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Item 7. Management’s Discussion and Analysis

2023-12-08 compared with 2022-12-09 · 291 added, 295 removed, 170 unchanged (78% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our discussions below in this Item 7 should be read along with Janel’s audited financial statements and related notes thereto as of September 30, 2022 and 2021 and for each of the two years in the

period ended September 30, 2022 included in this Annual Report on Form 10-K.

Our discussions below in this Item 7 should be read along with Janel’s audited financial statements and related notes thereto as of September 30, 2023 and 2022 and for each of the two years in

the period ended September 30, 2023 included in this Annual Report on Form 10-K.

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

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 higher risk-adjusted rates of return and attracting and retaining exceptional talent.

Management at the holding

company level focuses on significant capital allocation decisions and corporate governance.

Management at the

holding company level focuses on significant capital allocation decisions and corporate governance.

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

Recent Investment

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.

Year Ended September 30, 2023 Acquisitions

On May 22, 2023, the Company acquired all the rights, title and interests to a royalty agreement for certain antibody products, which we include in our Life Sciences segment.

On March 2, 2023, the Company completed a business combination whereby it acquired all of the outstanding stock of Stephen Hall, PhD Ltd., which we include in our Life Sciences segment.

On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience Corporation, which we include in our Life Sciences

Year Ended September 30, 2022 Acquisitions

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.

Investment in Marketable Securities - Rubicon

On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $0.001 per share, of Rubicon Technology, Inc.

("Rubicon"), at a price per share of $20.00, in a cash tender

offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the "Rubicon Purchase Agreement").

(“Rubicon”), at a price per share of $20.00, in a cash

tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the “Rubicon Purchase Agreement”).

Pursuant to the terms of the Rubicon Purchase Agreement, the acquired shares represented

45.0% 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 purpose of our

investment in Rubicon is for Janel to acquire a significant ownership interest in Rubicon, together with representation on Rubicon's Board, in an attempt to (i) restructure the Rubicon business to achieve profitability and (ii) assist Rubicon in

utilizing its NOL carry-forward assets.

Year Ended September 30, 2022 Acquisitions

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.

Year Ended September 30, 2021 Acquisitions

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.

which we include in our Logistics 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.

The Company owned

approximately 46.6% of Rubicon’s issued and outstanding shares of common stock as of September 30, 2023.

Results of Operations – Janel Corporation

Our results of operations and period-over-period changes are discussed in the following section.

The tables and discussion should be read in conjunction with the accompanying Consolidated Financial

Statements and the notes thereto appearing in Item 8.

The tables and discussion should be read in conjunction with the accompanying Consolidated

Financial Statements and the notes thereto appearing in Item 8.

Refer to Item 7.

“Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2021, filed on December 23,

2021, for a comparison of fiscal year 2021 results of operations to the fiscal year 2020 results of operations, which specific discussion is incorporated herein by reference.

“Management Discussion and Analysis of Financial Condition and Results of Operations” in ou r Annual Report on Form 10-K for the year ended September 30, 2022 , filed on December 9, 2022,

for a comparison of fiscal year 2022 results of operation s to the fiscal year 2021 results of operations, which specific discussion is incorporated herein by reference.

Our condensed consolidated results of operations are as follows:

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(in thousands)

Forwarding expenses and cost of revenue

Forwarding expenses and cost of revenues

Operating expenses

Income from operations

Net (loss) income

Net income (loss)

Adjusted operating income (1)

Revenue for the year ended September 30, 2022 was $316,863, or 116.4% higher than fiscal 2021.

Revenue increased largely due to our Logistics segment which benefited from acquisitions and higher

freight prices due to tight global shipping capacity relative to the prior fiscal year.

Income from operations for fiscal 2022 was $9,498 compared to an income from operations of $3,951 for fiscal 2021, an increase of $5,547, largely as a result

of our Logistics segment which benefited from acquisitions and strong demand due to tight global shipping capacity, partially offset by higher spending in the corporate segment for stock based compensation and legal fees related to the Rubicon

Adjusted operating income for fiscal 2022 increased to $12,797 versus $5,894 in the prior fiscal year primarily due to the increase in Logistics profits partially offset by higher acquisition expenses at Corporate.

The Company’s net loss for the year ended September 30, 2022 totaled $2,138 or $2.07 per diluted share, compared to net income of approximately $5,203 or $5.26 per diluted share for the year ended

Consolidated revenues for the year ended September 30, 2023 were $186,449, or 41.2% lower than fiscal 2022.

Revenues decreased primarily due to lower freight prices in our Logistics segment as

a result of lower freight demand relative to improved global transportation capacity.

Income from operations for fiscal 2023 was $2,599 compared to income from operations of $9,498 for fiscal 2022, a decrease of $6,899, largely as a result of

lower profits across our business segments, especially at our Logistics segment, which benefited from unusually high demand in the prior fiscal year.

Adjusted operating income for fiscal 2023 decreased to $5,353 versus $12,797 in the prior fiscal

year primarily due to an overall decrease in profits at our business segments.

The Company’s net income for the year ended September 30, 2023 totaled $723 or $0.36 per diluted share, compared to net loss of ($2,138) or ($2.07) per diluted share for the year ended

September 30, 2022.

The decline in net income was largely due to a non-cash mark-to-market write-down of our equity investment in Rubicon, higher interest expenses and higher earn-out accruals as profit related to an acquisition were higher than

The increase in net income was largely due to a smaller non-cash mark-to-market write down of an equity investment, a change in fair value of an earnout and an income tax benefit, partially offset by lower profits in our

business segments and higher interest expense.

(1) The following table sets forth a reconciliation of income from operations to adjusted operating income:

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Our Logistics business helps its clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability.

Key services include arrangement of freight forwarding by air, ocean

and ground, customs entry filing, warehousing, cargo insurance procurement, logistics planning, product repacking and online shipment tracking.

Key services include arrangement of freight forwarding by air,

ocean and ground, customs entry filing, warehousing, cargo insurance procurement, logistics planning, product repacking and online shipment tracking.

Financial Summary

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Fiscal 2023 compared with fiscal 2022

Total revenue in fiscal 2022 was $295,343 as compared to $125,863 in fiscal 2021, an increase of $169,480 or 134.7%.

Of the increase in revenue, two acquisitions accounted for $102,412 of additional

revenue compared to the prior year and $67,068 represented organic growth.

A rise in transportation rates drove organic growth due to a shortage of transportation capacity globally.

Higher prices for ocean, air and trucking services led to

significant growth in both gross revenue and forwarding expenses.

Our volume, as measured in ocean freight by twenty-foot equivalent units, grew 3%, air freight volume as measured by metric tons increased 17% and customs entries grew 4%.

fiscal 2023, we anticipate both gross revenue and forwarding expenses decreasing as demand is expected to decrease to match the industry's available capacity.

Gross profit in fiscal 2022 was $52,397, an increase of $32,673, or 165.7%, as compared to $19,724 in fiscal 2021.

Two acquisitions accounted for $26,170 of additional gross profit, while a 33%

increase in organic gross profit was attributed to volume growth and higher pricing across most of our services—especially air and ocean—resulting in higher adjusted gross profits per transaction.

Gross profit as a percentage of revenue increased

to 17.7% compared to 15.7% for the prior year, due to the higher gross profit margins at an acquired business partially offset by lower gross profit margins due to the increase in transportation rates.

Total revenue in fiscal 2023 was $166,052 as compared to $295,343 in fiscal 2022, a decrease of $129,291 or 43.8%.

Revenues decreased primarily due to lower freight prices as a result of lower

freight demand relative to improved global transportation capacity.

Lower prices for ocean, air and trucking services led to a decrease in both gross revenue and forwarding expenses.

Compared to fiscal 2022, during fiscal 2023, our volume, as

measured in ocean freight by twenty-foot equivalent units, fell 25%, air freight volume as measured by metric tons fell 25% and customs entries fell 16%.

Gross profit in fiscal 2023 was $42,114, a decrease of $10,283, or 19.6%, as compared to $52,397 in fiscal 2022.

Gross profit as a percentage of revenue increased to 25.4% compared to 17.7% for

the prior fiscal year, primarily because gross profit declined at a slower rate compared with gross revenue, which declined more significantly due to lower freight prices.

Selling, General and Administrative Expenses

Selling, general and administrative expenses from continuing operations in fiscal 2022 were $40,075 as compared to $16,656 in fiscal 2021.

The increase of $23,419, or 140.6%, was mainly due to

additional expenses from acquired businesses and costs to support business growth.

Selling, general and administrative expenses in fiscal 2023 were $37,310 as compared to $40,075 in fiscal 2022.

The decrease of $2,765, or 6.9%, was mainly due to lower personnel expenses and a

recovery of previously expensed bad debt.

As a percentage of gross revenue, selling, general and administrative expenses were 22.5% and 13.6% for fiscal 2023 and fiscal 2022, respectively.

The increase in selling, general and administrative

expenses as a percentage of revenue largely reflected the decrease in transportation rates and its impact on revenue.

Income from Operations

Income from operations increased to $12,322 in fiscal 2022 compared to $3,068 in fiscal 2021.

Income from operations increased as a result of the contribution from acquisitions, favorable industry

pricing and operating leverage from revenue growth.

Our operating margin as a percentage of gross profit was 23.5% in fiscal 2022 compared to 15.6% in fiscal 2021, largely due to operating leverage from significantly higher gross profit due to

elevated industry demand and pricing.

Income from operations decreased to $4,804 in fiscal 2023 compared to $12,322 in fiscal 2022.

Income from operations decreased as a result of lower transportation volume and prices partially

offset by lower personnel expense.

Operating margin as a percentage of gross profit was 11.4% in fiscal 2023 compared to 23.5% in fiscal 2022, largely due to lower gross profits.

Results of Operations - Life Sciences

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Total revenue was $11,059 in fiscal 2023 compared with $11,625 in fiscal 2022.

Revenue decreased 3.0% or $367 primarily related to the timing of orders, in particular for diagnostic reagents.

Gross profit was $8,692 and $8,128 for fiscal years 2022 and 2021, respectively, representing a year-over-year increase of $564 or 6.9%.

In the fiscal years ended September 30, 2022 and 2021, the

Life Sciences segment had a gross profit margin of 74.8% and 67.8%, respectively.

The increase in gross profit and the related margin reflected lower cost recognized upon the sale of acquired inventory and improved product mix.

The gross profit

margin was impacted by the amortization of non-cash acquired inventory expenses of $492 and $708 for fiscal 2022 and 2021, respectively.

Revenue decreased 4.9% or $566 primarily related to lower demand for diagnostic reagents, partially offset by

current year acquisitions.

Organic growth excluding acquisition revenue declined $1,408, or 12.1% as COVID-19 pandemic-related revenue declined in fiscal 2023.

Gross profit was $8,683 and $8,692 for fiscal years 2023 and 2022, respectively, relatively consistent with prior year.

In the fiscal years ended September 30, 2023 and 2022, the Life Sciences

segment had a gross profit margin of 78.5% and 74.8%, respectively.

The increase in gross profit margin resulted from an improvement in product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the Life Sciences segment were $6,149 and $5,421 for fiscal years 2023 and 2022, respectively.

The year-over-year increase was largely due to

inflation, additional cost in the business to support future growth and expenses from acquired businesses.

As a percentage of revenue, selling, general and administrative expenses were 46.6% and 37.3% for fiscal 2022 and fiscal 2021,

respectively.

The year-over-year increase was due to additional

expenses from acquired businesses.

As a percentage of revenue, selling, general and administrative expenses were 55.6% and 46.6% for fiscal 2023 and fiscal 2022, respectively.

Income from Operations

The Life Sciences business earned $2,534 and $3,271 in income from operations for fiscal 2023 and 2022, respectively.

The decrease in operating income reflected a decline in revenue and higher

expenses partially offset by favorable mix in the business.

As a result of these factors, the income from operations as a percentage of revenue declined from 30.5% in fiscal year 2021 to 28.1% in fiscal year 2022.

The decrease in income from operations was primarily due to lower demand

for diagnostic reagents and additional expenses from acquired businesses.

As a result of these factors, income from operations as a percentage of revenue declined from 28.1% in fiscal year 2022 to 22.9% in fiscal year 2023.

Results of Operations - Manufacturing

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Fiscal 2023 compared with fiscal 2022

Total revenue was $9,895 in fiscal 2022 compared with $8,564 in fiscal 2021, an increase of 15.5%.

The revenue increase largely reflected higher product pricing implemented to address an increase in

the cost of sales and an increase in volume as demand remained steady.

Total revenue was $9,338 in fiscal 2023 compared with $9,895 in fiscal 2022, a decrease of 5.6%.

The revenue decline largely reflected a decrease in volume across the business, offset in part

by higher product pricing.

Gross profit was $4,875 and $5,108 for fiscal years 2023 and 2022, respectively.

Gross profit margin for the Manufacturing segment during fiscal 2022 was 51.6%, as compared to 53.5%, in fiscal 2021.

The year-over-year decrease in gross profit margin was generally due to mix of business.

The year-over-year decline in gross profit reflected a decrease in sales volume.

Gross profit margin for the

Manufacturing segment during fiscal 2023 was 52.2%, as compared to 51.6%, in fiscal 2022.

The increase in gross profit margin was generally due to a favorable product mix shift.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the Manufacturing segment were $3,095 and $2,696 for fiscal years 2022 and 2021, respectively.

As a percentage of gross revenue, selling, general and

administrative expenses were 31.3% and 31.5% for fiscal 2022 and fiscal 2021, respectively, as expenses remained consistent with the growth of the business.

Selling, general and administrative expenses for the Manufacturing segment were $2,978 and $3,095 for fiscal years 2023 and 2022, respectively, a decrease of $117, or 3.8%.

As a percentage of

gross revenue, selling, general and administrative expenses were 31.9% and 31.3% for fiscal 2023 and fiscal 2022, respectively, consistent with prior year.

Income from Operations

Income from operations for fiscal 2022 was $2,013 compared to $1,885 in fiscal 2021, representing a 6.8% increase compared to the prior year and consistent with the growth in the business.

Income from operations for fiscal 2023 was $1,897 compared to $2,013 in fiscal 2022, representing a 5.8% decrease compared to the prior fiscal year and consistent with the decline in revenue.

Results of Operations – Corporate and Other

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Change in fair value of earnout

Gain on Paycheck Protection Program loan forgiveness

Net income before taxes

Income tax expense

Net (loss) Income

Income tax benefit (expense)

Net Income (loss)

Preferred stock dividends

Non-controlling interest dividends

Net (loss) Income Available to Common Stockholders

Net income (loss) Available to Common Stockholders

Total Corporate Expenses

Corporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, increased by $3,447 to $8,108, or 74.0%, in fiscal 2022 as compared

to fiscal 2021.

The increase was due primarily to legal and consulting costs related to the Rubicon investment, stock-based compensation related to restricted stock issuance with immediate vesting, higher accounting-related professional expense,

increased merger and acquisition expenses and increases in amortization of intangible expenses.

Corporate expenses, which include amortization of intangible assets, stock-based compensation and merger and acquisition expenses, decreased by $1,472 to $6,636, or 18.2%, in

fiscal 2023 as compared to fiscal 2022.

The decrease was due primarily to lower stock-based compensation expense and lower accounting and merger and acquisition related professional expense, offset in part by current year increases in

amortization of intangible expenses.

We incur merger and acquisition deal-related expenses and intangible amortization at the Corporate level rather than at the segment level.

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Interest expense for the consolidated company increased $722, or 56.6%, to $1,998 in fiscal 2023 from $1,276 in fiscal 2022.

The increase was primarily due to higher average debt balances to support

our acquisition efforts and higher interest rates.

The increase was primarily due to higher interest rates, partially

offset by lower average debt outstanding.

Income Tax Expense

On a consolidated basis, the Company recorded an income tax expense of $2,190 in fiscal 2022, as compared to an income tax expense of $961 in fiscal 2021.

The increase in expense was primarily due

to an increase in pretax income and the non-deductible legal consulting expense related to the Rubicon investment and utilization of prior NOL carry forwards.

In 2016, a deferred tax asset was established to reflect a net operating loss

carryforward.

The Company fully utilized its Federal loss carryforwards in fiscal 2022 and still has a small number of state loss carryforwards that could be used in the future with ongoing profitability.

On a consolidated basis, the Company recorded an income tax benefit of $198 in fiscal 2023, as compared to an income tax expense of ($2,190) in fiscal 2022.

The decrease in income tax expense

was primarily due to a decrease in pretax income.

Preferred Stock Dividends

Preferred stock dividends include the Company’s Series C Stock and dividends accrued but not paid.

For the year ended September 30, 2022 and 2021, preferred stock dividends were $586 and $766,

respectively.

The decrease in dividends of $180, or 23.5%, was the result of the Company retiring $6,000 of Series C Preferred Stock on March 31, 2022 and the annual dividend rate change from 9% to 5%.

Dividends accrued but not paid on the

Company’s Series C Stock were $1,745 and $2,427 as of September 30, 2022 and 2021, respectively.

Net (loss) Income

Net (loss) income was ($2,138), or $2.07 per diluted share, for fiscal 2022 and $5,203, or $5.26 per diluted share, for fiscal year 2021.

The decrease in net income was primarily due to an unrealized loss on the Rubicon investment, higher interest expense and the change in

fair value of an earnout, partially offset by higher operating income.

Net (loss) income Available to Common Stockholders

Net (loss) income available to common stockholders was ($3,128) or ($3.03) per diluted share for fiscal 2022 and $4,437 or $4.48 per diluted share for fiscal 2021.

The decrease in net income was

primarily due to unrealized loss on the Rubicon investment, higher interest expense and the change in fair value of an earnout, partially offset by higher operating income and non-controlling interest dividend.

For the fiscal years ended September 30, 2023 and 2022, preferred stock dividends were $284

and $586, respectively.

Preferred stock dividends for fiscal 2023 decreased $302, or 51.5%, compared to fiscal 2022 as a result of the Company retiring $6,000 of Series C Preferred Stock on March 31, 2022 and due to a decrease in the annual

dividend rate from 9% to 5%.

Dividends accrued but not paid on the Company’s Series C Stock were $2,029 and $1,745 as of September 30, 2023 and 2022, respectively.

Net Income (loss)

Net income (loss) was $723, or $0.60 per diluted share, for fiscal 2023 and ($2,138), or ($2.07) per diluted share, for fiscal year 2022.

The increase in net income was primarily due to a

smaller non-cash mark-to-market write-down of an equity investment, a change in fair value of an earnout, lower stock-based compensation and an income tax benefit offset by lower profits in our business segments and higher interest expense.

Net income (loss) Available to Common Stockholders

Net income (loss) available to common stockholders was $439 or $0.36 per diluted share for fiscal 2023 and ($3,128) or ($3.03) per diluted share for fiscal 2022.

The increase in net income

available to common stockholders was largely due to a smaller non-cash mark-to-market write-down of an equity investment, a change in fair value of an earnout, lower stock-based compensation and an income tax benefit offset by lower profits in

our business segments and higher interest expense as well as lower preferred stock dividends and the absence of dividends to non-controlling shareholders.

LIQUIDITY AND CAPITAL RESOURCES

Our ability to satisfy liquidity requirements–including satisfying debt obligations and funding working capital, day-to-day operating expenses and capital expenditures–depends upon

future performance , which is subject to general economic conditions, competition and other factors, some of which are beyond Janel’s control.

Our ability to satisfy liquidity requirements–including satisfying debt obligations and funding working capital, day-to-day operating expenses and capital expenditures–depends

upon future performance , which is subject to general economic conditions, competition and other factors, some of which are beyond Janel’s control.

Our Logistics segment depends on commercial credit

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As a customs broker, our Logistics segment makes significant cash advances for a select group of our credit-worthy customers.

These cash advances are for customer obligations, such as the payment of

duties and taxes to customs authorities primarily in the United States.

These cash advances are for customer obligations, such as the

payment of duties and taxes to customs authorities primarily in the United States.

Increases in duty rates could result in increases in the amounts we advance on behalf of our customers.

Cash advances are a “pass through” and are not recorded as a component

of revenue or expense.

Cash advances are a “pass through” and are not recorded as

a component of revenue or expense.

The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities.

through” billings can influence our traditional credit collection metrics.

These “pass through” billings can influence our traditional credit collection metrics.

For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms.

Management believes that it has established effective credit

control procedures and has historically experienced relatively insignificant collection problems.

Management believes that it has established

effective credit control procedures and has historically experienced relatively insignificant collection problems.

Janel’s cash flow performance for the 2023 fiscal year may not necessarily be indicative of future cash flow performance.

As of September 30, 2022, and compared with the prior fiscal year, the Company’s cash and cash equivalents increased by $357, or 6%, to $6,591 from $6,234 as of September 30, 2021.

During the fiscal

year ended September 30, 2022, Janel’s net working capital deficiency (current assets less current liabilities) decreased by $1,641, from ($14,784) at September 30, 2021 to ($13,143) at September 30, 2022.

Cash flows from continuing operating activities

Net cash provided by (used in) continuing operating activities for fiscal years 2022 and 2021 was $12,107 and ($201), respectively.

The increase in cash provided by operations for the year ended

September, 2022 was driven principally by higher profits, timing of cash collections for accounts receivables and cash payments on accounts payables primarily in our Logistics segment for the year ended September 30, 2022.

As of September 30, 2023, and compared with the prior fiscal year, the Company’s cash and cash equivalents decreased by $4,130, or 62.7%, to $2,461 from $6,591 as of September 30, 2022.

the fiscal year ended September 30, 2023, Janel’s net working capital deficiency (current assets less current liabilities) decreased by $6,407, from ($13,143) at September 30, 2022 to ($19,550) at September 30, 2023.

Cash flows from operating activities

Net cash provided by operating activities for fiscal years 2023 and 2022 was $11,388 and $12,107, respectively.

The decrease in cash provided by operations for the year ended September 30, 2023 was driven principally by lower net income, deferred income tax provision, change in fair value of an earnout and an increase in prepaid expenses,

partially offset by the timing of cash collections for accounts receivables and cash payments on accounts payable primarily in our Logistics segment for the year ended September 30, 2023.

Cash flows from investing activities

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Net cash used in investing activities for fiscal 2023

related to the Rubicon investment (net of dividend) and one Life Sciences acquisition.

The fiscal 2021 amount was associated with two Logistics acquisitions and one Life Sciences acquisition.

The Company also used $551 for the acquisition of

property and equipment for the year ended September 30, 2022 compared to $234 for the year ended September 30, 2021.

related to the two acquisitions in our Life Sciences segment and earnout payments the former owners of ELFS.

The fiscal 2022 amount was associated with the Rubicon investment (net of dividend) and one Life Sciences acquisition.

The Company also

used $360 for the acquisition of property and equipment for the year ended September 30, 2023 compared to $551 for the year ended September 30, 2022.

Cash flows from financing activities

Net cash (used in) provided by financing activities was ($281) for fiscal 2022 and $19,194 for fiscal 2021.

Net cash used in financing activities in fiscal 2022 primarily included proceeds from an

increase in our amended term loan, proceeds from our private placement offering, offset by repayments on our line of credit and repurchase of Series C Preferred Stock.

Net cash provided by financing activities in fiscal year 2021 primarily

included proceeds from an increase in our line of credit–which financed our acquisition of ELFS–and proceeds from the sale of Series C Preferred Stock, partially offset by repayments on our term loan and notes payables to related party.

Net cash (used in) financing activities was ($9,018) for fiscal 2023 and ($281) for fiscal 2022.

Net cash used in financing activities in fiscal 2023 primarily included repayment of our term

loan and line of credit.

Net cash provided by financing activities in fiscal year 2022 primarily included proceeds from an increase in our amended term loan and proceeds from our private placement offering, offset in part by repayments on our

line of credit and repurchase of Series C Preferred Stock.

Credit Facilities

Santander Bank Facility

On October 17, 2017, the 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 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 million to $3 million 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) provided for a new bridge term loan to the Company

in the principal amount of up to $12,000 (the "Bridge Facility") to be funded in connection with the acquisition by the Company of up to 45% of the outstanding shares of Rubicon Technology, Inc., a Delaware corporation (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 wholly-owned subsidiaries that comprise the Company’s Logistics segment (collectively, the “Janel Group Borrowers”), with the Company as a guarantor, have a Loan and Security Agreement

(as amended, the “Santander Loan Agreement”) with Santander with respect to a revolving line of credit facility (the “Santander Facility”).

The Santander Loan Agreement was amended on March 31, 2022 to provide for, among other changes, the

(i) the maximum revolving facility amount available was increased from $30,000 to $31,500 (limited to 85% of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander

Loan Agreement); (ii) the LIBOR basis on which interest under the Santander Loan Agreement was calculated under certain circumstances was changed to the Secured Overnight Financing Rate (“SOFR”) and interest on the Santander Facility accrues at

an annual rate equal to the one-month SOFR plus 2.75%;

(iii) a one-time increase from $1,000 to $3,000 in the amount the Company was permitted to distribute to holders of the Company’s Series C Preferred Stock if specified conditions are met;

and (iv) the amount of indebtedness of the Company’s Antibodies Incorporated subsidiary that the Company was permitted to guaranty was increased from $2,920 to $5,000.

On July 13, 2022, the Santander Loan Agreement was further amended by a Consent, Waiver and Second Amendment (the “Second Santander Amendment”) to (i) increase the maximum revolving facility

amount available to $35,000 (limited to 85% of the Janel Group Borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement) and (ii) provide for a new bridge term loan to

the Company in the principal amount of up to $12,000 (the “Bridge Facility”) to be funded in connection with the acquisition (the “Rubicon Transaction”)by the Company of up to 45% of the outstanding shares of Rubicon Technology, Inc.

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%.

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, Inc., (the “Janel Group”) to the Company.

On January 30, 2023, the Santander Loan Agreement was further amended by the Third Amendment to the Amended and Restated Loan and Security Agreement (the “Third Santander Amendment”).

amended by the terms of the Third Santander Amendment, the percentage of the Borrowers’ eligible accounts receivable used to calculate the borrowing base under the Loan Agreement was increased from 85% to 90% for Domestic Insured Accounts (as

defined in the Amendment), subject to adjustments set forth in the Loan Agreement.

On April 25, 2023, in connection with an amendment to the Credit Agreement entered into with First Merchants Bank (“First Merchant”) as described further below, we entered into the Fourth

Amendment to the Amended and Restated Loan and Security Agreement (the “Fourth Santander Amendment”).

The Fourth Santander Amendment (i) included modifications to address the amendments made to the First Merchants Credit Facilities (as defined

below) and the consolidation of the debt thereunder and (ii) terminated the subordination agreement relating to the Company’s guarantee of the First Merchant’s Credit Facilities.

On August 22, 2023, we entered into the Fifth Amendment to the Amended and Restated Loan and Security Agreement (the “Fifth Santander Amendment”).

The Fifth Santander Amendment permitted

certain unsecured guaranties by the Company in the ordinary course of business guarantying obligations of subsidiaries in an aggregate amount not to exceed $4,000 and related modifications to certain negative covenants.

The Santander Loan Agreement matures on September 21, 2026.

Interest accrues on the Santander Facility at an annual rate equal to the one-month SOFR plus 2.75%.

The Janel Group Borrowers’

obligations under the Santander Facility are secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants.

As a result of its terms, the Santander Facility is classified as

a current liability on the consolidated balance sheet.

At September 30, 2023, outstanding borrowings under the Santander Facility were $18,759, representing 53.6% of the $35,000 available thereunder, and interest was accruing at an effective

interest rate of 7.60%.

At September 30, 2022, outstanding borrowings under the Santander Facility were $26,396, representing 75.4% of the $35,000 available thereunder, and interest was accruing at an effective

interest rate of 5.79%.

The Company was in compliance with the financial covenants defined in the Santander Loan Agreement at both September 30, 2023 and September 30, 2022.

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availability, $1,622 available for future borrowings under its $35,000 Santander Facility and $906 in cash.

The Company believes that its current financial resources will be sufficient to finance the operations and obligations (current and long-term liabilities) of the Logistics segment for the short- and

The Company believes that its current financial resources will be sufficient to finance the operations and obligations (current and long-term liabilities) of the Logistics segment for the

short- and long-term.

However, the actual working capital needs of the Logistics segment will depend upon numerous factors, including operating results;

the costs associated with growing the Logistics segment, either organically or through acquisitions;

the costs associated with growing the Logistics segment, either organically or through

acquisitions;

competition and availability under the Santander Facility, none of which can be predicted with certainty.

If cash flow and available credit are not sufficient to fund working capital, the operations of the Logistics segment will be materially

If cash flow and available credit are not sufficient to fund working capital, the operations of the Logistics segment will be

materially negatively impacted.

Life Sciences and Manufacturing

First Merchants Bank Credit Facility

On February 29, 2016, Indco entered into a Credit Agreement (as amended, the “Prior First Merchants Credit Agreement”) with First Merchants.

On August 1, 2022, Indco and First Merchants entered into Amendment No.

3 to the Prior First Merchants Credit Agreement, modifying the terms of Indco’s credit facilities.

Under the revised

terms, the credit facilities consisted 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 “Prior First

Merchants Facility”).

Interest accrued 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 was less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA

ratio was greater than or equal to 2:1).

Interest accrued on the revolving loan at an annual rate equal to one-month adjusted term SOFR plus 2.75%.

Interest accrued on the mortgage loan at an annual rate of 4.19%.

Indco’s obligations under the

Prior First Merchants Credit Facility were secured by all of Indco’s real property and other assets, and are guaranteed by Janel, and Janel’s guarantee of Indco’s obligations was secured by a pledge of Janel’s Indco shares.

On April 25, 2023, Indco and certain other Subsidiaries of the Company that are part of the Life Science and Manufacturing segments (together with Indco, the “Borrowers” and each, a

“Borrower”), entered into a Credit Agreement (the “Credit Agreement”) with First Merchants.

The Credit Agreement constitutes an amendment and restatement of the Prior First Merchants Credit Agreement.

The credit facilities provided under the

Credit Agreement (the “First Merchants Credit Facilities”) consist of a $3,000 revolving loan (limited to the borrowing base and reserves), a $5,000 acquisition loan, a $6,905 Term A loan and a $620 Term B loan as a continuation of the mortgage

loan under the Prior First Merchants Credit Agreement.

Interest accrues on the outstanding revolving loan, Term A loan and acquisition loan at an annual rate equal to one-month adjusted term SOFR plus either (i) 2.75% (if the Borrowers’ total

funded debt to EBITDA ratio is less or equal to 1.75:1) or (ii) 3.50% (if the Borrowers’ total funded debt to EBITDA ratio is greater than to 1.75:1).

Interest accrues on the Term B loan at an annual rate of 4.19%.

The Borrowers’ obligations

under the First Merchants Credit Facilities are secured by all of the Borrowers’ real property and other assets, and are guaranteed by the Company, and the Company’s guarantee of the Borrowers’ obligations is secured by a pledge of the Company’s

equity interests in certain of the Borrowers.

The revolving loan portion will expire on August 1, 2027, the Term A loan portion will mature on April 25, 2033, the Term B loan portion will mature on July 1, 2025 and the acquisition loan will

permit multiple draws until October 25, 2024, at which point the outstanding principal amount will amortize, with all remaining amounts due at maturity of the acquisition loan on April 25, 2029;

each of the foregoing maturities, subject to

earlier termination as provided in the Credit Agreement and unless renewed or extended.

As of September 30, 2023, there were $500 of outstanding borrowings under the acquisition loan, $450 of outstanding borrowings under the revolving loan, $6,235 of outstanding borrowings under

the Term A loan and $610 of outstanding borrowings under the Term B loan, with interest accruing on the acquisition loan and revolving loan at an effective interest rate of 8.18% and on the Term A loan and Term B loan at an effective interest

rate of 8.18% and 4.19%, respectively.

As of September 30, 2022, there were no outstanding borrowings under the revolving loan under the Prior First Merchants Credit Agreement, $5,420 of borrowings under the term loan under the

Prior First Merchants Credit Agreement, and $631 of borrowings under the mortgage loan under the Prior First Merchants Credit Agreement with interest accruing on such term loan and mortgage loan at an effective interest rate of 6.63% and 4.19%,

respectively.

The Company was in compliance with the financial covenants defined in the First Merchants Credit Agreement at September 30, 2023 and the Prior First Merchants Credit Agreement at September 30,

Working Capital Requirements

Life Sciences and Manufacturing’s cash needs are currently met by the Term A loan, Term B loan, revolving loan and acquisition loan under the First Merchants Credit Facilities and cash on hand.

As of September 30, 2023, Life Sciences and Manufacturing had $2,550 available under its $3,000 revolving loan and had $4,500 available under its $5,000 acquisition loan subject to collateral availability and $1,101 and $266 in cash,

respectively.

The Company believes that the current financial resources will be sufficient to finance the Life Sciences and Manufacturing segment’s operations and obligations (current and long-term liabilities) for the long and short- term.

However, actual working capital needs will depend upon numerous factors, including operating results;

the cost associated with growing the Life Sciences and Manufacturing segments, either organically or through acquisitions;

availability under the revolving credit facility, none of which can be predicted with certainty.

If cash flow and available credit are not sufficient to fund working capital, Life Sciences and Manufacturing’s operations will be materially

negatively impacted.

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First Northern Bank of Dixon

On June 21, 2018, 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 (the “First Northern Term Loan”), which bears interest at an annual rate of 4.00% and matures on November 14, 2029.

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”).

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

Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company, entered into a Business Loan Agreement (as amended, the “First Northern Loan Agreement”) with First Northern

Bank of Dixon (“First Northern”) on June 21, 2018.

The First Northern Loan Agreement provided for a $2,235 term loan (the “First Northern Term Loan”) and a $750 revolving credit facility (the “First Northern Revolving Loan”).

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 (the “First Northern Solar Loan”) on November 18, 2019 and a $60 term loan in connection with a potential expansion of generator capacity on the Antibodies property (the “First Northern Generator Loan”) on June 19, 2020.

On April 25, 2023, each of the First Northern Term Loan, the First Northern Revolving Loan, the First Northern Solar Loan and the First Northern Generator Loan was paid in full with the

proceeds provided by the First Merchants Credit Facilities and the First Merchants Loan Agreement.

In connection with the repayment, each business loan agreement governing such First Northern loans was terminated and all liens granted to First

Northern in connection with the First Northern Loan Agreement and such business loan agreements on any property of Antibodies were released.

Antibodies has no further obligations owing to First Northern in connection with the First Northern Loan

Agreement and such business loan agreements.

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 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

As of September 30, 2022, the total amount outstanding under the First Northern Solar Loan was $23, of which $15 is included in long-term debt and $8 is included in current portion of long-term

debt, with interest accruing at an effective interest rate of 4.43%.

As of September 30, 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%.

The Company was in compliance with the financial covenants defined in the First Northern Loan Agreement at September 30, 2022 and September 30, 2021.

Working Capital Requirements

Life Sciences cash needs are currently met by the First Northern Loan Agreement and cash on hand of $1,147.

The Company believes that the current financial resources will be sufficient to finance

Life Sciences operations and obligations (current and long-term liabilities) for the long- and short- term.

However, actual working capital needs will depend upon numerous factors, including operating results;

the cost associated with growing

Life Sciences, either organically or through acquisitions;

competition and availability under the revolving credit facility, none of which can be predicted with certainty.

If cash flow and available credit are not sufficient to fund working

capital, Life Sciences operations will be materially negatively impacted.

Manufacturing

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"), which has been 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 a fixed annual rate of 4.19% until July 1, 2023.

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 Merchant 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 defined in the First Merchants Credit Agreement at both September 30, 2022 and September 30, 2021.

Working Capital Requirements

Manufacturing’s cash needs are currently met by the term loan and revolving credit facility under the First Merchants Credit Agreement and cash on hand.

As of September 30, 2022, Manufacturing had

$1,000 available under its $1,000 revolving facility subject to collateral availability and $1,221 in cash.

The Company believes that the current financial resources will be sufficient to finance the Manufacturing segment's operations and

obligations (current and long-term liabilities) for the long- and short- term.

However, actual working capital needs will depend upon numerous factors, including operating results;

the cost associated with growing the Manufacturing segment,

either organically or through acquisitions;

and availability under the revolving credit facility, none of which can be predicted with certainty.

If cash flow and available credit are not sufficient to fund working capital,

Manufacturing’s operations will be materially negatively impacted.

As of September 30, 2022, there were no outstanding borrowings under the First Northern Revolving Loan.

The Company was in compliance with the financial covenants defined in the First Northern Loan Agreement at April 25, 2023.

CURRENT OUTLOOK

The results of operations in the Logistics, Life Sciences and Manufacturing segments are affected by the general economic cycle, particularly as it influences global trade levels and specifically

the import and export activities of our Logistics segment’s various current and prospective customers.

Historically, the Company’s annual results of operations have been subject to seasonal trends which have been the result of, or influenced by,

numerous factors including climate, national holidays, consumer demand, economic conditions, the growth and diversification of the segment’s international network and service offerings and other similar and subtle forces.

The results of operations in the Logistics, Life Sciences and Manufacturing segments are affected by the general economic cycle, particularly as it influences global trade levels and

specifically the import and export activities of our Logistics segment’s various current and prospective customers.

Historically, the Company’s annual results of operations have been subject to seasonal trends which have been the result of, or

influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions, the growth and diversification of the segment’s international network and service offerings and other similar and subtle forces.

The Company cannot accurately forecast many of these factors, nor can it estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that

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The Company’s subsidiaries are implementing business strategies to grow revenue and profitability for fiscal 2024 and beyond.

Our Logistics strategy calls for additional branch offices, introduction

of new revenue streams for existing locations, sales force expansion, additional acquisitions and a continued focus on implementing lean methodologies to contain operating expenses.

In fiscal 2023, we anticipate both gross revenue and profit

declines relative to the prior fiscal year as transportation demand moderates to match the industry's available capacity.

Our Logistics strategy calls for additional branch offices,

introduction of new revenue streams for existing locations, sales force expansion, additional acquisitions and a continued focus on implementing lean methodologies to contain operating expenses.

Our Life Sciences and Manufacturing segments expect to introduce new product lines and wider distribution and promotion of their products with internet sales efforts.

In addition to supporting its

subsidiaries’ growth plans, the Company may seek to grow by entering new business segments through acquisition.

Certain elements of the Company’s profitability and growth strategy, including proposals for acquisition and accelerating revenue growth, are contingent upon the availability of adequate financing

on terms acceptable to the Company.

In addition to supporting

its subsidiaries’ growth plans, the Company may seek to grow by entering new business segments through acquisition.

Certain elements of the Company’s profitability and growth strategy, including proposals for acquisition and accelerating revenue growth, are contingent upon the availability of adequate

financing on terms acceptable to the Company.

Without adequate equity and/or debt financing, the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated timing, and the

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are described in Note 1 – Summary of Significant Accounting Policies, included herein, which contains a summary of the significant accounting policies and methods used in the

preparation of our consolidated financial statements.

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which require us to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.

Actual results could differ from those

We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition

and cash flows.

Our accounting policies are described in Note 1 – Summary of Significant Accounting Policies, included herein, which contains a summary of the significant accounting policies and methods used

in the preparation of our consolidated financial statements.

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which require us to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.

Actual results could differ from

those estimates.

condition and cash flows.

Business Combinations and Related Acquired Intangible Assets and Goodwill .

We record all tangible and intangible assets acquired and liabilities assumed in a

business combination at fair value as of the acquisition date in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations.

Acquisition date fair value represents the price that would be received to sell an asset or paid

to transfer a liability in an orderly transaction between market participants as measured on the acquisition date.

We record all tangible and intangible assets acquired and liabilities assumed

in a business combination at fair value as of the acquisition date in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations.

Acquisition date fair value represents the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market participants as measured on the acquisition date.

The valuations are based on information that existed as of the acquisition date.

During the measurement period, which shall not

exceed one year from the acquisition date, we may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that we have subsequently obtained regarding facts and circumstances that existed as of

the acquisition date.

During the measurement period, which shall

not exceed one year from the acquisition date, we may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that we have subsequently obtained regarding facts and circumstances that existed as

of the acquisition date.

Such fair value assessments require judgments and estimates, which may cause final amounts to differ materially from original estimates.

As part of acquisitions of businesses, we acquired certain identifiable intangible assets, which are valued as of the acquisition date using a discounted cash flow (“DCF”) model.

Key assumptions in

the DCF model include (i) future revenues, (ii) earnings before interest, taxes depreciation and amortization (“EBITDA”) and (iii) the weighted average cost of capital discount rate.

Estimated future revenues include assumptions about our ability

to renew contracts in a competitive bidding process.

assumptions in the DCF model include (i) future revenues, (ii) earnings before interest, taxes depreciation and amortization (“EBITDA”) and (iii) the weighted average cost of capital discount rate.

Estimated future revenues include assumptions

about our ability to renew contracts in a competitive bidding process.

A decrease in revenues or gross and EBITDA margins may adversely affect the value of identifiable intangible assets.

The discount rate focuses on rates of return for equity and debt and is

calculated using public information from selected guideline companies.

The discount rate focuses on rates of return for equity

and debt and is calculated using public information from selected guideline companies.

The magnitude of the discount rate reflects the perceived risk of an investment.

A change in the estimated risk of the acquired company cash flows would change the discount

rate, which in turn could significantly affect the valuation of acquired identifiable intangible assets.

A change in the estimated risk of the acquired company cash flows would change

the discount rate, which in turn could significantly affect the valuation of acquired identifiable intangible assets.

The excess amount of the aggregated purchase consideration paid over the fair value of the net of assets acquired and liabilities assumed is recorded as goodwill.

Goodwill is evaluated for

impairment annually or more frequently if an event occurs or circumstances change, such as material deterioration in performance that would indicate an impairment may exist.

When evaluating goodwill for impairment, we may first perform a

qualitative assessment (“step zero” of the impairment test) to determine whether it is more likely than not that a reporting unit is impaired.

If we decide not to perform a qualitative assessment, or if we determine that it is more likely than

not the carrying amount of a reporting unit exceeds its the fair value, then we perform a quantitative assessment (“step one” of the impairment test) and calculate the estimated fair value of the reporting unit.

If the carrying amount of the

reporting unit exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount to its estimated fair value.

The decision to perform a qualitative impairment assessment in a given year is influenced by a

number of factors, including the significance of the excess of the reporting units’ estimated fair value over carrying amount at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date

of our acquisitions.

evaluated for impairment annually or more frequently if an event occurs or circumstances change, such as material deterioration in performance that would indicate an impairment may exist.

During the fourth quarter of 2021, we changed

the date of our annual impairment test of goodwill and indefinite-lived intangible assets from September 30 to July 1.

When evaluating goodwill for impairment, we may first perform a qualitative assessment

(“step zero” of the impairment test) to determine whether it is more likely than not that a reporting unit is impaired.

If we decide not to perform a qualitative assessment, or if we determine that it is more likely than not the carrying amount

of a reporting unit exceeds its the fair value, then we perform a quantitative assessment (“step one” of the impairment test) and calculate the estimated fair value of the reporting unit.

If the carrying amount of the reporting unit exceeds the

estimated fair value, an impairment charge would be recorded to reduce the carrying amount to its estimated fair value.

The decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including

the significance of the excess of the reporting units’ estimated fair value over carrying amount at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date of our acquisitions.

No indicators of impairment were identified from the date of our annual impairment test through September 30, 2023.

A qualitative assessment is performed for intangibles and long-lived assets to determine if there are any indicators that the carrying amount might not be recovered.

A quantitative analysis may be

performed in order to test the intangibles and long-lived assets for impairment.

A quantitative analysis may

be performed in order to test the intangibles and long-lived assets for impairment.

If a quantitative analysis is necessary, an income approach, specifically a relief from royalty method, is used to estimate the fair value of the intangibles and

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The estimated fair value of each intangible and long-lived assets is compared to its carrying amount to determine if impairment exists.

If the carrying amount of a intangibles and long-lived assets

exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount of the intangibles and long-lived assets.

No indicators of impairment of our intangibles and long-lived assets were identified from the date of

our annual impairment test through September 30, 2022.

If the carrying amount of a intangibles and long-lived

assets exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount of the intangibles and long-lived assets.

No indicators of impairment of our intangibles and long-lived assets were identified from the

date of our annual impairment test through September 30, 2023.

RECENT ACCOUNTING STANDARDS

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Adjusted Operating Income

As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business as

well as other intangible assets acquired in our acquisitions.

As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business

as well as other intangible assets acquired in our acquisitions.

Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets such as customer relationships.

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more representative of the actual results of our operations.

Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is used

by management as a supplemental performance measure to assess our business’s ability to generate cash and economic returns.

Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is

used by management as a supplemental performance measure to assess our business’s ability to generate cash and economic returns.

Adjusted operating income is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest and taxes.

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and circumstances that users of the financial statements may find significant.

In addition, although other companies in our industry may report measures titled organic growth, adjusted operating income or similar measures, such non-GAAP financial measures may be calculated

differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures.

Because of these limitations, you should consider organic growth and adjusted operating income alongside other

financial performance measures, including total revenue, operating income and our other financial results presented in accordance with U.S.

In addition, although other companies in our industry may report measures titled organic growth, adjusted operating income or similar measures, such non-GAAP financial measures may be

calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures.

Because of these limitations, you should consider organic growth and adjusted operating income alongside

other financial performance measures, including total revenue, operating income and our other financial results presented in accordance with U.S.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis