Janel Corp 10-Q for FY2023 Q2
Janel Corp (JANL)
10-Q
2023-05-05
For: 2023-03-31
View Original
Added on
April 06, 2026
About this 10-Q
Janel Corp filed this 10-Q on May 5, 2023, covering the quarter ended March 31, 2023 (FY2023 Q2).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $45.38M
- down 43.9% from $80.85M a year earlier
- Net income
- $218K
- down 82.9% from net income of $1.27M a year earlier
- Diluted EPS
- $0.12
- down 87.4% from $0.95 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number: 333-60608
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (212 ) 373-5895
Former name, former address and former fiscal year, if changed from last report: N/A
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbols(s)
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Name of each exchange
on which registered
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None
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None
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None
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer
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☐ |
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Smaller reporting company
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Emerging growth company
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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 May 5, 2023 was 1,186,354 .
JANEL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
For Quarterly Period Ended March 31, 2023
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Page
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3
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Item 1.
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3
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3
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4
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5
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6
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7
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Item 2.
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18
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Item 4.
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26
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27
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Item 1.
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27
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Item 1A.
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27
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Item 2.
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27
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Item 6.
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27
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28
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| ITEM 1. |
FINANCIAL STATEMENTS
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JANEL CORPORATION AND SUBSIDIARIES
(in thousands, except share and per share data)
(Unaudited)
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March 31,
2023 |
September 30,
2022
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ASSETS
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||||||||
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Current Assets:
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||||||||
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Cash
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$
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$
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Accounts receivable, net of allowance for doubtful accounts
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Inventory, net
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Prepaid expenses and other current assets
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Total current assets
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Property and Equipment, net
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Other Assets:
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Intangible assets, net
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Goodwill
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| Investment in marketable securities at fair value | ||||||||
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Operating lease right of use asset
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Security deposits and other long-term assets
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Total other assets
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Total assets
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$
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$
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities:
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||||||||
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Lines of credit
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$
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$
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Accounts payable - trade
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Accrued expenses and other current liabilities
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Dividends payable
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Current portion of earnout
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Current portion of long-term debt
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Current portion of deferred acquisition payments
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Current portion of subordinated promissory note-related party
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Current portion of operating lease liabilities
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Total current liabilities
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Other Liabilities:
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Long-term debt
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Long-term portion of earnout
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Subordinated promissory notes-related party
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Mandatorily redeemable non-controlling interest
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Deferred income taxes
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Long-term operating lease liabilities
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Other liabilities
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Total other liabilities
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Total liabilities
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Stockholders’ Equity:
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Preferred Stock, $
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Series C
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Common stock, $
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Paid-in capital
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Common treasury stock, at cost,
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(
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)
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(
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)
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Accumulated earnings
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Total stockholders’ equity
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Total liabilities and stockholders’ equity
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$
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$
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||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
JANEL CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
(Unaudited)
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Three Months Ended
March 31,
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Six Months Ended
March 31,
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|||||||||||||||
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2023
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2022
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2023
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2022
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|||||||||||||
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Revenue
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$
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$
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$
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$
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||||||||
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Forwarding expenses and cost of revenue
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Gross profit
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Cost and Expenses:
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Selling, general and administrative
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Amortization of intangible assets
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Total Costs and Expenses
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Income from Operations
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Other Items:
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Interest expense
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(
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)
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(
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)
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(
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(
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)
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||||||||
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Unrealized loss on marketable securities
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(
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)
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( |
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Income Before Income Taxes
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Income tax expense
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
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Net Income
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Preferred stock dividends
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(
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)
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(
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)
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(
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(
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||||||||
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Non-controlling interest dividends
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( |
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Net Income Available to Common Stockholders
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$
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$
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$
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$
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Net income per share
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Basic
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$
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$
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$
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$
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Diluted
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$
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$
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$
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$
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Net income per share attributable to common stockholders:
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||||||||||||||||
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Basic
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$
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$
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$
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$
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Diluted
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$
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$
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$
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$
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Weighted average number of shares outstanding:
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Basic
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Diluted
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The accompanying notes are an integral part of these condensed consolidated financial statements.
JANEL CORPORATION AND SUBSIDIARIES
(in thousands, except share and per share data)
(Unaudited)
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PREFERRED STOCK
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COMMON STOCK
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PAID-IN CAPITAL
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COMMON
TREASURY STOCK
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ACCUMULATED EARNINGS
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TOTAL EQUITY
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||||||||||||||||||||||||||||||
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SHARES
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$ |
SHARES
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$ |
$ |
SHARES
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$ |
$ |
$ |
|||||||||||||||||||||||||||
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Balance - September 30, 2022
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|
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$
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$
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$
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(
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)
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$
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$
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Net Income
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—
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—
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—
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Dividends to preferred stockholders
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—
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—
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(
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)
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—
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(
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)
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||||||||||||||||||||||||
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Stock-based compensation
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—
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—
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—
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||||||||||||||||||||||||||
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Balance - December 31, 2022
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|
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(
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)
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|||||||||||||||||||||||||
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Net Income
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—
|
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—
|
|
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—
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|
|
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||||||||||||||||||||||||||
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Dividends to preferred stockholders
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—
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—
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(
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)
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—
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(
|
)
|
||||||||||||||||||||||||
| Stock based compensation | — | — | — | ||||||||||||||||||||||||||||||||
|
Balance - March 31, 2023
|
|
$ |
|
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$
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$
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|
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$
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(
|
)
|
$
|
|
$
|
|
|||||||||||||||||||
|
PREFERRED STOCK
|
COMMON STOCK
|
PAID-IN CAPITAL
|
COMMON
TREASURY STOCK
|
ACCUMULATED EARNINGS
|
TOTAL EQUITY
|
||||||||||||||||||||||||||||||
|
SHARES
|
$ |
SHARES
|
$ |
$ |
SHARES
|
$ |
$ |
$
|
|||||||||||||||||||||||||||
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Balance - September 30, 2021
|
|
|
|
$
|
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$
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|
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$
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(
|
)
|
$
|
|
$
|
|
||||||||||||||||||||
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Net Income
|
—
|
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—
|
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—
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||||||||||||||||||||||||||
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Dividends to preferred stockholders
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—
|
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—
|
|
(
|
)
|
—
|
|
|
(
|
)
|
||||||||||||||||||||||||
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Stock-based compensation
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—
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—
|
|
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—
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||||||||||||||||||||||||||
|
Stock options exercise
|
|
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|
|
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||||||||||||||||||||||||||
|
Balance - December 31, 2021
|
|
|
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||||||||||
|
Net Income
|
—
|
|
—
|
|
|
—
|
|
|
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||||||||||||||||||||||||||
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Dividends to preferred stockholders
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—
|
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—
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(
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)
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—
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|
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(
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)
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||||||||||||||||||||||||
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Dividend to non-controlling interest
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— | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||
| Preferred C shares purchased |
( |
) | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||||||
| Preferred C shares converted |
( |
) | — | — | |||||||||||||||||||||||||||||||
| Preferred B shares converted |
( |
) | — | — | |||||||||||||||||||||||||||||||
|
Stock based compensation
|
—
|
|
|
|
|
—
|
|
|
|
||||||||||||||||||||||||||
| Stock options exercise |
|||||||||||||||||||||||||||||||||||
|
Balance - March 31, 2022
|
|
$
|
|
|
$
|
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$
|
|
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$
|
(
|
)
|
$
|
|
$
|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
JANEL CORPORATION AND SUBSIDIARIES
(in thousands)
(Unaudited)
|
Six Months Ended
March 31,
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||||||||
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2023
|
2022
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Cash Flows From Operating Activities:
|
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Net income
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$
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$
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|
||||
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Adjustments to reconcile net income to net cash provided by operating activities:
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||||||||
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(Recovery of) provision for uncollectible accounts
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(
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)
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|
|||||
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Depreciation
|
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||||||
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Deferred income tax provision
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(
|
)
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|
|||||
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Amortization of intangible assets
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Amortization of acquired inventory valuation
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Amortization of loan costs
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Stock-based compensation
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| Unrealized loss on marketable securities |
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Change in fair value of mandatorily redeemable noncontrolling interest
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Changes in operating assets and liabilities, net of effects of acquisitions:
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Accounts receivable
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(
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)
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|||||
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Inventory
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(
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)
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(
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)
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||||
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Prepaid expenses and other current assets
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(
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)
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(
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)
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||||
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Security deposits and other long-term assets
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(
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)
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Accounts payable and accrued expenses
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(
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)
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Other liabilities
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Net cash provided by operating activities
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Cash Flows From Investing Activities:
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Acquisition of property and equipment, net of disposals
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(
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)
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(
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)
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Earnout payment
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( |
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Acquisitions
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(
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)
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(
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)
|
||||
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Net cash used in investing activities
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(
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)
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(
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)
|
||||
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Cash Flows From Financing Activities:
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||||||||
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Repayments of term loan
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(
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)
|
(
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)
|
||||
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Proceeds from stock option exercise
|
|
|
||||||
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Lines of credit payments, net
|
(
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)
|
(
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)
|
||||
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Repayment of subordinated promissory notes
|
(
|
)
|
(
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)
|
||||
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Dividends paid to minority shareholders
|
( |
) | ||||||
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Dividends paid to preferred stockholders
|
( |
) | ||||||
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Repurchase of Series C Preferred Stock
|
( |
) | ||||||
|
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
|
Net decrease in cash
|
(
|
)
|
(
|
)
|
||||
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Cash at beginning of the period
|
|
|
||||||
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Cash at end of period
|
$
|
|
$
|
|
||||
|
Supplemental Disclosure of Cash Flow Information:
|
||||||||
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Cash paid during the period for:
|
||||||||
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Interest
|
$
|
|
$
|
|
||||
|
Income taxes
|
$
|
|
$
|
|
||||
|
Non-cash operating activities:
|
||||||||
|
Contingent earnout acquisition
|
$ | $ | ||||||
|
Due to former owner
|
$ | $ | ||||||
| Non-cash investing activities: |
||||||||
|
Purchase price adjustments
|
$ |
$ |
||||||
|
Non-cash financing activities:
|
||||||||
|
Dividends declared to preferred stockholders
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
JANEL CORPORATION AND SUBSIDIARIES
| 1. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
The accompanying interim unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of Article 8 of Regulation S-X and the instructions to Form 10-Q of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in
audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Janel Corporation (the “Company” or “Janel”) believes that the disclosures made are adequate to make the
information presented not misleading. The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. The results
of operations for the periods presented are not necessarily indicative of the results to be expected for a full fiscal year, or any other period. These condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the Company’s Form 10-K as filed with the Securities and Exchange Commission.
Business Description
Janel is a holding company with subsidiaries in three business segments: Logistics, Life Sciences and Manufacturing. The Company strives to create shareholder value primarily through three strategic priorities: supporting its
businesses’ efforts to make investments and to build long-term profits; allocating Janel’s capital at high risk-adjusted rates of return; and attracting and retaining exceptional talent.
Management at the holding company focuses on significant capital allocation decisions, corporate governance and
supporting Janel’s subsidiaries where appropriate. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into
new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
Revenue and revenue recognition
Logistics
Revenue is recognized upon transfer of control of promised services to customers. With respect to its Logistics
segment, the Company has determined that, in general, each shipment transaction or service order constitutes a separate contract with the customer. When the Company provides multiple services to a customer, different contracts may be present
for different services.
The Company typically satisfies its performance obligations as services are rendered at a point in time. A typical
shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the
performance of its obligations as services are completed at a point in time during the life of a shipment, including services at origin, freight and destination. The Company fulfills nearly all of its performance obligations within a one- to
two-month period.
The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally,
revenue is recorded on a gross basis when the Company is acting as principal and is primarily responsible for fulfilling the promise to provide the services, when it has discretion in setting the prices for the services to the customers, and
the Company has the ability to direct the use of the services provided by the third party. Revenue is recognized on a net basis when the Company is acting as agent and we do not have latitude in carrier selection or in establishing rates with
the carrier.
In the
Logistics segment, the Company disaggregates its revenues by its five primary service
categories: Trucking, Ocean, Air, Other, and Customs Brokerage. A summary of the Company’s revenues disaggregated by major service
lines for the three and six months ended March 31, 2023 and 2022 was as follows (in thousands) :
|
Three Months Ended
March 31,
|
Six
Months Ended
March 31,
|
|||||||||||||||
|
2023
|
2022
|
2023
|
2022
|
|||||||||||||
|
Service Type
|
||||||||||||||||
|
Trucking
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Ocean
|
||||||||||||||||
|
Air
|
|
|
|
|
||||||||||||
| Other | ||||||||||||||||
|
Customs Brokerage
|
|
|
|
|
||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The
results for the six months ended March 31, 2022 include an immaterial correction in the classification of service type revenue. The correction resulted in a reduction of the Other category of $1,518 and an increase to Ocean, Air, Trucking and Custom Brokerage of $1,019 ,
$410 , $35 and $54 , respectively. The corrections had no effect on reported revenue or results of operations.
Life Sciences and Manufacturing
Revenue 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. Revenue from the Company’s Manufacturing segment, which is comprised of Indco, a majority-owned subsidiary of the
Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries (“Indco”), are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories.
Revenue for Life Sciences and Manufacturing are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.
| 2. |
ACQUISITIONS
|
Fiscal 2023 Acquisitions
Life Sciences
On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience
Corporation (“IBS”), for an aggregate purchase price of $4,055 , net of $153 cash received. At closing, $3,000 was paid in cash, $250 is due to the former stockholder of IBS as a deferred acquisition payment upon integration, $600 was recorded as a preliminary earnout consideration (not to exceed $750 )
and $205 was recorded as a preliminary working capital adjustment. The acquisition was funded with cash provided by normal
operations, and the results of operations of IBS are included in Janel’s condensed consolidated results of operations since the date of the acquisition. In connection with the combination, the Company recorded an aggregate of $954 in goodwill and $2,495 in
other identifiable intangibles. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. IBS is a
developer and manufacturer of high-quality reagents used by research and diagnostic customers. IBS was founded in 2007 and is headquartered in Mukilteo, Washington. The acquisition of IBS was completed to expand our product offerings in our
Life Sciences segment.
On March 2, 2023, the Company completed a business combination whereby it acquired all of the outstanding stock of Stephen Hall PhD, Ltd.
(“SH”) for an aggregate purchase price of $609 . At closing, $500 was paid in cash, with $100 due to the former stockholder of SH as
a deferred acquisition payment upon integration, and $9 recorded as a preliminary working capital adjustment. The acquisition was
funded with cash provided by normal operations, and the results of operations of SH are included in Janel’s condensed consolidated results of operations since the date of the acquisition. In connection with the combination, the Company
recorded an aggregate of $190 in goodwill and $202 in other identifiable intangibles. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated
results of operations, individually or in aggregate. SH is a developer and manufacturer of antibodies and cell culture media for research and diagnostic uses. SH was founded in 2011 and is headquartered in Lafayette, Indiana. The
acquisition of SH was completed to expand our product offerings in our Life Sciences segment.
The Company is still finalizing the valuation of assets acquired and liabilities assumed for both IBS and SH, and, as such, the fair value
amounts are preliminary and subject to change. Primary amounts subject to adjustment include, but are limited to, intangible assets, fair value of accounts receivable or a change in the goodwill balance.
Fiscal 2022
Acquisitions
Life Sciences
On August 15, 2022, the Company completed a business combination whereby it acquired all of the membership interests of ECM Biosciences LLC
(“ECM”) for $850 , net of $16
cash received. At closing, the former member of ECM was paid $600 in cash and an additional $250 was due to the former member, which is included in accrued expenses and other current liabilities. In connection with the combination, the
Company recorded an aggregate of $24 in goodwill and $222 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations. The results of operations of the acquired businesses are included in
Janel’s consolidated results of operations since the date of the acquisition and are included in our Life Sciences segment. The acquisition of ECM was completed to expand our product offerings in our Life Sciences segment. Supplemental pro
forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate.
Investment in
Marketable Securities - Rubicon
On August 19, 2022, the Company acquired 1,108,000
shares (the “Acquired Shares”) of the common stock, par value $0.001 per share, of Rubicon Technology, Inc. (“Rubicon”), at a
price per share of $20.00 , in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022,
between the Company and Rubicon (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Acquired Shares represented 44.99 %
of Rubicon’s issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022.
Rubicon is an advanced materials provider specializing in monocrystalline sapphire for
applications in optical and industrial systems.
| 3. |
INVENTORY
|
Inventories consisted of the following (in thousands):
|
March 31,
2023
|
September 30,
2022
|
|||||||
|
Finished goods
|
$
|
|
$
|
|
||||
|
Work-in-process
|
|
|
||||||
|
Raw materials
|
|
|
||||||
|
Gross inventory
|
|
|
||||||
|
Less – reserve for inventory valuation
|
(
|
)
|
(
|
)
|
||||
|
Inventory net
|
$
|
|
$
|
|
||||
| 4. |
INTANGIBLE ASSETS
|
A summary of intangible assets and the estimated useful lives used in the
computation of amortization is as follows (in thousands):
|
March 31,
2023
|
September 30,
2022
|
Life
|
|||||||
|
Customer relationships
|
$
|
|
$
|
|
|
||||
|
Trademarks/names
|
|
|
|
||||||
|
Trademarks/names
|
|
|
Indefinite
|
||||||
|
Other
|
|
|
|
||||||
|
|
|
||||||||
|
Less: Accumulated Amortization
|
(
|
)
|
(
|
)
|
|||||
|
Intangible assets, net
|
$
|
|
$
|
|
|||||
The composition of the intangible assets balance at March
31, 2023 and September 30, 2022 is as follows (in thousands):
|
March 31,
2023
|
September 30,
2022
|
|||||||
|
Logistics
|
$
|
|
$
|
|
||||
| Life Sciences | ||||||||
|
Manufacturing
|
|
|
||||||
|
|
|
|||||||
|
Less: Accumulated Amortization
|
(
|
)
|
(
|
)
|
||||
|
Intangible assets, net
|
$
|
|
$
|
|
||||
Amortization expense for the six months ended March 31, 2023 and 2022 was $1,069 and $996 , respectively.
| 5. |
GOODWILL
|
The Company’s goodwill carrying amounts relate to acquisitions in the
Logistics, Life Sciences and Manufacturing business segments.
The composition of the goodwill balance at March 31, 2023 and September 30,
2022 was as follows (in thousands):
|
March 31,
2023
|
September 30,
2022
|
|||||||
|
Logistics
|
$
|
|
$
|
|
||||
| Life Sciences | ||||||||
|
Manufacturing
|
|
|
||||||
| Total |
$
|
|
$
|
|
||||
| 6. |
NOTES PAYABLE – BANKS
|
| (A) |
Santander Bank Facility
|
The wholly-owned subsidiaries which comprise the Company’s Logistics segment
(collectively, the “Janel Group Borrowers”), with the Company as a guarantor, have a Loan and Security Agreement (the “Santander Loan Agreement”) with
Santander with respect to a revolving line of credit facility (the “Santander Facility”). The Santander Loan Agreement was amended on March 31, 2022 to provide for, among other changes, the following: (i) the maximum revolving
facility amount available was increased from $30,000 to $31,500 (limited to 85 % of the borrowers’ eligible accounts receivable
borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement); (ii) the LIBOR basis on which interest under the Santander Loan Agreement was calculated under certain circumstances was changed to the Secured Overnight Financing Rate (“SOFR”) and interest on the
Santander Facility accrues at an annual rate equal to the one-month SOFR plus 2.75 %; (iii) a one-time increase from $1,000 to $3,000 in the amount the Company was permitted to distribute to holders of the Company’s Series C Stock if specified conditions are met; and (iv)
the amount of indebtedness of the Company’s Antibodies Incorporated subsidiary which the Company was permitted to guaranty was increased from $2,920
to $5,000 .
On July 13, 2022, the Santander Loan Agreement
was further amended by a Consent, Waiver and Second Amendment (the “Second Santander Amendment”) to (i) increase the maximum revolving facility amount available to $35,000 (limited to 85 % of the Janel Group Borrowers’ eligible
accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement) and (ii) provide for a new bridge term loan to the Company in the principal amount of up to $12,000 (the “Bridge Facility”) to be funded in connection with the acquisition by the Company of up to 45 % of the outstanding shares of Rubicon Technology, Inc. (“Rubicon”), subject to the satisfaction of certain customary limited conditions
(the “Rubicon Transaction”). The Bridge Facility was drawn on August 18, 2022 and matured on the earlier to occur of (i) twenty (20 )
business days following the funding of the Bridge Facility and (ii) the date of funding of the dividend to be paid by Rubicon in connection with the Rubicon Transaction. The Company repaid the Bridge Facility in full on August 30, 2022.
The Second Santander Amendment also contained a one-time waiver and consent to (a) the consummation of the Rubicon Transaction, and (b) a dividend of $2,500 to be paid by Janel Group (as defined herein) to the Company.
On January 30, 2023, the Santander Loan
Agreement was further amended by the Third Amendment to the Amended and Restated Loan and Security Agreement (the “Third Santander Amendment”). As amended by the terms of the Third Santander Amendment, the percentage of the Borrowers’
eligible accounts receivable used to calculate the borrowing base under the Loan Agreement was increased from 85 % to 90 % for Domestic Insured Accounts (as defined in the Amendment), subject to adjustments set forth in the Loan Agreement.
The
Santander Loan Agreement matures on September 21, 2026 . Interest accrues on the Santander Facility at an annual rate equal to
the one-month SOFR plus 2.75 %.
The Janel Group Borrowers’ obligations under the Santander Facility are secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants. As a result of its terms, the
Santander Facility is classified as a current liability on the consolidated balance sheet.
At March 31, 2023, outstanding borrowings under the Santander Facility were $18,157 ,
representing 51.9 % of the $35,000
available subject to limitations thereunder, and interest was accruing at an effective interest rate of 7.02 %.
At September 30, 2022, outstanding borrowings under the Santander Facility were $26,396 ,
representing 75.4 % of the $35,000
available thereunder, and interest was accruing at an effective interest rate of 5.79 %.
The Company was in compliance with the financial covenants defined in the
Santander Loan Agreement at both March
31, 2023 and September 30, 2022.
| (B) |
First Merchants Bank Credit Facility
|
On February 29, 2016, Indco entered into a Credit Agreement (the “First
Merchants Credit Agreement”) with First Merchants Bank (“First Merchant”), which was subsequently amended on August 30, 2019 and July 1, 2020.
On August 1, 2022, Indco and First Merchants entered into Amendment No. 3 to the First Merchants Credit Agreement, modifying the
terms of Indco’s credit facilities. Under the revised terms, the credit facilities consist of a $5,500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan, and the continuation of a mortgage loan in the original principal amount of $680 (collectively, the “First Merchants Facility”). Interest will accrue on the term loan at an annual rate equal to one-month adjusted term SOFR plus either 2.75 %
(if Indco’s total funded debt to EBITDA ratio is less than 2 :1), or 3.5 % (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2 :1). Interest will accrue on the revolving loan at an annual rate equal to one-month adjusted
term SOFR plus 2.75 %. Interest will accrue on the mortgage loan at an annual rate of 4.19 %. Indco’s obligations under the First Merchants Credit Facility are secured by all of Indco’s real property and other assets, and are guaranteed by Janel, and
Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares. The term loan and revolving loan portions of the First Merchants Credit Facility will expire on August 1, 2027 , and the mortgage loan will mature on July 1, 2025
(subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.
As of March 31, 2023, there were no outstanding borrowings under the revolving loan, $4,747
of borrowings under the term loan, and $620 of borrowings under the mortgage loan with interest accruing on the term loan and
mortgage loan at an effective interest rate of 8.41 % and 4.19 %, respectively.
As of September 30, 2022, there wereno outstanding borrowings under the revolving loan, $5,420 of borrowings under the term loan, and $631 of
borrowings under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 6.63 %
and 4.19 %, respectively.
As of September 30, 2022, there were
Indco was in compliance with the financial covenants defined in the First
Merchants Credit Agreement at both March 31, 2023 and September
30, 2022.
| (in thousands) |
March 31,
2023
|
September 30,
2022
|
||||||
|
Total Debt*
|
$
|
|
$
|
|
||||
|
Less Current Portion
|
(
|
)
|
(
|
)
|
||||
| Long-term Portion |
$
|
|
$
|
|
||||
| * |
|
| (C) |
First Northern Bank of Dixon
|
Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the
Company, entered into a Business Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First Northern”) on June 21, 2018, as amended November 2019 and October 2, 2020. The First Northern Loan Agreement
provides for a $2,235 term loan (the “First Northern Term Loan”) which bears interest at an annual rate of 4.00 % and matures on November 14, 2029 .
In addition, Antibodies has a $750 revolving credit facility with First Northern (the “First Northern Revolving Loan”), which bears
interest at a variable index rate, currently 7.75 % and matures on November 10, 2023 .
Antibodies also entered into
There were no outstanding borrowings under the First Northern Generator Loan as of March 31, 2023 or September 30, 2022.
As of March 31, 2023, the total amount outstanding under the First Northern Term Loan was $2,055 , of which $1,996 is included
in long-term debt and $59 is included in current portion of long-term debt, with interest accruing at an effective interest rate
of 4.18 %.
As of March 31, 2023, the total amount outstanding under the First Northern Solar Loan was $20 , of which $12 is included in
long-term debt, and $8 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43 %.
As of March 31, 2023, the total amount outstanding under the First Northern Revolving Loan was $575 , which is included in lines of credit, with interest accruing at an effective interest rate of 8.75 %.
As of September 30, 2022, the total amount outstanding under the First Northern Term Loan was $
As of September 30, 2022, the total amount outstanding under the First Northern Solar Loan was $23 , of which $15 is included in
long-term debt and $8 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43 %.
As of September 30, 2022, there wer no outstanding borrowings under the First Northern Revolving Loan.
The Company was in compliance with the financial covenants defined in the First Northern Loan Agreement at March 31, 2023 and September 30, 2022.
| (in thousands) |
March 31,
2023
|
September 30,
2022
|
||||||
|
Total Debt*
|
$
|
|
$
|
|
||||
|
Less Current Portion
|
(
|
)
|
(
|
)
|
||||
| Long-term Portion |
$
|
|
$
|
|
||||
| * |
|
| 7. |
SUBORDINATED PROMISSORY NOTES - RELATED PARTY
|
Aves
Labs, Inc., a wholly-owned subsidiary of the Company, is the obligor on a fixed 0.5 % subordinated promissory note in the
amount of $1,850 (the “ICT Subordinated Promissory Note”) issued to the former owner of ImmunoChemistry Technologies, LLC
(“ICT”), in connection with a business combination whereby the Company acquired all of the membership interests of ICT. The ICT Subordinated Promissory Note is payable in sixteen scheduled quarterly installments of principal and interest
beginning March 4, 2021, matures on December 4, 2024 , and may be prepaid, in whole or in part, without premium or penalty.
The
ICT Subordinated Promissory Note is guaranteed by the Company and is secured by the Company’s membership interests in ICT. The ICT Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest
premiums and other amounts payable to Santander, First Merchants and the First Northern.
As of March 31, 2023, the amount outstanding under the ICT Subordinated Promissory Note was $496 , of
which $363 is included in the current portion of subordinated promissory notes and $133 is included in the long-term portion of subordinated promissory notes.
As of September
30, 2022, the amount outstanding under the ICT Subordinated Promissory Note was $707 , of which $425 is included in the current portion of subordinated promissory notes and $282 is included in the long-term portion of subordinated promissory notes.
Janel Group, Inc. (“Janel Group”), a wholly-owned
subsidiary of the Company, is the obligor on four fixed 4 % subordinated promissory notes totaling $6,000 in the aggregate
(together, the “ELFS Subordinated Promissory Notes”), payable to certain former shareholders of Expedited Logistics and Freight Services, LLC (“ELFS”), in
connection with the Company’s business combination whereby it acquired all the membership interest of ELFS and its related subsidiaries. All of the ELFS Subordinated Promissory Notes are guaranteed by the Company and are
subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Facility. The ELFS Subordinated Promissory Notes are payable in twelve equal consecutive quarterly
installments of principal together with accrued interest. Beginning October 15, 2021 and on the same day of the next eight
consecutive calendar quarters, thereafter payment of accrued interest and unpaid interest is due to the former shareholders. Beginning October 15, 2023 and on the same day of the next twelve consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders. In June 2022, the
principal amount of the ELFS Subordinated Promissory Notes was adjusted to $5,100 due to a revised working capital adjustment of
$900 .
As of March 31, 2023, the amount outstanding under the ELFS Subordinated Promissory Notes was $5,100 , of which $425 is included in the current portion of subordinated promissory notes and $4,675 was included in the long-term portion of subordinated promissory notes.
As of September
30, 2022, the amount outstanding under the ELFS Subordinated Promissory Notes was $5,100 and was included in the long-term
portion of subordinated promissory notes.
| (in thousands) |
March 31,
2023
|
September 30,
2022
|
||||||
|
Total subordinated promissory notes
|
$
|
|
$
|
|
||||
|
Less current portion of subordinated promissory notes
|
(
|
)
|
(
|
)
|
||||
|
Long term portion of subordinated promissory notes
|
$
|
|
$
|
|
||||
| 8. |
STOCKHOLDERS’ EQUITY
|
(in thousands, except share and per share data)
|
Preferred Stock
|
Series C Cumulative Preferred Stock
Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) were initially entitled to receive annual dividends at a rate of
7 % per annum of the original issuance price of $500 , when and if declared by the Company’s Board of Directors, with such rate to increase by 2 %
annually beginning on the third anniversary of issuance of such Series C Stock to a maximum rate of 13 %. By the filing of the Certificate
of Amendment to the Company’s Certificate of Incorporation on March 31, 2022, the annual dividend rate decreased to 5 % per annum of the
original issuance price, when and if declared by the Company’s Board of Directors, and will increase by 1 % beginning on January 1, 2024.
Such rate is to increase on each January 1 thereafter for four years to a maximum rate of 9 %. The dividend rate of the Series C Stock as of each March 31, 2023 and September 30, 2022 was 5
On March 31, 2022, the Company purchased 4,687 shares of the Series C Stock from two holders at a
purchase price of $500 per share plus accrued dividends, or an aggregate of $3,000 , and exchanged 4,905 shares of Series C Stock plus accrued
dividends from one holder, for the issuance of 65,205 shares of the Company’s Common Stock, par value $0.001 per share valued at
$47.00 per share of Common Stock (the closing price for the Common Stock on March 30, 2022), or a total value of $3,065 . As a result of these transactions, the number of issued and outstanding shares of Series C Stock was reduced from 20,960 11,368
| 9. |
STOCK-BASED COMPENSATION
|
|
|
(in thousands, except share and per share data)
|
On
October 30, 2013, the Board of Directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.
On September 21, 2021, the Board of Directors of the Company adopted the
Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock may be granted to
employees, directors and consultants to the Company and its subsidiaries. The Amended Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company
and was updated to reflect certain other non-substantive amendments.
Total stock-based compensation for the six months ended March 31, 2023 and 2022 amounted to $123
and $768 , respectively, and is included in selling, general and administrative expense in
the Company’s statements of operations.
| (A) |
Stock Options
|
The Company uses the Black-Scholes option pricing model to estimate the fair
value of our share-based awards. In applying this model, we use the following assumptions:
| • |
Risk-free interest rate - We determine the risk-free interest rate by using a weighted
average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate.
|
| • |
Expected term - We estimate the expected term of our options on the average of the
vesting date and term of the option.
|
|
•
|
Expected volatility - We estimate expected volatility using daily
historical trading data of a peer group.
|
| • |
Dividend yield - We have never paid dividends on our common stock and currently have no
plans to do so; therefore, no dividend yield is applied.
|
The fair values of our employee option awards were estimated using the assumptions below, which
yielded the following weighted average grant date fair values for the periods presented:
|
Six
Months Ended
March 31, 2023 |
||||
|
Risk-free interest rate
|
|
%
|
||
|
Expected option term in years
|
|
|||
|
Expected volatility
|
|
%
|
||
| Dividend yield |
% | |||
|
Weighted average grant date fair value
|
$
|
|
||
Options for Employees
|
Number
of Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||||||||||
|
Outstanding balance at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
$
|
|
|
$
|
|
||||||||||
|
Outstanding balance at March 31, 2023
|
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable at March 31, 2023
|
|
$
|
|
|
$
|
|
||||||||||
The
aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at March 31, 2023 of $31.00 per share and the exercise price of the stock options that had strike prices below such closing price.
As of March 31, 2023, there was approximately $442 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted
average period of 2.43 years.
Liability classified share-based awards
During the six months ended March 31, 2023, 7,018 options were granted 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:
|
Six
Months Ended
March 31, 2023 |
||||
|
Risk-free interest rate
|
|
%
|
||
|
Expected option term in years
|
|
|||
|
Expected volatility
|
|
%
|
||
| Dividend yield |
% | |||
|
Weighted average grant date fair value
|
$
|
|
||
|
Number
of Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||||||||||
|
Outstanding balance at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
$
|
|
|
$
|
|
||||||||||
|
Outstanding balance at March 31, 2023
|
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable at March 31, 2023
|
|
$
|
|
|
$
|
|
||||||||||
The aggregate intrinsic value in the above table was calculated as the
difference between the valuation price of Indco’s common stock at March 31, 2023 of $15.20 per share and the exercise price of the
stock options that had strike prices below such closing price.
The liability classified awards were measured at fair value at each
reporting date until the final measurement date, which was the date of completion of services required to earn the option. The accrued compensation cost related to these options was approximately $330 and $361 as of March 31, 2023 and September 30, 2022,
respectively, and is included in other liabilities in the condensed consolidated financial statements. The compensation cost related to these options was approximately $20 and $21 for the six
months ended March 31, 2023 and 2022, 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.
As a result of
previous option exercise and stock repurchase activity, the mandatorily redeemable non-controlling interest percentage was 9.77 %
as of March 31, 2023.
Changes in the fair value of the vested options are recognized in earnings in the condensed consolidated financial statements.
The options are classified as liabilities, and the underlying shares of
Indco’s common stock also contain put options which result in their classification as a mandatorily redeemable security. While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase
the shares upon death.
As of March 31, 2023, there was
approximately $66 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 .
| 10. |
INCOME PER COMMON SHARE
|
The following table provides a reconciliation of the basic and diluted
earnings per share (“EPS”) computations for the three and six months ended March 31, 2023 and 2022:
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||||||||||
|
(in thousands, except per share data)
|
2023 |
2022
|
2023 |
2022
|
||||||||||||
|
Income:
|
||||||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Preferred stock dividends
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Non-controlling interest dividends
|
( |
) | ( |
) | ||||||||||||
|
Net Income available to common stockholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Common Shares:
|
||||||||||||||||
|
Basic - weighted average common shares
|
|
|
|
|
||||||||||||
|
Effect of dilutive securities:
|
||||||||||||||||
|
Stock options
|
|
|
|
|
||||||||||||
|
Convertible preferred stock
|
|
|
|
|
||||||||||||
|
Diluted - weighted average common stock
|
|
|
|
|
||||||||||||
|
Income per Common Share:
|
||||||||||||||||
|
Basic -
|
||||||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Preferred stock dividends
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
| Non-controlling interest dividends |
( |
) | ( |
) | ||||||||||||
|
Net Income available to common stockholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Diluted -
|
||||||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Preferred stock dividends
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
| Non-controlling interest dividends |
( |
) | ( |
) | ||||||||||||
|
Net income available to common stockholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The computation for the diluted number of shares excludes unexercised stock
options that are anti-dilutive. There were 10 no
Potentially diluted securities for the three- and six-month periods ended March 31, 2023 and 2022 were
as follows:
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||||||||||
|
2023
|
2022
|
2023 |
2022 | |||||||||||||
|
Employee stock options (Note 9)
|
|
|
||||||||||||||
| 11. |
INCOME TAXES
|
The reconciliation of income tax computed at the Federal statutory rate to
the provision for income taxes from continuing operations for the three and six-month periods ended March 31, 2023 and 2022 is as follows (in thousands):
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||||||||||
| 2023 | 2022 |
2023 |
2022 |
|||||||||||||
|
Federal taxes at statutory rates
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Permanent differences
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
State and local taxes, net of Federal benefit
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Total
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
| 12. |
BUSINESS SEGMENT INFORMATION
|
As referenced above in Note 1, the Company operates in three
reportable segments: Logistics, Life Sciences and Manufacturing.
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 selected financial information about the Company’s reportable segments and
Corporate for the purpose of reconciling to the consolidated totals for the three and six months ended March 31, 2023:
|
For the three months ended March 31, 2023
(in thousands)
|
Consolidated
|
Logistics
|
Life Sciences
|
Manufacturing
|
Corporate
|
|||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Forwarding expenses and cost of revenue
|
|
|
|
|
|
|||||||||||||||
|
Gross profit
|
|
|
|
|
|
|||||||||||||||
|
Selling, general and administrative
|
|
|
|
|
|
|||||||||||||||
|
Amortization of intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Income (loss) from operations
|
|
|
|
|
(
|
)
|
||||||||||||||
|
Interest expense
|
|
|
|
|
|
|||||||||||||||
|
Identifiable assets
|
|
|
|
|
|
|||||||||||||||
|
Capital expenditures, net of disposals
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
For the six months ended March 31, 2023
(in thousands)
|
Consolidated
|
Logistics
|
Life Sciences
|
Manufacturing
|
Corporate
|
|||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Forwarding expenses and cost of revenue
|
|
|
|
|
|
|||||||||||||||
|
Gross profit
|
|
|
|
|
|
|||||||||||||||
|
Selling, general and administrative
|
|
|
|
|
|
|||||||||||||||
|
Amortization of intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Income (loss) from operations
|
|
|
|
|
(
|
)
|
||||||||||||||
|
Interest expense
|
|
|
|
|
|
|||||||||||||||
|
Identifiable assets
|
|
|
|
|
|
|||||||||||||||
|
Capital expenditures, net of disposals
|
|
|
|
|
|
|
|
|
|
|
||||||||||
The following tables present selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the three and six
months ended March 31, 2022:
|
For the three months ended March 31, 2022
(in thousands)
|
Consolidated
|
Logistics
|
Life Sciences
|
Manufacturing
|
Corporate
|
|||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Forwarding expenses and cost of revenue
|
|
|
|
|
|
|||||||||||||||
|
Gross profit
|
|
|
|
|
|
|||||||||||||||
|
Selling, general and administrative
|
|
|
|
|
|
|||||||||||||||
|
Amortization of intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Income (loss) from operations
|
|
|
|
|
(
|
)
|
||||||||||||||
|
Interest expense
|
|
|
|
|
|
|||||||||||||||
|
Identifiable assets
|
|
|
|
|
|
|||||||||||||||
|
Capital expenditures, net of disposals
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
For the six months ended March 31, 2022
(in thousands)
|
Consolidated
|
Logistics
|
Life Sciences
|
Manufacturing
|
Corporate
|
|||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Forwarding expenses and cost of revenue
|
|
|
|
|
|
|||||||||||||||
|
Gross profit
|
|
|
|
|
|
|||||||||||||||
|
Selling, general and administrative
|
|
|
|
|
|
|||||||||||||||
|
Amortization of intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Income (loss) from operations
|
|
|
|
|
(
|
)
|
||||||||||||||
|
Interest expense
|
|
|
|
|
|
|||||||||||||||
|
Identifiable assets
|
|
|
|
|
|
|||||||||||||||
|
Capital expenditures, net of disposals
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
13.
|
FAIR VALUE MEASUREMENTS
|
Recurring Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value on a recurring basis based on the three-level valuation
hierarchy (in thousands):
|
Level 1
|
March 31,
2023 |
September 30,
2022
|
||||||
|
Investment in Rubicon at fair value
|
$
|
|
$
|
|
||||
As of each March 31, 2023 and September 30, 2022, the Company held 46.07 % and 44.99 %, respectively of the total issued and
outstanding shares of Rubicon and reported its investment under the fair value method pursuant to ASC 320. Management determined that it was appropriate to carry its investment in Rubicon at fair value because the investment was traded on the
NASDAQ stock exchange through January 2, 2023 and began trading on the OTCQB Capital Market on January 3, 2023 and had daily trading activity, the combination of which provide a better indicator of value. The investment in Rubicon is re-measured
at the end of each quarter based on the trading price and any change in the value is reported on the income statement as an unrealized gain or loss on marketable securities in other income (expense).
The following table sets forth a summary of the changes in the fair value of the Company’s investment in Rubicon, which is measured at fair
value on a recurring basis utilizing Level 1 assumptions in its valuation (in thousands):
|
March 31,
2023
|
September 30,
2022
|
|||||||
|
Balance beginning of period
|
$
|
|
$
|
|
||||
|
Purchase of Rubicon Investment
|
|
|
||||||
|
Fair value adjustment to Rubicon investment
|
(
|
)
|
(
|
)
|
||||
|
Balance end of period
|
$
|
|
$
|
|
||||
The following table
presents the Company’s liabilities that are measured at fair value on a recurring basis based on the three-level valuation hierarchy (in thousands):
|
Level 3
|
March 31,
2023
|
September 30,
2022
|
||||||
|
Contingent earnout liabilities
|
$
|
|
$
|
|
||||
These liabilities
relate to the estimated fair value of earnout payments to former IBS and ELFS owners for the periods ending March 31, 2023 and September 30, 2022. The current and non-current portions of the fair value of the contingent earnout liability at March
31, 2023 were $1,324 and $2,163 ,
respectively. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2022 were $1,664
and $2,916 , respectively.
The following table sets forth a summary of the changes in
the fair value of the Company’s contingent earnout liabilities, which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation (in thousands):
|
March 31,
2023
|
September 30,
2022
|
|||||||
|
Balance beginning of period
|
$
|
|
$
|
|
||||
|
Fair value of contingent consideration recorded in connection with business combinations
|
|
|
||||||
| Earnout payment-ELFS |
( |
) | ||||||
|
Balance end of period
|
$
|
|
$
|
|
||||
| 14. |
LEASES
|
The Company has operating leases for office and warehouse space in certain
locations where it conducts business. As of March 31, 2023, the remaining terms of the Company’s operating leases were between
and 67 months, and certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts
include the minimum lease payments that the Company is obligated to make under the non-cancelable initial terms of the leases as the renewal terms are at the Company’s option and the Company is not reasonably certain to exercise those renewal
options at lease commencement.
The components of lease cost for the three- and six-month periods ended
March 31, 2023 and 2022 are as follows (in thousands):
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Short-term lease cost
|
|
|
|
|
||||||||||||
|
Total lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Rent expense for the six
months ended March 31, 2023 and 2022 was $1,150 and $1,200 , respectively. Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the
condensed consolidated balance sheets for operating leases as of March 31, 2023 were
$5,177 , $1,700 and
$3,678 , respectively. Operating lease right of use assets, current portion of operating lease
liabilities and long-term operating lease liabilities reported in the condensed consolidated balance sheets for operating leases as of September 30, 2022 were $5,660 , $1,825 and $4,001 , respectively.
As of March 31, 2023 and
September 30, 2022, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 4.4 years and 2.98 % and 4.6 years and 3.05 %, respectively.
Future minimum lease payments under non-cancelable operating leases as of
March 31, 2023 are as follows (in thousands):
|
2024
|
$
|
|
||
|
2025
|
|
|||
|
2026
|
|
|||
| 2027 |
|
|||
|
2028
|
|
|||
| Thereafter |
||||
|
Total undiscounted lease obligations
|
|
|||
|
Less: Imputed interest
|
(
|
)
|
||
|
Total lease obligation
|
$
|
|
| 15. | SUBSEQUENT EVENTS |
On April 25, 2023 Indco, and certain other Subsidiaries of the Company that are
part of the Life Science and Manufacturing segments (together with Indco, the “Borrowers” and each, a “Borrower”), entered into a Credit Agreement (the “Credit Agreement”) with First Merchants. The Credit Agreement constitutes an
amendment and restatement of that certain Credit Agreement dated February 29, 2016 between Indco and First Merchants (as amended, the “Prior Credit Agreement”). The credit facilities provided under the Credit Agreement (the “First
Merchants Credit Facilities”) will consist of a $3,000 Revolving Loan (limited to the borrowing base and reserves), a $5,000 Acquisition Loan, a $6,905
Term A Loan and a $620 Term B Loan as a continuation of the Mortgage Loan under the Prior Credit Agreement. Interest will
accrue on the outstanding Revolving Loan, Term A Loan and Acquisition Loan at an annual rate equal to one-month 2.75 1.75 3.50 1.75 4.19 %. The Borrowers’ obligations under the First Merchants Credit Facilities are secured by all of
the Borrowers’ real property and other assets, and are guaranteed by the Company, and the Company’s guarantee of the Borrowers’ obligations is secured by a pledge of the Company’s equity interests in certain of the Borrowers. The
Revolving Loan portion of the First Merchants Credit Facilities will expire on August 1, 2027 , the Term A Loan portion of the First Merchants Credit Facilities will mature on April 25, 2033 ,
the Term B Loan portion of the First Merchants Credit Facilities will mature on July 1, 2025 and the Acquisition Loan will
permit multiple draws until October 25, 2024, at which point the outstanding principal amount will amortize, with all remaining amounts due at maturity of the Acquisition Loan on April 25, 2029 ; each of the foregoing maturities, subject to earlier termination as provided in the Credit Agreement and unless renewed or extended. Proceeds provided
by the First Merchants Credit Facilities were used in part to repay amounts outstanding under the First Northern Term Loan, First Northern Revolving Loan and the First Northern Solar Loan.
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto as of and for
the three and six months ended March 31, 2023, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Amounts presented in this section are in thousands, except share and per share
data.
As used throughout this Report, “we,” “us”, “our,” “Janel,” “the Company,” “Registrant” and similar words refer to Janel Corporation and its Subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Report”) contains certain statements that are, or may deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and that reflect management’s current expectations with respect to our operations, performance, financial condition, and other developments. These forward – looking statements may
generally be identified using the words “may,” “will,” “intends,” “plans,” projects,” “believes,” “should,” “expects,” “predicts,” “anticipates,” “estimates,” and similar expressions or the negative of these terms or other comparable terminology.
These statements are necessarily estimates reflecting management’s best judgment based upon current information and involve several risks, uncertainties and assumptions. We caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and readers are advised that various factors, including, but not limited to, those set forth elsewhere in this Report, could affect our financial performance and could cause our actual results for
future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, our strategy of expanding our business through acquisitions of other
businesses; we may be required to record a significant charge to earnings related to the impairment of acquired assets; we may fail to realize the expected benefits or strategic objectives of any acquisition, or that we spend resources exploring
acquisitions that are not consummated; risks associated with litigation, including contingent auto liability and insurance coverage, and indemnification claims and other unforeseen claims and liabilities that may arise from an acquisition; changes
in tax rates, laws or regulations and our acquired companies and subsidiaries’ ability to utilize anticipated tax benefits; the impact of inflation and rising interest rates on our investments, business and operations; conflicts of interest with
the minority shareholders of our business; economic and other conditions in the markets in which we operate; we may not have sufficient working capital to continue operations; we may lose customers who are not obligated to long-term contracts to
transact with us; instability in the financial markets, including in the banking sector; changes or developments in U.S. laws or policies; competition from companies with greater financial resources and from companies that operate in areas in which
we plan to expand; our dependence on technically skilled employees; impacts from climate change, including the increased focus by third-parties on sustainability issues and our ability to comply therewith; the impact of increases in shipping costs,
long lead times, supply shortages and supply changes; competition from parties who sell their businesses to us and from professionals who cease working for us; terrorist attacks and other acts of violence or war; security breaches or cybersecurity
attacks; the level of our insurance coverage, including related to product and other liability risks; our compliance with applicable privacy, security and data laws; risks related to the diverse platforms and geographies which host our management
information and financial reporting systems; our dependence on the availability of cargo space from third parties; the impact of claims arising from transportation of freight by the carriers with which we contract, including an increase in premium
costs; risks related to the classification of owner-operators in the transportation industry; recessions and other economic developments that reduce freight volumes; other events affecting the volume of international trade and international
operations; risks arising from our ability to comply with governmental permit and licensing requirements or statutory and regulatory requirements; the impact of seasonal trends and other factors beyond our control on our Logistics business; changes
in governmental regulations applicable to our Life Sciences business; the ability of our Life Sciences business to continually produce products that meet high-quality standards such as purity, reproducibility and/or absence of cross-reactivity; the
ability of our Life Sciences business to maintain, determine the scope of and defend its and its competitors’ intellectual property rights; the impact of pressures in the life sciences industry to increase the predictability of or reduce healthcare
costs; any decrease in the availability, or increase in the cost or supply shortages, of raw materials used by Indco; risks arising from the environmental, health and safety regulations applicable to Indco; the reliance of our Indco business on a
single location to manufacture their products; the controlling influence exerted by our officers and directors and one of our stockholders; the unlikelihood that we will issue dividends in the foreseeable future; and risks related to ownership of
our common stock, including share price volatility, the lack of a guaranteed continued public trading market for our common stock, our ability to issue shares of preferred stock with greater rights than our common stock and costs related to
maintaining our status as a public company; and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual outcomes may vary materially from those projected. You should not place undue reliance on any of our forward-looking statements which speak only as of the date they are made. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of these factors, see our periodic reports filed with the SEC, including our most recent
Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
OVERVIEW
Janel Corporation ("Janel," the "Company," or the "Registrant") is a holding company with subsidiaries in three business segments: Logistics, Life Sciences and Manufacturing. The Company strives to
create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating Janel's capital at high risk-adjusted rates of return; and attracting and
retaining exceptional talent.
Management at the Janel holding company focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through
its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably priced companies
with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
Logistics
The Company’s Logistics segment is comprised of several wholly-owned subsidiaries. The Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management
services, including freight forwarding via air, ocean and land-based carriers; customs brokerage services; warehousing and distribution services; trucking and other value-added logistics services. In addition to these revenue streams, the Company
earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.
Life Sciences
The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal
antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on
an original equipment manufacturer (OEM) basis.
On March 2, 2023, the Company completed a business combination whereby it acquired all of the outstanding stock of Stephen Hall, PhD Ltd., which we include in our Life Sciences segment.
On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience Corporation, which we include in our Life Sciences segment.
On August 15, 2022, the Company completed a business combination whereby it acquired all the membership interests of ECM Biosciences LLC, which we include in our Life Sciences segment.
Manufacturing
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”). Indco is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for
specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.
Investment in Marketable Securities - Rubicon
On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $0.001 per share, of Rubicon Technology, Inc. ("Rubicon"), at a price per share of $20.00, in a cash tender
offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the "Rubicon Purchase Agreement"). Pursuant to the terms of the Rubicon Purchase Agreement, the acquired shares represented 44.99% of
Rubicon's issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022.
Rubicon is an advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. The purpose of our investment in Rubicon is for Janel to acquire
a significant ownership interest in Rubicon, together with representation on Rubicon's Board, in an attempt to (i) restructure the Rubicon business to achieve profitability and (ii) assist Rubicon in utilizing its net operating loss carry-forward
assets. Although we are optimistic about our investment in Rubicon, our investment involves risks and uncertainties that are beyond our control.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles
require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.
Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. For a description of the Company’s critical accounting policies
and estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K filed with the SEC on December 9, 2022. Critical
accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. There were no significant changes to our critical accounting
policies during the six months ended March 31, 2023.
NON-GAAP FINANCIAL MEASURES
While we prepare our financial statements in accordance with U.S. GAAP, we also utilize and present certain financial measures, in particular adjusted operating income, which is not based on or
included in U.S. GAAP (we refer to these as “non-GAAP financial measures”).
Organic Growth
Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months.
The organic growth presentation provides useful period-to-period comparison of revenue results as it excludes revenue from acquisitions that would not be included in the comparable prior period.
Adjusted Operating Income
As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business as well
as other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets such as customer relationships. Because these charges
are not indicative of our operations, we believe that adjusted operating income is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business that is more
representative of the actual results of our operations.
Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is used by
management as a supplemental performance measure to assess our business’s ability to generate cash and economic returns.
Adjusted operating income is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest and taxes.
We believe that organic growth and adjusted operating income provide useful information in understanding and evaluating our operating results in the same manner as management. However, organic growth
and adjusted operating income are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for total revenue, operating income or any other operating performance measures calculated in accordance
with U.S. GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and
circumstances that users of the financial statements may find significant.
In addition, although other companies may report measures titled organic growth, adjusted operating income or similar measures, such non-GAAP financial measures may be calculated differently from how
we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider organic growth and adjusted operating income alongside other financial performance
measures, including total revenue, operating income and our other financial results presented in accordance with U.S. GAAP.
Results of Operations – Janel Corporation - Three and Six Months Ended March 31, 2023 and 2022
Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion should be read in conjunction with the accompanying Condensed Consolidated
Financial Statements and the notes thereto.
Our consolidated results of operations are as follows:
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
(in thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
Revenue
|
$
|
45,378
|
$
|
80,851
|
$
|
102,422
|
$
|
164,165
|
||||||||
|
Forwarding expenses and cost of revenue
|
31,629
|
64,342
|
73,756
|
132,167
|
||||||||||||
|
Gross profit
|
13,749
|
16,509
|
28,666
|
31,998
|
||||||||||||
|
Operating expenses
|
12,845
|
14,362
|
26,382
|
27,209
|
||||||||||||
|
Income from operations
|
904
|
2,147
|
2,284
|
4,789
|
||||||||||||
|
Net income
|
218
|
1,273
|
578
|
2,961
|
||||||||||||
|
Adjusted operating income
|
$
|
1,636
|
$
|
3,454
|
$
|
3,693
|
$
|
6,816
|
||||||||
Consolidated revenue for the three months ended March 31, 2023 was $45,378, which was $35,473 or 43.9% lower than the prior year period. Consolidated revenue for the six months ended March 31, 2023
were $102,422, which was $61,743 or 37.6% lower than the prior year period. Revenue for both the three and six months ended March 31, 2023 decreased primarily due to lower freight prices in our Logistics segment as a result of lower freight demand
relative to improved global transportation capacity.
Income from operations for the three months ended March 31, 2023 was $904 compared with $2,147 in the prior year period. Income from operations for the six months ended March 31, 2023 was $2,284
compared with $4,789 in the prior year period. The decrease for both the three and six months ended March 31, 2023 resulted from lower profits across our business segments, especially at our Logistics segment, which benefited from unusually high
demand in the prior year periods.
Net income for the three months ended March 31, 2023 totaled $218 or $0.18 per diluted share, compared to net income of $1,273 or $1.23 per diluted share for the three months ended March 31, 2022. Net
income for the six months ended March 31, 2023 totaled $578 or $0.48 per diluted share, compared to net income of $2,961 or $2.89 per diluted share for the six months ended March 31, 2022. The decline in net income was largely due to lower profits
in our business segments, higher interest expense and a non-cash mark-to-market write-down of an equity investment.
Adjusted operating income for the three months ended March 31, 2023 decreased to $1,636 versus $3,454 in the prior year period. Adjusted operating income for the six months ended March 31, 2023
decreased to $3,693 versus $6,816 in the prior year period. The decrease for both the three and six months ended March 31, 2023 resulted from an overall decrease in profits at our business segments.
The following table sets forth a reconciliation of operating income to adjusted operating income:
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
(in thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
Income from operations
|
$
|
904
|
$
|
2,147
|
$
|
2,284
|
$
|
4,789
|
||||||||
|
Amortization of intangible assets
|
543
|
487
|
1,069
|
996
|
||||||||||||
|
Stock-based compensation
|
62
|
728
|
123
|
768
|
||||||||||||
|
Cost recognized on sale of acquired inventory
|
127
|
92
|
217
|
263
|
||||||||||||
|
Adjusted operating income
|
$
|
1,636
|
$
|
3,454
|
$
|
3,693
|
$
|
6,816
|
||||||||
Results of Operations – Logistics – Three and Six Months Ended March 31, 2023 and 2022
Our Logistics business helps its clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include arrangement of freight
forwarding by air, ocean and ground, customs entry filing, warehousing, cargo insurance procurement, logistics planning, product repackaging and online shipment tracking.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Revenue
|
$
|
39,878
|
$
|
75,073
|
$
|
91,678
|
$
|
152,629
|
||||||||
|
Forwarding expenses
|
29,831
|
62,281
|
70,098
|
127,891
|
||||||||||||
|
Gross profit
|
10,047
|
12,792
|
21,580
|
24,738
|
||||||||||||
|
Gross profit margin
|
25.2
|
%
|
17.0
|
%
|
23.5
|
%
|
16.2
|
%
|
||||||||
|
Selling, general & administrative
|
8,734
|
10,066
|
18,262
|
19,415
|
||||||||||||
|
Income from operations
|
$
|
1,313
|
$
|
2,726
|
$
|
3,318
|
$
|
5,323
|
||||||||
Revenue
Total revenue for the three months ended March 31, 2023 was $39,878 as compared to $75,073 for the three months ended March 31, 2022, a decrease of $35,195, or 46.9%. Total revenue for the six months
ended March 31, 2023 was $91,678 as compared to $152,629 for the six months ended March 31, 2022, a decrease of $60,951 or 39.9%. Revenue decreased for both the three and six months ended March 31, 2023 primarily due to lower freight prices as a
result of lower freight demand relative to improved global transportation capacity.
Gross Profit
Gross profit for the three months ended March 31, 2023 was $10,047, a decrease of $2,745, or 21.5%, as compared to $12,792 for the three months ended March 31, 2022. Gross profit margin as a
percentage of revenue increased to 25.2% for the three months ended March 31, 2023, compared to 17.0% for the prior year period, primarily because gross profit declined at a slower rate as compared to gross revenue, which declined more
significantly due to lower freight prices.
Gross profit for the six months ended March 31, 2023 was $21,580, a decrease of $3,158, or 12.8%, as compared to $24,738 for the six months ended March 31, 2022. Gross profit margin as a percentage of
revenue increased to 23.5% compared to 16.2% for the prior year period, primarily because gross profit declined at a slower rate compared with gross revenue, which declined more significantly due to lower freight prices.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2023 were $8,734, as compared to $10,066 for the three months ended March 31, 2022. This decrease of $1,332, or 13.2%,
was mainly due to lower personnel expenses and bad debt expense. Selling, general and administrative expenses as a percentage of revenue were 21.9% and 13.4% for the three months ended March 31, 2023 and 2022, respectively. The increase in selling,
general and administrative expenses as a percentage of revenue largely reflected the reduction in transportation rates.
Selling, general and administrative expenses for the six months ended March 31, 2023 were $18,262, as compared to $19,415 for the six months ended March 31, 2022. This decrease of $1,153, or 5.9%, was
mainly due to lower personnel expenses and recovery of bad debt expense. Selling, general and administrative expenses as a percentage of revenue were 19.9% and 12.7% of revenue for the six months ended March 31, 2023 and 2022, respectively. The
increase in selling, general and administrative expenses as a percentage of revenue largely reflected the decrease in transportation rates.
Income from Operations
Income from operations decreased to $1,313 for the three months ended March 31, 2023, as compared to income from operations of $2,726 for the three months ended March 31, 2022, a decrease of $1,413,
or 51.8%. Income from operations decreased as a result of lower transportation demand. Operating margin as a percentage of gross profit for the three months ended March 31, 2023 was 13.1% compared to 21.3% in the prior year period due to lower
gross profits.
Income from operations increased to $3,318 for the six months ended March 31, 2023, as compared to $5,323 for the six months ended March 31, 2022, a decrease of $2,005, or 37.7%. Income from
operations decreased during the six months ended March 31, 2023 as a result of lower transportation demand. Our operating margin as a percentage of gross profit for the six months ended March 31, 2023 was 15.4% compared to 21.5% in the prior year
period largely due to lower gross profits.
Results of Operations – Life Sciences – Three and Six Months Ended March 31, 2023 and 2022
The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides
antibody manufacturing for academic and industry research scientists. Our Life Sciences business also produces products for other life science companies on an OEM basis.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Revenue
|
$
|
3,068
|
$
|
3,275
|
$
|
5,906
|
$
|
6,519
|
||||||||
|
Cost of sales
|
500
|
775
|
1,138
|
1,605
|
||||||||||||
|
Cost recognized upon sales of acquired inventory
|
127
|
92
|
217
|
263
|
||||||||||||
|
Gross profit
|
2,441
|
2,408
|
4,551
|
4,651
|
||||||||||||
|
Gross profit margin
|
79.6
|
%
|
73.5
|
%
|
77.1
|
%
|
71.3
|
%
|
||||||||
|
Selling, general and administrative
|
1,570
|
1,283
|
3,080
|
2,533
|
||||||||||||
|
Income from operations
|
$
|
871
|
$
|
1,125
|
$
|
1,471
|
$
|
2,118
|
||||||||
Revenue
Total revenue was $3,068 and $3,275 for the three months ended March 31, 2023 and 2022, respectively, reflecting a decrease of $207, or 6.3%, compared to the prior year period due to
lower demand for diagnostic reagents, partially offset by current year acquisitions. Organic revenue excluding acquisition revenue declined $500, or 15.3%.
Total revenue was $5,906 and $6,519 for the six months ended March 31, 2023 and 2022, respectively, reflecting a decrease of $613, or 9.4%, compared to the prior year period due
to lower demand for diagnostic reagents, partially offset by current year acquisitions. Organic revenue excluding acquisition revenue declined $988, or 15.2%.
Gross Profit
Gross profit was $2,441 and $2,408 for the three months ended March 31, 2023 and 2022, respectively, an increase of $33, or 1.4%. During the three months ended March 31, 2023 and 2022, gross profit
margin was 79.6% and 73.5%, respectively, as product mix improved.
Gross profit was $4,551 and $4,651 for the six months ended March 31, 2023 and 2022, respectively, a decrease of $100 or 2.2%. In the six months ended March 31, 2023 and 2022, the Life Sciences
segment had a gross profit margin of 77.1% and 71.3%, respectively. Gross profit margin increased as product mix improved.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Life Sciences segment were $1,570 and $1,283 for the three months ended March 31, 2023 and 2022, respectively. Selling, general and administrative
expenses were $3,080 and $2,533 for the six months ended March 31, 2023 and 2022, respectively. The year-over-year increases for both periods were largely due to additional expenses from acquired businesses.
Income from Operations
Income from operations for the three months ended March 31, 2023 and 2022 was $871 and $1,125, respectively, a decrease of $254, or 22.6%. Income from operations for the six months ended March 31,
2023 and 2022 was $1,471 and $2,118, respectively, a decrease of $647, or 30.6%. Both the three-month and six-month periods were impacted by lower demand for diagnostic reagents and additional expenses from acquired businesses.
Results of Operations - Manufacturing – Three and Six Months Ended March 31, 2023 and 2022
The Company’s Manufacturing segment reflects its majority-owned Indco subsidiary, which manufactures and distributes industrial mixing equipment.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Revenue
|
$
|
2,432
|
$
|
2,503
|
$
|
4,838
|
$
|
5,017
|
||||||||
|
Cost of sales
|
1,171
|
1,194
|
2,303
|
2,408
|
||||||||||||
|
Gross profit
|
1,261
|
1,309
|
2,535
|
2,609
|
||||||||||||
|
Gross profit margin
|
51.9
|
%
|
52.3
|
%
|
52.4
|
%
|
52.0
|
%
|
||||||||
|
Selling, general and administrative
|
776
|
765
|
1,550
|
1,494
|
||||||||||||
|
Income from operations
|
$
|
485
|
$
|
544
|
$
|
985
|
$
|
1,115
|
||||||||
Revenue
Total revenue was $2,432 and $2,503 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $71, or 2.8%. Total revenue was $4,838 and $5,017 for the six months ended March 31,
2023 and 2022, respectively, a decrease of $179, or 3.6%. The decrease in revenue for both the three and six months ended March 31, 2023 reflected a decrease in volume across the business offset in part by higher product pricing.
Gross Profit
Gross profit was $1,261 and $1,309 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $48, or 3.7%. Gross profit margin for the three months ended March 31, 2023 and 2022
was 51.9% and 52.3%, respectively. Gross profit was $2,535 and $2,609 for the six months ended March 31, 2023 and 2022, respectively, a decrease of $74, or 2.8%. Gross profit margin for the six months ended March 31, 2023 and 2022 was 52.4% and
52.0%, respectively. The gross profit and gross profit margin for both the three- and six-month periods remained relatively unchanged.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $776 and $765 for the three months ended March 31, 2023 and 2022, respectively, an increase of $11, or 1.4%. Selling, general and administrative
expenses were $1,550 and $1,494 for the six months ended March 31, 2023 and 2022, respectively, an increase of $56, or 3.7%. The increase in expenses relative to revenue for the three- and six-month periods reflected the mix of business.
Income from Operations
Income from operations was $485 for the three months ended March 31, 2023 compared to $544 for the three months ended March 31, 2022, representing a 10.8% decrease from the prior year period due to
unfavorable order timing versus the prior year period. Income from operations was $985 for the six months ended March 31, 2023 compared to $1,115 for the six months ended March 31, 2022, representing a 11.7% decrease from the prior year period.
Results of Operations – Corporate and Other – Three and Six Months Ended March 31, 2023 and 2022
Below is a reconciliation of income from operating segments to net income available to common stockholders.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
||||||||||||||
|
(in thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
Total income from operating segments
|
$
|
2,669
|
$
|
4,395
|
$
|
5,774
|
$
|
8,556
|
||||||||
|
Corporate expenses
|
(1,160
|
)
|
(1,033
|
)
|
(2,298
|
)
|
(2,003
|
)
|
||||||||
|
Amortization expense
|
(543
|
)
|
(487
|
)
|
(1,069
|
)
|
(996
|
)
|
||||||||
|
Stock-based compensation
|
(62
|
)
|
(728
|
)
|
(123
|
)
|
(768
|
)
|
||||||||
|
Total corporate expenses
|
(1,765
|
)
|
(2,248
|
)
|
(3,490
|
)
|
(3,767
|
)
|
||||||||
|
Interest expense
|
(474
|
)
|
(269
|
)
|
(948
|
)
|
(548
|
)
|
||||||||
|
Unrealized loss on marketable securities
|
(111
|
)
|
-
|
(510
|
)
|
—
|
||||||||||
|
Net income before taxes
|
319
|
1,878
|
826
|
4,241
|
||||||||||||
|
Income tax expense
|
(101
|
)
|
(605
|
)
|
(248
|
)
|
(1,280
|
)
|
||||||||
|
Net income
|
218
|
1,273
|
578
|
2,961
|
||||||||||||
|
Preferred stock dividends
|
(70
|
)
|
(233
|
)
|
(142
|
)
|
(444
|
)
|
||||||||
|
Non-controlling interest dividends
|
—
|
(61
|
)
|
—
|
(61
|
)
|
||||||||||
|
Net Income Available to Common Stockholders
|
$
|
$ 148
|
$
|
979
|
$
|
436
|
$
|
2,456
|
||||||||
Total Corporate Expenses
Total Corporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, decreased by $483, or 21.5%, to $1,765 in the three months
ended March 31, 2023 as compared to $2,248 for the three months ended March 31, 2022. Total Corporate expenses decreased by $277, or 7.4%, to $3,490 for the six months ended March 31, 2023 as compared to $3,767 for the six months ended March 31,
2022. The decrease in both periods was due primarily to higher stock-based compensation related to restricted stock issuance with immediate vesting, higher accounting-related professional expense, and increased merger and acquisition expenses in
prior year periods partially offset by current year increases in amortization of intangible expenses. We incur merger and acquisition deal-related expenses and intangible amortization at the Corporate level rather than at the segment level.
Interest Expense
Interest expense for the consolidated company increased $205, or 76.2%, to $474 for the three months ended March 31, 2023 from $269 for the three months ended March 31, 2022. Interest expense for the
consolidated company increased by $400, or 73.0%, to $948 for the six months ended March 31, 2023 from $548 for the six months ended March 31, 2022. The increase in both periods was primarily due to higher interest rates.
Income Tax Expense
On a consolidated basis, the Company recorded an income tax expense of $101, an effective tax rate of 31.7% for the three months ended March 31, 2023, as compared to an income tax expense of $605, an
effective tax rate of 32.2% for the three months ended March 31, 2022. On a consolidated basis, the Company recorded an income tax expense of $248, an effective tax rate of 30.0% for the six months ended March 31, 2023, as compared to an income tax
expense of $1,280, an effective tax rate of 30.2% for the six months ended March 31, 2022. The rate was higher than the statutory rate of 21% in both periods, due to non-deductible expenses and state income taxes. The decrease in expense for both
periods was primarily due to a decrease in pretax income.
Preferred Stock Dividends
Preferred stock dividends include any dividends accrued but not paid on the Company’s Series C Cumulative Preferred Stock (the “Series C Preferred Stock”). For the three months ended March 31, 2023
and 2022, preferred stock dividends were $70 and $233, respectively, representing a decrease of $163, or 70.0%. For the six months ended March 31, 2023 and 2022, preferred stock dividends were $142 and $444, respectively, representing a decrease of
$302, or 68.0%. The decrease in preferred stock dividends in both periods was the result of the Company retiring $6,000 of Series C Preferred Stock on March 31, 2022 and the change in the annual dividend rate from 9% to 5% at that time.
Net Income
Net income was $218, or $0.18 per diluted share, for the three months ended March 31, 2023 compared to net income of $1,273 or $1.23 per diluted share, for the three months ended March 31, 2022.
Net income was $578, or $0.48 per diluted share, for the six months ended March 31, 2023 compared to net income of $2,961, or $2.89 per diluted share, for the six months ended March 31, 2022. The
decline in net income in both periods was largely due to lower profits in our business segments, higher interest expenses and a non-cash mark-to-market write-down of an equity investment.
Income Available to Common Stockholders
Income available to holders of Common Stock was $148, or $0.12 per diluted share, for the three months ended March 31, 2023 compared to income available to holders of Common Stock of $979, or $0.95
per diluted share, for the three months ended March 31, 2022. Income available to holders of Common Stock was $436, or $0.36 per diluted share, for the six months ended March 31, 2023 compared to income available to holders of Common Stock of
$2,456, or $2.40 per diluted share, for the six months ended March 31, 2022. The decrease in net income available to common stockholders for both periods reflected lower net income and a decrease in the dividend rate with respect to the Series C
Preferred Stock as of March 31, 2022 from 9% to 5%.
LIQUIDITY AND CAPITAL RESOURCES
General
Our ability to satisfy liquidity requirements—including meeting debt obligations and funding working capital, day-to-day operating expenses, and capital expenditures—depends upon future performance,
which is subject to general economic conditions, competition and other factors, some of which are beyond our control. Our Logistics segment depends on commercial credit facilities to fund day-to-day operations as there is a difference between the
timing of collection cycles and the timing of payments to vendors.
As a customs broker, our Logistics segment makes significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of
duties and taxes to customs authorities primarily in the United States. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a “pass through” and are not recorded as a component
of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. These “pass
through” billings can influence our traditional credit collection metrics.
For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures and has
historically experienced relatively insignificant collection problems. Our subsidiaries depend on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments
to vendors. Generally, we do not make significant capital expenditures.
Our cash flow performance for the 2023 fiscal year may not necessarily be indicative of future cash flow performance.
Cash flows from operating activities
Net cash provided by operating activities was $10,100 for the six months ended March 31, 2023, versus $5,991 provided by operating activities for the six months ended March 31, 2022. The increase in
cash provided by operations for the six months ended March 31, 2023 compared to the prior year period was driven principally by lower net working capital at our Logistics segment, offset by a decline in net income.
Cash flows from investing activities
Net cash used in investing activities totaled $5,782 for the six months ended March 31, 2023, versus $382 for the six months ended March 31, 2022. We used $178 for the acquisition of property and equipment, $1,693 in earnout payment to the former owners of ELFS and $3,911 for the acquisition of two business for the six months ended March 31, 2023,
compared to $270 for the acquisition of property and equipment for the six months ended March 31, 2022.
Cash flows from financing activities
Net cash used in financing activities was $8,596 for the six months ended March 31, 2023, versus net cash used in financing activities of $8,409 for the six months ended March 31, 2022. Net cash used
in financing activities for the six months ended March 31, 2023 primarily included repayment of funds from our line of credit, and repayment of funds from our term loan. Net cash provided financing activities for the six months ended March 31, 2022
primarily included funds from our line of credit partially offset by repayments of term loans.
Off-Balance Sheet Arrangements
As of March 31, 2023, we had no off-balance sheet arrangements or obligations.
| ITEM 4. |
CONTROLS AND PROCEDURES
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The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our management, with the participation of our Chief Executive Officer and our Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2023, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Principal Financial Officer have concluded that as
of March 31, 2022, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer
and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There has been no change in the Company's overall internal control over financial reporting (as such is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the
quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
| ITEM 1. |
LEGAL PROCEEDINGS
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Janel is occasionally subject to claims and lawsuits which typically arise in the normal course of business. While the outcome of these claims cannot be predicted with certainty, management does not
believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
| ITEM 1A. |
RISK FACTORS
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For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. There have
been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s 2022 Annual Report.
| ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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There were no unregistered sales of equity securities during the six months ended March 31, 2023. In addition, there were no shares of Common Stock purchased by us during the six months ended March
31, 2023.
| ITEM 6. |
EXHIBIT INDEX
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Third Amendment to Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, a Texas
limited liability company, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as loan party obligors dated January 30, 2023
(incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 3, 2023)
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Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith)
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Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (filed herewith)
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Section 1350 Certification of Principal Executive Officer (filed herewith)
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Section 1350 Certification of Principal Financial Officer (filed herewith)
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101
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Interactive data files providing financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 for the three and six months ended March 31, 2023
and 2022 in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022, (ii) Condensed Consolidated Statements of
Operations for the three and six months ended March 31, 2023 and 2022, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and six months March 31, 2023 and 2022, (iv) Condensed Consolidated Statements of
Cash Flows for the six months ended March 31, 2023 and 2022, and (v) Notes to Condensed Consolidated Financial Statements.
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Dated:
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May 5, 2023 |
JANEL CORPORATION
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Registrant
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/s/ Darren C. Seirer
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Darren C. Seirer
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Chairman, President and Chief Executive Officer
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(Principal Executive Officer)
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Dated:
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May 5, 2023 |
JANEL CORPORATION
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Registrant
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/s/ Vincent A. Verde
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Vincent A. Verde
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Principal Financial Officer, Treasurer and Secretary
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28
Exhibit 31.1
CERTIFICATION
I, Darren Seirer, certify that:
| 1. |
I have reviewed this Quarterly Report on Form 10-Q of Janel Corporation (the “Registrant”);
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| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this report;
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| 4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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| (c) |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
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| (d) |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
| 5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the
Registrant’s board of directors (or persons performing the equivalent function):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,
process, summarize and report financial information; and
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| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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Date: May 5, 2023
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/s/ Darren C. Seirer
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Darren C. Seirer
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Chairman, President and Chief Executive Officer
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|
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(Principal Executive Officer)
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Exhibit 31.2
CERTIFICATION
I, Vincent A. Verde, certify that:
| 1. |
I have reviewed this Quarterly Report on Form 10-Q of Janel Corporation (the “Registrant”);
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this report;
|
| 4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| (c) |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
|
| (d) |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
| 5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the
Registrant’s board of directors (or persons performing the equivalent function):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,
process, summarize and report financial information; and
|
| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
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Date: May 5, 2023
|
/s/ Vincent A. Verde
|
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Vincent A. Verde
|
|
|
Principal Financial Officer, Treasurer and Secretary
|
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report on Form 10-Q of Janel Corporation (the “Company”) for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Darren Seirer, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
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Date: May 5, 2023
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/s/ Darren C. Seirer
|
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Darren C. Seirer
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Chairman, President and Chief Executive Officer
|
|
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(Principal Executive Officer)
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The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being
filed as part of the Report or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report on Form 10-Q of Janel Corporation (the “Company”) for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Vincent A. Verde, Principal Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
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Date: May 5, 2023
|
/s/ Vincent A. Verde
|
|
Vincent A. Verde
|
|
|
Principal Financial Officer, Treasurer and Secretary
|
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being
filed as part of the Report or as a separate disclosure document.