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, 2023, and based on their evaluation, has concluded that our disclosure controls and procedures were effective. 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, 2023. 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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 34 Table of Contents ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers The current executive officers and directors of the Company are as follows: Name Age Position Darren C. Seirer 49 Board Chairman, President and Chief Executive Officer John Eidinger 43 Board Vice Chairman Gerard van Kesteren 74 Director, Chair of Audit Committee Karen Miller Ryan 59 Director, Chair of Compensation Committee Gregory J. Melsen 71 Director, Chair of Nominating and Corporate Governance Committee John J. Gonzalez, II 73 Director, Senior Advisor for Mergers and Acquisitions Gregory B. Graves 63 Director Vincent A. Verde 61 Principal Financial Officer, Treasurer and Secretary Darren C. Seirer has served as Board Chairman, President and Chief Executive Officer of the Company since January 1, 2023. Mr. Seirer has been a private investor since 2019 and he has served as an advisor to the Company since 2021. Mr. Seirer was previously at Select Equity Group, L.P. from 1993 to 2019. Mr. Seirer has served as a director of Rubicon Technology, an investment of the Company. Mr. Seirer is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in financial services and mergers and acquisitions. John Eidinger has served as Vice Chairman of the Board since January 1, 2023. Since 2019, Mr. Eidinger has advised and assisted the Company in business development. Previously, Mr. Eidinger was a private investor. From 2011 until 2017, Mr. Eidinger was an associate portfolio manager from Select Equity Group, L.P. Mr. Eidinger is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in financial services and mergers and acquisitions. 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 and also serves as a senior advisor to the Company. Gregory J. Melsen has served as a Director of Janel since January 2018. 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 including Techne Corporation (now Bio-Techne Corporation), a holding company for biotechnology and clinic diagnostic brands. He also 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 Corporate 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. Ms. Miller Ryan serves as chair of the Compensation Committee. 35 Table of Contents Gregory B. Graves, has served as a Director of Janel since May 31, 2023. Mr. Graves served as Executive Vice President and Chief Financial Officer and Treasurer of Entegris, Inc. (“Entegris”), a company focused on specialty chemicals and advanced materials solutions, from July 2008 to May 15, 2023. Mr. Graves has served as a director of Laird Superfood, Inc. (a plant-based food company) since September 2018, and was a member of the board of directors of Plug Power Inc. (an energy solutions provider) from May 2017 to June 2019. In 2022, Mr. Graves joined the board of directors of Skywater Technologies, Inc., a semiconductor manufacturer. Mr. Graves is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in accounting and finance. 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, 2023 . Board of Directors During the fiscal year ended September 30, 2023, the board of directors met eleven 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, Mr. Graves and Ms. Miller Ryan. The Audit Committee met four times during fiscal 2023. The Audit Committee has the following responsibilities, among others, as set forth in the Audit Committee charter: 36 Table of Contents • 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. The board of directors of the Company has determined that Messrs. Gonzalez, Graves, 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 also determined that Ms. Miller Ryan, Mr. Graves 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 2023 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 2023 for services rendered to the Company’s Logistics segment. 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. The Company’s board of directors has determined each of Messrs. Graves, Melsen and van Kesteren to be an audit committee financial expert based on their respective experiences. 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 2023. 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 Ms. Miller Ryan as the chair and Messrs. Gonzalez, Graves, Melsen and van Kesteren. The Company’s board of directors has determined that Ms. Miller Ryan and Messrs. Gonzalez, Graves, Melsen and van Kesteren are independent members of the Compensation Committee. 37 Table of Contents 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 2023. 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: • 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 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 Messrs. Seirer and Eidinger are not independent by virtue of the fact that they are Executive Officers of the Company. The board of directors has determined that Messrs. Gonzalez, Graves, 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, 2023 (actual dollar amounts): Name Fees Earned or Paid in Cash (1) Option Awards (2) All Other Compensation Total Gerard van Kesteren $ 50,000 $ 103,100 $ 40,000 (3) $ 193,100 Karen Miller Ryan $ 50,000 $ 103,100 $ — $ 153,100 Gregory J. Melsen $ 50,000 $ 103,100 $ — $ 153,100 John J. Gonzalez $ 40,000 $ 103,100 $ 109,000 (4) $ 252,100 Gregory B. Graves $ 13,333 $ — $ — (5) $ 13,333 Brendan Killackey (6) $ — $ — $ 447,885 $ 447,885 (1) Compensation is paid on a monthly basis. (2) The aggregate number of options outstanding as of September 30, 2023, for each director was as follows: Gerard van Kesteren – 7,499, John J. Gonzalez II – 7,499, Gregory J. Melsen – 14,375, and Karen Miller Ryan – 5,000. (3) Represents compensation paid to Mr. van Kesteren in connection with his consulting arrangement. (4) Represents compensation paid to Mr. Gonzalez in connection with his consulting arrangement and payment of medical insurance premiums. (5) Represents compensation paid to Mr. Graves in connection with his board of directors fee since being appointed effective May 31, 2023. (6) Director through January 1, 2023.Directors who also serve as executive officers of the Company do not receive additional compensation for their board service. 38 Table of Contents Pursuant to the Company’s non-employee director compensation policy, for the fiscal year 2023 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. Employment Arrangements The Company has no active employment agreements with any of its officers or directors. 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 Mr. Seirer, 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, Vice Chairman, our former Chief Executive Officer and President, 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 awarded to, paid to or earned by the named executive officers as compensation for their services in all capacities during the fiscal years ended September 30, 2023 and 2022 (actual dollar amounts): Name and Principal Position Year Base Salary ($) Bonus ($) All Other Comp. ($) Total ($) Darren C. Seirer, Chief Executive Officer and President 2023 100,000 — 751 (1) 100,751 Dominique Schulte, Chief Executive Officer and President 2023 100,000 — 24,821 (2) 124,821 2022 50,000 — 16,478 66,478 John Eidinger, Vice Chairman 2023 144,000 — — 144,000 Vincent A. Verde, Principal Financial Officer, Treasurer and Secretary 2023 215,000 208,355 35,494 (3) 458,849 2022 215,000 80,936 27,606 323,542 (1) Amounts reported under all other compensation for the fiscal year ended September 30, 2023 include $751 of 401(k) contributions paid on behalf of Mr. Seirer for the fiscal year ended 2023. (2) Ms. Schulte served as Chief Executive Officer and President and as a Director through January 1, 2023. Amounts reported under all other compensation for the fiscal year ended September 30, 2023, include $23,319 of medical insurance premiums and $1,502 of 401(k) contributions paid for the fiscal year ended 2023. (3) Amounts reported under the “Bonus” column for fiscal year ended September 30, 2023 include a discretionary bonus $177,778 related to fiscal year 2022 performance. Amounts reported under all other compensation for fiscal year ended September 30, 2023 include $27,740 of medical insurance premiums and $7,754 of 401(k) contributions paid on behalf of Mr. Verde for the fiscal year ended 2023. 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, 2023 and 2022 were approximately $535,200 and $379,000, respectively. The administrative expense charged to operations for the fiscal years ended September 30, 2023 and 2022 aggregated approximately $65,600 and $64,000, respectively. 40 Table of Contents 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, 2023 None of our named executive officers had any outstanding stock awards at September 30, 2023. 41 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, 2023. 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, 2023. 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) 108,236 9.1 % van Kesteren Foundation (4) 81,915 6.9 % (1) The address of each person and entity included in this table is 80 Eighth Avenue, New York, NY 10011, except for the van Kesteren Foundation which is Seestrasse 39, 8846 Willerzell, Switzerland . (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 1,666 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2023. (4) Mr. van Kesteren, a director of the Company, and his wife are members of the board of directors of the van Kesteren Foundation. Mr. van Kesteren disclaims beneficial ownership of the shares of the Company’s common stock held by the van Kesteren Foundation. 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, 2023 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 Eidinger 186,704 15.7 % John J. Gonzalez, II (2) 108,236 9.1 % Gerard van Kesteren (2) 19,166 1.6 % Gregory J. Melsen (2) 11,042 * Karen Miller Ryan (3) 6,111 * Gregory B. Graves 1,200 * Vincent A. Verde 665 * Darren C. Seirer (4) — * All directors and executive officers as a group 333,124 26.4 % (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 1,666 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2023. (3) Includes 833 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2023. (4) Does not include shares beneficially owned by Dominique Schulte, Mr. Seirer’s spouse, which are referenced above and for which Mr. Seirer disclaims beneficial ownership. 42 Table of Contents Equity Compensation Plan Information The following table provides information, as of September 30, 2023, 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 Weighted-average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans 2013 Non-Qualified Stock Option Plan (1) 6,621 $ 5.49 35,701 Amended and Restated 2017 Equity Incentive Plan (2) 34,372 $ 25.81 69,753 Total 40,993 $ 22.53 105,454 (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. 43 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, 2022 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 the fees of Prager Metis CPAs, LLC, the Company’s sole independent public accountant, for the audit of our financial statements for the fiscal years ended September 30, 2023 and 2022, and fees billed for other services provided by Prager Metis during those periods. Year End September 30, Fee Category 2023 2022 Audit Fees $ 338,750 $ 377,050 Audit-Related Fees 50,195 92,000 Tax Fees 55,495 71,768 Total Fees $ 444,440 $ 540,818 Audit Fees Audit fees include fees paid and accrued for professional services rendered by Prager Metis CPA’s for 2023 and 2022, fees for the audits of our financial statements included in our Annual Report on Form 10-K for 2023 and 2022, and reviews of the financial statements included in our Quarterly Reports on Form 10-Q. Audit fees also include comfort letter fees for 2022. 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. 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. 44 Table of Contents (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 (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2022 filed December 9, 2022) † 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 10.8 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) 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 Merchants Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 6, 2019) 45 Table of Contents 10.13 Pledge Agreement, effective as of August 30, 2019, by Janel Corporation to First Merchants 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 (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022) 10.24 Third Amendment to Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, a Texas limited liability company, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as loan party obligors dated January 30, 2023 ( incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2022) 10.25 Amended and Restated Credit Agreement, by and among Indco, Inc., Antibodies Incorporated, Aves Labs, Inc., Phosphosolutions LLC, Immunochemistry Technologies LLC, ECM Biosciences, LLC, Stephen Hall PhD LTD, Immunobioscience Corp., (collectively as borrowers), and each individually, a “Borrower”), and First Merchants Bank dated April 25, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023). 10.26 Fourth Amendment to Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, as loan party obligors dated April 25, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023). 10.27 Fifth Amendment to Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, as loan party obligors dated August 22, 2023 ( 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) 46 Table of Contents 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, 2023 in Inline XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2023 and September 30, 2022, (ii) Consolidated Statements of Operations for the years ended September 30, 2023 and 2022, (iii) Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2023 and 2022, (iv) Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022, 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. 47 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 8, 2023 By: /s/ Darren C. Seirer Darren C. Seirer Director, Board Chair, President and Chief Executive Officer (Principal Executive Officer) Date: December 8, 2023 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/ Darren C. Seirer Director, Board Chairman, President and Chief Executive Officer December 8, 2023 Darren C. Seirer /s/ John Eidinger Director, Board Vice Chairman December 8, 2023 John Eidinger /s/ Vincent A. Verde Principal Financial Officer, Treasurer and Secretary December 8, 2023 Vincent A. Verde /s/ John J. Gonzalez, II Director December 8, 2023 John J. Gonzalez, II /s/ Gregory J. Melsen Director December 8, 2023 Gregory J. Melsen /s/ Karen Miller Ryan Director December 8, 2023 Karen Miller Ryan /s/ Gerard van Kesteren Director December 8, 2023 Gerard van Kesteren /s/ Gregory B. Graves Director December 8, 2023 Gregory B. Graves 48 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, 2023 and 2022 F-3 Consolidated Statements of Operations for the Years Ended September 30, 2023 and 2022 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the Years Ended September 30, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F-1 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, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended September 30, 2023 and 2022, 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, 2023 and 2022, and the results of its operations, stockholders’ equity and its cash flows for the years ended September 30, 2023 and 2022, 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. 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 8, 2023 F-2 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) September 30, 2023 2022 ASSETS Current Assets: Cash $ 2,461 $ 6,591 Accounts receivable, net of allowance for doubtful accounts 27,518 57,077 Inventory, net 4,850 4,802 Prepaid expenses and other current assets 4,459 3,423 Total current assets 39,288 71,893 Property and Equipment, net 4,922 5,044 Other Assets: Intangible assets, net 22,204 22,420 Goodwill 20,317 18,622 Investment in Rubicon at fair value 1,573 2,371 Operating lease right of use asset 7,460 5,660 Security deposits and other long-term assets 1,070 522 Total other assets 52,624 49,595 Total assets $ 96,834 $ 126,532 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Line of credit $ 19,709 $ 26,396 Accounts payable - trade 25,447 44,960 Accrued expenses and other current liabilities 6,337 7,194 Dividends payable 2,029 1,745 Current portion of earnout 592 1,664 Current portion of long-term debt 715 639 Current portion of deferred acquisition payments — 188 Current portion of subordinated promissory note- related party 1,988 425 Current portion of operating lease liabilities 2,020 1,825 Total current liabilities 58,837 85,036 Other Liabilities: Long-term debt 5,784 7,519 Long-term portion of earnout 1,738 2,916 Subordinated promissory notes- related party 3,424 5,382 Mandatorily redeemable non-controlling interest 565 430 Deferred income taxes 1,341 2,541 Long-term operating lease liabilities 5,689 4,001 Other liabilities 483 380 Total other liabilities 19,024 23,169 Total liabilities 77,861 108,205 Stockholders’ Equity: Preferred Stock, $ 0.001 par value; 100,000 shares authorized Series C 30,000 shares authorized and 11,368 shares issued and outstanding at September 30, 2023 and September 30, 2022 , liquidation value of $ 7,713 and $ 7,429 at September 30, 2023 and September 30, 2022 , 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, 2023 and September 30, 2022 , respectively 1 1 Paid-in capital 17,107 17,184 Common treasury stock, at cost, 20,000 shares ( 240 ) ( 240 ) Accumulated earnings 2,105 1,382 Total stockholders’ equity 18,973 18,327 Total liabilities and stockholders’ equity $ 96,834 $ 126,532 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended September 30, 2023 2022 Revenues $ 186,449 $ 316,863 Forwarding expenses and cost of revenues 130,777 250,666 Gross profit 55,672 66,197 Cost and Expenses: Selling, general and administrative 50,975 54,723 Amortization of intangible assets 2,098 1,976 Total Costs and Expenses 53,073 56,699 Income from Operations 2,599 9,498 Other Items: Interest expense ( 1,998 ) ( 1,276 ) Fair value adjustments to Rubicon investment (net of dividends) ( 798 ) ( 7,601 ) Change in fair value of earnout 857 ( 980 ) Change in fair value of mandatorily redeemable non-controlling interest ( 135 ) 411 Income Before Income Taxes 525 52 Income tax benefit (expense) 198 ( 2,190 ) Net Income (Loss) 723 ( 2,138 ) Preferred stock dividends ( 284 ) ( 586 ) Non-controlling interest dividends — ( 404 ) Net Income (Loss) Available to Common Stockholders $ 439 $ ( 3,128 ) Net income (loss) per share: Basic $ 0.61 $ ( 2.07 ) Diluted $ 0.60 $ ( 2.07 ) Net income (loss) per share attributable to common stockholders: Basic $ 0.37 $ ( 3.03 ) Diluted $ 0.36 $ ( 3.03 ) Weighted average number of shares outstanding: Basic 1,186.4 1,030.8 Diluted 1,206.2 1,030.8 The accompanying notes are an integral part of these consolidated financial statements. F-4 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 TOTAL EQUITY Shares $ Shares $ $ Shares $ $ $ 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 Net Income — — — — — — — 723 723 Dividends to preferred stockholders — — — — ( 284 ) — — — ( 284 ) Stock based compensation — — — — 207 — — — 207 Balance - September 30, 2023 11,368 $ — 1,206,354 $ 1 $ 17,107 20,000 $ ( 240 ) $ 2,105 $ 18,973 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents JANEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended September 30, 2023 2022 Cash Flows from Operating Activities: Net income (loss) $ 723 $ ( 2,138 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for uncollectible accounts, net of recoveries ( 100 ) 1,142 Depreciation 508 484 Deferred income provision ( 1,200 ) 242 Amortization of intangible assets 2,098 1,976 Amortization of acquired inventory valuation 425 492 Amortization of loan costs 89 9 Stock based compensation 231 832 Unrealized loss on fair value adjustment to Rubicon investment (net of dividend) 798 7,601 Change in fair value of earnout ( 857 ) 980 Change in fair value of mandatorily redeemable noncontrolling interest 135 ( 353 ) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 29,799 ( 5,874 ) Inventory 34 ( 1,503 ) Prepaid expenses and other current assets ( 1,036 ) ( 421 ) Security deposits and other long-term assets ( 48 ) 55 Accounts payable and accrued expenses ( 20,396 ) 8,546 Other liabilities 185 37 Net cash provided by operating activities 11,388 12,107 Cash Flows from Investing Activities: Acquisition of property and equipment, net of disposals ( 360 ) ( 551 ) Investment in Rubicon (net of dividend) — ( 9,972 ) Acquisitions ( 4,447 ) ( 946 ) Earnout payment ( 1,693 ) — Net cash used in investing activities ( 6,500 ) ( 11,469 ) Cash Flows from Financing Activities: Dividends paid to preferred stockholders — ( 657 ) Dividends paid to minority shareholders — ( 404 ) Repayments borrowings of term loan ( 1,748 ) 2,538 Proceeds from stock option exercise — 277 Line of credit (payments) ( 6,687 ) ( 3,241 ) Repurchase of Series C Preferred Stock — ( 2,343 ) Proceeds from Private Placement — 4,000 Repayment of subordinated promissory note-related party ( 583 ) ( 451 ) Net cash (used in) financing activities ( 9,018 ) ( 281 ) Net (decrease) increase in cash ( 4,130 ) 357 Cash at beginning of the period 6,591 6,234 Cash at end of period 2,461 6,591 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 1,862 $ 882 Income taxes $ 1,393 $ 1,883 Non-cash investing activities: Contingent earnout acquisition $ 300 $ — Due to former owner 455 250 Non-cash financing activities: Dividends declared to preferred stockholders $ 284 $ 586 The accompanying notes are an integral part of these consolidated financial statements. F-6 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 Corporation (“Janel” or the “Company”) 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 segment is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air-, ocean- and land-based carriers, customs brokerage services, warehousing and distribution services, trucking and other value-added logistics services. In addition to these revenue streams, the Company earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges. Life Sciences The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on an original equipment manufacturer (“OEM”) basis. On 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. The acquisition of Stephen Hall, PhD Ltd., was completed to expand our product offering in our Life Sciences segment. On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience Corporation, which we include in our Life Sciences segment. The acquisition of ImmunoBioScience Corporation was completed to expand our product offering in our Life Sciences segment. On August 15, 2022, the Company completed a business combination whereby it acquired all the membership interests of ECM Biosciences LLC, which we include in our Life Sciences segment. Manufacturing The Company’s manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatuses for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders. F-7 Table of Contents Investment in Marketable Securities - Rubicon On August 19, 2022, the Company acquired 1,108,000 shares of the common stock, par value $ 0.001 per share, of Rubicon Technology, Inc. (“Rubicon”), at a price per share of $ 20.00 , in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the “Rubicon Purchase Agreement”). Pursuant to the terms of the Rubicon Purchase Agreement, the acquired shares represent 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 Company owned approximately 46.6 % of Rubicon’s issued and outstanding shares of common stock as of September 30, 2023. Rubicon is an advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems.The purpose of our investment in Rubicon is for Janel to acquire a significant ownership interest in Rubicon, together with representation on Rubicon’s Board, in an attempt to (i) restructure the Rubicon business to achieve profitability and (ii) assist Rubicon in utilizing its net operating loss carry-forward assets. 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 90.2 %, 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. Recoveries of previously written off accounts receivables are charged back to the allowance for doubtful accounts. The allowance for doubtful accounts as of September 30, 2023 and September 30, 2022 was $ 1,255 and $ 1,547 , 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. F-8 Table of Contents 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. 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. The change in the impairment test date lessens resource constraints that exist in connection with the Company’s year-end close and financial reporting process and provide for additional time to complete the required impairment testing. This change did not represent a material change to our method of applying an accounting principle, and therefore does not delay, accelerate or avoid an impairment charge. 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, 2023 and 2022. 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, 2023 and 2022. 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 Notes 16 and 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 . F-9 Table of Contents 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. 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, 2023 and 2022 was as follows: Year Ended September 30, Service Type 2023 2022 Trucking $ 80,364 $ 95,333 Ocean freight 42,047 123,989 Air freight 23,095 48,312 Other 11,675 15,191 Custom brokerage 8,871 12,518 Total $ 166,052 $ 295,343 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. F-10 Table of Contents 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 10. 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. 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, 2023, 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 . 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 9.8 % as of each of September 30, 2023 and 2022. 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 .” F-11 Table of Contents 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. 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, 2023 amounted to $ 372 . 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 In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020 - 04, Reference Rate Reform (Topic 848) . In December 2022, the FASB issued ASU 2022 - 06 to temporarily ease the potential burden in accounting for reference rate reform. The standards provide optional expedients and exceptions for applying accounting principles generally accepted in the United States to existing contracts, hedging relationships, and other transactions affected by reference rate reform. The standards apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate to be discontinued because of reference rate reform. The standards were effective upon issuance and can generally be applied through December 31, 2024. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of September 30, 2023, we continue to monitor our contracts and transactions for potential application of these ASUs. 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 became effective for us in the first quarter of fiscal year 2023. The new standard is required to be applied using a cumulative-effect transition method. The adoption of this standard did not have a material effect on our consolidated financial statements and related disclosures. F-12 Table of Contents 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 became effective for us in the first quarter of fiscal 2023. The new standard is required to be applied using a cumulative-effect transition method. The adoption of this standard did not have a material effect on our consolidated financial statements and related disclosures. 2. ACQUISITIONS Fiscal 2023 Acquisitions Life Sciences On November 1, 2022, the Company completed a business combination whereby it acquired all of the outstanding stock of ImmunoBioScience Corporation (“IBS”), for an aggregate purchase price of $ 3,755 , net of $ 153 cash received. At closing, $ 3,000 was paid in cash, $ 250 was due to the former stockholder of IBS as a deferred acquisition payment upon integration, $ 300 was recorded as a preliminary earnout consideration (not to exceed $ 750 ) and $ 205 was recorded as a preliminary working capital adjustment. The acquisition was funded with cash provided by normal operations, and the results of operations of IBS are included in Janel’s condensed consolidated results of operations since the date of the acquisition. In connection with the combination, the Company recorded an aggregate of $ 1,468 in goodwill and $ 1,680 in other identifiable intangibles. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. IBS is a developer and manufacturer of high-quality reagents used by research and diagnostic customers. IBS was founded in 2007 and is headquartered in Mukilteo, Washington. The acquisition of IBS was completed to expand our product offerings in our Life Sciences segment. On March 2, 2023, the Company completed a business combination whereby it acquired all of the outstanding stock of Stephen Hall PhD, Ltd. (“SH”) for an aggregate purchase price of $ 600 . At closing, $ 500 was paid in cash and $ 100 was due to the former stockholder of SH as a deferred acquisition payment upon integration. The acquisition was funded with cash provided by normal operations, and the results of operations of SH are included in Janel’s condensed consolidated results of operations since the date of the acquisition. In connection with the combination, the Company recorded an aggregate of $ 181 in goodwill and $ 202 in other identifiable intangibles. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. SH is a developer and manufacturer of antibodies and cell culture media for research and diagnostic uses. SH was founded in 2011 and is headquartered in Lafayette, Indiana. The acquisition of SH was completed to expand our product offerings in our Life Sciences segment. On May 22, 2023, the Company acquired all the rights, title and interests to a royalty agreement for certain antibody products for a purchase price of $ 500 . The Company recorded this acquisition as a royalty asset, which is included in security deposits and other long-term assets in the accompanying condensed consolidated balance sheet and will be amortized over the estimated life of ten years . Fiscal 2022 Acquisitions Life Sciences On August 15, 2022, the Company completed a business combination whereby it acquired all of the membership interests of ECM Biosciences LLC (“ECM”) for $ 850 , net of $ 16 cash received. At closing, the former member of ECM was paid $ 600 in cash and an additional $ 250 was due to the former member, which is included in accrued expenses and other current liabilities. In connection with the combination, the Company recorded an aggregate of $ 24 in goodwill and $ 222 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations. The results of operations of the acquired businesses are included in Janel’s consolidated results of operations since the date of the acquisition and are included in our Life Sciences segment. The acquisition of ECM was completed to expand our product offerings in our Life Sciences segment. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. Investment in Marketable Securities - Rubicon On August 19, 2022, the Company acquired 1,108,000 shares (the “Acquired Shares”) of the common stock, par value $ 0.001 per share, of Rubicon Technology, Inc. (“Rubicon”), at a price per share of $ 20.00 , in a cash tender offer made pursuant to the Stock Purchase and Sale Agreement, dated July 1, 2022, between the Company and Rubicon (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Acquired Shares represented 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. Due to share repurchases effectuated by Rubicon, the Company owned approximately 46.6 % of Rubicon’s issued and outstanding shares of common stock as of September 30, 2023. F-13 Table of Contents Rubicon is an advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. 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, 2023 2022 Life Building and improvements $ 3,064 $ 3,076 12 - 30 years Land and improvements 1,385 1,385 Indefinite Furniture and Fixture 373 298 3 - 7 years Computer Equipment 988 907 3 - 5 years Machinery & Equipment 1,454 1,357 3 - 15 years Leasehold Improvements 270 137 3 - 5 years 7,534 7,160 Less Accumulated Amortization ( 2,612 ) ( 2,116 ) $ 4,922 $ 5,044 Depreciation expense for the fiscal year ended September 30, 2023 and 2022 was $ 508 and $ 484 , respectively. 4. INVENTORY Inventories consisted of the following (in thousands): Year End September 30, 2023 2022 Finished goods $ 2,095 $ 1,823 Work-in-process 969 763 Raw materials 1,811 2,260 Gross inventory 4,875 4,846 Less – reserve for inventory valuation ( 25 ) ( 44 ) $ 4,850 $ 4,802 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, 2023 2022 Life Customer relationships $ 25,238 $ 23,625 15 - 24 Years Trademarks/names 4,559 4,539 1 - 20 Years Trademarks/names 521 521 Indefinite Other 1,429 1,180 2 - 22 Years 31,747 29,865 Less: Accumulated Amortization ( 9,543 ) ( 7,445 ) $ 22,204 $ 22,420 F-14 Table of Contents The composition of the intangible assets balance at September 30, 2023 and 2022 is as follows (in thousands) : September 30, 2023 2022 Logistics $ 18,174 $ 18,174 Life Sciences 5,873 3,991 Manufacturing 7,700 7,700 31,747 29,865 Less: Accumulated Amoritzation ( 9,543 ) ( 7,445 ) $ 22,204 $ 22,420 Amortization expense of intangible assets for the year ended September 30, 2023 and 2022 was $ 2,098 and $ 1,976 , respectively. The future amortization of these intangible assets is expected to be as follows (in thousands): Fiscal Year 2024 $ 2,092 Fiscal Year 2025 2,089 Fiscal Year 2026 2,088 Fiscal Year 2027 2,069 Fiscal Year 2028 2,069 Thereafter 11,276 $ 21,683 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, 2023 and 2022 is as follows (in thousands) : September 30, 2023 2022 Logistics $ 9,175 $ 9,175 Life Sciences 6,096 4,401 Manufacturing 5,046 5,046 $ 20,317 $ 18,622 7. NOTES PAYABLE - BANKS (A) Santander Bank Facility 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 following: (i) the maximum revolving facility amount available was increased from $ 30,000 to $ 31,500 (limited to 85 % of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Santander Loan Agreement); (ii) the LIBOR basis on which interest under the Santander Loan Agreement was calculated under certain circumstances was changed to the Secured Overnight Financing Rate (“SOFR”) and interest on the Santander Facility accrues at an annual rate equal to the one-month SOFR plus 2.75 %; (iii) a one-time increase from $ 1,000 to $ 3,000 in the amount the Company was permitted to distribute to holders of the Company’s Series C 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. (“Rubicon”) . 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 , Inc. (the Janel Group”) to the Company. F-15 Table of Contents On January 30, 2023, the Santander Loan Agreement was further amended by the Third Amendment to the Amended and Restated Loan and Security Agreement (the “Third Santander Amendment”). As amended by the terms of the Third Santander Amendment, the percentage of the Borrowers’ eligible accounts receivable used to calculate the borrowing base under the Loan Agreement was increased from 85 % to 90 % for Domestic Insured Accounts (as defined in the Amendment), subject to adjustments set forth in the Loan Agreement. 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 Merchants 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. (B) 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, which was subsequently amended on August 30, 2019 and July 1, 2020. On August 1, 2022, Indco and First Merchants entered into Amendment No. 3 to the 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 :1.00) or (ii) 3.50 % (if the Borrowers’ total funded debt to EBITDA ratio is greater than to 1.75 :1.00). 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 . F-16 Table of Contents 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. Indco was in compliance with the financial covenants define d in the First Merchants Credit Agreement at September 30, 2023 and September 30, 2022. The table below sets forth the total long term debt, net of capitalized loan fees of $ 349 for the First Merchants Credit Agreement (in thousands): September 30, 2023 2022 Total Debt $ 6,499 $ 6,051 Less Current Portion ( 715 ) ( 574 ) Long-term Portion $ 5,784 $ 5,477 These obligations mature as follows (in thousands): Fiscal Year 2024 $ 715 Fiscal Year 2025 1,276 Fiscal Year 2026 690 Fiscal Year 2027 690 Fiscal Year 2028 691 Thereafter 2,437 $ 6,499 (C) First Northern Bank of Dixon 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 current portion of long-term debt, with interest accruing at an effective interest rate of 4.43 %. 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 . F-17 Table of Contents 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 (“ICT”), in connection with a business combination whereby the Company acquired all of the membership interests of ICT. The ICT Subordinated Promissory Note is payable in sixteen scheduled quarterly installments of principal and interest beginning March 4, 2021, matures on December 4, 2024 , and may be prepaid, in whole or in part, without premium or penalty. The ICT Subordinated Promissory Note is guaranteed by the Company and is secured by the Company’s membership interests in ICT. The ICT Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts payable to Santander, First Merchants and the First Northern. As of September 30, 2023, the amount outstanding under the ICT Subordinated Promissory Note was $ 312 , of which $ 288 is included in the current portion of subordinated promissory notes and $ 24 is included in the long-term portion of subordinated promissory notes. As of September 30, 2022, the amount outstanding under ICT Subordinated Promissory Note was $ 707 , of which $ 425 is included in the current portion of subordinated promissory notes and $ 282 is included in the long-term portion of subordinated promissory notes. Janel Group, Inc. (“Janel Group”), a wholly-owned subsidiary of the Company, is the obligor on four fixed 4 % subordinated promissory notes totaling $ 6,000 in the aggregate (together, the “ELFS Subordinated Promissory Notes”), payable to certain former shareholders of Expedited Logistics and Freight Services, LLC (“ELFS”), in connection with the Company’s business combination whereby it acquired all the membership interest of ELFS and its related subsidiaries. All of the ELFS Subordinated Promissory Notes are guaranteed by the Company and are subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Facility. The ELFS Subordinated Promissory Notes are payable in twelve equal consecutive quarterly installments of principal together with accrued interest. Beginning October 15, 2021 and on the same day of the next eight consecutive calendar quarters, thereafter payment of accrued interest and unpaid interest is due to the former shareholders. Beginning October 15, 2023 and on the same day of the next twelve consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders. In June 2022, the principal amount of the ELFS Subordinated Promissory Notes was adjusted to $ 5,100 due to a revised working capital adjustment of $ 900 . As of September 30, 2023, the amount outstanding under the ELFS Subordinated Promissory Notes was $ 5,100 , of which $ 1,700 is included in the current portion of subordinated promissory notes and $ 3,400 was included in the long-term portion of subordinated promissory notes. As of September 30, 2022, the amount outstanding under the ELFS Subordinated Promissory Notes was $ 5,100 and was included in the long-term portion of subordinated promissory notes. September 30, 2023 2022 (in thousands) Total Subordinated Promissory Notes $ 5,412 $ 5,807 Less Current Portion of Subordinated Promissory Notes ( 1,988 ) ( 425 ) Long Term Portion of Subordinated Promissory Notes $ 3,424 $ 5,382 These obligations mature as follows (in thousands): Total 2024 1,988 2025 1,724 2026 1,700 $ 5,412 F-18 Table of Contents 9. 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. (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, 2023 and 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, 2023 and 2022 was 5 % and 5 %, 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 $ 7,713 and $ 7,429 as of September 30, 2023 and September 30, 2022, 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, par value $ 0.001 per share valued at $ 47.00 per share of Common Stock (the closing price for the Common Stock on March 30, 2022), or a total value of $ 3,065 . As a result of these transactions, the number of issued and outstanding shares of Series C Stock was reduced from 20,960 shares to 11,368 shares. 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, 2023 and 2022, the Company declared dividends on Series C Stock of $ 284 and $ 586 , respectively. At September 30, 2023 and 2022, the Company had accrued dividends of $ 2,029 and $ 1,745 , respectively. F-19 Table of Contents (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. 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. 10. 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, 2023 and 2022 amounted to $ 231 and $ 832 , 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 our common stock. • 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: 2023 2022 Risk-free interest rate 3.98 % 1.10 % Expected option term in years 5.5 - 6.5 5.5 - 6.5 Expected volatility 93.6 % 100.3 % - 110.3 % Dividend yield — % — % Weighted average grant date fair value $ 30.06 - $ 41.24 $ 17.60 - $ 19.07 F-20 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 at September 30, 2022 30,993 $ 12.68 6.8 $ 1,251.45 Granted 10,000 $ 53.06 9.3 $ — Outstanding balance at September 30, 2023 40,993 $ 22.53 6.6 $ 482.49 Exercisable at September 30, 2023 21,831 $ 9.95 4.9 $ 399.40 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, 2023 of $ 28.25 per share and the exercise price of the stock options that had strike prices below such closing price. As of September 30, 2023, there was approximately $ 338 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, 2023, there were no options granted and no 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 Risk-free interest rate 1.10 % Expected option term in years 5.5 - 6.5 Expected volatility 39 % Dividend yield — % Grant date fair value $ 5.57 - $ 6.66 Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding Balance at September 30, 2022 35,607 $ 12.22 6.67 $ 175.98 Outstanding Balance at September 30, 2023 35,607 $ 12.22 5.76 $ 119.94 Exercisable on September 30, 2023 28,613 $ 11.40 5.30 $ 113.20 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, 2023 of $ 15.19 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 $ 334 and $ 311 as of September 30, 2023 and September 30, 2022, respectively, and is included in other liabilities in the condensed consolidated financial statement. The compensation cost related to these options was approximately $ 23 and $ 42 for the fiscal years ended September 30, 2023 and September 30, 2022, 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. As a result of previous option exercise and stock repurchase activity, the mandatorily redeemable non-controlling interest percentage was 9.8 % as of each of September 30, 2023 and 2022. 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. As of September 30, 2023, there was approximately $ 16 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 . F-21 Table of Contents (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. 11. 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, 2023 and 2022 (in thousands, except share and per share data): Year Ended September 30, 2023 2022 Income (Loss): Net income (loss) $ 723 $ ( 2,138 ) Preferred stock dividends ( 284 ) ( 586 ) Non-controlling interest dividends — ( 404 ) Net income (loss) available to common stockholders $ 439 $ ( 3,128 ) Common Shares: Basic - weighted average common shares 1,186.4 1,030.8 Effect of dilutive stock options 20 — Diluted - weighted average common stock 1,206.2 1,030.8 Income (Loss) per Common Share: Basic - Net income (loss) $ 0.61 $ ( 2.07 ) Preferred stock dividends ( 0.24 ) ( 0.57 ) Non-controlling interest dividends — ( 0.39 ) Net income (loss) attributable to common stockholders $ 0.37 $ ( 3.03 ) Diluted - Net income (loss) $ 0.60 $ ( 2.07 ) Preferred stock dividends ( 0.24 ) ( 0.57 ) Non-controlling interest dividends — ( 0.39 ) Net income (loss) available to common stockholders $ 0.36 $ ( 3.03 ) The computation for the diluted number of shares excludes unexercised stock options that are anti-dilutive. There were 10,000 anti-dilutive shares for the fiscal years ended September 30, 2023 and 48,293 anti-dilutive shares for the fiscal years ended September 30, 2022. Potentially diluted securities as of September 30, 2023 and 2022 are as follows: September 30, 2023 2022 Employee stock options (Note 10) 40,993 30,993 12. INCOME TAXES The reconciliation of income tax computed at the Federal statutory rate to the provision for income taxes from operations is as follows (in thousands): Year Ended September 30, 2023 2022 Federal taxes at statutory rates $ 110 $ 11 Permanent differences 250 1,477 State and local taxes, net of Federal benefit ( 273 ) 702 Other ( 285 ) — $ ( 198 ) $ 2,190 F-22 Table of Contents The provisions of income taxes are summarized as follows (in thousands): Year Ended September 30, 2023 2022 Current $ 1,048 $ 1,948 Deferred ( 1,246 ) 242 $ ( 198 ) $ 2,190 The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands): 2023 2022 Deferred tax assets - net state operating loss carryforwards $ 52 $ — Lease liability 1,814 1,755 Other 768 690 Stock based compensation 374 406 Total deferred tax assets 3,008 2,851 Valuation allowance — — Total deferred tax assets net of valuation allowance 3,008 2,851 Deferred tax liabilities - depreciation and amortization 2,564 3,648 Prepaid expenses 30 38 Right of use assets 1,755 1,706 Total deferred tax liabilities 4,349 5,392 Net deferred tax liability $ ( 1,341 ) $ ( 2,541 ) The Company has no Federal net operating loss carryforwards for income tax purposes as of September 30, 2023. The Company will recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 30, 2023, 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. Income tax returns for tax years from 2019 through 2022 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. 13. 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, 2023 and 2022 were $ 535 and $ 379 , respectively. The administrative expense charged to operations for the years ended September 30, 2023 and 2022 aggregated $ 65 and $ 64 , respectively. 14. 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. F-23 Table of Contents 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, 2023 and 2022: For the year ended September 30, 2023 (in thousands) Consolidated Logistics Life Sciences Manufacturing Corporate Revenues $ 186,449 $ 166,052 $ 11,059 $ 9,338 $ — Forwarding expenses and cost of revenues 130,777 123,938 2,376 4,463 — Gross profit 55,672 42,114 8,683 4,875 — Selling, general and administrative 50,975 37,310 6,149 2,978 4,538 Amortization of intangible assets 2,098 — — — 2,098 Income (loss) from operations 2,599 4,804 2,534 1,897 ( 6,636 ) Interest expense 1,998 1,357 248 393 — Identifiable assets 96,834 34,823 11,932 4,202 45,877 Capital expenditures, net of disposals $ 360 $ 271 $ 87 $ 2 $ — 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 $ — Goodwill and intangible assets are recorded at the Corporate level and are included in identifiable assets. 15. LEASES The Company has operating leases for office and warehouse space in all districts where it conducts business. As of September 30, 2023, the remaining terms of the Company’s operating leases were between one and 126 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, 2023 and 2022 are as follows: 2023 2022 Operating lease cost $ 2,102 $ 1,869 Short-term lease cost 372 353 T otal lease cost $ 2,474 $ 2,222 Rent expense for the year ended September 30, 2023 and 2022 was $ 2,474 and $ 2,222 , 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, 2023 were $ 7,460 , $ 2,020 and $ 5,689 , 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. During the twelve months ended September 30, 2023 and 2022, the Company entered into new operating leases and recorded an additional $ 1,759 and $ 4,397 , respectively in operating lease right of use assets and corresponding lease liabilities. As of September 30, 2023 and 2022, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 5.9 years and 4.01 % and 4.6 years and 3.05 % respectively. Cash paid for amounts included in the measurement of operating lease obligations were $ 2,012 and $ 1,797 for the twelve months ended September 30, 2023 and 2022. F-24 Table of Contents Future minimum lease payments under non-cancelable operating leases as of September 30, 2023 are as follows (in thousands) : Year End September 30, 2023 2024 $ 2,066 2025 1,685 2026 1,199 2027 1,209 2028 1,196 Thereafter 1,567 Total undiscounted loan payments 8,922 Less imputed interest ( 1,213 ) Total lease obligation $ 7,709 16. 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 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 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 Merchants 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, 2023 and 2022 and recorded a loss of $ 798 and $ 19,789 , respectively 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, 2023 and 2022. September 30, September 30, 2023 2022 Balance at beginning of year $ 2,371 $ — Purchase of Rubicon investment — 22,160 Fair value adjustments to Rubicon investment ( 798 ) ( 19,789 ) Total $ 1,573 $ 2,371 The summarized financial information of Rubicon as of and for the twelve months ended September 30, 2023 is as follows: total assets $ 4,185 , total liabilities $ 615 , total revenues $ 2,692 , gross profit $ 582 and net income $ 735 . 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 . 17. 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. F-25 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, 2023 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 $ 1,573 $ 1,573 $ — $ — $ 1,573 $ 1,573 $ — $ — Liabilities: Contingent earnout liabilities $ 2,330 $ — $ — $ 2,330 $ 2,330 $ — $ — $ 2,330 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 Investment in Rubicon at fair value As of each of September 30, 2023 and September 30, 2022, the Company held 46.6 % and 45.0 %, respectively, of the total issued and outstanding shares of Rubicon and reported its investment under the fair value method pursuant to ASC 320. Management determined that it was appropriate to carry its investment in Rubicon at fair value because the investment was traded on the NASDAQ stock exchange through January 2, 2023, began trading on the OTCQB Capital Market on January 3, 2023 and had daily trading activity, the combination of which provide a better indicator of value. The investment in Rubicon is re-measured at the end of each quarter based on the trading price and any change in the value is reported on the income statement as an unrealized gain or loss on marketable securities in other income (expense). Refer to Note 16 to Consolidated Financial Statements for reconciliation of changes to the investment in Rubicon for the years ended September 30, 2023 and 2022. Contingent earnout liabilities These liabilities relate to the estimated fair value of earnout payments to former IBS and ELFS owners for the periods ending September 30, 2023 and 2022. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2023 were $ 592 and $ 1,738 , respectively. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2022 were $ 1,664 and $ 2,916 , respectively . F-26 Table of Contents 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, 2023 2022 Balance at beginning of year $ 4,580 $ 3,600 Fair value of contingent consideration recorded in connection with business combinations 300 — Earnout payment ( 1,693 ) — Fair value adjustment of contingent earnout liabilities ( 857 ) 980 Balance at end of year $ 2,330 $ 4,580 The Company determined the fair value of the contingent earnout liability using forecasted results through the expected earnout periods. 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, 2023. 18. COMMITMENTS AND CONTINGENCIES Employment Agreements The Company has various employment agreements, including employment agreements with the previous owners of ELFS and PhosphoSolutions. 19. 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, 2023 and 2022. No customer accounted for 10% or more of consolidated accounts receivable at September 30, 2023 and 2022. (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. 20. SUBSEQUENT EVENTS On October 4, 2023, Rubicon announced that it had authorized a cash dividend of $ 1.10 per share of Common Stock of Rubicon and set October 16, 2023 as the record date for the distribution. On October 23, 2023 the Company received $ 1,219 in dividends . On December 1, 2023, in connection with an amendment (the “Purchase Agreement Amendment”) to that certain Membership Interest Purchase Agreement dated as of September 21, 2021 (the “Purchase Agreement”) among Janel Group, ELFS and former shareholders of ELFS, (the “ELFS Sellers”), (i) the Janel Group Borrowers and Santander entered into an Acknowledgment and Consent Agreement pursuant to which Santander consented to the Purchase Agreement Amendment and the effect of the modifications thereunder on the Santander Loan Agreement and (ii) the ELFS Sellers and Santander entered into an Acknowledgment and Consent Agreement pursuant to which Santander consented to the Purchase Agreement Amendment and the effect of the modifications thereunder on the Subordination Agreement (as defined in the Santander Loan Agreement) between Santander and the ELFS Sellers. As amended, the parties agreed to (i) certain modifications fixing the amount of the remaining earnout payments in earnout year three and four (as defined in the Purchase Agreement) to $ 1,078 each earnout year and (ii) extended the maturity by an additional two years and restored the pre-working capital adjusted amount of the ELFS Subordinated Promissory Notes (as defined in the Purchase Agreement) to $ 6,000 (increase of $ 900 ) payable to the Subordinated Lender thereunder (collectively, the “Purchase Modifications”). F-27