borrowers can borrow up~~maximum revolving facility amount available was increased from $30,000 to ~~$30,000 limited~~$31,500 (limited to 85% of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement) ; (ii) the LIBOR basis on which interest under the Santander Loan Agreement was calculated under certain circumstances was changed to the Secured Overnight Financing Rate (“SOFR”); (iii) a one-time increase from $1,000 to $3,000 in the amount the Company was permitted to distribute to holders of the Company’s Series C Stock if specified conditions are met; and (iv) the amount of indebtedness of the Company’s Antibodies Incorporated subsidiary which the Company was permitted to guaranty was increased from $2,920 to $5,000. The Santander Loan ~~Agreement.~~ Agreement matures on September 21, 2026. Interest accrues on the Santander Facility at an annual rate equal to ~~LIBOR (30, 60 or 90 day)~~the one-month SOFR plus 2.25% subject to a LIBOR floor of 75 basis 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~~2.75%. 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. As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance ~~sheet.~~sheet.

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At ~~December 31, 2021,~~June 30, 2022, outstanding borrowings under the Santander Facility were ~~$23,842,~~$22,920, representing ~~79.47%~~89.0% of the ~~$30,000~~$31,500 available subject to limitations thereunder, and interest was accruing at an effective interest rate of ~~3.00%~~3.16%.

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

The Company was in compliance with the covenants defined in the Santander Loan Agreement at both ~~December 31, 2021~~June 30, 2022 and September 30, 2021.

(B)	First Merchants Bank Credit Facility

Indco 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 Facility are secured by all of Indco’s real property and other assets, and are guaranteed by ~~Janel.~~the Company. Additionally, ~~Janel’s~~the Company’s guarantee of Indco’s obligations is secured by a pledge of ~~Janel’s~~the Company’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 ~~December 31, 2021,~~June 30, 2022, there were 0 outstanding borrowings under the revolving loan, ~~$2,519~~$2,131 of borrowings under the term loan, and ~~$649~~$637 of ~~borrowing~~borrowings under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of ~~2.85%~~3.87% and 4.19%, respectively.

As of September 30, 2021, there were 0 outstanding borrowings under the revolving loan, $2,713 of borrowings under the term loan, and $655 of ~~borrowing~~borrowings under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83% and 4.19%, respectively.

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Indco was in compliance with the covenants defined in the First Merchants Credit Agreement at both ~~December 31, 2021~~June 30, 2022 and September 30, 2021.

	December 31, 2021			September 30, 2021
	(in thousands)
(in thousands)							June 30, 2022			September 30, 2021
Total Debt*	$	3,168		$	3,368		$	2,768		$	3,368
Less Current Portion		(809	)		(809	)		(809	)		(809	)
Long Term Portion	$	2,359		$	2,559		$	1,959		$	2,559

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

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(C)	First Northern Bank of Dixon

Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company, ~~(by succession),~~ has a 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 Prime plus 325 basis points (currently 4.18%) and matures on November 14, 2029.

In addition, Antibodies has a $750 revolving credit facility with First Northern which currently bears interest at the annual rate of Prime plus 325 basis points (currently 4.18%) and matures on November 5, 2022 (the “First Northern Revolving Loan”). and is collateralized by real property owned by Antibodies and guaranteed by the Company. There were 0 outstanding borrowings on the revolving credit facility as of ~~December 31, 2021~~June 30, 2022 or September 30, 2021.

Antibodies also has 2 separate business loan agreements with First Northern: a $125 term loan in connection with 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 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 0 outstanding borrowings under the Generator Loan as of ~~December 31, 2021~~June 30, 2022 or September 30, 2021.

As of ~~December 31, 2021,~~June 30, 2022, the total amount outstanding under the First Northern Term Loan was ~~$2,126,~~$2,098, of which ~~$2,070~~$2,041 is included in long-term debt and ~~$56~~$57 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.

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

As of ~~December 31, 2021,~~June 30, 2022, the total amount outstanding under the First Northern Solar Loan was ~~$28,~~$25, of which ~~$21~~$17 is included in long-term debt, and $7$8 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

As of September 30, 2021, the total amount outstanding under the First Northern Solar Loan was $105, of which $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%.

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The Company was in compliance with the covenants defined in the First Northern Loan Agreement at ~~December 31, 2021~~June 30, 2022 and September 30, 2021.

	December 31, 2021			September 30, 2021
	(in thousands)
(in thousands)							June 30, 2022			September 30, 2021
Total Debt*	$	2,154		$	2,244		$	2,123		$	2,244
Less Current Portion		(63	)		(59	)		(65	)		(59	)
Long Term Portion	$	2,091		$	2,185		$	2,058		$	2,185

*	Long-term debt under the First Northern Loan Agreement 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.~~annum for five years.

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7.	SUBORDINATED PROMISSORY NOTES - RELATED PARTY

Aves Labs, Inc., a wholly-owned subsidiary of the Company, is the obligor on a fixed 0.5% subordinated promissory note in the amount of $1,850 (the “ICT Subordinated Promissory Note”) issued to the former owner of 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 16 scheduled quarterly installments of principal and interest beginning March 4, 2021, matures on ~~March 21, 2025,~~December 4, 2024, 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 Company’s 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 Facility and the First Northern Bank of Dixon.

As of ~~December 31, 2021,~~June 30, 2022, the amount outstanding under the ICT Subordinated Promissory Note was ~~$1,066,~~$825, of which ~~$500~~$450 is included in the current portion of subordinated promissory notes and ~~$566~~$375 is included in the long-term portion of subordinated promissory notes.

As of 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, Inc. (“Janel ~~Group~~Group”), a wholly-owned subsidiary of the Company, is the obligor on 4 fixed 4% subordinated promissory notes totaling $6,000 in the aggregate (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~~As of June 30, 2022, the principal amount of the ELFS Subordinated Promissory Notes ~~totaling $6,000 were recorded net of~~was adjusted to $5,100 due to a revised working capital adjustment of ~~$1,163.~~$900.

As of ~~both of December 31, 2021~~June 30, 2022 and September 30, 2021, the amount outstanding under the ELFS Subordinated Promissory Notes was $5,100 and $4,838, respectively, and was included in the long-term portion of subordinated promissory notes.

	December 31, 2021			September 30, 2021
	(in thousands)
(in thousands)							June 30, 2022			September 30, 2021
Total subordinated promissory notes	$	5,904		$	6,075		$	5,925		$	6,075
Less current portion of subordinated promissory notes		(500	)		(550	)		(450	)		(550	)
Long term portion of subordinated promissory notes	$	5,404		$	5,525		$	5,475		$	5,525

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8.	STOCKHOLDERS’ EQUITY

(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 (“Common Stock”) at any time on a one-share (of Series B Stock) for 10-shares (of Common Stock) basis. On March 31, 2022, the Company, on behalf of 2 holders, converted the remaining 30.6 shares of Series B Stock into 306 shares of the Company’s Common Stock. On March 31, 2022, the Company submitted for filing to the Nevada Secretary of State a Certificate, Amendment or Withdrawal of Designation withdrawing the Company’s Series B Convertible Preferred Stock from the Company’s Articles of Incorporation. As of June 30, 2022, the Company had 0 shares of Series B Stock outstanding.

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 $500, 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 to the Company’s Certificate of Incorporation on March 31, 2022, 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 will increase by 1% beginning on January 1, 2024. 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 June 30, 2022 was 5%.

On March 31, 2022, the Company purchased 4,687 shares of the Series C Stock from 2 holders at a purchase price of $500 per share plus accrued dividends, or an aggregate of $3,000, and exchanged 4,905 shares of Series C Stock plus accrued dividends from 1 holder, for the issuance of 65,205 shares of the Company’s Common Stock, par value $0.001 per share valued at $47.00 per share of Common Stock (the closing price for the Common Stock on March 30, 2022), or a total value of $3,065. As a result of these transactions, the number of issued and outstanding shares of Series C Stock was reduced from 20,960 shares to 11,368 shares.

8.9.	STOCK-BASED COMPENSATION

On October 30, 2013, the ~~board~~Board of ~~directors~~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 September 21, 2021, the ~~board~~Board of ~~directors~~Directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and 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 Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company and was updated to reflect certain other non-substantive amendments.

Total stock-based compensation for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ amounted to ~~$29~~$800 and ~~$24,~~$85, respectively, and 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.

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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.

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:

		~~Three~~Nine Months Ended ~~December 31,~~June 30, ~~2021~~2022
Risk-free interest rate		1.10%
Expected option term in years		5.5-6.5
Expected volatility		100.3% - 110.3%
Dividend yield		0%
Weighted average grant date fair value		$~~17.60~~5.57 - ~~$19.07~~$6.66

Options for Employees

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		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		98,994		$	5.93		4.5	$	1,689.38
Granted		10,000		$	23.00		9.8	$	0		10,000		$	23.00		9.3	$	0
Exercised		(17,500	)	$	4.87		—	$	—		(35,000	)	$	4.60		—	$	—
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
Outstanding balance at June 30, 2022											73,994		$	8.87		5.1	$	2,303.14
Exercisable at June 30, 2022											56,498		$	6.36		4.0	$	1,900.74

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The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at ~~December 31, 2021~~June 30, 2022 of ~~$24~~$40 per share and the exercise price of the stock options that had strike prices below such closing price.

As of ~~December 31, 2021,~~June 30, 2022, there was approximately ~~$153~~$155 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.

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Liability classified share-based awards

During the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, 7,018 options were granted and 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:

	~~Three~~Nine Months Ended ~~December 31,~~June 30, ~~2021~~2022
Risk-free interest rate		1.10%
Expected option term in years		5.5-6.5
Expected volatility		39%
Dividend yield		0%
Weighted average grant date fair value		$~~5.57 - $6.66~~17.16

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		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		38,961		$	10.28		6.62	$	78.16
Granted		7,018		$	17.16		9.75	$	0		7,018		$	17.16		9.25	$	0
Exercised		(10,372	)	$	8.30		—	$	—		(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
Outstanding balance at June 30, 2022											35,607		$	12.22		7.02	$	175.98
Exercisable at June 30, 2022											21,663		$	10.72		6.00	$	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 ~~December 31, 2021~~June 30, 2022 of $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 ~~$279~~$300 and $361 as of ~~December 31, 2021~~June 30, 2022 and September 30, 2021, respectively, and is included in other liabilities in the condensed consolidated financial ~~statement.~~statements. The compensation cost related to these options was approximately ~~$11~~$31 and ~~$15~~$50 for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 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, 2 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.~~June 30, 2022.

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

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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 ~~December 31, 2021,~~June 30, 2022, there was approximately ~~$70~~$49 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

On March 30, 2022, the Board of Directors of the Company approved an equity grant of 15,000 shares of Common Stock as a Restricted Stock Award to an employee of the Company pursuant to the Company’s Amended Plan, vesting immediately. The compensation cost related to this award was approximately $705 for the nine-month period ended June 30, 2022 and was included in selling, general and administrative expense in the Company’s statements of operations.

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 nine months ended ~~December 31, 2021,~~June 30, 2022, 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 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;~~businesses and other strategic transactions, such as the proposed Rubicon Transaction; the risk that we may fail to realize the expected benefits or strategic objectives of any acquisition or strategic transaction, or that we spend resources exploring acquisitions or strategic transactions that are not consummated; the impact of the coronavirus on worldwide economic conditions and on our businesses; 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;~~operate (including rising inflation and interest rates); the risk that we may not have sufficient working capital to continue operations; instability in the financial markets; 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; our compliance with applicable privacy, security and data laws; competition faced by our 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 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 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, 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~~Life Sciences businesses on a single location to manufacture their products; the ability of our ~~life sciences~~Life Sciences business to compete effectively; the ability of our ~~life sciences~~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;~~services; changes in governmental regulations applicable to our ~~life sciences~~Life Sciences business; the ability of our ~~life sciences~~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, ~~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 SEC, including our most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

1923

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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 segment was renamed “Logistics”; this change related to the name only and 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’s capital at high risk-adjusted rates of return; and attracting and retaining exceptional talent.

Management at the holding company 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.

Logistics

The Company’s Logistics segment is comprised of several wholly-owned 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 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, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc., (“W.R. Zanes”) which we include in our Logistics segment.

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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 December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”) 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.

Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. ~~Our significant~~For a description of the Company’s critical accounting policies ~~are described in Note 1, “Summary~~and estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of ~~Business~~Financial Condition and ~~Significant~~Results of Operations—Critical Accounting ~~Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended September 30, 2021, which are included~~Estimates” 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 condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. There were no significant changes to our critical accounting policies during the ~~three~~nine months ended ~~December 31, 2021.~~June 30, 2022.

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”).

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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.

We believe that organic growth and adjusted operating income provide useful information in understanding and evaluating our operating results in the same manner as management. However, 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 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 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.

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Our consolidated results of operations are as follows:

	Three Months Ended December 31, 2021		Three Months Ended December 31, 2020
Revenues	$	83,314	$	26,478
(in thousands)					Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		Nine Months Ended June 30, 2022		Nine Months Ended June 30, 2021
Revenue					$	78,984	$	34,826	$	243,149	$	91,446
Forwarding expenses and cost of revenues		67,825		20,029		61,819		26,058		193,986		68,680
Gross profit		15,489		6,449		17,165		8,768		49,163		22,766
Operating expenses		12,847		5,960		13,994		7,446		41,203		20,114
Operating income	$	2,642	$	489
Income from operations						3,171		1,322		7,960		2,652
Net income	$	1,688	$	255		2,158		870		5,119		1,721
Adjusted operating income	$	3,362	$	978	$	3,822	$	1,868	$	10,638	$	4,301

Consolidated revenues for the three months ended ~~December 31, 2021~~ June 30, 2022 were ~~$83,314,~~$78,984, which was $44,158 or ~~214.7%~~127% higher than the prior year period. Revenues over this period increased due to a recovery from the impact of the COVID-19 pandemic experienced in the prior year period as well as an increase in revenue of $27,759 from an acquisition. Consolidated revenues for the nine months ended June 30, 2022 were $243,149, which was $151,703 or 166% higher than the prior year period. Revenues over this period increased across all three segments due to a recovery from the impact of the COVID-19 pandemic experienced in the prior ~~fiscal~~ year period as well as an increase in revenue of $78,367 from acquisitions.

Income from operations for the three months ended June 30, 2022 was $3,171 compared with $1,322 in the prior year period. Income from operations for the nine months ended June 30, 2022 was $7,960 compared with $2,652 in the prior year period. The increase for both the three and nine months ended June 30, 2022 resulted from a recovery from the impact of ~~acquisitions, which accounted for $24,840 of additional revenue compared to~~the COVID-19 pandemic experienced in the prior ~~year. Operating~~year period as well as an increase in income from operations of $1,723 and $3,977, respectively from acquisitions, partially offset by stock-based compensation and higher spending in the Corporate segment.

Net income for the three months ended ~~December 31, 2021 was $2,642~~June 30, 2022 totaled $2,158 or $1.93 per diluted share, compared ~~with $489 in~~to net income of $870 or $0.88 per diluted share for the ~~prior year period as a result~~three months ended June 30, 2021. Net income for the nine months ended June 30, 2022 totaled $5,119 or $4.85 per diluted share, compared to net income of $1,721 or $1.75 per diluted share for the ~~economic recovery experienced across all of our segments, partially offset by higher spending in the corporate segment.~~ nine months ended June 30, 2021.

Adjusted operating income for the three months ended ~~December 31, 2021~~June 30, 2022 increased to ~~$3,362~~$3,822 versus ~~$978~~ $1,868 in the prior year period. Adjusted operating income for the nine months ended June 30, 2022 increased to $10,638 versus $4,301 in the prior year period. The ~~Company’s net income~~increase for both the three and nine months ended ~~December 31, 2021 totaled approximately $1,688 or $1.66 per diluted share, compared to~~June 30, 2022 resulted from a ~~net~~recovery in profits from the impact of the COVID-19 pandemic for our segments and the contribution of income ~~of $255 or $0.26 per diluted share for the three months ended December 31, 2020.~~from acquisitions.

The following table sets forth a reconciliation of operating income to adjusted operating income:

	Three Months Ended December 31,
	2021		2020
Operating income	$	2,642	$	489
(in thousands)					Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		Nine Months Ended June 30, 2022		Nine Months Ended June 30, 2021
Income from operations					$	3,171	$	1,322	$	7,960	$	2,652
Amortization of intangible assets		509		251		489		288		1,485		832
Stock-based compensation		40		24		32		31		800		85
Cost recognized on sale of acquired inventory		171		214		130		227		393		732
Adjusted operating income	$	3,362	$	978	$	3,822	$	1,868	$	10,638	$	4,301

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Results of Operations – Logistics – Three and Nine Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~

Our Logistics 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, customs entry filing, warehousing, cargo insurance procurement, logistics planning, product repackaging and online shipment tracking.

	Three Months Ended December 31,						Three Months Ended June 30,						Nine Months Ended June 30,
	2021			2020			2022			2021			2022			2021
(in thousands)
Revenue	$	77,556		$	22,260		$	73,684		$	29,369		$	226,313		$	76,002
Forwarding expense		65,610			18,395
Gross profit	$	11,946		$	3,865
Forwarding expenses								59,889			24,173			187,780			62,818
Gross Profit								13,795			5,196			38,533			13,184
Gross profit margin		15.4	%		17.4	%		18.7	%		17.7	%		17.0	%		17.3	%
Selling, general and administrative expenses	$	9,349		$	3,374
Selling, general & administrative								10,387			4,523			29,802			11,640
Income from operations	$	2,597		$	491		$	3,408		$	673		$	8,731		$	1,544

Revenue

Total revenue for the three months ended ~~December 31, 2021~~ June 30, 2022 was ~~$77,556~~$73,684 as compared to ~~$22,260~~$29,369 for the three months ended ~~December 31, 2020,~~June 30, 2021, an increase of ~~$55,296~~$44,315 or ~~248.4%~~151%. ~~The~~ Of the increase in revenue, ~~was primarily driven by~~an acquisition accounted for $27,759 of additional revenue compared to the prior year period and $16,556 represented organic growth and increased revenues resulting from the rise in transportation rates as a result of capacity issues ~~globally~~ globally.

~~and a recovery~~Total revenue for the nine months ended June 30, 2022 was $226,313 as compared to $76,002 for the nine months ended June 30, 2021, an increase of $150,311 or 198%. Of the increase in ~~business compared with the depressed levels in the prior year period, while~~revenue, two acquisitions accounted for $~~24,840~~77,112 of additional revenue compared to the prior ~~year.~~year period and $73,199 represented organic growth and increased revenues resulting from the rise in transportation rates as a result of capacity issues globally.

Gross Profit

Gross profit for the three months ended ~~December 31, 2021~~ June 30, 2022 was ~~$11,946,~~$13,795, an increase of ~~$8,081,~~$8,599, or ~~209.1%~~165%, as compared to ~~$3,865~~$5,196 for the three months ended ~~December 31, 2020. Two acquisitions~~June 30, 2021. An acquisition accounted for ~~$5,834~~$7,182 of additional gross profit compared to the prior year period. A recovery in business accounted for the balance of the gross profit increase compared with the depressed levels in the prior fiscal year and drove organic gross profit growth of ~~58%~~27%. Gross margin as a percentage of revenue increased to 18.7% for the three months ended June 30, 2022, compared to 17.7% for the prior year period, due to higher gross profit margins at an acquired business partially offset by lower gross profit margins due to the increase in transportation rates.

Gross profit for the nine months ended June 30, 2022 was $38,533, an increase of $25,349, or 192%, as compared to $13,184 for the nine months ended June 30, 2021. This increase was mainly the result of increased revenue from two acquisitions and organic growth in our base business due to a global economic recoveryfrom the impact of the COVID-19 pandemic. Gross profit as a percentage of revenue decreased to ~~15.4% for the three months ended December 31, 2021~~17.0% compared to ~~17.4%~~17.3% for the prior year period due to the increase in transportation rates versus the prior year period partially offset by higher gross profit margins at an acquired business.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended ~~December 31, 2021~~ June 30, 2022 were ~~$9,349,~~$10,387, as compared to ~~$3,374~~$4,523 for the three months ended ~~December 31, 2020.~~June 30, 2021. This increase of $5,864, or 130%, was mainly due to additional expenses from an acquired business. As a percentage of revenue, selling, general and administrative expenses were 14.1% and 15.4% of revenue for the three months ended June 30, 2022 and 2021, respectively. The decline in selling, general and administrative expenses as a percentage of revenue largely reflected the rise in transportation rates as a result of capacity issues globally and favorable operating leverage due to strong organic growth.

Selling, general and administrative expenses for the nine months ended June 30, 2022 were $29,802, as compared to $11,640 for the nine months ended June 30, 2021. This increase of ~~$5,975,~~$18,162, or ~~177.1%~~156%, was mainly due to additional expenses from acquired businesses. As a percentage of revenue, selling, general and administrative expenses were ~~12.1%~~ 13.2% and ~~15.2%~~15.3% of revenue for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. The decline in selling, general and administrative expenses as a percentage of revenue largely reflected the rise in transportation rates as a result of capacity issues ~~globally.~~globally and favorable operating leverage due to strong organic growth.

Income from Operations

Income from operations increased to ~~$2,597~~$3,408 for the three months ended ~~December 31, 2021,~~June 30, 2022, as compared to income from operations of ~~$491~~$673 for the three months ended ~~December 31, 2020,~~June 30, 2021, an increase of ~~$2,106.~~$2,735. Income from operations increased as a result of the ~~economic recovery~~contribution of revenue from ~~the COVID-19 pandemic compared to the prior fiscal year~~an acquisition and ~~contributions~~favorable operating leverage from ~~two acquisitions.~~ revenue growth. Operating margin as a percentage of gross profit for the three months ended ~~December 31, 2021~~ June 30, 2022 was ~~21.7%~~24.7% compared to ~~12.7%~~13.0% in the prior year period largely due to operating leverage from significantly higher gross profit as business recovered compared with the depressed levels in the prior year period.

23Income from operations increased to $8,731 for the nine months ended June 30, 2022, as compared to $1,544 for the nine months ended June 30, 2021, an increase of $7,187, or 465%. Income from operations increased during the nine months ended June 30, 2022 as a result of acquisitions and favorable leverage from revenue growth relative to the prior year period. Our operating margin as a percentage of gross profit for the nine months ended June 30, 2022 was 22.7% compared to 11.7% in the prior year period largely due to operating leverage from significantly higher gross profit as business recovered compared with the depressed levels in the prior year period.

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Results of Operations – Life Sciences – Three and Nine Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~

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Life Sciences – Selected Financial Information:

	Three Months Ended December 31,						Three Months Ended June 30,						Nine Months Ended June 30,
	2021			2020			2022			2021			2022			2021
(in thousands)
Revenue	$	3,244		$	2,349		$	2,738		$	3,384		$	9,257		$	8,973
Cost of sales		830			542			518			714			2,123			2,145
Cost recognized upon sale of acquired inventory		171			214
Cost recognized upon sales of acquired inventory								130			227			393			732
Gross profit	$	2,243		$	1,593			2,090			2,443			6,741			6,096
Gross profit margin		69.1	%		67.8	%		76.3	%		72.2	%		72.8	%		67.9	%
Selling, general and administrative expenses	$	1,250		$	976
Income from operations	$	993		$	617
Selling, general and administrative								1,225			1,084			3,758			3,273
Income from Operations							$	865		$	1,359		$	2,983		$	2,823

Revenue

Total revenue was $2,738 and $3,384 for the three months ended June 30, 2022 and 2021, respectively, reflecting a decrease of $646 or 19.1% compared to the prior year period due to the timing of orders, in particular for diagnostic reagents.

Total revenue was ~~$3,244~~$9,257 and ~~$2,349~~$8,973 for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively, remained relatively unchanged with an increase of ~~$895~~$284 or ~~38.1%~~3.2%. ~~An acquisition accounted for $404 of the revenue increase in the quarter, while organic growth of 21% accounted for the balance of revenue growth as~~ ~~academic research recovered from the impacts of the COVID-19 pandemic.~~

Gross Profit

Gross profit was ~~$2,243~~$2,090 and ~~$1,593~~ $2,443 for the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively, ~~an increase~~a decrease of ~~$650~~$353 or ~~40.8%~~14.5%. During the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ gross profit margin was ~~69.1%~~ 76.3% and ~~67.8%~~72.2%, respectively, as ~~favorable product mix and lower~~ cost recognized upon sale of acquired inventory ~~benefited~~declined and product mix improved.

Gross profit was $6,741 and $6,096 for the nine months ended June 30, 2022 and 2021, respectively, an increase of $645 or 10.6%. In the nine months ended June 30, 2022 and 2021, the Life Sciences segment had a gross profit ~~margin.~~margin of 72.8% and 67.9%, respectively. Gross profit margin for both periods increased in line with revenue with consistent contributions from an acquisition and as cost recognized upon the sale of acquired inventory decreased.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the Life Sciences segment were ~~$1,250~~ $1,225 and ~~$976~~$1,084 for the three months ended ~~December 31,~~June 30, 2022 and 2021, respectively. Selling, general and ~~2020,~~administrative expenses were $3,758 and $3,273 for the nine months ended June 30, 2022 and 2021, respectively. The year-over-year ~~increase~~increases for both periods was largely due to an acquired business.

Income from Operations

Income from operations for the three months ended ~~December 31,~~June 30, 2022 and 2021 was $865 and ~~2020~~ $1,359, respectively, a decrease of $494 or 36.4%, due to the timing of orders, in particular to diagnostic reagents. Income from operations for the nine months ended June 30, 2022 and 2021 was ~~$993~~ $2,983 and ~~$617,~~$2,823, respectively, an increase of ~~$376~~$160 or ~~60.9%~~5.7%, 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~~COVID-19 pandemic experienced in the prior fiscal year and lower cost recognized on acquired inventory and, to a lesser extent, a contribution from an acquisition.

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Results of Operations - Manufacturing – Three and Nine Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~

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

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Manufacturing – Selected Financial Information:

	Three Months Ended December 31,						Three Months Ended June 30,						Nine Months Ended June 30,
	2021			2020			2022			2021			2022			2021
(in thousands)
Revenue	$	2,514		$	1,869		$	2,562		$	2,073		$	7,579		$	6,471
Cost of revenues		1,214			878
Cost of sales								1,282			944			3,690			2,985
Gross profit	$	1,300		$	991			1,280			1,129			3,889			3,486
Gross profit margin		51.7	%		53.0	%		50.0	%		54.5	%		51.3	%		53.9	%
Selling, general and administrative expenses	$	729		$	642
Income from operations	$	571		$	349
Selling, general and administrative								676			682			2,170			2,007
Income from Operations							$	604		$	447		$	1,719		$	1,479

Revenue

Total revenue was ~~$2,514~~$2,562 and ~~$1,869~~$2,073 for the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively, an increase of ~~$645,~~$489. Total revenue was $7,579 and $6,471 for the nine months ended June 30, 2022 and 2021, respectively, an increase of $1,108, or ~~34.5%~~17.1%. The increase in revenue ~~increase~~for the nine months ended June 30, 2022 reflected a broad increase across the business and higher product pricing relative to the ~~COVID-19 related~~COVID-19-related slowdown reflected in the prior ~~fiscal~~ year. period.

Gross Profit

Gross profit was ~~$1,300~~$1,280 and ~~$991~~$1,129 for the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively, an increase of ~~$309,~~$151, or ~~31.2%~~13.8%. Gross profit margin for the three months ended ~~December 31,~~June 30, 2022 and 2021 was 50.0% and ~~2020~~ 54.5%, respectively. Gross profit was ~~51.7%~~$3,889 and ~~53.0%~~$3,486 for the nine months ended June 30, 2022 and 2021, respectively, an increase of $403, or 11.6%. Gross profit margin for the nine months ended June 30, 2022 and 2021 was 51.3% and 53.9%, respectively. The year-over-year decrease in gross profit margin for both periods was generally due to the mix of ~~business.~~business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were ~~$729~~$676 and ~~$642~~$682 for the three months ended ~~December 31,~~June 30, 2022 and 2021, respectively, a decrease of $6 or 1.0%. Selling, general and ~~2020,~~administrative expenses were $2,170 and $2,007 for the nine months ended June 30, 2022 and 2021, respectively, an increase of ~~$87~~$163 or ~~13.6%~~8.1%. The increase in expenses relative to revenue for the three- and nine-month periods reflected ~~positive operating leverage on higher volumes.~~the mix of business.

Income from Operations

Income from operations was ~~$571~~$604 for the three months ended ~~December 31, 2021~~June 30, 2022 compared to ~~$349~~$447 for the three months ended ~~December 31, 2020,~~June 30, 2021, representing a ~~63.6%~~35.1% increase from the prior year period due to favorable order timing versus the prior year period. Income from operations was $1,719 for the nine months ended June 30, 2022 compared to $1,479 for the nine months ended June 30, 2021, representing an 16.3% increase from the prior year period. The increase was due to favorable operating leverage as revenue ~~recovered.~~recovered from the impact of the COVID-19 pandemic.

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Results of Operations – Corporate and Other – Three and Nine Months Ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~

Below is a reconciliation of income from operating segments to net income ~~(loss)~~ available to common 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 June 30,						Nine Months Ended June 30,
(in thousands)	2022			2021			2022			2021
Total income from operating segments	$	4,877		$	2,479		$	13,433		$	5,846
Corporate expenses		(1,185	)		(838	)		(3,188	)		(2,277	)
Amortization expense		(489	)		(288	)		(1,485	)		(832	)
Stock-based compensation		(32	)		(31	)		(800	)		(85	)
Total Corporate expenses		(1,706	)		(1,157	)		(5,473	)		(3,194	)
Interest expense		(299	)		(141	)		(847	)		(418	)
Gain on Paycheck Protection Program loan forgiveness		-			-			-			135
Net income before taxes		2,872			1,181			7,113			2,369
Income tax expense		(714	)		(311	)		(1,994	)		(648	)
Net income		2,158			870			5,119			1,721
Preferred stock dividends		(71	)		(197	)		(515	)		(566	)
Non-controlling interest dividends		-			-			(61	)		-
Net Income Available to Common Stockholders	$	2,087		$	673		$	4,543		$	1,155

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Total Corporate Expenses

Total ~~corporate~~Corporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, increased by ~~$551,~~$549 or ~~56.9%~~47.5%, to ~~$1,519~~$1,706in the three months ended June 30, 2022 as compared to $1,157 for the three months ended ~~December 31, 2021~~June 30,2021. Total Corporate expenses increased by $2,279 or 71.4%, to $5,473 for the nine months ended June 30, 2022 as compared to ~~$968~~$3,194 for the ~~three~~nine months ended ~~December 31, 2020.~~June 30,2021. The increase in both periods was due primarily to ~~high~~erstock-based compensation related to restricted stock issuance with immediate vesting, higher accounting related professional expense, increased merger and acquisition expenses and increases in amortization of intangible expenses. We incur merger and acquisition deal-related expenses and intangible amortization at the ~~corporate~~Corporate level rather than at the segment level.

Interest Expense

Interest expense for the consolidated company increased $158 or 112.1%, to $299 for the three months ended June 30, 2022 from $141 for the three months ended June 30,2021. Interest expense for the consolidated company increased ~~$160,~~by $429 or ~~134.5%~~102.6%, to ~~$279~~$847 for the ~~three~~nine months ended ~~December 31, 2021~~June 30, 2022 from ~~$119~~$418 for the ~~three~~nine months ended ~~December 31,~~June 30, ~~2020~~2021. The increase in both periods was primarily due to 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.

Income ~~Taxes~~Tax Expense

On a consolidated basis, the Company recorded an income tax expense of ~~$675~~$714 for the three months ended ~~December 31, 2021,~~June 30, 2022, as compared to an income tax expense of ~~$115~~$311 for the three months ended ~~December 31,~~June 30, ~~2020.~~2021. On a consolidated basis, the Company recorded an income tax expense of $1,994 for the nine months ended June 30, 2022, as compared to an income tax expense of $648 for the nine months ended June 30,2021. The increase in expense for both periods was primarily due to 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 expects to continue to use, through ongoing profitability.~~

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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 Preferred Stock”). For the three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020,~~, preferred stock dividends were ~~$211~~$71 and ~~$174,~~$197, respectively, representing ~~an increase~~a decrease of ~~$37,~~$126, or ~~21.3%~~64.0%. For the nine months ended June 30, 2022 and 2021, preferred stock dividends were $515 and $566, respectively, representing a decrease of $51, or 9.0%. The ~~increase~~decrease in preferred stock dividends in both periods was the result of ~~a higher number of shares~~the Company retiring $6,000 of Series C Preferred Stock ~~outstanding~~on March 31, 2022 and ~~an increase in~~the annual dividend rate ~~as of January 1, 2021~~ change from 9% to 8%5%.

Net Income

Net income was ~~$1,688,~~$2,158, or ~~$1.66~~ $1.93 per diluted share, for the three months ended ~~December 31, 2021~~June 30, 2022 compared to net income of ~~$255,~~$870 or ~~$0.26~~$0.88 per diluted share, for the three months ended ~~December 31, 2020.~~June 30,2021.

Net income was $5,119, or $4.85 per diluted share, for the nine months ended June 30, 2022 compared to net income of $1,721, or $1.75 per diluted share, for the nine months ended June 30,2021. The increase for both periods was primarily due to higher revenues and gross profit, partially offset by higher selling, general and administrative expenses across our operating segments and at ~~corporate.~~Corporate.

Income Available to Common ~~Shareholders~~Stockholders

Income available to holders of ~~common shares~~ Common Stock was ~~$1,477,~~$2,087, or ~~$1.45~~$1.87 per diluted share, for the three months ended June 30, 2022 compared to income available to holders of Common Stock of $673, or $0.68 per diluted share, for the three months ended ~~December 31, 2021~~June 30,2021.

Income available to holders of Common Stock was $4,543, or $4.31 per diluted share, for the nine months ended June 30, 2022 compared to income available to holders of ~~common shares~~Common Stock of ~~$81,~~$1,115, or ~~$0.08~~$1.17 per diluted share, for the ~~three~~nine months ended ~~December 31,~~June 30, ~~2020.~~ 2021. The increase in net income for both periods was primarily due to higher revenues, partially offset by higher selling, general and administrative expenses across our businesses and ~~corporate~~Corporate in both periods and an increase in the dividend rate with respect to the Series C Stock as of January 1, 2021 to 8%.

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~~our control. Our Logistics 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.

~~Table of Contents~~

As a customs broker, our Logistics 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.

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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. 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 ~~Paycheck Protection Program (“PPP”)~~ under 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~~Our cash flow performance for the 2022 fiscal year may not necessarily be indicative of future cash flow performance.

~~As of December 31, 2021, the Company’s cash and working capital deficiency (current assets minus current liabilities)~~ ~~were $5,186 and $13,444, respectively. As of September 30, 2021, the Company’s cash and working capital deficiency were~~ $6,234 and $14,784. Compared with the prior period, the Company’s cash decreased $1,048, or 17%, and its working capital deficiency (current assets minus current liabilities) decreased $1,340, or 9%. The decrease in cash and working capital deficiency was primarily the result of an increase in accounts receivables 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~~$8,678 for the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, versus ~~($812) used in~~$139 provided by operating activities for the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021. The increase in cash provided by operations for the ~~three~~nine months ended ~~December 31, 2021~~June 30, 2022 compared to the prior year period was driven principally by higher profits ~~timing of cash payments for accounts payables~~ and ~~accrued expenses, partially offset by the timing of cash collections for accounts receivables.~~lower net working capital at our Logistics segment.

Cash flows from investing activities

Net cash used in investing activities totaled ~~$169~~$589 for the nine months ended June 30, 2022, versus $3,001 for the ~~three~~nine months ended ~~December 31, 2021, versus $2,861~~June 30, 2021. We used $477 for ~~three~~the acquisition of property and equipment for the nine months ended ~~December 31, 2020. The Company used $169~~June 30, 2022 compared to $2,874 for the acquisition of two businesses and $127 for the acquisition of property and equipment for the ~~three~~nine months ended ~~December 31, 2021 compared to $2,806 for the acquisition of two businesses and $55 for the acquisition of property and equipment for the three months ended December 31, 2020.~~June 30, 2021.

Cash flows from financing activities

Net cash used in financing activities was ~~$6,170~~$10,487 for the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, versus net cash provided by financing activities of ~~$2,156~~$2,439 for the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021. Net cash used in financing activities for the ~~three~~nine months ended ~~December 31, 2021~~June 30, 2022 primarily included repayment of funds from our line of credit, ~~partially,~~repurchase of Series C Stock and dividends paid to holders of Series C Stock, repayment of funds from our term loan and notes payable related ~~party.~~party, partially offset by proceeds from stock option exercises. Net cash provided financing activities for the ~~three~~nine months ended ~~December 31, 2020~~June 30, 2021 primarily included ~~proceeds~~funds from our line of credit partially offset by repayments onof term ~~loan and notes payable related party.~~loans.

~~Table of Contents~~

Off-Balance Sheet Arrangements

As of ~~December 31, 2021,~~June 30, 2022, we had no off-balance sheet arrangements or obligations.

ITEM 4.

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 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.

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Our management, with the participation of our Chief Executive Officer and our 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, 2021,~~June 30, 2022, 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 1517 percent of the Company’s total assets and 3445 percent of income before income taxes of the Company as of and for the quarter ended ~~December 31, 2021.~~June 30, 2022. Based on this evaluation, the Company’s Chief Executive Officer and Principal Financial Officer have concluded that 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 (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~December 31, 2021~~June 30, 2022 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.

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, 2021. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s 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~~nine months ended ~~December 31, 2021.~~June 30, 2022. In addition, there were no shares of ~~common stock~~Common Stock purchased by us during the ~~three~~nine months ended ~~December 31, 2021.~~June 30, 2022.

ITEM 5.

OTHER INFORMATION

28On August 1, 2022, Indco and First Merchants Bank entered into Amendment No. 3 to the First Merchants Credit Agreement, modifying the terms of Indco’s credit facilities. Under the revised terms, the credit facilities consist of a $5.500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan and the continuation of a mortgage loan in the original principal amount of $680. Interest will accrue on the term loan at an annual rate equal to one-month adjusted term SOFR 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 will accrue on the revolving loan at an annual rate equal to one-month adjusted term SOFR plus 2.75%. Interest will accrue on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants Credit Facilities are secured by all of Indco’s real property and other assets, and are guaranteed by Janel, and 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 Credit Facilities will expire on July 31, 2027, and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the Credit Agreement), unless renewed or extended.

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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 ~~December 31, 2021~~June 30, 2022 for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of ~~December 31, 2021~~June 30, 2022 and September 30, 2021, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ (iv) Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 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)

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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: ~~February~~ 9,August 5, 2022	JANEL CORPORATION
	Registrant

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

Dated: August 5,~~February 9,~~ 2022	JANEL CORPORATION
	Registrant

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

3036

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)

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

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

	Three Months Ended December 31,						Nine Months Ended June 30,
	2021			2020			2022			2021
Cash Flows From Operating Activities:
Net income	$	1,688		$	255		$	5,119		$	1,721
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for (recovery of) uncollectible accounts		102			(32	)		354			(22	)
Depreciation		107			86			351			265
Deferred income tax provision		133			86			(185	)		488
Amortization of intangible assets		509			251			1,485			832
Amortization of acquired inventory valuation		171			214			393			732
Amortization of loan costs		2			2			7			7
Stock-based compensation		40			24			800			85
Gain on Paycheck Protection Program loan forgiveness								0			(135	)
Changes in fair value of mandatorily redeemable noncontrolling interest		58			86			58			86
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(4,952	)		(1,857	)		(10,026	)		(6,558	)
Inventory		(464	)		(150	)		(1,299	)		(319	)
Prepaid expenses and other current assets		684			(326	)		(724	)		(205	)
Security deposits and other long-term assets		67			(40	)		44			6
Accounts payable and accrued expenses		7,172			607			12,275			3,144
Other liabilities		(26	)		(18	)		26			12
Net cash provided by (used in) operating activities		5,291			(812	)
Net cash provided by operating activities								8,678			139
Cash Flows From Investing Activities:
Acquisition of property and equipment, net of disposals		(169	)		(55	)		(477	)		(127	)
Acquisitions, net of cash acquired		0			(2,806	)
Net cash used in investing activities		(169	)		(2,861	)
Acquisitions								(112	)		(2,874	)
Net cash (used in) investing activities								(589	)		(3,001	)
Cash Flows From Financing Activities:
Repayments of term loan		(292	)		(206	)		(728	)		(1,333	)
Proceeds from stock options exercise		85			21			161			46
Line of credit, (payments) proceeds, net		(5,795	)		2,380			(6,717	)		4,539
Repayment of subordinated promissory notes		(168	)		(39	)		(142	)		(813	)
Dividends paid to minority shareholders								(61	)		0
Dividends paid to preferred stockholders								(657	)		0
Repurchase of Series C Preferred Stock								(2,343	)		0
Net cash (used in) provided by financing activities		(6,170	)		2,156			(10,487	)		2,439
Net decrease in cash		(1,048	)		(1,517	)
Net (decrease) in cash								(2,398	)		(423	)
Cash at beginning of the period		6,234			3,349			6,234			3,349
Cash at end of period	$	5,186		$	1,832		$	3,836		$	2,926

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	194		$	99		$	597		$	361
Income taxes	$	10		$	12		$	1,261		$	38
Non-cash operating activities:
Gain on Paycheck Protection Program loan forgiveness							$	0		$	135
Non-cash investing activities:
Purchase price adjustments-ELFS							$	112			0
Due to seller 338 election								0		$	30
Subordinated promissory notes of ICT	$	0		$	1,850		$	0		$	1,760
Non-cash financing activities:
Dividends declared to preferred stockholders	$	211		$	174		$	515		$	566

	(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

	For the three Months Ended December 31,
	2021			2020
Income:
Net income	$	1,688		$	255
Preferred stock dividends		(211	)		(174	)
Net income available to common stockholders	$	1,477		$	81

Common Shares:
Basic - weighted average common shares		959.1			935.9
Effect of dilutive securities:
Stock options		58.7			30.6
Convertible preferred stock		0.3			0.3
Diluted - weighted average common stock		1,018.1			966.8

Income per Common Share:
Basic -
Net income	$	1.76		$	0.27
Preferred stock dividends		(0.22	)		(0.18	)
Net income attributable to common stockholders	$	1.54		$	0.09

Diluted -
Net income	$	1.66		$	0.26
Preferred stock dividends		(0.21	)		(0.18	)
Net income available to common stockholders	$	1.45		$	0.08

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
(in thousands, except per share data)	2022			2021			2022			2021
Income:
Net income	$	2,158		$	870		$	5,119		$	1,721
Preferred stock dividends		(71	)		(197	)		(515	)		(566	)
Non-controlling interest dividends		0			0			(61	)		0
Net Income available to common stockholders	$	2,087		$	673		$	4,543		$	1,155

Common Shares:
Basic - weighted average common shares		1,057.7			939.6			996.9			937.2
Effect of dilutive securities:
Stock options		58.9			54.9			58.0			44.3
Convertible preferred stock		0			0.3			0.1			0.3
Diluted - weighted average common stock		1,116.6			994.8			1,055.0			981.8

Income per Common Share:
Basic -
Net income	$	2.04		$	0.93		$	5.13		$	1.84
Preferred stock dividends		(0.07	)		(0.20	)		(0.51	)		(0.60	)
Non-controlling interest dividends		0			0			(0.06	)		0
Net Income available to common stockholders	$	1.97		$	0.73		$	4.56		$	1.24

Diluted -
Net income	$	1.93		$	0.88		$	4.85		$	1.75
Preferred stock dividends		(0.06	)		(0.20	)		(0.48	)		(0.58	)
Non-controlling interest dividends		0			0			(0.06	)		0
Net income available to common stockholders	$	1.87		$	0.68		$	4.31		$	1.17

	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

	For the Three Months Ended June 30, 2022			For the Three Months Ended June 30, 2021			For the Nine Months Ended June 30, 2022			For the Nine Months Ended June 30, 2021
Federal taxes at statutory rates	$	(604	)	$	(247	)	$	(1,494	)	$	(497	)
Permanent differences		0			13			0			20
State and local taxes, net of Federal benefit		(110	)		(77	)		(500	)		(171	)
Total	$	(714	)	$	(311	)	$	(1,994	)	$	(648	)

	��	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 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		67,825		65,610		1,001		1,214		0
Gross margin		15,489		11,946		2,243		1,300		0
Selling, general and administrative		12,338		9,349		1,250		729		1,010
Amortization of intangible assets		509		0		0		0		509
Income (loss) from operations		2,642		2,597		993		571		(1,519	)
Interest expense		279		224		29		26		0
Identifiable assets		122,237		64,899		10,083		4,017		43,238
Capital expenditures	$	169	$	65	$	102	$	2	$	0

For the three months ended June 30, 2022 (in thousands)	Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenue	$	78,984	$	73,684	$	2,738	$	2,562	$	0
Forwarding expenses and cost of revenues		61,819		59,889		648		1,282		0
Gross profit		17,165		13,795		2,090		1,280		0
Selling, general and administrative		13,505		10,387		1,225		676		1,217
Amortization of intangible assets		489		0		0		0		489
Income (loss) from operations		3,171		3,408		865		604		(1,706	)
Interest expense		299		242		31		26		0
Identifiable assets		126,106		67,196		12,137		4,363		42,410
Capital expenditures	$	207	$	171	$	13	$	23	$	0

For the nine months ended June 30, 2022 (in thousands)	Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenue	$	243,149	$	226,313	$	9,257	$	7,579	$	0
Forwarding expenses and cost of revenues		193,986		187,780		2,516		3,690		0
Gross profit		49,163		38,533		6,741		3,889		0
Selling, general and administrative		39,718		29,802		3,758		2,170		3,988
Amortization of intangible assets		1,485		0		0		0		1,485
Income (loss) from operations		7,960		8,731		2,983		1,719		(5,473	)
Interest expense		847		683		88		76		0
Identifiable assets		126,106		67,196		12,137		4,363		42,410
Capital expenditures	$	477	$	260	$	171	$	46	$	0

For the three months ended June 30, 2021 (in thousands)	Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenue	$	34,826	$	29,369	$	3,384	$	2,073	$	0
Forwarding expenses and cost of revenues		26,058		24,173		941		944		0
Gross profit		8,768		5,196		2,443		1,129		0
Selling, general and administrative		7,158		4,523		1,084		682		869
Amortization of intangible assets		288		0		0		0		288
Income (loss) from operations		1,322		673		1,359		447		(1,157	)
Interest expense		141		62		34		39		6
Identifiable assets		72,494		26,903		10,366		3,644		31,581
Capital expenditures	$	47	$	33	$	14	$	0	$	0

For the nine months ended June 30, 2021 (in thousands)	Consolidated		Logistics		Life Sciences		Manufacturing		Corporate
Revenue	$	91,446	$	76,002	$	8,973	$	6,471	$	0
Forwarding expenses and cost of revenues		68,680		62,818		2,877		2,985		0
Gross profit		22,766		13,184		6,096		3,486		0
Selling, general and administrative		19,282		11,640		3,273		2,007		2,362
Amortization of intangible assets		832		0		0		0		832
Income (loss) from operations		2,652		1,544		2,823		1,479		(3,194	)
Interest expense		418		180		89		129		20
Identifiable assets		72,494		26,903		10,366		3,644		31,581
Capital expenditures	$	218	$	76	$	127	$	15	$	0

Level 3	December 31, 2021		September 30, 2021		June 30, 2022		September 30, 2021
Contingent earnout liabilities	$	3,600	$	3,600	$	3,600	$	3,600
Level 3 Liabilities	$	3,600	$	3,600	$	3,600	$	3,600

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		Nine Months Ended June 30, 2022		Nine Months Ended June 30, 2021
Operating lease cost	$	457	$	235	$	1,370	$	721
Short-term lease cost		123		2		371		14
Total lease cost	$	580	$	237	$	1,741	$	735

	Year End December 31, 2021
2022	$	1,798
2023		1,441		$	1,620
2024		1,147			1,293
2025		853			1,032
2026		620			671
2027					626
Thereafter		1,168			853
Total undiscounted loan payments		7,027			6,095
Less: Imputed interest		(522	)		(425	)
Total lease obligation	$	6,505		$	5,670