x
2022
¨
Nevada | 86-1005291 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
Identification No.) |
(Address of principal executive offices) | (Zip Code) |
( (212) 373-5895
report: N/A
Title of each class | Trading symbols(s) | Name of each exchange on which registered | ||
None | None | None |
☐
☐
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company | ||
Emerging growth company |
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☒
2022
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Item 1. | |||
Item 1A. | 35 | ||
Item 2. | 35 | ||
Item 5. | Other Information | 35 | |
Item 6. | |||
36 |
ITEM 1. | FINANCIAL STATEMENTS |
June 30, September 30, 2017 2016 (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,889,468 $ 965,115 Accounts receivable, net of allowance for doubtful accounts of $242,270 and $230,000, respectively 13,323,679 12,353,582 Inventory 332,365 356,875 Prepaid expenses and sundry current assets 314,059 233,716 Total current assets 15,859,571 13,909,288 PROPERTY AND EQUIPMENT, NET 338,218 287,391 OTHER ASSETS Intangible assets, net (Note 3) 12,041,771 12,373,266 Goodwill 9,101,858 8,443,477 Deferred income taxes 587,983 844,977 Security deposits 122,246 99,658 Total other assets 21,853,858 21,761,378 Total assets $ 38,051,647 $ 35,958,057 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - banks (Note 4) $ 6,674,311 $ 6,498,403 Note payable - related party, net of imputed interest (Note 5) 492,635 500,000 Accounts payable - trade 11,635,006 9,298,029 Accrued expenses and other current liabilities 1,832,335 1,254,926 Dividends payable 994,945 623,077 Note payable – other - - Current portion of long-term debt 857,148 857,148 Total current liabilities 22,486,380 19,031,583 OTHER LIABILTIES LONG-TERM DEBT – BANK Long-term debt (Note 4) 3,640,179 4,616,540 Long-term debt - related party, net of imputed interest (Note 5) - 471,108 Deferred compensation 78,568 78,568 Total other liabilities 3,718,747 5,166,216 Total liabilities 26,205,127 24,197,799 STOCKHOLDERS' EQUITY Preferred stock, $0.001 par value; 100,000 shares authorized Series A 20,000 shares authorized and 20,000 shares issued and outstanding at both dates 20 20 Series B 5,700 shares authorized and 1,271 shares issued and outstanding at both dates 1 1 Series C 20,000 shares authorized and 14,205 shares issued and outstanding at both dates 15 15 Common stock, $0.001 par value; 4,500,000 shares authorized, 573,951 shares issued and 553,951 and 573,951 shares outstanding, respectively 574 574 Paid-in capital 12,710,441 12,920,416 Treasury stock, at cost 20,000 shares (Note 6) (240,000 ) - Accumulated deficit (1,700,803 ) (2,161,994 ) Total Janel Corporation stockholders' equity 10,770,248 10,759,032 Non-controlling interest 1,076,272 1,001,226 Total stockholders' equity 11,846,520 11,760,258 Total liabilities and stockholders' equity $ 38,051,647 $ 35,958,057
June 30, ASSETS Current Assets: $ 6,234 Total current assets Property and Equipment, net Other Assets: Total other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: $ 29,637 Total current liabilities 84,647 79,559 Other Liabilities: Total other liabilities Total liabilities Stockholders’ Equity: Total stockholders’ equity Total liabilities and stockholders’ equity - 3 -
Three months ended June 30, | Nine months ended June 30, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
REVENUES | ||||||||||||||||||||
Global Logistics Services | $ | 17,963,837 | $ | 15,425,092 | $ | 49,499,193 | $ | 53,935,789 | ||||||||||||
Manufacturing | 2,283,041 | 2,080,361 | 6,444,205 | 2,792,667 | ||||||||||||||||
TOTAL REVENUES | 20,246,878 | 17,505,453 | 55,943,398 | 56,728,456 | ||||||||||||||||
COST AND EXPENSES | ||||||||||||||||||||
Forwarding expenses | 14,455,926 | 12,157,139 | 39,810,183 | 44,171,758 | ||||||||||||||||
Cost of revenues - manufacturing | 989,313 | 961,587 | 2,888,458 | 1,266,878 | ||||||||||||||||
Selling, general and administrative | 4,002,311 | 3,460,936 | 11,206,459 | 9,798,908 | ||||||||||||||||
Amortization of intangible assets | 195,666 | 203,237 | 578,997 | 402,915 | ||||||||||||||||
TOTAL COSTS AND EXPENSES | 19,643,216 | 16,782,899 | 54,484,097 | 55,640,459 | ||||||||||||||||
INCOME FROM OPERATIONS | 603,662 | 722,554 | 1,459,301 | 1,087,997 | ||||||||||||||||
OTHER ITEMS | ||||||||||||||||||||
Interest expense, net of interest income | (184,280 | ) | (199,892 | ) | (566,807 | ) | (476,665 | ) | ||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 419,382 | 522,662 | 892,494 | 611,332 | ||||||||||||||||
Income taxes | (129,419 | ) | (36,604 | ) | (356,257 | ) | (75,181 | ) | ||||||||||||
NET INCOME FROM CONTINUING OPERATIONS | 289,963 | 486,058 | 536,237 | 536,151 | ||||||||||||||||
Loss from discontinued operations, net of tax | - | (1,668 | ) | - | (184,845 | ) | ||||||||||||||
NET INCOME | 289,963 | 484,390 | 536,237 | 351,306 | ||||||||||||||||
Less: net income attributable to non-controlling interests | 30,943 | 35,331 | 75,046 | 49,636 | ||||||||||||||||
NET INCOME ATTRIBUTABLE TO JANEL CORPORATION STOCKHOLDERS | 259,020 | 449,059 | 461,191 | 301,670 | ||||||||||||||||
Preferred stock dividends | (127,706 | ) | (133,819 | ) | (383,118 | ) | (262,165 | ) | ||||||||||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 131,314 | $ | 315,240 | $ | 78,073 | $ | 39,505 | ||||||||||||
Income per share from continuing operations attributable to common stockholders: | Basic | $ | 0.52 | $ | 0.85 | $ | 0.95 | $ | 0.93 | |||||||||||
Diluted | $ | 0.42 | $ | 0.78 | $ | 0.77 | $ | 0.87 | ||||||||||||
(Loss) per share from discontinued operations attributable to common stockholders: | Basic | $ | - | $ | - | $ | - | $ | (0.32 | ) | ||||||||||
Diluted | $ | - | $ | - | $ | - | $ | (0.32 | ) | |||||||||||
Net income (loss) per share attributable to common stockholders: | Basic | $ | 0.24 | $ | 0.55 | $ | 0.14 | $ | 0.07 | |||||||||||
Diluted | $ | 0.19 | $ | 0.51 | $ | 0.11 | $ | 0.06 | ||||||||||||
Basic weighted average number of shares outstanding | 553,951 | 573,951 | 567,309 | 573,951 | ||||||||||||||||
Fully-diluted weighted average number of shares outstanding | 686,699 | 622,624 | 693,332 | 613,865 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue | $ | 78,984 | $ | 34,826 | $ | 243,149 | $ | 91,446 | ||||||||
Forwarding expenses and cost of revenues | 61,819 | 26,058 | 193,986 | 68,680 | ||||||||||||
Gross profit | 17,165 | 8,768 | 49,163 | 22,766 | ||||||||||||
Cost and Expenses: | ||||||||||||||||
Selling, general and administrative | 13,505 | 7,158 | 39,718 | 19,282 | ||||||||||||
Amortization of intangible assets | 489 | 288 | 1,485 | 832 | ||||||||||||
Total Costs and Expenses | 13,994 | 7,446 | 41,203 | 20,114 | ||||||||||||
Income from Operations | 3,171 | 1,322 | 7,960 | 2,652 | ||||||||||||
Other Items: | ||||||||||||||||
Interest expense | (299 | ) | (141 | ) | (847 | ) | (418 | ) | ||||||||
Gain on Paycheck Protection Program loan forgiveness | 0 | 0 | 0 | 135 | ||||||||||||
Income Before Income Taxes | 2,872 | 1,181 | 7,113 | 2,369 | ||||||||||||
Income tax expense | (714 | ) | (311 | ) | (1,994 | ) | (648 | ) | ||||||||
Net Income | 2,158 | 870 | 5,119 | 1,721 | ||||||||||||
Preferred stock dividends | (71 | ) | (197 | ) | (515 | ) | (566 | ) | ||||||||
Non-controlling interest dividends | 0 | 0 | (61 | ) | 0 | |||||||||||
Net Income Available to Common Stockholders | $ | 2,087 | $ | 673 | $ | 4,543 | $ | 1,155 | ||||||||
Net income per share | ||||||||||||||||
Basic | $ | 2.04 | $ | 0.93 | $ | 5.13 | $ | 1.84 | ||||||||
Diluted | $ | 1.93 | $ | 0.88 | $ | 4.85 | $ | 1.75 | ||||||||
Net income per share attributable to common stockholders: | ||||||||||||||||
Basic | $ | 1.97 | $ | 0.73 | $ | 4.56 | $ | 1.24 | ||||||||
Diluted | $ | 1.87 | $ | 0.68 | $ | 4.31 | $ | 1.17 | ||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 1,057.7 | 939.6 | 996.9 | 937.2 | ||||||||||||
Diluted | 1,116.6 | 994.8 | 1,055.0 | 981.8 |
Common Stock | Preferred Stock | Paid-in | Accumulated | Treasury Stock | Non- Controlling | Total | ||||||||||||||||||||||||||||||||||||||
Shares | $ | Shares | $ | Capital | Deficit | Shares | $ | TOTAL | Interest | Equity | ||||||||||||||||||||||||||||||||||
Balance - September 30, 2016 | 573,951 | $ | 574 | 35,476 | $ | 36 | $ | 12,920,416 | $ | (2,161,994 | ) | - | - | $ | 10,759,032 | $ | 1,001,226 | $ | 11,760,258 | |||||||||||||||||||||||||
Net income | - | - | - | - | - | 461,191 | - | - | 461,191 | 75,046 | $ | 536,237 | ||||||||||||||||||||||||||||||||
Dividends to preferred stockholders | - | - | - | - | (383,118 | ) | - | - | - | (383,118 | ) | - | $ | (383,118 | ) | |||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 173,143 | - | - | - | 173,143 | - | $ | 173,143 | ||||||||||||||||||||||||||||||||
Treasury stock acquired | - | - | - | - | - | - | 20,000 | (240,000 | ) | (240,000 | ) | - | $ | (240,000 | ) | |||||||||||||||||||||||||||||
Balance - June 30, 2017 | 573,951 | $ | 574 | 35,476 | $ | 36 | $ | 12,710,441 | $ | (1,700,803 | ) | 20,000 | $ | (240,000 | ) | $ | 10,770,248 | $ | 1,076,272 | $ | 11,846,520 |
PREFERRED STOCK | COMMON STOCK | PAID-IN CAPITAL | COMMON TREASURY STOCK | ACCUMULATED EARNINGS | TOTAL EQUITY | |||||||||||||||||||||||||||||||
SHARES | $ | SHARES | $ | $ | SHARES | $ | $ | $ | ||||||||||||||||||||||||||||
Balance - September 30, 2021 | 20,991 | 0 | 962,207 | $ | 1 | $ | 14,838 | 20,000 | $ | (240 | ) | $ | 3,520 | $ | 18,119 | |||||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 1,688 | 1,688 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (211 | ) | — | 0 | 0 | (211 | ) | |||||||||||||||||||||||||
Stock-based compensation | — | 0 | — | 0 | 29 | — | 0 | 0 | 29 | |||||||||||||||||||||||||||
Stock option exercise | 0 | 0 | 17,500 | 0 | 85 | 0 | 0 | 0 | 85 | |||||||||||||||||||||||||||
Balance - December 31, 2021 | 20,991 | 0 | 979,707 | 1 | 14,741 | 20,000 | (240 | ) | 5,208 | 19,710 | ||||||||||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 1,273 | 1,273 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (233 | ) | — | 0 | 0 | (233 | ) | |||||||||||||||||||||||||
Dividends to non-controlling interest | — | 0 | — | 0 | (61 | ) | — | 0 | 0 | (61 | ) | |||||||||||||||||||||||||
Preferred C shares purchased | (4,687 | ) | 0 | 0 | 0 | (1,731 | ) | — | — | 0 | (1,731 | ) | ||||||||||||||||||||||||
Preferred C shares converted | (4,905 | ) | 0 | 65,205 | 0 | 0 | — | — | 0 | 0 | ||||||||||||||||||||||||||
Preferred B shares converted | (31 | ) | 0 | 306 | 0 | 0 | — | — | 0 | 0 | ||||||||||||||||||||||||||
Stock based compensation | 0 | 0 | 15,000 | — | 718 | 0 | 0 | 0 | 718 | |||||||||||||||||||||||||||
Stock options exercise | 0 | 0 | 17,500 | 0 | 76 | 0 | 0 | 0 | 76 | |||||||||||||||||||||||||||
Balance - March 31, 2022 | 11,368 | $ | 0 | 1,077,718 | $ | 1 | $ | 13,510 | 20,000 | $ | (240 | ) | $ | 6,481 | $ | 19,752 | ||||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 2,158 | 2,158 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (71 | ) | — | 0 | 0 | (71 | ) | |||||||||||||||||||||||||
Stock based compensation | — | 0 | — | 0 | 22 | — | 0 | 0 | 22 | |||||||||||||||||||||||||||
Balance – June 30, 2022 | 11,368 | $ | 0 | 1,077,718 | $ | 1 | $ | 13,461 | 20,000 | $ | (240 | ) | $ | 8,639 | $ | 21,861 |
PREFERRED STOCK | COMMON STOCK | PAID-IN CAPITAL | COMMON TREASURY STOCK | ACCUMULATED EARNINGS (DEFICIT) | TOTAL EQUITY | |||||||||||||||||||||||||||||||
SHARES | $ | SHARES | $ | $ | SHARES | $ | $ | $ | ||||||||||||||||||||||||||||
Balance - September 30, 2020 | 19,791 | 0 | 918,652 | $ | 1 | $ | 14,604 | 20,000 | $ | (240 | ) | $ | (1,683 | ) | $ | 12,682 | ||||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 255 | 255 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (174 | ) | — | 0 | 0 | (174 | ) | |||||||||||||||||||||||||
Stock-based compensation | — | 0 | — | 0 | 10 | — | 0 | 0 | 10 | |||||||||||||||||||||||||||
Stock options exercise | 0 | 0 | 2,502 | 0 | 21 | 0 | 0 | 0 | 21 | |||||||||||||||||||||||||||
Balance - December 31, 2020 | 19,791 | 0 | 921,154 | 1 | 14,461 | 20,000 | (240 | ) | (1,428 | ) | 12,794 | |||||||||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 596 | 596 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (195 | ) | — | 0 | 0 | (195 | ) | |||||||||||||||||||||||||
Stock based compensation | — | 0 | — | 0 | 12 | — | 0 | 0 | 12 | |||||||||||||||||||||||||||
Balance - March 31, 2021 | 19,791 | $ | 0 | 921,154 | $ | 1 | $ | 14,278 | 20,000 | $ | (240 | ) | $ | (832 | ) | $ | 13,207 | |||||||||||||||||||
Net Income | — | 0 | — | 0 | 0 | — | 0 | 870 | 870 | |||||||||||||||||||||||||||
Dividends to preferred stockholders | — | 0 | — | 0 | (197 | ) | — | 0 | 0 | (197 | ) | |||||||||||||||||||||||||
Stock based compensation | — | 0 | — | 0 | 13 | — | 0 | 0 | 13 | |||||||||||||||||||||||||||
Stock options exercise | 0 | 0 | 6,053 | 0 | 25 | 0 | 0 | 0 | 25 | |||||||||||||||||||||||||||
Balance – June 30, 2021 | 19,791 | $ | 0 | 927,207 | $ | 1 | $ | 14,119 | 20,000 | $ | (240 | ) | $ | 38 | $ | 13,918 |
Nine months ended June 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 536,237 | $ | 351,306 | ||||
Plus (loss) from discontinued operations | - | 184,845 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Bad debt expense | 82,460 | 341 | ||||||
Depreciation | 85,291 | 62,592 | ||||||
Deferred income tax | 256,994 | - | ||||||
Amortization of intangible assets | 578,997 | 402,915 | ||||||
Amortization of imputed interest | 21,526 | 41,954 | ||||||
Stock based compensation | 173,143 | 91,492 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (753,754 | ) | 1,942,323 | |||||
Inventory | 24,510 | (49,397 | ) | |||||
Prepaid expenses and sundry current assets | (87,655 | ) | (64,279 | ) | ||||
Accounts payable and accrued expenses | 1,910,937 | (1,924,522 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 2,828,686 | 1,039,570 | ||||||
NET CASH USED IN DISCONTINUED OPERATIONS | - | (184,845 | ) | |||||
2,828,686 | 854,725 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Acquisition of property and equipment | (136,118 | ) | (307,550 | ) | ||||
Cash acquired from acquisition | 115,986 | - | ||||||
Acquisition of subsidiary | (100,000 | ) | (10,734,663 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (120,132 | ) | (11,042,213 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Dividends paid | (11,250 | ) | (11,250 | ) | ||||
Proceeds (payments) from bank loans | (1,032,951 | ) | 5,479,229 | |||||
Proceeds from sale of preferred series C shares | - | 4,352,663 | ||||||
Repayment of notes payable - related party | (500,000 | ) | - | |||||
Treasury stock acquisition | (240,000 | ) | - | |||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (1,784,201 | ) | 9,820,642 | |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 924,353 | (366,846 | ) | |||||
CASH AND CASH EQUIVALENTS, beginning of the period | 965,115 | 942,748 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 1,889,468 | $ | 575,901 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 545,281 | $ | 476,665 | ||||
Income taxes | $ | 145,470 | $ | 75,181 | ||||
Non-cash financing activities: | ||||||||
Dividends declared to preferred stockholders | $ | 371,868 | $ | 262,165 | ||||
Acquisition of business: | ||||||||
Intangible assets acquired | $ | 898,381 | $ | 12,102,838 |
Nine Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 5,119 | $ | 1,721 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Provision for (recovery of) uncollectible accounts | 354 | (22 | ) | |||||
Depreciation | 351 | 265 | ||||||
Deferred income tax provision | (185 | ) | 488 | |||||
Amortization of intangible assets | 1,485 | 832 | ||||||
Amortization of acquired inventory valuation | 393 | 732 | ||||||
Amortization of loan costs | 7 | 7 | ||||||
Stock-based compensation | 800 | 85 | ||||||
Gain on Paycheck Protection Program loan forgiveness | 0 | (135 | ) | |||||
Changes in fair value of mandatorily redeemable noncontrolling interest | 58 | 86 | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | (10,026 | ) | (6,558 | ) | ||||
Inventory | (1,299 | ) | (319 | ) | ||||
Prepaid expenses and other current assets | (724 | ) | (205 | ) | ||||
Security deposits and other long-term assets | 44 | 6 | ||||||
Accounts payable and accrued expenses | 12,275 | 3,144 | ||||||
Other liabilities | 26 | 12 | ||||||
Net cash provided by operating activities | 8,678 | 139 | ||||||
Cash Flows From Investing Activities: | ||||||||
Acquisition of property and equipment, net of disposals | (477 | ) | (127 | ) | ||||
Acquisitions | (112 | ) | (2,874 | ) | ||||
Net cash (used in) investing activities | (589 | ) | (3,001 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Repayments of term loan | (728 | ) | (1,333 | ) | ||||
Proceeds from stock options exercise | 161 | 46 | ||||||
Line of credit, (payments) proceeds, net | (6,717 | ) | 4,539 | |||||
Repayment of subordinated promissory notes | (142 | ) | (813 | ) | ||||
Dividends paid to minority shareholders | (61 | ) | 0 | |||||
Dividends paid to preferred stockholders | (657 | ) | 0 | |||||
Repurchase of Series C Preferred Stock | (2,343 | ) | 0 | |||||
Net cash (used in) provided by financing activities | (10,487 | ) | 2,439 | |||||
Net (decrease) in cash | (2,398 | ) | (423 | ) | ||||
Cash at beginning of the period | 6,234 | 3,349 | ||||||
Cash at end of period | $ | 3,836 | $ | 2,926 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 597 | $ | 361 | ||||
Income taxes | $ | 1,261 | $ | 38 | ||||
Non-cash operating activities: | ||||||||
Gain on Paycheck Protection Program loan forgiveness | $ | 0 | $ | 135 | ||||
Non-cash investing activities: | ||||||||
Purchase price adjustments-ELFS | $ | 112 | 0 | |||||
Due to seller 338 election | 0 | $ | 30 | |||||
Subordinated promissory notes of ICT | $ | 0 | $ | 1,760 | ||||
Non-cash financing activities: | ||||||||
Dividends declared to preferred stockholders | $ | 515 | $ | 566 |
1. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
INDCO, Inc. (“INDCO”)
General. On March 21, 2016,Commission.
Three Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Service Type | ||||||||||||||||
Ocean freight | $ | 28,633 | $ | 13,082 | $ | 93,794 | $ | 33,556 | ||||||||
Trucking | 24,920 | 5,051 | 70,234 | 14,104 | ||||||||||||
Air freight | 13,716 | 7,735 | 40,653 | 18,808 | ||||||||||||
Other | 3,619 | 25 | 12,064 | 83 | ||||||||||||
Customs brokerage | 2,796 | 3,476 | 9,568 | 9,451 | ||||||||||||
Total | $ | 73,684 | $ | 29,369 | $ | 226,313 | $ | 76,002 |
2. | ACQUISITION |
Under the terms of the INDCO Purchase Agreement, the purchase price for the INDCO sharesmembership interests was $11,000,000,$19,000, subject to certain closing adjustments and customary indemnifications, representations and warranties. Theas set forth in the related purchase price was paid atagreement. Further earnout payments in an amount not anticipated to exceed $4,500 will be due to the former members of ELFS based on the operating profit earned by ELFS. Upon the closing in cash.
INDCO comprises the Manufacturing segment of the Company.
Purchase Price Allocation. In accordancetransaction, the former members of ELFS were paid $13,000 in cash and were issued an aggregate amount of $6,000 in subordinated promissory notes. Refer to Note 7 to the Condensed Consolidated Financial Statements for ELFS subordinated promissory notes information.
Goodwill represents the excess of the purchase price overacquisition as follows: cash - $13,000; earnout payments - $3,600; and subordinated promissory notes - $4,837 (preliminary net of working capital adjustment of $1,163). In March 2022, the fair value of the underlying net tangibleconsideration transferred was adjusted to $21,700, and identifiable intangible assets.
The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Fair Value | ||||
Cash | $ | 377,653 | ||
Accounts receivable, net | 620,632 | |||
Inventory | 372,212 | |||
Prepaid expenses and other current assets | 109,333 | |||
Fixed assets | 155,050 | |||
Accounts payable and other liabilities | (1,690,202 | ) | ||
Note payable - related party | (129,258 | ) | ||
Customer relationships and other intangibles | 7,700,000 | |||
Goodwill | 4,402,838 | |||
Non-controlling interest | (918,258 | ) | ||
Purchase price | $ | 11,000,000 |
W.J. Byrnes & Co. (“Byrnes”)
General.On April 1, 2017, the Company executed and closed a Stock Purchase Agreement (the “Byrnes Purchase Agreement”) for the purchase by the Company of 100% of the outstanding common stock (the “Byrnes Shares”) of W.J. Byrnes & Co., a global logistics services provider with five U.S. locations.
Under the terms of the Byrnes Purchase Agreement, the purchase price for the Byrnes Shares was $100,000 in cash, paid at the closing, plus the assumption of Byrnes’ net liabilities, subject to certain closing adjustments and customary indemnifications, representations and warranties.
The Byrnes acquisition expands the domestic network of the Company’s Global Logistics Services segment.
Purchase Price Allocation. In accordance with the acquisition method of accounting, the Company allocated the consideration to the net tangible and identifiable intangible assets based on their estimated fair values, which were determined by an independent valuation performed by a third party, as of the effective acquisition date, April 1, 2017.
Goodwill represents the excess of the purchase price over the fair value of the underlyingsubordinated promissory notes was adjusted to $5,100, in each case due to a change in the net tangible and identifiable intangible assets.
Theworking capital adjustment of $263.
(in thousands, except per share data) | Three Months ended June 30, 2021 | Nine Months ended June 30, 2021 | ||||||
Revenue | $ | 54,207 | $ | 146,098 | ||||
Income from Operations | $ | 2,263 | $ | 4,313 | ||||
Net Income | $ | 1,046 | $ | 2,658 | ||||
Net Income Available to Common Stockholders | $ | 849 | $ | 2,092 | ||||
Net Income per share: | ||||||||
Basic | $ | 1.12 | $ | 2.84 | ||||
Diluted | $ | 1.06 | $ | 2.71 | ||||
Net Income per share attributable to Common Stockholders: | ||||||||
Basic | $ | 0.90 | $ | 2.23 | ||||
Diluted | $ | 0.86 | $ | 2.13 |
Fair Value | ||||
Cash | $ | 115,986 | ||
Accounts receivable, net of allowance for doubtful accounts | 298,803 | |||
Customer relationships and other intangibles | 240,000 | |||
Goodwill | 658,381 | |||
Security deposits | 15,275 | |||
Note payable - bank | (224,998 | ) | ||
Accounts payable - trade | (891,169 | ) | ||
Accrued expenses and other current liabilities | (112,278 | ) | ||
Purchase price | $ | 100,000 |
3. | INVENTORY |
June 30, 2022 | September 30, 2021 | |||||||
Finished goods | $ | 1,097 | $ | 919 | ||||
Work-in-process | 777 | 968 | ||||||
Raw materials | 2,329 | 1,365 | ||||||
Gross inventory | 4,203 | 3,252 | ||||||
Less – reserve for inventory valuation | (70 | ) | (25 | ) | ||||
Inventory net | $ | 4,133 | $ | 3,227 |
INTANGIBLE ASSETS |
June 30, | September 30, | |||||||||
2017 | 2016 | Life | ||||||||
Customer relationships | $ | 11,690,000 | $ | 11,450,000 | 15-20 years | |||||
Trademarks / names | 1,770,000 | 1,770,000 | 20 years | |||||||
Other | 60,000 | 60,000 | 2-5 years | |||||||
13,520,000 | 13,280,000 | |||||||||
Less: accumulated amortization | (1,478,229 | ) | (906,734 | ) | ||||||
$ | 12,041,771 | $ | 12,373,266 |
June 30, 2022 | September 30, 2021 | Life | |||||||
Customer relationships | $ | 23,482 | $ | 23,482 | 12-24 Years | ||||
Trademarks/names | 4,490 | 4,490 | 1-20 Years | ||||||
Trademarks/names | 521 | 521 | Indefinite | ||||||
Other | 1,149 | 1,149 | 2-22 Years | ||||||
29,642 | 29,642 | ||||||||
Less: Accumulated Amortization | (6,953 | ) | (5,469 | ) | |||||
Intangible assets, net | $ | 22,689 | $ | 24,173 |
June 30, 2022 | September 30, 2021 | |||||||
Logistics | $ | 18,174 | $ | 18,174 | ||||
Life Sciences | 3,768 | 3,768 | ||||||
Manufacturing | 7,700 | 7,700 | ||||||
29,642 | 29,642 | |||||||
Less: Accumulated Amortization | (6,953 | ) | (5,469 | ) | ||||
Intangible assets, net | $ | 22,689 | $ | 24,173 |
5. |
June 30, 2022 | September 30, 2021 | |||||||
Logistics | $ | 9,175 | $ | 9,063 | ||||
Life Sciences | 4,377 | 4,377 | ||||||
Manufacturing | 5,046 | 5,046 | ||||||
Total | $ | 18,598 | $ | 18,486 |
6. | NOTES PAYABLE – BANKS |
Presidential Financial Corporation Borrowing Facility
On March 27, 2014, Janel Corporation and several of its
(A) | Santander Bank Facility |
Asinterest was accruing at an effective interest rate of June3.16%.
First Merchants Bank Borrowing Facility
On March 21, 2016, INDCO executedSeptember 30, 2021.
(B) | First Merchants Bank Credit Facility |
renewed or extended.
(in thousands) | June 30, 2022 | September 30, 2021 | ||||||
Total Debt* | $ | 2,768 | $ | 3,368 | ||||
Less Current Portion | (809 | ) | (809 | ) | ||||
Long Term Portion | $ | 1,959 | $ | 2,559 |
* | Note: Payment under the First Merchants Credit Agreement term loan is due in monthly installments of $65 plus monthly interest, at LIBOR plus 2.75% to 3.5% per annum, and payment under the First Merchants Credit Agreement mortgage loan is due in monthly installments of $4. |
(C) |
(in thousands) | June 30, 2022 | September 30, 2021 | ||||||
Total Debt* | $ | 2,123 | $ | 2,244 | ||||
Less Current Portion | (65 | ) | (59 | ) | ||||
Long Term Portion | $ | 2,058 | $ | 2,185 |
* | Long-term debt under the First Northern Loan Agreement is due in monthly installments of $12 plus monthly interest, at 4.18% per annum for five years. |
7. | SUBORDINATED PROMISSORY NOTES - RELATED PARTY |
Long-term debt - related party consists
June 30, | September 30, | |||||||
2017 | 2016 | |||||||
Non-interest bearing note payable to a related party, net of imputed interest due | $ | 492,635 | $ | 971,108 | ||||
Less current portion | (492,635 | ) | (500,000 | ) | ||||
$ | - | $ | 471,108 |
(in thousands) | June 30, 2022 | September 30, 2021 | ||||||
Total subordinated promissory notes | $ | 5,925 | $ | 6,075 | ||||
Less current portion of subordinated promissory notes | (450 | ) | (550 | ) | ||||
Long term portion of subordinated promissory notes | $ | 5,475 | $ | 5,525 |
STOCKHOLDERS’ EQUITY |
On October 1, 2016,
(A) | Preferred Stock |
On March 31, 2017, the Company acquired 20,000 shares of its common stock for an aggregate of $240,000. This amount was paid in April 2017.
On May 12, 2017, the two executive officers were granted an aggregate of 11,121 options to purchase shares of the Company’s $0.001 par value common stock under(“Common Stock”) at any time on a one-share (of Series B Stock) for 10-shares (of Common Stock) basis. On March 31, 2022, the Company, on behalf of 2 holders, converted the remaining 30.6 shares of Series B Stock into 306 shares of the Company’s Common Stock. On March 31, 2022, the Company
9. | STOCK-BASED COMPENSATION |
On May 12, 2017, two employees were granted an aggregate of 10,000 options to purchase up to 100,000 shares of the Company’s common stock under the Company’s 2013 Non-Qualified Stock Option Plan. The options are exercisable for a period of ten years at an exercise price of $8.01 per share. The shares are exercisable in three equal annual installments commencing on the first anniversary of the grant date.
On May 12, 2017, the Company adopted the Company’s 2017 Equity Incentive Plan (the “Plan”) pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards, and (iv) stock appreciation rights with respect to shares of the Company’s common stock may be grantedissuance to directors, officers, employees of and consultants to the Company. ParticipantsCompany and all termsits subsidiaries.
(A) | Stock Options |
• | 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. |
Nine Months Ended June 30,2022 | |||
Risk-free interest rate | 1.10% | ||
Expected option term in years | 5.5-6.5 | ||
Expected volatility | 100.3% - 110.3% | ||
Dividend yield | 0% | ||
Weighted average grant date fair value | $5.57 - $6.66 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding balance at September 30, 2021 | 98,994 | $ | 5.93 | 4.5 | $ | 1,689.38 | ||||||||||
Granted | 10,000 | $ | 23.00 | 9.3 | $ | 0 | ||||||||||
Exercised | (35,000 | ) | $ | 4.60 | — | $ | — | |||||||||
Outstanding balance at June 30, 2022 | 73,994 | $ | 8.87 | 5.1 | $ | 2,303.14 | ||||||||||
Exercisable at June 30, 2022 | 56,498 | $ | 6.36 | 4.0 | $ | 1,900.74 |
On May 12, 2017, a non-executive director was granted an aggregate of 6,524 options to purchase sharesdifference between the closing price of the Company’s common stock underat June 30, 2022 of $40 per share and the Plan. exercise price of the stock options that had strike prices below such closing price.
Nine Months Ended June 30,2022 | ||||
Risk-free interest rate | 1.10% | |||
Expected option term in years | 5.5-6.5 | |||
Expected volatility | 39% | |||
Dividend yield | 0% | |||
Weighted average grant date fair value | $17.16 |
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 | 9.25 | $ | 0 | ||||||||||
Exercised | (10,372 | ) | $ | 8.30 | — | $ | — | |||||||||
Outstanding balance at June 30, 2022 | 35,607 | $ | 12.22 | 7.02 | $ | 175.98 | ||||||||||
Exercisable at June 30, 2022 | 21,663 | $ | 10.72 | 6.00 | $ | 139.47 |
On May 12, 2017,repurchase of 7,000 shares of Indco’s stock, the mandatorily redeemable non-controlling interest percentage was 9.77% as of June 30, 2022.
time.
(B) | Restricted Stock |
10. | INCOME PER COMMON SHARE |
For the three months ended June 30, 2017 | Consolidated | Global Logistics Services | Manufacturing | Corporate | ||||||||||||
Revenues | $ | 20,246,878 | $ | 17,963,837 | $ | 2,283,041 | $ | - | ||||||||
Forwarding expenses and cost of revenues | 15,445,239 | 14,455,926 | 989,313 | - | ||||||||||||
Gross margin | 4,801,639 | 3,507,911 | 1,293,728 | - | ||||||||||||
Selling, general and administrative | 4,002,311 | 2,870,235 | 635,680 | 496,396 | ||||||||||||
Amortization of intangible assets | 195,666 | - | 2,500 | 193,166 | ||||||||||||
Income (loss) from operations | 603,662 | 637,676 | 655,548 | (689,562 | ) | |||||||||||
Interest expense | 184,280 | 116,672 | 67,608 | - | ||||||||||||
Identifiable assets | 38,051,647 | 13,976,503 | 2,343,533 | 21,731,611 | ||||||||||||
Capital expenditures | 5,510 | - | 5,510 | - |
For the Three Months Ended June 30, | For the Nine Months Ended June 30, | |||||||||||||||
(in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Income: | ||||||||||||||||
Net income | $ | 2,158 | $ | 870 | $ | 5,119 | $ | 1,721 | ||||||||
Preferred stock dividends | (71 | ) | (197 | ) | (515 | ) | (566 | ) | ||||||||
Non-controlling interest dividends | 0 | 0 | (61 | ) | 0 | |||||||||||
Net Income available to common stockholders | $ | 2,087 | $ | 673 | $ | 4,543 | $ | 1,155 | ||||||||
Common Shares: | ||||||||||||||||
Basic - weighted average common shares | 1,057.7 | 939.6 | 996.9 | 937.2 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options | 58.9 | 54.9 | 58.0 | 44.3 | ||||||||||||
Convertible preferred stock | 0 | 0.3 | 0.1 | 0.3 | ||||||||||||
Diluted - weighted average common stock | 1,116.6 | 994.8 | 1,055.0 | 981.8 | ||||||||||||
Income per Common Share: | ||||||||||||||||
Basic - | ||||||||||||||||
Net income | $ | 2.04 | $ | 0.93 | $ | 5.13 | $ | 1.84 | ||||||||
Preferred stock dividends | (0.07 | ) | (0.20 | ) | (0.51 | ) | (0.60 | ) | ||||||||
Non-controlling interest dividends | 0 | 0 | (0.06 | ) | 0 | |||||||||||
Net Income available to common stockholders | $ | 1.97 | $ | 0.73 | $ | 4.56 | $ | 1.24 | ||||||||
Diluted - | ||||||||||||||||
Net income | $ | 1.93 | $ | 0.88 | $ | 4.85 | $ | 1.75 | ||||||||
Preferred stock dividends | (0.06 | ) | (0.20 | ) | (0.48 | ) | (0.58 | ) | ||||||||
Non-controlling interest dividends | 0 | 0 | (0.06 | ) | 0 | |||||||||||
Net income available to common stockholders | $ | 1.87 | $ | 0.68 | $ | 4.31 | $ | 1.17 |
11. | INCOME TAXES |
For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | For the Nine Months Ended June 30, 2022 | For the Nine Months Ended June 30, 2021 | |||||||||||||
Federal taxes at statutory rates | $ | (604 | ) | $ | (247 | ) | $ | (1,494 | ) | $ | (497 | ) | ||||
Permanent differences | 0 | 13 | 0 | 20 | ||||||||||||
State and local taxes, net of Federal benefit | (110 | ) | (77 | ) | (500 | ) | (171 | ) | ||||||||
Total | $ | (714 | ) | $ | (311 | ) | $ | (1,994 | ) | $ | (648 | ) |
12. | BUSINESS SEGMENT INFORMATION |
For the three months ended June 30, 2022 (in thousands) | Consolidated | Logistics | Life Sciences | Manufacturing | Corporate | |||||||||||||||
Revenue | $ | 78,984 | $ | 73,684 | $ | 2,738 | $ | 2,562 | $ | 0 | ||||||||||
Forwarding expenses and cost of revenues | 61,819 | 59,889 | 648 | 1,282 | 0 | |||||||||||||||
Gross profit | 17,165 | 13,795 | 2,090 | 1,280 | 0 | |||||||||||||||
Selling, general and administrative | 13,505 | 10,387 | 1,225 | 676 | 1,217 | |||||||||||||||
Amortization of intangible assets | 489 | 0 | 0 | 0 | 489 | |||||||||||||||
Income (loss) from operations | 3,171 | 3,408 | 865 | 604 | (1,706 | ) | ||||||||||||||
Interest expense | 299 | 242 | 31 | 26 | 0 | |||||||||||||||
Identifiable assets | 126,106 | 67,196 | 12,137 | 4,363 | 42,410 | |||||||||||||||
Capital expenditures | $ | 207 | $ | 171 | $ | 13 | $ | 23 | $ | 0 |
For the nine months ended June 30, 2022 (in thousands) | Consolidated | Logistics | Life Sciences | Manufacturing | Corporate | |||||||||||||||
Revenue | $ | 243,149 | $ | 226,313 | $ | 9,257 | $ | 7,579 | $ | 0 | ||||||||||
Forwarding expenses and cost of revenues | 193,986 | 187,780 | 2,516 | 3,690 | 0 | |||||||||||||||
Gross profit | 49,163 | 38,533 | 6,741 | 3,889 | 0 | |||||||||||||||
Selling, general and administrative | 39,718 | 29,802 | 3,758 | 2,170 | 3,988 | |||||||||||||||
Amortization of intangible assets | 1,485 | 0 | 0 | 0 | 1,485 | |||||||||||||||
Income (loss) from operations | 7,960 | 8,731 | 2,983 | 1,719 | (5,473 | ) | ||||||||||||||
Interest expense | 847 | 683 | 88 | 76 | 0 | |||||||||||||||
Identifiable assets | 126,106 | 67,196 | 12,137 | 4,363 | 42,410 | |||||||||||||||
Capital expenditures | $ | 477 | $ | 260 | $ | 171 | $ | 46 | $ | 0 |
For the three months ended June 30, 2021 (in thousands) | Consolidated | Logistics | Life Sciences | Manufacturing | Corporate | |||||||||||||||
Revenue | $ | 34,826 | $ | 29,369 | $ | 3,384 | $ | 2,073 | $ | 0 | ||||||||||
Forwarding expenses and cost of revenues | 26,058 | 24,173 | 941 | 944 | 0 | |||||||||||||||
Gross profit | 8,768 | 5,196 | 2,443 | 1,129 | 0 | |||||||||||||||
Selling, general and administrative | 7,158 | 4,523 | 1,084 | 682 | 869 | |||||||||||||||
Amortization of intangible assets | 288 | 0 | 0 | 0 | 288 | |||||||||||||||
Income (loss) from operations | 1,322 | 673 | 1,359 | 447 | (1,157 | ) | ||||||||||||||
Interest expense | 141 | 62 | 34 | 39 | 6 | |||||||||||||||
Identifiable assets | 72,494 | 26,903 | 10,366 | 3,644 | 31,581 | |||||||||||||||
Capital expenditures | $ | 47 | $ | 33 | $ | 14 | $ | 0 | $ | 0 |
For the nine months ended June 30, 2021 (in thousands) | Consolidated | Logistics | Life Sciences | Manufacturing | Corporate | |||||||||||||||
Revenue | $ | 91,446 | $ | 76,002 | $ | 8,973 | $ | 6,471 | $ | 0 | ||||||||||
Forwarding expenses and cost of revenues | 68,680 | 62,818 | 2,877 | 2,985 | 0 | |||||||||||||||
Gross profit | 22,766 | 13,184 | 6,096 | 3,486 | 0 | |||||||||||||||
Selling, general and administrative | 19,282 | 11,640 | 3,273 | 2,007 | 2,362 | |||||||||||||||
Amortization of intangible assets | 832 | 0 | 0 | 0 | 832 | |||||||||||||||
Income (loss) from operations | 2,652 | 1,544 | 2,823 | 1,479 | (3,194 | ) | ||||||||||||||
Interest expense | 418 | 180 | 89 | 129 | 20 | |||||||||||||||
Identifiable assets | 72,494 | 26,903 | 10,366 | 3,644 | 31,581 | |||||||||||||||
Capital expenditures | $ | 218 | $ | 76 | $ | 127 | $ | 15 | $ | 0 |
13. | FAIR VALUE MEASUREMENTS |
For the three months ended June 30, 2016 | Consolidated | Global Logistics Services | Manufacturing | Corporate | ||||||||||||
Revenues | $ | 17,505,453 | $ | 15,425,092 | $ | 2,080,361 | $ | - | ||||||||
Forwarding expenses and cost of revenues | 13,118,726 | 12,157,139 | 961,587 | - | ||||||||||||
Gross margin | 4,386,727 | 3,267,953 | 1,118,774 | - | ||||||||||||
Selling, general and administrative | 3,460,936 | 2,613,697 | 594,186 | 253,053 | ||||||||||||
Amortization of intangible assets | 203,237 | - | 2,500 | 200,737 | ||||||||||||
Income (loss) from operations | 722,554 | 654,256 | 522,088 | (453,790 | ) | |||||||||||
Interest expense | 199,892 | 120,988 | 78,904 | - | ||||||||||||
Identifiable assets | 33,761,934 | 12,338,707 | 1,744,624 | 19,678,603 | ||||||||||||
Capital expenditures | 19,797 | - | 19,797 | - |
For the nine months ended June 30, 2017 | Consolidated | Global Logistics Services | Manufacturing | Corporate | ||||||||||||
Revenues | $ | 55,943,398 | $ | 49,499,193 | $ | 6,444,205 | $ | - | ||||||||
Forwarding expenses and cost of revenues | 42,698,641 | 39,810,183 | 2,888,458 | - | ||||||||||||
Gross margin | 13,244,757 | 9,689,010 | 3,555,747 | - | ||||||||||||
Selling, general and administrative | 11,206,459 | 8,001,437 | 1,911,848 | 1,293,174 | ||||||||||||
Amortization of intangible assets | 578,997 | - | 7,500 | 571,497 | ||||||||||||
Income (loss) from operations | 1,459,301 | 1,687,573 | 1,636,399 | (1,864,671 | ) | |||||||||||
Interest expense | 566,807 | 356,362 | 210,445 | - | ||||||||||||
Identifiable assets | 38,051,647 | 13,976,503 | 2,343,533 | 21,731,611 | ||||||||||||
Capital expenditures | 136,118 | 22,793 | 113,325 | - |
For the nine months ended June 30, 2016 | Consolidated | Global Logistics Services | Manufacturing | Corporate | ||||||||||||
Revenues | $ | 56,728,456 | $ | 53,935,789 | $ | 2,792,667 | $ | - | ||||||||
Forwarding expense and cost of revenues | 45,438,636 | 44,171,758 | 1,266,878 | - | ||||||||||||
Gross margin | 11,289,820 | 9,764,031 | 1,525,789 | - | ||||||||||||
Selling, general and administrative | 9,798,908 | 8,086,749 | 805,985 | 906,174 | ||||||||||||
Amortization of intangible assets | 402,915 | - | 3,333 | 399,582 | ||||||||||||
Income (loss) from operations | 1,087,997 | 1,677,282 | 716,471 | (1,305,756 | ) | |||||||||||
Interest expense | 476,665 | 382,804 | 93,861 | - | ||||||||||||
Identifiable assets | 33,761,934 | 12,338,707 | 1,744,624 | 19,678,603 | ||||||||||||
Capital expenditures | 307,550 | 2,905 | 304,645 | - |
Level 3 | June 30, 2022 | September 30, 2021 | ||||||
Contingent earnout liabilities | $ | 3,600 | $ | 3,600 | ||||
Level 3 Liabilities | $ | 3,600 | $ | 3,600 |
June 30, 2022 | September 30, 2021 | |||||||
Balance 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 end of period | $ | 3,600 | $ | 3,600 |
14. |
Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | |||||||||||||
Operating lease cost | $ | 457 | $ | 235 | $ | 1,370 | $ | 721 | ||||||||
Short-term lease cost | 123 | 2 | 371 | 14 | ||||||||||||
Total lease cost | $ | 580 | $ | 237 | $ | 1,741 | $ | 735 |
2023 | $ | 1,620 | ||
2024 | 1,293 | |||
2025 | 1,032 | |||
2026 | 671 | |||
2027 | 626 | |||
Thereafter | 853 | |||
Total undiscounted loan payments | 6,095 | |||
Less: Imputed interest | (425 | ) | ||
Total lease obligation | $ | 5,670 |
15. | SUBSEQUENT EVENTS |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
its Subsidiaries.
10-K for the fiscal year ended September 30, 2021.
Janel’s managementholding company focuses on significant capital allocation decisions, corporate governance and support of itssupporting Janel’s subsidiaries where appropriate. The CompanyJanel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. JanelWe plan to either will acquire businesses within itsour existing segments or it will expand itsour portfolio into new strategic segments. Janel’sOur acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
The Company employs 121 full-time and five part-time peopleaccordance with generally accepted accounting principles in the United States. NoneThese generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of these employees is covered byassets, liabilities, net sales and expenses during the reporting period.
“Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations
Global Logistics Services – ThreeOperations—Critical Accounting Estimates” in our Annual Report on Form 10-K filed with the SEC on December 27, 2021. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. There were no significant changes to our critical accounting policies during the nine months ended June 30, 20172022.
Revenues. Totalpresent 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”).
(in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | ||||||||||||
Revenue | $ | 78,984 | $ | 34,826 | $ | 243,149 | $ | 91,446 | ||||||||
Forwarding expenses and cost of revenues | 61,819 | 26,058 | 193,986 | 68,680 | ||||||||||||
Gross profit | 17,165 | 8,768 | 49,163 | 22,766 | ||||||||||||
Operating expenses | 13,994 | 7,446 | 41,203 | 20,114 | ||||||||||||
Income from operations | 3,171 | 1,322 | 7,960 | 2,652 | ||||||||||||
Net income | 2,158 | 870 | 5,119 | 1,721 | ||||||||||||
Adjusted operating income | $ | 3,822 | $ | 1,868 | $ | 10,638 | $ | 4,301 |
Forwarding Expenses. Total forwarding expenses from continuing operations$0.88 per diluted share for the three months ended June 30, 2017 were $14,455,926, as2021. Net income for the nine months ended June 30, 2022 totaled
Certain items have been categorized as “corporate” expenses attributable to overall managementnine months ended June 30, 2022 resulted from a recovery in profits from the impact of the CompanyCOVID-19 pandemic for our segments and other non-segment specific activities. These expenses are discussed below under “Corporate Selling, General and Administrative Expenses.” the contribution of income from acquisitions.
(in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | ||||||||||||
Income from operations | $ | 3,171 | $ | 1,322 | $ | 7,960 | $ | 2,652 | ||||||||
Amortization of intangible assets | 489 | 288 | 1,485 | 832 | ||||||||||||
Stock-based compensation | 32 | 31 | 800 | 85 | ||||||||||||
Cost recognized on sale of acquired inventory | 130 | 227 | 393 | 732 | ||||||||||||
Adjusted operating income | $ | 3,822 | $ | 1,868 | $ | 10,638 | $ | 4,301 |
Selling, Generalbusiness helps its clients move and Administrative Expenses.manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include 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 June 30, | Nine Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue | $ | 73,684 | $ | 29,369 | $ | 226,313 | $ | 76,002 | ||||||||
Forwarding expenses | 59,889 | 24,173 | 187,780 | 62,818 | ||||||||||||
Gross Profit | 13,795 | 5,196 | 38,533 | 13,184 | ||||||||||||
Gross profit margin | 18.7 | % | 17.7 | % | 17.0 | % | 17.3 | % | ||||||||
Selling, general & administrative | 10,387 | 4,523 | 29,802 | 11,640 | ||||||||||||
Income from operations | $ | 3,408 | $ | 673 | $ | 8,731 | $ | 1,544 |
Interest Expense. Total interest expense2021. This increase
Income from Continuing Operations before Income Taxes. As a result of the above, income from continuing operations before income taxes for the three months ended June 30, 2017 was $521,004, as compared to $533,268 for the three months ended June 30, 2016. This is a decrease of ($12,264), or (2.3%).
Manufacturing – Three months ended June 30, 2017 and 2016
Revenues. Total revenues for the three months ended June 30, 2017 were $2,283,041, as compared to $2,080,361 for the three months ended June 30, 2016. This is an increase of $202,680, or 9.7%. The increase primarily is due to growth in demand for core INDCO manufactured mixer products.
Cost of Revenues. Total cost of revenues for the three months ended June 30, 2017 was $989,313 as compared to $961,587 for the three months ended June 30, 2016. This is an increase of $27,726, or 2.9%. The increase primarily is due to costs associated with meeting the growth in demand described above.
Gross Margin. Total gross margin for the three months ended June 30, 2017 was $1,293,728, as compared to $1,118,774 for the three months ended June 30, 2016. This is an increase of $174,954, or 15.6%. As a percentage of revenue, gross margin for the three months ended June 30, 2017 was 56.7%, as compared to 53.8% for the three months ended June 30, 2016. The increase primarily is due to growth in sales of relatively higher margin products.
Selling, General and Administrative Expenses. Total selling, general and administrative expenses for the three months ended June 30, 2017 were $635,680, as compared to $594,186 for the three months ended June 30, 2016. This is an increase of $41,494 or 7.0%. The increase primarily is due to additional sales expenses associated with the growth of the business.
Interest Expense. Total interest expense for the three months ended June 30, 2017 was $67,608 as compared to $78,904 for the three months ended June 30, 2016. This is a decrease of ($11,296), or (14.3%). The decrease is due to paydown of principal on the First Merchants Bank Borrowing Facility referenced below.
Income from Continuing Operations before Income Taxes. As a result of the above, income from continuing operations before income taxes for the three months ended June 30, 2017 was $587,940, as compared to $443,184 for the three months ended June 30, 2016. This is an increase of $144,756, or 32.7%.
Corporate – Three months ended June 30, 2017 and 2016
Corporate Selling, General and Administrative Expenses. Total corporate selling, general and administrative expenses from continuing operations for the three months ended June 30, 2017 were $496,396, as compared to $253,053 for the three months ended June 30, 2016. This is an increase of $243,343, or 96.2%. The increase is due to the recategorization of certain costs, previously included in the Global Logistics Services segment, as “corporate” costs. These include primarily the salaries of executives whose responsibilities have shifted from the Global Logistics Service segment to Janel Corporation corporate development.
Amortization of Intangible Assets.Total amortization of intangible assets for the three months ended June 30, 2017 was $193,166 as compared to $200,737 for the three months ended June 30, 2016. This is a decrease of ($7,571), or (3.8%). The decrease is due to an amortization adjustment related to INDCO in the first quarter following the INDCO acquisition.
Net Loss. As a result of the above, net loss for the three months ended June 30, 2017 was ($689,562), as compared to ($453,790) for the three months ended June 30, 2016. This is a decrease of ($235,772) or (52.0%).
Consolidated income taxes – Three months ended June 30, 2017 and 2016
The company recorded a net income tax provision for the three months ended June 30, 2017 of $129,419, as compared to $36,604 for the three months ended June 30, 2016.
Global Logistics Services – Nine months ended June 30, 2017 and 2016
Revenues. Total revenues from continuing operations for the nine months ended June 30, 2017 were $49,499,193, as compared to $53,935,789 for the nine months ended June 30, 2016. This is a decrease of ($4,436,596), or (8.2%). The decrease primarily is due to the loss of a low-margin, high-revenue customer, offset by revenues from new customers, including those derived from the Byrnes acquisition.
Forwarding Expenses. Total forwarding expenses from continuing operations for the nine months ended June 30, 2017 were $39,810,183 as compared to $44,171,758 for the nine months ended June 30, 2016. This is a decrease of ($4,361,575), or (9.9%). The decrease primarily is due to reduction in expenses associated with the loss of the low-margin, high-revenue customer referenced above, offset by additional expenses associated with new customer revenues, including those derived from the Byrnes acquisition.
For the current fiscal year, certain items have been categorized as “corporate” expenses attributable to overall management of Janel and other non-segment specific activities. These expenses are discussed below under “Corporate Selling, General and Administrative Expenses.” The following discussion of selling, general and administrative expenses in the Global Logistics Service segment excludes these “corporate” items.
Selling, General and Administrative Expenses. Total selling, general and administrative expenses from continuing operations for the nine months ended June 30, 2017 were $8,001,437 as compared to $8,086,749 for the nine months ended June 30, 2016. This is a decrease of ($85,312), or (1.1%). The decrease is due to certain cost reduction initiatives enacted in prior periods. As a percentage of revenue selling,largely reflected the rise in transportation rates as a result of capacity issues globally and favorable operating leverage due to strong organic growth.
Interest Expense. Total interest expenserevenue, selling, general and administrative expenses were
Income from Continuing Operations before Income Taxes. As a result of the above, income from continuing operations before income taxes$1,544 for the nine months ended June 30, 2017 was $1,331,211,2021, an increase of $7,187, or 465%. Income from operations increased during the nine months ended June 30, 2022 as compared a result of acquisitions and favorable leverage from revenue growth relative to $1,294,478the prior year period. Our operating margin as a percentage of gross profit for the nine months ended June 30, 2016. This is2022 was 22.7% compared to 11.7% in the prior year period largely due to operating leverage from significantly higher gross profit as business recovered compared with the depressed levels in the prior year period.
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue | $ | 2,738 | $ | 3,384 | $ | 9,257 | $ | 8,973 | ||||||||
Cost of sales | 518 | 714 | 2,123 | 2,145 | ||||||||||||
Cost recognized upon sales of acquired inventory | 130 | 227 | 393 | 732 | ||||||||||||
Gross profit | 2,090 | 2,443 | 6,741 | 6,096 | ||||||||||||
Gross profit margin | 76.3 | % | 72.2 | % | 72.8 | % | 67.9 | % | ||||||||
Selling, general and administrative | 1,225 | 1,084 | 3,758 | 3,273 | ||||||||||||
Income from Operations | $ | 865 | $ | 1,359 | $ | 2,983 | $ | 2,823 |
INDCO, which comprises2021, respectively, reflecting a decrease of
Revenues. Total revenues$9,257 and $8,973 for the nine months ended June 30, 2017 were $6,444,2052022 and $2,792,667 2021, respectively, remained relatively unchanged with an increase of $284 or 3.2%.
Cost2022 and 2021, respectively, a decrease of Revenues. Total
lower net working capital at our Logistics segment. 2021. 2022 2021 2022 2021 (in thousands) Revenue $ 2,562 $ 2,073 $ 7,579 $ 6,471 Cost of sales 1,282 944 3,690 2,985 Gross profit 1,280 1,129 3,889 3,486 Gross profit margin 50.0 % 54.5 % 51.3 % 53.9 % Selling, general and administrative 676 682 2,170 2,007 Income from Operations $ 604 $ 447 $ 1,719 $ 1,479 MarginProfitTotal gross Gross profit margin for the three months ended June 30, 2022 and 2021 was 50.0% and 54.5%, respectively. Gross profit was $3,889 and $3,486 for the nine months ended June 30, 2022 and 2021, respectively, an increase of $403, or 11.6%. Gross profit margin for the nine months ended June 30, 2017 2022 and 2021 was $3,555,74851.3% and $1,525,78953.9%, respectively. The year-over-year decrease in gross profit margin for both periods was generally due to the mix of business.fourthree months ended June 30, 2016.Selling, General2022 and Administrative Expenses. Total selling,2021, respectively, a 2017 were $1,911,8482022 and $805,9852021, respectively, an increase of $163 or 8.1%. The increase in expenses relative to revenue for the fourthree- and nine-month periods reflected the mix of business.2016.Interest Expense. Total interest expense2022 compared to $447 for the three months ended June 30, 2021, representing 20172021, representing an 16.3% increase from the prior year period. The increase was $210,445due to favorable operating leverage as revenue recovered from the impact of the COVID-19 pandemic.$93,861 forOther – Three and Nine Months Ended June 30, 2022 and 2021 (in thousands) 2022 2021 2022 2021 Total income from operating segments $ 4,877 $ 2,479 $ 13,433 $ 5,846 Corporate expenses (1,185 ) (838 ) (3,188 ) (2,277 ) Amortization expense (489 ) (288 ) (1,485 ) (832 ) Stock-based compensation (32 ) (31 ) (800 ) (85 ) Total Corporate expenses (1,706 ) (1,157 ) (5,473 ) (3,194 ) Interest expense (299 ) (141 ) (847 ) (418 ) Gain on Paycheck Protection Program loan forgiveness - - - 135 Net income before taxes 2,872 1,181 7,113 2,369 Income tax expense (714 ) (311 ) (1,994 ) (648 ) Net income 2,158 870 5,119 1,721 Preferred stock dividends (71 ) (197 ) (515 ) (566 ) Non-controlling interest dividends - - (61 ) - Net Income Available to Common Stockholders $ 2,087 $ 673 $ 4,543 $ 1,155 fourthree months ended June 30, 2016.Income from Continuing Operations before Income Taxes. Income from continuing operations before income taxes2022 as compared to $1,157 for the three months ended June 30,2017 was $1,425,954 and $622,610 for the four months ended June 30, 2016.Corporate – Nine months ended June 30, 2017 and 2016Corporate Selling, General and Administrative Expenses. Total corporate selling, general and administrative expenses from continuing operations2022 as compared to $3,194 for the nine months ended June 30, 2017 were $1,293,174 as compared$906,174stock-based compensation related to restricted stock issuance with immediate vesting, higher accounting related professional expense, increased merger and acquisition expenses and increases in amortization of intangible expenses. We incur merger and acquisition deal-related expenses and intangible amortization at the Corporate level rather than at the segment level.2016. This is2022 from $418 for the nine months ended June 30,2021. The increase in both periods was primarily due to higher average debt balances to support our acquisition efforts and higher interest rates.42.7%64.0%. For the nine months ended June 30, 2022 and 2021, preferred stock dividends were $515 and $566, respectively, representing a decrease of $51, or 9.0%. The increase is duedecrease in preferred stock dividends in both periods was the result of the Company retiring $6,000 of Series C Preferred Stock on March 31, 2022 and the annual dividend rate change from 9% to 5%.recategorizationthree months ended June 30, 2022 compared to net income of certain costs, previously included in$870 or $0.88 per diluted share, for the Global Logistics Services segment, as “corporate” costs. These include primarily the salaries of executives whose responsibilities have shifted from the Global Logistics Service segment to Janel Corporation corporate development.Amortization of Intangible Assets.Total amortization of intangible assetsthree months ended June 30,2017 was $571,497, as2022 compared to $399,582net income of $1,721, or $1.75 per diluted share, for the nine months ended June 30, 2016. This is an increase of $171,915, or 43.0%.2021. The increase isfor both periods was primarily due to higher revenues and gross profit, partially offset by higher selling, general and administrative expenses across our operating segments and at Corporate.full-year impactthree months ended June 30, 2022 compared to income available to holders of goodwill amortization associated withCommon Stock of $673, or $0.68 per diluted share, for the March 2016 purchasethree months ended June 30,2021.INDCO and additional goodwill amortization associated with the April 2017 purchase of Byrnes. These amounts do not include amortization associated with the INDCO term loan origination fee.Net Loss. As a result of the above, net lossCommon 2017 was ($1,864,671) as2022 compared to ($1,305,756)income available to holders of Common Stock of $1,115, or $1.17 per diluted share, for the nine months ended June 30, 2016. This is a decrease of ($558,915) or (42.8%).Consolidated income taxes – Nine months ended June 30, 2017 and 2016company recorded aincrease in net income tax provision for both periods was primarily due to higher revenues, partially offset by higher selling, general and administrative expenses across our businesses and Corporate in both periods and an increase in the nine months ended June 30, 2017dividend rate with respect to the Series C Stock as of $356,257, as comparedJanuary 1, 2021 to $75,181 for the nine months ended June 30, 2016.Liquidity and Capital ResourcesGeneral.8%.our liquidity requirements, which derive fromincluding satisfying debt obligations and fund working capital, needs, day-to-day operating expenses and capital expenditures, depends upon our future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond our control. We dependOur Logistics segment depends on our commercial credit facilities to fund our day-to-day operations as there is a timing difference between ourthe timing of collection cycles and the timing of our payments to vendors.Janel’snine months ending June 30, 2017 is2022 fiscal year may not necessarily be indicative of future cash flow performance.Flowsflows from Operating Activities.operating activities2017 was $2,828,686, as compared to $1,039,5702021. The increase in cash provided by operations for the nine months ended June 30, 2016. This is an increase of $1,789,116, or 172.1%. The increase primarily is due2022 compared to changes in accounts payablethe prior year period was driven principally by higher profits and accrued liabilities, offset by changes in accounts receivable.Flowsflows from Discontinued Operating Activities.investing activitiesdiscontinued operatinginvesting activitiestotaled $589 for the nine months ended June 30, 2022, versus $3,001 for the nine months ended June 30, 2017 was $46,878, which amount was reported within continuing operations in 2017, as compared to $184,8452021. We used $477 for the nine months ending June 30, 2016. This is a decrease acquisition of ($137,967), or (74.6%). The 2016 figure includes the settlement of a lawsuit involving the Company's discontinued food business.Cash Flows from Investing Activities. Net cash used in investing activitiesproperty and equipment for the nine months ended June 30, 2017 was $120,132, as2022 compared to $11,042,213$2,874 for the acquisition of two businesses and $127 for the acquisition of property and equipment for the nine months ended June 30, 2016. The decrease reflects the INDCO acquisition in the prior period.Flowsflows from Financing Activities. financing activities(used in)used in financing activities was $10,487 for the nine months ended June 30, 2022, versus net cash provided by financing activities of $2,439 for the nine months ended June 30, 2021. Net cash used in financing activities for the nine months ended June 30, 2017 was ($1,784,201) as compared to $9,820,642 for the nine months ended June 30, 2016. The cash used in financing activities for the nine months ending June 30, 20172022 primarily went toward the second of three annual earnout payments associated with the 2014 acquisition of Alpha/PCL and towardincluded repayment of the First Merchants Bank Borrowing Facility associated with the INDCO acquisition. Thefunds from our line of credit, repurchase of Series C Stock and dividends paid to holders of Series C Stock, repayment of funds from our term loan and notes payable related party, partially offset by proceeds from stock option exercises. Net cash provided by financing activities for the nine months ended June 30, 20162021 primarily cameincluded funds from the First Merchants Bank Borrowing Facility and the sale of additional Preferred Series C shares, both associated with the INDCO acquisition.- 15 -Global Logistics ServicesPresidential Financial Corporation Borrowing Facility. On March 27, 2014, Janel Corporation and several of its subsidiaries within its Global Logistics Services segment (collectively, the “Janel Borrowers”), entered into a Loan and Security Agreement with Presidential Financial Corporation (“Presidential”) with respect to a revolvingour line of credit facility (the “Presidential Facility”). As currently amended, the Presidential Facility provides that the Janel Borrowers can borrow up to $10,000,000, limited to 85%partially offset by repayments of the Janel Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Loan and Security Agreement. Interest will accrue at an annual rate equal to five percent above the greater of (a) the prime rate of interest quoted in The Wall Street Journal from time to time, or (b) 3.25%. The Janel Borrowers’ obligations under the Presidential Facility are secured by the assets of the Janel Borrowers. The Loan Security Agreement requires, among other things, that the Company, on a monthly basis, maintain a “minimum fixed charge covenant ratio” and “tangible net worth,” both as defined. The Presidential Facility will expire on March 27, 2018, subject to earlier termination as provided in the Loan and Security Agreement, unless renewed.Working Capital Requirements.Janel Group’s cash needs are currently met by cash flow from operations, the Presidential Facility and cash on hand. term loans.2017, the Company2022, we had $662,442 available under its Presidential Facility and $1,232,102 in cash. The Company believes that current financial resources will be sufficient to finance Janel Group operations and obligations (current and long-term liabilities) for the long- and short-terms. However, Janel Group’s actual working capital needs for the long- and short-terms will depend upon numerous factors, including operating results, the cost associated with growing Janel Group either internallyno off-balance sheet arrangements or through acquisition, competition, and the availability under the Presidential Facility. None of these factors can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, Janel Group’s operations will be materially negatively impacted.ManufacturingFirst Merchants Bank Borrowing Facility.On March 21, 2016, INDCO executed a Credit Agreement with First Merchants Bank (“First Merchants”) with respect to a $6,000,000 term loan and $1,500,000 (limited to the borrowing base and reserves) revolving loan(together, the “First Merchants Facility”). Interest will accrue on the term loan at an annual rate equal to the one-month LIBOR plus either 3.75% (if INDCO’s cash flow leverage ratio is less than or equal to 2:1) or 4.75% (if INDCO’s cash flow leverage ratio is greater than 2:1). Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%. INDCO’s obligations under theFirst Merchants Facilityare secured by all of INDCO’s assets, and are guaranteed by the Company. The Credit Agreement requires, among other things, that INDCO, on a monthly basis, not exceed a “maximum total funded debt to EBITDA ratio” and maintain a “minimum fixed charge covenant ratio,” both as defined. TheFirst Merchants Facilityrequires monthly payments until the expiration date on the fifth anniversary of the loan. The loan is subject to earlier termination as provided in the Credit Agreement, unless renewed.Working Capital Requirements.INDCO’s cash needs are currently met bycash flow from operations, the First Merchants Facility, and cash on hand. As of June 30, 2017, INDCO had $1,500,000 available under its $1,500,000 revolving facility, subject to collateral availability, and $657,366 in cash. The Company believes that the current financial resources will be sufficient to finance INDCO operations and obligations (current and long-term liabilities) for the long- and short-terms. However, actual working capital needs for the long- and short-terms will depend upon numerous factors, including operating results, the cost associated with growing INDCO either internally or through acquisition, competition, and available credit under the revolving credit facility. None of these factors can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, INDCO’s operations will be materially negatively impacted.Current OutlookThe results of operations for both Janel Group and INDCO are affected by the general economic cycle. Janel Group is particularly influenced by global trade levels, specifically the import and export activities of its current and prospective customers. Historically, Janel Group’s quarterly results of operations have been subject to seasonal trends which have been the result of, or influenced by, numerous factors, including climate, national holidays, consumer demand, economic conditions, the growth and diversification of Janel Group’s international network and service offerings, and other similar and subtle forces.The Company cannot accurately forecast many of these factors, nor can it estimate accurately the relative influence of any factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.Both Janel Group and INDCO are implementing business strategies to grow revenue and profitability for the current fiscal year and beyond. Janel Group’s strategy calls for additional branch offices, introduction of new revenue streams for existing locations, sales force expansion, additional acquisitions, and a continued focus on implementing lean methodologies to contain operating expenses. INDCO’s strategy calls for introductions of new product lines and wider distribution and promotion of its print- and web-based catalog.
obligations.- 16 -In addition to supporting its subsidiaries’ growth plans, the Company may seek to grow by entering new business segments through acquisition.Certain elements of our profitability and growth strategy, principally proposals for acquisition and accelerating our revenue growth, are contingent upon the availability of adequate financing on terms acceptable to the Company. Without adequate equity and/or debt financing, the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated timing, and the Company’s operations will be materially negatively impacted.Critical Accounting Policies and EstimatesManagement’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such difference may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to revenue recognition, the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily allowance for doubtful accounts, accruals for transportation and other direct costs, accruals for cargo insurance, and deferred income taxes. Management bases its estimates on historical experience and on various assumptions which are believed to be reasonable under the circumstances. We reevaluate these significant factors as facts and circumstances change. Historically, actual results have not differed significantly from management’s estimates.Management believes that the nature of the Company’s business is such that there are few, if any, complex challenges in accounting for operations. Revenue recognition is considered the critical accounting policy.Revenue RecognitionGlobal Logistics ServicesThe Company’s Global Logistics Services segment comprises several wholly-owned subsidiaries, collectively known as “Janel Group.” Janel Group derives its revenues from air freight, ocean freight and customs brokerage services.In its capacity as an air freight and ocean freight service provider, Janel Group acts as an indirect carrier: it does not own any transportation assets. Rather, it purchases transportation services from direct carriers (airlines, steam ship lines, etc.) and resells them to its customers. By consolidating shipments from multiple customers and availing itself of its buying power, Janel Group is able to negotiate favorable rates from direct carriers and offer to its customers better rates than the customers could obtain themselves.Air freight revenues include charges for carrying shipments when Janel Group acts as an air freight consolidator. Ocean freight revenues include charges for carrying shipments when Janel Group acts as a Non-Vessel Operating Common Carrier (“NVOCC”). Janel Group issues a House Airway Bill (“HAWB”) or a House Ocean Bill of Lading (“HOBL”) to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, Janel Group receives a contract of carriage known as a Master Airway Bill for air freight shipments and a Master Ocean Bill of Lading for ocean freight shipments. At this point, the risk of loss passes to the carrier; however, in order to claim for any such loss, the customer is obligated to pay the freight charges.Based upon the terms of the contract of carriage, Janel Group recognizes air freight and ocean freight revenues when the freight is tendered to the direct carrier. Costs related to the shipments are recognized at the same time.In some cases, Janel Group acts as an agent for the shipper, in which case it does not issue a HAWB or a HOBL. Revenues from these activities include only commission and fees earned for services performed. They are recognized upon completion of services.In its capacity as a customs broker, Janel Group provides multiple services, including preparing documentation necessary for clearing shipments through U.S. customs, calculating and providing for payment of duties and other charges on its customers’ behalves and arranging for required inspections. Revenues derived from these activities are recognized upon completion of the services.- 17 -The movement of freight may require multiple services. In most instances, Janel Group may perform multiple services including destination break bulk and value-added services such as local transportation, distribution services and logistics management. Each of these services has separate fee that is recognized as revenue upon completion of the service.Customers frequently request an all-inclusive rate for a set of services known as “door-to-door services.” In these cases, the customer is billed a single rate for all services from pickup at origin to delivery. The allocation of revenue and expense among the components of services when provided under an all-inclusive rate are done in an objective manner on a fair value basis in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables.”ManufacturingThe Company’s Manufacturing segment comprises its majority-owned INDCO subsidiary, which manufactures and distributes industrial mixing equipment. INDCO derives its revenues from product sales and shipping and handling charges, net of actual product returns and discounts. Since INDCO’s standard shipping terms are FOB shipping point, revenue primarily is recognized on the date products are shipped to the customer. INDCO recognizes revenues from both e-commerce and traditional channels in the same manner. Accounts receivable are stated at their estimated net realizable value. INDCO makes an allowance for doubtful accounts based on its analysis of customer accounts and its historical experience with accounts receivable write-offs.EstimatesWhile judgments and estimates are a necessary component of any system of accounting, the Company’s use of estimates primarily is limited to the following areas that, in the aggregate, are not a major component of the Company’s consolidated statements of operations:a.accounts receivable valuation;b.the useful lives of long-term assets;c.the accrual of costs related to ancillary services the Company provides;d.accrual of tax expense on an interim basis;e.deferred tax valuation allowance; andf.impairment of intangible assets.Management believes that the methods utilized in these areas are non-aggressive in approach and consistent in application. Management believes that there are limited, if any, alternative accounting principles or methods which could be applied to the Company’s transactions. While the use of estimates means that actual future results may be different from those contemplated by the estimates, the Company believes that alternative principles and methods used for making such estimates would not produce materially different results than those reported.Recent Accounting PronouncementsFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company belis that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.ITEM 4. CONTROLS AND PROCEDURES (asdesigned to ensure that term is definedinformation required to be disclosed in Rules 13a-15(e) and 15d-15(e)reports filed under the Securities Exchange Act of 1934, as amended (“Exchange(the “Exchange Act”)) that are designed to provide reasonable assurance that information, which is required to be disclosed in the reports that it files or submits under the Exchange Act,, is recorded, processed, summarized and reported within the specified time periods, specified in the rules and forms of the Securities and Exchange Commission, andthat such information is accumulated and communicated to management, in a timely manner. The Company’sincluding our Chief Executive Officer and ChiefPrincipal Financial Officer, haveas 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.this systemthe effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2022, the end of the period covered by this quarterly report,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 17 percent of the Company’s total assets and 45 percent of income before income taxes of the Company as of and for the quarter ended June 30, 2022. Based on this evaluation, the Company’s Chief Executive Officer and Principal Financial Officer have concluded that as of the systemend of such period, the Company’s disclosure controls and procedures were effective.effective. Therein the process of reviewing the internal control structure of ELFS and, if necessary, will make appropriate changes as it integrates ELFS into the Company’s overall internal control over financial reporting process. Other than as described above, there have been no changes in ourthe Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter ended June 30, 2022 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.- 18 -predicatedpredicted 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 financial position orbusiness, results of operations.operations, financial condition or cash flows.ITEM 1A. RISK FACTORS ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ITEM 6. EXHIBIT INDEX Exhibit No.Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith) 3.1ArticlesRule 13a-14(a)/15d-14(a) Certification of Incorporation of Wine Systems Design, Inc. (predecessor name) (incorporated by reference to Exhibit 3A to Wine Systems Design, Inc. (predecessor name) Registration Statement on Form SB-2 filed May 10, 2001, File No. 333-60608)Principal Financial Officer (filed herewith)3.2Restated and Amended By-LawsSection 1350 Certification of Janel Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 1, 2013, File No. 333-60608)Principal Executive Officer (filed herewith)3.3CertificateSection 1350 Certification of Designation of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 17, 2007 File No. 333-60608)Principal Financial Officer (filed herewith)3.4101Certificate of Designation of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October 22, 2007, File No. 333-60608)3.5Certificate of Designation of Series C Cumulative Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 29, 2014, File No. 333-60608)3.6Certificate of Change pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 21, 2015, File No. 333-60608)3.7Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 toMarch 31, 2016, File No. 333-60608)3.8Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-QJune 30, 2022 for the quarter ended March 31, 2017, File No. 333-60608)3.9Certificate of Amendment to Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed April 21, 2015, File No. 333-60608)10.1Janel World Trade, Ltd. 2013 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 1, 2013, File No. 333-60608)10.2Janel Corporation 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, File No. 333-60608)10.3Loanthree and Security Agreement dated March 27, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 2, 2014, File No. 333-60608)10.4First Amendment to the Loan and Security Agreement, dated September 10, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 16, 2014, File No. 333-60608)10.5Second Amendment to the Loan and Security Agreement, dated September 25, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 30, 2014, File No. 333-60608)10.6Third Amendment to the Loan and Security Agreement, dated October 9, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 15, 2014, File No. 333-60608)10.7Fourth Amendment to the Loan and Security Agreement, dated August 18, 2015, by and among Janel Corporation (formerly, Janel World Trade, Ltd.), Janel Group, Inc. (formerly, the Janel Group of New York), The Janel Group of Illinois, The Janel Group of Georgia, The Janel Group of Los Angeles, Janel Ferrara Logistics, LLC, Alpha International, LP, PCL Transport, LLC and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 20, 2015, File No. 333-60608)10.8Amended and Restated Demand Secured Promissory Note made by Janel Corporation (and its subsidiaries) in favor of Presidential Financial Corporation, dated August 18, 2015 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 20, 2015, File No. 333-60608)10.9Credit Agreement, effective as of February 29, 2016, by and between INDCO, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 25, 2016, File No. 333-60608)10.10Term Loan Promissory Note, effective as of March 16, 2016, made by INDCO, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 25, 2016, File No. 333-60608)- 19 -10.11Revolving Loan Promissory Note, effective as of February 29, 2016, made by INDCO, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed March 25, 2016, File No. 333-60608)10.12Security Agreement, effective as of February 29, 2016, made by INDCO, Inc and the Company, Inc. for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed March 25, 2016, File No. 333-60608)10.13Continuing Guaranty Agreement, effective as of February 29, 2016, made by Janel Corporation for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed March 25, 2016, File No. 333-60608)10.14Agreement of Lease dated January 2, 2015 between 303 Merrick LLC and The Janel Group of New York, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2014, File No. 333-60608)31.1Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*31.2Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*32.1Section 1350 Certifications*101Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarternine months ended June 30, 20172022 and 2021 in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of June 30, 20172022 and September 30, 2016,2021, (ii) Condensed Consolidated Statements of IncomeOperations for the three and nine months ended June 30, 20172022 and 2016,2021, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended June 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Cash Flows for the threenine months ended June 30, 20172022 and 2016,2021, and (v) Notes to UnauditedCondensed Consolidated Financial Statements*Statements.104 *Filed herewithCover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith)- 20 -4, 20175, 2022JANEL CORPORATION Registrant /s/ Brendan J. KillackeyDominique Schulte Brendan J. KillackeyDominique Schulte Chairman, President and Chief Executive Officer JANEL CORPORATION Registrant /s/ Carlos PlaVincent A. Verde Carlos PlaVincent A. Verde ChiefPrincipal Financial Officer,(Principal Financial Officer) Treasurer and Secretary- 21 -