Item 1. Business
ITEM 1.
BUSINESS
Our Business
Janel Corporation (“Janel,” the “Company” or the “Registrant”) is a holding company with subsidiaries in three business segments: Logistics, Life Sciences and Manufacturing. The Company strives to
create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating Janel capital at high risk-adjusted rates of return; and attracting and
retaining exceptional talent.
Management at the Janel holding company focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through
its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably priced
companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
Janel was incorporated on August 31, 2000 and is domiciled in the state of Nevada. Its corporate headquarters are located in New York, New York.
As of September 30, 2022, Janel and its consolidated subsidiaries employed 326 full-time employees in the United States. None of these employees is covered by a collective bargaining agreement.
Janel and its subsidiaries have experienced no work stoppages and consider relations with their employees to be good. Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our
management team. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We continuously evaluate, modify and enhance our internal processes and technologies to increase employee
engagement, productivity, efficiency opportunities, skills and resources needed for success.
Our Business Segments
We have three reportable segments: Logistics, Life Sciences and Manufacturing. The following provides greater detail regarding each of these segments.
Logistics
The Company’s Logistics segment is comprised of several wholly-owned subsidiaries. The Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management
services, including freight forwarding via air, ocean and land-based carriers; customs brokerage services; warehousing and distribution services; trucking and other value-added logistics services. In addition to these revenue streams, the Company
earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor
charges.
On September 21, 2021, the Company completed a business combination whereby it acquired all the membership interests of Expedited Logistics and Freight Services, LLC (“ELFS”) and related
subsidiaries, which we include in our Logistics segment.
On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc., (“W.R. Zanes”),
which we include in our Logistics segment.
Life Sciences
The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal
antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies
on an original equipment manufacturer (OEM) basis.
On August 15, 2022, the Company completed a business combination whereby it acquired all the membership interests of ECM Biosciences LLC, which we include in our Life Sciences segment.
On December 4, 2020, the Company completed a business combination whereby it acquired all the membership interests of ImmunoChemistry Technologies, LLC (“ICT”), which we include in our Life Sciences
segment.
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Manufacturing
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”). Indco is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatuses 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.
Recent Investment
On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $0.001 per share, of Rubicon Technology, Inc. ("Rubicon"), at a price per share of $20.00, in a cash tender
offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the "Rubicon Purchase Agreement"). Pursuant to the terms of the Rubicon Purchase Agreement, the acquired shares represent 44.99% of
Rubicon's issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022.
Rubicon is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Rubicon uses proprietary crystal growth
technology to produce high-quality sapphire products to meet customers exacting specifications.
The purpose of our investment in Rubicon is for Janel to acquire a significant ownership interest in Rubicon, together with representation on Rubicon's Board, in an attempt to (i) restructure the
Rubicon business to achieve profitability and (ii) assist Rubicon in utilizing its net operating loss ("NOL") carry-forward assets. Although we are optimistic about our investment in Rubicon, our investment involves risks and uncertainties that
are beyond our control, including those discussed herein under Item 1A, Risk Factors.
Logistics
The Company’s Logistics segment helps clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include customs entry filing;
arrangement of freight forwarding by air, ocean and ground; warehousing; cargo insurance procurement; logistics planning; product repackaging; online shipment tracking and hazardous material warehousing and distribution.
Our Logistics segment earns flat fees for certain services, such as customs entry filing. For brokered services, Logistics earns the difference between the rate charged by a service provider and the
rate Logistics charges the customer for the provider’s service. Its freight consolidation activities, in addition to on-going volume-based relationships with providers, allow Logistics to command preferred service rates that can be passed on
profitably to the customer.
As a non-asset-based logistics provider, we own only a minimal amount of equipment. We generally expect to neither own nor operate any material transportation assets and, consequently, arrange for
transportation of our customers’ shipments via trucking companies, commercial airlines, air cargo carriers, railroads, ocean carriers and other non-asset based third-party providers. By not owning the transportation equipment used to transport
the freight, which results in relatively minimal fixed operating costs, we are able to leverage our network of locations to offer competitive pricing and flexible solutions to our customers. Moreover, our balanced product offering provides us
with revenue streams from multiple sources and enables us to retain customers even as they shift across various modes of transportation. We believe our low capital intensity model allows us to provide low-cost solutions to our customers, operate
our business with strong cash flow characteristics and retain significant flexibility in responding to changing industries and economic conditions.
During the fiscal year ended September 30, 2022, Logistics handled approximately 167,000 individual import and export shipments originating or terminating in countries around the world.
Approximately 42% of the revenues from these activities related to ocean freight, 32% to trucking, 16% to air freight, 5% to custom brokerage trucking and the remainder of 5% to other.
Based upon revenues, our customers are diverse, with the largest individual customer accounting for about 3.5% of revenues and the top ten customers accounting for 22.1% of revenues during fiscal
2022.
As of September 30, 2022, our Logistics segment operated out of twenty-five full-service locations in the United States and maintained a network of independent agent relationships in many trading
countries, giving it the ability to provide a global service to its clients.
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Each office is responsible for its growth and profitability. Logistics management helps the offices as needed with efforts such as human resources, maintaining a common information technology
platform and centralized accounting services. Our growth strategy includes servicing existing customers well and acquiring more of their business, hiring new people who can grow our company and adding new companies or services through
acquisitions.
The logistics industry is highly fragmented, with low barriers to entry and intense competition. Our Logistics segment competes against providers ranging in size from “mom-and-pop” businesses to
multi-national firms with hundreds of offices worldwide. Many of our Logistics customers utilize more than one logistics provider.
The freight forwarding industry requires dealings in currencies other than the U.S. Dollar. As a result, our Logistics segment is exposed to the inherent risks of international currency markets and
governmental interference. Some countries in which the Logistics segment maintains agent relationships have currency control regulations that influence our ability to hedge foreign currency exposure. Logistics tries to manage these exposures by
accelerating international currency settlements among those agents.
Historically, the quarterly operating results of the Logistics segment have been subject to seasonal trends. The fiscal third and fourth quarters have traditionally been the strongest, and the
fiscal second quarter has traditionally been the weakest. This pattern has been the result of, or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and other similar and subtle forces.
A significant portion of Logistics segment revenues are derived from customers in industries with shipping patterns tied to consumer demand and/or just-in-time production schedules. Many Logistics
customers may ship a significant portion of their goods at or near the end of a quarter. Therefore, the timing of revenues is, to a large degree, affected by factors beyond the segment's control, such as shifting consumer demand for retail goods
and manufacturing production delays. We cannot accurately forecast many of these factors, nor can we estimate the relative impact of any given factor. Therefore, historical patterns experienced may not continue in the future.
Government Regulation
Interstate and international transportation of freight is highly regulated. Failure to comply with applicable state and federal regulations, or to maintain required permits or licenses, can result
in substantial fines or revocation of operating permits or authorities imposed on both transportation intermediaries and their shipper customers. We cannot give assurance as to the degree or cost of future regulations on our business. Some of the
regulations affecting our current and prospective operations are described below.
Logistics is a customs broker licensed and permitted by U.S. Customs and Border Protection (“CBP”). All U.S. customs brokers are required to maintain prescribed records and are subject to periodic
audits by CBP. Logistics is a registered Ocean Transportation Intermediary (“OTI”) and is licensed as a non-vessel operating common carrier (“NVOCC”) by the Federal Maritime Commission (“FMC”). The FMC has established certain qualifications for
shipping agents, including certain surety bonding requirements. We also operate as a Transportation Security Administration (“TSA”) certified Indirect Air Carrier (“IAC”), providing air freight services, subject to commercial standards set forth
by the International Air Transport Association (“IATA”) and federal regulations issued by the Transportation Security Administration.
Air freight forwarding operations are subject to regulation, as an indirect air cargo carrier, under the Federal Aviation Act, as enforced by the Federal Aviation Administration of the U.S.
Department of Transportation and the Transportation Security Administration of the Department of Homeland Security. While air freight forwarders are exempted from most of the Federal Aviation Act’s requirements by the Economic Aviation
Regulations, the industry is subject to ongoing regulatory and legislative developments that can impact the economics of the industry by requiring changes to operating practices or influencing the demand for, and the costs of, providing services
to customers.
Surface freight forwarding operations are subject to various state and federal statutes and are regulated by the Federal Motor Carrier Safety Administration of the U.S. Department of Transportation
and, to a very limited extent, the Surface Transportation Board. These federal agencies have broad investigatory and regulatory powers, including the power to issue a certificate of authority or license to engage in the business; to approve
specified mergers, consolidations and acquisitions; and to regulate the delivery of some types of domestic shipments and operations within particular geographic areas.
The Federal Motor Carrier Safety Administration also has the authority to regulate interstate motor carrier operations, including the regulation of certain rates, charges and accounting systems; to
require periodic financial reporting; and to regulate insurance, driver qualifications, operation of motor vehicles, parts and accessories for motor vehicle equipment, hours of service of drivers, inspection, repair, maintenance standards and
other safety related matters. The federal laws governing interstate motor carriers have both direct and indirect application to the Company. The breadth and scope of the federal regulations may affect our operations and the motor carriers that
are used in the provisioning of the transportation services. In certain locations, state or local permits or registrations may also be required to provide or obtain intrastate motor carrier services.
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Risk Management and Insurance
As a property freight broker, we are not legally liable for loss or damage to our customers’ cargo. In our customer contracts, we may agree to assume cargo liability up to a stated maximum.
We typically do not assume cargo liability above minimum industry standards in our international freight forwarding, ocean transportation or air freight businesses on international or domestic air
shipments. With regards to international freight forwarding, ocean transportation and international domestic air freight shipments, we offer our customers the option to purchase shippers’ insurance coverage to insure goods in transit. When we
agree to store goods for our customers for longer terms, we provide limited warehouseman’s coverage to our customers and typically contract for warehousing services from companies that provide us the same degree of coverage.
We maintain a broad cargo liability insurance policy to help protect us against catastrophic losses that may not be recovered from the responsible contracted carrier. We also carry various liability
insurance policies, including automobile and general liability, with an umbrella policy.
Life Sciences
The Company’s wholly-owned Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research
and provides antibody manufacturing for academic and industry research scientists.
Our Life Sciences segment also produces products for life science companies on an original equipment manufacturer (OEM) basis. Through a combined portfolio of nearly 3,000 products and a range of
custom services, the Life Sciences segment provides the scientific community with high-quality tools to support critical research efforts.
Our Life Sciences segment is based in Davis, California on an owned 40-acre facility and two other leased locations in the U.S. Our growth strategy is to place high-quality products in the hands of
more researchers to accelerate scientific discovery.
Our growth strategies include:
•
Product innovation : By working with key researchers and scientific organizations, we seek to develop new products to enhance the range of tools available and thereby
expand the capabilities of life science researchers.
•
Operational improvement : We continue to enhance our operational designs and processes to be more efficient, which supports higher profitability and enables us to devote
more resources to investments in growth and innovation.
•
Attract and retain exceptional talent : High-quality scientists enable our top-quality products and services to be offered, which are key to our reputation in the
marketplace.
•
Acquisitions and investments : We intend to grow by acquiring new businesses with high-quality reputations that will benefit from our combined innovation and operational
strength.
•
Customers and distribution methods: We sell our biotechnology products directly to customers, principally direct through our website or distributors. Some of our
customers utilize our scientific expertise and production capabilities and purchase our products and re-label them. Our reputation for quality products is critical to our ability to attract new customers for both our products and
services.
•
Broad product offering: A number of companies supply protein-related research and diagnostic reagents. Customers choose their products based upon product quality,
reputation and price. We believe a number of our products have long-standing reputations and that our portfolio overall is well-regarded, especially amongst the academic, diagnostic and pharmaceutical research community.
•
Manufacturing: Our antibodies are produced using a variety of technologies including traditional animal immunization and hybridoma technology as well as recombinant
antibody techniques. We are not dependent on key or sole source suppliers for most of our products, as we typically have several outside sources for all critical raw materials necessary for the manufacture of our products.
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The majority of our life science products are shipped within two days of receipt of customers’ orders. Consequently, we typically do not maintain a significant backlog of orders for our Life
Sciences segment products.
Our Life Sciences segment is subject to regulation. One of our subsidiaries, Antibodies, Inc., maintains International Organization of Standardization certification for medical devices to support
our manufacturing operation. We also comply with regulations related to the United States Department of Agriculture, National Institutes of Health, Office of Laboratory Animal Welfare and the United States Food and Drug Administration. Many of
our customers are regulated and must verify our compliance with their standards throughout the supply chain, which requires us to maintain careful records. The failure to comply with these regulations may impair our ability to compete in the
marketplace.
Manufacturing
The Company’s Manufacturing segment is composed of Indco, which is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatuses for specific
applications within various industries. Indco’s headquarters and manufacturing operations are located in a single owned facility in New Albany, Indiana.
Indco provides solutions for the mixing needs of customers operating in diverse industries, including chemicals, inks, paints, construction, plastics, adhesives, cosmetics, food and pharmaceuticals.
Solutions include standard product configurations, both manufactured and distributed, available for order from Indco’s website and its print catalog, which is mailed quarterly. In addition, Indco manufactures custom-designed mixing solutions that
Indco helps specify, design, machine, assemble and distribute. During the fiscal year ended September 30, 2022, Indco made approximately 4,400 individual shipments to customers. In fiscal 2022, approximately 83% of Indco’s revenue came from
manufacturing activity. The remainder of its revenue came from non-manufactured product distribution activity. Indco’s revenue is generally level throughout the year with little seasonality.
Indco relies on a variety of providers of raw materials, mechanical components and other services in order to manufacture its products. These providers include national and multi-national suppliers
for common industrial components such as motors, gear drives, motor controls and many other standard hardware products. Additionally, regional and local suppliers provide Indco-specific parts such as castings and fabricated metal components. Raw
materials–primarily steel bars, plates and shafts–are sourced from domestic steel mills through local distributors. Alternative or substantially similar options are available from suppliers other than those Indco currently employs. While custom
cast or fabricated parts are at greater risk of supply interruption, alternative equivalent suppliers are typically available.
Our growth strategy within the industrial mixer business is to enhance our reputation as a high-quality manufacturer of often customized products to meet specialized mixing needs. Indco’s products
are frequently utilized in mission-critical applications, making our high-quality and strong service offering highly valuable to our customers. Our growth strategy includes keeping our direct relationship with the customer relevant through our
web presence, introducing new relevant products and expanding our reach into new and existing markets with sales efforts and partners.
The industrial mixer manufacturing industry is highly fragmented with low barriers to entry. Indco competes with companies of all sizes based on a combination of pricing, lead-times, service,
quality and ability to reach customers through internet presence and catalog circulation.
Government regulation directly governing Indco’s industrial mixer product line is minimal. Changing energy efficiency standards, however, as mandated by the Department of Energy, can, over time,
affect electric motor manufacturers whose products are used by Indco. Historically, these changes have resulted in only minor changes to our product line.
Indco is subject to U.S. federal, state and local provisions regulating the discharge of materials into the environment or otherwise for the protection of the environment. Although current
operations have not been significantly affected by compliance with these environmental laws, the Company cannot predict what impact future environmental regulations may have on Indco. Indco does not anticipate making any material capital
expenditures for environmental control purposes during the remainder of the current or succeeding fiscal years.
Additional information with respect to Janel’s businesses
Our principal executive offices and corporate headquarters are located at 80 Eighth Avenue, New York, New York 10011, and our telephone number is (212) 373-5895.
Janel maintains a website ( http://www.janelcorp.com ) where certain corporate governance documents and links to its subsidiaries’ websites can be found. Janel’s periodic reports filed with the
SEC can be accessed at the SEC’s website ( http://www.sec.gov ) and indirectly through Janel’s website ( http://www.janelcorp.com ). The information contained or connected to our website is not incorporated by reference into this Annual
Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.
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