UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
 
FORM 10-Q
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 20212022
 
OR
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
 
Commission file number: 333-60608
 
JANEL CORPORATION
(Exact name of registrant as specified in its charter)
 
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)

Registrant’s telephone number, including area code: (212) 373-5895
Former name, former address and former fiscal year, if changed from last report: N/A
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading symbols(s)
 
Name of each exchange
on which registered
None
 None
 None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐Accelerated filer☐
Non-accelerated filer ☐Smaller reporting company☒
 Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
 
The number of shares of Common Stock outstanding as of February 9, 20223, 2023 was 959,707.1,186,354.
 

JANEL CORPORATION
 
QUARTERLY REPORT ON FORM 10-Q
For Quarterly Period Ended December 31, 20212022
 
TABLE OF CONTENTS

   Page
    
Part I - Financial Information
3
    
 
Item 1.
Financial Statements
3
    
  
Condensed Consolidated Balance Sheets as of December 31, 20212022 (unaudited) and September 30, 2021
2022
3
    
  
Condensed Consolidated Statements of Operations for the three months ended December 31, 20212022 and 20202021 (unaudited)
4
    
  
Condensed Consolidated Statement of Stockholders’ Equity for the three months ended December 31, 20212022 and 20202021 (unaudited)
5
    
  
Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 20212022 and 20202021 (unaudited)
6
    
  
Notes to Condensed Consolidated Financial Statements (unaudited)
7
    
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
    
 
Item 4.
Controls and Procedures
28
26
    
Part II - Other Information
28
    
 
Item 1.
Legal Proceedings
28
    
 
Item 1A.
Risk Factors
28
    
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28

Item 5.Other Information28
    
 
Item 6.
Exhibit Index
29
28
    
  
Signatures
30
29

2

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
 


 
December 31,
2022		  
September 30,
2022
 
ASSETS      
Current Assets:      
Cash
 
$
4,155
  $6,591 
Accounts receivable, net of allowance for doubtful accounts
  
42,598
   
57,077
 
Inventory, net
  
4,979
   
4,802
 
Prepaid expenses and other current assets
  
2,800
   
3,423
 
Total current assets  
54,532
   
71,893
 
Property and Equipment, net  
5,004
   
5,044
 
Other Assets:        
Intangible assets, net
  
24,389
   
22,420
 
Goodwill
  
19,576
   
18,622
 
Investment in marketable securities at fair value  1,972   2,371 
Operating lease right of use asset
  
5,600
   
5,660
 
Security deposits and other long-term assets
  
491
   
522
 
Total other assets  
52,028
   
49,595
 
Total assets 
$
111,564
  
$
126,532
 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities:        
Lines of credit
 
$
21,320
  $26,396 
Accounts payable - trade
  
35,323
   
44,960
 
Accrued expenses and other current liabilities
  
6,186
   
7,194
 
Dividends payable
  
1,816
   
1,745
 
Current portion of earnout
  
1,892
   
1,664
 
Current portion of long-term debt
  
640
   
639
 
Current portion of deferred acquisition payments
  
440
   
188
 
Current portion of subordinated promissory note-related party
  
825
   
425
 
Current portion of operating lease liabilities
  
1,729
   
1,825
 
Total current liabilities  70,171   85,036 
Other Liabilities:        
Long-term debt
  
7,176
   
7,519
 
Long-term portion of earnout
  
3,288
   
2,916
 
Subordinated promissory notes-related party
  
4,864
   
5,382
 
Mandatorily redeemable non-controlling interest
  
430
   
430
 
Deferred income taxes
  
2,526
   
2,541
 
Long-term operating lease liabilities
  
4,053
   
4,001
 
Other liabilities
  
390
   
380
 
Total other liabilities  
22,727
   
23,169
 
Total liabilities  
92,898
   
108,205
 
Stockholders’ Equity:        
Preferred Stock, $0.001 par value; 100,000 shares authorized
        
Series C 30,000 shares authorized and 11,368 shares issued and outstanding at December 31, 2022 and September 30, 2022, liquidation value of $7,500 and $7,429 at December 31, 2022 and September 30, 2022, respectively
  
—
   
—
 
Common stock, $0.001 par value; 4,500,000 shares authorized, 1,206,354 issued and 1,186,354 outstanding as of  December 31, 2022  and September 30, 2022, respectively
  
1
   
1
 
Paid-in capital
  
17,163
   
17,184
 
Common treasury stock, at cost, 20,000 shares
  
(240
)
  
(240
)
Accumulated earnings
  
1,742
   
1,382
 
Total stockholders’ equity  
18,666
   
18,327
 
Total liabilities and stockholders’ equity 
$
111,564
  
$
126,532
 

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
3

JANEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
December 31,
  
Three Months Ended
December 31,
 
 
2021
  
2020
  
2022
  
2021
 
Revenue $83,314  
$
26,478
  $57,044  
$
83,314
 
Forwarding expenses and cost of revenues  
67,825
   
20,029
 
Forwarding expenses and cost of revenue  
42,127
   
67,825
 
Gross profit  
15,489
   
6,449
   
14,917
   
15,489
 
Cost and Expenses:                
Selling, general and administrative  
12,338
   
5,709
   
13,011
   
12,338
 
Amortization of intangible assets  
509
   
251
   
526
   
509
 
Total Costs and Expenses  
12,847
   
5,960
   
13,537
   
12,847
 
Income from Operations  
2,642
   
489
  
1,380
   
2,642
 
Other Items:                
Interest expense
  
(279
)
  
(119
)
  
(474
)
  
(279
)
Unrealized loss on marketable securities
  (399)  — 
Income Before Income Taxes  
2,363
   
370
  
507
   
2,363
 
Income tax expense  
(675
)
  
(115
)
  
(147
)
  
(675
)
Net Income
  1,688   255  360   1,688 
Preferred stock dividends  
(211
)
  
(174
)
  
(72
)
  
(211
)
Net Income Available to Common Stockholders 
$
1,477
  
$
81
 
$
288
  
$
1,477
 
        
Net income per share        
Net Income per share        
Basic 
$
1.76
  
$
0.27
 
$
0.30
  
$
1.76
 
Diluted 
$
1.66
  
$
0.26
 
$
0.30
  
$
1.66
 
Net income per share attributable to common stockholders:                
Basic 
$
1.54
  
$
0.09
 
$
0.24
  
$
1.54
 
Diluted 
$
1.45
  
$
0.08
 
$
0.24
  
$
1.45
 
Weighted average number of shares outstanding:                
Basic  
959.1
   
935.9
   
1,186.3
   
959.1
 
Diluted  
1,018.1
   
966.8
   
1,208.2
   
1,018.1
 

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
4

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 
Balance - September 30, 2022  11,368  $
—   1,206,354  $
1  $17,184   20,000  $
(240) $1,382  $18,327 
Net Income  —   0   —   0   0   —   0   1,688   1,688   —   —   —   —   —   —   —   360   360 
Dividends to preferred stockholders  —   0   —   0   (211)  —   0   0   (211)  —   —   —   —   (72)  —   —   —   (72)
Stock-based compensation  —   0   —   0   29   —   0   0   29   —   —   —   —   51   —   —   —   51 
Stock options exercise  0   0   17,500   0   85   0   0   0   85 
Balance - December 31, 2021  20,991  $0   979,707  $1  $14,741   20,000  $(240) $5,208  $19,710 
                                    
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 
Balance - December 31, 2022  11,368  $
—   1,206,354  $
1  $
17,163   20,000  $
(240) $
1,742  $
18,666 

  PREFERRED STOCK  COMMON STOCK  PAID-IN CAPITAL  
COMMON TREASURY
STOCK
  
ACCUMULATED
EARNINGS
(DEFICIT)
  TOTAL EQUITY 
  SHARES  
$
  SHARES  
$
  
$
  SHARES  
$
  
$
  
$
 
Balance - September 30, 2021  20,991  $
—   962,207  $1  $14,838   20,000  $(240) $3,520  $18,119 
Net Income  —   —   —   —   —   —   —   1,688   1,688 
Dividends to preferred stockholders  —   —   —   —   (211)  —   —   —   (211)
Stock-based compensation  —   —   —   —   29   —   —   —   29 
Stock option exercise
  —   —   17,500   —   85   —   —   —   85 
Balance - December 31, 2021  20,991  $
—   979,707  $
1  $
14,741   20,000  $
(240) $
5,208  $
19,710 

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
5

JANEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
 
Three Months Ended
December 31,
  
Three Months Ended
December 31,
 
 
2021
  
2020
  
2022
  
2021
 
Cash Flows From Operating Activities:            
Net income
 
$
1,688
  $255  
$
360
  $1,688 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Provision for (recovery of) uncollectible accounts  
102
   
(32
)
Adjustments to reconcile net income to net cash provided by operating activities:
        
(Recovery of) Provision for uncollectible accounts
  
(71
)
  
102
 
Depreciation  
107
   
86
   
121
   
107
 
Deferred income tax provision  
133
   
86
 
Deferred income provision
  
(15
)
  
133
 
Amortization of intangible assets  
509
   
251
   
526
   
509
 
Amortization of acquired inventory valuation  
171
   
214
   
90
   
171
 
Amortization of loan costs  
2
   
2
   
4
   
2
 
Stock-based compensation  
40
   
24
   
61
   
40
 
Changes in fair value of mandatorily redeemable noncontrolling interest  
58
   
86
 
Unrealized loss on marketable securities
  399   —
 
Change in fair value of mandatorily redeemable noncontrolling interest
  
—
   
58
 
Changes in operating assets and liabilities, net of effects of acquisitions:                
Accounts receivable  
(4,952
)
  
(1,857
)
  
14,656
   
(4,952
)
Inventory  
(464
)
  
(150
)
  
84
   
(464
)
Prepaid expenses and other current assets  
684
   
(326
)
  
623
   
684
 
Security deposits and other long-term assets  
67
   
(40
)
Security deposits and other long term assets
  
31
   
67
 
Accounts payable and accrued expenses  
7,172
   
607
   
(11,115
)
  
7,172
 
Other liabilities  
(26
)
  
(18
)
  
26
   
(26
)
Net cash provided by (used in) operating activities  5,291   (812)
Net cash provided by operating activities  5,780   5,291 
Cash Flows From Investing Activities:                
Acquisition of property and equipment, net of disposals  
(169
)
  
(55
)
  
(80
)
  
(169
)
Acquisitions, net of cash acquired  
0
   
(2,806
)
Acquisition
  
(2,847
)
  
—
 
Net cash used in investing activities  (169)  (2,861)  (2,927)  (169)
Cash Flows From Financing Activities:                
Repayments of term loan  
(292
)
  
(206
)
Proceeds from stock options exercise  
85
   
21
 
Line of credit, (payments) proceeds, net  
(5,795
)
  
2,380
 
Repayment of subordinated promissory notes  
(168
)
  
(39
)
Net cash (used in) provided by financing activities  
(6,170
)
  
2,156
 
Rrepayments of term loan
  
(347
)
  
(292
)
Proceeds from stock option exercise
  
—
   
85
 
Lines of credit payments, net
  
(5,076
)
  
(5,795
)
Issuance (repayment) of subordinated promissory notes
  
134
   
(168
)
Net cash used in financing activities  
(5,289
)
  
(6,170
)
Net decrease in cash  
(1,048
)
  
(1,517
)
  
(2,436
)
  
(1,048
)
Cash at beginning of the period  
6,234
   
3,349
   
6,591
   
6,234
 
Cash at end of period 
$
5,186
  
$
1,832
  
$
4,155
  
$
5,186
 
                
Supplemental Disclosure of Cash Flow Information:                
Cash paid during the period for:
                
Interest 
$
194
  
$
99
  
$
380
  
$
194
 
Income taxes 
$
10
  
$
12
  
$
9
  
$
10
 
Non-cash investing activities:                
Subordinated promissory notes of ICT $
0  $
1,850 
Contingent earn-out acquisition
 $600  $—
 
Due to former IBS owner $
455  $—
 
Non-cash financing activities:
                
Dividends declared to preferred stockholders 
$
211
  
$
174
  
$
72
  
$
211
 

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

6
JANEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data)

1.BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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

Business Description

Janel is a holding company with subsidiaries in three business segments: Logistics, Life Sciences and Manufacturing. 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.

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.
In the Logistics segment, the Company disaggregates its revenuesrevenue by its 5five primary service categories: trucking, ocean, freight, air, freight, trucking, customs brokerage, and other. other. A summary of the Company’s revenuesrevenue disaggregated by major service lines for the three months ended December 31, 20212022 and 20202021 was as follows:follows (in thousands):
 
 
Three Months Ended
December 31,
 
 
Three Months
Ended
December 31,
  
Three Months
Ended
December 31,
  2022  
2021
 
Service Type 
2021
  
2020
       
Ocean freight $32,876  $9,039 
Trucking  21,775   4,352  $22,761  $21,810 
Air freight
  13,874   6,202 
Ocean
  18,166   33,895 
Air
  6,239   14,284 
Customs brokerage
  
2,434
   
3,755
 
Other
  5,330   12   2,200
   3,812
 
Customs brokerage
  
3,701
   
2,655
 
Total 
$
77,556
  
$
22,260
  
$
51,800
  
$
77,556
 

The results for the prior quarter ended December 31,2021 includes an immaterial correction in the classification of service type revenue resulting in a reduction of the Other category of $1,500 and an increase to Ocean and Air of $1,100 and $400, respectively. The correction had no effect on the reported Revenue or results of Operations.
7
Life Sciencesand Manufacturing

RevenuesRevenue 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. RevenuesRevenue from the Company’s Manufacturing segment, which is comprised of Indco, a majority-owned subsidiary of the 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. Revenue for Life Sciences and Manufacturing are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.

Manufacturing
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the Company.  Revenues from Indco are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories. Revenues are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.

2.ACQUISITIONACQUISITIONS
 
Fiscal 20212023 Acquisition
 
LogisticsLife Sciences

On September 21, 2021,November 1, 2022, the Company completed the acquisition ofa business combination whereby it acquired all of the membership interestsoutstanding stock of Expedited Logistics and Freight Services, LLCImmunoBioScience Corporation (“ELFS”IBS”) and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS.  The, for an aggregate purchase price for the membership interestsof $4,055, net of $153 cash received.  At closing, $3,000 was $19,000, subject to certain closing adjustments as set forthpaid in the related purchase agreement.  Further earnout payments in an amount not anticipated to exceed $4,500 will becash, $250 is due to the former membersstockholder 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 cashIBS as a deferred acquisition payment upon integration, $600 was recorded as a preliminary earnout consideration (not to exceed $750) and were issued an aggregate amount of $6,000 in subordinated promissory notes.

$205 was recorded as a preliminary working capital adjustment. The ELFS acquisition was funded with cash provided by normal operations, borrowings underand the Amended Loanresults of operations of IBS are included in Janel’s condensed consolidated results of operations since the date of the acquisition. In connection with the combination, the Company recorded an aggregate of $954 in goodwill and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) dated September 21, 2021,$2,495 in other identifiable intangibles. The Company is still finalizing the valuation of assets acquired and liabilities assumed, and, as wellsuch, the fair value amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are limited to, intangible assets, fair value of accounts receivable or a change in the goodwill balance. Supplemental pro forma information has not been provided as subordinated promissory notes issued to the former membersacquisition did not have a significant impact on Janel’s condensed consolidated results of ELFS. Thisoperations, individually or in aggregate. IBS is a developer and manufacturer of high-quality reagents used by research and diagnostic customers. IBS was founded in 2007 and is headquartered in Mukilteo, Washington. The acquisition of IBS was completed to expand our product offerings in our LogisticsLife Sciences segment.

The following table summarizes, on
Fiscal 2022 Acquisition

Life Sciences

On August 15, 2022, the Company completed a business combination whereby it acquired all of the membership interests of ECM Biosciences LLC (“ECM”) for $850, net of $16 cash received. At closing, the former member of ECM was paid $600 in cash and an unaudited pro forma basis,additional $250 was due to the condensed combinedformer member, which is included in accrued expenses and other current liabilities. In connection with the combination, the Company recorded an aggregate of $24 in goodwill and $222 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations. The results of operations of the Company for the three months ended December 31, 2020 assuming the acquisition of ELFS was made on October 1, 2020. The pro forma unaudited condensedacquired businesses are included in Janel’s consolidated results give effect to, among other things, amortization of intangible assets and interest expense on acquisition-related debt.  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
 
Revenue $44,375 
Income from Operations $630 
Net Income
 $245 
Net Income Available to Common Stockholders
 $71 
Net income per share:
    
Basic
 $0.26 
Diluted
 $0.25 
Net income per share attributable to common stockholders:
    
Basic
 $0.08 
Diluted
 $0.07 

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred hadsince the date of the acquisition occurredand is included in our Life Sciences segment. The acquisition of ECM was completed to expand our product offerings in our Life Sciences segment. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on OctoberJanel’s consolidated results of operations, individually or in aggregate.

Investment in Marketable Securities - Rubicon

On August 19, 2022, the Company acquired 1,108,000 shares (the “Acquired Shares”) of the common stock, par value $0.001 per share, of Rubicon Technology, Inc. (“Rubicon”), at a price per share of $20.00, in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2019, nor are they necessarily indicative2022, between the Company and Rubicon (the “Purchase Agreement”). Pursuant to the terms of future results.the Purchase Agreement, the Acquired Shares represented 44.99% of Rubicon’s issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022.

Rubicon is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Rubicon uses proprietary crystal growth technology to produce high-quality sapphire products to meet customers exacting specifications.

8
3.INVENTORY
 
Inventories consisted of the following (in thousands):

 
December 31,
2021
  
September 30,
2021
  
December 31,
2022
  
September 30,
2022
 
Finished goods $860  $919  $1,704  $1,823 
Work-in-process  944   968   958   763 
Raw materials  1,745   1,365   2,364   2,260 
Gross inventory  
3,549
   
3,252
   
5,026
   
4,846
 
Less – reserve for inventory valuation  
(28
)
  
(25
)
  
(47
)
  
(44
)
Inventory net 
$
3,521
  
$
3,227
  
$
4,979
  
$
4,802
 

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

 
December 31,
2021
  
September 30,
2021
 
Life
 
December 31,
2022
  
September 30,
2022
 
Life
Customer relationships $23,482  $23,482 12-24 Years $25,653  $23,625 12-24 Years
Trademarks/names  4,490   4,490 1-20 Years  4,641   4,539 1-20 Years
Trademarks/names  521   521 Indefinite  521   521 Indefinite
Other  
1,149
   
1,149
 2-22 Years  
1,545
   
1,180
 2-22 Years
  29,642   29,642    32,360   29,865  
Less: Accumulated Amortization  
(5,978
)
  
(5,469
)
   
(7,971
)
  
(7,445
)
 
Intangible assets, net 
$
23,664
  
$
24,173
   
$
24,389
  
$
22,420
  

The composition of the intangible assets balance at December 31, 20212022 and September 30, 20212022 is as follows (in thousands):

 
December 31,
2021
  
September 30,
2021
  
December 31,
2022
  
September 30,
2022
 
Logistics
 $18,174  $18,174  $18,174  $18,174 
Life Sciences  3,768   3,768   6,486   3,991 
Manufacturing  7,700   7,700   7,700   7,700 
  
29,642
   
29,642
   
32,360
   
29,865
 
Less: Accumulated Amortization  
(5,978
)
  
(5,469
)
  
(7,971
)
  
(7,445
)
Intangible assets, net 
$
23,664
  
$
24,173
  
$
24,389
  
$
22,420
 

Amortization expense for the three months ended December 31, 2022 and 2021 was $526 and 2020 was $509, and $251, respectively.
 
5.GOODWILL
 
The Company’s goodwill carrying amounts relate to the acquisitions in the Logistics, Life Sciences and Manufacturing businesses.business segments.

9
The composition of the goodwill balance at December 31, 20212022 and September 30, 20212022 was as follows (in thousands):

 
December 31,
2021
  
September 30,
2021
  
December 31,
2022
  
September 30,
2022
 
Logistics
 $9,063  $9,063  $9,175  $9,175 
Life Sciences  4,377   4,377   5,355   4,401 
Manufacturing  5,046   5,046   5,046   5,046 
Total
 
$
18,486
  
$
18,486
  
$
19,576
  
$
18,622
 

9
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 recentlyThe Santander Loan Agreement was amended in September 2021,on March 31, 2022 to provide for, among other changes, the Santander Facility provides thatfollowing: (i) the Janel Group Borrowers can borrow upmaximum 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. InterestAgreement); (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”) and interest on the Santander Facility accrues at an annual rate equal to LIBOR (30, 60 or 90 day)the one-month SOFR plus 2.25% subject2.75%; (iii) a one-time increase from $1,000 to a LIBOR floor$3,000 in the amount the Company was permitted to distribute to holders 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 makingCompany’s Series C preferred payments or distributionsStock if specified conditions are met.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.

On July 13, 2022, the Santander Loan Agreement was further amended by a Consent, Waiver and Second Amendment (the “Second Santander Amendment”) to (i) increase the maximum revolving facility amount available to $35,000 (limited to 85% of the Janel Group Borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement), and (ii) provide for a new bridge term loan to the Company in the principal amount of up to $12,000 (the “Bridge Facility”) to be funded in connection with the acquisition by the Company of up to 45% of the outstanding shares of Rubicon Technology, Inc. (“Rubicon”), subject to the satisfaction of certain customary limited conditions (the “Rubicon Transaction”). The Bridge Facility was drawn on August 18, 2022 and matured on the earlier to occur of (i) twenty (20) business days following the funding of the Bridge Facility and (ii) the date of funding of the dividend to be paid by Rubicon in connection with the Rubicon Transaction. The Company repaid the Bridge Facility in full on August 30, 2022. The Second Santander Amendment also contained a one-time waiver and consent to (a) the consummation of the Rubicon Transaction, and (b) a dividend of $2,500 to be paid by Janel Group (as defined herein) to the Company.

The Santander Loan Agreement matures on September 21, 20262026.  Interest accrues on the Santander Facility at an annual rate equal to the one-month SOFR plus 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.

At December 31, 2021,2022, outstanding borrowings under the Santander Facility were $23,842,$20,920, representing 79.47%59.8% of the $30,000$35,000 available subject to limitations thereunder, and interest was accruing at an effective interest rate of 3.00%5.94%.

At September 30, 2021,2022, outstanding borrowings under the Santander Facility were $29,637,$26,396, representing 98.8%75.4% of the $30,000$35,000 available subject to limitations thereunder, and interest was accruing at an effective interest rate of 3.00%5.79%.

 The Company was in compliance with the financial covenants defined in the Santander Loan Agreement at both December 31, 20212022 and September 30, 2021.2022.
 
(B)First Merchants Bank Credit Facility
 
On March 21, 2016, Indco hasentered into a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect(“First Merchant”), which was subsequently amended on August 30, 2019 and July 1, 2020.

On August 1, 2022, Indco and First Merchants 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$1,000 (limited to the borrowing base and reserves) revolving loan, and the continuation of a $680 mortgage loan (together,in the original principal amount of $680 (collectively, the “First MerchantMerchants Facility”).  Interest accrueswill accrue on the term loan at an annual rate equal to the one-month LIBORadjusted 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 accrueswill accrue on the revolving loan at an annual rate equal to the one-month LIBORadjusted term SOFR plus 2.75%. Interest accrueswill accrue on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants Credit Facility are secured by all of Indco’s real property and other assets, and are guaranteed by Janel. Additionally,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 Facility will expire on August 30, 2024,1, 2027, 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.

10
As of December 31, 2021,2022, there were 0no outstanding borrowings under the revolving loan, $2,519$5,099 of borrowings under the term loan, and $649$626 of borrowingborrowings under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.85%7.97% and 4.19%, respectively.

As of September 30, 2021,2022, there were 0no outstanding borrowings under the revolving loan, $2,713$5,420 of borrowings under the term loan, and $655$631 of borrowingborrowings under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83%6.63% and 4.19%, respectively.
10
Indco was in compliance with the financial covenants defined in the First Merchants Credit Agreement at both December 31, 20212022 and September 30, 2021.2022.
 
 
December 31,
2021
  
September 30,
2021
 
     (in thousands) 
(in thousands) 
December 31,
2022
  
September 30,
2022
 
Total Debt*
 $3,168  $3,368  $5,725  $6,051 
Less Current Portion  
(809
)
  
(809
)
  
(574
)
  
(574
)
Long Term Portion 
$
2,359
  
$
2,559
 
Long-term Portion 
$
5,151
  
$
5,477
 

*
Note: Term Loan isprincipal payments are due in monthly installments of $65$46 plus monthly interest, at LIBORSOFR plus 2.75% to 3.5% per annum, and the mortgage loan is due in monthly installments of $4, including interest at 4.19%. The credit facilities are collateralized by all of Indco’s assets and guaranteed by Janel.

(C)First Northern Bank of Dixon

Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company, (by succession), hasentered into a loan agreementBusiness Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First Northern”), with respect to on June 21, 2018, as amended November 2019 and October 2, 2020. The First Northern Loan Agreement provides for 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%)4.00% 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”). There were 0 outstanding borrowings, which bears interest at a variable index rate, currently 7.75% and  matures on the revolving credit facility as of December 31, 2021 or September 30, 2021.November 10, 2023.

Antibodies also has 2entered into two separate business loan agreements with First Northern: a $125 term loan in connection with thea potential expansion of solar generation capacity on the Antibodies property (“First(the “First Northern Solar Loan”) bearing, which bears interest at thean annual rate of 4.43% (subject to adjustment in five years)years and maturingmatures on November 14, 2029; and a $60 term loan in connection with thea potential expansion of generator capacity on the Antibodies property (“(the “First Northern Generator Loan”) bearing, which bears interest at thean annual rate of 4.25% and maturingmatures on November 5, 2025.

There were 0no outstanding borrowings under the First Northern Generator Loan as of December 31, 20212022 or September 30, 2021.2022.
 
As of December 31, 2021,2022, the total amount outstanding under the First Northern Term Loan was $2,126,$2,070, of which $2,070$2,012 is included in long-term debt and $56$58 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.

As of December 31, 2022, the total amount outstanding under the First Northern Solar Loan was $21, of which $13 is included in long-term debt, and $8 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

As of December 31, 2022, the total amount outstanding under the First Northern Revolving Loan was $400, which is included in lines of credit, with interest accruing at an effective interest rate of 8.25%.

As of September 30, 2021,2022, the total amount outstanding under the First Northern Term Loan was $2,139,$2,084, of which $2,084$2,027 is included in long-term debt and $55$57 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,September 30, 2022, the total amount outstanding under the First Northern Solar Loan was $28,$23, of which $21$15 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 amount2022, there were no outstanding borrowings 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%.
Revolving Loan.
The Company was in compliance with the financial covenants defined in the First Northern Loan Agreement at December 31, 20212022 and September 30, 2021.2022.
 
 
December 31,
2021
  
September 30,
2021
 
 (in thousands)
 
(in thousands) 
December 31,
2022
  
September 30,
2022
 
Total Debt*
 $2,154  $2,244  $2,091  $2,107 
Less Current Portion  
(63
)
  
(59
)
  
(66
)
  
(65
)
Long Term Portion 
$
2,091
  
$
2,185
 
Long-term Portion 
$
2,025
  
$
2,042
 

*
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.
 
11
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 16sixteen 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.Northern.

As of December 31, 2021,2022, the amount outstanding under the ICT Subordinated Promissory Note was $1,066,$589, of which $500$400 is included in the current portion of subordinated promissory notes and $566$189 is included in the long-term portion of subordinated promissory notes.

As of September 30, 2021,2022, the amount outstanding under the ICT Subordinated Promissory Note was $1,237,$707, of which $550$425 is included in the current portion of subordinated promissory notes and $687$282 is included in the long-term portion of subordinated promissory notes.

Janel Group, Inc. (“Janel Group”), a wholly-owned subsidiary of the Company, is the obligor on 4four fixed 4% subordinated promissory notes totaling $6,000 in the aggregate (together, the “ELFS Subordinated Promissory Notes”), payable to certain former shareholders of ELFS.Expedited Logistics and Freight Services, LLC (“ELFS”), in connection with the Company’s business combination whereby it acquired all the membership interest of ELFS and its related subsidiaries.  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 12twelve equal consecutive quarterly installments of principal together with accrued interest.  Beginning October 15, 2021 and on the same day of the next 8eight 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 12twelve consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders. TheIn June 2022, the principal amount of the ELFS Subordinated Promissory Notes totaling $6,000 were recorded net ofwas adjusted to $5,100 due to a revised working capital adjustment of $1,163.$900.

As of both of December 31, 2021 and September 30, 2021,2022, the amount outstanding under the ELFS Subordinated Promissory Notes was $4,838$5,100, of which $425 was included in the current portion of subordinated promissory notes and $4,675 was included in the long-term portion of subordinated promissory notes.

As of September 30, 2022, the amount outstanding under the ELFS Subordinated Promissory Notes was $5,100 and was included in the long-term portion of subordinated promissory notes.


 
December 31,
2021
  
September 30,
2021
 
 (in thousands) 
(in thousands) 
December 31,
2022
  
September 30,
2022
 
Total subordinated promissory notes $5,904  $6,075  $5,689  $5,807 
Less current portion of subordinated promissory notes  (500)  (550)  (825)  (425)
Long term portion of subordinated promissory notes $5,404  $5,525  $4,864  $5,382 

8.STOCKHOLDERS’ EQUITY

(in thousands, except share and per share data)

(A)Common Stock

On August 10, 2022, the Company issued 88,888 shares of its common stock, par value $0.001 per share, at a purchase price of $45 per share (the closing sale price per share of common stock on August 9, 2022) as reported on the Pink tier of the OTC market, or an aggregate purchase price of $4,000. The shares were sold to accredited investors in a private placement in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder.

(B)Preferred Stock

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 December 31, 2022 and September 30, 2022 was 5%.

On March 31, 2022, the Company purchased 4,687 shares of the Series C Stock from two 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 one 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
(in thousands, except share and per share data)

On October 30, 2013, the boardBoard of directorsDirectors 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 boardBoard of directorsDirectors 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 months ended December 31, 2022 and 2021 and 2020 amounted to $29$51 and $24,$29, 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.
 
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 Months Ended
December 31, 2022
2021
 
Risk-free interest rate 1.10%

3.98		%
Expected option term in years 5.5-6.5 
Expected volatility 100.3% - 110.3%
93.6		%
Dividend yield
  0%

—		%
Weighted average grant date fair value $17.6030.06 - $19.07$41.24 

Options for Employees

  
Number of
Options
  
Weighted
Average
Exercise
Price
  
Weighted
Average
Remaining
Contractual
Term (in years)
  
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2021
  98,994  $5.93   4.5  $1,689.38 
Granted  10,000  $
23.00   9.8  $
0 
Exercised  (17,500
)
 $
4.87   —  $
— 
Outstanding balance at December 31, 2021
  
91,494
  $
8.00   5.1  $1,463.60 
Exercisable at December 31, 2021
  
73,998
  $
5.88   4.1  $1,341.14 
13
Options for Employees

  
Number
of Options
  
Weighted
Average
Exercise
Price
  
Weighted
Average
Remaining
Contractual
Term (in years)
  
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2022
  30,993  $12.68   6.8  $1,251.45 
Granted  10,000  $53.06   9.6  $— 
Outstanding balance at December 31, 2022
  
40,993
  $22.53   7.3  $812.57 
Exercisable at December 31, 2022
  
21,831
  $9.96   5.7  $631.90 
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, 20212022 of $24$38.90 per share and the exercise price of the stock options that had strike prices below such closing price.
 
As of December 31, 2021,2022, there was approximately $153$485 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.2.67 years.

Liability classified share-based awards
 
During the three months ended December 31, 2021,2022, 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 Months Ended
December 31, 2022
2021
 
Risk-free interest rate  1.10%
3.98
%
Expected option term in years  5.5-6.54.5-5.5 
Expected volatility  39%
44
%
Dividend yield
  0%
—
%
Weighted average grant date fair value 
$		$5.573.96 - $6.66$6.68 

  
Number of
Options
  
Weighted
Average
Exercise
Price
  
Weighted
Average
Remaining
Contractual
Term (in years)
  
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2021
  38,961  $10.28   6.62  $78.16 
Granted  7,018  $
17.16   9.75  $
0 
Exercised  (10,372
)
 $
8.30   —  $
— 
Outstanding balance at December 31, 2021
  
35,607
  $
12.22   7.51  $
175.98 
Exercisable at December 31, 2021
  
21,663
  $
10.72   6.49  $
139.47 
  
Number
of Options
  
Weighted
Average
Exercise
Price
  
Weighted
Average
Remaining
Contractual
Term (in years)
  
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2022
  35,607  $12.22   6.67  $175.98 
Granted  7,018  $15.20   9.75  $— 
Outstanding balance at December 31, 2022
  
42,625
  $12.71   7.10  $119.94 
Exercisable at December 31, 2022
  
28,613
  $11.40   6.00  $113.20 

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, 20212022 of $17.16$15.20 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$320 and $361 as of December 31, 20212022 and September 30, 2021,2022, 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 months ended December 31, 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.

14
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, two 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, 2021.2022.

14
Changes in the fair value of the vested options are recognized in earnings in the condensed consolidated financial statements.
 
The options are classified as liabilities, and the underlying shares of Indco’s common stock also contain put options which result in their classification as a mandatorily redeemable security. While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death, which is certain to occur at some point in time.death.
 
As of December 31, 2021,2022, there was approximately $70$76 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.year.

 
9.10.INCOME PER COMMON SHARE
 
The following table provides a reconciliation of the basic and diluted incomeearnings per share (“EPS”) computations for the three months ended December 31, 20212022 and 2020 (in thousands, except per share data):2021:
 
 
For the three Months Ended
December 31,
  
Three Months Ended
December 31,
 
 
2021
  
2020
 
(in thousands, except per share data) 
2022
  
2021
 
Income:            
Net income
 $1,688  $255 $360  $1,688 
Preferred stock dividends  
(211
)
  
(174
)
  
(72
)
  
(211
)
Net income available to common stockholders 
$
1,477
  
$
81
 
$
288
  
$
1,477
 
                
Common Shares:                
Basic - weighted average common shares  959.1   935.9   1,186.3   959.1 
Effect of dilutive securities:                
Stock options  58.7   30.6   21.9   58.7 
Convertible preferred stock  
0.3
   
0.3
   
—
   
0.3
 
Diluted - weighted average common stock  
1,018.1
   
966.8
   
1,208.2
   
1,018.1
 
                
Income per Common Share:                
Basic -                
Net income
 $1.76  $0.27 $0.30  $1.76 
Preferred stock dividends  
(0.22
)
  
(0.18
)
  
(0.06
)
  
(0.22
)
Net income attributable to common stockholders 
$
1.54
  
$
0.09
 
$
0.24
  
$
1.54
 
                
Diluted -                
Net income
 $1.66  $0.26 $0.30  $1.66 
Preferred stock dividends  
(0.21
)
  
(0.18
)
  
(0.06
)
  
(0.21
)
Net income available to common stockholders 
$
1.45
  
$
0.08
 
$
0.24
  
$
1.45
 

The computation for the diluted number of shares excludes unvested restricted stock and unexercised stock options that are anti-dilutive. There were 10 anti-dilutive shares for each of the three-month period ended December 31, 20212022 and 0 anti-dilutive shares for the three-month period ended December 31, 2020.2021.

Potentially dilutive securities as of December 31, 2022 and 2021 are as follows:

  
Three Months Ended
December 31,
 
  
2022
  
2021
 
Employee stock options (Note 9)  22   92 
   22   92 

15
Potentially diluted securities as of December 31, 2021 and 2020 are as follows:

  
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 

10.11.INCOME TAXES
 
The reconciliation of income tax computed at the Federal statutory rate to the provision for income taxes from continuing operations for the three-month periods ended December 31, 2022 and 2021 is as follows (in thousands):

  
Three Months Ended
December 31,
 
  2022
  2021
 
Federal taxes at statutory rates $107  $496 
Permanent differences  1   10 
State and local taxes, net of Federal benefit  39   169 
Total $147  $675 
 ��
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
 

11.12.BUSINESS SEGMENT INFORMATION

As referenced above in noteNote 1, the Company operates in 3three reportable 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 was in name only and had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level resultsManufacturing.

The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance.

The following tables presentspresent selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the three months ended December 31, 2021 and 2020:2022:
 
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 
For the three months ended December 31, 2022
(in thousands)
 
Consolidated
  
Logistics
  
Life Sciences
  
Manufacturing
  
Corporate
 
Revenue $57,044  $51,800  $2,838  $2,406  $— 
Forwarding expenses and cost of revenue  42,127   40,267   728   1,132   — 
Gross profit
  14,917   11,533   2,110   1,274   — 
Selling, general and administrative  12,338   9,349   1,250   729   1,010   13,011   9,528   1,510   774   1,199 
Amortization of intangible assets  509   0   0   0   509   526   —   —   —   526 
Income (loss) from operations
  2,642   2,597   993   571   (1,519)  1,380   2,005   600   500   (1,725)
Interest expense  279   224   29   26   0   474   334   37   103   — 
Identifiable assets  122,237   64,899   10,083   4,017   43,238   111,564   49,220   11,317   4,085   46,942 
Capital expenditures $169  $65  $102  $2  $0 
Capital expenditures, net of disposals
 
80  
68  
10  
2  
— 

The following tables present selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the three months ended December 31, 2021:
 
For the three months ended December 31, 2020 (in thousands)
 
Consolidated
  
Logistics
  
Life Sciences
  
Manufacturing
  
Corporate
 
Revenues $26,478  $22,260  $2,349  $1,869  $0 
Forwarding expenses and cost of revenues  20,029   18,395   756   878   0 
Gross margin
  6,449   3,865   1,593   991   0 
Selling, general and administrative  5,709   3,374   976   642   717 
Amortization of intangible assets  251   0   0   0   251 
Operating income (loss)
  489  491  617   349  (968)
Interest expense  119   37   28   47   7 
Identifiable assets  68,224   22,418   10,252   3,501   32,053 
Capital expenditures $55  $
19  $24  $12  $0 
For the three months ended December 31, 2021
(in thousands)
 
Consolidated
  
Logistics
  
Life Sciences
  
Manufacturing
  
Corporate
 
Revenue $83,314  $77,556  $3,244  $2,514  $— 
Forwarding expenses and cost of revenue  67,825   65,610   1,001   1,214   — 
Gross profit
  15,489   11,946   2,243   1,300   — 
Selling, general and administrative  12,338   9,349   1,250   729   1,010 
Amortization of intangible assets  509   —   —   —   509 
Income (loss) from operations  2,642  2,597  993   571  (1,519)
Interest expense  279   224   29   26   — 
Identifiable assets  122,237   64,899   10,083   4,017   43,238 
Capital expenditures, net of disposals
 
169   
65  
102  
2  
— 

16

12.13.FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following table presents the Company’s assets that are measured at fair value on a recurring basis based on the three-level valuation hierarchy (in thousands):

Level 1 December 31,
 2022		  
September 30,
2022
 
Investment in Rubicon at fair value $1,972  $2,371 
Level 1 Assets $1,972  $2,371 
 
As of December 31, 2022 and September 30, 2022, the Company held approximately 45% of the total issued and outstanding shares of Rubicon and reported its investment under the fair value method pursuant to ASC 320. Management determined that it was appropriate to carry its investment in Rubicon at fair value because the investment was traded on the NASDAQ stock exchange, had daily trading activity and had a better indicator of value. The investment in Rubicon is re-measured at the end of each quarter based on the trading price and any change in the value is reported on the income statement as a realized gain or loss in other income (expense).

The following table sets forth a summary of the changes in the fair value of the Company’s investment in Rubicon, which is measured at fair value on a recurring basis utilizing Level 1 assumptions in its valuation (in thousands):

  
December 31,
2022
  
September 30,
2022
 
Balance beginning of period $2,371  $— 
Purchase of Rubicon Investment  —   22,160 
Unrealized loss on Rubicon investment  (399)  (19,789)
Balance end of period $1,972  $2,371 

The following table presents the Company’s liabilities that are measured at fair value on a recurring basis based on the three-level valuation hierarchy (in thousands):

Level 3 December 31, 2021  September 30, 2021  
December 31,
2022
  
September 30,
2022
 
Contingent earnout liabilities
 
$
3,600
  
$
3,600
  
$
5,180
  
$
4,580
 
Level 3 Liabilities
 $3,600  $3,600  $5,180  $4,580 

This liabilityThese liabilities relates to the estimated fair value of earnout payments to former IBS and ELFS owners for the earnout period ending December 31, 20212022 and September 30, 2021.2022. The current and non-current portions of the fair value of the contingent earnout liability at December 31, 20212022 were $1,892 and $3,288, respectively. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2021 are $1,0542022 were $1,664 and $2,546,$2,916, respectively.

Refer to Note 2 to Consolidated Financial Statements for ELFS acquisition information. The following table sets forth a summary of the changes in the fair value of the Company’s contingent earnout liabilities, which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation (in thousands):

  December 31, 2021  September 30, 2021 
Balance at beginning of period
 
$
3,600
  
$
0
 
Fair value of contingent consideration recorded in connection with business combinations
  
0
   
3,600
 
Change in fair value of contingent consideration
  
0
   
0
 
Balance at end of period
 $3,600  $3,600 
  
December 31,
2022
  
September 30,
2022
 
Balance beginning of period
 
$
4,580
  
$
3,600
 
Fair value of contingent consideration recorded in connection with business combinations
  
600
   
980
 
Balance end of period
 $5,180  $4,580 

17
13.14.LEASES
 
The Company has operating leases for office and warehouse space in all districtscertain locations where it conducts business. As of December 31, 2021,2022, the remaining terms of the Company’s operating leases were between one and 6070 months, and certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include the minimum lease payments that the Company is obligated to make under the non-cancelable initial terms of the leases as the renewal terms are at the Company’s option and the Company is not reasonably certain to exercise those renewal options at lease commencement.
 
The components of lease cost for the three-month periods ended December 31, 20212022 and 20202021 are as follows (in thousands):

  
Three Months Ended
December 31,
 
  2022  2021 
Operating lease cost $551  $480 
Short-term lease cost  20   152 
Total lease cost $571  $632 
 
  
Three Months
Ended
December 31,
2021
  
Three Months
Ended
December 31,
2020
 
Operating lease cost $480  $231 
Short-term lease cost  
152
   
14
 
Total lease cost 
$
632
  
$
245
 

17
Rent expense for the three months ended December 31, 2022 and 2021 was $571 and 2020 was $632, and $245, respectively. Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the condensed consolidated balance sheets for operating leases as of December 31, 20212022 were $6,353, $1,797$5,600, $1,729 and $4,708,$4,053, respectively. Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the condensed consolidated balance sheets for operating leases as of September 30, 20212022 were $2,936, $1,2815,660, $1,825 and $1,751,$4,001, respectively.

During the three months ended December 31, 2021,2022, the Company through its wholly owned subsidiary ELFS entered into new operating leases and recorded an additional $3,842$399 in operating lease right of use assets and corresponding lease liabilities.

As of December 31, 20212022 and September 31, 2021,30, 2022, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 5.24.4 years and 3.18%3.00% and 2.94.6 years and 3.89%3.05%, respectively.

Future minimum lease payments under non-cancelable operating leases as of December 31, 20212022 are as follows (in thousands):
 
 
Year End
December 31,
2021
 
2022
 $1,798 
2023  1,441  $1,759 
2024
  1,147   1,409 
2025
  853   1,005 
2026  
620
   709 
2027  
723
 
Thereafter
  1,168   566 
Total undiscounted loan payments
  
7,027
   
6,171
 
Less: Imputed interest
  
(522
)
Less: imputed interest
  
(389
)
Total lease obligation
 
$
6,505
  
$
5,782
 

18

15.SUBSEQUENT EVENT

On January 30, 2023, Janel Group, Inc., a wholly-owned subsidiary of the Company, and Janel Group’s wholly-owned subsidiaries, as Borrowers, and the Company and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as Loan Party Obligors, entered into the Third Amendment (the “Amendment”) to the Amended and Restated Loan and Security Agreement, dated September 21, 2021 (the “Loan Agreement”), with Santander Bank, N.A., in its capacity as Lender. As amended by the terms of the Amendment, the 85% of the Borrowers’ eligible accounts receivable used to calculate the borrowing base under the Loan Agreement was increased to 90% for Domestic Insured Accounts (as defined in the Amendment), subject to adjustments set forth in the Loan Agreement.

18
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 ended December 31, 2021,2022, 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-lookingforward – looking statements may generally be identified by the use ofusing 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 ofseveral 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; we may be required to record a significant charge to earnings related to the risk thatimpairment of acquired assets; we may fail to realize the expected benefits or strategic objectives of any acquisition, or that we spend resources exploring acquisitions that are not consummated; risks associated with litigation, including contingent auto liability and insurance coverage;coverage, and indemnification claims and other unforeseen claims and liabilities that may arise from an acquisition; changes in tax rates, laws or regulations and our, our acquired companies’ and subsidiaries’ ability to utilize anticipated tax benefits; the impact of rising interest rates on our investments, business and operations; conflicts of interest with the minority shareholders of our business; the impact of the coronavirus pandemic on worldwide economic conditions and on our businesses; economic and other conditions in the markets in which we operate; the risk that we may not have sufficient working capital to continue operations; we may lose customers who are not obligated to long-term contracts to transact with us; instability in the financial markets; changes or developments in U.S. laws or policies; competition from companies with greater financial resources and from companies that operate in areas in which we plan to expand; our dependence on keytechnically skilled employees; impacts from climate change, including the increased focus by third-parties on sustainability issues and our ability to comply therewith; the impact of increases in shipping costs, long lead times, supply shortages and supply changes; 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; the level of our insurance coverage, including related to product and other liability risks; our compliance with applicable privacy, security and data laws; competition faced byrisks related to the diverse platforms and geographies which host our logistics services freight carriers with greatermanagement information and financial resources and from companies that operate in areas in which we plan to expand;reporting systems; our dependence on the availability of cargo space from third parties; the impact of claims arising from transportation of freight by the carriers with which we contract, including an increase in premium costs; risks related to the classification of owner-operators in the transportation industry; recessions and other economic developments that reduce freight volumes;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; the impact of seasonal trends; competition faced bytrends and other factors beyond our manufacturing (Indco)control on our Logistics business; changes in governmental regulations applicable to our Life Sciences business; the ability of our Life Sciences business from competitors with greater financial resources; Indco’s dependence on individual purchase orders to generate revenue;continually produce products that meet high-quality standards such as purity, reproducibility and/or absence of cross-reactivity; the ability of our Life Sciences business to maintain, determine the scope of and defend its and its competitors’ intellectual property rights; the impact of pressures in the life sciences industry to increase the predictability of or reduce healthcare costs; any decrease in the availability, or increase in the cost or supply shortages, of raw materials used by Indco; Indco’s ability to obtain and retain skilled technical personnel; risks associated with product liability claims due to alleged defects in Indco’s products; risks arising from the environmental, health and safety regulations applicable to Indco;Indco; the reliance of our Indco and life sciences businessesbusiness on a single location to manufacture their products; the ability of our life sciences business to compete effectively; the ability of our life sciences business to introduce new products in a timely manner; product or other liabilities associated with the manufacture and sale of new products and services; changes in governmental regulations applicable to our life sciences business; the ability of our life sciences business to continually produce products that meet high quality standards such as purity, reproducibility and/or absence of cross-reactivity; the controlling influence exerted by our officers and directors and one of our stockholders; our inability tothe unlikelihood that we will issue dividends in the foreseeable future; and risks related to ownership of our common stock, including share price volatility, and the lack of a guaranteed continued public trading market for our common stock, the impactour ability to issue shares of COVID-19 onpreferred stock with greater rights than our operationscommon stock and financial results;costs related to maintaining our status as a public company; 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, 2021.2022.

19
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 Janel 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-pricedreasonably 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,carriers; customs brokerage services,services; warehousing and distribution services,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.

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,November 1, 2022, the Company completed a business combination whereby it acquired all of the membership interestsoutstanding stock of ImmunoChemistry Technologies, LLC. (“ICT”)ImmunoBioScience Corporation, which we include in our Life Sciences segment.

20On August 15, 2022, the Company completed a business combination whereby it acquired all the membership interests of ECM Biosciences LLC, which we include in our Life Sciences segment.
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.

Investment in Marketable Securities - Rubicon

On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $0.001 per share, of Rubicon Technology, Inc. ("Rubicon"), at a price per share of $20.00, in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the "Rubicon Purchase Agreement"). Pursuant to the terms of the Rubicon Purchase Agreement, the acquired shares represented 44.99% of Rubicon's issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022.

Rubicon is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Rubicon uses proprietary crystal growth technology to produce high-quality sapphire products to meet customers exacting specifications.

The purpose of our investment in Rubicon is for Janel to acquire a significant ownership interest in Rubicon, together with representation on Rubicon's Board, in an attempt to (i) restructure the Rubicon business to achieve profitability and (ii) assist Rubicon in utilizing its net operating loss carry-forward assets. Although we are optimistic about our investment in Rubicon, our investment involves risks and uncertainties that are beyond our control.

20
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 significantFor a description of the Company’s critical accounting policies are described in Note 1, “Summaryand estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of BusinessFinancial Condition and SignificantResults of Operations—Critical Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended September 30, 2021, which are includedEstimates” in our Annual Report on Form 10-K filed with the SEC on December 27, 2021.9, 2022. 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 months ended December 31, 2021.2022.

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”).

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.
21
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.

21
Results of Operations – Janel Corporation – Three Months Ended December 31, 2022 and 2021

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

Our consolidated results of operations are as follows:

 
Three Months
Ended
December 31,
2021
 
Three Months
Ended
December 31,
2020
  
Three Months Ended
December 31,
 
Revenues 
$
83,314
 $26,478 
Forwarding expenses and cost of revenues  
67,825
  20,029 
(in thousands) 2022 2021 
Revenue $57,044  $83,314 
Forwarding expenses and cost of revenue  42,127   67,825 
Gross profit 
15,489
 6,449  14,917  15,489 
Operating expenses  
12,847
  5,960   13,537   12,847 
Operating income 
$
2,642
 $489 
Income from operations  1,380   2,642 
Net income 
$
1,688
 $255   360   1,688 
Adjusted operating income 
$
3,362
 $978  $2,057  $3,362 

Consolidated revenuesrevenue for the three months ended December 31, 2021 were $83,314,2022 was $57,044, which was $26,270 or 214.7% higher32% lower than the prior year period. Revenues increased across all three segmentsRevenue over this period decreased primarily due to lower freight prices in our Logistics segment as a recoveryresult of lower freight demand relative to improved global transportation capacity.

Income from operations for the impact of the COVID-19 pandemic experiencedthree months ended December 31, 2022 was $1,380 compared with $2,642 in the prior fiscal year as well asperiod. The decrease for the impactthree months ended December 31, 2022 resulted from lower profits across of acquisitions,our business segments, especially at our Logistics segment which accounted for $24,840 of additional revenue compared tobenefited from unusual demand in the prior year. Operating

Net income for the three months ended December 31, 20212022 totaled $360 or $0.24 per diluted share, compared to net income of $1,688 or $1.66 per diluted share for the three months ended December 31, 2021. The decline in net income was $2,642 compared with $489largely due to lower profits in the prior year period asour business segments, higher interest expense and a resultnon-cash mark-to-market write-down of the economic recovery experienced across all of our segments, partially offset by higher spending in the corporate segment.  an equity investment.

Adjusted operating income for the three months ended December 31, 2021 increased2022 decreased to $3,362$2,057 versus $978$3,362 in the prior year period. The Company’s net incomedecrease for the three months ended December 31, 2021 totaled approximately $1,688 or $1.66 per diluted share, compared to a net income of $255 or $0.26 per diluted share for the three months ended December 31, 2020.2022 resulted from an overall decrease in profits.

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

 
Three Months Ended
December 31,
  
Three Months Ended
December 31,
 
 2021  2020 
Operating income 
$
2,642
  $489 
(in thousands) 2022 2021 
Income from operations $1,380  $2,642 
Amortization of intangible assets 
509
  251  526  509 
Stock-based compensation 
40
  24  61  40 
Cost recognized on sale of acquired inventory  
171
   214   90   171 
Adjusted operating income 
$
3,362
  $978  $2,057  $3,362 

22
Results of Operations – Logistics – Three Months Ended December 31, 20212022 and 20202021

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,
  
  2021  2020 
Revenue 
$
77,556
  
$
22,260
 
Forwarding expense  
65,610
   
18,395
 
Gross profit 
$
11,946
  
$
3,865
 
Gross profit margin  
15.4
%
  
17.4
%
Selling, general and administrative expenses 
$
9,349
  
$
3,374
 
Income from operations 
$
2,597
  
$
491
 
22
  
Three Months Ended
December 31,
 
  2022  2021 
(in thousands)      
Revenue $51,800  $77,556 
Forwarding expense  40,267   65,610 
Gross profit  11,533   11,946 
Gross profit margin  22.3%  15.4%
Selling, general and administrative expenses  9,528   9,349 
Income from operations $2,005  $2,597 

Revenue

Total revenue for the three months ended December 31, 20212022 was $77,556$51,800 as compared to $22,260$77,556 for the three months ended December 31, 2020, an increase2021, a decrease of $55,296$25,756 or 248.4%33%. The increase in revenue wasRevenue decreased primarily driven by the rise in transportation ratesdue to lower freight prices as a result of capacity issues globally and a recovery in business compared with the depressed levels in the prior year period, while two acquisitions accounted for $24,840 of additional revenue comparedlower freight demand relative to the prior year.improved global transportation capacity.

Gross Profit

Gross profit for the three months ended December 31, 20212022 was $11,946, an increase$11,533, a decrease of $8,081,$413, or 209.1%3%, as compared to $3,865$11,946 for the three months ended December 31, 2020. Two acquisitions accounted for $5,834 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%.2021. Gross margin as a percentage of revenue decreasedincreased to 15.4%22.3% for the three months ended December 31, 20212022, compared to 17.4%15.4% for the prior year periodperiod. Our gross profit margin increased as gross profit declined slightly as compared with gross revenue which declined more significantly due to the increase in transportation rates, partially offset by higher gross profit margins at an acquired business.lower freight prices.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended December 31, 20212022 were $9,349,$9,528, as compared to $3,374$9,349 for the three months ended December 31, 2020.2021. This increase of $5,975,$179, or 177.1%2%, was mainly due to additional expenses from acquired businesses.personnel investments. As a percentage of revenue, selling, general and administrative expenses were 12.1%18.4% and 15.2%12.1% of revenue for the three months ended December 31, 20212022 and 2020,2021, respectively. The declineincrease in selling, general and administrative expenses as a percentage of revenue largely reflected the risereduction in transportation rates as a result of capacity issues globally.and additional personnel investments.

Income from Operations

Income from operations increaseddecreased to $2,005 for the three months ended December 31, 2022, as compared to income from operations of $2,597 for the three months ended December 31, 2021, as compared to income from operationsa decrease of $491 for the three months ended December 31, 2020, an increase of $2,106.$592. Income from operations increaseddecreased as a result of the economic recovery from the COVID-19 pandemic compared to the prior fiscal yearlower transportation demand and contributions from two acquisitions.higher personnel investments. Operating margin as a percentage of gross profit for the three months ended December 31, 20212022 was 21.7%17.4% compared to 12.7%21.7% in the prior year period largely due to operating leverage from significantlylower gross profits and higher gross profit as business recovered compared with the depressed levels in the prior year period.personnel investments.
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Results of Operations – Life Sciences – Three Months Ended December 31, 20212022 and 20202021

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

Life Sciences – Selected Financial Information:
 
Three Months
Ended
December 31,
  
Three Months Ended
December 31,
 
 2021  2020  2022  2021 
(in thousands)      
Revenue $3,244  $2,349  $2,838  $3,244 
Cost of sales 830  542  638  830 
Cost recognized upon sale of acquired inventory  171   214   90   171 
Gross profit $2,243  $1,593  2,110  2,243 
Gross profit margin 69.1% 67.8% 74.3% 69.1%
Selling, general and administrative expenses $
1,250  $976 
Selling, general and administrative  1,510   1,250 
Income from operations $993  $617  $600  $993 

Revenue

Total revenue was $3,244 $2,838and $2,349$3,244 for the three months ended December 31, 2022 and 2021, respectively, reflecting a decrease of $406 or 12.5% compared to the prior year period due to the timing of orders, in particular for diagnostic reagents and 2020, respectively, an increase of $895 or 38.1%. 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.lower COVID- related sales.

23
Gross Profit

Gross profit was $2,243$2,110 and $1,593$2,243 for the three months ended December 31, 2022 and 2021, and 2020, respectively, an increasea decrease of $650$133 or 40.8%5.9%. During the three months ended December 31, 20212022 and 2020,2021, gross profit margin was 69.1%74.3% and 67.8%69.1%, respectively, as favorable product mix and lower cost recognized upon sale of acquired inventory benefited gross profit margin.declined and product mix improved.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the Life Sciences segment were $1,250$1,510 and $976$1,250 for the three months ended December 31, 20212022 and 2020,2021, respectively. The year-over-year increase was largely due to an acquired business.acquisition integration expenses.

Income from Operations

Income from operations for the three months ended December 31, 2022 and 2021 was $600 and 2020 was $993, respectively, a decrease of $393 or 39.6%, due to the timing of orders, in particular to diagnostic reagents, lower COVID-related sales and $617, an increase of $376 or 60.9%, largely due to positive operating leverage from the increase in revenue as a result of the recovery from the impact of the COVID-19-related shut downs experienced in the prior fiscal year and, to a lesser extent, a contribution from an acquisition.acquisition-related expenses.

Results of Operations - Manufacturing – Three Months Ended December 31, 20212022 and 20202021

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

Manufacturing – Selected Financial Information:
 
Three Months Ended
December 31,
  
Three Months Ended
December 31,
 
 2021  2020  2022  2021 
(in thousands)      
Revenue $2,514  $1,869  $2,406  $2,514 
Cost of revenues  1,214   878 
Cost of sales  1,132   1,214 
Gross profit $1,300  $991  1,274  1,300 
Gross profit margin 51.7% 53.0% 53.0% 51.7%
Selling, general and administrative expenses $729  $642   774   729 
Income from operations $571  $349  $500  $571 

Revenue

Total revenue was $2,514$2,406 and $1,869$2,514 for the three months ended December 31, 2022 and 2021, and 2020, respectively, an increasea decrease of $645, or 34.5%.$108. The revenue increase reflected a broad increase across the business relative to the COVID-19 related slowdowndecrease in the prior fiscal year.

Gross Profit
Gross profit was $1,300 and $991revenue for the three months ended December 31, 2022 reflected a decrease in volume across the business offset in part by higher product pricing.

Gross Profit

Gross profit was $1,274 and $1,300 for the three months ended December 31, 2022 and 2021, and 2020, respectively, an increasea decrease of $309,$26, or 31.2%2.0%. Gross profit margin for the three months ended December 31, 2022 and 2021 was 53.0% and 2020 was 51.7% and 53.0%, respectively. The year-over-year decreaseincrease in gross profit margin was generally due to thea more favorable mix of business.business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $729$774 and $642$729 for the three months ended December 31, 20212022 and 2020,2021, respectively, an increase of $87$45 or 13.6%6.2%. The increase in expenses relative to revenue for the three-month periods reflected positive operating leverage on higher volumes.the mix of business.

Income from Operations

Income from operations was $500 for the three months ended December 31, 2022 compared to $571 for the three months ended December 31, 2021, compared to $349 for the three months ended December 31, 2020, representing a 63.6% increase12.4% decrease from the prior year period. The increase was period due to favorable operating leverage as revenue recovered.the timing of orders.

24
Results of Operations – Corporate and Other – Three Months Ended December 31, 20212022 and 20202021

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
December 31,
 
(in thousands) 2022  2021 
Total income from operations by segment $3,105  $4,161 
Corporate expenses  (1,138)  (1,000)
Amortization of intangible assets  (526)  (509)
Stock-based compensation  (61)  (10)
Total corporate expenses  (1,725)  (1,519)
Interest expense  (474)  (279)
Unrealized loss on Rubicon investment  (399)  — 
Net income before taxes  507   2,363 
Income taxes expense  (147)  (675)
Net Income  360   1,688 
Preferred stock dividends  (72)  (211)
Net Income Available to Common Stockholders $288  $1,477 

25
Total Corporate Expenses

Total corporateCorporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, increased by $551,$206 or 56.9%13.6%, to $1,725 in the three months ended December 31, 2022 as compared to $1,519 for the three months ended December 31, 2021 as compared to $968 for the three months ended December 31, 2020.2021. The increase was due primarily to higher accounting relatedhigher stock-based compensation, higher accounting-related professional expense, increasedan increase in merger and acquisition expenses and increases in amortization of intangible expenses. We incur merger and acquisition deal-related expenses and intangible amortization at the corporateCorporate level rather than at the segment level.

Interest Expense

Interest expense for the consolidated company increased $160,$195, or 134.5%69.9%, to $474for the three months ended December 31, 2022 from $279 for the three months ended December 31, 2021 from $119 2021. The increase was primarily due to higher interest rates and higher average debt balances to support our acquisition efforts.

Income Tax Expense

On a consolidated basis, the Company recorded an income tax expense of $147for the three months ended December 31,2020 primarily due 2022, as compared 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 Expense
On a consolidated basis, the Company recorded an income tax expense of $675 for the three months ended December 31, 2021, as compared to an income tax expense of $115 for the three months ended December 31,2020.2021. The increasedecrease in expense was primarily due to an increase inlower 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.

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, 20212022 and 2020,2021, preferred stock dividends were $211$72 and $174,$211, respectively, representing an increasea decrease of $37,$139, or 21.3%65.9%. The increasedecrease in preferred stock dividends was the result of a higher number of sharesthe Company retiring $6,000 of Series C Preferred Stock outstandingon March 31, 2022 and an increasethe change in the annual dividend rate as of January 1, 2021 from 9% to 8%5%.

Net Income

Net income was $360, or $0.24 per diluted share, for the three months ended December 31, 2022 compared to net income of $1,688 or $1.66 per diluted share, for the three months ended December 31, 2021 compared to2021.The decline in net income was largely due to lower profits in our business segments, higher interest expenses and a non-cash mark-to-market write-down of $255,an equity investment.

Income Available to Common Stockholders

Income available to holders of Common Stock was $288, or $0.26$0.24 per diluted share, for the three months ended December 31, 2020. The increase was primarily due2022 compared to higher revenues and gross profit, partially offset by higher selling, general and administrative expenses across our operating segments and at corporate.
Income Available to Common Shareholders
Incomeincome available to holders of common shares wasCommon Stock of $1,477, or $1.45 per diluted share, for the three months ended December 31, 2021 compared to2021.

The decrease in net income available to holders of common shares of $81, or $0.08 per diluted share, for the three months ended December 31,2020. The increase instockholders reflected lower net income, was primarily due higher revenues, partially offset by higher selling, general and administrative expenses across our businesses and corporate in both periods and an increasea decrease in the dividend rate with respect to the Series C Stock as of January 1, 2021 March 31, 2022 from 9% to 8%5%.

25
LIQUIDITY AND CAPITAL RESOURCES

General

Our ability to satisfy liquidity requirements, including satisfyinginclude meeting debt obligations and fundfunding 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’sour 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.

26
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.

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’sOur 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$5,780 for the three months ended December 31, 2021,2022, versus ($812) used in$5,291 provided by operating activities for the three months ended December 31, 2020.2021. The increase in cash provided by operations for the three months ended December 31, 20212022 compared to the prior year period was driven principally by higher profits, timing of cash payments for accounts payables and accrued expenses, partiallylower net income 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 $2,927 for the three months ended December 31, 2022, versus $169 for the three months ended December 31, 2021, versus $2,8612021. We used $80 for the acquisition of property and equipment and $2,847 for the acquisition of one business for the three months ended December 31, 2020. The Company used2022, compared to $169 for the acquisition of property and equipment for the three 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, 2020.2021.

Cash flows from financing activities

Net cash used in financing activities was $5,289 for the three months ended December 31, 2022, versus net cash used in financing activities of $6,170 for the three months ended December 31, 2021, versus net2021. Net cash provided byused in financing activities of $2,156 for the three months ended December 31, 2020.2022 primarily included repayment of funds from our line of credit, and repayment of funds from our term loan. Net cash used in financing activities for the three months ended December 31, 2021 primarily included repaymentrepayments of funds from our line of credit partially,and repayments of term loan and notes payable related party. Net cash provided financing activities for the three months ended December 31, 2020 primarily included proceeds from our line of credit partially offset by repayments on term loan and notes payable related party.loans.
27
Off-Balance Sheet Arrangements

As of December 31, 2021,2022, 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, 2021,2022, 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 15 percent of the Company’s total assets and 34 percent of income before income taxes of the Company as of and for the quarter ended December 31, 2021. Based on thissuch evaluation, the Company’sour Chief Executive Officer and our Principal Financial Officer have concluded that, as of the end of such period, the Company’sDecember 31, 2022, our disclosure controls and procedures were effective.
As referenced above,are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Company acquired ELFS on September 21, 2021. The CompanyExchange Act is recorded, processed, summarized, and reported within the time periods specified in the processrules and forms of reviewing the internal control structure of ELFSSEC, and if necessary, will makethat such information is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, as appropriate, changes as it integrates ELFS into the Company’s overall internal control over financial reporting process.  Other than as described above, there haveto allow timely decisions regarding required disclosure.

There has been no changeschange in the Company’sCompany's overall internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)15(d)-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 20212022 that has materially affected, or is reasonably likely to materially affect, ouror internal control over financial reporting.

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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, 2021.2022. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s 20212022 Annual Report.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the three months ended December 31, 2021.2022. In addition, there were no shares of common stockCommon Stock purchased by us during the three months ended December 31, 2021.2022.

ITEM 5.OTHER INFORMATION
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On January 30,Table2023, Janel Group, Inc. (“Janel”), a wholly-owned subsidiary of ContentsJanel Corporation (the “Company”), and Janel’s wholly-owned subsidiaries, as Borrowers, and the Company and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as Loan Party Obligors, entered into the Third Amendment (the “Amendment”) to the Amended and Restated Loan and Security Agreement, dated September 21, 2021 (the “Loan Agreement”), with Santander Bank, N.A., in its capacity as Lender. As amended by the terms of the Amendment, the 85% of the Borrowers’ eligible accounts receivable used to calculate the borrowing base under the Loan Agreement was increased to 90% for Domestic Insured Accounts (as defined in the Amendment), subject to adjustments set forth in the Loan Agreement.

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)
10.1Third Amendment to Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, a Texas limited liability company, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as loan party obligors dated January 30, 2023 (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, 20212022 for the three months ended December 31, 20212022 and 20202021 in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of December 31, 20212022 and September 30, 2021,2022, (ii) Condensed Consolidated Statements of Operations for the three months ended December 31, 20212022 and 2020,2021, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended December 31, 20212022 and 2020,2021, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 20212022 and 2020,2021, and (v) Notes to Condensed Consolidated Financial Statements.
104Cover 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, 2022
3, 2023		JANEL CORPORATION
 Registrant
  
 /s/ Dominique SchulteDarren Seirer
 Dominique SchulteDarren Seirer
 Chairman, President and Chief Executive Officer
 
(Principal Executive Officer)
  
Dated: February 9, 2022
3, 2023		JANEL CORPORATION
 Registrant
  
 /s/ Vincent A. Verde
 Vincent A. Verde
 Principal Financial Officer, Treasurer and Secretary


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