UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number: 333-60608

JANEL CORPORATION

~~(Exact~~ (Exact name of registrant as specified in its charter)

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

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

Registrant’s telephone number, including area code: ~~(516) 256-8143~~(212) 373-5895

Former name, former address and former fiscal year, if changed from last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting ~~company,”~~company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

The number of shares of Common Stock outstanding as of ~~August 7, 2020~~February 11, 2021 was ~~865,652.~~901,154.

JANEL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For Quarterly Period Ended ~~June 30,~~December 31, 2020

TABLE OF CONTENTS

			Page

Part I - Financial Information			3

	Item 1.	Financial Statements	3

		Consolidated Balance Sheets as of ~~June 30,~~December 31, 2020 (unaudited) and September 30, ~~2019~~2020	3

		Consolidated Statements of Operations for the ~~Three and Nine Months~~three months ended ~~June 30,~~December 31, 2020 and 2019 (unaudited)	4

		Consolidated Statement of Changes in Stockholders’ Equity for the ~~Nine Months~~three months ended ~~June 30,~~December 31, 2020 and 2019 (unaudited)	5

		Consolidated Statements of Cash Flows for the ~~Nine Months~~three months ended ~~June 30,~~December 31, 2020 and 2019 (unaudited)	6

		Notes to Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2527

	~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~	37

	Item 4.	Controls and Procedures	3739

Part II - Other Information			3941

	Item 1.	Legal Proceedings	41

	Item 1.1A.	~~Legal Proceedings~~Risk Factors	3941

	~~Item 1A.~~	~~Risk Factors~~	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3941

	~~Item 3.~~	~~Defaults Upon Senior Securities~~	39

	~~Item 4.~~	~~Mine Safety Disclosures~~	39

	~~Item 5.~~	~~Other Information~~	39

	Item 6.	Exhibit Index	4042

		Signatures	4143

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

JANEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~(dollars~~ (dollars in thousands, except share and per share data)

June 30, 2020
(Unaudited)

September 30,
2019

ASSETS
Current Assets:
Cash $ 2,679 $ 2,163
Accounts receivable, net of allowance for doubtful accounts 12,476 21,351
Inventory, net 3,956 4,371
Prepaid expenses and other current assets 354 531
Note receivable 71 139
Total current assets 19,536 28,555
Property and Equipment, net 4,044 3,954
Other Assets:
Intangible assets, net 12,869 13,598
Goodwill 13,641 13,525
Operating lease right of use asset 1,498 —
Security deposits and other long-term assets 206 87
Total other assets 28,214 27,210
Total assets $ 51,794 $ 59,719
LIABILITIES
Current Liabilities:
Line of credit $ 5,923 $ 8,391
Accounts payable – trade 14,539 22,061
Accrued expenses and other current liabilities 2,562 2,272
Dividends payable 1,541 1,041
Current portion of subordinated promissory note 157 152
Short-term lease liabilities 438 —
Current portion of Paycheck Protection Program (PPP) loan 1,351 —
Current portion of long-term debt 919 828
Total current liabilities 27,430 34,745
Other Liabilities:
Long-term debt 5,991 6,602
Paycheck Protection Program (PPP) loan 1,380 —
Subordinated promissory notes 424 541
Mandatorily redeemable non-controlling interest 619 619
Deferred income taxes 2,360 2,000
Long-term operating lease liabilities 1,082 —
Other liabilities 320 334
Total other liabilities 12,176 10,096
Total liabilities 39,606 44,841
STOCKHOLDERS’ EQUITY
Preferred Stock, $0.001 par value; 100,000 shares authorized
Series B 5,700 shares authorized and 331 and 631 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively. — —
Series C 20,000 shares authorized and 20,000 shares issued and outstanding at June 30, 2020 and September 30, 2019, liquidation value of $13,041 and $12,541 at June 30, 2020 and September 30, 2019, respectively — —
Common stock, $0.001 par value; 4,500,000 shares authorized, 875,652 issued and 855,652 outstanding as of June 30, 2020 and 863,812 issued and 843,812 outstanding as of September 30, 2019 1 1
Paid-in capital 14,739 15,075
Treasury stock, at cost, 20,000 shares (240 ) (240 )
Accumulated (deficit) earnings (2,312 ) 42
Total stockholders’ equity 12,188 14,878
Total liabilities and stockholders’ equity $ 51,794 $ 59,719

	December 31, 2020 (Unaudited)			September 30, 2020
ASSETS
Current Assets:
Cash	$	1,832		$	3,349
Accounts receivable, net of allowance for doubtful accounts		22,885			20,245
Inventory, net		3,828			3,666
Prepaid expenses and other assets		759			433
Total current assets		29,304			27,693
Property and Equipment, net		5,024			4,977
Other Assets:
Intangible assets, net		14,805			13,333
Goodwill		16,153			14,146
Operating lease right of use asset		2,630			2,621
Security deposits and other long-term assets		308			265
Total other assets		33,896			30,365
Total assets	$	68,224		$	63,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit	$	10,827		$	8,447
Accounts payable – trade		21,213			20,769
Accrued expenses and other current liabilities		3,314			3,007
Dividends payable		1,835			1,661
Current portion of Paycheck Protection Program (PPP) loan		1,326			1,913
Current portion of deferred acquisition payments		176			178
Current portion of subordinated promissory note-related party		1,204			504
Current portion of long-term debt		865			866
Current portion of operating lease liabilities		806			720
Total current liabilities		41,566			38,065
Other Liabilities:
Long-term debt		6,222			6,432
Long-term portion of Paycheck Protection Program (PPP) loan		1,554			960
Subordinated promissory notes-related party		1,151			39
Long-term portion of deferred acquisition payments		374			372
Mandatorily redeemable non-controlling interest		690			604
Deferred income taxes		1,656			1,569
Long-term operating lease liabilities		1,848			1,924
Other liabilities		369			388
Total other liabilities		13,864			12,288
Total liabilities		55,430			50,353
Stockholders' Equity:
Preferred Stock, $0.001 par value; 100,000 shares authorized
Series B 5,700 shares authorized, 31 shares issued and outstanding		—			—
Series C 20,000 shares authorized and 20,000 shares issued and 19,760 outstanding at December 31, 2020 and September 30, 2020, liquidation value of $11,716 and $11,541 at December 31, 2020 and September 30, 2020, respectively		—			—
Common stock, $0.001 par value; 4,500,000 shares authorized, 921,154 issued and 901,154 outstanding as of December 31, 2020 and 918,652 issued and 898,652 outstanding as of September 30, 2020		1			1
Paid-in capital		14,461			14,604
Treasury stock, at cost, 20,000 shares		(240	)		(240	)
Accumulated deficit		(1,428	)		(1,683	)
Total stockholders' equity		12,794			12,682
Total liabilities and stockholders' equity	$	68,224		$	63,035

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

Table of Contents

JANEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended December 31,
	2020			2019
Revenue	$	26,478		$	19,821
Forwarding expenses and cost of revenues		20,029			13,534
Gross profit		6,449			6,287
Cost and Expenses:
Selling, general and administrative		5,709			6,085
Amortization of intangible assets		251			243
Total Costs and Expenses		5,960			6,328
Income (Loss) from Operations		489			(41	)
Other Items:
Interest expense net of interest income		(119	)		(163	)
Income (Loss) Before Income Taxes		370			(204	)
Income tax (expense) benefit		(115	)		84
Net Income (Loss)		255			(120	)
Preferred stock dividends		(174	)		(151	)
Net Income (Loss) Available to Common Stockholders	$	81		$	(271	)

Net income (loss) per share
Basic	$	0.27		$	(0.14	)
Diluted	$	0.26		$	(0.14	)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.09		$	(0.31	)
Diluted	$	0.08		$	(0.31	)
Weighted average number of shares outstanding:
Basic		935,936			865,275
Diluted		966,872			865,275

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

Table of Contents

JANEL CORPORATION AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(in thousands, except share and per share data)~~

~~(Unaudited)~~

Three Months Ended
June 30,

Nine Months Ended
June 30,

2020 2019 2020 2019
Revenue $ 18,498 $ 20,311 $ 57,440 63,607
Forwarding expenses and cost of revenues 13,405 14,225 40,064 44,664
Gross profit 5,093 6,086 17,376 18,943
Costs and Expenses:
Selling, general and administrative 5,482 5,600 18,151 16,681
Amortization of intangible assets 243 230 729 674
Total Costs and Expenses 5,725 5,830 18,880 17,355
(Loss) Income from Operations (632 ) 256 (1,504 ) 1,588
Other Items:
Interest expense net of interest income (108 ) (183 ) (412 ) (543 )
(Loss) Income Before Income Taxes (740 ) 73 (1,916 ) 1,045
Income tax expense (557 ) (103 ) (438 ) (356 )
Net (Loss) Income (1,297 ) (30 ) (2,354 ) 689
Preferred stock dividends (174 ) (150 ) (500 ) (420 )
Net (Loss) Income Available to Common Stockholders $ (1,471 ) $ (180 ) $ (2,854 ) $ 269

Net (loss) Income per share
Basic $ (1.49 ) $ (0.04 ) $ (2.71 ) $ 0.81
Diluted $ (1.49 ) $ (0.04 ) $ (2.71 ) $ 0.73
Net (loss) income per share attributable to common stockholders:
Basic $ (1.69 ) $ (0.22 ) $ (3.29 ) $ 0.32
Diluted $ (1.69 ) $ (0.22 ) $ (3.29 ) $ 0.28
Weighted average number of shares outstanding:
Basic 872,838 852,071 868,033 849,104
Diluted 872,838 852,071 868,033 938,830

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

~~Table of Contents~~

~~JANEL CORPORATION AND SUBSIDIARIES~~

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

~~(in~~ (in thousands, except share and per share data)

(Unaudited)

PREFERRED STOCK COMMON STOCK
PAID-IN
CAPITAL
TREASURY STOCK
ACCUMULATED
EARNINGS
(DEFICIT)

TOTAL
EQUITY

SHARES
$ SHARES
$
$ SHARES
$
$
$
Balance - September 30, 2019 20,631 $ — 863,812 $ 1 $ 15,075 20,000 $ (240 ) $ 42 $ 14,878
Net Loss — — — — — — — (2,354 ) (2,354 )
Dividends to preferred stockholders — — — — (500 ) — — — (500 )
Conversion of Preferred B shares to Common Shares (300 ) — 3,000 — — — — — —
Issuance of Restricted Stock — — 5,000 — — — — — —
Restricted stock vested but not issued — — — — (30 ) — — — (30 )
Stock-based compensation — — — — 163 — — — 163
Stock option exercise — — 3,840 — 31 — — — 31
Balance – June 30, 2020 20,331 $ — 875,652 $ 1 $ 14,739 20,000 $ (240 ) $ (2,312 ) $ 12,188

	PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY
	SHARES		$		SHARES		$		$			SHARES		$			$			$
Balance - September 30, 2020		19,791		—		918,652	$	1	$	14,604			20,000	$	(240	)	$	(1,683	)	$	12,682
Net Income		—		—		—		—		—			—		—			255			255
Dividends to preferred stockholders		—		—		—		—		(174	)		—		—			—			(174	)
Stock-based compensation		—		—		—		—		10			—		—			—			10
Stock option exercise		—		—		2,502		—		21			—		—			—			21
Balance - December 31, 2020		19,791	$	—		921,154	$	1	$	14,461			20,000	$	(240	)	$	(1,428	)	$	12,794

PREFERRED STOCK COMMON STOCK
PAID-IN
CAPITAL
TREASURY STOCK
ACCUMULATED
EARNINGS
(DEFICIT)

TOTAL
EQUITY

SHARES
$
SHARES
$
$ SHARES
$
$
$
Balance -September 30, 2018 21,271 $ — 837,951 $ 1 $ 15,872 20,000 $ (240 ) $ (606 ) $ 15,027
Net Income — — — — — — — 689 689
Cumulative effect of change in accounting principle — — — — — — — 32 32
Dividends to preferred stockholders — — — — (420 ) — — — (420 )
Restricted stock vested but not issued — — — — (235 ) — — — (235 )
Stock option exercise — — 9,461 — 72 — — — 72
Stock-based compensation — — — — 251 — — — 251
Balance – June 30, 2019 21,271 $ — 847,412 $ 1 $ 15,540 20,000 $ (240 ) $ 115 $ 15,416

	PREFERRED STOCK				COMMON STOCK				PAID-IN CAPITAL			TREASURY STOCK					ACCUMULATED EARNINGS (DEFICIT)			TOTAL EQUITY
	SHARES		$		SHARES		$		$			SHARES		$			$			$
Balance - September 30, 2019		20,631		—		863,812	$	1	$	15,075			20,000	$	(240	)	$	42		$	14,878
Net Loss		—		—		—		—		—			—		—			(120	)		(120	)
Dividends to preferred stockholders		—		—		—		—		(151	)		—		—			—			(151	)
Stock-based compensation		—		—		—		—		55			—		—			—			55
Stock option exercise		—		—		3,840		—		31			—		—			—			31
Balance - December 31, 2019		20,631	$	—		867,652	$	1	$	15,010			20,000	$	(240	)	$	(78	)	$	14,693

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

Table of Contents

JANEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(in~~ (in thousands)

(Unaudited)

Nine Months Ended
June 30,

2020 2019
Cash Flows From Operating Activities:
Net (loss) income $ (2,354 ) $ 689
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision for uncollectible accounts 137 353
Depreciation and amortization 198 229
Deferred income tax 360 318
Amortization of intangible assets 729 674
Amortization of acquired inventory valuation 597 195
Amortization of loan costs 7 7
Stock-based compensation 217 329
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable 8,738 (1,108 )
Inventory (182 ) (161 )
Prepaid expenses and other current assets 177 (276 )
Security deposits and other long term assets (51 ) (8 )
Accounts payable and accrued expenses (7,317 ) 1,910
Other liabilities 7 68
Net cash provided by operating activities 1,263 3,219
Cash Flows From Investing Activities:
Acquisition of property and equipment, net of disposals (288 ) (303 )
Acquisitions (115 ) (1,935 )
Net cash used in investing activities (403 ) (2,238 )
Cash Flows From Financing Activities:
Repayments of term loan (519 ) (916 )
Proceeds from stock option exercise 31 72
Line of credit, net (2,472 ) 712
Proceeds from PPP loan 2,727 -
Repayment of subordinated promissory notes (111 ) (72 )
Net cash used in financing activities (344 ) (204 )
Net increase in cash 516 777
Cash at beginning of the period 2,163 585
Cash at end of period $ 2,679 $ 1,362

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:

Interest $ 420 $ 542
Income taxes $ 7 $ 132
Non-cash operating activities:
Operating lease right of use asset $ 1,900 $ -
Operating lease liabilities
Non-cash investing activities:
$ 1,917 $ -
Contingent earn-out acquisition $ - $ 50
Subordinated Promissory notes of Honor $ - $ 456
Non-cash financing activities:

Dividends declared to preferred stockholders $ 500 $ 420
Vested restricted stock unissued $ 30 $ 235

	Three Months Ended December 31,
	2020			2019
Cash Flows From Operating Activities:
Net income (loss)	$	255		$	(120	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
(Recovery of) provision for uncollectible accounts		(32	)		68
Depreciation		86			55
Deferred income tax		86			(11	)
Amortization of intangible assets		251			243
Amortization of acquired inventory valuation		214			220
Amortization of loan costs		2			5
Stock-based compensation		24			74
Changes in fair value of mandatorily redeemable noncontrolling interest		86			—
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(1,857	)		2,850
Inventory		(150	)		111
Prepaid expenses and current assets		(326	)		(25	)
Security deposits and other long-term assets		(40	)		(176	)
Accounts payable and accrued expenses		607			(4,054	)
Other liabilities		(18	)		(29	)
Net cash used in operating activities		(812	)		(789	)
Cash Flows From Investing Activities:
Acquisition of property and equipment, net of disposals		(55	)		(97	)
Acquisitions		(2,806	)		—
Net cash used in investing activities		(2,861	)		(97	)
Cash Flows From Financing Activities:
Repayments of term loan		(206	)		(35	)
Proceeds from stock option exercise		21			31
Line of credit, proceeds, net		2,380			370
Repayment of subordinated promissory notes		(39	)		(36	)
Net cash provided by financing activities		2,156			330
Net (decrease) increase in cash		(1,517	)		(556	)
Cash at beginning of the period		3,349			2,163
Cash at end of period	$	1,832		$	1,607

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	99		$	152
Income taxes	$	12		$	2
Non-cash investing activities:
Subordinated promissory notes of ICT	$	1,850		$	—
Non-cash financing activities:
Dividends declared to preferred stockholders	$	174		$	151

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

Table of Contents

JANEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(in~~ (in thousands, except share and per share data)

1.	BASIS OF PRESENTATION ~~SUMMARY OF BUSINESS~~ AND SIGNIFICANT ACCOUNTING POLICIES

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

Business description

Janel is a holding company with subsidiaries in three business segments: Global Logistics Services, Manufacturing and Life Sciences. A management group at the holding company level ~~(the “corporate group”)~~ 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~~reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.

Global Logistics Services

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

On ~~November 20, 2018,~~December 31, 2020, we ~~completed a business combination whereby we acquired the membership interest of Honor Worldwide Logistics, LLC (“Honor”), a global logistics services provider with two U.S. locations. See note 2.~~

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

Manufacturing

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

Life Sciences

The Company’s Life Sciences segment, which is comprised of ~~Aves Labs, Inc. (“Aves”), Antibodies Incorporated (“Antibodies”), IgG, LLC (“IgG”) and PhosphoSolutions, LLC, which are~~several wholly-owned subsidiaries, ~~of the Company.~~

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

~~Through~~

Table of Contents

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

On September 6, 2019, the Company, through its wholly owned subsidiary Aves, acquired all of the equity interests of PhosphoSolutions, LLC and all of the stock of PhosphoSolutions, Inc. (collectively “Phospho”). See note 2.

On July 1, 2019, we acquired the membership interests of a ~~small~~ life sciences company on July 1, 2019 and the equity interests of PhosphoSolutions, LLC. (“Phospho”) on September 6, 2019. Both acquisitions were completed primarily to expand our product offerings in Life Sciences.company. See note 2.

~~Table of Contents~~

Basis of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as Indco, of which Janel owns ~~91.65%~~90.68%, with a non-controlling interest held by existing Indco management. The Indco non-controlling interest is mandatorily redeemable and is recorded as a liability. All intercompany transactions and balances have been eliminated in consolidation.

Uses of estimates in the preparation of financial statements

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

Cash

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

Accounts receivable and allowance for doubtful accounts receivable

Accounts receivable are recorded at the contractual amount. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical collection experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions, and other factors that may affect the customers’ ability to pay. The Company writes off accounts receivable balances that have aged significantly once all collection efforts have been exhausted and the receivables are no longer deemed collectible from the customer. The allowance for doubtful accounts as of ~~June 30,~~December 31, 2020 and September 30, ~~2019~~2020 was ~~$554~~$473 and ~~$503,~~$496, respectively.

Inventory

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

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Property and equipment and depreciation policy

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

Maintenance and repairs are recorded as expenses when incurred.

Goodwill

The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired in a business combination. Under current authoritative guidance, goodwill is not amortized but is tested for impairment annually (on September 30) as well as when an event or change in circumstance indicates impairment may have occurred. Goodwill is tested for impairment by comparing the fair value of the Company’s individual reporting units to their carrying amount to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than the carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value.

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If there is a material change in economic conditions, including as a result of continued disruption due to the coronavirus (COVID-19) pandemic, or other circumstances influencing the estimate of future cash flows or significantly affect the fair value of our reporting units, the Company could be required to recognize impairment charges in the future. There were no indicators of impairment of goodwill as of June 30, 2020 and September 30, 2019.

The fair value of our reporting units was in excess of carrying value and goodwill was not deemed to be impaired as of ~~June 30, 2020 and~~ September 30, ~~2019.~~2020. There were no indicators of impairment of goodwill as of December 31, 2020.

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

Intangibles and long-lived assets

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

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

The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management. If there is a material change in economic conditions, ~~including as a result of continued disruption due to the COVID-19 pandemic,~~ or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.

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

There were no indicators of impairment of long-lived assets as of ~~June 30, 2020 and September 30, 2019.~~December 31, 2020.

Business segment information

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

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Revenues and revenue recognition

~~Adoption of ASC Topic 606, “Revenue from Contracts~~The Company recognizes revenues in accordance with ~~Customers”~~

~~On October 1, 2018, the Company adopted~~ ASU 2014-09,Revenue from Contracts with Customers (“ASC Topic 606”), using the modified retrospective method. Results for reporting periods beginning on or after October 1, 2018 are presented under ASC Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with the accounting standards in effect for those periods..

~~The Company recorded an increase~~to the opening balance of retained earnings of $32, net of tax, as of October 1, 2018 due to the cumulative impact of adoption of ASC Topic 606. The impact to revenue and associated cost for the nine months ended June 30, 2019~~was a decrease of $135 and $109, respectively, as a result of applying ASC Topic 606.~~

Global Logistics Services

Revenue Recognition

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

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

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

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In the Global Logistics Services segment, the Company disaggregates its revenues by its four primary service categories: ocean ~~import and export,~~ freight, ~~forwarding, customs~~air freight, custom brokerage and ~~air import~~trucking and ~~export.~~other. A summary of the Company’s revenues disaggregated by major service lines for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019 was as follows:

	Three Months Ended June 30,		Nine Months Ended June 30,		Three Months Ended December 31,		Three Months Ended December 31,
Service Type	2020		2020		2020		2019
Ocean import and export	$	6,376	$	18,113
Freight forwarding		2,873		9,335
Ocean freight					$	9,039	$	5,857
Trucking and other						4,364		3,810
Customs brokerage		2,411		7,716		2,655		2,194
Air import and export		3,905		11,808
Air freight						6,202		4,218
Total	$	15,565	$	46,972	$	22,260	$	16,079

Manufacturing

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

Life Sciences

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

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Income (loss) per common share

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

Stock-based compensation to employees

Equity classified share-based awards

The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation-Stock Compensation.” For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for restricted shares; the expense is recognized over the service period for awards expected to vest.

Stock-based compensation to non-employees

Liability classified share-based awards

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

These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in note 11. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vesting are recognized through compensation expense. Compensation expense reflects estimates of the number of instruments expected to vest.

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The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustment to the settlement liability. Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in non-current liabilities.

Non-employee share-based awards

In prior periods up to September 30, 2019, the Company accounted for stock-based compensation to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity-Based Payments to Non-employees.” Measurement of share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The fair value of share-based payment transactions is determined at the earlier of performance commitment date or performance completion date. The Company believes that the fair value of the stock-based award is more reliably measurable than the fair value of the services received. The fair value of the granted stock-based awards is remeasured at each reporting date, and expense is recognized over the vesting period of the award.

In June 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions.

The Company adopted ASU 2018-07 on October 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the ~~nine~~three months ended ~~June 30, 2020.~~December 31, 2019.

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Mandatorily Redeemable Non-Controlling Interests

The non-controlling interests that are reflected as mandatorily redeemable non-controlling interests in the consolidated financial statements consist of non-controlling interests related to the Indco acquisition whose owners have certain redemption rights that allow them to require the Company to purchase the non-controlling interests of those owners upon certain events outside the control of the Company, includingupon the death of the holder. The Company is required to purchase 20% per year of the ~~8.35%~~ mandatorily redeemable non-controlling interest at the option of the holder beginning on the third anniversary of the date of the Indco acquisition, which was March 21, 2019. As of ~~June~~December 31, 2020, and September 30, 2020, the holder ~~did~~had not ~~exercise~~exercised the redemption rights.

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

On the date the Company acquires the controlling interest in a business combination, the fair value of the non-controlling interest is recorded in the long-term liabilities section of the consolidated balance sheet under the caption “Mandatorily redeemable non-controlling interest.” The mandatorily redeemable non-controlling interest is adjusted each reporting period, if required, to its then current redemption value, based on the predetermined formula defined in the respective agreement. The Company reflects any adjustment in the redemption value and any earnings attributable to the mandatorily redeemable non-controlling interest in its consolidated statements of operations by recording the adjustments and earnings to other income and expense in the caption “change in fair value of mandatorily redeemable non-controlling interest.”

~~Note receivable~~

On March 2, 2018, the Company issued a convertible promissory note in the amount of $125 with a potential non-related party acquisition target. The note bears interest on the outstanding principal amount at a rate of 8% per annum, and both principal and interest was payable on the maturity date of April 24, 2020. The convertible note, at the election of the Company, can be converted into common stock of the acquisition target. On April 9, 2020, the Company agreed to a revised payment schedule, with $75 due upon signing of the revised payment schedule and $72, representing the remaining principal and accrued interest, due on September 24, 2020. As of June 30, 2020, and September 30, 2019, amounts outstanding including accrued interest were $71 and $139, respectively. As of June 30, 2020, the Company is no longer pursuing this potential acquisition target.

Income taxes

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

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. The benefit of tax positions taken or expected to be taken in the Company’s income tax returns are recognized in the consolidated financial statements if such positions are more likely than not of being sustained.

Recent accounting pronouncements

Recently adopted accounting pronouncements

On October 1, 2019, the Company adopted ASU No. 2016-02, Leases (“(“ASC 842” or “ASU 2016-02”), issued by the FASB in February 2016 which was subsequently supplemented by clarifying guidance intended to improve financial reporting of leasing transactions. The new lease accounting guidance requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for all leases with initial terms longer than 12 months and provides enhanced disclosures on key information of leasing arrangements. The guidance allows companies to apply the requirements retrospectively, either to all prior periods presented or through a cumulative adjustment in the year of adoption.

The Company adopted the new standards as of the beginning of the period of adoption, or effective October 1, 2019 using the modified retrospective transition method. The Company elected to use the package of practical expedients which allowed the Company to (i) not reassess whether an arrangement contains a lease, (ii) carry forward its lease classification as operating or capital leases and (iii) not reassess its previously-recorded initial direct costs. For all existing operating leases as of October 1, 2019, the Company recorded operating lease ~~right of use~~right-of-use assets of $1,043 and corresponding lease liabilities of $1,060, with an offset to other liabilities of $17 to eliminate deferred rent on the consolidated balance sheets.

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Operating lease expense is recognized on a straight-line basis over the lease term. At each balance sheet date, operating lease liabilities represent the present value of the future minimum payments related to non-cancelable periods.

Leases with an initial term of 12 months or less (short-term leases) are not recognized in the balance sheet, and the related lease payments are recognized as incurred over the lease term.

All significant lease arrangements after October 1, 2019 are recognized as right-of-use assets and lease liabilities at lease commencement. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent ~~its~~the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of the future lease payments using the Company’s incremental borrowing rate.

The adoption of the new lease accounting standard did not have a material impact on the Company’s results of operations or cash flows.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company’s current share-based payment awards to non-employees consist only of grants made to its non-employee directors as compensation solely relates to each individual’s role as a non-employee director. As such, in accordance with ASC 718, the Company accounts for these share-based payment awards to its ~~non-employee~~non- employee directors in the same manner as share-based payment awards for its employees. The Company adopted this standard on October 1, 2019, and the amendments in this guidance had no material effect on either the accounting for its share-based payment awards to its non-employee directors, or the Company’s consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement~~, which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. This new accounting standard is effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

~~Table~~ This standard will be effective for us in the first quarter of ~~Contents~~

~~This~~fiscal year 2023. Early adoption of the new ~~accounting~~ standard is ~~effective for annual periods beginning after December 15, 2019. Early adoption~~permitted; however, we have not elected to early adopt the standard. The new standard is ~~permitted. The Company is~~required to be applied using a cumulative-effect transition method. We are currently evaluating the ~~effects~~effect that the ~~adoption of this guidance~~new standard will have on ~~its consolidated~~our financial ~~statements.~~

position, results of operations and related disclosures.

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

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

~~Reclassifications~~

Prior year financial statement amounts are reclassified as necessary to conform to the current year presentation. These prior period reclassifications did not affect the Company’s net income, earnings per share, stockholders’ equity or working capital.

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2.	ACQUISITIONS

~~The~~

Fiscal 2021 Acquisitions

Life Sciences

On December 4, 2020, through Aves, the Company completed ~~four~~a business ~~acquisitions in~~combination whereby we acquired all of the ~~fiscal year ended September 30, 2019, with an~~membership interests of ImmunoChemistry Technologies, LLC (“ICT”) for the aggregate purchase price of ~~$6,768,~~$3,478, net of $105 cash ~~acquired.~~received. At closing, $1,628 was paid in cash and a promissory note in the amount of $1,850 was issued to the former owner. The Company recorded an aggregate ~~$2,067~~of $1,721 in goodwill and ~~$2,165~~$1,206 in other identifiable intangibles. The Company is still finalizing the valuation of assets acquired and liabilities assumed, and, as such, the fair value amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are not limited to, intangible assets, fair value of accounts receivable and the goodwill balance. This acquisition was funded with cash provided by normal operations along with a note to the former owner. The results of operations of the acquired businesses are included in Janel’s consolidated results of operations since the date of ~~each~~the acquisition. Supplemental pro forma information has not been provided as the ~~acquisitions~~acquisition did not have a significant impact on Janel’s consolidated results of operations individually or in ~~the~~ aggregate. ICT is a developer and manufacturer of cell viability assay kits, ELISA buffers and fluorescent reagents for use in research and diagnostics. ICT was founded in 1994 and is headquartered in Bloomington, Minnesota. The acquisition of ICT was completed to expand our product offerings in our Life Sciences segment.

Purchase price allocation

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

	Fair Value
Accounts receivable	$	177
Inventory		226
Prepaids and other current assets		3
Property & equipment, net		64
Intangibles - customer relationships		793
Intangibles - trademark		120
Intangibles - other		293
Goodwill		1,721
Accounts payable & accrued expenses		(24	)
Purchase price, net of cash received	$	3,373

~~Through its wholly-owned subsidiary,~~

Global Logistics Services

On December 31, 2020, through Janel Group, the Company acquired the membership interests of Honor on November 20, 2018 in a transaction pursuant to which Honor became a direct wholly-owned subsidiary of Janel Group and an indirect wholly-owned subsidiary of the Company. At closing, a subordinated promissory note in the aggregate amount of $456 was issued to a former member. The acquisition of Honor was funded with cash provided by normal operations along with a subordinated promissory note. Honor provides global logistics services with two U.S. locations and expands the domestic network of the Company’s Global Logistics Services segment. The results of operations for Honor are reflected in the Global Logistics Services reporting segment.

~~PhosphoSolutions~~

Through Aves, the Company completed a business combination whereby we acquired Phospho on September 6, 2019. The aggregate purchase price for Phospho was $4,043, net of $13 of cash received. At closing, $4,000 was paid in cash and $56 was recorded in accrued expenses as preliminary tax gross up due to the former owners. Phospho is a manufacturer and distributor of monoclonal and polyclonal antibodies, principally used in neuroscience research. Phospho was founded in 2001 and is headquartered in Aurora, Colorado. The results of operations for Phospho are reflected in the Life Sciences reporting segment. As of June 30, 2020, the Company paid $172 in tax gross up consideration to the former owners and recorded an additional $116 of goodwill related to the Phospho acquisition.

~~Other Acquisitions~~

~~On October 17, 2018, we~~ completed a business combination whereby we acquired substantially all of the assets and certain liabilities of a global logistics services provider with ~~one~~two U.S. ~~location. On July 1, 2019, we~~locations. The aggregate purchase price for this acquisition was $1,282. At closing, $1,182 was paid in cash and $100 was placed in escrow for a period of twelve months for the purpose of securing the indemnification obligations of former stockholders. The Company recorded an aggregate of $285 in goodwill and $517 in other identifiable intangibles. The Company is still finalizing the valuation of assets acquired and liabilities assumed, and, as such, the ~~membership interests~~fair value amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are not limited to, intangible assets, fair value of accounts receivable or a ~~life sciences company~~change in the goodwill balance. This acquisition was funded with cash provided by normal operations along with a note to the former owner. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations individually or in aggregate. This acquisition was completed to expand our product offerings in ~~Life Sciences. These acquisitions were~~our Global Logistics Services segment.

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Purchase price allocation

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

	Fair Value
Accounts receivable	$	573
Property & equipment, net		13
Intangibles – customer relationships		490
Intangibles - trademark		16
Intangibles - other		11
Goodwill		285
Accounts payable & accrued expenses		(106	)
Purchase price	$	1,282

Fiscal 2020 Acquisition

Effective July 23, 2020, through Janel Group, the Company acquired all of the outstanding common stock of a global logistics services provider with two U.S. locations for $132, net of $853 cash received. At closing, the former stockholder was paid $300 in cash and $194, $193 and $193 is due to the stockholder as deferred acquisition payments on the first, second and third anniversary of the closing date, respectively, and the Company assumed $135 in the form of a Paycheck Protection Program (PPP) loan. The Company recorded an aggregate of $506 in goodwill and $690 in other identifiable intangibles. This acquisition was funded with cash provided by normal ~~operations.~~operations along with a deferred acquisition payment due to the former stockholder. The results of operations ~~for these acquisitions~~of the acquired businesses are ~~reported~~included in ~~our Global Logistics Services and Life Sciences segments. The aggregate purchase price for these acquisitions was $430. At closing, $50 was recorded~~the Janel’s consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations individually or in ~~accrued expenses as a preliminary earnout consideration.~~aggregate.

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INVENTORY

Inventories consisted of the following:

June 30,
2020

September 30,
2019

Finished Goods $ 2,484 $ 2,988
Work-in-Process 298 461
Raw Materials 1,201 946
Less - Reserve for Inventory Valuation (27 ) (24 )
Inventory Net $ 3,956 $ 4,371

	December 31, 2020			September 30, 2020
Finished Goods	$	1,390		$	1,246
Work-in-Process		1,285			1,406
Raw Materials		1,181			1,039
Gross Inventory		3,856			3,691
Less - Reserve for Inventory Valuation		(28	)		(25	)
Inventory Net	$	3,828		$	3,666

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4.	PROPERTY AND EQUIPMENT

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

	June 30, 2020			September 30, 2019			Life	December 31, 2020			September 30, 2020			Life
Building and Improvements	$	2,672		$	2,577		15-30 Years	$	3,119		$	3,096		15-30 Years
Land and Improvements		869			835		Indefinite		1,235			1,235		Indefinite
Furniture & Fixtures		282			218		3-7 Years		285			282		3-7 Years
Computer Equipment		302			465		3-5 Years		577			385		3-5 Years
Machinery & Equipment		1,151			973		3-15 Years		1,143			1,288		3-15 Years
Leasehold Improvements		183			181		Shorter of Lease Term or Asset Life		115			115		3-5 Years
		5,459			5,249				6,474			6,401
Less: Accumulated Depreciation and Amortization		(1,415	)		(1,295	)
Property and Equipment Net	$	4,044		$	3,954
Less: Accumulated Depreciation									(1,450	)		(1,424	)
Property and equipment, net								$	5,024		$	4,977

Depreciation ~~and amortization~~ expense for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019 was ~~$198~~$86 and ~~$229,~~$55, respectively.

5.	INTANGIBLE ASSETS

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

	December 31, 2020			September 30, 2020			Life
Customer Relationships	$	15,675		$	14,392		15-24 Years
Trademarks / Names		1,836			1,820		1-20 Years
Trademarks / Names		571			451		Indefinite
Other		1,322			1,018		2-5 Years
		19,404			17,681
Less: Accumulated Amortization		(4,599	)		(4,348	)
Intangible assets, net	$	14,805		$	13,333

June 30,
2020

September 30,
2019
Life
Customer Relationships $ 13,762 $ 13,762 15-20 Years
Trademarks / Names 2,251 2,251 20 Years
Other 978 978 2-5 Years
16,991 16,991
Less: Accumulated Amortization (4,122 ) (3,393 )
Intangible Assets Net $ 12,869 $ 13,598

	December 31, 2020			September 30, 2020
Global Logistics Services	$	8,160		$	7,643
Manufacturing		7,700			7,700
Life Sciences		3,544			2,338
		19,404			17,681
Less: Accumulated Amortization		(4,599	)		(4,348	)
Intangible assets, net	$	14,805		$	13,333

Amortization expense ~~of intangible assets~~ for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019 was ~~$729~~$251 and ~~$674,~~$243, respectively.

GOODWILL

The Company’s goodwill carrying amounts relate to the acquisitions in the Global Logistics Services, Manufacturing and Life Sciences businesses. In the nine month period ended June 30, 2020, with respect to the Phospho acquisition, the Company paid $172 in tax gross up consideration to the former owners and recorded an additional $116 of goodwill.

~~Table of Contents~~

The composition of the goodwill balance at ~~June 30,~~December 31, 2020 and September 30, ~~2019~~2020 was as follows:

	June 30, 2020		September 30, 2019		December 31, 2020		September 30, 2020
Global Logistics Services	$	5,655	$	5,655	$	6,446	$	6,161
Manufacturing		5,046		5,046		5,046		5,046
Life Sciences		2,940		2,824		4,661		2,939
Total Goodwill	$	13,641	$	13,525
					$	16,153	$	14,146

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7.	NOTES PAYABLE –- BANKS

(A)	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 ~~March~~December 2020, the Santander Facility currently provides 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 accrues on the Santander Facility at an annual rate equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points. The Janel Group Borrowers’ obligations under the Santander Facility are secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants. The Santander Facility matures on October 17, 2022, unless earlier terminated or renewed. As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance sheet.

At ~~June~~September 30, 2020, outstanding borrowings under the Santander Facility were ~~$5,923, representing 34.84% of the available amount thereunder,~~$8,447, and interest was accruing at an effective interest rate of ~~2.61%~~2.40%.

At December 31, 2020, outstanding borrowings under the Santander Facility were $10,827, and interest was accruing at an effective interest rate of 2.40%.

The Janel Group Borrowers were in compliance with the covenants defined in the Santander Loan Agreement at ~~June 30,~~December 31, 2020 and September 30, ~~2019.~~2020.

(B)	First Merchants Bank Credit Facility

On March 21, 2016, as amended in August 2019 and July 2020, Indco ~~entered into~~executed a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan, ~~and~~a $1,000 (limited to the borrowing base and reserves) revolving loan and a $680 mortgage loan (together, the “First ~~Merchants~~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 ~~the Company, and the Company’s~~Janel. Additionally, Janel’s guarantee of Indco’s obligations is secured by a pledge of ~~the Company’s~~Janel’s Indco shares. The ~~First Merchants Credit Agreement contains customary terms~~term loan and ~~covenants. The~~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.~~renewed or extended.

As of ~~June~~September 30, 2020, there were no outstanding borrowings under the revolving loan, ~~and $4,625~~$4,349 of borrowings ~~net of capitalized loan cost of $38,~~ 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 ~~3.68%.~~3.66% and 4.19%, respectively.

~~The Company~~As of December 31, 2020, there were no outstanding borrowings under the revolving loan, $4,130 of borrowings under the term loan, and $671 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 3.64% and 4.19%, respectively.

Indco was in compliance with the covenants defined in the First Merchants Credit Agreement at ~~June 30,~~both December 31, 2020 and September 30, ~~2019.~~2020.

	December 31, 2020			September 30, 2020
Long-Term Debt *	$	4,801		$	5,025
Less Current Portion		(808	)		(808	)
	$	3,993		$	4,217

June 30,
2020

September 30,
2019

Long Term Debt^*
$ 4,625 $ 5,455
Less Current Portion (786 ) (786 )
$ 3,839 $ 4,669

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~~Note: Long Term Debt~~

Under the First Merchant Credit Agreement, the term loan is due in monthly installments of $65 plus monthly interest, at LIBOR plus ~~3.75%~~2.75% to ~~4.75%~~3.5% per ~~annum.~~annum, and the mortgage loan is due in monthly installments of $4, including interest at 4.19%. The ~~note~~First Merchant Facility is collateralized by all of Indco’s assets and guaranteed by Janel.

~~Table of Contents~~

(C)	First Northern Bank of Dixon

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

~~Dividend yield - We have never paid dividends on our common stock and currently have no plans to do so;~~

•

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

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

		~~Nine~~ Three Months Ended ~~June 30,~~December 31, 2020
Risk-free Interest Rate		~~1.59%~~0.46%
Expected Option Term in Years		5.5-6.5
Expected Volatility		~~101.2%~~103.0% - ~~101.7%~~105.4%
Dividend Yield		0%
Weighted Average Grant Date Fair Value		$~~6.97~~6.90 - ~~$7.33~~$7.19

~~Table of Contents~~

Options for Employees

Number of
Options

Weighted
Average Exercise
Price

Weighted Average
Remaining Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2019 110,837 $ 5.05 5.98 $ 438.06
Granted 7,500 $ 9.00 9.25 $ —
Exercised (3,841 ) $ 8.17 — $ —
Outstanding Balance at June 30, 2020 114,496 $ 5.21 5.42 $ 310.00
Exercisable on June 30, 2020 101,164 $ 4.77 4.98 $ 310.00

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding Balance at September 30, 2020		93,996		$	5.76		5.24	$	304.99
Granted		7,500			9.00		9.75		—
Exercised		(2,502	)		8.58		—		—
Outstanding Balance at December 31, 2020		98,994			5.93		5.29		29.35
Exercisable on December 31, 2020		83,998			5.42		4.61		29.35

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at ~~June 30,~~December 31, 2020 of ~~$7.50~~$4.60 per share and the exercise price of the stock options that had strike prices below such closing price.

As of ~~June 30,~~December 31, 2020, there was approximately ~~$38~~$66 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted average period of less than one year.

~~Options for Non-Employees~~

There were no non-employee options awarded, exercised or forfeited during the ~~nine-month~~three-month period ended ~~June 30,~~December 31, 2020. ~~During the nine-month period ended June 30, 2020, 15,000 non-employee options were forfeited.~~

Number of
Options

Weighted
Average Exercise
Price

Weighted Average
Remaining Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2019 51,053 $ 7.58 7.80 $ 72.68
Forfeited (15,000 ) $ 8.04 — $ —
Outstanding Balance at June 30, 2020 36,053 $ 7.38 7.01 $ 21.91
Exercisable on June 30, 2020 6,053 $ 4.13 6.25 $ 21.91

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding Balance at September 30, 2020		6,053	$	4.13		6.0	$	29.48
Outstanding Balance at December 31, 2020		6,053		4.13		5.75		2.84
Exercisable on December 31, 2020		6,053		4.13		5.75		2.84

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of our common stock at ~~June 30,~~December 31, 2020, of ~~$7.50~~$4.60 per share and the exercise price of the stock options that had strike prices below such closing price.

As of ~~June 30,~~December 31, 2020, there was ~~approximately $13 of total~~no unrecognized compensation expense related to the ~~unvested~~vested stock ~~options, which is expected to be recognized over a weighted average period of less than one year.~~options.

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Liability classified share-based awards

~~Additionally, during~~During the ~~nine~~three months ended ~~June 30,~~December 31, 2020, ~~6,880~~6,948 options were granted and 7,000 options were exercised with respect to Indco’s common stock. The Company uses the Black-Scholes option pricing model to estimate the fair value of Indco’s share-based awards. In applying this model, the Company used the following assumptions:

		~~Nine~~ Three Months Ended ~~June 30,~~December 31, 2020
Risk-free Interest Rate		~~1.59%~~0.46%
Expected Option Term in Years		5.5 - 6.5
Expected Volatility		~~101.2%~~103.0% - ~~101.7%~~105.4%
Dividend Yield		0%
Weighted Average Grant Date Fair Value		$~~8.59~~9.66 - ~~$9.03~~$10.00

~~Table of Contents~~

Number of
Options

Weighted
Average Exercise
Price

Weighted Average
Remaining Contractual
Term (in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding Balance at September 30, 2019 32,133 $ 8.85 7.34 $ 85.45
Granted 6,880 $ 11.08 9.25 $ —
Outstanding Balance at June 30, 2020 39,013 $ 9.24 7.06 $ 85.45
Exercisable on June 30, 2020 25,343 $ 7.98 6.24 $ 85.45

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding Balance at September 30, 2020		39,013		$	9.24		6.81	$	85.45
Granted		6,948			12.29		9.75		—
Exercised		(7,000	)		6.48		—		—
Outstanding Balance at December 31, 2020		38,961			10.28		7.37		78.16
Exercisable on December 31, 2020		22,905			9.16		6.39		71.75

The aggregate intrinsic value in the above table was calculated as the difference between the valuation price of Indco’s common stock at ~~June 30,~~December 31, 2020 of ~~$11.08~~$12.29 per share and the exercise price of the stock options that had strike prices below such closing price.

The liability classified awards were measured at fair value at each reporting date until the final measurement date, which was the date of completion of services required to earn the option. The accrued compensation cost related to these options was approximately ~~$319~~$309 and ~~$172~~$284 as of ~~June 30,~~December 31, 2020 and September 30, ~~2019,~~2020, respectively, and is included in other liabilities in the consolidated financial statement. The compensation cost related to these options was approximately $15 and $19 for the three-month periods ended December 31, 2020 and 2019, respectively. The cost associated with the options issued on each grant date is being recognized ratably over the period of service required to earn each tranche of options.

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

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

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

As of ~~June 30,~~December 31, 2020, there was approximately ~~$51~~$79 of total unrecognized compensation expense related to the unvested Indco stock options. This expense is expected to be recognized over a weighted average period of less than one year.

(B)	Restricted Stock

During the ~~nine~~three months ended ~~June 30,~~December 31, 2020, there were no shares of restricted stock granted. Under the 2017 Plan, each grant of restricted stock vests over a three-year period, and the cost to the recipient is zero. Restricted stock compensation expense, which is a non-cash item, is being recognized in the Company’s financial statements over the vesting period of each restricted stock grant.

~~The following table summarizes the status of our employee unvested restricted stock under the 2017 Plan for the nine months ended June 30, 2020:~~

Restricted Stock
Weighted Average
Grant Date Fair Value

Weighted Average
Remaining
Contractual Term
(in years)

Unvested at September 30, 2019 5,000 $ 8.01 0.61
Vested (5,000 ) $ 8.01 —
Unvested at June 30, 2020 — $ — —

As of ~~June 30,~~December 31, 2020, there was no unrecognized compensation cost related to non-employee unvested ~~employee~~ restricted stock.

~~The following table summarizes the status of our non-employee unvested restricted stock under the 2017 Plan for the nine months ended June 30, 2020:~~

Restricted Stock
(in thousands)

Weighted Average
Grant Date Fair Value

Weighted Average
Remaining
Contractual Term
(in years)

Unvested at September 30, 2019 26,667 $ 8.04 0.88
Vested (3,333 ) $ — —
Unvested at June 30, 2020 23,334 $ 8.04 0.16

2023

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As of ~~June 30,~~December 31, 2020, there was approximately $12 of unrecognized compensation cost related to non-employee unvested restricted stock. The cost is expected to be recognized over a weighted-average period of approximately 0.16 years.

~~As of June~~and September 30, 2020, included in accrued expenses and other current liabilities was ~~$189~~$306 which represents ~~21,666~~35,000 shares of restricted stock that vested but were not issued.

12.	INCOME PER COMMON SHARE

The following table provides a reconciliation of the basic and diluted income (loss) per share (“EPS”) computations for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019 (in thousands, except share and per share data):

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,						For the Three Months Ended December 31,
	2020			2019			2020			2019			2020			2019
Income:
Net income (loss)	$	(1,297	)	$	(30	)	$	(2,354	)	$	689		$	255		$	(120	)
Preferred stock dividends		(174	)		(150	)		(500	)		(420	)		(174	)		(151	)
Net Income (loss) available to common stockholders	$	(1,471	)	$	(180	)	$	(2,854	)	$	269		$	81		$	(271	)

Common Shares:
Basic - weighted average common shares		872,838			852,071			868,033			849,104			935,936			865,275
Effect of dilutive securities:
Stock options		—			—			—			56,697			30,626			—
Restricted stock		—			—			—			20,319			—			—
Convertible preferred stock		—			—			—			12,710			310			—
Diluted - weighted average common stock	$	872,838		$	852,071		$	868,033		$	938,830			966,872			865,275

Income per Common Share:
Basic -
Basic
Net income (loss)	$	(1.49	)	$	(0.04	)	$	(2.71	)	$	0.81		$	0.27		$	(0.14	)
Preferred stock dividends		(0.20	)		(0.18	)		(0.58	)		(0.49	)		(0.18	)		(0.17	)
Net Income (loss) available to common stockholders	$	(1.69	)	$	(0.22	)	$	(3.29	)	$	0.32		$	0.09		$	(0.31	)

Diluted -
Diluted
Net income (loss)	$	(1.49	)	$	(0.04	)	$	(2.71	)	$	0.73		$	0.26		$	(0.14	)
Preferred stock dividends		(0.20	)		(0.18	)		(0.58	)		(0.45	)		(0.18	)		(0.17	)
Net income (loss) available to common stockholders	$	(1.69	)	$	(0.22	)	$	(3.29	)	$	0.28		$	0.08		$	(0.31	)

The computation for the diluted number of shares excludes unvested restricted stock and unexercised stock options ~~and unexercised warrants~~ that are anti-dilutive. There were 6,363 dilutive shares and no anti-dilutive shares for the ~~three- and nine-month~~three-month periods ended ~~June 30, 2020.~~December 31, 2020 and 2019, respectively.

Potentially dilutive securities as of ~~June 30,~~December 31, 2020 and 2019 were as follows:

	June 30,				December 31,
	2020		2019		2020		2019
Employee Stock Options		114,496		110,837		98,994		114,496
Non-employee Stock Options		36,053		51,053		6,053		36,053
Employee Restricted Stock		5,000		5,000		—		5,000
Non-employee Restricted Stock		26,667		26,667		—		26,667
Convertible Preferred Stock		3,310		12,710		310		6,310
		185,526		206,267		105,357		188,526

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13.	INCOME TAXES

The Company’s estimated fiscal ~~2020~~2021 and ~~2019~~2020 blended U.S. federal statutory corporate income tax rate of ~~22.9%~~ 31% and ~~34.1%, respectively, were~~41% was applied in the computation of the ~~Company’s~~ income tax provision for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and ~~2019, respectively.~~2019.

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The reconciliation of income tax computed at the Federal statutory rate to the ~~benefit (provision)~~(benefit) provision for income taxes ~~for the nine months ended June 30, 2020 was~~is as follows:

	Nine Months Ended
	June 30, 2020			June 30, 2019			December 31, 2020		December 31, 2019
Federal taxes at statutory rates	$	402			(219	)	$	78	$	(43	)
Permanent differences		(332	)		(35	)		3		(15	)
Other		(451	)		-
State and local taxes		(57	)		(102	)		34		(26	)
Income tax expense	$	(438	)		(356	)
							$	115	$	(84	)

14.	BUSINESS SEGMENT INFORMATION

As discussed above in note 1, the Company operates in three reportable segments: 1) Global Logistics Services, 2) Manufacturing and 3) Life ~~Sciences, supported by a corporate group which conducts activities that are non-segment specific.~~ Sciences. The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance.

The following ~~tables present~~table presents selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020:

For the three months ended June 30, 2020	Consolidated			Global Logistics Services			Manufacturing		Life Sciences			Corporate
For the three months ended December 31, 2020															Consolidated		Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	18,498		$	15,565		$	1,605	$	1,328		$	-		$	26,478	$	22,260	$	1,869	$	2,349	$	—
Forwarding expenses and cost of revenues		13,405			12,194			752		459			-			20,029		18,395		878		756		—
Gross profit		5,093			3,371			853		869			-			6,449		3,865		991		1,593		—
Selling, general and administrative		5,482			3,429			482		951			620			5,709		3,374		642		976		717
Amortization of intangible assets		243			-			-		-			243			251		—		—		—		251
Operating (loss) income		(632	)		(58	)		371		(82	)		(863	)
Interest expense (income) net		108			30			49		25			4
Identifiable assets as of June 30, 2020		51,794			13,173			2,472		9,776			26,373
Operating income (loss)																489		491		349		617		(968	)
Interest expense																119		37		47		28		7
Identifiable assets																68,224		22,418		3,501		10,252		32,053
Capital expenditures	$	157		$	28		$	11	$	118		$	-		$	55	$	19	$	12	$	24	$	—

For the nine months ended
June 30, 2020
Consolidated
Global Logistics
Services
Manufacturing Life Sciences Corporate
Revenue $ 57,440 $ 46,972 $ 5,531 $ 4,937 $ -
Forwarding expenses and cost of revenues 40,064 35,896 2,505 1,663 -
Gross profit 17,376 11,076 3,026 3,274 -
Selling, general and administrative 18,151 11,019 1,865 3,002 2,265
Amortization of intangible assets 729 - - - 729
Operating (loss) income (1,504 ) 57 1,161 272 (2,994 )
Interest expense (income) net 412 150 187 76 (1 )
Identifiable assets as of June 30, 2020 51,794 13,173 2,472 9,776 26,373
Capital expenditures $ 288 $ 92 $ 34 $ 162 $ -

~~Table of Contents~~

For the three months ended June 30, 2019	Consolidated		Global Logistics Services		Manufacturing		Life Sciences		Corporate
For the three months ended December 31, 2019												Consolidated			Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	20,311	$	16,708	$	2,419	$	1,184	$	—		$	19,821		$	16,079	$	1,870	$	1,872	$	—
Forwarding expenses and cost of revenues		14,225		12,872		1,066		287		—			13,534			12,087		845		602		—
Gross profit		6,086		3,836		1,353		897		—			6,287			3,992		1,025		1,270		—
Selling, general and administrative		5,600		3,600		492		795		713			6,085			3,638		682		980		785
Amortization of intangible assets		230		—		—		—		230			243			—		—		—		243
Operating income (loss)		256		236		861		102		(943	)
Interest expense (income) net		183		127		31		27		(2	)
Identifiable assets as of June 30, 2019		55,266		20,672		2,753		6,566		25,275
Operating (loss) income													(41	)		354		343		290		(1,028	)
Interest expense (income)													163			66		72		27		(2	)
Identifiable assets													56,777			17,926		2,148		9,766		26,937
Capital expenditures	$	50	$	—	$	26	$	24	$	—		$	97		$	47	$	23	$	27	$	—

For the nine months ended
June 30, 2019
Consolidated
Global Logistics
Services
Manufacturing Life Sciences Corporate
Revenue $ 63,607 $ 52,378 $ 6,952 $ 4,277 $ —
Forwarding expenses and cost of revenues 44,664 40,247 3,076 1,341 —
Gross profit 18,943 12,131 3,876 2,936 —
Selling, general and administrative 16,681 10,220 2,167 2,226 2,068
Amortization of intangible assets 674 — — — 674
Operating income (loss) 1,588 1,911 1,709 710 (2,742 )
Interest expense (income) net 543 352 107 91 (7 )
Identifiable assets as of June 30, 2019 55,266 20,672 2,753 6,566 25,275
Capital expenditures $ 303 $ 16 $ 67 $ 220 $ —

15.	RISKS AND UNCERTAINTIES

(In thousands)	December 31, 2020			September 30, 2020
Total Subordinated Promissory Notes	$	2,355		$	543
Less Current Portion of Subordinated Promissory Notes		(1,204	)		(504	)
Long Term Portion of Subordinated Promissory Notes	$	1,151		$	39

2020	$	485
2021		467		$	805
2022		372			786
2023		223			537
2024		166			496
2025					247
Total undiscounted lease payments		1,713			2,871
Less: Imputed interest		(193	)		(217	)
Total lease obligations	$	1,520		$	2,654

	June 30, 2020 (Unaudited)			September 30, 2019
ASSETS
Current Assets:
Cash	$	2,679		$	2,163
Accounts receivable, net of allowance for doubtful accounts		12,476			21,351
Inventory, net		3,956			4,371
Prepaid expenses and other current assets		354			531
Note receivable		71			139
Total current assets		19,536			28,555
Property and Equipment, net		4,044			3,954
Other Assets:
Intangible assets, net		12,869			13,598
Goodwill		13,641			13,525
Operating lease right of use asset		1,498			—
Security deposits and other long-term assets		206			87
Total other assets		28,214			27,210
Total assets	$	51,794		$	59,719
LIABILITIES
Current Liabilities:
Line of credit	$	5,923		$	8,391
Accounts payable – trade		14,539			22,061
Accrued expenses and other current liabilities		2,562			2,272
Dividends payable		1,541			1,041
Current portion of subordinated promissory note		157			152
Short-term lease liabilities		438			—
Current portion of Paycheck Protection Program (PPP) loan		1,351			—
Current portion of long-term debt		919			828
Total current liabilities		27,430			34,745
Other Liabilities:
Long-term debt		5,991			6,602
Paycheck Protection Program (PPP) loan		1,380			—
Subordinated promissory notes		424			541
Mandatorily redeemable non-controlling interest		619			619
Deferred income taxes		2,360			2,000
Long-term operating lease liabilities		1,082			—
Other liabilities		320			334
Total other liabilities		12,176			10,096
Total liabilities		39,606			44,841
STOCKHOLDERS’ EQUITY
Preferred Stock, $0.001 par value; 100,000 shares authorized
Series B 5,700 shares authorized and 331 and 631 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively.		—			—
Series C 20,000 shares authorized and 20,000 shares issued and outstanding at June 30, 2020 and September 30, 2019, liquidation value of $13,041 and $12,541 at June 30, 2020 and September 30, 2019, respectively		—			—
Common stock, $0.001 par value; 4,500,000 shares authorized, 875,652 issued and 855,652 outstanding as of June 30, 2020 and 863,812 issued and 843,812 outstanding as of September 30, 2019		1			1
Paid-in capital		14,739			15,075
Treasury stock, at cost, 20,000 shares		(240	)		(240	)
Accumulated (deficit) earnings		(2,312	)		42
Total stockholders’ equity		12,188			14,878
Total liabilities and stockholders’ equity	$	51,794		$	59,719

	June 30, 2020			September 30, 2019
Long Term Debt^*	$	4,625		$	5,455
Less Current Portion		(786	)		(786	)
	$	3,839		$	4,669

	June 30, 2020			September 30, 2019
Long term subordinated promissory notes	$	581		$	693
Less current portion of subordinated promissory note		(157	)		(152	)
	$	424		$	541

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding Balance at September 30, 2019		110,837		$	5.05		5.98	$	438.06
Granted		7,500		$	9.00		9.25	$	—
Exercised		(3,841	)	$	8.17		—	$	—
Outstanding Balance at June 30, 2020		114,496		$	5.21		5.42	$	310.00
Exercisable on June 30, 2020		101,164		$	4.77		4.98	$	310.00

	Restricted Stock			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)
Unvested at September 30, 2019		5,000		$	8.01		0.61
Vested		(5,000	)	$	8.01		—
Unvested at June 30, 2020		—		$	—		—

	Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)
Unvested at September 30, 2019		26,667		$	8.04		0.88
Vested		(3,333	)	$	—		—
Unvested at June 30, 2020		23,334		$	8.04		0.16

For the nine months ended June 30, 2020	Consolidated			Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	57,440		$	46,972	$	5,531	$	4,937	$	-
Forwarding expenses and cost of revenues		40,064			35,896		2,505		1,663		-
Gross profit		17,376			11,076		3,026		3,274		-
Selling, general and administrative		18,151			11,019		1,865		3,002		2,265
Amortization of intangible assets		729			-		-		-		729
Operating (loss) income		(1,504	)		57		1,161		272		(2,994	)
Interest expense (income) net		412			150		187		76		(1	)
Identifiable assets as of June 30, 2020		51,794			13,173		2,472		9,776		26,373
Capital expenditures	$	288		$	92	$	34	$	162	$	-

For the nine months ended June 30, 2019	Consolidated		Global Logistics Services		Manufacturing		Life Sciences		Corporate
Revenue	$	63,607	$	52,378	$	6,952	$	4,277	$	—
Forwarding expenses and cost of revenues		44,664		40,247		3,076		1,341		—
Gross profit		18,943		12,131		3,876		2,936		—
Selling, general and administrative		16,681		10,220		2,167		2,226		2,068
Amortization of intangible assets		674		—		—		—		674
Operating income (loss)		1,588		1,911		1,709		710		(2,742	)
Interest expense (income) net		543		352		107		91		(7	)
Identifiable assets as of June 30, 2019		55,266		20,672		2,753		6,566		25,275
Capital expenditures	$	303	$	16	$	67	$	220	$	—

	Nine Months Ended June 30, 2020		Three Months Ended December 31, 2020		Three Months Ended December 31, 2019
Operating lease cost	$	559	$	231	$	200
Short-term lease cost		103		14		14
Total lease cost	$	662	$	245	$	214

	Three Months Ended December 31, 2020		Three Months Ended December 31, 2019
Revenues	$	26,478	$	19,821
Forwarding expenses and cost of revenues		20,029		13,534
Gross profit		6,449		6,287
Operating expenses		5,960		6,328
Operating income (loss)		489		(41	)
Net income (loss)		255		(120	)
Adjusted operating income		978		496

~~Exhibit No.~~ 10.1	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.

~~31.1~~10.2	Subscription Agreement for sale of Series C Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 2, 2020).

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

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

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

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

101	Interactive data files providing financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30,~~December 31, 2020 for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019 in XBRL (Extensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of ~~June 30,~~December 31, 2020 and September 30, ~~2019,~~2020, (ii) Consolidated Statements of Operations for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019, (iii) Consolidated Statement of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019, and (v) Notes to Consolidated Financial Statements.

Dated: ~~August~~ 7, ~~2020~~ February 11, 2021	JANEL CORPORATION
	Registrant

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

Dated: ~~August 7, 2020~~February 11, 2021	JANEL CORPORATION
	Registrant

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