What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-12 · 485 added, 442 removed, 459 unchanged (67% of the section changed)

3 unchanged sentences

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

March 31, 2020

June 30, 2020

September 30,

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Total other assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

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Dividends payable

Current portion of operating lease liabilities

Current portion of subordinated promissory note

Short-term lease liabilities

Current portion of Paycheck Protection Program (PPP) loan

Current portion of long-term debt

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Long-term debt

Paycheck Protection Program (PPP) loan

Subordinated promissory notes

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100,000 shares authorized

Series B 5,700 shares authorized and 631 shares issued and outstanding as of March 31, 2020 and September 30, 2019, respectively

Series C 20,000 shares authorized and 20,000 shares issued and outstanding at March 31, 2020 and September 30, 2019, liquidation value of $12,867 and $12,541 at March 31, 2020 and

September 30, 2019, respectively

Series B 5,700 shares authorized and 331 and 631 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively.

Series C 20,000 shares authorized and 20,000 shares issued and outstanding at June 30, 2020 and September 30, 2019, liquidation value of $13,041 and $12,541 at June 30,

2020 and September 30, 2019, respectively

Common stock, $0.001 par value;

4,500,000 shares authorized, 867,652 issued and 847,652 outstanding as of March 31, 2020 and 863,812 issued and 843,812 outstanding as of September 30,

4,500,000 shares authorized, 875,652 issued and 855,652 outstanding as of June 30, 2020 and 863,812 issued and 843,812 outstanding as of

September 30, 2019

Paid-in capital

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Three Months Ended

Six Months Ended

Nine Months Ended

Forwarding expenses and cost of revenues

Cost and Expenses:

Costs and Expenses:

Selling, general and administrative

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(Loss) Income Before Income Taxes

Income tax benefit (expense)

Income tax expense

Net (Loss) Income

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Dividends to preferred stockholders

Conversion of Preferred B shares to Common Shares

Issuance of Restricted Stock

Restricted stock vested but not issued

Stock-based compensation

Stock option exercise

Balance - March 31, 2020

Balance – June 30, 2020

PREFERRED STOCK

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Dividends to preferred stockholders

Vested restricted stock unissued

Restricted stock vested but not issued

Stock option exercise

Stock-based compensation

Balance - March 31, 2019

Balance – June 30, 2019

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

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(in thousands)

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities:

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Provision for uncollectible accounts

Depreciation and amortization

Deferred income tax

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Accounts payable and accrued expenses

Lease liability

Other liabilities

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Proceeds from stock option exercise

Line of credit, proceeds, net

Line of credit, net

Proceeds from PPP loan

Repayment of subordinated promissory notes

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Net cash used in financing activities

Net increase in cash

Cash at beginning of the period

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Operating lease right of use asset

Operating lease liabilities Non-cash investing activities :

Operating lease liabilities

Non-cash investing activities :

Contingent earn-out acquisition

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BASIS OF PRESENTATION, SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying interim unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of Article 8 of Regulation S-X and the instructions to Form 10-Q of the Securities and

Exchange Commission.

The accompanying interim unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of Article 8 of Regulation S-X and the instructions to Form 10-Q of

the Securities and Exchange Commission.

As a result, certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.

Janel Corporation

(the “Company” or “Janel”) believes that the disclosures made are adequate to make the information presented not misleading.

The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair

statement of the results for the interim periods presented.

Janel Corporation (the “Company” or “Janel”) believes that the disclosures made are adequate to make the information presented not misleading.

The consolidated financial statements reflect all adjustments which are, in the opinion of management,

necessary to a fair statement of the results for the interim periods presented.

The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full fiscal year, or any other period.

These consolidated financial

statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Form 10-K as filed with the Securities and Exchange Commission.

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

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Global Logistics Services, Manufacturing and Life Sciences.

A management group at the holding company level

(the “corporate group”) focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate.

Janel expects to grow through its subsidiaries’ organic growth and by completing

acquisitions.

We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments.

Our acquisition strategy focuses on reasonably priced companies with strong and capable management teams,

attractive existing business economics and stable and predictable earnings power.

A management group at the holding company level (the

“corporate group”) focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate.

Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions.

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.

Global Logistics Services

The Company’s Global Logistics Services segment is comprised of several wholly-owned subsidiaries, collectively known as “Janel Group.” Janel Group is a non-asset based, full-service provider of cargo transportation

logistics management services, including freight forwarding via air-, ocean- and land-based carriers, customs brokerage services, warehousing and distribution services, and other value-added logistics services.

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

cargo transportation logistics management services, including freight forwarding via air-, ocean- and land-based carriers, customs brokerage services, warehousing and distribution services, and other value-added logistics services.

On November 20, 2018, we completed a business combination whereby we acquired the membership interest of Honor Worldwide Logistics, LLC (“Honor”), a global logistics services provider with two

On October 17, 2018, we completed a business combination whereby we acquired substantially all of the assets and certain liabilities of a global logistics services provider with one U.S.

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The Company’s Manufacturing segment is comprised of Indco, Inc.

(“Indco”), a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within

various industries.

(“Indco”), 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.

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The Company’s Life Sciences segment is comprised of Aves Labs, Inc.

(“Aves”), Antibodies Incorporated (“Antibodies”), IgG, LLC (“IgG”) and PhosphoSolutions, LLC, which are wholly-owned subsidiaries of the Company.

The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody

manufacturing for academic and industry research scientists.

(“Aves”), Antibodies Incorporated (“Antibodies”), IgG, LLC (“IgG”) and PhosphoSolutions, LLC, which are wholly-owned

subsidiaries of the Company.

The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and

provides antibody manufacturing for academic and industry research scientists.

Our Life Sciences business also produces products for other life science companies on an original equipment manufacturer (“OEM”) basis.

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(“Phospho”) on September 6, 2019.

Both acquisitions were

completed primarily to expand our product offerings in Life Sciences.

Both acquisitions were completed primarily to expand our product offerings in Life Sciences.

Basis of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as Indco, of which Janel owns 91.65%, with a non-controlling interest held by existing

Indco management.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as Indco, of which Janel owns 91.65%, with a non-controlling

interest held by existing Indco management.

The Indco non-controlling interest is mandatorily redeemable and is recorded as a liability.

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The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

The most critical estimates made by the

Company are those relating to accounts receivables valuation, the useful lives of long-term assets, accrual of cost related to ancillary services the Company provides and accrual of tax expense on an interim basis.

GAAP”) requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

The most critical

estimates made by the Company are those relating to accounts receivables valuation, the useful lives of long-term assets, accrual of cost related to ancillary services the Company provides and accrual of tax expense on an interim basis.

The Company maintains cash balances at various financial institutions.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250.

The Company’s accounts at these institutions

may, at times, exceed the federally insured limits.

The Company’s accounts at

these institutions may, at times, exceed the federally insured limits.

The Company has not experienced any losses in such accounts.

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The Company records its allowance for doubtful accounts based upon its assessment of various factors.

The Company considers historical collection

experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions, and other factors that may affect the customers’

ability to pay.

The Company considers historical

collection experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions, and other factors that may affect the

customers’ ability to pay.

The Company writes off accounts receivable balances that have aged significantly once all collection efforts have been exhausted and the receivables are no longer deemed collectible from the customer.

The allowance for doubtful

accounts as of March 31, 2020 and September 30, 2019 was $654 and $503, respectively.

The allowance for

doubtful accounts as of June 30, 2020 and September 30, 2019 was $554 and $503, respectively.

Inventory is valued at the lower of cost (using the first-in, first-out method) or net realizable value.

The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory,

inventory not meeting quality control standards and inventory subject to expiration for its Antibodies business.

The products of Antibodies require the initial manufacture of multiple batches to determine if quality standards can consistently be

The Company maintains an inventory valuation reserve to provide for slow moving and

obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration for its Antibodies business.

The products of Antibodies require the initial manufacture of multiple batches to determine if quality standards

can consistently be met.

In addition, the Company will produce larger batches of established products than current sales requirements due to economies of scale.

The manufacturing process for these products, therefore, has and will continue to produce quantities in

excess of forecasted usage.

The manufacturing process for these products, therefore, has and will continue to

produce quantities in excess of forecasted usage.

The Company values acquired manufactured antibody inventory based on a three-year forecast.

Inventory quantities in excess of the forecast are not valued due to uncertainty over salability.

Amounts are charged to the

reserve when the Company scraps or disposes of inventory.

are charged to the reserve when the Company scraps or disposes of inventory.

Property and equipment and depreciation policy

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Property and equipment acquired in business combinations are initially recorded at fair value.

Depreciation is provided for in amounts sufficient to amortize the costs of

the related assets over their estimated useful lives on the straight-line and accelerated methods for both financial reporting and income tax purposes.

Depreciation is provided for in amounts sufficient to

amortize the costs of the related assets over their estimated useful lives on the straight-line and accelerated methods for both financial reporting and income tax purposes.

Maintenance and repairs are recorded as expenses when incurred.

The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired in a business combination.

Under current authoritative guidance, goodwill

is not amortized but is tested for impairment annually (on September 30) as well as when an event or change in circumstance indicates impairment may have occurred.

Goodwill is tested for impairment by comparing the fair value of the Company’s

individual reporting units to their carrying amount to determine if there is potential goodwill impairment.

If the fair value of the reporting unit is less than the carrying value, an impairment loss is recorded to the extent that the implied fair

value of the goodwill of the reporting unit is less than its carrying value.

If there is a material change in economic conditions, including as a result of continued disruption due to the coronavirus (COVID-19) pandemic, or other circumstances

influencing the estimate of future cash flows or significantly affect the fair value of our reporting units, the Company could be required to recognize impairment charges in the future.

There were no indicators of impairment of goodwill as of March

21, 2020 and September 30, 2019.

The fair value of our reporting units was in excess of carrying value and goodwill was not deemed to be impaired as of March 31, 2020 and September 30, 2019.

Under current authoritative

guidance, goodwill is not amortized but is tested for impairment annually (on September 30) as well as when an event or change in circumstance indicates impairment may have occurred.

Goodwill is tested for impairment by comparing the fair value of

the Company’s individual reporting units to their carrying amount to determine if there is potential goodwill impairment.

If the fair value of the reporting unit is less than the carrying value, an impairment loss is recorded to the extent that the

implied fair value of the goodwill of the reporting unit is less than its carrying value.

If there is a material change in economic conditions, including as a result of continued disruption due to the coronavirus (COVID-19) pandemic, or other circumstances influencing the estimate of

future cash flows or significantly affect the fair value of our reporting units, the Company could be required to recognize impairment charges in the future.

There were no indicators of impairment of goodwill as of June 30, 2020 and September 30, 2019.

The fair value of our reporting units was in excess of carrying value and goodwill was not deemed to be impaired as of June 30, 2020 and September 30,

Intangibles and long-lived assets

Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In reviewing for

impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.

In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.

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

The determination of

future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management.

If there is a material change in economic conditions, including as a result of continued disruption due to the

coronavirus (COVID-19) pandemic, or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.

There were no indicators of impairment of long-lived

assets as of March 31, 2020 and September 30, 2019.

The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management.

If there is a material change in economic conditions, including as a result of continued

disruption due to the COVID-19 pandemic, or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.

There were no indicators of impairment of

long-lived assets as of June 30, 2020 and September 30, 2019.

Business segment information

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Global Logistics Services, Manufacturing and Life Sciences.

The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment

level in order to make decisions about resources to be allocated to the segments and to assess their performance.

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.

Revenues and revenue recognition

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On October 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (“ASC Topic 606”), using the modified retrospective method.

Results for reporting

periods beginning on or after October 1, 2018 are presented under ASC Topic 606;

however, prior period amounts are not adjusted and continue to be reported in accordance with the accounting standards in effect for those periods.

The Company recorded an increase to the opening balance of retained earnings of $32, net of tax, as of October 1, 2018 due to the cumulative impact of adoption of ASC Topic

The impact to revenue and associated cost for the six months ended March 31, 2019 was an increase of $218 and $177, respectively, as a result of applying ASC Topic 606.

Results for reporting periods beginning on or after October 1, 2018 are presented under ASC Topic 606;

however, prior period amounts are not adjusted and continue to be reported in accordance with the accounting standards in effect for those

The Company recorded an increase to the opening balance of retained earnings of $32, net of

tax, as of October 1, 2018 due to the cumulative impact of adoption of ASC Topic 606.

The impact to revenue and associated cost for the nine months ended June 30, 2019 was a decrease of $135 and $109, respectively, as a result of applying ASC Topic 606.

Global Logistics Services

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Revenue is recognized upon transfer of control of promised services to customers.

With respect to its Global Logistics Services segment, the Company has determined that in general each shipment transaction or service

order constitutes a separate contract with the customer.

With respect to its Global Logistics Services segment, the Company has determined that in general each shipment

transaction or service order constitutes a separate contract with the customer.

When the Company provides multiple services to a customer, different contracts may be present for different services.

The Company typically satisfies its performance obligations as services are rendered at a point in time.

A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight

services from origin to destination port and destination services, such as customs clearance and final delivery.

The Company measures the performance of its obligations as services are completed at a point in time during the life of a shipment,

including services at origin, freight and destination.

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 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 we do not have latitude in carrier selection or to establish rates with the carrier.

Generally, revenue is recorded on a gross basis when the Company 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 we do not have latitude in carrier selection or to establish rates with the carrier.

In the Global Logistics Services segment, the Company disaggregates its revenues by its four primary service categories:

ocean import and export, freight forwarding, customs brokerage and air import and export.

summary of the Company’s revenues disaggregated by major service lines for the three and six months ended March 31, 2020 was as follows:

summary of the Company’s revenues disaggregated by major service lines for the three and nine months ended June 30, 2020 was as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

Ocean import and export

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Revenues from Indco are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories.

Indco receives customer product orders via phone call, email, internet or fax.

of each standard product sold is listed in Indco’s print and web-based catalog.

Indco receives customer product orders via phone call, email,

internet or fax.

The pricing of each standard product sold is listed in Indco’s print and web-based catalog.

Customer specific products are priced by quote.

A sales order acknowledgement is sent to every customer for every order to confirm pricing and the specifications of the

products ordered.

A sales order acknowledgement is sent to every customer for every order to confirm pricing

and the specifications of the products ordered.

The revenue is recognized at a point in time when the product is shipped to the customer.

Life Sciences

Revenues from the Life Sciences segment are derived from the sale of high-quality monoclonal and polyclonal antibodies, diagnostic reagents and diagnostic kits and other immunoreagents for biomedical research and

antibody manufacturing.

Revenues from the Life Sciences segment are derived from the sale of high-quality monoclonal and polyclonal antibodies, diagnostic reagents and diagnostic kits and other immunoreagents for

biomedical research and antibody manufacturing.

Revenues are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.

Income (loss) per common share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding, excluding unvested restricted stock, during the period.

net income (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options or warrants or the vesting of restricted stock units.

The treasury stock method

is used to calculate the potential dilutive effect of these common stock equivalents.

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding, excluding unvested restricted stock, during

Diluted net income (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options or warrants or the vesting of restricted stock units.

treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents.

Potentially dilutive shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive.

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Equity classified share-based awards

The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation-Stock Compensation.” For employee stock-based

awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for restricted shares;

the expense is recognized over the service period for awards

expected to vest.

The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation-Stock Compensation.” For

employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for restricted shares;

the expense is recognized over the service

period for awards expected to vest.

Stock-based compensation to non-employees

Liability classified share-based awards

The Company maintains other share unit compensation grants for shares of Indco, the Company’s majority-owned subsidiary, which vest over a period of up to three years following their grant.

The shares contain certain

put features where the Company is either required or expects to settle vested awards on a cash basis.

The Company maintains other share unit compensation grants for shares of Indco, which vest over a period of up to three years following their grant.

The shares contain certain put features where

the Company is either required or expects to settle vested awards on a cash basis.

These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date.

The determination of the fair

value of the share units under these plans is described in note 10.

determination of the fair value of the share units under these plans is described in note 11.

The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability.

Changes in fair value after

vesting are recognized through compensation expense.

Changes in fair value after vesting are recognized through compensation expense.

Compensation expense reflects estimates of the number of instruments expected to vest.

The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the

cumulative expense reflects the revisions, with a corresponding adjustment to the settlement liability.

Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while

settlements due beyond 12 months of the reporting date are presented in non-current liabilities.

The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustment to the settlement

Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in non-current liabilities.

Non-employee share-based awards

In prior periods up to September 30, 2019, the Company accounted for stock-based compensation to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity-Based Payments to

Non-employees.” Measurement of share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable:

(a) the goods or services received;

or (b) the equity instruments issued.

The fair value of

share-based payment transactions is determined at the earlier of performance commitment date or performance completion date.

The Company believes that the fair value of the stock-based award is more reliably measurable than the fair value of the

services received.

In prior periods up to September 30, 2019, the Company accounted for stock-based compensation to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity-Based

Payments to Non-employees.” Measurement of share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable:

(a) the goods or services received or (b) the equity instruments issued.

value of share-based payment transactions is determined at the earlier of performance commitment date or performance completion date.

The Company believes that the fair value of the stock-based award is more reliably measurable than the fair value

of the services received.

The fair value of the granted stock-based awards is remeasured at each reporting date, and expense is recognized over the vesting period of the award.

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Improvements to Nonemployee Share-Based Payment Accounting.

The guidance was issued to simplify the accounting for

share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees.

nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions.

The guidance was issued to simplify the

accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees.

result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions.

The Company adopted ASU 2018-07 on October 1, 2019.

The adoption of the standard did not have a material impact on our financial statements for the six months ended March 31, 2020.

The adoption of the standard did not have a material impact on our financial statements for the nine months ended June 30, 2020.

Mandatorily Redeemable Non-Controlling Interests

The non-controlling interests that are reflected as mandatorily redeemable non-controlling interests in the consolidated financial statements consist of non-controlling interests related to the Indco acquisition

whose owners have certain redemption rights that allow them to require the Company to purchase the non-controlling interests of those owners upon certain events outside the control of the Company, including

upon the death of the holder.

The Company is required to purchase 20% of the 8.35% mandatorily redeemable non-controlling interest at the option of the holder beginning on the third anniversary of the date of the Indco acquisition, which was

March 21, 2019.

As of March 31, 2020, the holder did not exercise the redemption rights.

On the date the Company acquires the controlling interest in a business combination, the fair value of the non-controlling interest is recorded in the long-term liabilities section of the consolidated balance sheet

under the caption “ Mandatorily redeemable non-controlling interest .” The mandatorily redeemable non-controlling interest is adjusted each reporting period, if required, to its then current redemption value,

based on the predetermined formula defined in the respective agreement.

The Company reflects any adjustment in the redemption value and any earnings attributable to the mandatorily redeemable non-controlling interest in its consolidated statements

of operations by recording the adjustments and earnings to other income and expense in the caption “ change in fair value of mandatorily redeemable non-controlling interest .”

The non-controlling interests that are reflected as mandatorily redeemable non-controlling interests in the consolidated financial statements consist of non-controlling interests

related to the Indco acquisition whose owners have certain redemption rights that allow them to require the Company to purchase the non-controlling interests of those owners upon certain events outside the control of the Company, including upon the death of the holder.

The Company is required to purchase 20% of the 8.35% mandatorily redeemable non-controlling interest at the option of the holder beginning on the third anniversary of the date of the

Indco acquisition, which was March 21, 2019.

As of June 30, 2020, the holder did not exercise the redemption rights.

On the date the Company acquires the controlling interest in a business combination, the fair value of the non-controlling interest is recorded in the long-term liabilities section of the

consolidated balance sheet under the caption “ Mandatorily redeemable non-controlling interest .” The mandatorily redeemable non-controlling interest is adjusted each reporting period, if required, to its then

current redemption value, based on the predetermined formula defined in the respective agreement.

The Company reflects any adjustment in the redemption value and any earnings attributable to the mandatorily redeemable non-controlling interest in

its consolidated statements of operations by recording the adjustments and earnings to other income and expense in the caption “ change in fair value of mandatorily redeemable non-controlling interest .”

Note receivable

On March 2, 2018, the Company issued a convertible promissory note in the amount of $125 with a potential non-related party acquisition target.

The note bears interest on the outstanding principal amount at a rate

of 8% per annum, and both principal and interest is payable on the maturity date of April 24, 2020.

The note bears interest on the outstanding

principal amount at a rate of 8% per annum, and both principal and interest was payable on the maturity date of April 24, 2020.

The convertible note, at the election of the Company, can be converted into common stock of the acquisition target.

As of March 31, 2020, and

April 9, 2020, the Company agreed to a revised payment schedule, with $75 due upon signing of the revised payment schedule and $72, representing the remaining principal and accrued interest, due on September 24, 2020.

As of June 30, 2020, and

September 30, 2019, amounts outstanding including accrued interest were $71 and $139, respectively.

As of March 31, 2020, the Company is no longer pursuing this potential acquisition target.

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of:

payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.

Deferred tax assets and liabilities are

measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized

in the results of operations in the period that includes the enactment date.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The ultimate realization of

deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

The benefit of tax positions taken or expected to

be taken in the Company’s income tax returns are recognized in the consolidated financial statements if such positions are more likely than not of being sustained.

As of June 30, 2020, the Company is no longer pursuing this potential acquisition target.

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount

(i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.

Deferred tax assets and

liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.

A valuation allowance is

provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred

tax liabilities during the period in which related temporary differences become deductible.

The benefit of tax positions taken or expected to be taken in the Company’s income tax returns are recognized in the consolidated financial statements if

such positions are more likely than not of being sustained.

Recent accounting pronouncements

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On October 1, 2019, the Company adopted ASU No.

2016-02, Leases (“ASC 842” or “ASU 2016-02”) issued by the FASB in February 2016 which was subsequently supplemented by

clarifying guidance intended to improve financial reporting of leasing transactions.

The new lease accounting guidance requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for all leases with initial terms

longer than 12 months and provides enhanced disclosures on key information of leasing arrangements.

The guidance allows companies to apply the requirements retrospectively, either to all prior periods presented or through a cumulative adjustment in

the year of adoption.

2016-02, Leases (“ASC 842” or “ASU 2016-02”), issued by the FASB in February 2016 which was subsequently

supplemented by clarifying guidance intended to improve financial reporting of leasing transactions.

The new lease accounting guidance requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for all leases with

initial terms longer than 12 months and provides enhanced disclosures on key information of leasing arrangements.

The guidance allows companies to apply the requirements retrospectively, either to all prior periods presented or through a cumulative

adjustment in the year of adoption.

The Company adopted the new standards effective October 1, 2019 using the modified retrospective transition method.

The Company elected to use the package of practical expedients which allowed the Company to (i) not

reassess whether an arrangement contains a lease, (ii) carry forward its lease classification as oper ating or capital leases and (iii) not reassess its previously-recorded initial direct costs.

For all existing

operating leases as of October 1, 2019, the Company recorded operating lease right of use asset of $1,043 and corresponding lease liabilities of $1,060, with an offset to other liabilities of $17 to eliminate deferred rent on the consolidated

balance sheets.

The Company elected to use the package of practical expedients which allowed

the Company to (i) not reassess whether an arrangement contains a lease, (ii) carry forward its lease classification as operating or capital leases and (iii) not reassess its previously-recorded initial direct costs.

For all existing operating

leases as of October 1, 2019, the Company recorded operating lease right of use assets of $1,043 and corresponding lease liabilities of $1,060, with an offset to other liabilities of $17 to eliminate deferred rent on the consolidated balance

Operating lease expense is recognized on a straight-line basis over the lease term.

At each balance sheet date, operating lease liabilities represent the present value of the future minimum payments related to

non-cancelable periods.

At each balance sheet date, operating lease liabilities represent the present value of the future minimum

payments related to non-cancelable periods.

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

All significant lease arrangements after October 1, 2019 are recognized as right-of-use assets and lease liabilities at lease commencement.

Right-of-use assets represent the Company’s right to use an underlying asset

for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease.

Right-of-use assets and liabilities are recognized at the commencement date based on the present value of the future lease payments

using the Company’s incremental borrowing rate.

Right-of-use assets represent the Company’s right to

use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease.

Right-of-use assets and liabilities are recognized at the commencement date based on the present value of the

future lease payments using the Company’s incremental borrowing rate.

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

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation , which expands the scope of Topic 718 to include all share-based payment transactions for

acquiring goods and services from nonemployees.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation , which expands the scope of Topic 718 to include all share-based payment

transactions for acquiring goods and services from nonemployees.

The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

The Company’s

current share-based payment awards to non-employees consist only of grants made to its non-employee directors as compensation solely relates to each individual’s role as a non-employee director.

As such, in accordance with ASC 718, the Company

accounts for these share-based payment awards to its non-employee directors in the same manner as share-based payment awards for its employees.

Company’s current share-based payment awards to non-employees consist only of grants made to its non-employee directors as compensation solely relates to each individual’s role as a non-employee director.

As such, in accordance with ASC 718, the

Company accounts for these share-based payment awards to its non-employee directors in the same manner as share-based payment awards for its employees.

The Company adopted this standard on October 1, 2019, and the amendments in this guidance had no

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Recently issued accounting pronouncements not yet adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement , which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement , which modifies the disclosure requirements on fair value measurements in Topic 820,

Fair Value Measurement.

This new accounting standard is effective for annual periods beginning after December 15, 2019.

Early adoption is permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its disclosures.

The Company is evaluating the effects that the adoption of this guidance will have on its

consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill

impairment test.

Simplifying the Test for Goodwill Impairment , to simplify the subsequent

measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

This new accounting standard is effective for annual periods beginning after December 15, 2019.

Early adoption is permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its consolidated

financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and

requires the use of a forward-looking expected loss model.

Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs

less a reserve and equal to the net amount expected to be collected.

This standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

The Company is

evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

The Company is evaluating the effects that the adoption of this

guidance will have on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which replaces the incurred loss methodology previously

employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model.

Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update

will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected.

This standard is effective for annual periods beginning after December 15, 2019, including interim periods within

those fiscal years, with early adoption permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

Reclassifications

Prior year financial statement amounts are reclassified as necessary to conform to the current year presentation.

These prior period reclassifications did not affect the Company’s net income, earnings per share,

stockholders’ equity or working capital.

These prior period reclassifications did not affect the Company’s net income,

earnings per share, stockholders’ equity or working capital.

The Company completed four business acquisitions in the fiscal year ended September 30, 2019, with an aggregate purchase price of $6,768, net of cash acquired.

The Company recorded an aggregate $2,067 in goodwill and

$2,165 in other identifiable intangibles.

The Company recorded an aggregate

$2,067 in goodwill and $2,165 in other identifiable intangibles.

The results of operations of the acquired businesses are included in Janel’s consolidated results of operations since the date of each acquisition.

Supplemental pro forma information has not been provided

as the acquisitions did not have a material impact on Janel’s consolidated results of operations, individually or in the aggregate.

Supplemental pro forma information

has not been provided as the acquisitions did not have a significant impact on Janel’s consolidated results of operations, individually or in the aggregate.

Honor Worldwide Logistics, LLC

Through its wholly-owned subsidiary, Janel Group, the Company acquired the membership interests of Honor on November 20, 2018 in a transaction pursuant to which Honor became a direct wholly-owned subsidiary of Janel

Group and an indirect wholly-owned subsidiary of the Company.

Through its wholly-owned subsidiary, Janel Group, the Company acquired the membership interests of Honor on November 20, 2018 in a transaction pursuant to which Honor became a direct wholly-owned

subsidiary of Janel Group and an indirect wholly-owned subsidiary of the Company.

At closing, a subordinated promissory note in the aggregate amount of $456 was issued to a former member.

The acquisition of Honor was funded with cash provided by normal operations

along with a subordinated promissory note.

The acquisition of Honor was funded with cash provided by

normal operations along with a subordinated promissory note.

Honor provides global logistics services with two U.S.

locations and expands the domestic network of the Company’s Global Logistics Services segment.

The results of operations for Honor are reflected in

the Global Logistics Services reporting segment.

The results of operations for Honor

are reflected in the Global Logistics Services reporting segment.

PhosphoSolutions

1 unchanged sentence

The aggregate purchase price for Phospho was $4,043, net of $13 of cash received.

At closing, $4,000 was

paid in cash and $56 was recorded in accrued expenses as preliminary tax gross up due to former owners.

Phospho is a manufacturer and distributor of monoclonal and polyclonal antibodies, principally used in neuroscience research.

founded in 2001 and is headquartered in Aurora, Colorado.

closing, $4,000 was paid in cash and $56 was recorded in accrued expenses as preliminary tax gross up due to the former owners.

Phospho is a manufacturer and distributor of monoclonal and polyclonal antibodies, principally used in neuroscience

Phospho was founded in 2001 and is headquartered in Aurora, Colorado.

The results of operations for Phospho are reflected in the Life Sciences reporting segment.

As of March 31, 2020, the Company paid $172 in tax gross up consideration to former owners and

recorded an additional $116 of goodwill related to the Phospho acquistion.

As of June 30, 2020, the Company paid $172 in tax gross up consideration to

the former owners and recorded an additional $116 of goodwill related to the Phospho acquisition.

Other Acquisitions

On October 17, 2018, we completed a business combination whereby we acquired substantially all of the assets and certain liabilities of a global logistics services provider with one U.S.

On July 1, 2019, we

acquired the membership interests of a life sciences company to expand our product offerings in Life Sciences.

On July 1, 2019, we acquired the membership interests of a life sciences company to expand our product offerings in Life Sciences.

These acquisitions were funded with cash provided by normal operations.

The results of operations for these acquisitions are reported in our Global Logistics Services and Life Sciences segments.

The results of operations for these

acquisitions are reported in our Global Logistics Services and Life Sciences segments.

The aggregate purchase price for these acquisitions was $430.

closing, $50 was recorded in accrued expenses as a preliminary earnout consideration.

At closing, $50 was recorded in accrued expenses as a preliminary earnout consideration.

Inventories consisted of the following:

15 unchanged sentences

Shorter of Lease Term or Asset Life

Accumulated Depreciation

Depreciation expense for the six months ended March 31, 2020 and 2019 was $92 and $152, respectively.

Accumulated Depreciation and Amortization

Property and Equipment Net

Depreciation and amortization expense for the nine months ended June 30, 2020 and 2019 was $198 and $229, respectively.

INTANGIBLE ASSETS

4 unchanged sentences

Accumulated Amortization

Amortization expense for the six months ended March 31, 2020 and 2019 was $486 and $444, respectively.

Intangible Assets Net

Amortization expense of intangible assets for the nine months ended June 30, 2020 and 2019 was $729 and $674, respectively.

The Company’s goodwill carrying amounts relate to the acquisitions in the Global Logistics Services, Manufacturing and Life Sciences businesses.

As of March 31, 2020, the Company paid $172 in tax gross up

consideration to former owners and recorded an additional $116 of goodwill related to the Phospho acquistion.

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

In the nine month period ended June 30, 2020,

with respect to the Phospho acquisition, the Company paid $172 in tax gross up consideration to the former owners and recorded an additional $116 of goodwill.

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

September 30,

2 unchanged sentences

Life Sciences

Total Goodwill

NOTES PAYABLE – BANKS

Santander Bank Facility

On October 17, 2017, the Janel Group subsidiaries (collectively the “Janel Group Borrowers”), with the Company as a guarantor, entered into a Loan and Security Agreement (the “Santander Loan Agreement”) with

Santander Bank, N.A.

On October 17, 2017, the Janel Group subsidiaries (collectively the “Janel Group Borrowers”), with the Company as a guarantor, entered into a Loan and Security Agreement (the “Santander Loan

Agreement”) with Santander Bank, N.A.

(“Santander”) with respect to a revolving line of credit facility (the “Santander Facility”).

As amended in March 2018, November 2018 and March 2020, the Santander Facility currently provides that the Janel Group Borrowers can

borrow up to $17,000 limited to 85% of the Janel Group Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Santander Loan Agreement.

Interest accrues on the Santander Facility at an annual rate

equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points.

The Janel Group Borrowers’ obligations under the Santander Facility are secured by all of the

assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants.

As amended in March 2018, November 2018 and March 2020, the Santander Facility currently provides that the Janel

Group Borrowers can borrow up to $17,000 limited to 85% of the Janel Group Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Santander Loan Agreement.

Interest accrues on the Santander Facility

at an annual rate equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points.

The Janel Group Borrowers’ obligations under the Santander Facility are secured

by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants.

The Santander Facility matures on October 17, 2022, unless earlier terminated or renewed.

As a result of its terms, the Santander

Facility is classified as a current liability on the consolidated balance sheet.

At March 31, 2020, outstanding borrowings under the Santander Facility were $7,533, representing 82.33% of the available amount thereunder, and interest was accruing at an effective interest rate of 3.26%.

Group Borrowers were in compliance with the covenants defined in the Santander Loan Agreement at March 31, 2020 and September 30, 2019.

As a result of its terms, the

Santander Facility is classified as a current liability on the consolidated balance sheet.

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

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

First Merchants Bank Credit Facility

On March 21, 2016, as amended in August 2019, Indco entered into a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan and $1,000 (limited to the

borrowing base and reserves) revolving loan (together, the “First Merchants Facility”).

Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to EBITDA ratio is less than

2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1).

On March 21, 2016, as amended in August 2019, Indco entered into a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan and

$1,000 (limited to the borrowing base and reserves) revolving loan (together, the “First Merchants Facility”).

Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to

EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1).

Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%.

Indco’s obligations under the First Merchants Facility

are secured by all of Indco’s assets and are guaranteed by the Company, and the Company’s guarantee of Indco’s obligations is secured by a pledge of the Company’s Indco shares.

The First Merchants Credit Agreement contains customary terms and

Indco’s obligations under the

First Merchants Facility are secured by all of Indco’s assets and are guaranteed by the Company, and the Company’s guarantee of Indco’s obligations is secured by a pledge of the Company’s Indco shares.

The First Merchants Credit Agreement contains

customary terms and covenants.

The First Merchants Facility will expire on August 30, 2024 (subject to earlier termination as provided in the Credit Agreement) unless renewed.

As of March 31, 2020, there were no outstanding borrowings under the revolving loan and $4,931 of borrowings under the term loan, with interest accruing on the term loan at an effective interest rate of 5.08%.

The Company was in compliance with the covenants defined in the First Merchants Credit Agreement at March 31, 2020 and September 30, 2019.

As of June 30, 2020, there were no outstanding borrowings under the revolving loan and $4,625 of borrowings, net of capitalized loan cost of $38, under the term loan, with interest accruing on

the term loan at an effective interest rate of 3.68%.

The Company was in compliance with the covenants defined in the First Merchants Credit Agreement at June 30, 2020 and September 30, 2019.

September 30,

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First Northern Bank of Dixon

On June 21, 2018, AB Merger Sub, Inc., a wholly-owned, indirect subsidiary of the Company, entered into a Business Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First

Northern”), with respect to a $2,025 First Northern Term Loan (the “First Northern Term Loan”).

On June 21, 2018, AB Merger Sub, Inc., a wholly-owned, indirect subsidiary of the Company, entered into a Business Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of

Dixon (“First Northern”), with respect to a $2,025 First Northern Term Loan (the “First Northern Term Loan”).

The proceeds of the First Northern Term Loan were used to fund a portion of the merger consideration to acquire Antibodies.

Interest was to accrue on

the First Northern Term Loan at an annual rate based on the five-year Treasury constant maturity (index) plus 2.50% (margin) for years one through five then adjusted and fixed for years six through ten using the same index and margin.

borrower’s and the Company’s obligations to First Northern under the First Northern Loan Agreement are secured by certain real property owned by Antibodies as of the closing of the Antibodies merger.

to accrue on the First Northern Term Loan at an annual rate based on the five-year Treasury constant maturity (index) plus 2.50% (margin) for years one through five then adjusted and fixed for years six through ten using the same index and margin.

The borrower’s and the Company’s obligations to First Northern under the First Northern Loan Agreement are secured by certain real property owned by Antibodies as of the closing of the Antibodies merger.

The First Northern Loan Agreement contains

1 unchanged sentence

On November 18, 2019, Antibodies modified and refinanced its existing credit facilities with First Northern Bank.

The existing First Northern Term Loan was increased to $2,235, the initial interest rate decreased to

4.18%, and the maturity date was extended to November 14, 2029, with all other terms, covenants and conditions substantially unchanged.

The existing revolving credit facility was expanded to $500, the interest rate decreased to 6.0%, and the

maturity date was extended to October 1, 2020, with all other terms, covenants and conditions substantially unchanged.

Additionally, Antibodies entered into a new business loan agreement (“Solar Loan”) which provided for a $125 term loan in

connection with a potential expansion of solar generation capacity on the Antibodies property.

The existing First Northern Term Loan was increased to $2,235, the initial

interest rate decreased to 4.18%, and the maturity date was extended to November 14, 2029, with all other terms, covenants and conditions substantially unchanged.

The existing revolving credit facility was expanded to $500, the interest rate

decreased to 6.0%, and the maturity date was extended to October 1, 2020, with all other terms, covenants and conditions substantially unchanged.

Additionally, Antibodies entered into a new business loan agreement (“Solar Loan”) which provided for

a $125 term loan in connection with a potential expansion of solar generation capacity on the Antibodies property.

The initial interest rate on the facility is 4.43%, subject to adjustment in five years.

As of March 31, 2020, there were no outstanding borrowings under the revolving credit facility and $2,217 of borrowings under the term loan.

On June 19, 2020, First Northern extended

the draw period on the Solar Loan from May 14, 2020 to August 14, 2020, with all other terms, covenants and conditions substantially unchanged.

Additionally, on June 19, 2020, we entered into a new business loan agreement (“Generator Loan”) which

provided for a $60 term loan in connection with a potential expansion of generator capacity on the Antibodies property.

The draw period for the Generator Loan expires in November 5, 2020.

The interest rate for the Generator Loan is 4.25%, and the

loan matures on November 5, 2025.

There were no outstanding borrowings under the Generator Loan.

As of June 30, 2020, there were no outstanding borrowings under the revolving credit facility, $2,204 of borrowings under the First Northern Term Loan and $81 under the Solar Loan.

September 30,

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Less Current Portion

Long Term Debt is due in monthly principal and interest installments of $12 plus monthly interest, at an effective interest rate of 4.18% as of March 31, 2020 and 5.28% as of September, 2019, per annum.

The note is collateralized

by real property owned by Antibodies and guaranteed by Janel.

The Company was in compliance with the covenants defined in the First Northern Loan Agreement at March 31, 2020 and September 30, 2019.

Long Term Debt is due in monthly principal and interest installments of $12 plus monthly interest, at an effective interest rate of 4.18% as of June 30, 2020 and 5.28% as of September 2019, per annum.

note is collateralized by real property owned by Antibodies and guaranteed by Janel.

The Company was in compliance with the covenants defined in the First Northern Loan Agreement at June 30, 2020 and September 30, 2019.

SUBORDINATED PROMISSORY NOTES

On June 22, 2018, in connection with the Antibodies acquisition, AB HoldCo, Inc.

(“AB HoldCo”), a wholly-owned subsidiary of the Company, entered into two subordinated promissory notes

(“AB HoldCo Subordinated Promissory Notes”) with certain former shareholders of Antibodies.

(“AB HoldCo”), a wholly-owned subsidiary of the Company, entered into two subordinated promissory notes (“AB

HoldCo Subordinated Promissory Notes”) with certain former shareholders of Antibodies.

As the result of the merger of AB HoldCo into Antibodies, Antibodies became the obligor under the AB HoldCo Subordinated Promissory Notes.

AB HoldCo Subordinated Promissory Notes are guaranteed by the Company and are subordinate to the terms of any credit agreement, loan agreement, indenture, promissory note, guaranty or other debt instrument pursuant to which the obligor or any

affiliate of the obligor incurs, borrows, extends, guarantees, renews or refinances any indebtedness for borrowed money or other extensions of credit with any federal or state bank or other institutional lender and are unsecured.

AB HoldCo Subordinated Promissory Notes has a 4% annual interest rate payable in arrears on the last business day of each calendar quarter, commencing on September 30, 2018, and the full outstanding principal balance and accrued, unpaid

interest is due on June 22, 2021.

Both notes are subject to prepayment in whole or in part, without premium or penalty, of the outstanding principal amount of the notes, together with all accrued interest on such principal amount up to the date

of prepayment.

Both of the AB HoldCo

Subordinated Promissory Notes are guaranteed by the Company and are subordinate to the terms of any credit agreement, loan agreement, indenture, promissory note, guaranty or other debt instrument pursuant to which the obligor or any affiliate of

the obligor incurs, borrows, extends, guarantees, renews or refinances any indebtedness for borrowed money or other extensions of credit with any federal or state bank or other institutional lender and are unsecured.

Each of the AB HoldCo Subordinated Promissory Notes has a 4% annual interest rate payable in arrears on the last business day of each calendar quarter, commencing on September 30, 2018, and the

full outstanding principal balance and accrued, unpaid interest is due on June 22, 2021.

Both notes are subject to prepayment in whole or in part, without premium or penalty, of the outstanding principal amount of the notes, together with all

accrued interest on such principal amount up to the date of prepayment.

Any prepayment shall be applied first to accrued but unpaid interest, and then to outstanding principal.

As of March 31, 2020, and September 30, 2019, amounts outstanding under the two AB HoldCo Subordinated Promissory Notes was

$344 and is included in the l ong term portion of subordinated promissory notes.

On November 20, 2018, in connection with the Honor acquisition, Janel Group, a wholly-owned subsidiary of the Company, entered into a subordinated promissory note (“Janel Group Subordinated Promissory Note”) with a

former owner of Honor.

As of each of June 30, 2020, and September 30, 2019, the amount

outstanding under the two AB HoldCo Subordinated Promissory Notes was $344, which is included in the long-term portion of subordinated promissory notes.

On November 20, 2018, in connection with the Honor acquisition, Janel Group, a wholly-owned subsidiary of the Company, entered into a subordinated promissory note (“Janel Group Subordinated

Promissory Note”) with a former owner of Honor.

The Janel Group Subordinated Promissory Note is guaranteed by the Company.

The Janel Group Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts

payable to the Santander Bank Facility and the First Merchants Bank Credit Facility.

The Janel Group Subordinated Promissory Note, has a 6.75% annual interest rate, payable in twelve equal consecutive quarterly installments of principal and

interest, on the last day of January, April, July and October beginning in January 2019, and shall be due and payable each in the amount of $42.

The outstanding principal and accrued and unpaid interest are payable in a single payment on the

three-year anniversary date of November 20, 2021.

The note is subject to prepayment in whole or in part, without premium or penalty, of the outstanding principal amount of the notes, together with all accrued but unpaid interest on such principal

amount up to the date of prepayment.

As of March 31, 2020, and September 30, 2019, the amounts outstanding under the Janel Group Subordinated Promissory Note was $276 and $349, respectively.

The Janel Group Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums

and other amounts payable to the Santander Bank Facility and the First Merchants Bank Credit Facility.

The Janel Group Subordinated Promissory Note, has a 6.75% annual interest rate, payable in twelve equal consecutive quarterly installments of

principal and interest, on the last day of January, April, July and October beginning in January 2019, and shall be due and payable each in the amount of $42.

The outstanding principal and accrued and unpaid interest are payable in a single payment

on the three-year anniversary date of November 20, 2021.

The note is subject to prepayment in whole or in part, without premium or penalty, of the outstanding principal amount of the notes, together with all accrued but unpaid interest on such

principal amount up to the date of prepayment.

As of June 30, 2020, and September 30, 2019, the amounts outstanding under the Janel Group Subordinated Promissory Note were $237 and $349, respectively.

September 30,

Long term portion of subordinated promissory notes

Current portion of subordinated promissory note

Long term subordinated promissory notes

Less current portion of subordinated promissory note

SBA PAYCHECK PROTECTION PROGRAM LOAN

On April 19, 2020, the Company received a loan (the “PPP Loan”) in the aggregate amount of $2,726 from Santander, pursuant to the Paycheck Protection Program (the “PPP”) offered by the Small Business Administration

(“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), Section 7(a)(36) of the Small Business Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a note dated April 19, 2020 issued by the

Company, matures on April 19, 2022 and bears interest at a rate of 1.00% per annum.

All principal and interest payments are deferred for six months from the date of the note.

To the extent the PPP Loan is not forgiven, principal and interest

payments in the amount of $153 are due monthly commencing on November 1, 2020.

The Company may prepay the note at any time prior to maturity with no prepayment penalties.

The Company may only use funds from the PPP Loan for purposes specified in

the CARES Act and related PPP rules, which include payroll costs, costs used to continue group health care benefits, rent, utilities and certain mortgage payments (“qualifying expenses”).

As of June 30, 2020, the

amount outstanding, including accrued interest, under the PPP Loan was $2,731.

The Company intends to use the entire PPP Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts granted as part of the PPP Loan may be forgiven if they are used for qualifying expenses as

described in the CARES Act, which was recently extended for a 24-week period commencing on the date of disbursement of the PPP Loan.

The Company expects that this loan will be forgiven.

STOCKHOLDERS’ EQUITY

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In addition, the Company is authorized to issue 100,000 shares of preferred stock, par value $0.001.

The preferred stock is issuable in

series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be determined by the Company’s board of directors or a duly authorized committee thereof,

without stockholder approval.

The board of directors may fix the number of shares constituting each series and increase or decrease the number of shares of any series.

The preferred stock is issuable in series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be

determined by the Company’s board of directors or a duly authorized committee thereof, without stockholder approval.

The board of directors may fix the number of shares constituting each series and increase or decrease the number of shares of any

Preferred Stock

Series B Convertible Preferred Stock

Shares of the Company’s Series B Convertible Preferred Stock (the “Series B Stock”) are convertible into shares of the Company’s $0.001 par value common stock at any time on a one-share (of Series B Stock) for

ten-shares (of common stock) basis.

Shares of the Company’s Series B Convertible Preferred Stock (the “Series B Stock”) are convertible into shares of the Company’s $0.001 par value common stock at any time on a one-share (of

Series B Stock) for ten-shares (of common stock) basis.

On September 6, 2019, a holder of the Series B Stock converted 640 shares of Series B Stock into 6,400 shares of the Company’s Common Stock.

On April 23, 2020, a holder of the Series B Stock

converted 300 shares of Series B Stock into 3,000 shares of the Company’s Common Stock.

Series C Cumulative Preferred Stock

Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) are entitled to receive annual dividends at a rate of 5% per annum of the original issuance price of $10, when and if declared by the

Company’s board of directors, with such rate increased by 1% annually beginning on January 1, 2019.

Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) are entitled to receive annual dividends at a rate of 5% per annum of the original issuance price of $10, when

and if declared by the Company’s board of directors, with such rate increased by 1% annually beginning on January 1, 2019.

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 March

31, 2020 was 7%.

The dividend rate of the

Series C Stock as of June 30, 2020 was 7%.

In the event of liquidation, holders of the Series C Stock shall be paid an amount equal to the original issuance price, plus any accrued but unpaid dividends thereon.

Shares of the Series C Stock may be redeemed by the Company at

any time upon notice and payment of the original issuance price, plus any accrued but unpaid dividends thereon.

The liquidation value of the Series C Stock was $12,867 as of March 31, 2020.

For the six months ended March 31, 2020, the Company declared dividends on the Series C Stock of $326.

As of March 31, 2020, the Company had accrued dividends of $1,366.

Shares of the Series C Stock may be

redeemed by the Company at any time upon notice and payment of the original issuance price, plus any accrued but unpaid dividends thereon.

The liquidation value of the Series C Stock was $13,041 as of June 30, 2020.

For the nine months ended June 30, 2020, the Company accrued dividends on the Series C Stock of $500.

As of June 30, 2020, the Company had accrued dividends of $1,541.

Equity Incentive Plan

On May 12, 2017, the Company adopted the 2017 Equity Incentive Plan which was amended on May 8, 2018 (as amended, the “2017 Plan”).

Under the 2017 Plan, non-statutory stock options, restricted stock awards and stock

appreciation rights with respect to shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company.

Participants and all terms of any awards under the Plan are at the discretion of the

Company’s Compensation Committee of the board of directors.

Under the 2017 Plan, non-statutory stock options, restricted

stock awards and stock appreciation rights with respect to shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company.

Participants and all terms of any awards under the Plan are at the

discretion of the Company’s Compensation Committee of the board of directors.

STOCK-BASED COMPENSATION

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 the Company’s

common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.

Total stock-based compensation for the six months ended March 31, 2020 and 2019 amounted to $149 and $236, respectively, and was included in selling, general and administrative expense in the Company’s statements of

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 the Company’s common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.

Total stock-based compensation for the nine months ended June 30, 2020 and 2019 amounted to $217 and $251, respectively, and was included in selling, general and administrative expense in the

Company’s statements of operations.

Stock Options

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

Six Months Ended

Nine Months Ended

Risk-free Interest Rate

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Average Exercise

Weighted Average

Remaining Contractual

Term (in years)

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Outstanding Balance at September 30, 2019

Outstanding Balance at March 31, 2020

Exercisable on March 31, 2020

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, 2020 of $7.50 per share and the exercise price of the stock

options that had strike prices below such closing price.

As of March 31, 2020, there was approximately $51 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted average period of less

than one year.

Outstanding Balance at June 30, 2020

Exercisable on June 30, 2020

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at June 30, 2020 of $7.50 per share and the exercise

price of the stock options that had strike prices below such closing price.

As of June 30, 2020, there was approximately $38 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted

average period of less than one year.

Options for Non-Employees

There were no non-employee options awarded during the six-month period ended March 31, 2020.

During the six-month period ended March 31, 2020, 15,000 non-employee options were forfeited.

There were no non-employee options awarded during the nine-month period ended June 30, 2020.

During the nine-month period ended June 30, 2020, 15,000 non-employee options were forfeited.

Average Exercise

Weighted Average

Remaining Contractual

Term (in years)

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Outstanding Balance at September 30, 2019

Outstanding Balance at March 31, 2020

Exercisable on March 31, 2020

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of our common stock at March 31, 2020, of $7.50 per share and the exercise price of the stock options that

had strike prices below such closing price.

As of March 31, 2020, there was approximately $32 of total unrecognized compensation expense related to the unvested stock options, which is expected to be recognized over a weighted average period of less than one

Outstanding Balance at June 30, 2020

Exercisable on June 30, 2020

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of our common stock at June 30, 2020, of $7.50 per share and the exercise price of the

stock options that had strike prices below such closing price.

As of June 30, 2020, there was approximately $13 of total unrecognized compensation expense related to the unvested stock options, which is expected to be recognized over a weighted average

period of less than one year.

Liability classified share-based awards

Additionally, during the six months ended March 31, 2020, 6,880 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.

Additionally, during the nine months ended June 30, 2020, 6,880 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

Nine Months Ended

Risk-free Interest Rate

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Average Exercise

Weighted Average

Remaining Contractual

Term (in years)

2 unchanged sentences

Outstanding Balance at September 30, 2019

Outstanding Balance at March 31, 2020

Exercisable on March 31, 2020

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, 2020 of $11.08 per share and the exercise price of the stock options

that had strike prices below such closing price.

Outstanding Balance at June 30, 2020

Exercisable on June 30, 2020

The aggregate intrinsic value in the above table was calculated as the difference between the valuation price of Indco’s common stock at June 30, 2020 of $11.08 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 $302 and $172 as of March 31, 2020 and September 30, 2019, respectively, and is included in other liabilities in the consolidated financial statement.

cost related to these options was approximately $319 and $172 as of June 30, 2020 and September 30, 2019, respectively, and is included in other liabilities in the consolidated financial statement.

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.

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

options are settled.

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

The options are classified as liabilities, and the underlying shares of Indco’s common stock also contain put options which result in their classification as mandatorily redeemable securities.

While their redemption

does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death, which is certain to occur at some point in time.

As of March 31, 2020, 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.

While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death, which is certain to occur at some point in time.

As of June 30, 2020, there was approximately $51 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.

Restricted Stock

During the six months ended March 31, 2020, there were no shares of restricted stock granted.

Under the 2017 Plan, each grant of restricted stock vests over a three-year period, and the cost to the recipient is zero.

During the nine months ended June 30, 2020, there were no shares of restricted stock granted.

Under the 2017 Plan, each grant of restricted stock vests over a three-year period, and the cost to

the recipient is zero.

Restricted stock compensation expense, which is a non-cash item, is being recognized in the Company’s financial statements over the vesting period of each restricted stock grant.

The following table summarizes the status of our employee unvested restricted stock under the 2017 Plan for the six months ended March 31, 2020:

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

Restricted Stock

(in thousands)

Weighted Average

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Unvested at September 30, 2019

Unvested at March 31, 2020

As of March 31, 2020, there was approximately $2 of total unrecognized compensation cost related to unvested employee restricted stock.

The cost is expected to be recognized over a weighted-average period of

approximately 0.11 years.

The following table summarizes the status of our non-employee unvested restricted stock under the 2017 Plan for the six months ended March 31, 2020:

Unvested at June 30, 2020

As of June 30, 2020, there was no unrecognized compensation cost related to unvested employee restricted stock.

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

Restricted Stock

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Unvested at September 30, 2019

Unvested at March 31, 2020

As of March 31, 2020, there was approximately $30 of unrecognized compensation cost related to non-employee unvested restricted stock.

The cost is expected to be recognized over a weighted-average period of

approximately 0.38 years.

As of March 31, 2020, included in accrued expenses and other current liabilities was $159 which represents 18,333 shares of restricted stock that vested but were not issued.

Unvested at June 30, 2020

As of June 30, 2020, there was approximately $12 of unrecognized compensation cost related to non-employee unvested restricted stock.

The cost is expected to be recognized over a weighted-average

period of approximately 0.16 years.

As of June 30, 2020, included in accrued expenses and other current liabilities was $189 which represents 21,666 shares of restricted stock that vested

but were not issued.

INCOME PER COMMON SHARE

The following table provides a reconciliation of the basic and diluted income (loss) per share (“EPS”) computations for the three and six months ended March 31, 2020 and 2019 (in thousands, except share and per share

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

except share and per share data):

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Net income (loss)

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The computation for the diluted number of shares excludes unvested restricted stock, unexercised stock options and unexercised warrants that are anti-dilutive.

There were no anti-dilutive shares for the six-month

periods ended March 31, 2020.

Potentially dilutive securities as of March 31, 2020 and 2019 were as follows:

There were no

anti-dilutive shares for the three- and nine-month periods ended June 30, 2020.

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

Employee Stock Options

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The Company’s estimated fiscal 2020 and 2019 blended U.S.

federal statutory corporate income tax rate of 10.1% and 25.2%, respectively, were applied in the computation of the Company’s

income tax provision for the six months ended March 31, 2020 and 2019.

The reconciliation of income tax computed at the Federal statutory rate to the benefit (provision) for income taxes for the six months ended March 31, 2020 is as follows:

federal statutory corporate income tax rate of 22.9% and 34.1%, respectively, were applied in the computation of the Company’s income tax

provision for the nine months ended June 30, 2020 and 2019, respectively.

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

Nine Months Ended

Federal taxes at statutory rates

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State and local taxes

Income tax benefit (expense)

Income tax expense

BUSINESS SEGMENT INFORMATION

As discussed above in note 1, the Company operates in three reportable segments:

1) Global Logistics Services, 2) Manufacturing and 3) Life Sciences, supported by a corporate group which conducts activities that are

non-segment specific.

The following tables present selected financial information about the Company’s reportable segments for the three and six months ended March 31, 2020:

1) Global Logistics Services, 2) Manufacturing and 3) Life Sciences, supported by a corporate group which conducts

activities that are non-segment specific.

The following tables present selected financial information about the Company’s reportable segments for the three and nine months ended June 30, 2020:

For the three months ended

March 31, 2020

June 30, 2020

Global Logistics

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Interest expense (income) net

Identifiable assets

Identifiable assets as of June 30, 2020

Capital expenditures

For the six months ended

March 31, 2020

For the nine months ended

June 30, 2020

Global Logistics

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Interest expense (income) net

Identifiable assets

Identifiable assets as of June 30, 2020

Capital expenditures

The following tables present selected financial information about the Company’s reportable segments for the three and six months ended March 31, 2019:

The following tables present selected financial information about the Company’s reportable segments for the three and nine months ended June 30, 2019:

For the three months ended

March 31, 2019

June 30, 2019

Global Logistics

6 unchanged sentences

Interest expense (income) net

Identifiable assets

Identifiable assets as of June 30, 2019

Capital expenditures

For the six months ended

March 31, 2019

For the nine months ended

June 30, 2019

Global Logistics

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Interest expense (income) net

Identifiable assets

Identifiable assets as of June 30, 2019

Capital expenditures

2 unchanged sentences

The nature of Janel’s operations requires it to deal with currencies other than the U.S.

As a result, the Company is exposed to the inherent risks of international currency markets and governmental

interference.

As a result, the Company is exposed to the inherent risks of international currency markets and

governmental interference.

A number of countries where Janel maintains offices or agent relationships have currency control regulations.

The Company attempts to compensate for these exposures by accelerating international currency settlements among those

The Company attempts to compensate for these exposures by accelerating international currency settlements among

those agents.

Concentration of Credit Risk

The Company’s assets that are exposed to concentrations of credit risk consist primarily of cash and receivables from customers.

The Company places its cash with financial institutions that have high credit ratings.

The Company places its cash with financial institutions that have

high credit ratings.

The receivables from clients are spread over many customers.

The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of its customers’ financial condition.

have experienced heightened customer credit risk as a result of the negative impact to customers’ financial condition, employment levels and consumer confidence arising from economic disruptions related to the COVID-19 pandemic, and expect that our

risk in this area will remain high as long as the disruptions persist.

The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of its customers’

financial condition.

We have continued to experience heightened customer credit risk as a result of the negative impact to customers’ financial condition, employment levels and consumer confidence arising from economic disruptions related to the

COVID-19 pandemic, and expect that our risk in this area will remain high as long as the disruptions persist.

Legal Proceedings

Janel is occasionally subject to claims and lawsuits which typically arise in the normal course of business.

While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal

matters will have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.

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.

In December 2017, Janel Group received a Notice of Copyright Infringement letter from counsel for Warren Communications News, Inc.

(“Warren”), the publisher of the International Trade Today (“ITT”) newsletter.

The letter alleges that Janel Group

infringed upon Warren’s registered copyrights in its ITT newsletter (the “Warren Matter”).

As of March 31, 2020, the Company had a liability for settlement costs related to the Warren Matter, which is included in accrued expenses and other current

On May 11, 2020, the parties reached a settlement agreement and release to resolve any and all concerns between the parties, voluntarily and without admission of copyright infringement.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic.

As a result, public health measures have been taken by federal, state and local governments to

minimize exposure to and contain the virus.

Measures intended to reduce the spread of COVID-19, such as quarantines, travel restrictions and other governmental restrictions such as social distancing protocols, have has, and are likely to continue

to have, an adverse impact on economic activity, including with respect to business closures, increasing unemployment levels and financial market instability.

The extent or duration of the disruption on global, national, and local economies cannot

be reasonably estimated at this time.

However, should the pandemic and its economic impact continue for an extended period, the Company’s future business operations, including its results of operations, cash flows and financial position could be

significantly affected.

letter alleges that Janel Group infringed upon Warren’s registered copyrights in its ITT newsletter (the “Warren Matter”).

On May 11, 2020, the parties reached a settlement agreement and release to resolve any and all concerns between the parties,

voluntarily and without admission of copyright infringement.

The worldwide outbreak of COVID-19 (coronavirus), which was declared a pandemic by the World Health Organization on March 11, 2020, has impacted and may continue to impact our business operations, including

employees, customers, financial condition, liquidity and cash flow for an extended period of time.

In particular, we have experienced significant changes in demand among our various customers depending on their industry.

Federal and state

governments have implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes, and closure of

nonessential businesses, which measures have adversely impacted our business operations in the first three quarters of 2020.

Specifically, in the nine months ended June 30, 2020, we experienced a decrease of 10.3% in

our Global Logistics Services revenues and a decrease of 20.4% in our Manufacturing segment revenues as a result of the global trade slowdown arising from the COVID-19 pandemic.

We also experienced a significant slowdown in organic growth in our

Life Sciences segment due to a slowdown in orders and in academic research as a result of the pandemic.

Although some of the states and foreign markets in which we operate have begun to reopen on a phased basis, the United States and

other countries continue to struggle with rolling outbreaks of the virus.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this filing.

As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition,

liquidity, and future results of operations.

Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, industry, and workforce.

COMMITMENTS AND CONTINGENCIES

On February 4, 2020, Indco, Inc., a majority-owned subsidiary of the Company, entered into a Purchase and Sale Agreement with 4040 Earnings Way, LLC (“Seller”) to acquire from Seller the land and building which

serves as the Indco office and manufacturing facility in New Albany, Indiana, for a purchase price of $845.

Indco anticipates that the purchase price will be financed with cash from operations and a loan of up to $700 from First Merchants Bank

secured by the subject property.

Closing is expected to occur during the third quarter of fiscal 2020, ending June 30, 2020.

On February 4, 2020, Indco entered into a Purchase and Sale Agreement with 4040 Earnings Way, LLC (“Seller”) to acquire from the Seller the land and building that serves as the Indco office and

manufacturing facility in New Albany, Indiana, for a purchase price of $845, financed with cash from operations and a loan of up to $700 from First Merchants Bank secured by the subject property.

Closing on this property occurred July 1, 2020, see

The Company has operating leases for office and warehouse space in all districts where it conducts business.

As of March 31, 2020, the remaining terms of the Company’s operating leases were between one and 58 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 six-month period ended March 31, 2020 are as follows:

Six Months Ended

As of June 30, 2020, the remaining terms of the Company’s operating leases were

between one and 57 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 nine-month period ended June 30, 2020 are as follows:

Nine Months Ended

Operating lease cost

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Total lease cost

Rent expense for the six-month period March 31, 2019 was $372

Operating lease right of use asset, current portion of operating lease liabilities and long-term operating lease liabilities reported in the consolidated balance sheets for operating leases as of March 31, 2020 were $1,599, $479 and $1,142,

respectively.

During the three months ended March 31, 2020, the Company entered into a new operating lease and recorded an addition $857 in operating lease right of use asset of and corresponding lease liabilities.

As of March 31, 2020, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 3.9 years and 6.58%, respectively.

Cash paid for amounts included

in the measurement of operating lease obligations were $410 for the six months ended March 31, 2020.

Future minimum lease payments under non-cancelable operating leases as of March 31, 2020 are as follows:

Rent expense for the nine-month period June 30, 2019 was $567.

Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the consolidated balance sheets for operating leases as

of June 30, 2020 were $1,498, $438 and $1,082, respectively.

During the nine months ended June 30, 2020, the Company entered into a new operating lease and recorded an additional $857 in operating lease right of use assets and corresponding lease liabilities.

As of June 30, 2020, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 3.8 years and 6.58%, respectively.

for amounts included in the measurement of operating lease obligations were $657 for the nine months ended June 30, 2020.

Future minimum lease payments under non-cancelable operating leases as of June 30, 2020 are as follows:

Total undiscounted lease payments

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SUBSEQUENT EVENTS

CARES Act Loan

The Coronavirus Aid, Relief and Economic Security Act, Section 7(a)(36) of the Small Business Act (the “CARES Act”), which was signed into law in March 2020, established the Paycheck Protection Program (the “PPP”).

The PPP authorizes up to $349 billion in forgivable loans to small businesses.

Loan amounts are forgiven to the extent proceeds are used to cover documented payroll, mortgage interest, rent and utility costs over an eight-week measurement period

following loan funding.

Loans have a maturity of two years and bear interest at a rate of 1.00% per annum.

Prepayments may be made at any time prior to maturity without penalty.

On April 19, 2020, the Company entered into a Loan Agreement (the “Loan Agreement”) with Santander and executed a U.S.

Small Business Administration Note (the “Note”) pursuant to

which the Company borrowed $2,726 (the “Loan”) from Santander pursuant to the PPP under the CARES Act.

The Loan matures on April 19, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 19, 2020.

The Note may be prepaid by Janel at any time prior to

maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent and utilities (collectively, “Qualifying Expenses”).

Under the terms of the

PPP, certain amounts of the Loan may be forgiven if they are used for Qualifying Expenses as described in the CARES Act.

The Company's participation in the PPP subsequent to quarter end should allow the Company to avoid significant staff

reductions in the near term.

As discussed in note 14 (C) above, the Company received a letter in December 2017 from legal counsel representing Warren in which Warren made certain allegations against the Company of copyright infringement

concerning an electronic newsletter by Warren.

On May 11, 2020, the parties reached a settlement agreement and release to resolve any and all concerns between the parties, voluntarily and without admission of copyright infringement.

31, 2020, the Company had a liability for settlement costs related to the Warren Matter, which is included in accrued expenses and other current liabilities.

As previously reported, on February 4, 2020, Indco entered into a Purchase and Sale Agreement to acquire the land and building which serves as the Indco office and manufacturing facility in New Albany, Indiana.

transaction closed on July 1, 2020.

On July 1, 2020, Indco and First Merchants Bank entered into Amendment No.

2 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 a $680 mortgage loan.

Interest will accrue on the Term Loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total

funded debt to EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1).

Interest will accrue on the Revolving Loan at an annual rate equal to the one-month LIBOR plus 2.75%.

will accrue on the Mortgage Loan at an annual rate of 4.19%.

Indco’s obligations under the First Merchants Bank credit facilities are secured by all of Indco’s real property and other assets, and are guaranteed by Janel.

Additionally, Janel’s

guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares.

The term loan and revolving loan portions of the First Merchants credit facilities will expire on August 30, 2024, and the mortgage loan will mature on July 1, 2025

(subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.

On July 22, 2020, Janel Group, Inc., a wholly-owned subsidiary of Janel Corporation, and, Atlantic Customs Brokers, Inc.

(“Atlantic”) as borrowers, and the Company as loan party obligor, entered into the Consent, Joinder and Fourth Amendment (the “Amendment”) to the Loan and Security Agreement, dated October 17, 2017 (as heretofore amended, the “Loan

Agreement”), with Santander Bank, N.A., in its capacity as Lender.

Pursuant to, and among other changes effected by, the Amendment, (i) Atlantic was added as a new borrower under the Loan Agreement, (ii) acquisition seller financing of up to

$1,500 outstanding at any time was added as permitted indebtedness, and (iii) the Company was permitted to guaranty certain indebtedness of its Antibodies Incorporated subsidiary up to $2,920 outstanding at any time.

On July 23, 2020, Janel Group, Inc., a wholly-owned subsidiary of Janel Corporation, acquired all of the outstanding common stock of a global logistics services provider with two U.S.

effective July 23, 2020 for $880.

At closing the former stockholder was paid $300 in cash and $194, $193 and $193 is due to the stockholder on the first, second and third anniversary of the closing date.

The fair value of the purchase price and the

allocation thereof has not yet been determined.

The results of operations for this acquisition will be reported in our Global Logistics Services segment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements