JANEL CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Janel maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2022, and based on their evaluation, has concluded that our disclosure controls and procedures were effective. 33 Table of Contents Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we have performed an evaluation of the effectiveness of our internal control over financial reporting under the framework in Internal Control-Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Commission. Based on this assessment, management, including our Chief Executive Officer and Principal Financial Officer, has concluded that our internal control over financial reporting was effective as of September 30, 2022. This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 34 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers The executive officers and directors of the Company are as follows: Name Age Position Dominique Schulte 49 Board Chair, President and Chief Executive Officer Brendan J. Killackey 48 Director, Chief Information Officer Gerard van Kesteren 73 Director, Chair of Audit Committee John J. Gonzalez, II 72 Director, Senior Advisor for Mergers and Acquisitions Gregory J. Melsen 70 Director, Chair of Nominating and Corporate Governance Committee Karen Miller Ryan 58 Director, Chair of Compensation Committee Vincent A. Verde 60 Principal Financial Officer, Treasurer and Secretary Dominique Schulte has served as a Director of the Company since November 2015 and as Board Chair since May 8, 2018. Since October 1, 2018, Ms. Schulte has served as the Company’s President and Chief Executive Officer. Ms. Schulte practiced law at Simpson Thacher & Bartlett LLP in New York from 1999 through 2009, where she specialized in corporate and securities law and oversaw a number of successful securities transactions. Ms. Schulte is the managing member of Oaxaca Group, LLC (“Oaxaca”), which is the Company’s largest individual shareholder. Ms. Schulte is well-qualified to serve as a member of the Company’s board of directors based on her extensive experience in the practice of corporate and securities law. Brendan J. Killackey was elected to the Company’s board of directors in September 2014 and served as Chief Executive Officer from February 2015 through September 2018. Since October 1, 2018, Mr. Killackey has served as the Company’s Chief Information Officer. Mr. Killackey previously owned Progressive Technology Partners, LLC, a technology consultancy firm, which he founded in 2001. Given Janel’s and its subsidiaries’ reliance on technology, Mr. Killackey’s background and experience are valuable to the Company, and, therefore, he is well-qualified to serve as a member of the Company’s board of directors. Gerard van Kesteren has served as a Director of Janel since November 2015. From 1999 until 2014, Mr. van Kesteren served as the Chief Financial Officer of Kuehne + Nagel Group, an international freight forwarder and leading global provider of innovative and fully integrated supply chain solutions. Mr. van Kesteren has served as a director of Raben Group NV (Netherlands) and Planzer Holding AG (Switzerland) since 2015, and CTP NV (Netherlands) since 2021 and Deufol SE (Germany) since 2022. Mr. van Kesteren is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. van Kesteren serves as the chair of the Audit Committee. John J. Gonzalez, II has served as a Director of Janel since June 2016. Prior to that, he was a Senior Managing Director of Janel Group, following the August 2014 purchase by the Company of Alpha International and President Container Lines (“Alpha/PCL”), which he co-founded in 1979. Mr. Gonzalez has been involved in the transportation business since 1969. Mr. Gonzalez is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. Gonzalez served as chair of the Compensation Committee through September 28, 2022. Gregory J. Melsen has served as a Director of Janel since January 2018. Prior to that, he was Chief Financial Officer and Vice President of Human Resources for Healthsense, Inc., a leading provider of passive remote monitors for seniors from 2014 to 2015; and was Vice President-Finance, Treasurer and Chief Financial Officer of Techne Corporation (now Bio-Techne Corporation), a holding company for biotechnology and clinic diagnostic brands. Mr. Melsen has over 45 years of business experience, primarily in the accounting and finance areas. He has served as Chief Financial Officer at a number of companies and has 19 years of public accounting experience, including nine years as partner at Deloitte. Mr. Melsen is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in accounting and finance. Mr. Melsen serves as Chair of the Nominating and Governance Committee. Karen Miller Ryan , also known professionally as Karen Padgett, has served as a Director of Janel since October 2021. Prior to that, she served as Vice President of Global Marketing and Vice President of the Antibody Business Unit of Bio-Techne, a public global life science business from 2014 until 2019. From 1996 until 2014, Ms. Miller Ryan was the founder and Chief Executive Officer of Novus Biologicals, a private research reagent company, which she successfully grew until its sale to Bio-Techne. Ms. Miller Ryan is well qualified to serve as a member of the Company’s board of directors based on her extensive life science and executive leadership experience. On September 28, 2022, Ms. Miller Ryan was appointed as chair of the Compensation Committee. 35 Table of Contents Vincent A. Verde is Principal Financial Officer, Treasurer and Secretary of the Company and has served in such capacities since May 2018. From February 2018 to May 2018, Mr. Verde served as Controller of the Company. From January 2018 to February 2018, Mr. Verde served as a consultant for the Company. Prior to joining the Company, from December 2016 to February 2017, Mr. Verde served as a consultant for Xylem Inc., a publicly traded manufacturer and servicer of engineered solutions. Mr. Verde served from November 2014 to November 2016 as Subsidiary Controller for Teledyne Bolt, Inc., a developer, manufacturer and distributor of marine seismic data acquisition equipment and underwater remotely operated robotic vehicles and subsidiary of Teledyne Technologies Inc. (“Teledyne”). From January 2012 to November 2014, Mr. Verde served as Vice President and Corporate Controller for Bolt Technology Corporation, a then-publicly traded manufacturer and distributor of geophysical equipment and industrial clutches, which was acquired by Teledyne in November 2014. Mr. Verde has 17 years of public accounting experience, including eight years as Audit manager at Deloitte. Directors hold office for a one-year term until they are re-elected, or their successors have been duly elected and qualified. The executive officers are elected by the Board of Directors on an annual basis and serve under the direction of the Board. Executive officers devote all of their business time to the Company’s affairs. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of its Class A common stock to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of all such reports they file. Based on the Company’s review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that none of its directors, executive officers or persons who beneficially own more than 10% of the Company’s common stock failed to comply with Section 16(a) reporting requirements during the fiscal year ended September 30, 2022. Board of Directors During the fiscal year ended September 30, 2022, the board of directors met fourteen times. No incumbent director attended fewer than 75% of the aggregate of the total number of meetings of the board of directors of the Company and the total number of meetings held by all board committees in which that director served. Committees. The Company’s Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee operates under a charter that has been approved by the Company’s board of directors and is available on its website located at www.janelcorp.com . Audit Committee. The Company’s audit committee (“Audit Committee”) oversees its corporate accounting and financial reporting process. The Audit Committee consists of Mr. van Kesteren as the chair, Mr. Gonzalez, Mr. Melsen and Ms. Miller Ryan. The Audit Committee met five times during fiscal 2022. The Audit Committee has the following responsibilities, among others, as set forth in the Audit Committee charter: • reviewing and assessing the effectiveness of external auditors, their independence from Janel and any additional assignments they may be given, as well as reviewing their appointment, termination and remuneration; • reviewing and assessing the scope and plan of the audit, the examination process, audit results and reports, as well as whether auditor recommendations have been implemented by management; • recommending the approval of the annual internal audit report, including the responses of management thereto; • assessing management’s established risk assessment and any proposed measures to reduce risk; • assessing the Company’s efforts and policies of compliance with relevant laws and regulations; • reviewing, in tandem with external auditors, as well as the Chief Executive Officer and the Principal Financial Officer, whether accounting principles and the financial control mechanisms of Janel and its subsidiaries are appropriate in view of Janel’s size and complexity; and • reviewing annual and interim statutory and consolidated financial statements intended for publication and recommending such financial statements to the board of directors. 36 Table of Contents The Company’s board of directors designated Gerard van Kesteren as an audit committee financial expert considering his experience as Chief Financial Officer of Kuehne + Nagel Group. In addition, the Company’s board of directors has determined that Mr. Melsen’s extensive experience as a partner with Deloitte and his experience as Chief Financial Officer of Healthsense, Inc. and Techne Corporation qualifies him as an audit committee financial expert. The board of directors of the Company has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan meet the definition of independent directors under the Company’s criteria. The board of directors of the Company has determined that Ms. Miller Ryan and Mr. Melsen meet the Company’s independence criteria for audit committee membership, which is based on the Nasdaq rules regarding audit committee independence. The board of directors of the Company, however, has determined that Mr. van Kesteren does not meet the Company’s independence criteria for audit committee membership, as he received an annual $40,000 consulting fee during the fiscal year 2022 for services rendered to the Company’s Logistics segment. The board of directors of the Company has also determined that Mr. Gonzalez does not meet the Company’s independence criteria for audit committee membership, as he received an annual $90,000 consulting fee and cost of health insurance of $19,000 during the fiscal year 2022 for services rendered to the Company’s Logistics segment. Compensation Committee The Company’s compensation committee (the “Compensation Committee”) formulates, reviews and recommends compensation policies that are consistent with Janel’s established compensation philosophy and that will enable it to attract and retain high-quality leadership. The Compensation Committee met four times during fiscal 2022. The Compensation Committee has the following responsibilities, among others, as set forth in the Compensation Committee’s charter: • reviewing and approving the Company’s general compensation philosophy and objectives; • reviewing and approving the corporate goals and individual objectives relevant to the compensation of the Company’s Chief Executive Officer and evaluating the performance of the Chief Executive Officer considering these objectives; • approving base salary amounts, incentive and bonus compensation amounts and individual stock and/or option grants and awards for the Chief Executive Officer and, based on the recommendation of the Chief Executive Officer, all corporate officers at or above the Vice President level; • reviewing all forms of compensation for the Company’s senior management, including the form and amount of current salary, deferred salary, cash and non-cash benefits, and all compensation plans; • reviewing the Company’s severance or similar termination payments and administering the Company’s stock option and other incentive compensation plans and programs; • amending or modifying, where appropriate, the provisions of any compensation or benefit plan that does not require stockholder approval; • preparing and approving reports to stockholders on compensation matters which are required by the SEC and other government bodies; • performing an annual performance appraisal for members of the Company’s senior management designated by the board of directors; • establishing levels of director compensation to include marketplace reviews of retainers, meeting fees, stock plans and other similar components of compensation; and • annually reviewing succession plans for key positions within the Company. The Company’s Compensation Committee consists of Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan. Through September 28, 2022, Mr. Gonzalez served as the chair of the Compensation Committee. On September 28, 2022, Ms. Miller Ryan was appointed as chair of the Compensation Committee. The Company’s board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren, and Ms. Miller Ryan are independent members of the Compensation Committee. Nominating and Corporate Governance Committee The Company’s nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”) is responsible for developing and implementing policies and procedures that are intended to assure that Janel’s board of directors and the boards of directors (or equivalent) of its subsidiaries will be appropriately constituted and organized to meet its fiduciary obligations to the Company and its stockholders on an ongoing basis. The Nominating and Corporate Governance Committee met four times during fiscal 2022. Among other matters, the Nominating and Corporate Governance Committee is responsible for the following, as set forth in the Nominating and Corporate Governance Committee’s charter: 37 Table of Contents • making recommendations to Janel’s board of directors regarding matters and practices concerning the board, its committees and individual directors, as well as matters and practices of the boards, committees and individual directors of each of Janel’s subsidiaries; • periodically evaluating the size, composition and governance structure of Janel’s board of directors and its committees and the boards and committees of Janel’s subsidiaries and determining the future requirements of each such body; • periodically making recommendations concerning the qualifications, criteria, compensation and retirement age of members of Janel’s board of directors and the boards of its subsidiaries, which recommendations, upon approval by Janel’s board of directors, shall be incorporated in Janel’s Corporate Governance Guidelines; • recommending nominees for election to Janel’s board of directors and the boards of its subsidiaries and establishing and administering a board evaluation process; and • reviewing timely nominations by stockholders for the election of individuals to Janel’s board of directors and ensure that such stockholders are advised of any action taken by the board of directors with respect thereto. The Company’s Nominating and Corporate Governance Committee consists of the Company’s full board of directors. Mr. Melsen serves as the chair of the Nominating and Corporate Governance Committee. Independence of Directors The Company is not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, is not at this time required to (and does not) have a board of directors comprised of a majority of independent directors. Pursuant to Item 407(a) of Regulation S-K, however, Janel must disclose each director that is independent under the independence standards of either the New York Stock Exchange or Nasdaq, as selected by Janel. The Company has elected to use the independence standards prescribed under Nasdaq Rule 5605(a)(2), which defines an “independent director” as a person who does not have any relationship with the Company which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Based on the applicable criteria, the Company’s board of directors has determined that Mr. Killackey is not independent, as he is an employee of the Company. Ms. Schulte is not independent by virtue of the fact that she is an Executive Officer of the Company. The board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan are independent directors. Director Compensation The following table summarizes the compensation paid to the Company’s non-executive directors for their services during the Company’s fiscal year ended September 30, 2022 (actual dollar amounts): Name Fees Earned or Paid in Cash (1) Option Awards (2) All Other Compensation Total Gerard van Kesteren $ 50,000 $ 47,675 $ 40,000 (3) $ 137,675 John J. Gonzalez $ 50,000 $ 47,675 $ 109,000 (4) $ 206,675 Gregory J. Melsen $ 50,000 $ 47,675 $ — $ 97,675 Karen Miller Ryan $ 40,000 $ 47,675 $ — $ 87,675 (1) Compensation is paid on a monthly basis. (2) The aggregate number of options outstanding as of September 30, 2022, for each director was as follows: Gerard van Kesteren – 4,999, John J. Gonzalez II – 4,999, Gregory J. Melsen – 11,875, and Karen Miller Ryan – 2,500. (3) Represents compensation paid to Mr. van Kesteren in connection with his consulting agreement. (4) Represents compensation paid to Mr. Gonzalez in connection with his consulting arrangement and payment of medical insurance premiums. Pursuant to the Company’s non-employee director compensation policy, for the fiscal year 2022 non-employee directors received a retainer at an annual rate of $40,000, payable on a monthly basis, and 2,500 options, pursuant to the Amended and Restated Janel Corporation 2017 Equity Incentive Plan or such other equity plan that the Company may adopt from time to time. Directors who also serve as executive officers of the Company do not receive additional compensation for their board service. Committee chairs receive an additional retainer at an annual rate of $10,000. According to the non-employee director compensation policy, non-employee directors will be reimbursed for their reasonable travel and other expenses incurred to attend board of directors or board committee meetings. 38 Table of Contents Employment Arrangements No active employment arrangements. Code of Business Conduct and Ethics The Company has adopted a code of business conduct and ethics, including a whistleblower policy, that applies to all of its employees, including executive officers and directors. The code of business conduct and ethics, including our whistleblower policy, is available on the Company’s website at www.janelcorp.com . The Company intends to disclose, if required, any future amendments to, or waivers from, the code of business conduct and ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC. Corporate Governance Guidelines The Company’s board of directors has adopted corporate governance guidelines that serve as a flexible framework within which its board of directors and its committees operate. These guidelines cover a number of areas, including the size and composition of the board of directors, director selection criteria and qualifications, the agenda for board meetings, board member access to management and independent advisors, director compensation, director orientation and continuing education and annual board and committee self-evaluations. A copy of the corporate governance guidelines is available on the Company’s website at www.janelcorp.com . Communications with the Board Any stockholder desiring to contact the board, or any specific director(s), may send written communications to: Board of Directors (Attention: (Name(s) of director(s), as applicable)), c/o the Company’s Secretary, 80 Eighth Avenue, New York, New York 10011. Any proper communication so received will be processed by the Secretary. If it is unclear from the communication received whether it was intended or appropriate for the board, the Secretary will (subject to any applicable regulatory requirements) use his or her judgment to determine whether such communication should be conveyed to the board of directors or, as appropriate, to the member(s) of the board of directors named in the communication. Leadership Structure and Risk Oversight While the board of directors believes that there are various structures that can provide successful leadership to the Company, the Company’s executive functions are carried out by Ms. Schulte, the Company’s President and Chief Executive Officer, who also serves as chair of the Company’s board of directors and, together with the other directors, brings experience, oversight and expertise to the management of the Company. The board of directors believes that, due to the small size of the Company, this leadership structure best serves the Company and its stockholders. Management is responsible for the day-to-day management of risks the Company faces, while the board of directors has collective responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, management discusses with the board of directors the risks facing the Company and its strategy for managing them. 39 Table of Contents ITEM 11. EXECUTIVE COMPENSATION Introduction (actual dollar amounts) The following table provides summary information concerning compensation paid or accrued by us to our Chief Executive Officer and President, our Chief Information Officer and our Principal Financial Officer, Treasurer and Secretary. We refer to these individuals collectively as the “named executive officers”. Summary Compensation Table The following table sets forth information regarding the total compensation paid or earned by the named executive officers as compensation for their services in all capacities during the fiscal years ended September 30, 2022 and 2021 (actual dollar amounts): Name and Principal Position Year Base Salary ($) Bonus ($) All Other Comp. ($) Total ($) Dominique Schulte, Chief Executive Officer and President 2022 50,000 — 19,299 (1) 69,299 2021 50,000 — 16,478 66,478 Brendan J. Killackey, Chief Information Officer 2022 160,000 106,836 11,772 (2) 278,608 2021 160,000 44,000 11,659 215,659 Vincent A. Verde, Principal Financial Officer, Treasurer and Secretary 2022 215,000 80,936 27,606 (3) 323,542 2021 215,000 25,000 27,438 267,438 (1) Amounts reported under all other compensation for the fiscal year ended September 30, 2022, include $18,360 of medical insurance premiums and $939 of 401K contributions paid for the fiscal year ended 2022. (2) Includes $6,763 of medical insurance premiums and $5,009 of 401(k) contributions paid on behalf of Mr. Killackey for the fiscal year ended 2022. (3) Amounts reported under all other compensation for the fiscal year ended September 30, 2022 include $20,864 of medical insurance premiums and $6,742 of 401(k) contributions paid on behalf of Mr. Verde for the fiscal year ended 2022. Long-Term Incentive Plan Awards While the Company has adopted the Amended and Restated 2017 Equity Incentive Plan, pursuant to which certain stock awards may be granted to the Company’s directors, officers, employees and consultants, our current intent is to utilize this plan only to make annual equity awards to the Company’s non-employee directors. Savings and Stock Option Plans 401(k) and Profit-Sharing Plan (actual dollar amounts) The Company maintains a qualified retirement plan, commonly referred to as a 401(k) plan covering substantially all full-time employees under each segment. The Janel Corporation 401(k) Plan allows for employee salary deferrals including Roth 401(k) deferrals, employer matching contributions, employer profit sharing contributions and employee rollovers. The Janel Corporation 401(k) Plan provides for participant contributions of up to 50% of annual compensation (not to exceed the IRS limit), as defined by the plan. The Company contributes an amount equal to 50% of the participant’s first 6% of contributions. The combined expenses charged to operations for contributions made to the plans for the benefit of the employees for the fiscal years ended September 30, 2022 and 2021 were approximately $379,300 and $288,000, respectively. The administrative expense charged to operations for the fiscal years ended September 30, 2022 and 2021 aggregated approximately $64,000 and $59,000, respectively. Equity Plans On October 30, 2013, the Board of Directors adopted Janel’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries. The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee of the board of directors. On September 21, 2021, the Board of Directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended and Restated Plan”), which amended and restated the prior 2017 Equity Incentive Plan, as previously amended, and pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights with respect to up to 200,000 shares of the Company’s Common Stock, par value $.001 per share, may be granted to employees, directors and consultants to the Company and its subsidiaries. Participants and all terms of any grant under the Amended and Restated Plan are in the discretion of the Company’s Compensation Committee. Outstanding Equity Awards at September 30, 2022 None of our named executive officers had any outstanding stock awards at September 30, 2022. 40 Table of Contents ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following tables set forth information concerning beneficial ownership of shares of Common Stock outstanding as of September 30, 2022. For purposes of calculating beneficial ownership, Rule 13d-3 of the Exchange Act requires inclusion of shares of common stock that may be acquired within sixty days of the stated date. Unless otherwise indicated in the footnotes to a table, beneficial ownership of shares represents sole voting and investment power with respect to those shares. Certain Beneficial Owners The following table reflects the names and addresses of the only persons or entities known to the Company to be the beneficial owners of 5% or more of the outstanding shares of the Company’s common stock as of September 30, 2022. Name and address of Beneficial Owner (1) Shares Beneficially Owned Percent of Class Oaxaca Group L.L.C. (2) 485,302 40.9 % John Eidinger 186,704 15.7 % John J. Gonzalez, II (3) 106,570 9.0 % Gerard van Kesteren (3) 81,887 6.8 % Brendan Killackey 59,333 5.0 % (1) The address of each person and entity included in this table is 80 Eighth Avenue, New York, NY 10011 (2) These shares are held by Oaxaca Group L.L.C. Ms. Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares. (3) Includes 2,500 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2022. Directors and Executive Officers The following table sets forth information with respect to the beneficial ownership of the shares of common stock as of September 30, 2022 by each “named executive officer”, each current director and each nominee for election as a director and all directors and executive officers of the Company as a group. An asterisk (*) indicates ownership of less than 1%. Name of Beneficial Owner Shares Beneficially Owned Percent of Class Dominique Schulte (1) 485,302 40.9 % John J. Gonzalez, II (2) 106,570 9.0 % Gerard van Kesteren (2) 81,887 6.8 % Brendan Killackey 59,333 5.0 % Gregory J. Melsen (2) 9,376 * Karen Miller Ryan (3) 5,278 * Vincent A. Verde 665 * Total 748,411 61.7 % (1) These shares are held by Oaxaca Group L.L.C. Ms. Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares. (2) Includes 2,500 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2022. (3) Includes 834 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2022. 41 Table of Contents Equity Compensation Plan Information The following table provides information, as of September 30, 2022, with respect to all compensation arrangements maintained by the Company under which shares of common stock may be issued: Column A Column B Column C Plan Category: Equity Compensation plans not approved by security holders: Number of securities to be issued, upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans 2013 Stock Option Plan (1) 6,621 $ 5.49 35,701 Amended and Restated 2017 Equity Incentive Plan (2) 24,373 $ 14.64 79,753 Total 30,994 $ 20.13 115,454 (1) On October 30, 2013, the Board of Directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries. The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee of the board of directors. (2) On September 21, 2021, the Board of Directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights with respect to up to 200,000 shares of the Company’s common stock may be granted to employees, directors and consultants to the Company and its subsidiaries. Participants and all terms of any grant under the Amended and Restated Plan are in the discretion of the Compensation Committee. 42 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Related Party Transactions (actual dollar amounts) We are not aware of any transactions since October 1, 2021 or any proposed transactions in which the Company was a party where the amount involved exceeded the lesser of 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years and $120,000, and in which a director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES (actual dollar amounts) The following reflects Prager Metis CPAs, LLC, the Company’s sole independent public accountants, fees for the audit of our financial statements for the fiscal years ended September 30, 2022 and 2021, and fees billed for other services provided by Prager Metis during those periods. Year End September 30, Fee Category 2022 2021 Audit Fees $ 377,050 $ 292,500 Audit-Related Fees 92,000 41,500 Tax Fees 71,768 48,741 Total Fees $ 540,818 $ 382,741 Audit Fees Audit fees include fees paid and accrued for professional services rendered by Prager Metis CPA's for 2022 and 2021, fees for the audits of our financial statements included in our Annual Report on Form 10-K for 2022 and 2021, and reviews of the financial statements included in our Quarterly Reports on Form 10-Q. Audit fees also include comfort letter fees for 2021. Audit-Related Fees Audit-related services fees include fees paid and accrued for transaction related audit services and agreed upon procedures. Tax Fees Tax fees include fees paid and accrued for corporate tax compliance, counsel and advisory services. Approval of Independent Auditor Services and Fees The Audit Committee reviews all fees charged by the Company’s independent auditors and actively monitors the relationship between audit and non-audit services provided. The Audit Committee must pre-approve all audit and non-audit services provided by the Company’s independent auditors and fees charged. 43 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report (1) Financial Statements. The Consolidated Financial Statements filed as part of this report are listed on the Table of Contents to Consolidated Financial Statements. All other schedules are omitted because they are not applicable, are not required, or because the required information is included in the consolidated financial statements or notes thereto. (b) Exhibits Exhibit No. Description * 2.1 Stock Purchase and Sale Agreement, dated July 1, 2022, between Janel Corporation and Rubicon Technology, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed July 5, 2022) 3.1 Articles of Incorporation of Wine Systems Design, Inc. (predecessor name) (incorporated by reference to Exhibit 3A to Wine Systems Design, Inc. (predecessor name) Registration Statement on Form SB-2 filed May 10, 2001) 3.2 Amended and Restated By-Laws of Janel Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 1, 2013) 3.3 Certificate of Designations of Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 29, 2014) 3.4 Certificate of Change filed Pursuant to NRS 78.209 for Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 21, 2015) 3.5 Certificate of Amendment to Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed April 21, 2015) 3.6 Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 25, 2016) 3.7 Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) 3.8 Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K/A filed October 17, 2017) 3.9 Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 5, 2021) 3.10 Certificate, Amendment or Withdrawal of Designation pursuant to NRS 78.1955 with respect to Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 5, 2022) 4.1 Description of Registrant’s Securities (filed herewith) † 10.1 Janel World Trade, Ltd. 2013 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 1, 2013) 10.2 Credit Agreement, effective as of February 29, 2016, by and between Indco, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 25, 2016) 10.3 Security Agreement, effective as of February 29, 2016, made by Indco and the Company, Inc. for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed March 25, 2016) 10.4 Continuing Guaranty Agreement, effective as of February 29, 2016, made by Janel Corporation for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed March 25, 2016) † 10.5 Restricted Stock Award Agreement between Janel Corporation and Gerard van Kesteren dated May 12, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 5, 2017) 10.6 Business Loan Agreement, dated June 14, 2018, by and between AB Merger Sub, Inc. and First Northern Bank of Dixon (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed June 27, 2018) 44 Table of Contents 10.7 Promissory Note, dated June 14, 2018, made by AB Merger Sub, Inc. payable to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed June 27, 2018) 10.8 Deed of Trust, dated June 14, 2018, by Antibodies Incorporated, as Trustor (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed June 27, 2018) 10.9 Commercial Guaranty, dated June 14, 2018, from Janel Corporation (as Guarantor) to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed June 27, 2018) 10.10 Amendment No. 1 to Credit Agreement, effective as of August 30, 2019, by and between Indco, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 6, 2019) 10.11 Term Loan Promissory Note, effective as of August 30, 2019, made by Indco, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 6, 2019) 10.12 Revolving Loan Promissory Note, effective as of August 30, 2019, made by Indco, Inc. payable to First Merchant Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 6, 2019) 10.13 Pledge Agreement, effective as of August 30, 2019, by Janel Corporation to First Merchant Bank (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on September 6, 2019) † 10.14 Consulting Agreement, dated February 26, 2017, between Janel Corporation and John J. Gonzalez, II (incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K for the year ended September 30, 2018, filed on July 26, 2019) † 10.15 Consulting Agreement, dated September 28, 2016, between Janel Corporation and Gerard van Kesteren (incorporated by reference to Exhibit 10.31 of the Company’s Form 10-K for the year ended September 30, 2018, filed on July 26, 2019) 10.16 Amendment No. 2 to Credit Agreement effective as of July 1, 2020, by and between Indco Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020) 10.17 Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, a Texas limited liability company, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as loan party obligors dated September 21, 2021 (incorporated by reference to Exhibit 10.44 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2021) 10.18 First Amendment to Amended and Restated Loan and Security Agreement between (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022) 10.19 Consent, Waiver and Second Amendment to Amended and Restated Loan Agreement, dated as of July 13, 2022, by and among Santander Bank, N.A., Janel Group, Inc., Expedited Logistics and Freight Services, LLC, ELFS Brokerage LLC, Janel Corporation and Expedited Logistics and Freight Services, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 13, 2022) 10.20 Form letter purchase agreement, dated March 31, 2022, between the Company and holders of Series C Stock (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022) 10.21 Amended and Restated 2017 Janel Corporation Equity Incentive Plan dated September 21, 2021 (incorporated by reference to Exhibit 10.45 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021) 10.22 Subscription Agreement for sale of Series C Preferred Stock dated as of September 30, 2021 between Janel Corporation and Oaxaca Group LLC (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on October 5, 2021) 10.23 Amendment No. 3 to Credit Agreement effective as of August 1, 2022 entered into by and among Indco, Inc. , and First Merchants Bank (filed herewith) 21 Subsidiaries of the Registrant (filed herewith) 23.1 Consent of Prager Metis CPAs, LLC (filed herewith) 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith) 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (filed herewith) 32.1 Section 1350 Certification of Principal Executive Officer (furnished herewith) 32.2 Section 1350 Certification of Principal Financial Officer (furnished herewith) 101 Interactive data files providing financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022 in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2022 and September 30, 2021, (ii) Consolidated Statements of Operations for the years ended September 30, 2022 and 2021, (iii) Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the years ended September 30, 2022 and 2021, and (v) Notes to Consolidated Financial Statements (filed herewith) 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith) † Represents management contract, compensatory plan or arrangement in which directors and/or executive officers are entitled to participate. * Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the SEC upon request The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time. ITEM 16. FORM 10-K SUMMARY None. 45 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Janel Corporation has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. JANEL CORPORATION (Registrant) Date: December 9, 2022 By: /s/ Dominique Schulte Dominique Schulte Director, Board Chair, President and Chief Executive Officer (Principal Executive Officer) Date: December 9, 2022 By: /s/ Vincent A. Verde Vincent A. Verde Principal Financial Officer, Treasurer and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Dominique Schulte Director, Board Chair, President and Chief Executive Officer December 9, 2022 Dominique Schulte /s/ Vincent A. Verde Principal Financial Officer, Treasurer and Secretary December 9, 2022 Vincent A. Verde /s/John J. Gonzalez, II Director December 9, 2022 John J. Gonzalez, II /s/Brendan J. Killackey Director December 9, 2022 Brendan J. Killackey /s/Gregory J. Melsen Director December 9, 2022 Gregory J. Melsen /s/Karen Miller Ryan Director December 9, 2022 Karen Miller Ryan /s/Gerard van Kesteren Director December 9, 2022 Gerard van Kesteren 46 Table of Contents Report of Registered Independent Public Accounting Firm – Prager Metis CPAs, LLC (PCAOB ID number 273 ) F-2 Consolidated Balance Sheets as of September 30, 2022 and 2021 F-3 Consolidated Statements of Operations for the Years Ended September 30, 2022 and 2021 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the Years Ended September 30, 2022 and 2021 F-6 Notes to Consolidated Financial Statements F-7 47 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Janel Corporation and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Janel Corporation and Subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended September 30, 2022 and 2021, and the related notes to the consolidated financial statements (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2022 and 2021, and the results of its operations, stockholders’ equity and its cash flows for the years ended September 30, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. 48 Table of Contents Critical Audit Matters Critical audit matters are a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to an account or disclosure that is material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Prager Metis CPAs, LLC We have served as the Company’s auditor since 2019 Basking Ridge, New Jersey December 9, 2022 49 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) September 30, 2022 2021 ASSETS Current Assets: Cash $ 6,591 $ 6,234 Accounts receivable, net of allowance for doubtful accounts 57,077 52,312 Inventory, net 4,802 3,227 Prepaid expenses and other current assets 3,423 3,002 Total current assets 71,893 64,775 Property and Equipment, net 5,044 4,977 Other Assets: Intangible assets, net 22,420 24,173 Goodwill 18,622 18,486 Investment in Rubicon at fair value 2,371 — Operating lease right of use asset 5,660 2,936 Security deposits and other long-term assets 522 577 Total other assets 49,595 46,172 Total assets $ 126,532 $ 115,924 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Line of credit $ 26,396 $ 29,637 Accounts payable - trade 44,960 37,243 Accrued expenses and other current liabilities 7,194 6,311 Dividends payable 1,745 2,427 Current portion of earnout 1,664 1,054 Current portion of long-term debt 639 868 Current portion of deferred acquisition payments 188 188 Current portion of subordinated promissory note-related party 425 550 Current portion of operating lease liabilities 1,825 1,281 Total current liabilities 85,036 79,559 Other Liabilities: Long-term debt 7,519 4,744 Long-term portion of earnout 2,916 2,546 Subordinated promissory notes-related party 5,382 5,525 Long-term portion of deferred acquisition payments — 183 Mandatorily redeemable non-controlling interest 430 783 Deferred income taxes 2,541 2,299 Long-term operating lease liabilities 4,001 1,751 Other liabilities 380 415 Total other liabilities 23,169 18,246 Total liabilities 108,205 97,805 Stockholders’ Equity: Preferred Stock, $ 0.001 par value; 100,000 shares authorized Series B 5,700 shares authorized and 0 shares issued and outstanding as of September 30, 2022 , and 31 shares issued and outstanding as of September 30, 2021 , respectively — — Series C 30,000 shares authorized and 11,368 and 20,960 shares issued and outstanding at September 30, 2022 and September 30, 2021 , liquidation value of $ 7,429 and $ 12,907 at September 30, 2022 and September 30, 2021 , respectively — — Common stock, $ 0.001 par value; 4,500,000 shares authorized, 1,206,354 issued and 1,186,354 outstanding as of September 30, 2022 , and 962,207 issued and 942,207 outstanding as of September 30, 2021 , respectively 1 1 Paid-in capital 17,184 14,838 Common treasury stock, at cost, 20,000 shares ( 240 ) ( 240 ) Accumulated earnings 1,382 3,520 Total stockholders’ equity 18,327 18,119 Total liabilities and stockholders’ equity $ 126,532 $ 115,924 The accompanying notes are an integral part of these consolidated financial statements. 50 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended September 30, 2022 2021 Revenue $ 316,863 $ 146,419 Forwarding expenses and cost of revenue 250,666 113,986 Gross profit 66,197 32,433 Cost and Expenses: Selling, general and administrative 54,723 27,362 Amortization of intangible assets 1,976 1,120 Total Costs and Expenses 56,699 28,482 Income from Operations 9,498 3,951 Other Items: Interest expense ( 1,276 ) ( 589 ) Gain on Paycheck Protection Program loan forgiveness — 2,895 Fair value adjustments to Rubicon investment (net of dividends) ( 7,601 ) — Change in fair value of earnout ( 980 ) — Change in fair value of mandatorily redeemable non-controlling interest 411 ( 93 ) Income Before Income Taxes 52 6,164 Income tax expense ( 2,190 ) ( 961 ) Net (Loss) Income ( 2,138 ) 5,203 Preferred stock dividends ( 586 ) ( 766 ) Non-controlling interest dividends ( 404 ) — Net (Loss) Income Available to Common Stockholders $ ( 3,128 ) $ 4,437 Net (loss) Income per share Basic $ ( 2.07 ) $ 5.54 Diluted $ ( 2.07 ) $ 5.26 Net income (loss) per share attributable to common stockholders: Basic $ ( 3.03 ) $ 4.73 Diluted $ ( 3.03 ) $ 4.48 Weighted average number of shares outstanding: Basic 1,030.8 938.5 Diluted 1,030.8 989.5 The accompanying notes are an integral part of these consolidated financial statements. 51 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share and per share data) PREFERRED STOCK COMMON STOCK PAID-IN CAPITAL COMMON TREASURY STOCK ACCUMULATED EARNING (DEFICIT) TOTAL EQUITY Shares $ Shares $ $ Shares $ $ $ Balance - September 30, 2020 19,791 $ — 918,652 $ 1 $ 14,604 20,000 $ ( 240 ) $ ( 1,683 ) $ 12,682 Net Income — — — — — — — 5,203 5,203 Dividends to preferred stockholders — — — — ( 766 ) — — — ( 766 ) Preferred C shares purchased — — — — 600 — — — 600 Preferred C shares sold 1,200 — — — — — — — — Preferred B shares converted — — — — — — — — — Restricted stock issued — — 35,000 — 305 — — — 305 Stock based compensation — — — — 48 — — — 48 Stock option exercise — — 8,555 — 47 — — — 47 Balance - September 30, 2021 20,991 $ — 962,207 $ 1 $ 14,838 20,000 $ ( 240 ) $ 3,520 $ 18,119 Net (Loss) — — — — — — — ( 2,138 ) ( 2,138 ) Dividends to preferred stockholders — — — — ( 586 ) — — — ( 586 ) Dividends to non-controlling interest — — — — ( 404 ) — — — ( 404 ) Preferred C shares purchases ( 4,687 ) — — — ( 1,731 ) — — — ( 1,731 ) Preferred C shares converted ( 4,905 ) — 65,205 — — — — — — Preferred B shares converted ( 31 ) — 306 — — — — — — Common Stock issued in private placement — — 88,888 — 4,000 — — — 4,000 Stock based compensation — — 15,000 — 790 — — — 790 Stock option exercise — — 74,748 — 277 — — — 277 Balance - September 30, 2022 11,368 $ — 1,206,354 $ 1 $ 17,184 20,000 $ ( 240 ) $ 1,382 $ 18,327 The accompanying notes are an integral part of these consolidated financial statements. 52 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended September 30, 2022 2021 Cash Flows from Operating Activities: Net (loss) income $ ( 2,138 ) $ 5,203 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Provision for (recovery of) uncollectible accounts 1,142 70 Depreciation 484 371 Deferred income provision 242 730 Amortization of intangible assets 1,976 1,120 Amortization of acquired inventory valuation 492 708 Amortization of loan costs 9 9 Stock based compensation 832 115 Unrealized loss on fair value adjustment to Rubicon investment (net of dividend) 7,601 — Change in fair value of earnout 980 — Change in fair value of mandatorily redeemable non-controlling interest ( 353 ) 179 Gain on Paycheck Protection Program loan forgiveness — ( 2,895 ) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable ( 5,874 ) ( 20,698 ) Inventory ( 1,503 ) ( 43 ) Prepaid expenses and other current assets ( 421 ) ( 1,475 ) Security deposits and other long-term assets 55 14 Accounts payable and accrued expenses 8,546 16,292 Other liabilities 37 99 Net cash provided by (used in) operating activities 12,107 ( 201 ) Cash Flows from Investing Activities: Acquisition of property and equipment, net of disposals ( 551 ) ( 234 ) Investment in Rubicon (net of dividend) ( 9,972 ) — Acquisitions ( 946 ) ( 15,874 ) Net cash used in investing activities ( 11,469 ) ( 16,108 ) Cash Flows from Financing Activities: Dividends paid to preferred stockholders ( 657 ) — Dividends paid to minority shareholders ( 404 ) — Borrowings (repayments) of term loan 2,538 ( 1,673 ) Proceeds from stock option exercise 277 46 Line of credit, (payments) proceeds, net ( 3,241 ) 21,191 Repurchase of Series C Preferred Stock ( 2,343 ) — Restricted Stock Issued — 305 Proceeds from sale of Series C Preferred Stock — 600 Proceeds from Private Placement 4,000 — Repayment of subordinated promissory note-related party ( 451 ) ( 1,275 ) Net cash (used in) provided by financing activities ( 281 ) 19,194 Net increase in cash 357 2,885 Cash at beginning of the period 6,234 3,349 Cash at end of period $ 6,591 $ 6,234 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 882 $ 418 Income taxes $ 1,883 $ 82 Non-cash investing activities: Contingent earn-out acquisition $ — $ 3,600 Subordinated Promissory notes of ELFS $ — $ 4,837 Subordinated Promissory notes of ICT $ — $ 1,791 Due to former ECM owner $ 250 $ — Non-cash financing activities: Dividends declared to preferred stockholders $ 586 $ 766 The accompanying notes are an integral part of these consolidated financial statements. 53 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands except share and per share data) 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Business description Janel is a holding company with subsidiaries in three business segments: Logistics, Life Sciences and Manufacturing. The Company strives to create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating Janel’s capital at high risk-adjusted rates of return; and attracting and retaining exceptional talent. Management at the holding company focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power. Logistics The Company’s Logistics segment is comprised of several wholly-owned subsidiaries. The Logistics business 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 are accessorial revenue to the core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges. On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC (“ELFS”) and related subsidiaries, which we include in our Logistics segment. On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc. (“W.R. Zanes”), which we include in our Logistics segment. 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 business 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 of 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 of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”), which we include in our Life Sciences segment. Manufacturing The Company’s manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders. Recent Investment On August 19, 2022, the Company acquired 1,108,000 shares (the “Acquired Shares”) of the common stock, par value $ 0.001 per share, of Rubicon Technology, Inc. (“Rubicon”), at a price per share of $ 20.00 , in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Acquired Shares represented 44.99 % of Rubicon’s issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022. 54 Table of Contents 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. 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 90.23 %, with a non-controlling interest held by existing Indco management. The Indco non-controlling interest is mandatorily redeemable and is recorded as a liability. All intercompany transactions and balances have been eliminated in consolidation. Uses of estimates in the preparation of financial statements The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The most critical estimates made by the Company are those relating to accounts receivables valuation, the useful lives of long-term assets, accrual of cost related to ancillary services the Company provides, accrual of tax expense on an interim basis and potential impairment of goodwill and intangible assets with indefinite lives, long-lived assets impairment. Cash The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $ 250 . The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts. Accounts receivable and allowance for doubtful accounts receivable Accounts receivable are recorded at the contractual amount. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical collection experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions and other factors that may affect the customers’ ability to pay. The Company writes off accounts receivable balances that have aged significantly once all collection efforts have been exhausted and the receivables are no longer deemed collectible from the customer. The allowance for doubtful accounts as of September 30, 2022 and September 30, 2021 was $ 1,547 and $ 812 , respectively. Inventory Inventory is valued at the lower of cost (using the first-in, first-out method) or net realizable value. The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration for its Life Sciences business. The products of the Life Sciences business require the initial manufacture of multiple batches to determine if quality standards can consistently be met. In addition, the Company will produce larger batches of established products than current sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to produce quantities in excess of forecasted usage. The Company values acquired manufactured antibody inventory based on a three-year forecast. Inventory quantities in excess of the forecast are not valued due to uncertainty over salability. Property and equipment and depreciation policy Property and equipment are recorded at cost. Property and equipment acquired in business combinations are initially recorded at fair value. Depreciation is provided for in amounts sufficient to amortize the costs of the related assets over their estimated useful lives on the straight-line and accelerated methods for both financial reporting and income tax purposes. Maintenance and repairs are recorded as expenses when incurred. Goodwill The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired in a business combination. Under current authoritative guidance, goodwill is not amortized but is tested for impairment annually 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, or other circumstances influencing the estimate of future cash flows or significantly affecting the fair value of our reporting units, the Company could be required to recognize impairment charges in the future. 55 Table of Contents We have determined that it is impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each July 1 of prior reporting periods without the use of hindsight. As such, the change in annual impairment test date has been prospectively applied beginning July 1, 2021. The fair value of our reporting units were in excess of carrying value and goodwill was not deemed to be impaired as of September 30, 2022 and 2021. Intangibles and long-lived assets Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management. If there is a material change in economic conditions, 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. The Company concluded that the fair value of intangibles and long-lived assets were not deemed to be impaired as of September 30, 2022 and 2021. Equity-Method Investments The Company has determined that its investment in Rubicon is subject to the equity method of accounting, and the Company has elected the fair value option under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10, Financial Instruments (“ASC 825-10”) to account for the equity method investment. In accordance with ASC 825-10, the Company will present its equity method investment in Rubicon at fair value each reporting period with changes in fair value and dividends received from Rubicon recorded to income from investment in unconsolidated affiliate on the Company’s statements of operations. See Note 17 for further information about the Company’s investment in Rubicon’s equity securities accounted for under the fair value option. Business segment information The Company operates in three reportable segments: Logistics, Life Sciences and Manufacturing. The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance . Revenue and revenue recognition Logistics Revenue Recognition Revenue is recognized upon transfer of control of promised services to customers. With respect to its Logistics segment, the Company has determined that in general each shipment transaction or service order constitutes a separate contract with the customer. When the Company provides multiple services to a customer, different contracts may be present for different services. The Company typically satisfies its performance obligations as services are rendered at a point in time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed at a point in time during the life of a shipment, including services at origin, freight and destination. The Company fulfills nearly all of its performance obligations within a one to two-month period. 56 Table of Contents The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally, revenue is recorded on a gross basis when the Company is acting as principal and is primarily responsible for fulfilling the promise to provide the services, when it has discretion in setting the prices for the services to the customers, and the Company has the ability to direct the use of the services provided by the third party. Revenue is recognized on a net basis when the Company is acting as agent and we do not have latitude in carrier selection or establish rates with the carrier. In the Logistics segment, the Company disaggregates its revenues by its five primary service categories: ocean freight, trucking, air freight, custom brokerage and other. A summary of the Company’s revenues disaggregated by major service lines for the fiscal year ended September 30, 2022 and 2021 was as follows: Year Ended September 30, Service Type 2022 2021 Ocean freight $ 123,989 $ 61,436 Trucking 95,333 22,198 Air freight 48,312 26,970 Custom brokerage 12,518 14,424 Other 15,191 835 Total $ 295,343 $ 125,863 Life Sciences and 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 from the Company’s Manufacturing segment, which is comprised of Indco, a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries, are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories. Revenues for Life Sciences and Manufacturing 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. 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. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Potentially dilutive shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive. Equity classified share-based awards The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation- Stock Compensation.” For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for restricted shares; the expense is recognized over the service period for awards expected to vest. Stock-based compensation to non-employees Liability classified share-based awards The Company maintains other share unit compensation grants for shares of Indco, which vest over a period of up to three years following their grant. The shares contain certain put features where the Company is either required or expects to settle vested awards on a cash basis. These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in Note 11. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vesting are recognized through compensation expense. Compensation expense reflects estimates of the number of instruments expected to vest. 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. 57 Table of Contents Non-employee share-based awards The Company grants restricted stock awards, restricted stock units and stock options to certain directors, officers and employees. The Company accounts for share-based compensation as equity awards such that compensation cost is measured at the grant date based on the fair value of the award and is expensed ratably over the vesting period. The fair value of restricted stock is the market price as of the grant date, and the fair value of each stock option grant is estimated as of the grant date using the Black-Scholes option pricing model. Determining the fair value of share-based awards at the grant date requires judgment about, among other things, stock volatility, the expected life of the award and other inputs. The Company accounts for forfeitures as they occur. The Company issues new shares of common stock to satisfy exercises and vesting of awards granted under its stock plans. Share-based compensation expense is reflected in the consolidated statements of operations as part of selling general and administrative expenses. 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 holders. The Company is required to purchase 20 % per year of the mandatorily redeemable non-controlling interest at the option of the holders beginning on the third anniversary of the date of the Indco acquisition, which was March 21, 2019. As of September 30, 2022, the holders had not exercised their redemption rights. On December 13, 2021, two minority owners of Indco exercised 7,000 and 3,372 options to purchase Indco’s common stock at an exercise price of $ 6.48 and $ 12.07 for an aggregate purchase price of $ 45 and $ 41 , respectively. Indco issued related party promissory notes in the amount of $ 45 and $ 41 , respectively, which bear interest at 1 % per annum; both interest and principal are payable on the maturity date of December 31, 2024 . On November 30, 2020, a minority owner of Indco exercised 7,000 options to purchase Indco’s common stock at an exercise price of $ 6.48 for an aggregate purchase price of $ 45 . Indco issued a related party promissory note in the amount of $ 45 , which bears interest at 1 % per annum; both interest and principal are payable on the maturity date of December 31, 2023 . These notes are included in security deposits and other long-term assets. The fair value of the shares issued of Indco’s common stock was recorded as an increase in mandatorily redeemable non-controlling interest. As a result of the exercise of options to purchase Indco’s stock, the mandatorily redeemable non-controlling interest percentage was 9.77 % and 9.32 % as of September 30, 2022 and 2021. 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 .” Income taxes The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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. 58 Table of Contents Leases The Company determines if an arrangement is a lease at inception. Assets and obligations related to operating leases are included in operating lease right-of-use (“ROU”) assets; current portion of operating lease liability; and operating lease liability, net of current portion in our consolidated balance sheets. Assets and obligations related to finance leases are included in property, technology and equipment, net; current portion of finance lease liability; and finance lease liability, net of current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company’s agreements with lease and non-lease components are all each accounted for as a single lease component. For leases with an initial term of twelve months or less, the Company elected the exemption from recording right of use assets and lease liabilities for all leases that qualify and records rent expense on a straight-line basis over the lease term. Expenses for these short-term leases for the fiscal year ended September 30, 2022 amounted to $ 353 . Contingent Earnout Liabilities The Company accounts for contingent consideration relating to business combinations as a contingent earnout liability and a decrease (increase) to goodwill at the date of the acquisition and continually remeasures the asset or liability at each balance sheet date by recording changes in the fair value through change in fair value of contingent consideration in the consolidated statements of operations. The ultimate settlement of contingent earnout liabilities relating to business combinations may be for amounts that are materially different from the amounts initially recorded and may cause volatility in the Company’s results of operations. Recent accounting pronouncements Recently issued accounting pronouncements not yet adopted In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), and ASU No. 2021-01, “Reference Rate Reform: Scope” (“ASU 2021-01”), respectively. Together, ASU 2020-04 and ASU 2021-01 provide temporary optional expedients and exceptions for the application of U.S. GAAP, if certain criteria are met, to contract modifications, hedging relationships, and other arrangements that are expected to be impacted by the global transition away from certain reference rates, such as the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates, towards new reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. We are currently evaluating the effect that the new guidance will have on our financial position, results of operations and related disclosures. 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. This standard will be effective for us in the first quarter of fiscal year 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for us in the first quarter of fiscal 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and related disclosures. 59 Table of Contents 2. ACQUISITIONS 2022 Acquisitions Life Sciences On August 15, 2022, the Company completed a business combination whereby it acquired all of the membership interests of ECM Biosciences LLC (“ECM”), for $ 850 , net of $ 16 cash received. At closing, the former member of ECM was paid $ 600 in cash and an additional $ 250 was due to the former member which is included in accrued expenses and other current liabilities. In connection with the combination, the Company recorded an aggregate of $ 24 in goodwill and $ 222 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations. The results of operations of the acquired businesses are included in the Janel’s consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations individually or in aggregate. 2021 Acquisitions Logistics On September 21, 2021, the Company completed the acquisition of all of the membership interests of ELFS and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS. The purchase price for the membership interests was $ 19,000 , subject to certain closing adjustments as set forth in the related purchase agreement. Further earnout payments in an amount not anticipated to exceed $ 4,500 will be due to the former members of ELFS based on the operating profit earned by ELFS. Upon the closing of the transaction, the former members of ELFS were paid $ 13,000 in cash and were issued an aggregate amount of $ 6,000 in subordinated promissory notes. Refer to Note 8 to the Condensed Consolidated Financial Statements for ELFS subordinated promissory notes information. The ELFS acquisition was funded with cash provided by normal operations, borrowings under the Amended Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) dated September 21, 2021, as well as subordinated promissory notes issued to the former members of ELFS. This acquisition was completed to expand our product offerings in our Logistics segment. The preliminary fair value of the consideration transferred of $ 21,437 was valued a of the date of the acquisition as follows: cash - $ 13,000 ; earnout payments - $ 3,600 ; and subordinated promissory notes - $ 4,837 (preliminary net of working capital adjustment of $ 1,163 ). In March 2022, the fair value of the consideration transferred was adjusted to $ 21,700 , and the fair value of the subordinated promissory notes was adjusted to $ 5,100 , in each case due to a change in the net working capital adjustment of $ 263 . ELFS provides a variety of logistics services, which include domestic and international freight shipping and forwarding and hazardous material warehousing and distribution. The Company is headquartered in Houston, Texas and also has other offices in Texas, Louisiana, Colorado and Oklahoma and has dedicated agents, who work in specific areas to assist in logistics, in the following locations: Texas, Louisiana, North Dakota and Oklahoma. Purchase price allocation In accordance with the acquisition method of accounting, the Company allocated the consideration paid for ELFS to the net tangible and identifiable intangible assets based on their estimated fair values. The Company’s valuation of assets acquired and liabilities assumed, and the fair value amounts noted, are in the table below. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets (in thousands) . Fair Value Accounts Receivable $ 11,017 Prepaid expenses and other current assets 2,252 Property & equipment, net 59 Security deposits and other long-term assets 322 Operating lease right of use asset 901 Goodwill 2,643 Intangible assets 10,000 Accounts payable ( 2,399 ) Current portion of operating lease liabilities ( 445 ) Accrued expenses and other current liabilities ( 2,194 ) Long-term operating lease liabilities ( 456 ) Total Consideration Paid $ 21,700 60 Table of Contents The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Logistics Segment for the years ended September 30, 2021 assuming the acquisition of ELFS was made on October 1, 2020 (in thousands). 2021 Revenues $ 199,017 Forwarding expense 158,859 Gross profit 40,158 Selling, general and administrative expenses 34,011 Income from operations $ 6,147 The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition occurred on October 1, 2020, nor are they necessarily indicative of future results. The pro forma financial information includes the impact of purchase accounting and other nonrecurring items directly attributable to the acquisition, which include: • Amortization expense of acquired intangibles • Adjustments to interest expense to remove historical ELFS interest costs and reflect Janel’s current debt profile • The related tax impact of the above referenced adjustments The pro forma results do not include any cost savings or operational synergies that may be generated or realized due to the acquisition of ELFS. On December 31, 2020, through the Company’s Logistics segment, which is comprised of several wholly-owned subsidiaries completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W. R. Zanes, a logistics services provider with two U.S. locations. The aggregate purchase price for this acquisition was $ 1,282 . At closing, $ 1,182 was paid in cash and $ 100 was placed in escrow for a period of twelve months for the purpose of securing the indemnification obligations of former stockholders. The Company recorded an aggregate of $ 304 in goodwill and $ 531 in other identifiable intangibles. The acquisition was funded with cash provided by normal operations, funds available under the Santander Credit Facility. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. This acquisition was completed to expand our product offerings in our Logistics segment. Life Sciences On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”) for an aggregate purchase price of $ 3,419 , net of $ 105 cash received. At closing, $ 1,628 was paid in cash and a subordinated promissory note in the amount of $ 1,850 was issued to the former owner. The Company recorded the present value of $ 1,760 for the subordinated promissory note. The Company recorded an aggregate of $ 1,438 in goodwill and $ 1,430 in other identifiable intangibles. Subsequent to closing, the Company recorded an additional $ 30 purchase price adjustment related to an I.R.S Code Section 338(h)(10) election that was made in connection with the ICT acquisition. The ICT acquisition will be treated as an asset purchase for income tax purposes, which will allow for the tax deduction of ICT’s goodwill. The acquisition was funded with cash provided by normal operations along with a note to the former owner. The results of operations of the acquired businesses are included in Janel’s condensed consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. ICT is a developer and manufacturer of cell viability assay kits, ELISA buffers and fluorescent reagents for use in research and diagnostics. ICT was founded in 1994. The acquisition of ICT was completed to expand our product offerings in our Life Sciences segment. 3. PROPERTY AND EQUIPMENT A summary of property and equipment and the estimated lives used in the computation of depreciation and amortization is as follows (in thousands): September 30, 2022 2021 Life Building and improvements $ 3,076 $ 3,065 12 - 30 years Land and improvements 1,385 1,286 Indefinite Furniture and Fixture 298 298 3 - 7 years Computer Equipment 907 684 3 - 5 years Machinery & Equipment 1,357 1,253 3 - 15 years Leasehold Improvements 137 109 3 - 5 years 7,160 6,695 Less Accumulated Depreciation ( 2,116 ) ( 1,718 ) $ 5,044 $ 4,977 61 Table of Contents Depreciation expense for the fiscal year ended September 30, 2022 and 2021 was $ 484 and $ 371 , respectively. 4. INVENTORY Inventories consisted of the following (in thousands): Year End September 30, 2022 2021 Finished goods $ 1,823 $ 919 Work-in-process 763 968 Raw materials 2,260 1,365 Gross inventory 4,846 3,252 Less – reserve for inventory valuation ( 44 ) ( 25 ) Inventory net $ 4,802 $ 3,227 5. INTANGIBLE ASSETS A summary of intangible assets and the estimated useful lives used in the computation of amortization is as follows (in thousands): September 30, 2022 2021 Life Customer relationships $ 23,625 $ 23,482 12 - 24 Years Trademarks/names 4,539 4,490 1 - 20 Years Trademarks/names 521 521 Indefinite Other 1,180 1,149 2 - 22 Years 29,865 29,642 Less: Accumulated Depreciation ( 7,445 ) ( 5,469 ) $ 22,420 $ 24,173 The composition of the intangible assets balance at September 30, 2022 and 2021 is as follows (in thousands) : September 30, 2022 2021 Logistics $ 18,174 $ 18,174 Life Sciences 3,991 3,768 Manufacturing 7,700 7,700 29,865 29,642 Less: Accumulated Depreciation ( 7,445 ) ( 5,469 ) $ 22,420 $ 24,173 Amortization expense of intangible assets for the year ended September 30, 2022 and 2021 was $ 1,976 and $ 1,120 , respectively. The future amortization of these intangible assets is expected to be as follows (in thousands): Fiscal Year 2023 $ 1,941 Fiscal Year 2024 1,915 Fiscal Year 2025 1,912 Fiscal Year 2026 1,912 Fiscal Year 2027 1,892 Thereafter 12,327 $ 21,899 62 Table of Contents 6. GOODWILL The Company’s goodwill carrying amounts relate to the acquisitions in the Logistics, Life Sciences and Manufacturing businesses. The composition of the goodwill balance at September 30, 2022 and 2021 is as follows (in thousands) : September 30, 2022 2021 Logistics $ 9,175 $ 9,063 Life Sciences 4,401 4,377 Manufacturing 5,046 5,046 Total $ 18,622 $ 18,486 7. NOTES PAYABLE - BANKS (A) Santander Bank Facility On October 17, 2017, Janel Group (“Janel Group”), a wholly-owned subsidiary of the Company, and its subsidiaries, 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. The borrowers’ obligations under the Santander Facility are secured by all of the assets of the borrowers, and the Santander Loan Agreement contains customary terms and covenants. On September 21, 2021, the Santander Loan Agreement was amended and restated by the Amended and Restated Loan and Security Agreement by and among Janel Group and Janel Group’s wholly-owned subsidiaries, ELFS and ELFS Brokerage, LLC, as borrowers (the “Borrowers”), the Company and Expedited Logistics and Freight services, LLC, an Oklahoma limited liability company and wholly-owned subsidiary of Janel Group, as loan party obligors, and Santander. As amended and restated , the Santander Loan Agreement provided that the maximum revolving facility amount available increased from $ 17,000 to $ 30,000 (limited to 85 % of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Loan Agreement), interest accrued at an annual rate equal to LIBOR ( 30, 60 or 90 day ) plus 2.25 % subject to a LIBOR floor of 75 basis points at close, with a potential LIBOR floor reduction to 25 basis points upon certain conditions; the Company was provided the option of making distributions of up to $ 1 million annually on its outstanding shares of Series C Cumulative Preferred Stock (the “Series C Preferred Stock”) if specified conditions are met, and the maturity date of the Santander Facility was extended to September 21, 2026 . On March 31, 2022, the Santander Loan Agreement was amended to provide for, among other changes: (i) the maximum revolving facility amount available was increased from $ 30,000 to $ 31,500 (limited to 85 % of the Borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement) ; (ii) the LIBOR basis on which interest under the Santander Loan Agreement was calculated was changed to the Secured Overnight Financing Rate (“SOFR”) and interest on the Santander Facility accrues at an annual rate equal to the one-month SOFR plus 2.75 %; (iii) a one-time increase from $ 1,000 to $ 3,000 in the amount the Company was permitted to distribute to holders of the Company’s Series C Preferred Stock if specified conditions are met; and (iv) the amount of indebtedness of the Company’s Antibodies Incorporated subsidiary which the Company was permitted to guaranty was increased from $ 2,920 to $ 5,000 . On July 13, 2022, the Santander Loan Agreement was further amended by the Consent, Waiver and Second Amendment (the “Second Santander Amendment”) to (i) increase the maximum revolving facility amount available to $ 35,000 (limited to 85 % of the Borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement), and (ii) provide for a new bridge term loan to the Company in the principal amount of up to $ 12,000 (the “Bridge Facility”) to be funded in connection with the acquisition by the Company of up to 45 % of the outstanding shares of Rubicon (the “Rubicon Transaction”), subject to the satisfaction of certain customary limited conditions. The Bridge Facility was drawn on August 18, 2022 and matured on the earlier to occur of (i) twenty ( 20 ) business days following the funding of the Bridge Facility and (ii) the date of funding of the dividend to be paid by Rubicon in connection with the Rubicon Transaction. The Company repaid the Bridge Facility in full on August 30, 2022. The Second Santander Amendment also contained a one-time waiver and consent to (a) the consummation of the Rubicon Transaction, and (b) a dividend of $ 2,500 to be paid by Janel Group to the Company. At September 30, 2022, outstanding borrowings under the Santander Facility were $ 26,396 , representing 75.4 % of the $ 35,000 available thereunder, and interest was accruing at an effective interest rate of 5.79 %. At September 30, 2021, outstanding borrowings under the Santander Facility were $ 29,637 , representing 98.8 % of the $ 30,000 available thereunder, and interest was accruing at an effective interest rate of 3.00 %. 63 Table of Contents The Company was in compliance with the financial covenants defined in the Santander Loan Agreement at both September 30, 2022 and September 30, 2021. (B) First Merchants Bank Credit Facility On March 21, 2016, Indco entered into a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank (“First Merchant”), as amended . On August 1, 2022, Indco and First Merchants entered into Amendment No. 3 to the First Merchants Credit Agreement, modifying the terms of Indco’s credit facilities. Under the revised terms, the credit facilities consist of a $ 5,500 term loan, a $ 1,000 (limited to the borrowing base and reserves) revolving loan, and the continuation of a mortgage loan in the original principal amount of $ 680 (collectively, the “First Merchants Facility” ). Interest will accrue on the term loan at an annual rate equal to one-month adjusted term SOFR plus either 2.75 % (if Indco’s total funded debt to EBITDA ratio is less than 2 :1), or 3.5 % (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2 :1). Interest will accrue on the revolving loan at an annual rate equal to one-month adjusted term SOFR plus 2.75 %. Interest will accrue on the mortgage loan at an annual rate of 4.19 %. Indco’s obligations under the First Merchants Credit Facility are secured by all of Indco’s real property and other assets, and are guaranteed by Janel, and Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares.The term loan and revolving loan portions of the First Merchants Credit Facility will expire on August 1, 2027 , and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended. As of September 30, 2022, there were no outstanding borrowings under the revolving loan, $ 5,420 of borrowings under the term loan, and $ 631 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 6.63 % and 4.19 %, respectively. As of September 30, 2021, there were no outstanding borrowings under the revolving loan, $ 2,713 of borrowings under the term loan, and $ 655 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83 % and 4.19 %, respectively. Indco was in compliance with the financial covenants define d in the First Merchants Credit Agreement at both September 30, 2022 and September 30, 2021 (in thousands). September 30, 2022 2021 Total Debt * $ 6,051 $ 3,368 Less Current Portion ( 574 ) ( 809 ) Long-term Portion $ 5,477 $ 2,559 * Note: Term Loan is due in monthly installments of $ 46 plus monthly interest, at SOFR plus 2.75 % to 3.5 % per annum, mortgage loan is due in monthly installments of $ 4 , including interest at 4.19 %. The credit facilities are collateralized by all of Indco’s assets and guaranteed by Janel. These obligations mature as follows (in thousands): Fiscal Year 2023 $ 574 Fiscal Year 2024 575 Fiscal Year 2025 1,133 Fiscal Year 2026 550 Fiscal Year 2027 3,219 $ 6,051 (C) First Northern Bank of Dixon On June 21, 2018, as amended November 2019 and October 2, 2020, Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company, entered into a Business Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First Northern”) as amended. The First Northern Loan Agreement provides for a $ 2,235 term loan (“First Northern Term Loan”) which bears interest at an annual rate of 4.00 % and matures on November 14, 2029 . In addition, Antibodies has a $ 750 revolving credit facility with First Northern which currently bears interest at a variable index rate, currently 7.75 % and matures on November 10, 2023 (the “First Northern Revolving Loan”). 64 Table of Contents Antibodies also entered into two separate business loan agreements with First Northern: a $ 125 term loan in connection with a potential expansion of solar generation capacity on the Antibodies property. (“First Northern Solar Loan”), bearing interest at the annual rate of 4.43 % (subject to adjustment in five years ) and maturing on November 14, 2029 ; and a $ 60 term loan in connection with a potential expansion of generator capacity on the Antibodies property (“Generator Loan”), bearing interest at the annual rate of 4.25 % and maturing on November 5, 2025 . There were no outstanding borrowings under the Generator Loan at September 30, 2022 and 2021 . Antibodies’ obligations to First Northern are secured by Antibodies’ real property and are guaranteed by Janel . As of September 30, 2022, the total amount outstanding under the First Northern Term Loan was $ 2,084 , of which $ 2,027 is included in long-term debt and $ 57 is included in the current portion of long-term debt, with interest accruing at an effective interest rate of 4.18 %. As of September 30, 2022, the total amount outstanding under the First Northern Solar Loan was $ 23 , of which $ 15 is included in long-term debt and $ 8 is included in the current portion of long-term debt, with interest accruing at an effective interest rate of 4.43 %. As of September 30, 2021, the total amount outstanding under the First Northern Term Loan was $ 2,139 , of which $ 2,084 is included in long-term debt and $ 55 is included in the current portion of long-term debt, with interest accruing at an effective interest rate of 4.18 %. As of September 30, 2021, the total amount outstanding under the First Northern Solar Loan was $ 105 , of which $ 101 is included in long-term debt and $ 4 is included in the current portion of long-term debt, with interest accruing at an effective interest rate of 4.43 %. September 30, 2022 2021 (in thousands) Total Debt * $ 2,107 $ 2,244 Less Current Portion ( 65 ) ( 59 ) Long-term Portion $ 2,042 $ 2,185 * Long-term debt is due in monthly installments of $ 12 plus monthly interest, at 4.18 % per annum. The note is collateralized by real property owned by Antibodies and guaranteed by Janel. These obligations mature as follows (in thousands): Fiscal Year 2023 $ 66 Fiscal Year 2024 68 Fiscal Year 2025 70 Fiscal Year 2026 66 Fiscal Year 2027 69 Thereafter 1,768 $ 2,107 The Company was in compliance with the financial covenants defined in the First Northern Loan Agreement at September 30, 2022 and September 30, 2021. 8. SUBORDINATED PROMISSORY NOTES – RELATED PARTY Aves Labs, Inc., a wholly-owned subsidiary of the Company, is the obligor on a fixed 0.5 % subordinated promissory note in the amount of $ 1,850 (the “ICT Subordinated Promissory Note”) issued to the former owner of ImmunoChemistry Technologies, LLC, in connection with a business combination whereby the Company acquired all of the membership interests of ICT. The ICT Subordinated Promissory Note is payable in sixteen scheduled quarterly installments of principal and interest beginning March 4, 2021, matures on December 4, 2024 and may be prepaid, in whole or in part, without premium or penalty. The ICT Subordinated Promissory Note is guaranteed by the Company and is secured by the Company’s membership interests in ICT. The ICT Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts payable to Santander, First Merchants and the First Northern. As of September 30, 2022, the amount outstanding under the ICT Subordinated Promissory Note was $ 707 , of which $ 425 is included in the current portion of subordinated promissory notes and $ 282 is included in the long-term portion of subordinated promissory notes. 65 Table of Contents As of September 30, 2021, the amount outstanding under ICT Subordinated Promissory Note was $ 1,237 , of which $ 550 is included in the current portion of subordinated promissory notes and $ 687 is included in the long-term portion of subordinated promissory notes. Janel Group is the obligor on four fixed 4 % subordinated promissory notes totaling $ 6,000 in the aggregate (together, the “ELFS Subordinated Promissory Notes”), payable to certain former shareholders of ELFS. All of the ELFS Subordinated Promissory Notes are guaranteed by the Company and are subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Facility. The ELFS Subordinated Promissory Notes are payable in twelve equal consecutive quarterly installments of principal together with accrued interest. Beginning October 15, 2021, and on the same day of the next eight consecutive calendar quarters, thereafter payment of accrued interest and unpaid interest is due to the former shareholders. Beginning October 15, 2023, and on the same day of the next twelve consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders. In June 2022, the principal amount of the ELFS Subordinated Promissory Notes was adjusted to $ 5,100 due to a revised working capital adjustment of $ 900 . As of September 30, 2022 and September 30, 2021, the amount outstanding under the ELFS Subordinated Promissory Notes was $ 5,100 and $ 4,837 , respectively, and was included in the long-term portion of subordinated promissory notes. September 30, 2022 2021 (in thousands) Total subordinated promissory notes $ 5,807 $ 6,075 Less current portion of subordinated promissory notes ( 425 ) ( 550 ) Long term portion of subordinated promissory notes $ 5,382 $ 5,525 These obligations mature as follows (in thousands): Total Fiscal Year 2023 $ 395 Fiscal Year 2024 1,957 Fiscal Year 2025 1,755 Fiscal Year 2026 1,700 Total $ 5,807 9. SBA PAYCHECK PROTECTION PROGRAM LOANS On April 19, 2020, the Company received a loan (the “Company 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, as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The Company PPP Loan matures on April 19, 2022 and bears interest at a rate of 1.00 % per annum. Under the original terms, all principal and interest payments are deferred for six months from the date of the note. On July 23, 2020, the Company assumed a PPP Loan in connection with an acquisition in the amount of $ 135 (the “Acquisition PPP Loan”). The terms of the Acquisition PPP Loan were the same as the terms of the Company PPP Loan. In February 2021, the Company was informed that the Acquisition PPP Loan had been forgiven by the SBA. In February 2021, the Company applied for forgiveness of the Company PPP Loan in accordance with the terms of the CARES Act and o n July 22, 2021, the Company received notification from Santander that the SBA had granted full forgiveness of the Company’s PPP Loan on July 20, 2021 in the amount of $ 2,726 and interest payable in the amount of $ 34 . In accounting for the forgiveness of the Acquisition PPP Loan and Company PPP Loan, the Company is guided by ASC 470 Debt, and ASC 450-30 Gain contingency. Accordingly, the Company derecognized both the Acquisition PPP Loan and Company PPP Loan and recorded $ 2,895 as a Gain on Paycheck Protection Program loan forgiveness. 10. STOCKHOLDERS’ EQUITY (in thousands, except share per share data) Janel is authorized to issue 4,500,000 shares of common stock, par value $ 0.001 . 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. 66 Table of Contents (A) Common Stock On August 10, 2022, the Company issued 88,888 shares of its common stock, par value $ 0.001 per share (“Common Stock”), at a purchase price of $ 45 per share (the closing sale price per share of Common Stock on August 9, 2022 as reported on the Pink tier of the OTC market, or an aggregate purchase price of $ 4,000 . The shares were sold to accredited investors in a private placement in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. (B) 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 Common Stock at any time on a one- share (of Series B Stock) for ten -shares (of Common Stock) basis. The Company had 31 shares of Series B Stock outstanding as of September 30, 2021. On March 31, 2022, the Company, on behalf of two holders, converted the remaining 31 shares of Series B Stock into 306 shares of the Company’s Common Stock. On March 31, 2022, the Company submitted for filing to the Nevada Secretary of State a Certificate, Amendment or Withdrawal of Designation withdrawing the Company’s Series B Convertible Preferred Stock from the Company’s Articles of Incorporation. As of September 30, 2022, the Company had no shares of Series B Stock outstanding. Series C Cumulative Preferred Stock Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) were initially entitled to receive annual dividends at a rate of 7 % per annum of the original issuance price of $ 500 , when and if declared by the Company’s Board of Directors, with such rate to increase by 2 % annually beginning on the third anniversary of issuance of such Series C Stock to a maximum rate of 13 %. By the filing of the Certificate of Amendment to the Company’s Certificate of Incorporation on March 31, 2022, the annual dividend rate decreased to 5 % per annum of the original issuance price, when and if declared by the Company’s Board of Directors and will increase by 1 % beginning on January 1, 2024. Such rate is to increase on each January 1 thereafter for four years to a maximum rate of 9 %. The dividend rate of the Series C Stock as of September 30, 2022 and 2021 was 5 % and 8 %, respectively . In the event of liquidation, holders of Series C Stock shall be paid an amount equal to the original issuance price, plus any accrued but unpaid dividends thereon. Shares of 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 Series C Stock was $ 7,429 and $ 12,907 as of September 30, 2022 and September 30, 2021, respectively. On March 31, 2022, the Company purchased 4,687 shares of the Series C Stock from two holders at a purchase price of $ 500 per share plus accrued dividends, or an aggregate of $ 3,000 , and exchanged 4,905 shares of Series C Stock plus accrued dividends from one holder, for the issuance of 65,205 shares of the Company’s Common Stock valued at $ 47.00 per share of Common Stock (the closing price for the Common Stock on March 30, 2022), or a total value of $ 3,065 . As a result of these transactions, the number of issued and outstanding shares of Series C Stock was reduced from 20,960 shares to 11,368 shares. On September 30, 2021, the Company sold 1,200 shares of Series C Stock to an accredited investor at a purchase price of $ 500 per share, or an aggregate of $ 600 . Such shares issued on March 31, 2022 and September 30, 2021, were sold in private placements in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. In August 2021, the Board of Directors approved an increase in the number of shares of Series C Stock, from 20,000 shares to 30,000 shares. For the fiscal year ended September 30, 2022 and 2021, the Company declared dividends on Series C Stock of $ 586 and $ 766 , respectively. At September 30, 2022 and 2021, the Company had accrued dividends of $ 1,745 and $ 2,427 , respectively. (C) Equity Incentive Plan On May 12, 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”) pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company. On September 21, 2021, the Board of Directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock, par value $ 0.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries. 67 Table of Contents The Amended Plan increases the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopts certain other non-substantive amendments. Participants and all terms of any grant under the Amended Plan are in the discretion of the Company’s Compensation Committee. 11. STOCK-BASED COMPENSATION (in thousands, except share per share data) On October 30, 2013, the Board of Directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of Common Stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries. On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended and Restated Plan”), which amended and restated the prior 2017 plan, as previously amended, and pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights with respect to up to 200,000 shares of the Company’s Common Stock may be granted to directors, officers, employees of and consultants to the Company and its subsidiaries. The Amended and Restated Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended and Restated Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopts certain other non-substantive amendments. Participants and all terms of any grant under the Amended and Restated Plan are in the discretion of the Company’s Compensation Committee. Total stock-based compensation for the fiscal year ended September 30, 2022 and 2021 amounted to $ 832 and $ 115 , respectively, and was included in selling, general and administrative expense in the Company’s statements of operations. (A) Stock Options The Company uses the Black-Scholes option pricing model to estimate the fair value of our share-based awards. In applying this model, we use the following assumptions: • Risk-free interest rate - We determine the risk-free interest rate by using a weighted average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate. • Expected term - We estimate the expected term of our options on the average of the vesting date and term of the option. • Expected volatility - We estimate expected volatility using daily historical trading data of a peer group. • Dividend yield - We have never paid dividends on our common stock and currently have no plans to do so; therefore, no dividend yield is applied. The fair values of our employee option awards were estimated using the assumptions below, which yielded the following weighted average grant date fair values for the periods presented: 2022 2021 Risk-free interest rate 1.10 % 0.46 % Expected option term in years 5.5 - 6.5 5.5 - 6.5 Expected volatility 100.3 % - 110.3 % 100.3 % - 105.4 % Dividend yield — % — % Weighted average grant date fair value $ 5.57 - $ 6.66 $ 6.90 - $ 7.19 68 Table of Contents Options for Employees Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding balance September 30, 2021 98,994 $ 5.93 4.5 $ 1,689.38 Granted 10,000 $ 23.00 9.0 $ — Exercised ( 78,001 ) $ 5.44 — $ — Outstanding balance at September 30, 2022 30,993 $ 12.68 6.8 $ 1,251.45 Exercisable at September 30, 2022 13,497 $ 7.08 4.6 $ 620.53 The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s Common Stock at September 30, 2022 of $ 53.06 per share and the exercise price of the stock options that had strike prices below such closing price. As of September 30, 2022, there was approximately $ 133 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted average period of two years . Liability classified share-based awards During the fiscal year ended September 30, 2022, 7,018 options were granted and 10,372 options were exercised with respect to Indco’s common stock. The Company uses the Black-Scholes option pricing model to estimate the fair value of Indco’s share-based awards. In applying this model, the Company used the following assumptions: 2022 2021 Risk-free interest rate 1.10 % 0.46 % Expected option term in years 5.5 - 6.5 5.5 - 6.5 Expected volatility 39 % 35 % Dividend yield — % — % Grant date fair value $ 17.60 - $ 19.07 $ 9.66 - $ 10.00 Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding balance at September 30, 2021 38,961 $ 10.28 6.62 $ 78.16 Granted 7,018 $ 17.16 9.25 $ — Exercised ( 10,372 ) $ 8.30 — $ — Outstanding balance at September 30, 2022 35,607 $ 12.22 6.67 $ 175.98 Exercisable at September 30, 2022 21,663 $ 10.72 5.75 $ 139.47 The aggregate intrinsic value in the above table was calculated as the difference between the valuation price of Indco’s common stock at September 30, 2022 of $ 17.16 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 $ 311 and $ 361 as of September 30, 2022 and September 30, 2021, respectively, and is included in other liabilities in the condensed consolidated financial statement. The compensation cost related to these options was approximately $ 42 and $ 67 for the fiscal years ended September 30, 2022 and September 30, 2021, 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. Changes in the fair value of the vested options are recognized in earnings in the consolidated financial statements. The options are classified as liabilities, and the underlying shares of Indco’s common stock also contain put options which result in their classification as a mandatorily redeemable security. While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death. 69 Table of Contents As of September 30, 2022, there was approximately $ 39 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 two years . (B) Restricted Stock On March 30, 2022, the Board of Directors of the Company approved an equity grant of 15,000 shares of restricted stock to an employee of the Company pursuant to the Company’s Amended and Restated Plan, vesting immediately. The compensation cost related to this award was approximately $ 705 for the year ended September 30, 2022 and was included in selling, general and administrative expense in the Company’s statements of operations. 12. INCOME PER COMMON SHARE The following table provides a reconciliation of the basic and diluted income (loss) per share (“EPS”) computations for the fiscal years ended September 30, 2022 and 2021 (in thousands, except share and per share data): Year Ended September 30, 2022 2021 (Loss) Income: Net (loss) income $ ( 2,138 ) $ 5,203 Preferred stock dividends ( 586 ) ( 766 ) Non-controlling interest dividends ( 404 ) — Net (loss) income available to common stockholders $ ( 3,128 ) $ 4,437 Common Shares: Basic - weighted average common shares 1,030.8 938.5 Effect of dilutive stock options — 51 Diluted - weighted average common stock 1,030.8 989.5 (Loss) Income per Common Share: Basic - Net (loss) income $ ( 2.07 ) $ 5.54 Preferred stock dividends ( 0.57 ) ( 0.81 ) Non-controlling interest dividends ( 0.39 ) — Net (loss) income attributable to common stockholders $ ( 3.03 ) $ 4.73 Diluted - Net (loss) income $ ( 2.07 ) $ 5.26 Preferred stock dividends ( 0.57 ) ( 0.78 ) Non-controlling interest dividends ( 0.39 ) — Net (loss) income available to common stockholders $ ( 3.03 ) $ 4.48 The computation for the diluted number of shares excludes unexercised stock options that are anti-dilutive. There were 48,293 anti-dilutive shares for the fiscal years ended September 30, 2022 and no anti-dilutive shares for the fiscal years ended September 30, 2021. Potentially diluted securities as of September 30, 2022 and 2021 are as follows: September 30, 2022 2021 Employee stock options (Note 11) 30,993 98,994 Convertible preferred stock — 310 30,993 99,304 13. INCOME TAXES The reconciliation of income tax computed at the Federal statutory rate to the provision for income taxes from continuing operations is as follows (in thousands): Year Ended September 30, 2022 2021 Federal taxes at statutory rates $ 11 $ 1,295 Permanent differences 1,477 ( 600 ) State and local taxes, net of Federal benefit 702 199 Other — 67 Total $ 2,190 $ 961 70 Table of Contents The provisions of income taxes are summarized as follows (in thousands): Year Ended September 30, 2022 2021 Current $ 1,948 $ 232 Deferred 242 729 Total $ 2,190 $ 961 The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands): 2022 2021 Deferred tax assets - net operating loss carryforwards $ — $ 508 Lease liability 1,755 850 Other 690 ( 16 ) Stock based compensation 406 360 Total deferred tax assets 2,851 1,702 Valuation allowance — — Total deferred tax assets net of valuation allowance 2,851 1,702 Deferred tax liabilities - depreciation and amortization 3,648 3,124 Prepaid expenses 1,706 52 Right of use asset 38 825 Total deferred tax liabilities 5,392 4,001 Net deferred tax liability $ ( 2,541 ) $ ( 2,299 ) The Company has no net operating loss carryforwards for income tax purposes as of September 30, 2022. The Company will recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 30, 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations. In October 2021, the Company received notification from the Internal Revenue Service that the Internal Revenue Service audit for the 2018 tax year was completed with no changes to our reported tax for the 2018 tax year. Income tax returns for tax years from 2017 through 2021 remain subject to examination by the taxing jurisdictions. On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the IRA includes a 15% corporate minimum tax rate applied to certain large corporations and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We do not expect the IRA to have a material impact on our consolidated financial statements. 14. PROFIT SHARING AND 401(K) PLANS The Company maintains a qualified retirement plan commonly referred to as a 401(k) Plan covering substantially all full-time employees under each segment. The Janel Corporation 401(k) allows for employee salary deferrals including Roth 401(k) deferrals, employer matching contributions, employer profit sharing contributions and employee rollovers. The Janel Corporation 401(k) plan provides for participant contributions of up to 50 % of annual compensation (not to exceed the IRS limit), as defined by the plan. The Company contributes an amount equal to 50 % of the participant’s first 6 % of contributions. The combined expenses charged to operations for contributions made to the plans for the benefit of the employees for the years ended September 30, 2022 and 2021 were $ 379 and $ 288 , respectively. The administrative expense charged to operations for the years ended September 30, 2022 and 2021 aggregated $ 64 and $ 59 , respectively. 71 Table of Contents 15. BUSINESS SEGMENT INFORMATION As discussed above in Note 1, the Company operates in three reportable segments: Logistics, Life Sciences and Manufacturing. The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance. The following tables presents selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the fiscal years ended September 30, 2022 and 2021: For the year ended September 30, 2022 (in thousands) Consolidated Logistics Life Sciences Manufacturing Corporate Revenues $ 316,863 $ 295,343 $ 11,625 $ 9,895 $ — Forwarding expenses and cost of revenues 250,666 242,946 2,933 4,787 — Gross profit 66,197 52,397 8,692 5,108 — Selling, general and administrative 54,723 40,075 5,421 3,095 6,132 Amortization of intangible assets 1,976 — — — 1,976 Income (loss) from operations 9,498 12,322 3,271 2,013 ( 8,108 ) Interest expense 1,276 988 123 146 19 Identifiable assets 126,532 64,630 10,884 4,324 46,694 Capital expenditures, net of disposals $ 551 $ 300 $ 198 $ 53 $ — For the year ended September 30, 2021 (in thousands) Consolidated Logistics Life Sciences Manufacturing Corporate Revenues $ 146,419 $ 125,863 $ 11,992 $ 8,564 $ — Forwarding expenses and cost of revenues 113,986 106,139 3,864 3,983 — Gross profit 32,433 19,724 8,128 4,581 — Selling, general and administrative 27,362 16,656 4,469 2,696 3,541 Amortization of intangible assets 1,120 — — — 1,120 Income (loss) from operations 3,951 3,068 3,659 1,885 ( 4,661 ) Interest expense 589 294 117 156 22 Identifiable assets 115,924 59,026 9,344 3,905 43,649 Capital expenditures, net of disposals $ 234 $ 20 $ 174 $ 40 $ — Goodwill and intangible assets are recorded at the Corporate level and are included in identifiable assets. 16. LEASES The Company has operating leases for office and warehouse space in all districts where it conducts business. As of September 30, 2022, the remaining terms of the Company’s operating leases were between one and 60 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 years ended September 30, 2022 and 2021 are as follows: 2022 2021 Operating lease cost $ 1,869 $ 789 Short-term lease cost 353 240 T otal lease cost $ 2,222 $ 1,029 Rent expense for the year ended September 30, 2022 and 2021 was $ 2,222 and $ 1,029 , respectively. 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 September 30, 2022 were $ 5,660 , $ 1,825 and $ 4,001 , respectively. 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 September 30, 2021 were $ 2,936 , $ 1,281 and $ 1,751 , respectively. During the twelve months ended September 30, 2022 and 2021, the Company entered into new operating leases and recorded an additional $ 4,397 and $ 1,075 , respectively in operating lease right of use assets and corresponding lease liabilities. 72 Table of Contents As of September 30, 2022 and 2021, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 4.6 years and 3.05 % and 2.9 years and 3.89 % respectively. Cash paid for amounts included in the measurement of operating lease obligations were $ 1,797 and $ 785 for the twelve months ended September 30, 2022 and 2021. Future minimum lease payments under non-cancelable operating leases as of September 30, 2022 are as follows (in thousands) : Year End September 30, 2022 Fiscal Year 2023 $ 1,793 Fiscal Year 2024 1,425 Fiscal Year 2025 1,066 Fiscal Year 2026 617 Fiscal Year 2027 629 Thereafter 696 Total undiscounted loan payments 6,226 Less imputed interest ( 400 ) Total lease obligation $ 5,826 17. RUBICON INVESTMENT (in thousands, except per share data) On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $ 0.001 per share, of 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. Pursuant to the terms of the Purchase Agreement, the Acquired Shares represented 44.99 % of Rubicon’s issued and outstanding shares of common stock as of August 3, 2022, as reported in Rubicon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the SEC on August 12, 2022. The purchase price for the acquired Rubicon shares was $ 22,160 and was paid from the Company’s cash on hand, proceeds of the Bridge Loan, funds available under the Santander Credit Facility and funds available under the First Merchant Facility. On August 12, 2022 Rubicon announced that, in connection with the cash tender offer by the Company for up to 45 % of Rubicon’s issued and outstanding common stock, par value $ 0.001 per share, the Rubicon Board of Directors set August 23, 2022 (the “Record Date”) as the record date for its cash distribution of $ 11.00 per share of Common Stock (the “Distribution”). The Distribution and the Record Date was conditioned upon the consummation of the cash tender offer on August 19, 2022, and the Distribution in the amount of $ 12,188 was paid to the Company on August 29, 2022 . The Company revalued the investment in Rubicon’s securities on September 30, 2022 and recorded a loss of $ 19,789 within other income (loss), net of dividends on the Company’s consolidated. Below is reconciliation for the changes to the investment in Rubicon for the year ended September 30, 2022. Balance as of September 30, 2021 $ — Purchase of Rubicon investment 22,160 Fair value adjustments to Rubicon investment ( 19,789 ) Total $ 2,371 The summarized financial information of Rubicon as of and for the twelve months ended September 30, 2022 is as follows: total assets $ 5,340 , total liabilities $ 2,337 , total revenues $ 3,883 , gross profit $ 1,505 and net income $ 810 . 18. FAIR VALUE MEASUREMENTS Topic 820 established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy under Topic 820 are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. 73 Table of Contents Level 2: Inputs to the valuation methodology are quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Recurring Fair Value Measurements The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis based on the three-level valuation hierarchy (in thousands): Total fair value at September 30, 2022 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Investment in Rubicon at fair value $ 2,371 $ 2,371 $ — $ — $ 2,371 $ 2,371 $ — $ — Liabilities: Contingent earnout liabilities $ 4,580 $ — $ — $ 4,580 $ 4,580 $ — $ — $ 4,580 Total fair value at September 30, 2021 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Liabilities: Contingent earnout liabilities $ 3,600 $ — $ — $ 3,600 $ 3,600 $ — $ — $ 3,600 Investment in Rubicon at fair value As of September 30, 2022, the Company held approximately 45 % of the total issued and outstanding shares of Rubicon and reported its investment under the fair value method pursuant to ASC 320. Management determined that it was appropriate to carry its investment in Rubicon at fair value because the investment is traded on the NASDAQ stock exchange and has daily trading activity and is a better indicator of value. The investment in Rubicon is re-measured at the end of each quarter based on the trading price and any change in the value is reported on the income statement as a realized gain or loss in other income (expense). Refer to Note 17 to Consolidated Financial Statements for reconciliation of changes to the investment in Rubicon for the year ended September 30, 2022. Contingent earnout liabilities This liability relates to the estimated fair value of earnout payments to former ELFS owners for the earnout period ending September 30, 2022. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2022 were $ 1,664 and $ 2,916 , respectively. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2021 were $ 1,054 and $ 2,546 , respectively. Refer to Note 2 to Consolidated Financial Statements for ELFS acquisition information. The following table sets forth a summary of the changes in the fair value of the Company’s contingent earnout liabilities, which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation (in thousands): September 30, 2022 2021 Balance at beginning of year $ 3,600 $ — Fair value of contingent consideration recorded in connection with business combinations 980 3,600 Total $ 4,580 $ 3,600 74 Table of Contents The Company determined the fair value of the contingent earnout liability at September 30, 2022, using forecasted results through the expected earnout period. The principal inputs to the approach include expectations of the specific business’s revenue in fiscal years 2023 through 2025 using an appropriate discount rate. Given the use of significant inputs that are not observable in the market, the contingent liability is classified within Level 3 of the fair value hierarchy. There were no significant changes to this methodology during the year ended September 30, 2022. 19. COMMITMENTS AND CONTINGENCIES Employment Agreements The Company has various employment agreements, including employment agreements with the previous owners of ELFS and PhosphoSolutions. 20. RISK AND UNCERTAINTIES (A) Currency Risks The nature of Janel’s operations requires it to deal with currencies other than the U.S. Dollar. 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 agent relationships have currency control regulations. The Company attempts to compensate for these exposures by accelerating international currency settlements among those agents. (B) 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 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. 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 we expect that our risk in this area will remain high as long as the disruptions persist. (C) 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. (D) Concentration of Customers No customer accounts for 10% or more of consolidated sales for the years ended September 30, 2022 and 2021. No customer accounted for 10% or more of consolidated accounts receivable at September 30, 2022 and 2021. (E) Auto Insurance In the ordinary course of our Logistics business, we are a defendant in several legal proceedings arising out of the conduct of our Logistics business. These proceedings include third party claims for property damage or bodily injury incurred in connection with our services. Although there can be no assurance as to the ultimate disposition of these proceedings, we do not believe, based upon the information available at this time, that these property damage or bodily injury claims, in the aggregate, will have a material impact on our consolidated financial statements. Within our Logistics segment, ELFS, maintains auto liability for commercial trucking claims of up to $ 6,000 per occurrence, and general liability with of up to $ 6,000 per occurrence. 21. SUBSEQUENT EVENTS On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience Corporation (“IBS”), which we include in our Life Sciences segment. The aggregate purchase price for the outstanding stock was $ 4,000 , subject to certain closing adjustments, as set forth in the related stock purchase agreement. At closing, $ 3,000 was paid in cash, while $ 250 is due to the former stockholder of IBS as a deferred acquisition payment upon integration. Further earnout payments—in an amount not to exceed $ 750 —will be due to the former stockholder of IBS, based on applicable sales targets achieved during the three years post-close. IBS is a developer and manufacturer of high-quality reagents used by research and diagnostic customers. IBS was founded in 2007 and is headquartered in Mukilteo, Washington. The acquisition of IBS was completed to expand our product offerings in our Life Sciences segment . 75