EDGAR 10-K Filing

Company CIK: 1133062
Filing Year: 2021
Filename: 1133062_10-K_2021_0001140361-21-042974.json

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ITEM 1. BUSINESS
ITEM 1
BUSINESS
Our Business
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), Manufacturing and Life Sciences. 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 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.
Janel was incorporated on August 31, 2000 and is domiciled in the state of Nevada. Its corporate headquarters are located in New York, New York.
Janel and its consolidated subsidiaries employed 317 full-time people, as of September 30, 2021, in the United States. None of these employees is covered by a collective bargaining agreement. Janel and its subsidiaries have experienced no work stoppages and consider relations with their employees to be good. Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our management team. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency opportunities, skills, and resources they need to be successful.
Our Business Segments
We have three reportable segments: Logistics, Manufacturing and Life Sciences. The following provides greater detail regarding each of these segments.
Logistics
The Company’s Logistics segment is comprised of several wholly-owned subsidiaries. The Company’s Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air, ocean and land-based carriers, customs brokerage services, warehousing and distribution services, trucking, and other value-added logistics services. In addition to these revenue streams, the Company earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.
On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC. (“ELFS”) and related subsidiaries which we include in our Logistics segment.
On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc., (“W.R. Zanes”) which we include in our Logistics segment.
On July 23, 2020, the Company acquired all of the outstanding common stock of Atlantic Customs Brokers, Inc., (“ACB”) which we include in our Logistics 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.
Life Sciences
The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on an original equipment manufacturer (OEM) basis.
On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”) which we include in our Life Sciences segment.
Logistics
The Company’s Logistics segment helps clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include customs entry filing, arrangement of freight forwarding by air, ocean and ground, warehousing, cargo insurance procurement, logistics planning, product repackaging, online shipment tracking and hazardous material warehousing and distribution.
Our Logistics segment earns flat fees for certain services, such as customs entry filing. For brokered services, Logistics earns the difference between the rate charged by a service provider and the rate Logistics charges the customer for the provider’s service. Its freight consolidation activities, in addition to on-going volume-based relationships with providers, allows Logistics to command preferred service rates that can be passed on profitably to the customer.
As a non-asset-based logistics provider, we own only a minimal amount of equipment. We generally expect to neither own nor operate any material transportation assets and, consequently, arrange for transportation of our customers’ shipments via trucking companies, commercial airlines, air cargo carriers, railroads, ocean carriers and other non-asset based third-party providers. By not owning the transportation equipment used to transport the freight, which results in relatively minimal fixed operating costs, we are able to leverage our network of locations to offer competitive pricing and flexible solutions to our customers. Moreover, our balanced product offering provides us with revenue streams from multiple sources and enables us to retain customers even as they shift across various modes of transportation. We believe our low capital intensity model allows us to provide low-cost solutions to our customers, operate our business with strong cash flow characteristics, and retain significant flexibility in responding to changing industries and economic conditions.
During the fiscal year ended September 30, 2021, Logistics handled approximately 66,000 individual import and export shipments originating or terminating in countries around the world. Approximately 49% of the gross revenue from these activities related to ocean freight, 21% to air freight, 18% to trucking, 11% to custom brokerage trucking and the remainder of 1% to other.
Based upon revenue, our customers are diverse, with the largest individual customer accounting for about 6% of revenues and the top ten customers accounting for 28% of revenues during fiscal 2021.
As of September 30, 2021, our Logistics segment operated out of twenty full-service locations in the United States and maintained a network of independent agent relationships in many trading countries, giving it the ability to provide a global service to its clients.
Each office is responsible for its growth and profitability. Logistics management helps the offices as needed with efforts such as human resources, maintaining a common information technology platform and centralized accounting services. Our growth strategy includes servicing existing customers well and acquiring more of their business, hiring new people who can grow our company and adding new companies or services through acquisitions.
The logistics industry is highly fragmented, with low barriers to entry and intense competition. Our Logistics segment competes against providers ranging in size from “mom-and-pop” businesses to multi-national firms with hundreds of offices worldwide. Many of our Logistics customers utilize more than one logistics provider.
The global forwarding industry requires dealings in currencies other than the U.S. Dollar. As a result, our Logistics segment is exposed
to the inherent risks of international currency markets and governmental interference. Some countries in which the Logistics segment maintains agent relationships have currency control regulations that influence our ability to hedge foreign currency exposure. Logistics tries to manage these exposures by accelerating international currency settlements among those agents.
Historically, the quarterly operating results of the Logistics segment have been subject to seasonal trends. The fiscal third and fourth quarters have traditionally been the strongest, and the fiscal second quarter has traditionally been the weakest. This pattern has been the result of, or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and other similar and subtle forces.
A significant portion of Logistics segment revenues are derived from customers in industries with shipping patterns tied to consumer demand and/or just-in-time production schedules. Many Logistics customers may ship a significant portion of their goods at or near the end of a quarter. Therefore, the timing of revenues is, to a large degree, affected by factors beyond its control, such as shifting consumer demand for retail goods and manufacturing production delays. We cannot accurately forecast many of these factors, nor can we estimate the relative impact of any given factor. Therefore, historical patterns experienced may not continue in the future.
Government Regulation
Interstate and international transportation of freight is highly regulated. Failure to comply with applicable state and federal regulations, or to maintain required permits or licenses, can result in substantial fines or revocation of operating permits or authorities imposed on both transportation intermediaries and their shipper customers. We cannot give assurance as to the degree or cost of future regulations on our business. Some of the regulations affecting our current and prospective operations are described below.
Logistics is a customs broker licensed and permitted by U.S. Customs and Border Protection (“CBP”). All U.S. customs brokers are required to maintain prescribed records and are subject to periodic audits by CBP. Logistics is a registered Ocean Transportation Intermediary (“OTI”) and is licensed as a non-vessel operating common carrier (“NVOCC”) by the Federal Maritime Commission (“FMC”). The FMC has established certain qualifications for shipping agents, including certain surety bonding requirements. We also operate as a Transportation Security Administration (“TSA”) certified Indirect Air Carrier (“IAC”), providing air freight services, subject to commercial standards set forth by the International Air Transport Association (“IATA”) and federal regulations issued by the Transportation Security Administration.
Air freight forwarding operations are subject to regulation, as an indirect air cargo carrier, under the Federal Aviation Act as enforced by the Federal Aviation Administration of the U.S. Department of Transportation and the Transportation Security Administration of the Department of Homeland Security. While air freight forwarders are exempted from most of the Federal Aviation Act’s requirements by the Economic Aviation Regulations, the industry is subject to ongoing regulatory and legislative developments that can impact the economics of the industry by requiring changes to operating practices or influencing the demand for, and the costs of, providing services to customers.
Surface freight forwarding operations are subject to various state and federal statutes and are regulated by the Federal Motor Carrier Safety Administration of the U.S. Department of Transportation and, to a very limited extent, the Surface Transportation Board. These federal agencies have broad investigatory and regulatory powers, including the power to issue a certificate of authority or license to engage in the business, to approve specified mergers, consolidations and acquisitions, and to regulate the delivery of some types of domestic shipments and operations within particular geographic areas.
The Federal Motor Carrier Safety Administration also has the authority to regulate interstate motor carrier operations, including the regulation of certain rates, charges and accounting systems, to require periodic financial reporting, and to regulate insurance, driver qualifications, operation of motor vehicles, parts and accessories for motor vehicle equipment, hours of service of drivers, inspection, repair, maintenance standards and other safety related matters. The federal laws governing interstate motor carriers have both direct and indirect application to the Company. The breadth and scope of the federal regulations may affect our operations and the motor carriers that are used in the provisioning of the transportation services. In certain locations, state or local permits or registrations may also be required to provide or obtain intrastate motor carrier services.
Risk Management and Insurance
As a property freight broker, we are not legally liable for loss or damage to our customers’ cargo. In our customer contracts, we may agree to assume cargo liability up to a stated maximum.
We typically do not assume cargo liability above minimum industry standards in our international freight forwarding, ocean transportation or air freight businesses on international or domestic air shipments. With regards to international freight forwarding, ocean transportation and international domestic air freight shipments, we offer our customers the option to purchase shippers’ insurance coverage to insure goods in transit. When we agree to store goods for our customers for longer terms, we provide limited warehouseman’s coverage to our customers and typically contract for warehousing services from companies that provide us the same degree of coverage.
We maintain a broad cargo liability insurance policy to help protect us against catastrophic losses that may not be recovered from the responsible contracted carrier. We also carry various liability insurance policies, including automobile and general liability, with an umbrella policy.
Manufacturing
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”) which is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s headquarters and manufacturing operations are located in a single owned facility in New Albany, Indiana.
Indco provides solutions for the mixing needs of customers operating in diverse industries, including chemicals, inks, paints, construction, plastics, adhesives, cosmetics, food and pharmaceuticals. Solutions include standard product configurations, both manufactured and distributed, available for order from Indco’s website and its print catalog, mailed quarterly. In addition, Indco manufactures custom-designed mixing solutions that Indco helps specify, design, machine, assemble and distribute. During the fiscal year ended September 30, 2021, Indco made approximately 4,600 individual shipments to customers. In fiscal 2021, approximately 87% of Indco’s revenue came from manufacturing activity. The remainder of its revenue came from non-manufactured product distribution activity. Indco’s revenue generally is level throughout the year with little seasonality.
Indco relies on a variety of providers of raw materials, mechanical components and other services in order to manufacture its products. These providers include national and multi- national suppliers for common industrial components such as motors, gear drives, motor controls and many other standard hardware products. Additionally, regional and local suppliers provide Indco-specific parts such as castings and fabricated metal components. Raw materials, primarily steel bar, plate and shafts, are sourced from domestic steel mills through local distributors. Alternative or substantially similar options are available from suppliers other than those Indco currently employs. While custom cast or fabricated parts are at greater risk for supply interruption, alternative equivalent suppliers are typically available.
Our growth strategy within the industrial mixer business is to expand our reputation as a high-quality manufacturer of often customized products to meet specialized mixing needs. Indco’s products are often utilized in mission-critical applications, making our high quality and strong service offering highly valuable to our customers. Our growth strategy includes keeping our direct relationship with the customer relevant through our web presence, introducing new relevant products and expanding our reach into new and existing markets with sales efforts and partners.
The industrial mixer manufacturing industry is highly fragmented with low barriers to entry. Indco competes with companies of all sizes based on a combination of pricing, lead-times, service, quality and ability to reach customers through internet presence and catalog circulation.
Government regulation directly governing Indco’s industrial mixer product line is minimal. Changing energy efficiency standards, however, as mandated by the Department of Energy, can, over time, affect electric motor manufacturers whose products are used by Indco. Historically, these changes have resulted in only minor changes to our product line.
Indco is subject to U.S. federal, state and local provisions regulating the discharge of materials into the environment or otherwise for the protection of the environment. Although current operations have not been significantly affected by compliance with these environmental laws, the Company cannot predict what impact future environmental regulations may have on Indco. Indco does not anticipate making any material capital expenditures for environmental control purposes during the remainder of the current or succeeding fiscal years.
Life Sciences
The Company’s wholly-owned Life Sciences segment manufactures and distributes high-quality antibodies monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provide antibody manufacturing for academic and industry research scientists.
Our Life Sciences segment also produces products for life science companies on an original equipment manufacturer (OEM) basis. Through a combined portfolio of approximately 2,000 products and a range of custom services, the Life Sciences segment provides the scientific community with high quality tools to support critical research efforts.
Our Life Sciences segment is based in Davis, California on an owned 40-acre facility and two other leased locations in the U.S. Our growth strategy is to place high-quality products in the hands of more researchers to accelerate scientific discovery.
Our growth strategies include:
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Product innovation: By working with key researchers and scientific organizations, we seek to develop new products to enhance the range of tools available and thereby expand the capabilities of life science researchers.
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Operational improvement: We continue to enhance our operational designs and processes to be more efficient, which supports higher profitability and enables us to devote more resources to investments in growth and innovation.
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Attract and retain exceptional talent: High quality scientists enable our top-quality products and services to be offered which are key to our reputation in the market place.
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Acquisitions and investments: We intend to grow by acquiring new businesses with high quality reputations that will benefit from our combined innovation and operational strength.
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Customers and distribution methods: We sell our biotechnology products directly to customers, principally direct through our website or distributors. Some of our customers utilize our scientific expertise and production capabilities and purchase our products and re-label them. Our reputation for quality products is critical to our ability to attract new customers for both our products and services.
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Competitors: A number of companies supply protein-related research and diagnostic reagents. Customers choose their products based upon product quality, reputation and price. We believe a number of our products have long-standing reputations and that our portfolio overall is well-regarded, especially amongst the academic, diagnostic and pharmaceutical research community.
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Manufacturing: Our antibodies are produced using a variety of technologies including traditional animal immunization and hybridoma technology as well as recombinant antibody techniques. We are not dependent on key or sole source suppliers for most of our products as we typically have several outside sources for all critical raw materials necessary for the manufacture of our products.
The majority of our life science products are shipped within two days of receipt of the customers’ orders. Consequently, we typically do not maintain significant backlog of orders for our Life Sciences segment products.
Our Life Sciences segment is subject to regulation. Antibodies maintains International Organization of Standardization certification for medical devices to support our manufacturing operation. We also comply with regulations related to the United States Department of Agriculture, National Institutes of Health, Office of Laboratory Animal Welfare and the United States Food and Drug Administration. Many of our customers are regulated and must verify our compliance with their standards throughout the supply chain, which requires us to maintain careful records. The failure to comply with these regulations may impair our ability to compete in the marketplace.
Additional information with respect to Janel’s businesses
Our principal executive offices and corporate headquarters are located at 80 Eighth Avenue, New York, New York 10011, and our telephone number is (212) 373-5895.
Janel maintains a website (http://www.janelcorp.com) where certain corporate governance documents and links to its subsidiaries’ websites can be found. Janel’s periodic reports filed with the SEC can be accessed at the SEC’s website (http://www.sec.gov) and indirectly through Janel’s website (http://www.janelcorp.com). The information contained or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
The following risk factors should be read carefully in connection with an evaluation of the Company’s business and any forward-looking statements made in this Annual Report on Form 10-K and elsewhere. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” set forth above. Any of the following risks or others discussed in this Annual Report on Form 10-K or the Company’s other SEC filings could materially adversely affect the Company’s business, operating results and financial condition. An investment in Janel’s common stock is subject to risks inherent to the Company’s business. The material risks and uncertainties that management believes affect Janel are described below. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the Company’s business operations.
Risk Factors Related To The COVID-19 Pandemic
The coronavirus pandemic has significantly impacted worldwide economic conditions and has had, and may likely to continue to have, an adverse effect on our business operations, results of operations, cash flows and financial position.
The COVID-19 pandemic continues to have widespread implications and while we see improvements in the broader economy, it is difficult to predict how COVID-19 will impact the overall economy in the future. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has and will continue to impact our customers, suppliers, employees and other business partners. Many countries have begun the process of vaccinating their residents against COVID-19. However, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may impact the economy as well as our operations in the future. Our results for the fiscal year 2021 showed encouraging recovery as we navigate through this unique environment.
While we are seeing positive results despite the current COVID-19 environment, there remains uncertainty regarding how COVID-19 will impact the Company’s results in the future.
The effects of the COVID-19 pandemic may last for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; our ability to maintain sufficient qualified personnel due to employee illness, quarantine, willingness to return to work, vaccine and/or testing mandates, face-coverings and other safety requirements, general scarcity of employees, or travel and other restrictions; current global supply chain disruptions caused by the COVID-19 pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.
Risk Factors Related To Janel’s Growth Strategy
Janel’s strategy of expanding its business through acquisitions of other businesses presents special risks.
Janel expects to grow its businesses in part by completing acquisitions. Janel will either acquire businesses within its existing segments, or expand its portfolio into new segments. In either case:
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Janel’s financial condition may not be sufficient to support the funding needs of an expansion program;
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Janel may not be able to successfully identify suitable investment opportunities;
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acquisitions that Janel undertakes may not be successfully consummated or enhance profitability; or
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expansion opportunities may not be available to Janel upon reasonable terms.
There may be a limited number of operating companies available for acquisition that Janel deems to be desirable targets. Additionally, in recent years, the number of special purpose acquisition companies (“SPACs”) that have been formed has increased substantially. Many potential targets for SPACs have already entered into an initial business combination, and there are still SPACs seeking targets for their initial business combination, as well as many SPACs currently in registration with the SEC.
As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an acquisition. Janel may compete with entities whose financial resources, technical expertise and managerial capabilities are significantly greater than Janel’s. Therefore, Janel may be at a competitive disadvantage in negotiating and executing possible acquisitions. Even if Janel is successful in a competitive bidding process for an acquisition, this competition may affect the terms of completed transactions, and, as a result, Janel may pay more or receive less favorable terms than it expected for potential acquisitions.
In addition, even if Janel is able to successfully compete with these entities, it expects future acquisitions to encounter risks similar to those that past acquisitions have encountered, such as:
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difficulty in assimilating/integrating the operations and personnel of the acquired businesses;
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potential disruption of Janel’s or the target’s ongoing business;
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inability to realize the projected operational and financial benefits from the acquisition or to maximize financial and strategic benefits through the incorporation of acquired personnel and clients;
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difficulty maintaining uniform standards, controls, procedures and policies;
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impairment of relationships with employees and clients resulting from integration of the newly acquired company;
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strain on managerial and operational resources as management tries to oversee larger operations;
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significantly increased need for working capital to operate the acquired companies;
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exposure to unforeseen liabilities of acquired companies; and
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need to incur additional indebtedness, issue stock (which may have rights superior to the rights of Janel’s common stock and which may have a dilutive effect on Janel’s stockholders), or use cash in order to complete the acquisition.
Furthermore, management’s attention may be diverted by acquisition, investment, transition or integration activities. Janel may be required to dedicate additional management and other resources to newly acquired businesses.
Additionally, should Janel acquire a new line of business in which it has no operating history, the success of such new business cannot be assured. If an acquired entity is not efficiently or completely integrated, then Janel’s business, financial condition and operating results could be materially adversely affected.
Janel might fail to realize the expected benefits or strategic objectives of any acquisition it undertakes, or it may spend resources exploring acquisitions that are not consummated.
Due to its acquisition strategy, Janel faces a number of risks that could adversely affect Janel’s business, financial condition and operating results. Janel might not achieve its expected return on investment or may lose money. Janel may be adversely impacted by liabilities that it assumes from an acquired business, including from that business’s known and unknown obligations, intellectual property or other assets, terminated employees, current or former clients or other third parties.
In addition, Janel may fail to identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring, investing in or partnering with a company, including potential exposure to regulatory sanctions or liabilities resulting from an acquired business’s previous activities, internal controls and security environment. If any of these circumstances occurs, they could result in unexpected legal or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes or other adverse effects on Janel’s business.
Litigation, indemnification claims and other unforeseen claims and liabilities may arise from the acquisition or operation of acquired businesses.
Janel may face litigation or other claims as a result of certain terms and conditions of our acquisition agreements, such as earn-out payments or closing net asset adjustments. Alternatively, shareholder litigation may arise as a result of proposed acquisitions. If Janel is unable to complete the number and kind of acquisitions for which it plans, or if Janel is inefficient or unsuccessful at integrating any acquired businesses into its operations, Janel may not be able to achieve its planned rates of growth or improve its market share, profitability or competitive position.
Risk Factors Related To Janel’s Business And Industries
(in thousands except per share data)
Economic and other conditions in the markets in which Janel operates can affect demand for services and the Company’s results of operations.
Janel’s future operating results are dependent upon the economic environments of the markets in which it operates. Demand for services could be adversely affected by economic conditions in the industries of Janel’s customers.
Janel expects the demand for its services (and, consequently, results of operations) to continue to be sensitive to domestic and, increasingly, global economic conditions and other factors beyond Janel’s control.
Janel may not have sufficient working capital to continue operations.
Janel’s cash needs are currently met by commercial bank credit facilities, cash on hand and cash generated from current operations. Actual short- and long-term working capital needs will depend upon numerous factors, including operating results, the availability of a revolving line of credit, competition, and the cost associated with growing, either internally or through acquisition, none of which can be predicted with certainty. If results of operations and availability under Janel’s bank lines of credit are insufficient to meet cash needs, Janel will be required to obtain additional investment capital or debt funding to continue operations.
Our substantial debt obligations could restrict our operations and financial condition. Additionally, our ability to generate cash to make payments on our indebtedness depends on many factors beyond our control.
As of September 30, 2021, we had approximately $41,324 of short-term borrowings and long-term debt. We may also incur additional indebtedness in the future.
Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness rather than for other corporate purposes, including funding future expansion of our business and ongoing capital expenditures, which could impede our growth. Our substantial indebtedness could have other adverse consequences, including:
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making it more difficult for us to satisfy our financial obligations;
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increasing our vulnerability to adverse economic, regulatory, and industry conditions, and placing us at a disadvantage compared to our competitors that are less leveraged;
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limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
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limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions, and general corporate or other purposes; and
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exposing us to greater interest rate risk, including the risk to variable borrowings of a rate increase and the risk to fixed borrowings of a rate decrease.
Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond our control.
Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to pay our indebtedness when scheduled payments are due or to fund other liquidity needs. In these circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. Any refinancing of our debt could be at higher interest rates and may require make-whole payments and compliance with more onerous covenants, which could further restrict our business operations. Our ability to refinance our indebtedness or obtain additional financing would depend on, among other things, our financial condition at the time, restriction in the agreements governing our indebtedness, and the condition of the financial markets and the industries in which we operate. As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. Without this financing, we may have to seek additional equity or debt financing or restructure our debt, which could harm our long-term business prospects. Our failure to comply with the terms of any existing or future indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of the payment of all of our debt.
Instability in the financial markets may adversely affect our business.
Instability in the global financial markets could reduce availability of credit to our business. Although we currently have a revolving credit agreement with Santander Bank, N.A. in place until September 21, 2026 and another with First Merchants Bank in place until July 1, 2025, tightening credit markets could make it more difficult for us to access funds, refinance our existing indebtedness, enter into agreements for new indebtedness, or obtain funding through the issuance of the Company’s securities. In 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out LIBOR by the end of 2021. The deadline has been mostly extended and most U.S. dollar-denominated LIBOR maturity tenors will continue to be published under June 30, 2023.
We may need to renegotiate our revolving credit facility, as well as Indco’s credit agreement with First Merchants Bank. This could have an adverse effect on our financing costs by increasing the cost of our variable rate indebtedness.
Janel’s businesses are dependent upon technically skilled employees.
Janel believes that the success of its business is highly dependent on the continuing efforts of certain technically skilled employees, particularly experienced engineers in our Manufacturing segment and scientists in our Life Sciences segment. Only some of our employees are subject to employment agreements. The competition for experienced engineers in the Manufacturing segment and scientists in our Life Sciences business is intense. The loss of the services of technical skilled employees could have a material adverse effect on Janel’s business.
Climate change and increased focus by governmental and non-governmental organizations and customers on sustainability issues, including those related to climate change, may adversely affect our business and financial results.
Scientists have concluded that increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods, wildfires and other climatic events. Our Life Sciences business operates out of three locations and our Manufacturing business in a single location. Increased frequency of extreme weather could cause increased incidence of disruption to the production and distribution of our products at these locations. Increasing natural disasters in connection with climate change could also be a direct threat to our third-party vendors, service providers or other stakeholders, including disruptions on supply chains or information technology or other necessary services for our Company.
Federal, state, and local governments, as well as some of our customers, are beginning to respond to climate change issues. This increased focus on sustainability may result in new legislation or regulations and customer requirements that could negatively affect us as we may incur additional costs or be required to make changes to our operations in order to comply with any new regulations or customer requirements. Legislation or regulations that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels such as those used in the Company’s trucks in our Logistics segment, could adversely affect our operations and financial results.
More specifically, legislative, or regulatory actions related to climate change could adversely impact the Company by increasing our Logistics business fuel costs and reducing fuel efficiency and could result in the creation of substantial additional capital expenditures and operating costs in the form of taxes, emissions allowances, or required equipment upgrades. Any of these factors could impair our operating efficiency and productivity and result in higher operating costs. In addition, revenues could decrease if we are unable to meet regulatory or customer sustainability requirements. These additional costs, changes in operations, or loss of revenues could have a material adverse effect on our business, financial condition, and results of operations.
Increases in shipping costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and factors such as wage rate increases and inflation can have a material adverse effect on our business, financial condition, and operating results.
We may experience supply delays and shortages due to a variety of macroeconomic factors, including disruptions on the global supply chain as a result of the ongoing COVID-19 pandemic, especially with respect to goods from China. The ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers in China and the related transportation of their goods to the United States that are parts of our global supply chain. We have been able to make alternative delivery arrangements for limited quantities of goods, at increased cost.
While we have not yet experienced material shortages in supply as a result of these disruptions and our alternative delivery arrangements, if they were to be prolonged or expanded in scope, there could be resulting supply shortages that could impact our ability to manufacture and to deliver our products to our customers. Accordingly, such supply shortages and delivery limitations could have and material adverse effect on our business, financial condition, results of operations, and cash flows.
Furthermore, increases in compensation, wage pressure, and other expenses for our employees, may adversely affect our profitability. These cost increases may be the result of inflationary pressures that could further reduce our sales or profitability. Increases in other operating costs, including changes in energy prices and lease and utility costs, may increase our cost of products sold or selling, general, and administrative expenses. Our competitive price model and pricing pressures in the industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition, and results of operations.
Janel may face competition from parties who sell their businesses to Janel and from professionals who cease working for Janel.
While we typically enter into non-competition and non-solicitation agreements with parties that sell their businesses to us, one or more of the former owners of an acquired business who cease working for Janel or persons who leave Janel’s employment may compete with Janel or solicit Janel’s employees or clients in the future.
Even if ultimately resolved in Janel’s favor, any litigation associated with enforcing non-competition or non-solicitation agreements could be time consuming, costly and distract management’s focus from Janel’s business. Moreover, states and foreign jurisdictions may interpret restrictions on competition narrowly and in favor of employees.
Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, Janel may decide not to pursue legal remedies if it determines that the costs or other factors outweigh the benefits of any possible legal recourse or if the likelihood of success does not justify the costs of pursuing a legal remedy. Such persons, because they have worked for Janel or an acquired business, may be able to compete more effectively with Janel and may be more successful in soliciting its employees and clients than unaffiliated third parties.
Terrorist attacks and other acts of violence or war may affect any market on which the Company’s shares trade, the markets in which the Company’s subsidiaries operate, and the Company’s business operations and profitability.
Terrorist acts or acts of war or armed conflict could negatively affect Janel’s business operations. Any of these acts could result in increased volatility in, or damage to, the United States and worldwide financial markets and economy, and, in particular, could lead to increased regulatory requirements with respect to the security and safety of freight shipments and transportation. Acts of terrorism or armed conflict, and the uncertainty caused by such conflicts, could cause a reduction in demand for Janel’s businesses. In particular, this would have a corresponding negative effect on Janel’s Logistics business.
Security breaches or cybersecurity attacks could adversely affect Janel’s ability to operate, could result in personal information being misappropriated, and may cause Janel to be held liable or suffer harm to its reputation.
We are dependent on information technology systems and infrastructures to carry out important operational activities and to maintain our business records. In addition, we rely on the systems of third parties. As part of our normal business operations, we connect and store certain personal identifying and confidential information relating to our customers, vendors, employees and suppliers. External and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations.
Our third parties and we may be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost.
In addition, our insurance coverage and/or indemnification arrangements that we enter into, if any, may not be adequate to cover all of the costs related to cybersecurity attacks or disruptions resulting from such events. We must also rely on the safeguards put in place by customers, suppliers, vendors or other third parties to minimize the impact of cyber threats, other security threats or business disruptions. These third parties may have varying levels of cybersecurity expertise and safeguards. In the event of a breach affecting these third parties, our business and financial results could suffer materially. With respect to our commercial arrangements with these third parties, we have processes designed to require that the third parties and their employees and agents agree to maintain certain standards for the storage, protection and transfer of confidential, personal and proprietary information.
While, to date, we have not had a significant cyber-attack or breach that has had a material impact on our business or results of operations, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a third party’s employee or agent, the breakdown of a third party’s data protection processes or a cyber-attack on a third party’s information network and systems.
Acquired companies will need to be integrated with our information technology systems, which may cause additional training or licensing cost, along with potential delays and disruption. In such event, our revenue, financial results and ability to operate profitably could be negatively impacted. The challenges associated with integration of our acquisitions may increase these risks.
If we fail to comply with applicable privacy, security and data laws, regulations and standards, our business and reputation could be materially adversely affected.
As disclosed above, we connect and store certain personal identifying and confidential information relating to our customers, vendors, employees and supplier. The collection, maintenance, protection, use, transmission, disclosure and disposal of sensitive personal information are regulated at the federal, state, international and industry levels and requirements are imposed on us by contracts with clients. In some cases, such laws, rules, regulations and contractual requirements also apply to our vendors and require us to obtain written assurances of their compliance with such requirements. International laws, rules and regulations governing the use and disclosure of such information, such as the GDPR, can be more stringent than in the United States, and they vary across jurisdictions. In addition, more jurisdictions are regulating the transfer of data across borders and domestic privacy and data protection laws are generally becoming more onerous.
These laws, rules and contractual requirements are subject to change and the regulatory environment surrounding data security and privacy is increasingly demanding. Compliance with existing or new privacy, security and data laws, regulations and requirements may result in increased operating costs, and may constrain or require us to alter our business model or operations.
Our management information and financial reporting systems are spread across diverse platforms and geographies.
The growth of our business through acquisitions has resulted in our reliance on the accounting, business information, and other computer systems of these acquired entities to capture and transmit information concerning customer orders, carrier payment, payroll, and other critical business data. We continue to make progress towards migrating our various legacy operating and accounting systems to a singular Oracle- based system. As long as an acquired business remains on another information technology system, we face additional manual calculations, training costs, delays, and an increased possibility of inaccuracies in the data we use to manage our business and report our financial results. Any delay in compiling, assessing, and reporting information could adversely impact our business, our ability to timely react to changes in volumes, prices, or other trends, or to take actions to comply with financial covenants, all of which could negatively impact our stock price.
Risks related to our receipt of Paycheck Protection Program funding.
In response to the COVID-19 pandemic and the resulting impact on our current and future operations, we applied for a loan under the Paycheck Protection Program (the “PPP”). In April 2020 we were approved for the amount of $2,760, which we received in April 2020 and on July 23, 2020, as part of the ACB acquisition, the Company assumed a PPP loan in the amount of $135.
The PPP loan application required us to certify, among other things, that the current economic uncertainty made the PPP loan request necessary to support our ongoing operations. While we made this certification in good faith, the certification does not contain any objective criteria and is subject to interpretation. In early 2020, the Small Business Administration provided guidance that it would be unlikely that a public company with substantial market value and access to capital markets would be able to make the required certification in good faith, and such company should be prepared to demonstrate to the Small Business Administration, upon request, the basis for its certification. Further, the Secretary of the Treasury and the Small Business Administration Administrator announced that the government will conduct a full audit of all PPP loans of more than $2,000 for which the borrower applies for forgiveness. While we believe we have satisfied all eligibility requirements for the PPP loans, there is a risk that we may be deemed ineligible to have received the PPP loans or in violation of any of the laws or governmental regulations that apply to us in connection with the PPP loans. In such event, we may be required to repay the PPP loans in their entirety and we could be subject to additional penalties. The Company applied for forgiveness during the year and received forgiveness during the current fiscal year.
Risk Factors Related To Janel’s Logistics Business
Our Logistics business faces aggressive competition from freight carriers with greater financial resources and from companies that operate in areas in which our Logistics business plans to expand in the future.
Our Logistics business faces intense competition within the freight industry on a local, regional, national and global basis. Many of our Logistics business competitors have much larger facilities and far greater financial resources. In the freight forwarding industry, our Logistics business competes with a large and diverse group of freight forwarding concerns, commercial air and ocean carriers and a large number of locally established companies in geographic areas where our Logistics business does business or intends to do business in the future.
The loss of customers, agents or employees to competitors could adversely impact our Logistics business’ ability to maintain profitability.
In addition, the transport of freight, both domestically and internationally, is highly competitive and price sensitive, and new competitors emerge annually. Changes in the volume of freight transported, shippers’ preferences as to the timing of deliveries as a means to control shipping costs, economic and political conditions (including as a result of the COVID-19 pandemic), both in the United States and abroad, work stoppages, labor constraints (including as a result of wage inflation), U.S. and foreign laws relating to tariffs, trade restrictions, foreign investments and taxation may all have significant impact on our Logistics business overall business, growth and profitability.
Our Logistics business depends
on third-party carriers to transport our customers’ cargo.
Our Logistics business’s ability to serve its customers depends on the availability of air and sea cargo space, including space on passenger and cargo airlines, ocean carriers that service the transportation lanes and trucking companies that our Logistics business uses. Shortages of cargo space are most likely to develop around holidays and in especially heavy transportation lanes. In addition, available cargo space could be reduced as a result of decreases in the number of airlines or ocean carriers serving particular shipment lanes at particular times. Consequently, our ability to provide services for our customers could be adversely impacted by, among other things: shortages in available cargo capacity; changes by carriers and transportation companies in policies and practices such as scheduling, pricing, payment terms and frequency of service, increases in the cost of fuel, taxes and labor, changes in the financial stability or operating capabilities of carriers, and other factors not within our control. Reductions in airfreight or ocean freight capacity could negatively impact our yields. Material interruptions in service or stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact our business, results of operations and financial condition.
In addition, any determination that our third-party carriers have violated laws and regulations could seriously damage our reputation and brands, resulting in diminished revenue and profit and increased operating costs.
Higher carrier prices may result in decreased gross profits.
Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses. Our gross profit and income from operations may decrease if we are unable to increase our pricing to our customers. Increased demand for truckload services and pending changes in regulations may reduce available capacity and increase carrier pricing.
We may be subject to claims arising from transportation of freight by the carriers with which we contract.
We use the services of thousands of transportation companies in connection with our transportation operations. From time to time, the drivers employed and engaged by the carriers we contract with are involved in accidents, which may result in death or serious personal injuries.
The resulting types and/or amounts of damages may be excluded from or exceed the amount of insurance coverage maintained by the contracted carrier. Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for carriers, from time to time, claims may be asserted against us for their actions, or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all. A material increase in the frequency or severity of accidents, liability claims or workers’ compensation claims, or unfavorable resolutions of claims, could materially and adversely affect our operating results.
In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability. Our involvement in the transportation of certain goods, including but not limited to hazardous materials, could also increase our exposure in the event one of our contracted carriers is involved in an accident resulting in injuries or contamination.
One or more significant claims or the cost of maintaining our insurance could have an adverse effect on our results of operations.
We use the services of transportation companies and their drivers in connection with our transportation operations. From time to time, these drivers are, or may be, involved in accidents which may cause injuries and in which goods carried by them are lost or damaged. Such accidents usually result in equipment damage and, unfortunately, can also result in injuries or death.
Although these drivers are work for third-party carriers, from time-to-time claims may be asserted against us for their actions or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Our involvement in the transportation of certain goods, including, but not limited to, hazardous materials, could also increase our exposure in the event of an accident resulting in injuries or contamination. The resulting types and/or amounts of damages may under any of these circumstances be excluded by or exceed the amount of our insurance coverage or the insurance coverage maintained by the contracted carrier.
A material increase in the frequency or severity of accidents, claims for lost or damaged goods, liability claims, workers’ compensation claims, or unfavorable resolutions of any such claims could adversely affect our results of operations to the extent claims are not covered by our insurance or such losses exceed our reserves. Significant increases in insurance costs or the inability to purchase insurance as a result of these claims could also reduce our profitability and have an adverse effect on our results of operations.
The timing of the incurrence of these costs could also significantly and adversely impact our operating results compared to prior periods.
Increased insurance premium cost could have an adverse effect on our results of operations.
Insurance carriers may increase premiums for transportation companies generally. We could also experience additional increases in our insurance premiums in the future if our claims experience worsens. If our insurance or claims expense increases and we are unable to offset the increase with desired levels of insurance at reasonable rates, it could have an adverse effect on our results of operations and financial position. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have an adverse effect on our results of operations and financial position.
The motor carriers we contract with are subject to increasingly restrictive laws protecting the environment, including those relating to climate change, which could directly or indirectly have a material adverse effect on our business.
Future and existing environmental regulatory requirements could adversely affect operations and increase operating expenses, which in turn could increase our purchased transportation costs. If we are unable to pass such costs along to our customers, our business could be materially and adversely affected. Even without any new legislation or regulation, increased public concern regarding greenhouse gases emitted by transportation carriers could harm the reputations of companies operating in the transportation logistics industries and shift consumer demand toward more locally sourced products and away from our services.
A determination that owner-operators are employees, rather than independent contractors, could expose us to various liabilities and additional costs.
Federal and state legislation as well as tax and other regulatory authorities may seek to assert that independent contractors in the transportation service industry, such as our owner-operators, are employees rather than independent contractors. For example, on September 18, 2019, the state of California passed Assembly Bill 5 (AB5), which codified a standard test for determining a worker’s status as an employee or independent contractor for purposes of determining employee benefits such as paid vacation, sick leave, meals and rest breaks, and overtime, known as the ABC test. The ABC test is generally thought to lower the threshold for classifying a worker as an employee as opposed to an independent contractor. AB5 was scheduled to go into effect on January 1, 2020; however, a California Federal District judge issued a preliminary injunction enjoining California from enforcing AB5 as to motor carriers. California can appeal the decision to grant the preliminary injunction.
While new in California, versions of the ABC test have existed in a number of other states over the years and have been challenged in various courts as violating the federal government’s exclusive right to regulate motor carriers in interstate commerce. There can be no assurance that these interpretations and tax laws that consider these persons independent contractors will not change, that other federal or state legislation will not be enacted or that various authorities will not successfully assert a position that reclassifies independent contractors to be employees. If our owner-operators are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment, and tort laws, as well as our potential liability for employee benefits.
In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results.
Recessions and other economic developments that reduce freight volumes could have a material adverse impact on our Logistics business.
The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of customers like those serviced by our Logistics business, interest rate fluctuations and other economic factors beyond the control of our Logistics business.
Deterioration in the economic environment subjects our Logistics business to various risks that may have a material impact on its operating results and cause it, and therefore Janel, to not reach its long-term growth goals, as a result of, for example, the following:
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a reduction in overall freight volumes in the marketplace, reducing our Logistics business’s opportunities for growth;
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economic difficulties encountered by some of our Logistics business customers, who may, therefore, not be able to pay our Logistics business in a timely manner or at all, or may go out of business;
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economic difficulties encountered by a significant number of our Logistics business’s transportation providers, who may go out of business and, therefore, leave our Logistics business unable to secure sufficient equipment or other transportation services to meet commitments to its customers; and
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the inability of our Logistics business to appropriately adjust its expenses to changing market demands. In addition, if a downturn in the business cycles of our Logistics business customers causes a reduction in the volume of freight shipped by those customers, its, and therefore Janel’s, operating results could be adversely affected.
Other events affecting the volume of international trade and international operations could adversely affect our Logistics international operations.
In addition to economic conditions, our Logistics business’s international supply chain services are directly related to, and dependent on, the volume of international trade, particularly trade between the United States and foreign nations. This trade, as well as our Logistics business’s international supply chain services, is influenced by many factors, including:
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economic and political conditions in the United States and abroad;
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major work stoppages;
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exchange controls, currency conversion and fluctuations;
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war, other armed conflicts and terrorism; and
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U.S. and foreign laws relating to tariffs, trade restrictions, foreign investment and taxation.
The foregoing and other events beyond our Logistics business control, such as a failure of various nations to reach or adopt international trade agreements or an increase in bilateral or multilateral trade restrictions, could have a material adverse effect on our Logistics segment.
Our Logistics business may be unable to manage its staffing needs, which may have an adverse impact on its costs of doing business.
In order to respond to the high variability in our Logistics business model, it may be necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our Logistics business staffing levels to its business needs. Additionally, there may be labor constraints as a result of COVID-19-related vaccine mandates. In addition, our Logistics business has other primarily variable expenses that are fixed for a period of time, and it may not be able to adequately adjust them in a period of rapid change in market demand.
Our Logistics business faces competition in the freight forwarding, freight brokerage, logistics and supply chain management industry.
The freight forwarding, freight brokerage, logistics and supply chain management industry is intensely competitive and is expected to remain so for the foreseeable future. Our Logistics business faces competition from a number of companies, including many that have significantly greater financial, technical and marketing resources.
Customers increasingly are turning to competitive bidding processes, in which they solicit bids from a number of competitors, including competitors that are larger than our Logistics business. Increased competition may lead to revenue reductions, reduced profit margins or a loss of market share, any one of which could harm our Logistics business. There are many factors that could impair our Logistics business’s profitability, including the following:
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competition with other transportation services companies, some of which have a broader coverage network, a wider range of services, more fully developed information technology systems and greater capital resources than those of our Logistics business;
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reduction by our Logistics business competitors of their rates to gain business, especially during times of declining growth rates in the economy, which reductions may limit our Logistics business’s ability to maintain or increase rates, maintain its operating margins or maintain significant growth in its business;
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shifts in the business of shippers to asset-based trucking companies that also offer brokerage services in order to secure access to those companies’ trucking capacity, particularly in times of tight industry-wide capacity;
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solicitation by shippers of bids from multiple transportation providers for their shipping needs and the resulting depression of freight rates or loss of business to competitors; and
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the use by our Logistics business competitors of cooperative relationships to increase their ability to address shipper needs.
The Logistics industry is consolidating, and if our Logistics business cannot gain sufficient market presence, it may not be able to compete successfully against larger companies in its industry.
There currently is a trend within the logistics industry towards consolidation of the niche players into larger companies that are attempting to increase global operations through the acquisition of regional and local freight forwarders, brokers and other freight logistics providers. If our Logistics business cannot gain sufficient market presence or otherwise establish a successful strategy in its industry, it may not be able to compete successfully against larger companies in its industry.
Failure to comply with governmental permit and licensing requirements or statutory and regulatory requirements could result in civil and criminal sanctions, fines or revocation of our Logistics business’s operating authorities, and changes in these requirements could adversely affect our Logistics business.
Our Logistics business’s operations are subject to various state, local, federal and foreign statutes and regulations prohibiting various activities that in many instances require permits and licenses. Failure to maintain compliance with applicable law and regulations, required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our Logistics business operating authorities.
Moreover, government deregulation efforts, “modernization” of the regulations governing customs clearance and changes in the international trade and tariff environment could require material expenditures or otherwise adversely affect our Logistics business specifically.
Our Logistics business is subject to seasonal trends.
Historically, our Logistics business’s operating results have been subject to seasonal trends when measured on a quarterly basis. Its second fiscal quarter has traditionally been the weakest, and the third and fourth fiscal quarters have traditionally been the strongest. As a result, its quarterly operating results are likely to continue to fluctuate. This trend is dependent on numerous factors, including the markets in which our Logistics business operates, holiday seasons, consumer demand, climate, economic conditions and numerous other factors. This historical seasonality has also been influenced by the growth and diversification of our Logistics business international network and service offerings. A substantial portion of our Logistics business’s revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our Logistics business’s revenue is, to a large degree, affected by factors that are outside of its control. Our Logistics business historic operating patterns may not continue in future periods as it cannot influence or forecast many of these factors.
Risk Factors Related To Janel’s Manufacturing Business
Indco faces aggressive competition from competitors with greater financial resources.
Indco is a producer of industrial mixers and mixing equipment for a variety of industries. The industrial mixer manufacturing industry is highly fragmented with low barriers to entry.
This market is addressed by companies ranging in size from large, publicly held concerns with resources greater than those of Indco to small privately-owned entities. New competitors emerge annually, and many aggressively market through electronic media. Our competitors may be more innovative than us, and as a result, Indco may be unable to compete effectively.
Because most of Indco’s contracts are individual purchase orders and not long-term agreements, Indco may not be able to generate a similar amount of revenue in the future.
Indco must bid or negotiate each of its contracts separately, and when it completes a contract, there is generally no continuing source of revenue under that contract.
As a result, Indco cannot assure that it will have a continuing stream of revenue from any contract. Indco’s failure to generate new business on an ongoing basis would materially impair its ability to operate profitably.
Any decrease in the availability, or increase in the cost, of raw materials could materially affect Indco’s revenue and earnings.
The availability of certain critical raw materials is subject to factors that are not within Indco’s control. In some cases, these critical raw materials are purchased from suppliers operating in countries that may be subject to unstable political and economic conditions, or there may be other supply chain issues related to the procurement of such raw materials, including as a result of the COVID-19 pandemic or climate change.
While Indco has historically been able to source its raw materials from an assortment of suppliers, at any given time, Indco may be unable to obtain an adequate supply of critical raw materials on a timely basis, at prices and other terms acceptable to it, or at all. If Indco is unable to obtain adequate and timely deliveries of required raw materials, it may be unable to timely manufacture sufficient quantities of products. This could cause Indco to lose sales, incur additional costs, delay new product introductions or suffer harm to Indco’s reputation.
If suppliers increase the price of critical raw materials or are unwilling or unable to meet Indco’s demand, it may not have alternative sources of supply. In addition, costs of certain critical raw materials have been volatile due to factors beyond Indco’s control. Raw material costs are included in Indco’s contracts with customers, but in some cases Indco is exposed to changes in raw material costs from the time purchase orders are placed to when it purchases the raw materials for production. Changes in business conditions could adversely affect Indco’s ability to recover rapid increases in raw material costs and may adversely affect Indco’s, and therefore Janel’s, results of operations.
Failure to obtain and retain skilled technical personnel could adversely affect Indco’s operations.
Indco’s production facilities require skilled personnel to operate and provide technical services and support for its business. Competition for the personnel required for Indco’s business intensifies as activity increases. In periods of high utilization, it may become more difficult to find and retain qualified individuals. This could increase Indco’s costs or have other adverse effects on its operations.
If Indco’s customers successfully assert product liability claims against it due to defects in Indco’s products, its operating results may suffer and its reputation may be harmed.
Indco faces an inherent risk of exposure to claims in the event that the failure, use or misuse of its products results, or is alleged to result, in bodily injury, property damage or economic loss. While Indco believes that it meets or exceeds existing professional specification standards recognized or required in the industries in which it operates, Indco has been subject to claims in the past, and it may be subject to claims in the future. A successful product liability claims or series of claims against Indco, or a significant warranty claim or series of claims against it, could materially decrease its liquidity, and therefore Janel’s financial condition.
The extensive environmental, health and safety regulatory regimes applicable to Indco’s operations create potential exposure to significant liabilities.
The nature of Indco’s manufacturing business subjects its operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health.
Failure to comply with these laws and regulations, or with the permits required for Indco’s operations, could result in fines or civil or criminal sanctions, third-party claims for property damage or personal injury, and investigation and cleanup costs.
Potentially significant expenditures could be required in order to comply with new environmental laws or requirements that may be adopted or imposed in the future.
Indco has used, and currently uses, certain substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although Indco implements controls and procedures designed to reduce continuing risk of adverse impacts and environmental, health, and safety issues, Indco could incur substantial cleanup costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims as a result of violations, non-compliance or liabilities under these regulatory regimes.
As a manufacturing business, Indco also must comply with federal and state environmental laws and regulations which relate to the manner in which Indco stores and disposes of materials and the reports that Indco is required to file. Indco cannot ensure that it will not incur additional costs to maintain compliance with environmental laws and regulations or that it will not incur significant penalties for failure to be in compliance.
Indco relies on a single location to manufacture its products.
Indco’s business operates out of a single location in New Albany, Indiana. Indco employs lean manufacturing techniques and therefore carries little inventory. Indco could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around its facility in Indiana, including an outbreak of an infectious disease such as COVID-19. As a result, Indco may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered, and Indco may suffer damage to its reputation. Indco’s, and therefore Janel’s, financial condition and results of operations could be materially adversely affected were such events to occur.
Risk Factors Related To Janel’s Life Sciences Business
It may be difficult for Life Sciences to implement its strategies for revenue growth in light of competitive challenges.
Life Sciences faces significant competition across many of its product lines. Competitors include companies ranging from start-up companies, which may be able to more quickly respond to customers’ needs, to large multinational companies, which may have greater financial, marketing, operational, and research and development resources than the Company.
In addition, consolidation trends in the pharmaceutical, biotechnology and diagnostics industries have served to create fewer customer accounts and to concentrate purchasing decisions for some customers. Failure to anticipate and respond to competitors’ actions may impact the future sales and earnings of Life Sciences and therefore Janel.
If Life Sciences does not compete effectively, its business may be harmed.
Life Sciences encounters aggressive competition from numerous competitors in many areas of its business. It may not be able to compete effectively with all of these competitors. To remain competitive, Life Sciences must develop new products and periodically enhance its existing products. We anticipate that Life Sciences may also have to adjust the prices of many of its products to stay competitive. In addition, new competitors, technologies or market trends may emerge to threaten or reduce the value of our product lines.
If Life Sciences does not introduce new products in a timely manner, it may lose market share and be unable to achieve revenue growth targets.
Life Sciences sells many of its products in industries characterized by frequent new product and service introductions and evolving customer needs and industry standards. Many of the businesses competing with Life Sciences in these industries have significant financial and other resources to invest in new technologies, substantial intellectual property portfolios, significant experience in new product development, regulatory expertise, manufacturing capabilities and established distribution channels to deliver products to customers. Failure to innovate and develop new products may impact the future sales and earnings of Life Sciences and therefore Janel.
The manufacture and sale of products and services may expose us to product and other liability claims for which we could have substantial liability.
Life Sciences faces an inherent business risk of exposure to product and other liability claims if its products, services or product candidates are alleged or found to have caused injury, damage or loss.
While we retain product liability insurance, we may be unable to obtain insurance with adequate levels of coverage for potential liability on acceptable terms or claims of this nature may be excluded from coverage under the terms of any insurance policy that we obtain.
If we are unable to obtain such insurance or the amounts of any claims successfully brought against us substantially exceed our coverage, then our business could be adversely impacted.
Changes in governmental regulations may reduce demand for our products or increase our expenses.
Life Sciences competes in markets in which it or its customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs of producing these products.
The Life Sciences business operates from three locations, which exposes it to certain risks.
Our Life Sciences business operates out of three locations in Davis, California, Aurora, Colorado and Bloomington, Minnesota. Any significant disruption of those operations for any reason, such as strikes or other labor unrest or constraints, including as a result of COVID-19 vaccine mandates, power interruptions, fire, earthquakes, outbreaks of infectious diseases such as COVID-19, or other events beyond our control, could adversely affect our sales and customer relationships and therefore adversely affect our business.
The success of Life Sciences depends on its ability to continually produce products that meet high quality standards such as purity, reproducibility and/or absence of cross- reactivity.
Product quality and reputation are key purchasing decision factors for our Life Sciences customers. While our Life Sciences operations have experienced and qualified personnel, long operating histories and substantial production systems and protocols in place, failure on our part to meet our customers’ high-quality product expectations (in particular with respect to product purity, reproducibility and specificity) could adversely impact our business.
Risk Factors Related To Ownership of Janel’s Common Stock
Janel’s officers and directors and one of its stockholders have a controlling influence over Janel.
Janel’s officers and directors control the vote of approximately 69.7% of the outstanding shares of Janel’s common stock as of September 30, 2021, which includes Janel common stock such persons can acquire through the exercise of vested options granted to them. As a result, Janel’s officers and directors control the election of Janel’s directors and therefore have the ability to control the affairs of Janel. Furthermore, one particular investor in the Company has the right to appoint 50% of the members of Janel’s board of directors.
As a result, these officers, directors and stockholders have controlling influence over, among other things, the ability to amend Janel’s certificate of incorporation and bylaws or effect or preclude fundamental corporate transactions involving Janel, including the acceptance or rejection of any proposals relating to a merger of Janel or an acquisition of Janel by another entity. The interests of these officers, directors and stockholders may conflict with those of other stockholders. This concentration of ownership may also delay, deter or prevent a change in control of Janel, and some transactions may be more difficult or impossible without the support of these parties.
It is unlikely that Janel will issue dividends on its common stock in the foreseeable future.
Janel has never declared nor paid cash dividends on its common stock, and it does not intend to pay dividends in the foreseeable future. The payment of dividends in the future will be at the discretion of Janel’s board of directors.
Janel’s stock price is subject to volatility.
Janel’s common stock trades on the Pink tier of the OTC market under the symbol “JANL.” The market price of Janel’s common stock has been subject to significant fluctuations. There is an absence of a true market for Janel shares and thus a valid valuation is not readily maintained. This result is caused in part by the concentrated holdings of Janel, which has led to abnormal price volatility. Such fluctuations as well as economic conditions generally may adversely affect the market price of Janel’s common stock.
We may issue shares of preferred stock with greater rights than our common stock.
Our certificate of incorporation authorizes our board of directors to issue shares of preferred stock and to determine the price and other terms for those shares without the approval of our stockholders.
Any such preferred stock we may issue in the future could rank ahead of our common stock with respect to certain rights or obligations, including in terms of dividends, liquidation rights, and voting rights.
Janel has no assurance of a continued public trading market.
Janel’s common stock is quoted in the over-the-counter market on the Pink tier of the OTC market and, to the extent the market price of our common stock falls below $5.00 per share, may be subject to the low-priced security or so-called “penny stock” rules that impose additional sales practice requirements on broker-dealers who sell such securities. For any transaction involving a penny stock, the rules require, among other things, the delivery, prior to the transaction, of a disclosure schedule required by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the customer’s account.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.
Consequently, to the extent we are subject to the penny stock rules, such rules may affect the ability of broker-dealers to trade our securities. As a result, characterization as a “penny stock” can discourage investor interest in and limit the marketability of our common stock.
Janel incurs significant costs to comply with the laws and regulations affecting public companies which could harm its business and results of operations.
Janel is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes- Oxley Act”), and other applicable securities rules and regulations. These rules and regulations have increased and will continue to increase Janel’s legal, accounting and financial compliance costs and have made, and will continue to make, some activities more time-consuming and costly. For example, these rules and regulations could make it more difficult and more costly for Janel to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage.
These rules and regulations could also make it more difficult for Janel to attract and retain qualified persons to serve on its board of directors or its board committees or as executive officers. Janel’s management and other personnel devote a substantial amount of time to these compliance initiatives. As a result, management’s attention may be diverted from other business concerns, which could harm Janel’s business and operating results.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.

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ITEM 2. PROPERTIES
ITEM 2
PROPERTIES
Janel’s executive offices are located in approximately 3,300 square feet of leased space in New York, New York. The lease term ends September 1, 2025.
As of September 30, 2021, Logistics leased 6,900 square feet of office space in Garden City, New York. This location serves as the executive offices of the Logistics segment. The lease term ends March 31, 2025.
As of September 30, 2021, Logistics leased twenty office spaces, some of which are on a month-to-month basis, in twelve states located in the United States, Lease terms for these locations expire at various dates through March 31, 2025.
As of September 30, 2021, Indco owned an approximately 12,600 square feet manufacturing facility on a 1.2-acre parcel of land in New Albany, Indiana.
As of September 30, 2021, Life Sciences owned an approximately 25,000 square feet manufacturing facility on a 40-acre parcel of land in Davis, California. The Life Sciences segment also leases two other offices in the United States.
The Company believes that its owned and leased properties are adequate to meet its occupancy needs in the foreseeable future.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3
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. The information otherwise called for by this item is incorporated herein by reference to Note 18, Risks and Uncertainties, in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4
MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(in thousands, except share and per share data)
Janel Corporation’s common stock is traded on the Pink tier of the OTC market under the symbol “JANL.”
The following table sets forth the high and low bid prices for the common stock for each full quarterly period during the fiscal years indicated. The prices reflect the high and low bid prices as available through the Pink tier of the OTC market and represent prices between dealers. They do not reflect retailer markups, markdowns or commissions and may not represent actual transactions.
Fiscal Quarter
Fiscal Year 2021
Fiscal Year 2020
High
Low
High
Low
First Quarter, ended December 31,
$
8.00
$
3.00
$
8.57
$
5.97
Second Quarter, ended March 31,
$
17.50
$
4.51
$
8.50
$
5.97
Third Quarter, ended June 30,
$
18.00
$
11.00
$
8.05
$
3.00
Fourth Quarter, ended September 30,
$
19.00
$
14.00
$
10.00
$
3.00
On September 30, 2021, the Company had 58 holders of its shares of common stock. This amount does not include “street name” holders or beneficial holders of our common stock, whose holders of record are banks, brokers and other financial institutions.
The closing price of the common stock on that date was $23.00 per share.
Common Stock Dividends
We have not declared, and currently do not plan to declare in the foreseeable future, dividends on our common stock.
Series B Convertible Preferred Stock (“Series B Stock”)
The Company has 31 shares of Series B Stock outstanding as of September 30, 2021.
Series C Cumulative Preferred Stock (“Series C Stock”)
In August 2021, the board of directors approved an increase in the number of shares of Series C Stock, from 20,000 shares to 30,000 shares. On September 30, 2021, the Company sold 1,200 shares of Series C Stock to an accredited investor at a purchase price of $500 per share, or an aggregate of $600,000. The Company has 20,960 shares of Series C Stock outstanding as of September 30, 2021.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6
RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our discussions below in this Item 7 should be read along with Janel’s audited financial statements and related notes thereto as of September 30, 2021 and 2020 and for each of the two years in the period ended September 30, 2021 included in this Annual Report on Form 10-K.
INTRODUCTION
Janel is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Manufacturing and Life Sciences. 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 higher risk-adjusted rates of return; and attracting and retaining exceptional talent. Management at the holding company level focuses on significant capital allocation decisions and corporate governance. 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.
COVID-19
We continue to navigate operating the Company in light of the COVID-19 pandemic, which continues to have widespread implications. On the one hand, we have seen improvements in the broader economy, and our results for fiscal 2021 improved significantly compared to the prior fiscal year. That said, there remains uncertainty regarding how the ongoing nature of the COVID-19 pandemic will impact the overall economy and the Company’s results in particular. While many countries have begun the process of vaccinating their residents against COVID-19, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may hinder any economic recovery as well as our operations in the future.
Even after the COVID-19 pandemic subsides, the effects of the COVID-19 pandemic may last for a significant period of time thereafter and may continue to adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.
Year Ended September 30, 2021 Acquisitions
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.
On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”), which we include in our Life Sciences segment.
Year Ended September 30, 2020 Acquisitions
On July 23, 2020, the Company acquired all of the outstanding common stock of Atlantic Customs Brokers, Inc. (“ACB”), which we include in our Logistics segment.
Results of Operations - Janel Corporation
Our results of operations and period-over-period change are discussed in the following section. The tables and discussion should be read in conjunction with the accompanying Consolidated Financial Statements and the notes thereto appearing in Item 8.
Refer to Item 7. “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2020, filed on January 13, 2021, for a comparison of fiscal year 2020 results of operations to the fiscal year 2019 results of operations, which specific discussion is incorporated herein by reference.
Our condensed consolidated results of operations are as follows:
Financial Summary
Fiscal years ended September 30,
(in thousands)
Revenues
$
146,419
$
82,429
Forwarding expenses and cost of revenues
113,986
58,908
Gross profit
32,433
23,521
Operating expenses
28,482
25,245
Operating income (loss)
$
3,951
$
(1,724
)
Net income (loss)
$
5,203
$
(1,725
)
Adjusted operating income
$
5,894
$
Consolidated revenues for the year ended September 30, 2021 were $146,419, or 77.6% higher than fiscal 2020. Revenues increased across all three segments due to a recovery from the impact of the COVID-19 pandemic experienced in the prior fiscal year as well as acquisitions. Operating income for fiscal 2021 was $3,951 compared to an operating loss of ($1,724) for fiscal 2020, an increase of $5,675, as a result of the economic recovery experienced across all of our segments, partially offset by higher spending in the corporate segment. Adjusted operating income for fiscal 2021 increased to $5,894 versus $376 in the prior fiscal year.
The Company’s net income for the year ended September 30, 2021 totaled $5,203 or $5.26 per diluted share, compared to net loss of approximately ($1,725) or ($1.98) per diluted share for the year ended September 30, 2020. Net income increased as a result of the recovery from the impact of the COVID-19 pandemic in the prior fiscal year and the benefit from the forgiveness of our PPP Loan.
The following table sets forth a reconciliation of operating income to adjusted operating income:
Adjusted Operating Income
Fiscal years ended September 30,
(in thousands)
Income (loss) from operations
$
3,951
$
(1,724
)
Amortization of intangible assets
1,120
Stock-based compensation
Cost recognized on sale of acquired inventory
Adjusted operating income
$
5,894
$
BUSINESS PERFORMANCE
Results of Operations - Logistics
Financial Summary
Fiscal Years Ended
September 30,
(in thousands)
Revenue
$
125,863
$
68,492
Forwarding expense
106,139
53,397
Gross profit
$
19,724
$
15,095
Gross profit margin
16.0
%
22.0
%
Selling, general and administrative expenses
$
16,656
$
14,992
Income from operations
$
3,068
$
Fiscal 2021 compared with fiscal 2020
Revenue
Total revenue in fiscal 2021 was $125,863 as compared to $68,492 in fiscal 2020, an increase of $57,371 or 83.7%. The increase in revenue was primarily driven by the rise in transportation rates as a result of capacity issues globally as well as an increase in volume as a result of a recovery from the COVID-19 pandemic compared to the prior fiscal year. Three acquisitions accounted for 15% of the growth. Our volume as measured by twenty-foot equivalent units (“TEUs”) grew 30%, metric tons and custom entries grew 1% and 28%, respectively.
Gross Profit
Gross profit in fiscal 2021 was $19,724, an increase of $4,629, or 30.7%, as compared to $15,095 in fiscal 2020. This increase was mainly the result of a recovery in business compared with the depressed levels in the prior fiscal year which drove organic gross profit growth. Three acquisitions accounted for the balance of the growth. Our gross profit margin declined to 16.0% in fiscal 2021 compared to 22.0% in fiscal 2020 largely due to an increase in transportation rates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses from continuing operations in fiscal 2021 were $16,656, as compared to $14,992 in fiscal 2020. The increase of $1,664, or 11.1%, was mainly due to additional expenses from acquired businesses and investment to support business growth. As a percentage of gross revenue, selling, general and administrative expenses were 13.2% and 21.8% for fiscal 2021 and fiscal 2020, respectively.
Income from Operations
Operating income increased to $3,068 in fiscal 2021 compared to $103 in fiscal 2020. Income from operations increased as a result of the economic recovery from the COVID-19 pandemic compared to the prior fiscal year and contributions from three acquisitions. Our operating margin as a percentage of gross profit was 15.5% in fiscal 2021 compared to 0.7% in fiscal 2020.
Results of Operations - Manufacturing
Financial Summary
Fiscal years ended September 30,
(in thousands)
Revenue
$
8,564
$
7,319
Cost of revenues
$
3,983
$
3,329
Gross profit
$
4,581
$
3,990
Gross profit margin
53.5
%
54.5
%
Selling, general and administrative expenses
$
2,696
$
2,505
Income from operations
$
1,885
$
1,485
Fiscal 2021 compared with fiscal 2020
Revenue
Total revenue was $8,564 in
fiscal 2021 compared with $7,319 in fiscal 2020, an increase of 17%. The revenue increase reflected a broad increase across the business relative to the COVID-19 related slowdown in the prior fiscal year.
Gross Profit
Gross profit was $4,581 and $3,990 for fiscal years 2021 and 2020, respectively. Gross profit margin for the Manufacturing segment during fiscal 2021 was 53.5%, as compared to 54.5%, in fiscal 2020. The year-over-year decrease in gross profit margin was generally due to mix of business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Manufacturing segment were $2,696 and $2,505 for fiscal years 2021 and 2020, respectively. As a percentage of gross revenue, selling, general and administrative expenses were 31.5% and 34.2% for fiscal 2021 and fiscal 2020, respectively. The decrease in expenses relative to revenue reflected positive operating leverage on higher volumes.
Income from Operations
Operating income for fiscal 2021 was $1,885 compared to $1,485 in fiscal 2020, representing a 26.9% increase compared to the prior year. The increase was due to favorable operating leverage as revenue recovered.
Results of Operations - Life Sciences
Financial Summary
in thousands
(Fiscal years ended September 30,)
Revenue
$
11,992
$
6,618
Cost of revenues
3,156
1,306
Cost recognized upon sale of acquired inventory
Gross profit
$
8,128
$
4,436
Gross profit margin
67.0
%
67.0
%
Selling, general and administrative expenses
$
4,469
$
3,870
Income from operations
$
3,659
$
Fiscal 2021 compared with fiscal 2020
Revenue
Total revenue was $11,992 in
fiscal 2021 compared with $6,618 in fiscal 2020. Increase revenue of $5,374 is primarily related to academic research recovery from the impact of the COVID-19 pandemic. Acquired revenue of $1,290 added the balance of revenue growth.
Gross Profit
Gross profit was $8,128 and $4,436 for fiscal years 2021 and 2020, respectively. Gross profit margin of 67.0% remained flat between fiscal 2021 and the prior fiscal year. The gross profit margin was impacted by the amortization of non-cash acquired inventory expenses of $708 and $876 for fiscal 2021 and 2020, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Life Sciences segment were $4,469 and $3,870 for fiscal years 2021 and 2020, respectively.
The year-over-year increase was largely due to acquired businesses. As a percentage of gross revenue, selling, general and administrative expenses were 37.3% and 58.5% for fiscal 2021 and fiscal 2020, respectively.
Income from Operations
The Life Sciences business earned $3,659 and $566 in income from operations for fiscal 2021 and 2020, respectively. The increase in operating income reflected 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, contribution from acquisitions. The difference in operating margin of 30.5% in fiscal 2021 compared with 8.6% in fiscal 2020 was largely due to favorable leverage from the business recovery as research labs reopened during fiscal 2021.
Results of Operations - Corporate and Other
Below is a reconciliation of income from operations segments to net (loss) available to common stockholders:
Years Ended September 30,
(In thousands)
Total income from operating segments
$
8,612
$
2,154
Administrative expenses
(3,493
)
(2,724
)
Amortization expense
(1,120
)
(955
)
Stock-based compensation
(48
)
(199
)
Total Corporate expenses
(4,661
)
(3,878
)
Interest expense
(589
)
(521
)
Change in fair value of mandatorily redeemable non-controlling interest
(93
)
Gain on Paycheck Protection Program (PPP) loan forgiveness
2,895
-
Net income (loss) before taxes
6,164
(2,230
)
Income tax (expense) benefit
(961
)
Net income (loss)
5,203
(1,725
)
Preferred stock dividends
(766
)
(675
)
Net income (loss) Available to Common Stockholders
$
4,437
$
(2,400
)
Total Corporate Expenses
Corporate expenses increased by $783 to $4,661, or 20.2%, in fiscal 2021 as compared to fiscal 2020. The increase was due primarily to higher accounting related professional expense, increased merger and acquisition expenses and increases in amortization of intangible expenses partially offset by lower stock-based compensation. We incur merger and acquisition deal-related expenses and intangible amortization at the corporate level rather than at the segment level.
Interest Expense
Interest expense for the consolidated company increased $68, or 13.1%, to $589 in fiscal 2021 from $521 in fiscal 2020. The increase was primarily due to higher average debt balances to support our acquisition efforts and higher working capital within Logistics to support business growth partially offset by lower interest rates.
Income Tax Expense
On a consolidated basis, the Company recorded an income tax expense
of $961 in fiscal 2021, as compared to an income tax benefit of $505 in fiscal 2020. The increase in expense was primarily due to an increase in pretax income and the estimated deductible expense related to the expected loan forgiveness amount under the Paycheck Protection Program (“PPP”) loan received in the third quarter. 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 the Company’s Series C Stock and dividends accrued but not paid. For the year ended September 30, 2021 and 2020, preferred stock dividends were $766 and $675, respectively.
The increase of $91, or 13.5%, was the result of a higher number of shares of Series C Stock outstanding and an increase in dividend rate as of January 1, 2021 to 8%.
Dividends accrued but not paid on the Company’s Series C Stock were $2,427 and $1,661 as of September 30, 2021 and 2020, respectively.
Net income (loss) Available to Common Shareholders
Net income (loss) available to common shareholders was $4,437 or $4.48 per diluted share for fiscal 2021 and ($2,400) or ($2.75) per diluted share for fiscal 2020. The increase in net income was primarily due higher revenues, partially offset by higher selling, general and administrative expenses across our businesses in both periods and an increase in the dividend rate with respect to the Series C Stock as of January 1, 2021 to 8%.
LIQUIDITY AND CAPITAL RESOURCES
General
Our ability to satisfy liquidity requirements, including satisfying debt obligations and fund working capital, day-to-day operating expenses and capital expenditures, depends upon future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond Janel’s 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.
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. As discussed in greater detail in note 9 to the consolidated financial statements, on April 19, 2020, we entered into a loan agreement with Santander and executed a U.S. Small Business Administration note pursuant to which we borrowed $2,726 from Santander pursuant to the PPP 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.
Subsidiaries depend on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors. Generally, we do not make significant capital expenditures.
Janel’s cash flow performance for the 2021 fiscal year may not necessarily be indicative of future cash flow performance.
As of September 30, 2021, and compared with the prior fiscal year, the Company’s cash and cash equivalents increased by $2,885, or 86%, to $6,234 from $3,349 as of September 30, 2020. During the fiscal year ended September 30, 2021, Janel’s net working capital deficiency (current assets less current liabilities) increased by $4,412, from ($10,372) at September 30, 2020 to ($14,784) at September 30, 2021.
Cash flows from continuing operating activities
Net cash used in continuing operating activities for fiscal years 2021 and 2020 was $201 and $554, respectively. The decrease in cash used in operations for the year ended September, 2021 was driven principally by higher profits, partially offset by PPP loan forgiveness, timing of cash collections for accounts receivables and cash payments on accounts payables for the year ended September 30, 2021.
Cash flows from investing activities
Net cash used in investing activities, mainly for the acquisition of subsidiaries, was $16,108 for fiscal 2021 and $1,544 for fiscal 2020. The fiscal 2021 amount was associated with two Logistics and one Life Sciences acquisition, and the fiscal 2020 amount was associated with one Logistics and two Life Sciences acquisitions. The Company also used $234 for the acquisition of property and equipment for the year ended September 30, 2021 compared to $1,297 for the year ended September 30, 2020.
Cash flows from financing activities
Net cash provided by financing activities was $19,194 for fiscal 2021 and $3,284 for fiscal 2020. Net cash provided by financing activities in fiscal 2021 primarily included proceeds from an increase in our line of credit which financed our acquisition of ELFS and proceeds from the sale of Series C Preferred, partially offset by repayments on our term loan and notes payables to related party. Net cash provided by financing activities in fiscal 2020 primarily included proceeds from our PPP loan, deferred payments for the ACB acquisition and proceeds from stock option exercises, proceeds from sale of Series C Preferred, offset by repurchase of Series C Preferred.
Credit Facilities
Logistics
Santander Bank Facility
On October 17, 2017, the Janel Group subsidiaries (collectively the “Janel Group Borrowers”), with the Company as a guarantor, entered into a Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) with respect to a revolving line of credit facility (the “Santander Facility”). As amended in March 2018, November 2018, March 2020, July 2020 and December 2020, the Santander Facility provided that the Janel Group Borrowers can borrow up to $17,000 limited to 85% of the Janel Group Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Santander Loan Agreement. Interest accrued on the Santander Facility at an annual rate equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points. The Janel Group Borrowers’ obligations under the Santander Facility were secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contained customary terms and covenants. The Santander Facility was set to mature on October 17, 2022, unless earlier terminated or renewed. As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance sheet.
On September 21, 2021, Janel Group, ELFS and ELFS Brokerage, LLC, each wholly-owned subsidiaries of the Company, jointly and severally, individually and collectively as borrowers (collectively with Janel, the “Borrowers”), the Company and Expedited Logistics and Freight services, LLC, an Oklahoma limited liability company, as loan party obligors, and Santander Bank, N.A., as lender, entered into an Amended and Restated Loan and Security Agreement (as amended and restated, the “Loan Agreement”) that amended and restated the Santander Loan Agreement.
The Loan Agreement provides for, among other things, the following modifications to the Santander Loan Agreement: (1) ELFS and ELFS Brokerage, LLC were added as borrowers; (2) the maximum revolving facility amount available was increased from $17.0 million to $30.0 million (limited to 85% of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Loan Agreement); (3) the maturity date was extended from October 12, 2022 to September 21, 2026; (4) interest accrues at an annual rate equal to LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points at close, with a potential LIBOR floor reduction to 25 basis points upon certain conditions; and (5) the Company was provided the option of making Series C preferred payments or distributions if specified conditions are met.
At September 30, 2021, outstanding borrowings under the Santander Facility were $29,637, representing 98.8% of the $30,000 available thereunder, and interest was accruing at an effective interest rate of 3.00%.
At September 30, 2020, outstanding borrowings under the Santander Facility were $8,447, representing 49.7% of the $17,000 available thereunder, and interest was accruing at an effective interest rate of 2.40%.
The Company was in compliance with the covenants defined in the Santander Loan Agreement at both September 30, 2021 and September 30, 2020.
Working Capital Requirements
Through September 30, 2021, the Logistics segments cash needs were met by the Santander Facility and cash on hand. As of September 30, 2021, the Logistics segment had, subject to collateral availability, $181 available for future borrowings under its $30,000 Santander Facility and $4,177 in cash.
The Company believes that its current financial resources will be sufficient to finance the operations and obligations (current and long-term liabilities) of the Logistics segment for the short- and long-term. However, the actual working capital needs of the Logistics segment will depend upon numerous factors, including operating results, the costs associated with growing the Logistics segment, either organically or through acquisitions, competition and availability under the Loan Agreement, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, the operations of the Logistics segment will be materially negatively impacted.
Manufacturing
First Merchants Bank Credit Facility
On March 21, 2016, as amended in August 2019 and July 2020, Indco executed a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan and a $680 mortgage loan (together, the “First Merchant Facility”). Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1).
Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%. Interest accrues on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants Bank Facility are secured by all of Indco’s real property and other assets and are guaranteed by Janel. Additionally, Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares. The term loan and revolving loan portions of the First Merchants Facility will expire on August 30, 2024, and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.
As of September 30, 2021, there were no outstanding borrowings under the revolving loan, $2,713 of borrowings under the term loan, and $655 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83% and 4.19%, respectively.
As of September 30, 2020, there were no outstanding borrowings under the revolving loan, $4,349 of borrowings under the term loan, and $676 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 3.66% and 4.19%, respectively.
Indco was in compliance with the covenants defined in the First Merchants Credit Agreement at both September 30, 2021 and September 30, 2020.
Working Capital Requirements
Manufacturing’s cash needs are currently met by the term loan and revolving credit facility under the First Merchants Credit Agreement and cash on hand. As of September 30, 2021, Manufacturing had $1,000 available under its $1,000 revolving facility subject to collateral availability and $910 in cash. The Company believes that the current financial resources will be sufficient to finance Manufacturing operations and obligations (current and long-term liabilities) for the long and short term. However, actual working capital needs will depend upon numerous factors, including operating results, the cost associated with growing Manufacturing either organically or through acquisitions, competition and availability under the revolving credit facility, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, Manufacturing’s operations will be materially negatively impacted.
Life Sciences
First Northern Bank of Dixon
On June 21, 2018, Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company (by succession), entered into a Business Loan Agreement (the “First Northern Loan Agreement”), subsequently amended November 2019 and October 2, 2020, with First Northern Bank of Dixon (“First Northern”), with respect to a $2,235 term loan (the “First Northern Term Loan”) which bears interest at an annual rate of 4.00% and matures on November 14, 2029. In addition, Antibodies has a $500 revolving credit facility with First Northern which currently bears interest at the annual rate of 4.0%, and matures on October 5, 2021 (the “First Northern Revolving Loan”). Antibodies also entered into two separate business loan agreements with First Northern: a $125 term loan in connection with a potential expansion of solar generation capacity on the Antibodies property (“First Northern Solar Loan”) bearing interest at the annual rate of 4.43% (subject to adjustment in five years) and maturing on November 14, 2029; and a $60 term loan in connection with a potential expansion of generator capacity on the Antibodies property (“Generator Loan”) bearing interest at the annual rate of 4.25% and maturing on November 5, 2025. There were no outstanding borrowings under the Generator Loan as September 30, 2021 and 2020.
As of September 30, 2021, the total amount outstanding under the First Northern Term Loan was $2,139, of which $2,084 is included in long-term debt and $55 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.
As of September 30, 2021, the total amount outstanding under the First Northern Solar Loan was $105, of which $101 is included in long-term debt and $4 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.
As of September 30, 2020, the total amount outstanding under the First Northern Term Loan was $2,192, of which $2,139 is included in long-term debt and $53 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.
As of September 30, 2020, the total amount outstanding under the First Northern Solar Loan was $81, of which $76 is included in long-term debt and $5 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.
The Company was in compliance with the covenants defined in the First Northern Loan Agreement at September 30, 2021 and September 30, 2020.
Working Capital Requirements
Life Sciences cash needs are currently met by the First Northern Loan Agreement and cash on hand of $994. The Company believes that the current financial resources will be sufficient to finance Life Sciences operations and obligations (current and long-term liabilities) for the long and short term. However, actual working capital needs will depend upon numerous factors, including operating results, the cost associated with growing Life Sciences either organically or through acquisitions, competition and availability under the revolving credit facility, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, Life Sciences operations will be materially negatively impacted.
CURRENT OUTLOOK
The results of operations in the Logistics, Manufacturing and Life Sciences segments are affected by the general economic cycle, particularly as it influences global trade levels and specifically the import and export activities of our Logistics segment’s various current and prospective customers. The effects of the COVID-19 pandemic may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 pandemic has subsided. Historically, the Company’s annual 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 the segment’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 particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.
The Company’s subsidiaries are implementing business strategies to grow revenue and profitability for fiscal 2022 and beyond. Our Logistics 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.
Our Manufacturing and Life Sciences segments expect to introduce new product lines and wider distribution and promotion of their products with internet sales efforts. In addition to supporting its subsidiaries’ growth plans, the Company may seek to grow Janel by entering new business segments through acquisition.
Certain elements of the Company’s profitability and growth strategy, including proposals for acquisition and accelerating 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 may be materially negatively impacted.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting policies are described in Note 1 - Summary of Significant Accounting Policies, included herein includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.
Business Combinations and Related Acquired Intangible Assets and Goodwill. We record all tangible and intangible assets acquired and liabilities assumed in a business combination at fair value as of the acquisition date in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations. Acquisition date fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as measured on the acquisition date. The valuations are based on information that existed as of the acquisition date. During the measurement period, which shall not exceed one year from the acquisition date, we may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that we have subsequently obtained regarding facts and circumstances that existed as of the acquisition date. Such fair value assessments require judgments and estimates, which may cause final amounts to differ materially from original estimates.
As part of acquisitions of businesses, we acquired certain identifiable intangible assets, which are valued as of the acquisition date using a discounted cash flow (“DCF”) model. Key assumptions in the DCF model include (i) future revenues, (ii) earnings before interest, taxes depreciation and amortization (“EBITDA”) and (iii) the weighted average cost of capital discount rate. Estimated future revenues include assumptions about our ability to renew contracts in a competitive bidding process. A decrease in revenues or gross and EBITDA margins may adversely affect the value of identifiable intangible assets. The discount rate focuses on rates of return for equity and debt and is calculated using public information from selected guideline companies. The magnitude of the discount rate reflects the perceived risk of an investment. A change in the estimated risk of the acquired company cash flows would change the discount rate, which in turn could significantly affect the valuation of acquired identifiable intangible assets.
The excess amount of the aggregated purchase consideration paid over the fair value of the net of assets acquired and liabilities assumed is recorded as goodwill. Goodwill is evaluated for impairment annually or more frequently if an event occurs or circumstances change, such as material deterioration in performance that would indicate an impairment may exist. During the fourth quarter of 2021, we changed the date of our annual impairment test of goodwill and indefinite-lived intangible assets from September 30 to July 1. When evaluating goodwill for impairment, we may first perform a qualitative assessment (“step zero” of the impairment test) to determine whether it is more likely than not that a reporting unit is impaired. If we decide not to perform a qualitative assessment, or if we determine that it is more likely than not the carrying amount of a reporting unit exceeds its the fair value, then we perform a quantitative assessment (“step one” of the impairment test) and calculate the estimated fair value of the reporting unit. If the carrying amount of the reporting unit exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount to its estimated fair value. The decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including the significance of the excess of the reporting units’ estimated fair value over carrying amount at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the date of our acquisitions.
No indicators of impairment were identified from the date of our annual impairment test through September 30, 2021.
A qualitative assessment is performed for intangibles and long-lived assets to determine if there are any indicators that the carrying amount might not be recovered. A quantitative analysis may be performed in order to test the intangibles and long-lived assets for impairment. If a quantitative analysis is necessary, an income approach, specifically a relief from royalty method, is used to estimate the fair value of the intangibles and long-lived assets. Principal factors used in the relief from royalty method that require judgment are projected net sales, discount rates, royalty rates and terminal growth assumptions.
The estimated fair value of each intangible and long-lived assets is compared to its carrying amount to determine if impairment exists. If the carrying amount of a intangibles and long-lived assets exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount of the intangibles and long-lived assets. No indicators of impairment of our intangibles and long-lived assets were identified from the date of our annual impairment test through September 30, 2021.
RECENT ACCOUNTING STANDARDS
The recent accounting standards is discussed in Note 1 to the consolidated financial statements contained in this report.
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.
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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Consistent with the rules applicable to “smaller reporting companies”, we have omitted the information required by Item 7A.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item 8 are included in the Company’s Consolidated Financial Statements and set forth in the pages indicated in Item 15(a) of this Annual Report and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Janel maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”) and is accumulated and communicated to management, including its Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2021, and based on their evaluation, has concluded that our disclosure controls and procedures were effective.
For purposes of conducting its 2021 evaluation of the effectiveness of the Company’s internal control over financial reporting, management has excluded the acquisition of ELFS, completed on September 21, 2021, which constitutes 14 percent of total assets and 1 percent of income before income taxes of the Company, as of and for the year ended September 30, 2021. Refer to Note 2 - Acquisitions in Part II, Item 8 of this report for further discussion of the acquisition and its impact on the Company’s Consolidated Financial Statements.”
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we have performed an evaluation of the effectiveness of our internal control over financial reporting under the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Commission. Based on this assessment, management, including our Chief Executive Officer and Principal Financial Officer, has concluded that our internal control over financial reporting was effective as of September 30, 2021.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Control Over Financial Reporting
Other than the remediation efforts described below, there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Remedial Actions
As previously reported, in connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020 and thereafter, we previously identified a number of material weaknesses involving our Life Sciences and Logistics segments as well as our corporate office, as described below. As part of our remediation actions we engaged an external consultant to assist in the development and execution of a plan to remediate the material weaknesses related to our Life Sciences and Logistics segments and our Corporate office. This process included review of our controls and implementation of new controls addressing the underlying causes of the material weaknesses.
In connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020, management identified certain material weaknesses as of September 30, 2020. In particular, the Company had inadequate controls over the following:
Revenue
•
order entry, invoicing, collections and timeliness of revenue recognition in accordance with ASC Topic 606, Revenue from Contracts with Customers - Principal Agent Consideration (“ASC Topic 606”) (Life Sciences)
•
review of sales orders including pricing, and revenue cut off procedures (Life Sciences)
•
assessment of gross versus net revenue recognition criteria in accordance with ASC Topic 606 (Logistics)
Financial Close Process
•
month-end closing activities (i.e. journal entry review, account reconciliations, closing checklists, budget to actual analysis, review of financial package, inventory account analysis, etc.) (Life Sciences)
Inventory
•
inventory management and valuation of inventory (Life Sciences)
•
inventory valuation controls, inventory counts and reconciliation to general ledger (Life Sciences)
General IT Controls
•
accounting manager’s administrative access to financial accounting software and banking portal, roles and responsibilities around significant processes including financial close without independent review or back-up results in segregation of duties issue (Life Sciences)
•
certain information technology general controls, including segregation of duties, user access, change management, data back-ups and review of SOC 1 and 2 reports from critical vendors, some of which could have a direct impact on the Company’s financial reporting (Life Sciences)
•
prevention and timely detection of funds transfers to an unauthorized account (Logistics)
•
segregation of duties between Principal Financial Officer and corporate accountant regarding administrative access to financial accounting software and banking portal and the financial close process (Corporate).
With respect to the material weaknesses described above we designed and implemented the specific remediation initiatives described below:
•
We designed and implemented certain revenue general controls that enhanced the processes associated with sales order entry and review of pricing, invoicing, collections, revenue cut-off procedures, and to ensure timeliness of revenue recognition in accordance with ASC Topic 606.
•
We implemented formal processes, policies and procedures supporting our financial close process, including (i) frequency of balance sheet reconciliations, (ii) review of accounting memorandums, and (iii) reviewing journal entries in a timely manner. Additionally, we have increased the amount of formal documentation supporting journal entry reviews, balance sheet reconciliations, and other month end close activities.
•
Several valuation and analyses controls were implemented to improve the effectiveness and efficiency over the management of inventory and the inventory valuation process.
•
We designed and implemented certain IT general controls that address risks associated with user access and security, focused training for control owners to help sustain effective control operations, and implemented controls relating to segregation of duties to strengthen user access controls and security. These changes were made in operational controls as well as access to banking portals.
•
We made certain personnel changes within our accounting organization and implemented enhanced processes and procedures related to the review of principal-agent considerations around revenue recognition in accordance with ASC Topic 606, including the addition of accounting personnel with technical accounting expertise who will review transactions and the engagement of an additional third-party service provider to supplement the aforementioned team, as needed.
•
We implemented a formal review of charge codes in fiscal 2021;
•
updated company policies and controls with respect to the prevention and timely detection of funds transfers to unauthorized accounts including multifactor authentication, implemented a new payment processing validation procedure, updated internal firewall protocols related to e-mails and conducted updated training on finance-related internal controls policies.
As a result of our remediation efforts, we determined that the material weaknesses at our Corporate office have been remediated as of September 30, 2021.

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The executive officers and directors of the Company are as follows:
Name
Age
Position
Dominique Schulte
Board Chair, President and Chief Executive Officer
Brendan J. Killackey
Director, Chief Information Officer
Gerard van Kesteren
Director, Chair of Audit Committee
John J. Gonzalez, II
Director, Senior Advisor for Mergers and Acquisitions and Chair of Compensation Committee
Gregory J. Melsen
Director, Chair of Nominating and Corporate Governance Committee
Karen Miller Ryan
Director
Vincent A. Verde
Principal Financial Officer, Treasurer and Secretary
Dominique Schulte has served as a Director of Janel since November 2015 and as Board Chair since May 8, 2018. Since October 1, 2018, Ms. Schulte has served as the Company’s President and Chief Executive Officer. Ms. Schulte practiced law at Simpson Thacher & Bartlett LLP in New York, from 1999 through 2009, where she specialized in corporate and securities law and oversaw a number of successful securities transactions. Ms. Schulte is the managing member of Oaxaca Group, LLC (“Oaxaca”), which is the Company’s largest individual shareholder. Ms. Schulte is well-qualified to serve as a member of the Company’s board of directors based on her extensive experience in the practice of corporate and securities law.
Brendan J. Killackey was elected to the Company’s board of directors in September 2014 and served as Chief Executive Officer from February 2015 through September 2018. Since October 1, 2018, Mr. Killackey has served as the Company’s Chief Information Officer. Mr. Killackey previously owned Progressive Technology Partners, LLC, a technology consultancy firm, which he founded in 2001. Given Janel’s and its subsidiaries’ reliance on technology, Mr. Killackey’s background and experience are valuable to the Company, and, therefore, he is well-qualified to serve as a member of the Company’s board of directors.
Gerard van Kesteren has served as a Director of Janel since November 2015. From 1999 until 2014, Mr. van Kesteren served as the Chief Financial Officer of Kuehne + Nagel Group, an international freight forwarder and leading global provider of innovative and fully integrated supply chain solutions. Mr. van Kesteren has served as a director of Gategroup Holding AG since April 2015. Mr. van Kesteren is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. van Kesteren serves as the chair of the Audit Committee.
John J. Gonzalez, II has served as a Director of Janel since June 2016. Prior to that, he was a Senior Managing Director of Janel Group, following the August 2014 purchase by the Company of Alpha International and President Container Lines (“Alpha/PCL”), which he co-founded in 1979. Mr. Gonzalez has been involved in the transportation business since 1969. Mr. Gonzalez is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. Gonzalez serves as chair of the Compensation Committee.
Gregory J. Melsen has served as a Director of Janel since January 2018. Prior to that, he was Chief Financial Officer and Vice President of Human Resources for Healthsense, Inc., a leading provider of passive remote monitors for seniors from 2014 to 2015; and was Vice President-Finance, Treasurer and Chief Financial Officer of Techne Corporation (now Bio-Techne Corporation), a holding company for biotechnology and clinic diagnostic brands.
He also served as Interim Chief Executive Officer of Techne Corporation from December 2012 through March 2013. Mr. Melsen has over 40 years of business experience, primarily in the accounting and finance areas. He has served as Chief Financial Officer at a number of companies and has 19 years of public accounting experience, including nine years as partner at Deloitte. Mr. Melsen is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in accounting and finance. Mr. Melsen serves as Chair of the Nominating and Governance Committee.
Karen Miller Ryan, also known professionally as Karen Padgett, has served as a Director of Janel since October 2021. Prior to that, she served as Vice President of Global Marketing and Vice President of the Antibody Business Unit of Bio-Techne, a public global life science business from 2014 until 2019. From 1996 until 2014, Ms. Miller Ryan was the founder and Chief Executive Officer of Novus Biologicals, a private research reagent company, which she successfully grew until its sale to Bio-Techne. Ms. Miller Ryan is well qualified to serve as a member of the Company’s board of directors based on her extensive life science and executive leadership experience.
Mr. Vincent A. Verde is Principal Financial Officer, Treasurer and Secretary of the Company and has served in such capacities since May 2018. From February 2018 to May 2018, Mr. Verde served as Controller of the Company. From January 2018 to February 2018, Mr. Verde served as a consultant for the Company. Prior to joining the Company, from December 2016 to February 2017, Mr. Verde served as a consultant for Xylem Inc., a publicly traded manufacturer and servicer of engineered solutions. Mr. Verde served from November 2014 to November 2016 as Subsidiary Controller for Teledyne Bolt, Inc., a developer, manufacturer and distributor of marine seismic data acquisition equipment and underwater remotely operated robotic vehicles and subsidiary of Teledyne Technologies Inc. (“Teledyne”). From January 2012 to November 2014, Mr. Verde served as Vice President and Corporate Controller for Bolt Technology Corporation, a then-publicly traded manufacturer and distributor of geophysical equipment and industrial clutches, which was acquired by Teledyne in November 2014. Mr. Verde has 17 years of public accounting experience, including eight years as Audit manager at Deloitte.
Directors hold office for a one-year term until they are re-elected or their successors have been duly elected and qualified. The executive officers are elected by the board of directors on an annual basis and serve under the direction of the Board. Executive officers devote all of their business time to the Company’s affairs.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of its Class A common stock to file reports of ownership and changes in ownership with the Commission and to furnish the Company with copies of all such reports they file.
Based on the Company’s review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that none of its directors, executive officers or persons who beneficially own more than 10% of the Company’s Class A common stock failed to comply with Section 16(a) reporting requirements during the fiscal year ended September 30, 2021, except for Mr. van Kesteren and Mr. Gonzalez, each of whom had one late Form 4 filing reporting one transaction.
Board of Directors
During the fiscal year ended September 30, 2021, the board of directors met seventeen times. No incumbent directors attended fewer than 75% of the aggregate of the total number of meetings of the board of directors of the Company and the total number of meetings held by all board committees in which that director served.
Committees.
The Company’s board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee operates under a charter that has been approved by the Company’s board of directors and is available on its website located at www.janelcorp.com.
Audit Committee.
The Company’s audit committee (“Audit Committee”) oversees its corporate accounting and financial reporting process. The Audit Committee consists of Mr. van Kesteren as the chair, Mr. Gonzalez, Mr. Melsen and Ms. Miller Ryan. The Audit Committee met five times during fiscal 2021. The Audit Committee has the following responsibilities, among others, as set forth in the audit committee charter:
•
reviewing and assessing the effectiveness of external auditors, their independence from Janel and any additional assignments they may be given, as well as reviewing their appointment, termination, and remuneration;
•
reviewing and assessing the scope and plan of the audit, the examination process, audit results and reports, as well as whether auditor recommendations have been implemented by management;
•
recommending the approval of the annual internal audit concept and report, including the responses of management thereto;
•
assessing management’s established risk assessment and any proposed measures to reduce risk;
•
assessing the Company’s efforts and policies of compliance with relevant laws and regulations;
•
reviewing, in tandem with external auditors, as well as the Chief Executive Officer and the Principal Financial Officer, whether accounting principles and the financial control mechanisms of Janel and its subsidiaries are appropriate in view of Janel’s size and complexity; and
•
reviewing annual and interim statutory and consolidated financial statements intended for publication and recommending such financial statements to the board of directors.
The Company’s board of directors designated Gerard van Kesteren as an audit committee financial expert considering his experience as Chief Financial Officer of Kuehne + Nagel Group. In addition, the Company’s board of directors has determined that Mr. Melsen’s extensive experience as a partner with Deloitte and his experience as Chief Financial Officer of Healthsense, Inc. and Techne Corporation qualifies him as an audit committee financial expert. The board of directors of the Company has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan meet the definition of independent directors under the Company’s criteria. The board of directors of the Company has determined that Ms. Miller Ryan and Mr. Melsen are independent based on the Company’s independence criteria for audit committee membership which is based on the Nasdaq rules regarding audit committee independence. Furthermore, the board of directors of the Company has determined that Mr. van Kesteren is not “independent” based on the Company’s independence criteria for audit committee membership, as he received an annual $20,000 consulting fee during the fiscal year 2021 for services rendered to the Company’s Logistics segment. The board of directors of the Company has also determined that Mr. Gonzalez is not “independent” based on the Company’s independence criteria for audit committee membership, as he received an annual $90,000 consulting fee and cost of health insurance of $19,000 during the fiscal year 2021 for services rendered to the Company’s Logistics segment.
Compensation Committee
The Company’s compensation committee (the “Compensation Committee”) formulates, reviews and recommends compensation policies that are consistent with Janel’s established compensation philosophy and that will enable it to attract and retain high-quality leadership.
The Compensation Committee met four times during fiscal 2021. The Compensation Committee has the following responsibilities, among others, as set forth in the Compensation Committee’s charter:
•
reviewing and approving the Company’s general compensation philosophy and objectives;
•
reviewing and approving the corporate goals and individual objectives relevant to the compensation of the Company’s Chief Executive Officer and evaluating the performance of the Chief Executive Officer considering these objectives;
•
approving base salary amounts, incentive and bonus compensation amounts and individual stock and/or option grants and awards for the Chief Executive Officer and, based on the recommendation of the Chief Executive Officer, all corporate officers at or above the Vice President level;
•
reviewing all forms of compensation for the Company’s senior management, including the form and amount of current salary, deferred salary, cash and non-cash benefits, and all compensation plans;
•
reviewing the Company’s severance or similar termination payments and administering the Company’s stock option and other incentive compensation plans and programs;
•
amending or modifying, where appropriate, the provisions of any compensation or benefit plan that does not require stockholder approval;
•
preparing and approving reports to stockholders on compensation matters which are required by the SEC and other government bodies;
•
performing an annual performance appraisal for members of the Company’s senior management designated by the board of directors;
•
establishing levels of director compensation to include marketplace reviews of retainers, meeting fees, stock plans and other similar components of compensation; and
•
annually reviewing succession plans for key positions within the Company.
The Company’s Compensation Committee consists of Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan. Mr. Gonzalez serves as the chair of the Compensation Committee. The Company’s board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren, and Ms. Miller Ryan are independent members of the Compensation Committee.
Nominating and Corporate Governance Committee
The Company’s nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”) is responsible for developing and implementing policies and procedures that are intended to assure that Janel’s board of directors and the boards of directors (or equivalent) of its subsidiaries will be appropriately constituted and organized to meet its fiduciary obligations to the Company and its stockholders on an ongoing basis. The Nominating and Corporate Governance Committee met four times during fiscal 2021. Among other matters, the Nominating and Corporate Governance Committee is responsible for the following, as set forth in the Nominating and Corporate Governance Committee’s charter:
•
making recommendations to Janel’s board of directors regarding matters and practices concerning the board, its committees and individual directors, as well as matters and practices of the boards, committees and individual directors of each of Janel’s subsidiaries;
•
periodically evaluating the size, composition and governance structure of Janel’s board of directors and its committees and the boards and committees of Janel’s subsidiaries and determining the future requirements of each such body;
•
periodically making recommendations concerning the qualifications, criteria, compensation and retirement age of members of Janel’s board of directors and the boards of its subsidiaries, which recommendations, upon approval by Janel’s board of directors, shall be incorporated in Janel’s Corporate Governance Guidelines;
•
recommending nominees for election to Janel’s board of directors and the boards of its subsidiaries and establishing and administering a board evaluation process; and
•
reviewing timely nominations by stockholders for the election of individuals to Janel’s board of directors, and ensure that such stockholders are advised of any action taken by the board of directors with respect thereto.
The Company’s Nominating and Corporate Governance Committee consists of the Company’s full board of directors. Mr. Melsen serves as the chair of the Nominating and Corporate Governance Committee.
Independence of Directors
The Company is not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, is not at this time required to (and does not) have a board of directors comprised of a majority of independent directors. Pursuant to Item 407(a) of Regulation S-K, however, Janel must disclose each director that is independent under the independence standards of either the New York Stock Exchange or Nasdaq, as selected by Janel. The Company has elected to use the independence standards prescribed under Nasdaq Rule 5605(2), which defines an “independent director” as a person who does not have any relationship with the Company which, in the opinion of the Company’s board of directors would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Based on the applicable criteria, the Company’s board of directors has determined that Mr. Killackey is not independent, as he is an employee of the Company. Ms. Schulte is not independent by virtue of the fact that she is an Executive Officer of the Company.
The board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan are independent directors.
Director Compensation
During the Company’s fiscal year ended September 30, 2021, Mr. Killackey, the Company’s Chief Information Officer, did not receive any additional compensation for serving as a director. Ms. Schulte waived any board compensation during fiscal year 2021. The following table summarizes the compensation paid to the other directors for their services during the Company’s fiscal year ended September 30, 2021 (actual dollar amounts):
Name
Fees
Earned or
Paid in
Cash(1)
Option
Awards(2)
All Other
Compensation
Total
Gerard van Kesteren
$
40,000
$
18,043
$
20,000
(3)
$
78,043
John J. Gonzalez
$
40,000
$
18,043
$
109,000
(4)
$
167,043
Gregory J. Melsen
$
40,000
$
18,043
$
-
$
58,043
(1)
Compensation is paid on a monthly basis.
(2)
The aggregate number of options outstanding as of September 30, 2021 for each director was as follows: Gerard van Kesteren - 4,998, John J. Gonzalez II - 47,500, and Gregory J. Melsen - 9,375.
(3)
Represents compensation paid to Mr. van Kesteren in connection with his consulting agreement.
(4)
Represents compensation paid to Mr. Gonzalez in connection with his consulting agreement.
Pursuant to the Company’s non-employee director compensation policy, for the fiscal year 2021 non-employee directors received a retainer at an annual rate of $30,000, payable on a monthly basis, and 2,500 options, pursuant to the Amended and Restated Janel Corporation 2017 Equity Incentive Plan or such other equity plan that the Company may adopt from time to time.
Committee chairs receive an additional retainer at an annual rate of $10,000. According to the non-employee director compensation policy, non-employee directors will be reimbursed for their reasonable travel and other expenses incurred to attend board of directors or board committee meetings.
Employment Arrangements
(actual dollar amounts)
On February 26, 2017, the Company entered into an agreement with Mr. Gonzalez to serve as a Director and Senior Advisor for mergers and acquisitions for the Company, effective October 1, 2017. The original term of the agreement ended on September 30, 2021, and thereafter will renew automatically for an additional two-year term unless either party provides notice that it does not wish to renew. Under the terms of the agreement, during fiscal year 2021 the Company paid Mr. Gonzalez an annual retainer pursuant to non-employee director compensation policy of $40,000 for his service as a director and chair of the Compensation Committee, an annual consulting fee of $90,000 and the cost of health insurance of $19,000. This agreement was renewed and for fiscal 2022 the Company pays Mr. Gonzalez an annual retainer of $50,000 for his
service as a director and chair of the Compensation Committee, an annual consulting fee of $90,000 and the cost of health insurance of $19,000.
Code of Business Conduct and Ethics
The Company has adopted a code of business conduct and ethics, including a whistleblower policy that applies to all of its employees, including executive officers and directors. The code of business conduct and ethics, including our whistleblower policy is available on the Company’s website at www.janelcorp.com. The Company intends to disclose, if required, any future amendments to, or waivers from, the code of business conduct and ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.
Corporate Governance Guidelines
The Company’s board of directors has adopted corporate governance guidelines that serve as a flexible framework within which its board of directors and its committees operate. These guidelines cover a number of areas, including the size and composition of the board of directors, director selection criteria and qualifications, the agenda for board meetings, board member access to management and independent advisors, director compensation, director orientation and continuing education and annual board and committee self-evaluations. A copy of the corporate governance guidelines is available on the Company’s website at www.janelcorp.com.
Communications with the Board
Any stockholder desiring to contact the board, or any specific director(s), may send written communications to: Board of Directors (Attention: (Name(s) of director(s), as applicable)), c/o the Company’s Secretary, 80 Eighth Avenue, New York, New York 10011. Any proper communication so received will be processed by the Secretary. If it is unclear from the communication received whether it was intended or appropriate for the board, the Secretary will (subject to any applicable regulatory requirements) use his or her judgment to determine whether such communication should be conveyed to the board or, as appropriate, to the member(s) of the board named in the communication.
Leadership Structure and Risk Oversight
While the board believes that there are various structures which can provide successful leadership to the Company, the Company’s executive functions are carried out by Ms. Schulte, the Company’s President and Chief Executive Officer, who also serves as chair of the Company’s board of directors and, together with the other directors, brings experience, oversight and expertise to the management of the Company.
The board believes that, due to the small size of the Company, this leadership structure best serves the Company and its stockholders. Management is responsible for the day-to-day management of risks the Company faces, while the board has collective responsibility for the oversight of risk management. In its risk oversight role, the board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, management discusses with the board the risks facing the Company and its strategy for managing them.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11
EXECUTIVE COMPENSATION
Introduction
(actual dollar amounts)
The following table provides summary information concerning compensation paid or accrued by us to our Chief Executive Officer and President, our Chief Information Officer and our Principal Financial Officer, Treasurer and Secretary. We refer to these individuals collectively as the “named executive officers”.
Summary Compensation Table
The following table sets forth information regarding the total compensation paid or earned by the named executive officers as compensation for their services in all capacities during the fiscal years ended September 30, 2021 and 2020 (actual dollar amounts):
Name and Principal Position
Year
Base
Salary ($)
Bonus ($)
All Other
Comp. ($)
Total ($)
Dominique Schulte, Chief Executive Officer and President
50,000
-
16,478
(1)
66,478
37,311
-
9,625
46,936
Brendan J. Killackey, Chief Information Officer
160,000
44,000
11,659
(2)
215,659
155,000
20,000
11,362
186,362
Vincent A. Verde, Principal Financial Officer,
Treasurer and Secretary
215,000
25,000
27,438
(3)
267,438
200,000
30,000
15,168
245,168
(1)
Amounts reported under all other compensation for the fiscal year ended September 30, 2021 include $15,860 of medical insurance premiums and $618 of retirement contributions paid for the fiscal year ended 2021.
(2)
Includes $5,865 of medical insurance premiums and $5,794 of 401(k) contributions paid on behalf of Mr. Killackey for the fiscal year ended 2021. Mr. Killackey was elected to the Company’s board of directors in September 2014 and served as Chief Executive Officer from February 2015 through September 2018. Effective October 1, 2018, Mr. Killackey was appointed as the Company’s Chief Information Officer.
(3)
Amounts reported under all other compensation for the fiscal year ended September 30, 2021 include $17,948 of medical insurance premiums and $9,490 of 401(k) contributions paid on behalf of Mr. Verde for the fiscal year ended 2021.
Long-Term Incentive Plan Awards
While the Company has adopted the Amended and Restated 2017 Equity Incentive Plan, pursuant to which certain stock awards may be granted to the Company’s directors, officers, employees and consultants, our current intent is to utilize this plan only to make annual equity awards to the Company’s non-employee directors.
Savings and Stock Option Plans
401(k) and Profit-Sharing Plan
(actual dollar amounts)
The Company maintains a qualified retirement plan, commonly referred to as a 401(k) plan covering substantially all full-time employees under each segment.
The Janel Corporation 401(k) Plan allows for employee salary deferrals including Roth 401(k) deferrals, employer matching contributions, employer profit sharing contributions and employee rollovers. The Janel Corporation 401(k) Plan provides for participant contributions of up to 50% of annual compensation (not to exceed the IRS limit), as defined by the plan. The Company contributes an amount equal to 50% of the participant’s first 6% of contributions.
The combined expenses charged to operations for contributions made to the plans for the benefit of the employees for the fiscal years ended September 30, 2021 and 2020 were approximately $288,000 and $196,000 respectively.
The administrative expense charged to operations for the fiscal years ended September 30, 2021 and 2020 aggregated approximately $59,000 and $57,000, respectively.
Equity Plans
On October 30, 2013, the board of directors adopted Janel’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. The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee of the board of directors.
On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock could be granted to directors, officers, employees of and consultants to the Company.
On May 8, 2018, the board of directors of the Company adopted the Amended 2017 Plan. The provisions and terms of the Amended 2017 Plan were the same as those in the 2017 Plan, except that the Amended 2017 Plan removed the ability of the Company to award incentive stock options and removed the requirement for stockholder approval of the 2017 Plan.
On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended and Restated Plan”), which amended and restated the prior Amended 2017 Plan and pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock, par value $.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries. The provisions and terms of the Amended and Restated Plan are substantially the same as those in the Amended 2017 Plan except that the Amended and Restated Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended and Restated Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopted certain other non-substantive amendments. Participants and all terms of any grant under the Amended and Restated Plan are in the discretion of the Company’s Compensation Committee.
Outstanding Equity Awards at September 30, 2021
None of our named executive officers had any outstanding stock awards at September 30, 2021.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following tables set forth information concerning beneficial ownership of shares of common stock outstanding as of September 30, 2021. For purposes of calculating beneficial ownership, Rule 13d-3 of the Exchange Act requires inclusion of shares of common stock that may be acquired within sixty days of the stated date. Unless otherwise indicated in the footnotes to a table, beneficial ownership of shares represents sole voting and investment power with respect to those shares.
Certain Beneficial Owners
The following table reflects the names and addresses of the only persons or entities known to the Company to be the beneficial owners of 5% or more of the outstanding shares of the Company’s common stock as of September 30, 2021.
Name and address of Beneficial Owner (1)
Shares
Beneficially
Owned
Percent
of Class
Oaxaca Group L.L.C. (3)
447,647
47.5
%
John J. Gonzalez, II (2)
105,001
10.6
%
John Eidinger
90,499
9.6
%
Brendan J. Killackey
56,000
5.8
%
(1)
The address of each person and entity included in this table is 80 Eighth Avenue, New York, NY 10011
(2)
Includes 45,001 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(3)
These shares are held by Oaxaca Group L.L.C. Ms. Dominique Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares.
Management
The following table sets forth information with respect to the beneficial ownership of the shares of common stock as of September 30, 2021 by each “named executive officer”, each current director and each nominee for election as a director and all directors and executive officers of the Company as a group. An asterisk (*) indicates ownership of less than 1%.
Name of Beneficial Owner
Shares
Beneficially
Owned
Percent
of Class
Dominique Schulte(1)
447,647
47.5
%
John J. Gonzalez, II(2)
105,001
10.6
%
Brendan J. Killackey(4)
56,000
5.8
%
Gerard van Kesteren(3)
45,388
4.8
%
Gregory J. Melsen(5)
6,876
1.0
%
Vincent A. Verde
-
-
Total
660,912
69.7
%
(1)
These shares are held by Oaxaca Group L.L.C. Ms. Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares.
(2)
Includes 45,001 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(3)
Includes 2,499 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(4)
Includes 13,000 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(5)
Includes 6,876 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
Equity Compensation Plan Information
The following table provides information, as of September 30, 2021, with respect to all compensation arrangements maintained by the Company under which shares of common stock may be issued:
Column A
Column B
Column C
Plan Category: Equity Compensation plans not approved by security holders:
Number of
securities
to be issued,
upon
exercise
of
outstanding
options,
warrants
and rights
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and rights
Number of
securities
remaining
available
for future
issuance
under equity
compensation
plans
2013 Stock Option Plan (1)
37,121
$
6.13
33,379
Amended and Restated 2017 Equity Incentive Plan (2)
21,873
$
8.69
103,823
John Joseph Gonzalez, II - Options
40,000
$
4.25
-
Total
98,994
$
5.93
137,202
(1)
On October 30, 2013, the board of directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries. The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee (the “Committee”) of the board of directors or, if the board does not create the Committee, by the board which shall function as the Committee.
(2)
On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock could be granted to directors, officers, employees of and consultants to the Company. On May 8, 2018, the board of directors of Janel adopted the Amended 2017 Plan. The provisions and terms of the Amended 2017 Plan were the same as those in the 2017 Plan, except that the Amended 2017 Plan removed the ability of Janel to award incentive stock options and removed the requirement for stockholder approval of the 2017 Plan. On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan.
The provisions and terms of the Amended and Restated 2017 Janel Corporation Equity Incentive Plan are substantially the same as those in the Amended 2017 Plan except that the Amended and Restated 2017 Janel Corporation Equity Incentive 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.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions
We are not aware of any transactions since October 1, 2020 or any proposed transactions in which the Company was a party where the amount involved exceeded the lesser of 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years and $120,000, and in which a director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES
The firm of Prager Metis CPAs, LLC served as the Company’s sole independent public accountants for the fiscal years ended September 30, 2021 and 2020.
Audit Fees
Audit fees include fees paid and accrued by the Company to the Auditors in connection with the annual audit of the Company’s consolidated financial statements, and review of the Company’s interim financial statements.
Audit fees also include fees for services performed by the Auditors that are closely related to the audit and in many cases could only be provided by the Auditors. Such services include consents related to SEC and other regulatory filings.
The aggregate fees billed to the Company by the Auditors, as applicable, for audit services rendered to the Company totaled $292,500 for the year ended September 30, 2021 and $280,770 for the year ended September 30, 2020.
Audit Related Fees
Audit related services include agreed upon procedures. The aggregate fees billed and accrued to the Company by Prager Metis CPAs, LLC for audit related fees rendered to the Company for the fiscal years ended September 30, 2021 and 2020 totaled $41,500 and $12,000, respectively.
Tax Fees
Tax fees include corporate tax compliance, counsel and advisory services. The aggregate fees billed to the Company by the Auditors, as applicable, for the tax related services rendered to the Company for the fiscal years ended September 30, 2021 and 2020 totaled $48,741 and $20,875, respectively.
All Other Fees
The Auditors did not bill other fees to the Company for fiscal years ended September 30, 2021 and 2020.
Approval of Independent Auditor Services and Fees
The Audit Committee reviews all fees charged by the Company’s independent auditors and actively monitors the relationship between audit and non-audit services provided. The Audit Committee must pre-approve all audit and non-audit services provided by the Company’s independent auditors and fees charged.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed as part of this report
(1)
Financial Statements.
The Consolidated Financial Statements filed as part of this report are listed on the Table of Contents to Consolidated Financial Statements.
All other schedules are omitted because they are not applicable, are not required, or because the required information is included in the consolidated financial statements or notes thereto.
(b)
Exhibits
Exhibit
No.
Description
2.1
Agreement and Plan of Merger, dated May 8, 2018, by and among Antibodies Incorporated, AB HoldCo, Inc., AB Merger Sub, Inc., Richard Krogsrud, as Representative of the Stockholders, and the Rollover Stockholders signatory thereto (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed May 11, 2018)
3.1
Articles 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)
3.2
Amended and Restated By-Laws of Janel Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 1, 2013)
3.3
Certificate of Designations of Series B Convertible Stock (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October 22, 2007)
3.4
Certificate of Designations of Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 29, 2014)
3.5
Certificate of Change filed Pursuant to NRS 78.209 for Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 21, 2015)
3.6
Certificate 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)
3.7
Amendment 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 to the Company’s Current Report on Form 8-K filed March 25, 2016)
3.8
Amendment 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-Q for the quarter ended March 31, 2017)
3.9
Amendment 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 to the Company’s Current Report on Form 8-K/A filed October 17, 2017)
4.1
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)
† 10.1
Janel 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)
10.2
Loan 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)
10.3
First 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)
10.4
Second 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)
10.5
Third 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)
Exhibit
No.
Description
10.6
Fourth Amendment to the Loan and Security Agreement and Demand Secured Promissory Note, 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)
10.7
Amended 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)
10.8
Credit 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)
10.9
Term Loan Promissory Note, effective as of February 29, 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)
10.10
Revolving 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)
10.11
Security Agreement, effective as of February 29, 2016, made by Indco 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)
10.12
Continuing 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)
10.13
Agreement 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)
† 10.14
Janel Corporation 2017 Amended and Restated Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 11, 2018)
† 10.15
Restricted Stock Award Agreement between Janel Corporation and Gerard van Kesteren dated May 12, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 5, 2017)
10.16
Loan and Security Agreement, effective as of October 17, 2017, by and between Janel Corporation, Janel Group, Inc., PCL Transport, LLC, Janel Alpha GP, LLC, W.J. Byrnes & Co., Liberty International, Inc., and The Janel Group of Georgia, Inc., and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 17, 2017)
10.17
Revolving Credit Note, effective as of October 17, 2017 payable to Santander Bank, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 17, 2017)
10.18
First Amendment to the Loan and Security Agreement, dated March 21, 2018, by and among Janel Group, Inc., PCL Transport, LLC, Janel Alpha GP, LLC, W.J. Byrnes & Co., Inc., Liberty International, Inc., The Janel Group Georgia, Inc., Aves Labs, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report in Form 8-K filed March 23, 2018)
10.19
Limited Waiver, Joiner and Second Amendment, dated November 20, 2018, to the Loan and Security Agreement, by and among Janel Group, Inc., The Janel Group of Georgia, Inc., Aves Labs, Inc., Honor Worldwide Logistics LLC, HWL Brokerage LLC, Global Trading Resources, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K filed November 26, 2018)
10.20
Redemption Agreement, dated September 24, 2018, among the Company and the holders of all of the issued and outstanding shares of the Company’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 28, 2018)
10.21
Business Loan Agreement, dated June 14, 2018, by and between AB Merger Sub, Inc. and First Northern Bank of Dixon (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.22
Promissory Note, dated June 14, 2018, made by AB Merger Sub, Inc. payable to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.23
Deed of Trust, dated June 14, 2018, by Antibodies Incorporated, as Trustor (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.24
Commercial Guaranty, dated June 14, 2018, from Janel Corporation (as Guarantor) to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.25
Commercial Guaranty, dated June 14, 2018, from AB HoldCo, Inc. (as Guarantor) to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed June 27, 2018)
Exhibit
No.
Description
10.26
Note Purchase Agreement, dated June 22, 2018, by and between AB HoldCo, Inc. and Richard Krogsrud (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.27
Note Purchase Agreement, dated June 22, 2018, by and between AB HoldCo, Inc. and the Michael L. Smith and Ardyce F. Smith 1994 Revocable Trust (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.28
Subordinated Promissory Note, dated June 22, 2018, made by AB HoldCo, Inc. payable to Richard Krogsrud (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.29
Subordinated Promissory Note, dated June 22, 2018, made by AB HoldCo, Inc. payable to the Michael L. Smith and Ardyce F. Smith 1994 Revocable Trust (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed June 27, 2018)
10.30
Amendment No. 1 to Credit Agreement, effective as of August 30, 2019, by and between Indco, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 6, 2019)
10.31
Term Loan Promissory Note, effective as of August 30, 2019, made by Indco, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 6, 2019).
10.32
Revolving Loan Promissory Note, effective as of August 30, 2019 made by Indco, Inc. payable to First Merchant Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 6, 2019).
10.33
Pledge Agreement, effective as of August 30, 2019, by Janel Corporation to First Merchant Bank (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on September 6, 2019)
† 10.34
Consulting Agreement, dated February 26, 2017, between Janel Corporation and John J. Gonzalez, II (incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K for the year ended September 30, 2018 filed on July 26, 2019).
† 10.35
Consulting Agreement, dated September 28, 2016, between Janel Corporation and Gerard van Kesteren (incorporated by reference to Exhibit 10.31 of the Company’s Form 10-K for the year ended September 30, 2018 filed on July 26, 2019)
10.36
Purchase and Sale Agreement dated February 4, 2020 by and between 4040 Earnings Way, LLC, and Indco, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 4, 2020, as amended by the Company’s Current Report on Form 8-K/A filed March 6, 2020)
10.37
Third Amendment to Loan and Security Agreement dated March 4, 2020 by and between Santander Bank, N.A., Janel Group, Inc., Honor Worldwide Logistics LLC and Janel Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 4, 2020, as amended by the Company’s Current Report on Form 8-K/A filed March 6, 2020)
10.38
Loan Agreement dated April 19, 2020, by and between Janel Corporation and Santander Bank, N.A., together with the U.S. Small Business Administration Note dated April 19, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020)
10.39
Amendment No. 2 to Credit Agreement effective as of July 1, 2020, by and between Indco Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)
10.40
Consent, Joinder and Fourth Amendment to the Loan and Security Agreement dated as of July 22, 2020 by and among Janel Group, Inc., Atlantic Customs Brokers, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.40 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)
10.41
Consent, Joinder and Fifth Amendment to the Loan and Security Agreement dated as of December 4, 2020 by and among Janel Group, Inc., Atlantic Customs Brokers, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020)
10.42
Subscription Agreement for sale of Series C Preferred Stock dated as of September 29, 2020 between Janel Corporation and Oaxaca Group LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 2, 2020)
10.43
Membership Interest Purchase Agreement, by and between Janel Group, Inc., Expedited Logistics and Freight Services, LLC and the principal members of ELFS dated September 21, 2021 (filed herewith) *
Exhibit
No.
Description
10.44
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 September 21, 2021 (filed herewith)
10.45
Amended and Restated 2017 Janel Corporation Equity Incentive Plan dated September 21, 2021 (filed herewith)
10.46
Amendment 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 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2021)
10.47
Subscription Agreement for sale of Series C Preferred Stock dated as of September 30, 2021 between Janel Corporation and Oaxaca Group LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 5, 2021)
16.1
Letter from Crowe LLP to the Securities and Exchange Commission, dated February 22, 2019 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on February 22, 2019).
Subsidiaries of the Registrant (filed herewith)
23.1
Consent of Prager Metis CPAs, LLC (filed herewith)
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 (furnished herewith)
32.2
Section 1350 Certification of Principal Financial Officer (furnished herewith)
Interactive data files providing financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2021 and September 30, 2020, (ii) Consolidated Statements of Operations for the years ended September 30, 2021 and 2020, (iii) Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the years ended September 30, 2021 and 2020, and (v) Notes to Consolidated Financial Statements (filed herewith)
Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith)
†
Represents management contract, compensatory plan or arrangement in which directors and/or executive officers are entitled to participate.
*
Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.