UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30,
2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-60608
JANEL CORPORATION
(Exact name of registrant as specified in
its charter)
Nevada |
|
86-1005291 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization |
|
Identification No.) |
|
|
|
303 Merrick Road – Suite 400 |
|
|
Lynbrook, New York |
|
11563 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (718) 527-3800
(Former name, former address and former
fiscal year if changed from last report.)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No
¨
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes x
No ¨
Indicate by check mark if the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large Accelerated Filer ¨
Accelerated Filer ¨ Non-Accelerated Filer ¨
Smaller Reporting Company x
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨
No x
The number of shares of Common Stock outstanding
as of July 29, 2015 was 559,926 after giving effect to the 50:1 reverse stock split.
JANEL CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
JUNE 30, 2015 | | |
SEPTEMBER 30, 2014 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 323,580 | | |
$ | 664,620 | |
Accounts receivable, net of allowance for doubtful accounts of $168,629 at June 30, 2015 and $157,999 at September 30, 2014 | |
| 9,870,703 | | |
| 8,563,522 | |
Prepaid expenses and sundry current assets | |
| 162,060 | | |
| 221,398 | |
TOTAL CURRENT ASSETS | |
| 10,356,343 | | |
| 9,449,540 | |
PROPERTY AND EQUIPMENT, NET | |
| 73,468 | | |
| 16,650 | |
OTHER ASSETS: | |
| | | |
| | |
Intangible assets, net | |
| 6,926,795 | | |
| 7,171,625 | |
Security deposits | |
| 99,658 | | |
| 76,720 | |
TOTAL OTHER ASSETS | |
| 7,026,453 | | |
| 7,248,345 | |
TOTAL ASSETS | |
$ | 17,456,264 | | |
$ | 16,714,535 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Note payable – bank | |
$ | 2,950,306 | | |
$ | 4,003,385 | |
Accounts payable – trade | |
| 9,417,308 | | |
| 8,037,086 | |
Accrued expenses and other current liabilities | |
| 597,179 | | |
| 314,889 | |
Current portion of long-term debt – related party, net of imputed interest of $11,405 and $32,932, respectively | |
| 488,595 | | |
| 467,068 | |
TOTAL CURRENT LIABILITIES | |
| 13,453,388 | | |
| 12,822,428 | |
OTHER LIABILITIES: | |
| | | |
| | |
Long-term debt – related party, net of imputed interest of $94,783 and $134,596, respectively | |
| 905,217 | | |
| 865,404 | |
Deferred compensation | |
| 78,568 | | |
| 78,568 | |
TOTAL OTHER LIABILITIES | |
| 983,785 | | |
| 943,972 | |
STOCKHOLDERS’ EQUITY: | |
| | | |
| | |
Preferred Stock, $0.001 par value; 100,000 shares authorized: Series A; 20,000 shares authorized; 20,000 shares and 20,000 shares issued and outstanding, respectively | |
| 20 | | |
| 20 | |
Series B; 5,700 shares authorized; 1,271 shares and 1,271 shares issued and outstanding, respectively | |
| 2 | | |
| 2 | |
Series C; 7,000 shares authorized; 5,500 shares and 5,500 shares issued and outstanding, respectively | |
| 6 | | |
| 6 | |
Common Stock, $0.001 par value; 4,500,000 shares authorized: 559,926 shares and 554,211 shares issued and outstanding, respectively | |
| 560 | | |
| 554 | |
Paid-in Capital | |
| 8,367,488 | | |
| 8,307,961 | |
Accumulated deficit | |
| (5,348,985 | ) | |
| (5,360,408 | ) |
STOCKHOLDERS’ EQUITY | |
| 3,019,091 | | |
| 2,948,135 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 17,456,264 | | |
$ | 16,714,535 | |
See notes to financial statements
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
(Unaudited)
| |
THREE MONTHS ENDED | | |
NINE MONTHS ENDED | |
| |
JUNE 30, | | |
JUNE 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
REVENUES | |
$ | 16,650,954 | | |
$ | 11,121,377 | | |
$ | 47,182,227 | | |
$ | 32,847,671 | |
COSTS AND EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Forwarding expenses | |
| 13,861,741 | | |
| 9,602,678 | | |
| 39,203,833 | | |
| 28,251,611 | |
Selling, general and administrative | |
| 2,241,934 | | |
| 1,546,492 | | |
| 7,020,382 | | |
| 4,842,334 | |
Depreciation and amortization | |
| 80,434 | | |
| 4,239 | | |
| 238,135 | | |
| 11,828 | |
TOTAL COST AND EXPENSES | |
| 16,184,109 | | |
| 11,153,409 | | |
| 46,462,350 | | |
| 33,105,773 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING INCOME (LOSS) | |
| 466,845 | | |
| (32,032 | ) | |
| 719,877 | | |
| (258,102 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER ITEMS: | |
| | | |
| | | |
| | | |
| | |
Interest expense, net of interest and dividend income | |
| (116,937 | ) | |
| (38,630 | ) | |
| (373,612 | ) | |
| (85,662 | ) |
TOTAL OTHER ITEMS | |
| (116,937 | ) | |
| (38,630 | ) | |
| (373,612 | ) | |
| (85,662 | ) |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | |
| 349,908 | | |
| (70,662 | ) | |
| 346,265 | | |
| (343,764 | ) |
Income taxes | |
| 17,773 | | |
| 4,000 | | |
| 25,773 | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | |
| 332,135 | | |
| (74,662 | ) | |
| 320,492 | | |
| (352,764 | ) |
Loss from discontinued operations | |
| (45,778 | ) | |
| (25,322 | ) | |
| (128,129 | ) | |
| (50,252 | ) |
NET INCOME (LOSS) | |
$ | 286,357 | | |
$ | (99,984 | ) | |
$ | 192,363 | | |
$ | (403,016 | ) |
Preferred stock dividends | |
| 60,313 | | |
| 3,750 | | |
| 180,940 | | |
| 11,250 | |
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | |
$ | 226,044 | | |
$ | (103,734 | ) | |
$ | 11,423 | | |
$ | (414,266 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) per share from continuing operations: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.59 | | |
$ | (0.14 | ) | |
$ | 0.58 | | |
$ | (0.66 | ) |
Diluted | |
$ | 0.56 | | |
$ | (0.13 | ) | |
$ | 0.54 | | |
$ | (0.62 | ) |
Income (loss) per share from discontinued operations: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.08 | ) | |
$ | (0.05 | ) | |
$ | (0.23 | ) | |
$ | (0.09 | ) |
Diluted | |
$ | (0.08 | ) | |
$ | (0.04 | ) | |
$ | (0.22 | ) | |
$ | (0.09 | ) |
Net income (loss) per share available to common shareholders: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.40 | | |
$ | (0.19 | ) | |
$ | 0.02 | | |
$ | (0.77 | ) |
Diluted | |
$ | 0.38 | | |
$ | (0.18 | ) | |
$ | 0.02 | | |
$ | (0.73 | ) |
Basic weighted average number of shares Outstanding | |
| 556,919 | | |
| 554,204 | | |
| 556,779 | | |
| 537,298 | |
Fully diluted weighted average number of shares outstanding | |
| 592,624 | | |
| 586,909 | | |
| 589,484 | | |
| 570,003 | |
See notes to financial statements
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(unaudited)
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
ACCUMULATED | | |
| |
| |
COMMON STOCK | | |
PREFERRED STOCK | | |
| | |
ADDITIONAL | | |
| | |
OTHER | | |
| |
| |
| | |
| | |
| | |
| | |
TREASURY | | |
PAID-IN | | |
ACCUMULATED | | |
COMPREHENSIVE | | |
| |
| |
SHARES | | |
$ | | |
SHARES | | |
$ | | |
STOCK | | |
CAPITAL | | |
DEFICIT | | |
LOSS | | |
TOTAL | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
BALANCE–SEPTEMBER 30, 2014 | |
| 554,211 | | |
$ | 554 | | |
| 26,771 | | |
$ | 28 | | |
$ | - | | |
$ | 8,307,961 | | |
$ | (5,360,408 | ) | |
$ | - | | |
$ | 2,948,135 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| - | | |
| 192,363 | | |
| - | | |
| 192,363 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Dividends to preferred shareholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (180,940 | ) | |
| - | | |
| (180,940 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock issuance as compensation | |
| 5,715 | | |
| 6 | | |
| - | | |
| - | | |
| - | | |
| 13,327 | | |
| - | | |
| - | | |
| 13,333 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock options issued | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 46,200 | | |
| - | | |
| - | | |
| 46,200 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
BALANCE – JUNE 30, 2015 | |
| 559,926 | | |
$ | 560 | | |
| 26,771 | | |
$ | 28 | | |
$ | - | | |
$ | 8,367,488 | | |
$ | (5,348,985 | ) | |
$ | - | | |
$ | 3,019,091 | |
See notes to financial statements
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
NINE MONTHS ENDED
JUNE 30,
| |
| |
2015 | | |
2014 | |
OPERATING ACTIVITIES: | |
| | | |
| | |
Net income (loss) | |
$ | 192,363 | | |
$ | (403,016 | ) |
Add (loss) from discontinued operations | |
| 128,129 | | |
| 50,252 | |
Adjustments to reconcile net (loss) to net cash provided by operating activities: | |
| | | |
| | |
Bad debt reserve | |
| (10,630 | ) | |
| 298,908 | |
Depreciation | |
| 14,135 | | |
| 11,828 | |
Amortization of intangible assets | |
| 224,000 | | |
| - | |
Amortization of imputed interest | |
| 61,339 | | |
| - | |
Stock-based compensation | |
| 59,533 | | |
| 237,492 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (1,296,552 | ) | |
| (767,935 | ) |
Prepaid expenses and sundry current assets | |
| 59,338 | | |
| (47,185 | ) |
Accounts payable and accrued expenses | |
| 1,469,885 | | |
| (12,419 | ) |
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS | |
| 901,540 | | |
| (632,075 | ) |
NET CASH (USED IN) PROVIDED BY DISCONTINUED OPERATIONS | |
| (128,129 | ) | |
| 182,216 | |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | |
| 773,411 | | |
| (449,859 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES: | |
| | | |
| | |
Acquisition of property and equipment | |
| (70,952 | ) | |
| (8,758 | ) |
Escrow refund from acquisition | |
| 20,830 | | |
| - | |
NET CASH USED IN INVESTING ACTIVITIES | |
| (50,122 | ) | |
| (8,758 | ) |
| |
| | | |
| | |
FINANCING ACTIVITIES: | |
| | | |
| | |
Preferred dividends paid | |
| (11,250 | ) | |
| (11,250 | ) |
Repayments, net, from bank loan | |
| (1,053,079 | ) | |
| (420,404 | ) |
Proceeds from the sale of common stock | |
| - | | |
| 500,000 | |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | |
| (1,064,329 | ) | |
| 68,346 | |
| |
| | | |
| | |
DECREASE IN CASH AND CASH EQUIVALENTS | |
| (341,040 | ) | |
| (390,271 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD | |
| 664,620 | | |
| 625,584 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS – END OF PERIOD | |
$ | 323,580 | | |
$ | 235,313 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Interest | |
$ | 316,348 | | |
$ | 85,662 | |
Income taxes | |
$ | 20,371 | | |
$ | 21,039 | |
Non-cash financing activities: | |
| | | |
| | |
Dividends declared to preferred shareholders | |
$ | 180,940 | | |
$ | 11,250 | |
See notes to financial statements
JANEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)
The attached unaudited consolidated
financial statements have been prepared pursuant to the rules and regulations of Article 10 of regulation S-X and instructions
to Form 10-Q of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The
Company believes that the disclosures made are adequate to make the information presented not misleading. The consolidated financial
statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the
interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to
be expected for a full fiscal year, or any other period. These consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and related notes included in the Company’s Form 10-K as filed with the
Securities and Exchange Commission on or about December 29, 2014.
Deferred compensation of $78,568
represents compensation due to an officer of the Company upon termination, retirement or death. This amount has not changed
since 1992 and was accrued during the years 1984 through 1992.
| (A) | ALPHA INTERNATIONAL, LP. AND PCL TRANSPORT, LLC. |
On August 18, 2014 the Company
entered into an Equity Interest Purchase Agreement (“EIPA”) by and among the Company, its wholly owned subsidiaries,
The Janel Group of New York, Inc., Janel Alpha GP, LLC, Alpha Logistics, LLC, Alpha International, LP (“AILP”), PCL
Transport, LLC (“PCL”), and the principal owners of AILP and PCL, John Joseph Gonzalez II and Cathleen Margaret Gonzalez.
On September 10, 2014, the Company completed the acquisition of all of the equity interests of AILP and PCL pursuant to the terms
of the EIPA. As consideration for the equity interests, the Company paid $4,358,773 to the former owners of AILP and PCL at closing.
The former owners of AILP and PCL may receive additional consideration over the next three years for their equity interests as
follows: (i) $500,000 to be paid following the first anniversary of the closing provided that Mr. Gonzalez is still employed by
the Company (or pro rata if the employment was terminated prior to that date); (ii) $500,000, plus an amount equal to 40% of the
amount by which the Company’s EBITDA exceeds $1.0 million to be paid following the second anniversary of the closing, provided
that Mr. Gonzalez is still employed by the Company (or pro rata if the employment was terminated prior to that date) and the Company’s
EBITDA for the year then ended is more than $1.0 million; and $500,000, plus an amount equal to 40% of the amount by which such
the Company’s EBITDA exceeds $1.0 million to be paid following the third anniversary of the closing, provided that Mr. Gonzalez
is still employed by the Company (or pro rata if the employment was terminated prior to that date) and the Company’s EBITDA
for the year then ended is more than $1.0 million.
The purchase price for the acquired
assets was $5,691,245 consisting of $4,358,773 of cash, $1,332,472 of future cash to be paid (described above), net of imputed
interest of $167,528.
In addition, the Company entered
into an employment agreement with Mr. Gonzalez. Pursuant to the terms of the employment agreement, Mr. Gonzalez was (i) employed
by the Company at an annual salary of $200,000 plus typical employee benefits for an initial term of three years ending September
10, 2017 and thereafter will renew for 1-year terms unless either party provides notice that it does not wish to renew, and (ii)
granted option to purchase 2,000,000 shares of the Company’s common stock at a purchase price of $0.0849 per share (refer
to Note 8, below). The employment agreement also contains customary restrictive covenants.
| (B) | Purchase
price allocation |
In accordance
with the acquisition method of accounting, the Company allocated the consideration to the net tangible and identifiable intangible
assets based on their estimated fair values which were determined by an independent valuation performed by a third party.
Goodwill represents
the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. The factors
that contributed to the recognition of goodwill included securing buyer-specific synergies that increase revenue and profits and
are not otherwise available to a marketplace participant.
The assets
acquired and liabilities assumed as part of our acquisition were recognized at their fair values as of the acquisition date, September
10, 2014. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed:
| |
Fair Value | |
Accounts receivable, net | |
$ | 2,987,487 | |
Security deposits | |
| 19,150 | |
Prepaid expenses and other current assets | |
| 654 | |
Fixed assets | |
| 1,446 | |
Accounts payable and other liabilities | |
| (4,501,561 | ) |
Customer relationships | |
| 4,480,000 | |
Goodwill | |
| 2,704,069 | |
Purchase price | |
$ | 5,691,245 | |
A summary of intangible assets
resulting from the AILP and PCL acquisitions and the estimated useful lives used in the computation of amortization is as follows:
Customer relationships | |
$ | 4,480,000 | | |
15 years |
Goodwill | |
| 2,704,069 | | |
|
| |
| 7,184,069 | | |
|
Less escrow refund | |
| 20,830 | | |
|
Less accumulated amortization | |
| 236,444 | | |
|
| |
$ | 6,926,795 | | |
|
A summary of the changes
in intangible assets is as follows:
| |
June | | |
September | |
| |
2015 | | |
2014 | |
Balance – beginning of period | |
$ | 7,171,625 | | |
$ | - | |
Additions | |
| - | | |
| 7,184,069 | |
Reductions – escrow refund | |
| (20,830 | ) | |
| - | |
Amortization | |
| (224,000 | ) | |
| (12,444 | ) |
Balance – end of year period | |
$ | 6,926,795 | | |
$ | 7,171,625 | |
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 its 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.
On March 27, 2014, the Company
and its wholly-owned subsidiaries, entered into a Loan and Security Agreement with Presidential Financial Corporation (“Presidential”)
with respect to a three year $3.5 million (limited to the borrowing base and reserves) revolving line of credit facility (the “Presidential
Facility”) which replaces The Janel Group of New York’s previous line of credit agreement with Community National Bank
(“CNB”). On March 31, 2014, $1,282,673 of the Presidential Facility was used to repay the outstanding balances under
the line of credit facility with CNB.
On September 10, 2014 in conjunction
with the acquisition of AILP and PCL, the Company, AILP and PCL entered into a First Amendment to the Presidential Facility (“Loan
Amendment”), with Presidential, which Loan Amendment among other things, (1) added AILP and PCL as co-borrowers, (2) increased
the line of credit available (including AILP and PCL) from $3.5 million to $5.0 million and (3) increased the advance rate from
70% to 85%. On that date, $1,800,000 of the Presidential Facility was used to acquire AILP and PCL.
On September 25, 2014 there was
a Second Amendment and the Presidential Facility was temporarily increased to $5.5 million and on October 9, 2014, there was a
Third Amendment whereby the Presidential Facility was increased to $7.0 million. The Company can now borrow up to $7.0 million
limited to 85% of the aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Loan and Security
Agreement. Interest will accrue at an annual rate equal to five percent above the greater of (a) the prime rate of interest quoted
in The Wall Street Journal from time to time, or (b) 3.25%. The obligations under the Presidential facility are secured by all
of the assets of the Company, AILP and PCL. The Presidential Facility will expire on March 26, 2017 (subject to earlier termination
as provided in the Loan and Security Agreement) unless renewed. As of June 30, 2015, there were outstanding borrowings of $2,950,306
under the Presidential Facility (which represented 51.4% of the amount available thereunder) out of a total amount available for
borrowing under the Presidential Facility of approximately $5,739,000.
| 6 | LONG-TERM DEBT – RELATED PARTY |
Long-term debt consists of the
following:
| |
June 30, 2015 | | |
September 30, 2014 | |
Non-interest bearing note payable to a related party, net of imputed interest due when earned (see Note 3A, above, regarding the earn-out period). | |
$ | 1,393,812 | | |
$ | 1,332,472 | |
Less current portion | |
| (488,595 | ) | |
| (467,068 | ) |
| |
$ | 905,217 | | |
$ | 865,404 | |
These obligations mature as follows:
2015 | |
$ | 488,595 | |
2016 | |
| 472,199 | |
2017 | |
| 433,018 | |
| |
$ | 1,393,812 | |
On August 28, 2013, the Company,
and its wholly-owned subsidiary, The Janel Group of New York, Inc. (collectively, the “Seller”), entered into an Asset
Purchase Agreement (the “Asset Purchase Agreement”) with Allports Logistics Anchor Wharehouse, LLC (the “Purchaser”),
an entity affiliated with Nicholas V. Ferrara, a former director of the Company. Under the terms of the Agreement, the Purchaser
purchased certain of the Seller’s assets (the “NJ Assets”) used by the Seller in the Company’s Hillside,
New Jersey freight forwarding and logistics operations (the “NJ Business”). The Company had originally acquired its
New Jersey operations from an affiliate of Mr. Ferrara in two transactions in 2008 and 2010. The sale price of the NJ Assets consisted
of $401,067 in cash, and the assumption of all future lease obligations with respect to the three office and warehouse facilities
from which the Company conducted its New Jersey operations. At the closing of the sale on August 30, 2013, the Seller used the
cash portion of the purchase price to repay outstanding obligations secured by the NJ Assets, including the $229,241 outstanding
balance on the Seller’s term loan from CNB, and an aggregate $58,245 on two outstanding equipment financing arrangements.
Simultaneously with the closing Mr. Ferrara (i) paid the Company $110,000 for the release of restrictions on competition which
were agreed to as part of the 2008 portion of the acquisition of the NJ Business and (2) returned to the Company the 1,714,286
restricted common shares that were previously issued as part of the 2010 portion of the acquisition of the NJ Business (the restricted
common shares were subject to an earn out, however, none of the restricted common shares were earned). All of the expenses of the
NJ Business from and after the closing are the responsibility of the Purchaser. The Company retained its pre-closing accounts receivable
and accounts payable with respect to the NJ Business the net proceeds on these accounts receivable and payable will be used to
further reduce the Company’s obligations to Community National Bank. As previously reported by the Company, as of September
30, 2012 the Company had determined that there was full impairment of the goodwill relating to its 2008 and 2010 acquisitions of
the NJ Business, and recorded an impairment loss of $1,167,070 on September 30, 2012, representing the write-off of all of the
goodwill acquired in those transactions. As a result of the sale of the NJ Business to the Purchaser, the Company recorded a write
off of $1,562,061 associated with the customer list from the 2008 and 2010 acquisitions of the NJ Business.
From April 2011 until June 2012,
we operated a vertical sales and supply chain food industry business segment including supplier selection, manufacturing, transportation,
import, distribution, marketing and sales within the food industry. During the June 2012 quarter the Company divested itself of
and discontinued the food industry segment.
As a result of the above, the
Company elected to discontinue the operations of the NJ Business and the food sales segment. The operations associated with the
NJ Business and the food sales segment are summarized below. For the periods presented, there were no assets or liabilities associated
with the NJ Business or the food sales segment.
| |
THREE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
TOTAL DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| (339 | ) |
Selling, general and administrative expenses | |
| 45,778 | | |
| 25,661 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| 45,778 | | |
| 25,322 | |
| |
| | | |
| | |
LOSS FROM DISCONTINUED OPERATIONS | |
$ | (45,778 | ) | |
$ | (25,322 | ) |
| |
THREE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
NEW JERSEY DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| (339 | ) |
Selling, general and administrative expenses | |
| (180 | ) | |
| 4,281 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| (180 | ) | |
| 3,942 | |
| |
| | | |
| | |
INCOME FROM NEW JERSEY DISCONTINUED OPERATIONS | |
$ | 180 | | |
$ | (3,942 | ) |
| |
THREE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
FOOD SALES DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| - | |
Selling, general and administrative expenses | |
| 45,958 | | |
| 21,380 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| 45,958 | | |
| 21,380 | |
| |
| | | |
| | |
LOSS FROM FOOD SALES DISCONTINUED OPERATIONS | |
$ | (45,958 | ) | |
$ | (21,380 | ) |
| |
NINE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
TOTAL DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| (28,223 | ) |
Selling, general and administrative expenses | |
| 128,129 | | |
| 78,475 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| 128,129 | | |
| 50,252 | |
| |
| | | |
| | |
LOSS FROM DISCONTINUED OPERATIONS | |
$ | (128,129 | ) | |
$ | (50,252 | ) |
| |
NINE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
NEW JERSEY DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| (28,223 | ) |
Selling, general and administrative expenses | |
| (3,729 | ) | |
| 40,898 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| (3,729 | ) | |
| 12,675 | |
| |
| | | |
| | |
INCOME FROM NEW JERSEY DISCONTINUED OPERATIONS | |
$ | 3,729 | | |
$ | (12,675 | ) |
| |
NINE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
FOOD SALES DISCONTINUED OPERATIONS: | |
| | | |
| | |
REVENUES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
COSTS AND EXPENSES: | |
| | | |
| | |
Cost of sales | |
| - | | |
| - | |
Selling, general and administrative expenses | |
| 131,858 | | |
| 37,577 | |
Depreciation and amortization | |
| - | | |
| - | |
TOTAL COSTS AND EXPENSES | |
| 131,858 | | |
| 37,577 | |
| |
| | | |
| | |
LOSS FROM FOOD SALES DISCONTINUED OPERATIONS | |
$ | (131,858 | ) | |
$ | (37,577 | ) |
On April 15,
2015, the Company filed with the Nevada Secretary of State: (1) a Certificate of Change Pursuant to NRS 78.209 providing for a
one-for-fifty reverse stock split (“Reverse Stock Split”), such change which took effect on April 21, 2015. The Company
issued one share of Common Stock for every fifty shares of Common Stock held as of the close of business on April 20, 2015. To
avoid the issuance of fractional shares in connection with the Reverse Stock Split, if a shareholder would be entitled to receive
a fractional share, such shareholder will instead receive a whole share in lieu of such fractional share.
As a result of the above, all
relevant information relating to the number of shares, options and per share information have been retrospectively adjusted within
these consolidated financial statements to reflect the Reverse Stock Split for all periods presented.
On August 25, 2014, the Company
filed with the Nevada Secretary of State a Certificate of Designation for 7,000 shares of Series C Cumulative Preferred Stock,
par value $0.001 per share (the “Series C Stock”). On September 10, 2014 the Company sold 5,000 unregistered shares
of the newly authorized Series C Cumulative Stock for $2,500,000. On September 24, 2014 the Company sold an additional 500 unregistered
shares of the Series C Stock for $250,000. Holders of Series C Stock (“Series C Holders”) are entitled to receive annual
dividends at a rate of 8.25% per annum of the original Series C Stock issuance price, or $500.00 per share subject to adjustment
upon certain events (the “Original Issuance Price”), when, as and if declared by the Company’s Board of Directors,
such rate to increase by 2% annually beginning on the third anniversary of issuance of such Series C Preferred Stock to a maximum
rate of 14.25%. In the event of liquidation, Series C Holders shall be paid an amount equal to the Original Issuance Price, plus
any accrued but unpaid dividends thereon. Shares of Series C Preferred Stock may be redeemed (1) by the Company at any time upon
notice and payment of the Original Issuance Price, plus any accrued but unpaid dividends thereon (“Redemption Price”)
or (2) by the Series C Holders at their option beginning on the fourth anniversary of the issuance of the Series C Preferred Stock
for an amount equal to the Redemption Price.
On February 27, 2015, the Company’s
Board of Directors appointed Brendan Killackey, currently a director of the Company, as Chief Executive Officer. On March 2, 2015
Mr. Killackey was issued 5,715 shares of the Company’s Common Stock with an aggregate value of $20,000 (or $3.50, the closing
price for the Shares on February 27, 2015) for his services through August 31, 2015. The Company is recording a monthly expense
in the amount of $3,333 for the six months through August 31, 2015.
On October 6, 2013, the Company
entered into a Securities Purchase Agreement (the “Agreement”) with Oaxaca Group LLC, (the “Investor”),
for the sale to the Investor of an aggregate 153,847 shares of the Company’s common stock at a purchase price of $3.25 per
share, or an aggregate of $500,000. On October 30, 2013 the transaction closed. As part of the purchase, the Investor received
warrants to purchase an aggregate 250,000 shares of common stock at $4.00 per share. The warrants expire five years after the closing
date. The Agreement contains anti-dilution protections for the Investor. In addition, under the terms of the Agreement, the Company
agreed that, at the Investor’s option, the Company will present two nominees nominated by the Investor to become members
of the Company’s Board of Directors either through an action by written consent or through the vote of the Company’s
stockholders at the next meeting of the Company’s stockholders, and from and after such time the size of the Company’s
Board of Directors will be limited to no more than four members, unless approved by the Investor. Furthermore, the Company agreed
that it will not take certain actions without the approval of the Investor.
On December 29, 2014, options to
purchase 5,000 shares of common stock at an exercise price of $4.50 per share were granted to Brendan Killackey a member of the
Board of Directors of the Company and as of February 27, 2015 the Company’s Chief Executive Officer. The option vests in
three installments: On each of December 29, 2015 and 2016, the option becomes exercisable with respect to 1,667 shares and on December
29, 2017, the option becomes exercisable with respect to the remaining 1,666 shares. The fair value of the options, as determined
by using a Black-Scholes Option Pricing Model, was $22,500 and since the options vest over a period of three years resulted in
an $1,875 and $3,750 reduction to net income for the three and nine months ended June 30, 2015, respectively.
On September 10, 2014, in connection
with the employment agreement with John Joseph Gonzalez II (refer to Note 3(A), above), options to purchase 40,000 shares of common
stock at an exercise price of $4.245 per share were granted to Mr. Gonzalez. The option vests in three installments: On each of
September 10, 2015 and 2016, the option becomes exercisable with respect to 13,333 shares and on September 10, 2017, the option
becomes exercisable with respect to the remaining 13,334 shares. The fair value of the options was determined by using a
Black-Scholes Option Pricing Model was $169,800 and since the options vest over a period of three years resulted in a $14,150 and
$42,450 reduction to net income for the three and nine months ended June 30, 2015, respectively.
On October 30, 2013, options to
purchase 95,000 shares of common stock at an exercise price of $3.25 per share were granted to key employees of the Company. The
options were fully vested on the date of grant. The fair value of the options, as determined by using a Black-Scholes Option Pricing
Model, was $237,492 and since the options were fully vested resulted in a $237,492 reduction to net income for the prior year quarter
ended December 31, 2013.
| (a) | 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 predicated 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 financial position or results of operations. |
| (b) | The Company and/or its subsidiaries have been named as defendants in four separate lawsuits filed
in New York and New Jersey state courts, each alleging non-payment of food product purchases by the Company’s discontinued
food segment subsidiary. The total claimed in all four lawsuits in the aggregate (exclusive of any interest and costs) is
approximately $1,379,000. The Company is vigorously defending each of the lawsuits. |
Management
has evaluated events occurring after the date of these financial statements through the date that these financial statements were
issued. There have been no events that would require adjustment to or disclosure in the financial statements.
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As
used throughout this Report, “we,”
“our,” “Janel”, “the Company” and similar words refers to Janel Corporation.
forward-looking
statements
This
Quarterly Report on Form 10-Q contains certain forward-looking statements reflecting our current expectations with respect to
our operations, performance, financial condition, and other developments. These forward-looking statements may generally
be identified by the use of the words “may”, “will”, “believes”, “should”, “expects”,
“anticipates”, “estimates”, and similar expressions. These
statements are necessarily estimates reflecting management’s best judgment based upon current information and involve a
number of risks and uncertainties. We caution readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made, and readers are advised that various factors could affect our financial performance and
could cause our actual results for future periods to differ materially from those anticipated or projected. While
it is impossible to identify all such factors, such factors include, but are not limited to, those risks identified in
our periodic reports filed with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.
overview
Janel is a non-asset
based third party logistics services company, engaged in full-service cargo transportation logistics management, including freight
forwarding – via air, ocean and land-based carriers, customs brokerage services, and warehousing and distribution services.
Our headquarters are
in Lynbrook, New York and we operate through a network which includes six company-owned offices in the United States and independent
international agents in approximately 52 countries around the world.
As a non-asset based
third party logistics provider, we do not own any transportation assets and fulfill our transportation needs by purchasing transportation
services from direct (asset-based) carriers and from other transportation providers who generally provide us with favorable rates
with priority handling of our shipments. By consolidating multiple shipments from our customers we are able to negotiate favorable
pricing from these transportation providers and can offer lower rates to our customers than they could obtain on their own. This
non-asset based approach provides us with a variable cost structure and allows for a high level of operating flexibility. Our investment
in assets is limited to the purchase of office, warehouse and computer equipment and the leasing of office and warehouse space
for our company owned offices.
Historically, Janel’s
quarterly operating results have been subject to seasonal trends. The fiscal first and second quarters have traditionally been
the weakest and the fiscal third and fourth quarters have traditionally been the strongest. This pattern has been the result of,
or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and other similar
and subtle forces. This historical seasonality has also been influenced by the growth and diversification of Janel’s international
network and service offerings.
A significant portion
of Janel’s revenues are derived from customers in industries with shipping patterns closely tied to consumer demand and from
customers with shipping patterns dependent upon just-in-time production schedules. Many of Janel’s customers may ship a significant
portion of their goods at or near the end of a quarter. Therefore, the timing of Janel’s revenues are, to a large degree,
affected by factors beyond the Company’s control, such as shifting consumer demand for retail goods and manufacturing production
delays. The Company cannot accurately forecast many of these factors, nor can it estimate the relative impact of any particular
factor and, as a result, there is no assurance that historical patterns will continue in the future.
As described in the
Company’s SEC filings, on April 21, 2015 the Company’s name was changed from “Janel World Trade, Ltd.”
to “Janel Corporation” and the Company effected a one-for-fifty reverse stock split (Refer to Note 8 to these Consolidated
Financial Statements). All per share information in this Report reflects the reverse stock split.
results
of operations
The following discussion
and analysis addresses the results of operations for the three and nine months ended June 30, 2015, as compared to the results
of operations for the three and nine months ended June 30, 2014. The discussion and analysis then addresses the liquidity and financial
condition of the Company, and other matters.
On August 18, 2014
the Company completed the acquisition of Alpha International, LP. and PCL Transport, LLC. (collectively “Alpha”). Refer
to Notes 3 and 4 to the Consolidated Financial Statements.
Three months ended June 30, 2015
and 2014
Revenue.
Total revenue from continuing operations for the three months ended June 30, 2015 was $16,650,954, as compared to $11,121,377
for the three months ended June 30, 2014, an increase of $5,529,577 or 49.7%. This increase is mainly the result of the acquisition
of Alpha. Net revenue (revenue minus forwarding expense) from continuing operations for the three months ended June 30, 2015 was
$2,789,213, an increase of $1,270,514 or 83.7% as compared to net revenue of $1,518,699 for the three months ended June 30, 2014.
This increase was due to increased freight forwarding business and is mainly the result of the acquisition of Alpha.
Forwarding Expense.
Forwarding expense from continuing operations is primarily comprised of the fees paid by Janel directly to cargo carriers to
handle and transport its actual freight shipments on behalf of its customers between initial and final terminal points, and includes
any trucking and warehousing charges related to the shipments.
For the three months
ended June 30, 2015, forwarding expense from continuing operations increased by $4,259,063, or 44.4%, to $13,861,741 as compared
to $9,602,678 for the three months ended June 30, 2014, primarily as a result of higher revenues, and as a percentage of revenue
decreased to 83.2% for fiscal 2015, from 86.3% for the three months ended June 30, 2014, a 3.1 percentage point decrease. This
percentage decrease is principally the result of the acquisition of Alpha.
Selling, General
and Administrative Expense. For the three months ended June 30, 2015 and 2014, selling, general and administrative expenses
from continuing operations were $2,241,934 and $1,546,492, respectively, an increase of $695,442, or 45.0% when compared to the
prior year. Included in the three months ended June 30, 2015 is an expense in the amount of $16,025 associated with the issuance
of stock options (refer to Note 8(c) to the Consolidated Financial Statements) and $10,000 associated with stock based compensation
(refer to Note 8(b) to the Consolidated Financial Statements). As a percentage of revenue, selling, general and administrative
expenses were 13.5% and 13.9% of revenue for the three months ended June 30, 2015 and 2014, respectively, a 0.4 percentage point
decrease which is primarily due to the acquisition of Alpha.
Depreciation and
Amortization. For the three months ended June 30, 2015 and 2014, depreciation and amortization expenses from continuing operations
were $80,434 and $4,239, respectively, an increase of $76,195 and is the result of $74,667 in amortization associated with intangible
assets in connection with the Alpha acquisition (refer to Notes 3 and 4 to the Consolidated Financial Statements).
Interest Expense.
For the three months ended June 30, 2015 and 2014, interest expense from continuing operations was $116,937 and $38,630, respectively,
an increase of $78,307. This increase is primarily the result of higher interest costs under bank credit facilities during the
three months ended June 30, 2015 versus 2014 due to additional borrowings under our bank line of credit which were used to fund
the acquisition of Alpha. Included in interest expense for the three months ended June 30, 2015 is imputed interest amortization
in the amount of $20,715 in connection with the Alpha acquisition (refer to Note 6 to the Consolidated Financial Statements).
Income (Loss) From
Continuing Operations Before Income Taxes. For the reasons stated above, for the three months ended June 30, 2015 the
Company recorded income from continuing operations before income taxes of $349,908 compared to a loss from continuing operations
before income taxes of ($70,662) for the three months ended June 30, 2014.
Income Taxes.
The Company recorded a net income tax provision of $17,773 and $4,000 for the three months ended June 30, 2015 and 2014, respectively.
Both fiscal years reflect applicable state income taxes only as we have fully provided for a valuation allowance against the Company’s
deferred tax asset.
Loss From Discontinued
Operations. On August 28, 2013 the Company sold its New Jersey freight forwarding and logistics operations and in June
2012 discontinued its food segment business. As a result, the New Jersey operations and some ongoing expenses associated with the
food segment (principally legal fees) are included in discontinued operations. The three months ended June 30, 2015 and 2014 reflect
a loss from discontinued operations of ($45,778) and ($25,322), respectively. Refer to Note 7 to the Consolidated Financial Statements.
Net Income (Loss).
For the three months ended June 30, 2015 the Company recorded net income of $286,357 compared to a net loss of ($99,984) for
the three months ended June 30, 2014. Following accruals for or payments of dividends on the Company’s Preferred Stock, net
income available to common shareholders for the three months ended June 30, 2015 was $226,044 or $0.38 per diluted share compared
to a loss available to common shareholders for the three months ended June 30, 2014 of ($103,734) or ($0.18) per diluted share.
Nine months ended June 30, 2015 and
2014
Revenue.
Total revenue from continuing operations for the nine months ended June 30, 2015 was $47,182,227, as compared to $32,847,671
for the nine months ended June 30, 2014, an increase of $14,334,556 or 43.6%. This increase is mainly the result of the acquisition
of Alpha. Net revenue (revenue minus forwarding expense) from continuing operations for the nine months ended June 30, 2015 was
$7,978,394, an increase of $3,382,334 or 73.6% as compared to net revenue of $4,596,060 for the nine months ended June 30, 2014.
This increase was due to increased freight forwarding business and is mainly the result of the acquisition of Alpha.
Forwarding Expense.
Forwarding expense from continuing operations is primarily comprised of the fees paid by Janel directly to cargo carriers to
handle and transport its actual freight shipments on behalf of its customers between initial and final terminal points, and includes
any trucking and warehousing charges related to the shipments.
For the nine months
ended June 30, 2015, forwarding expense from continuing operations increased by $10,952,222, or 38.8%, to $39,203,833 as compared
to $28,251,611 for the nine months ended June 30, 2014, primarily as a result of higher revenues, and as a percentage of revenue
decreased to 83.1% for fiscal 2015, from 86.0% for the nine months ended June 30, 2014, a 2.9 percentage point decrease. This percentage
decrease is principally the result of the acquisition of Alpha.
Selling, General
and Administrative Expense. For the nine months ended June 30, 2015 and 2014, selling, general and administrative expenses
from continuing operations were $7,020,382 and $4,842,334, respectively, an increase of $2,178,048, or 45.0% when compared to the
prior year. Included in the nine months ended June 30, 2015 and 2014 is an expense in the amount of $46,200 and $237,492, respectively,
associated with the issuance of stock options (refer to Note 8(c) to the Consolidated Financial Statements) and for the nine months
ended June 30, 2015 an expense in the amount of $13,333 associated with stock based compensation (refer to Note 8(b) to the Consolidated
Financial Statements). As a percentage of revenue, selling, general and administrative expenses were 14.9% and 14.7% of revenue
for the nine months ended June 30, 2015 and 2014, respectively, a 0.2 percentage point increase which is primarily due to the acquisition
of Alpha.
Depreciation and
Amortization. For the nine months ended June 30, 2015 and 2014, depreciation and amortization expenses from continuing operations
were $238,135 and $11,828, respectively, an increase of $226,307 and is the result of $224,000 in amortization associated with
intangible assets in connection with the Alpha acquisition (refer to Notes 3 and 4 to the Consolidated Financial Statements).
Interest Expense.
For the nine months ended June 30, 2015 and 2014, interest expense from continuing operations was $373,612 and $85,662, respectively,
an increase of $287,950. This increase is primarily the result of higher interest costs under bank credit facilities during the
nine months ended June 30, 2015 versus 2014 due to additional borrowings under our bank line of credit which were used to fund
the acquisition of Alpha. Included in interest expense for the nine months ended June 30, 2015 is imputed interest amortization
in the amount of $61,339 in connection with the Alpha acquisition (refer to Note 6 to the Consolidated Financial Statements).
Income (Loss) From
Continuing Operations Before Income Taxes. For the reasons stated above, for the nine months ended June 30, 2015 the
Company recorded income from continuing operations before income taxes of $346,265 compared to a loss from continuing operations
before income taxes of ($343,764) for the nine months ended June 30, 2014.
Income Taxes.
The Company recorded a net income tax provision of $25,773 and $9,000 for the nine months ended June 30, 2015 and 2014, respectively.
Both fiscal years reflect applicable state income taxes only as we have fully provided for a valuation allowance against the Company’s
deferred tax asset.
Loss From Discontinued
Operations. On August 28, 2013 the Company sold its New Jersey freight forwarding and logistics operations and in June
2012 discontinued its food segment business. As a result, the New Jersey operations and some ongoing expenses associated with the
food segment (principally legal fees) are included in discontinued operations. The nine months ended June 30, 2015 and 2014 reflect
a loss from discontinued operations of ($128,129) and ($50,252), respectively. Refer to Note 7 to the Consolidated Financial Statements.
Net Income (Loss).
For the nine months ended June 30, 2015 the Company recorded net income of $192,363 compared to a net loss of ($403,016) for
the nine months ended June 30, 2014. Following accruals for or payments of dividends on the Company’s Preferred Stock, net
income available to common shareholders for the nine months ended June 30, 2015 was $11,423 or $0.02 per diluted share compared
to a loss available to common shareholders for the nine months ended June 30, 2014 of ($414,266) or ($0.73) per diluted share.
Liquidity
and Capital Resources
General. Our
ability to satisfy our liquidity requirements, which include satisfying our debt obligations and funding working capital, day-to-day
operating expenses and capital expenditures depends upon our future performance, which is subject to general economic conditions,
competition and other factors, some of which are beyond our control. We depend on our commercial credit facilities to fund our
day-to-day operations as there is a timing difference between our collection cycles and the timing of our payments to vendors.
Generally we do not have a need for significant capital expenditure as we are a non-asset based freight forwarder.
Janel’s cash
flow performance for the nine months ended June 30, 2015 is not necessarily indicative of future cash flow performance.
As of June 30, 2015,
and compared with the prior fiscal year, the Company’s cash and cash equivalents decreased by $341,040, or 51.3%, to $323,580
from $664,620, respectively. During the nine months ended June 30, 2015, Janel’s net working capital (current assets minus
current liabilities) increased by $275,843 to a negative ($3,097,045) at June 30, 2015, from a negative ($3,372,888) at September
30, 2014. This decrease is primarily due to a reduction of current assets which was partially offset by a reduction in current
liabilities.
Cash flows from
continuing operating activities. Net cash provided by continuing operating activities for the nine months ended June 30, 2015
was $901,540 and net cash used in continuing operating activities for the nine months ended June 30, 2014 was ($632,075), respectively.
The change was principally driven by the net income for the current year compared to a net loss in the prior year, a decrease in
payments of outstanding accounts payable, a decrease in payments for prepaid expenses and changes in non cash related items when
compared to the prior year, which were partially offset by a decrease in the collection of accounts receivable when compared to
the prior year.
Cash flows from
discontinued operating activities. Net cash used in discontinued operating activities was ($128,129) for the nine months ended
June 30, 2015 and net cash provided by discontinued operating activities was $182,216 for the nine months ended June 30, 2014.
Cash flows from
investing activities. Net cash used in investing activities for the nine months ended June 30, 2015, primarily capital expenditures
for property and equipment which was offset by the return of amounts in escrow in connection with the Alpha acquisition, was ($50,122).
Net cash used in investing activities for the nine months ended June 30, 2014 was ($8,758).
Cash flows from
financing activities. Net cash used in financing activities was ($1,064,329) for the nine months ended June 30, 2015 and for
the nine months ended June 30, 2014 net cash provided by financing activities was $68,346. The cash used in financing activities
for the nine months ended June 30, 2015 was primarily the result of the repayment of borrowings under our bank line of credit.
The cash provided by financing activities for the nine months ended June 30, 2014 consisted primarily of the sale on October 30,
2013 of 153,847 shares of the Company’s common stock for $500,000 (Refer to Note 8(b) to the Consolidated Financial Statements)
which was offset by a net decrease of ($420,404) under our bank line of credit.
Presidential Financial
Borrowing Facility. On March 27, 2014, the Company and its wholly-owned subsidiaries, The Janel Group Of New York, Inc., The
Janel Group of Illinois, Inc., The Janel Group of Georgia, Inc., The Janel Group of Los Angeles, Inc., and Janel Ferrara Logistics,
LLC (collectively, the “Janel Borrowers”), entered into a Loan and Security Agreement with Presidential Financial Corporation
(“Presidential”) with respect to a three year $3.5 million (limited to the borrowing base and reserves) revolving line
of credit facility (the “Presidential Facility”). The Presidential Facility replaced The Janel Group of New York’s
previous line of credit agreement with Community National Bank (“CNB”). On September 10, 2014 after completion of the
Alpha acquisition, the Janel Borrowers and Alpha entered into a First Amendment to the Presidential Facility (“Loan Amendment”),
with Presidential, which Loan Amendment among other things, (1) added Alpha as co-borrowers, (2) increased the line of credit available
to the Janel Borrowers (including Alpha) from $3.5 million to $5.0 million and (3) increased the advance rate from 70% to 85%.
On September 25, 2014 there was a Second Amendment and the Presidential Facility was temporarily increased to $5.5 million and
on October 9, 2014, subsequent to the period covered by this report, there was a Third Amendment whereby the Presidential Facility
was increased to $7.0 million. The Janel Borrowers can now borrow up to $7.0 million limited to 85% of the Janel Borrowers’
aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Loan and Security Agreement. Interest
will accrue at an annual rate equal to five percent above the greater of (a) the prime rate of interest quoted in The Wall Street
Journal from time to time, or (b) 3.25%. The Janel Borrowers’ obligations under the Presidential facility are secured by
all of the assets of the Janel Borrowers. The Presidential Facility will expire on March 26, 2017 (subject to earlier termination
as provided in the Loan and Security Agreement) unless renewed. On March 31, 2014, $1,282,673 of the Presidential Facility was
used to pay off the outstanding balances under the line of credit facility with CNB. On September 10, 2014, $1,800,000 of the Presidential
Facility was used to acquire Alpha. As of June 30, 2015, there were outstanding borrowings of $2,950,306 under the Presidential
Facility (which represented 51.4% of the amount available thereunder) out of a total amount available for borrowing under the Presidential
Facility of approximately $5,739,022.
Working Capital
Requirements. The Company’s cash needs are currently met by the Presidential Facility and cash on hand. As of June 30,
2015, the Company had $2,788,716 available under its $7.0 million Presidential Facility and $323,580 in cash from operations and
cash on hand. On October 9, 2014, the Presidential Facility was increased to $7.0 million. On September 10, 2014 the Company sold
5,000 shares of the Company’s Series C Cumulative Preferred Stock for $2,500,000 (Refer to Note 8(a) to the Consolidated
Financial Statements) and used the proceeds to acquire Alpha. On September 24, 2014 the Company sold 500 shares of the Company’s
Series C Cumulative Preferred Stock for $250,000 (Refer to Note 8(a) to the Consolidated Financial Statements) and used the proceeds
for general working capital purposes. On October 30, 2013, the Company raised $500,000 (Refer to Note 8(b) to the Consolidated
Financial Statements) from the sale of newly issued shares of the Company’s Common Stock at a price of $3.125 per share and
used the proceeds for general working capital purposes. The Company also issued five-year warrants to the investor for up to an
additional $1,000,000 investment upon exercise for additional newly issued shares of the Company’s common stock at a price
of $4.00. We believe that our current financial resources will be sufficient to finance our operations and obligations (current
and long-term liabilities) for the long and short terms. However, our actual working capital needs for the long and short terms
will depend upon numerous factors, including our operating results, the cost associated with growing the Company either internally
or through acquisition, competition, and the availability under our revolving credit facility, none of which can be predicted with
certainty. If our cash flow and available credit are not sufficient to fund our working capital, the Company’s operations
will be materially negatively impacted.
Current
Outlook
Our results of operations
are affected by the general economic cycle, particularly as it influences global trade levels and specifically the import and export
activities of Janel’s various current and prospective customers. Historically, the Company’s quarterly results of operations
have been subject to seasonal trends which have been the result of, or influenced by, numerous factors including climate, national
holidays, consumer demand, economic conditions, the growth and diversification of its international network and service offerings,
and other similar and subtle forces. We cannot accurately forecast many of these factors nor can we estimate accurately the relative
influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue
in future periods.
Janel is progressing
with the implementation of its business plan and strategy to grow its revenue and profitability for fiscal 2015 and beyond through
several avenues. The Company’s strategy for further growth includes plans to: open, as warranted, additional branch offices
domestically and/or outside the continental United States; introduce additional revenue streams for its existing headquarters and
branch locations; expand its existing sales force by hiring additional commission-only sales representatives with established customer
bases; increase its focus on growing revenue related to export activities; seek out and pursue privately held transportation-related
firms which may ultimately lead to their acquisition by the Company; and continue its focus on containing current and prospective
overhead and operating expenses, particularly with regard to the efficient integration of any additional offices or acquisitions.
Certain elements of
our profitability and growth strategy, principally proposals for acquisition and accelerating our revenue growth are contingent
upon the availability of adequate financing on terms acceptable to the Company. On October 30, 2013, the Company raised
$500,000 (Refer to Note 8(b) to the Consolidated Financial Statements) from the sale of newly issued shares of the Company’s
Common Stock at a price of $3.125 per share and used the proceeds for general working capital purposes. The Company also issued
five-year warrants to the investor for up to an additional $1,000,000 investment upon exercise for additional newly issued shares
of the company’s common stock at a price of $4.00. On September 10, 2014 the Company sold 5,000 shares of the Company’s
Series C Cumulative Preferred Stock for $2,500,000 (Refer to Note 8(a) to the Consolidated Financial Statements) and used the proceeds
to acquire Alpha. On September 24, 2014 the Company sold 500 shares of the Company’s Series C Cumulative Preferred Stock
for $250,000 (Refer to Note 8(a) to the Consolidated Financial Statements) and used the proceeds for general working capital purposes.
Without adequate equity and/or debt financing, the implementation of significant aspects of the Company’s strategic growth
plan may be deferred beyond the originally anticipated timing, and the Company’s operations will be materially negatively
impacted.
Critical
Accounting Policies and Estimates
Management’s
Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute
certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates,
and such difference may be material to the financial statements. The most significant accounting estimates inherent in the preparation
of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are
not readily apparent from other sources, primarily allowance for doubtful accounts, accruals for transportation and other direct
costs, accruals for cargo insurance, and deferred income taxes. Management bases its estimates on historical experience and on
various assumptions which are believed to be reasonable under the circumstances. We reevaluate these significant factors as facts
and circumstances change. Historically, actual results have not differed significantly from our estimates. These accounting policies
are more fully described in Note 1 of the Notes to the Consolidated Financial Statements.
Management believes
that the nature of the Company’s business is such that there are few, if any, complex challenges in accounting for operations.
Revenue recognition is considered the critical accounting policy due to the complexity of arranging and managing global logistics
and supply-chain management transactions.
Revenue Recognition
A. Full-Service Cargo Transportation
Logistics Management
Revenues are derived
from airfreight, ocean freight and custom brokerage services. The Company is a non-asset-based carrier and accordingly does not
own transportation assets. The Company generates the major portion of its air and ocean freight revenues by purchasing transportation
services from direct carriers (airlines, steam ship lines, etc.) and reselling those services to its customers. By consolidating
shipments from multiple customers and availing itself of its buying power, the Company is able to negotiate favorable rates from
the direct carriers, while offering to its customers lower rates than the customers could obtain themselves.
Airfreight revenues
include the charges for carrying the shipments when the Company acts as a freight consolidator. Ocean freight revenues include
the charges for carrying the shipments when the Company acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case, the
Company is acting as an indirect carrier. When acting as an indirect carrier, the Company will issue a House Airway Bill (HAWB)
or a House Ocean Bill of Lading (HOBL) to customers as the contract of carriage. In turn, when the freight is physically tendered
to a direct carrier, the Company receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master
Ocean Bill of Lading for ocean shipments. At this point the risk of loss passes to the carrier, however, in order to claim for
any such loss, the customer is first obligated to pay the freight charges.
Based upon the terms
in the contract of carriage, revenues related to shipments where the Company issues a HAWB or a HOBL are recognized at the time
the freight is tendered to the direct carrier. Costs related to the shipments are recognized at the same time.
Revenues realized when
the Company acts as an agent for the shipper and does not issue a HAWB or a HOBL include only the commission and fees earned for
the services performed. These revenues are recognized upon completion of the services.
Customs brokerage and
other services involves provide multiple services at destination including clearing shipments through customs by preparing required
documentation, calculating and providing for payment of duties and other charges on behalf of the customers, arranging for any
required inspections, and arranging for final delivery. These revenues are recognized upon completion of the services. Effective
with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, the Company changed its accounting
principle and no longer includes customs duty as a component of revenue.
The movement of freight
may require multiple services. In most instances the Company may perform multiple services including destination break bulk and
value added services such as local transportation, distribution services and logistics management. Each of these services has separate
fee that is recognized as revenue upon completion of the service.
Customers will frequently
request an all-inclusive rate for a set of services that is known in the industry as “door-to-door services.” In these
cases, the customer is billed a single rate for all services from pickup at origin to delivery. The allocation of revenue and expense
among the components of services when provided under an all inclusive rate are done in an objective manner on a fair value basis
in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables.”
Estimates
While judgments and
estimates are a necessary component of any system of accounting, the Company’s use of estimates is limited primarily to the
following areas that in the aggregate are not a major component of the Company’s consolidated statements of comprehensive
loss:
| a. | accounts receivable valuation; |
| b. | the useful lives of long-term assets; |
| c. | the accrual of costs related to ancillary services the Company provides; |
| d. | accrual of tax expense on an interim basis; and |
| e. | deferred tax valuation allowance. |
Management believes
that the methods utilized in all of these areas are non-aggressive in approach and consistent in application. Management believes
that there are limited, if any, alternative accounting principles or methods which could be applied to the Company’s transactions.
While the use of estimates means that actual future results may be different from those contemplated by the estimates, the Company
believes that alternative principles and methods used for making such estimates would not produce materially different results
than those reported.
| ITEM 4. | CONTROLS AND PROCEDURES |
We maintain a system
of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be
disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (“Exchange
Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities
and Exchange Commission, and is accumulated and communicated to management in a timely manner. Our Chief Executive Officer and
Chief Financial Officer have evaluated this system of disclosure controls and procedures as of the end of the period covered by
this quarterly report, and have concluded that the system is effective. There have been no changes in our internal control over
financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
On June 22, 2012 (amended
September 5, 2012), Fratelli Masturzo S.R.L., Clematis, S.R.L., Fratelli Longobardi S.R.L. and Pancrazio S.P.A. filed a law suit
in the Supreme Court of the State of New York County of Queens against The Janel Group of New York, Inc., Ferrara International
Logistics, Inc., Tutto Italia USA, LLC and Paul Sorvino Foods, Inc. (Case No. 018503/2012). The complaint alleges the non-payment
of food product purchases totaling $186,728. On February 26, 2013, the Company filed an answer on behalf of The Janel Group of
New York, Inc. and Ferrara International Logistics, Inc. denying the allegations. On June 27, 2013, the court denied the plaintiffs’
motion for default judgement. On March 11, 2015, the court dismissed the action because of the plaintiffs’ failure to prosecute.
On April 29, 2015, the court denied the plaintiffs’ motion for additional time to conduct discovery because the case had
already been dismissed. On July 11, 2015, the plaintiff filed a motion to restore the action and extend discovery. On July 21,
2015, the Company filed an affirmation in opposition of plaintiffs’ motion.
On January 29, 2013,
UGO Foods Corporation filed a law suit in the Supreme Court of the State of New York County of New York against Janel World Trade,
Ltd., The Janel Group of New York, Inc., Mann Global Enterprises, LLC as Successor of Janel Ferrara Logistics, LLC. (Case No. 700302/2013).
The complaint alleged the non-payment of food product purchases totaling $41,281. On February 27, 2013, the Company filed an answer
on behalf of The Janel Group of New York, Inc. denying the allegations. On July 24, 2015, this litigation was settled for payments
by Janel totaling $20,640.
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 predicated 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 financial position or results of operations.
Exhibit No. |
|
|
3.1 |
|
Amended and Restated Articles of Incorporation of Janel World Trade, Ltd. (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2012, File No. 333-60608) |
3.2 |
|
Restated and Amended By-Laws of Janel World Trade, Ltd. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2010, File No. 333-60608) |
3.3 |
|
Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 17, 2007 File No. 333-60608) |
3.4 |
|
Certificate of Designations of Series B Convertible Stock (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October 22, 2007, File No. 333-60608) |
3.5 |
|
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, File No. 333-60608) |
3.6 |
|
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, File No. 333-60608) |
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, File No. 333-60608) |
10.2 |
|
Loan and Security Agreement dated March 27, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 2, 2014, File No. 333-60608) |
10.3 |
|
Demand Secured Promissory Note dated March 27, 2014 made by Janel World Trade, Ltd. and its subsidiaries, payable to the order of Presidential Financial Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 2, 2014, File No. 333-60608) |
10.4 |
|
Agreement of Lease dated January 2, 2015 between 303 Merrick LLC and The Janel Group of New York, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2014, File No. 333-60608) |
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer* |
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer* |
32.1 |
|
Section 1350 Certifications* |
99.1 |
|
Press release dated August 7, 2015* |
101 |
|
Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, June 30, 2015 and September 30, 2014, (ii) Consolidated Statements of Income for the three and nine months ended June 30, 2015 and 2014, (iii) Consolidated Statements of Cash Flows for the nine months ended June 30, 2015 and 2014, and (v) Notes to Unaudited Consolidated Financial Statements* |
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: August 7, 2015 |
JANEL CORPORATION |
|
Registrant |
|
|
|
/s/ Brendan Killackey |
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
/s/ Philip J. Dubato |
|
Chief Financial Officer (Principal Financial Officer) |
Exhibit 31.1
CERTIFICATION
I, Brendan Killackey,
certify that:
1. I have reviewed
this Quarterly Report on Form 10-Q of Janel Corporation;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s
other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
5. The Registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the
equivalent function):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
Date: August 7, 2015 |
/s/ Brendan Killackey |
|
Chief Executive Officer
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Philip J. Dubato,
certify that:
1. I have reviewed
this Quarterly Report on Form 10-Q of Janel Corporation;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my
knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s
other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
5. The Registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the
equivalent function):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
Date: August 7, 2015 |
/s/ Philip J. Dubato |
|
Chief Financial Officer (Principal Financial Officer) |
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. §1350
In connection with
the report on Form 10-Q of Janel Corporation for the quarter ended June 30, 2015, as filed with the SEC on the date hereof (the
“Report”), each of the undersigned officers of the registrant certifies pursuant to 18 U.S.C. Section 1350 that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the registrant. |
Dated: August 7, 2015 |
/s/ Brendan Killackey |
|
Brendan Killackey |
|
Chief Executive Officer (Principal Executive Officer) |
|
/s/ Philip J. Dubato |
|
Philip J. Dubato |
|
Chief Financial Officer (Principal Financial Officer) |
Exhibit 99.1
For Immediate Release |
Contact: Investor Relations at |
|
Janel Corporation |
|
(718) 527-3800 |
|
IR@janelgroup.net |
Janel
CORPORATION REPORTS FISCAL THIRD quarter AND YEAR-TO-DATE 2015 RESULTS
LYNBROOK, NY – August 7, 2015 -- Janel Corporation (OTCQB:
JANL), a full-service global provider of integrated transportation logistics, announced today the financial results for its third
quarter ended June 30, 2015.
Advisory Note
All current and prior year share and per share amounts have
been adjusted to reflect the one-for-fifty reverse stock split effected on April 21, 2015.
Third Quarter 2015 Results
For the three months ended June 30, 2015, Janel reported revenue
of $16,650,954 an increase of $5,529,577 or 49.7% compared to the three months ended June 30, 2014.
For the three months ended June 30, 2015 the Company reported
income from continuing operations before income taxes of $349,908 compared to the prior year reported loss from continuing operations
before income taxes of ($70,662).
For the three months ended June 30, 2015 and after losses from
discontinued operations the Company reported net income of $286,357 compared to the prior year reported net loss of $(99,984).
Included in these results are losses associated with discontinued operations of $(45,778) and ($25,322) for the three months ended
June 30, 2015 and 2014, respectively. Net income available to common shareholders (following preferred stock dividends) was $226,044
or $0.38 per fully diluted share for the three months ended June 30, 2015 compared to a net loss available to common shareholders
of ($103,734) or ($0.18) per fully diluted share for the three months ended June 30, 2014.
Year-to-date 2015 Results
For the nine months ended June 30, 2015, Janel reported revenue
of $47,182,227 an increase of $14,334,556 or 43.6% compared to the nine months ended June 30, 2014.
For the nine months ended June 30, 2015 the Company reported
income from continuing operations before income taxes of $346,265 compared to the prior year reported loss from continuing operations
before income taxes of ($343,764).
For the nine months ended
June 30, 2015 and after losses from discontinued operations the Company reported net income of $192,363 compared to the prior year
reported net loss of $(403,016). Included in these results are losses associated with discontinued operations of $(128,129) and
($50,252) for the nine months ended June 30, 2015 and 2014, respectively. Also included in the 2014 period results was a one-time
non-cash charge of $237,492 for the issuance of stock options. Net
income available to common shareholders (following preferred stock dividends) was $11,423 or $0.02 per fully diluted share for
the nine months ended June 30, 2015 compared to a net loss available to common shareholders of ($414,266) or ($0.73) per fully
diluted share for the nine months ended June 30, 2014.
To be included in Janel’s database for Corporate
Press Releases and industry updates, investors are invited to send their e-mail address to: IR@janelgroup.net.
About Janel Corporation
Janel Corporation is a global provider of integrated logistics;
including domestic and international freight forwarding via multi-modal carriers, leading-edge, end-to-end, supply-chain technology,
customs brokerage, warehousing and distribution, and other transportation-related services. With offices throughout the U.S. (New
York, New Jersey, Chicago, Los Angeles, Atlanta and Philadelphia) and a network of independent international agents in approximately
52 countries, the Company provides the comprehensive logistics services and technology necessary to handle its customers' shipping
needs throughout the world. Cargo can be transported via air, sea or land, and Janel's national network of locations can manage
the shipment and/or receipt of cargo into or out of any location in the United States. Janel is registered as an Ocean Transportation
Intermediary and licensed as a FMC Licensed Freight Forwarder by the Federal Maritime Commission.
Janel Corporation's headquarters is located in Lynbrook, New
York and its common stock is listed on the OTCQB Bulletin Board under the symbol "JANL". Additional information on the
Company is available on its website at http://www.janelgroup.net
Forward-Looking Statements
This press release includes statements that may constitute
"forward-looking" statements, usually containing the words "believe," "estimate," "project,"
"intend," "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute
to such differences include, but are not limited to, the Company's dependence upon conditions in the air, ocean and land-based
freight forwarding industry, the size and resources of many competitors, the need for the Company to effectively integrate acquired
businesses and to successfully deliver its primary services, and other risks detailed in the Company's periodic report filings
with the Securities and Exchange Commission, including its most recent Form 8-K, Form 10-Q and Form 10-K filings. By making these
forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the
date of this release.
Contact:
Investor Relations
Janel Corporation
(718) 527-3800
IR@janelgroup.net
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| |
THREE MONTHS ENDED | | |
NINE MONTHS ENDED | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
| |
| | |
| | |
| | |
| |
REVENUES | |
$ | 16,650,954 | | |
$ | 11,121,377 | | |
$ | 47,182,227 | | |
$ | 32,847,671 | |
COST AND EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Forwarding expenses | |
| 13,861,741 | | |
| 9,602,678 | | |
| 39,203,833 | | |
| 28,251,611 | |
Selling, general and administrative | |
| 2,241,934 | | |
| 1,546,492 | | |
| 7,020,382 | | |
| 4,842,334 | |
Depreciation and amortization | |
| 80,434 | | |
| 4,239 | | |
| 238,135 | | |
| 11,828 | |
TOTAL COSTS AND EXPENSES | |
| 16,184,109 | | |
| 11,153,409 | | |
| 46,462,350 | | |
| 33,105,773 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING INCOME (LOSS) | |
| 466,845 | | |
| (32,032 | ) | |
| 719,877 | | |
| (258,102 | ) |
OTHER ITEMS: | |
| | | |
| | | |
| | | |
| | |
Interest expense, net of interest and dividend income | |
| (116,937 | ) | |
| (38,630 | ) | |
| (373,612 | ) | |
| (85,662 | ) |
TOTAL OTHER ITEMS | |
| (116,937 | ) | |
| (38,630 | ) | |
| (373,612 | ) | |
| (85,662 | ) |
INCOME (LOSS) FROM CONTINUING OPERATIONS | |
| | | |
| | | |
| | | |
| | |
BEFORE INCOME TAXES | |
| 349,908 | | |
| (70,662 | ) | |
| 346,265 | | |
| (343,764 | ) |
Income taxes | |
| 17,773 | | |
| 4,000 | | |
| 25,773 | | |
| 9,000 | |
NET INCOME (LOSS) FROM CONTINUING OPERATIONS | |
$ | 332,135 | | |
$ | (74,662 | ) | |
$ | 320,492 | | |
$ | (352,764 | ) |
Loss from discontinued operations | |
| (45,778 | ) | |
| (25,322 | ) | |
| (128,129 | ) | |
| (50,252 | ) |
NET INCOME (LOSS) | |
$ | 286,357 | | |
$ | (99,984 | ) | |
$ | 192,363 | | |
$ | (403,016 | ) |
Preferred stock dividends | |
| 60,313 | | |
| 3,750 | | |
| 180,940 | | |
| 11,250 | |
NET INCOME (LOSS) AVAILABLE TO COMMON | |
| | | |
| | | |
| | | |
| | |
STOCKHOLDERS | |
$ | 226,044 | | |
$ | (103,734 | ) | |
$ | 11,423 | | |
$ | (414,266 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Loss) per share from continuing operations: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.59 | | |
$ | (0.14 | ) | |
$ | 0.58 | | |
$ | (0.66 | ) |
Diluted | |
$ | 0.56 | | |
$ | (0.13 | ) | |
$ | 0.54 | | |
$ | (0.62 | ) |
(Loss) per share from discontinued operations: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.08 | ) | |
$ | (0.05 | ) | |
$ | (0.23 | ) | |
$ | (0.09 | ) |
Diluted | |
$ | (0.08 | ) | |
$ | (0.04 | ) | |
$ | (0.22 | ) | |
$ | (0.09 | ) |
Net (loss) per share available to common shareholders: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.40 | | |
$ | (0.19 | ) | |
$ | 0.02 | | |
$ | (0.77 | ) |
Diluted | |
$ | 0.38 | | |
$ | (0.18 | ) | |
$ | 0.02 | | |
$ | (0.73 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic weighted average number of shares outstanding | |
| 556,919 | | |
| 554,204 | | |
| 556,779 | | |
| 537,298 | |
Fully diluted weighted average number of shares outstanding | |
| 592,624 | | |
| 586,909 | | |
| 589,484 | | |
| 570,003 | |
See
notes to these consolidated financial statements included in the Company's Form 10-Q
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
June 30, 2015 | | |
September 30, 2014 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | |
| |
CURRENT ASSETS: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 323,580 | | |
$ | 664,620 | |
Accounts receivable, net of allowance for doubtful accounts of $168,629 at June 30, 2015 and $157,999 at September 30, 2014 | |
| 9,870,703 | | |
| 8,563,522 | |
Prepaid expenses and sundry current assets | |
| 162,060 | | |
| 221,398 | |
TOTAL CURRENT ASSETS | |
| 10,356,343 | | |
| 9,449,540 | |
PROPERTY AND EQUIPMENT, NET | |
| 73,468 | | |
| 16,650 | |
OTHER ASSETS: | |
| | | |
| | |
Intangible assets, net | |
| 6,926,795 | | |
| 7,171,625 | |
Security deposits | |
| 99,658 | | |
| 76,720 | |
TOTAL OTHER ASSETS | |
| 7,026,453 | | |
| 7,248,345 | |
TOTAL ASSETS | |
$ | 17,456,264 | | |
$ | 16,714,535 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Note payable - bank | |
$ | 2,950,306 | | |
$ | 4,003,385 | |
Accounts payable - trade | |
| 9,417,308 | | |
| 8,037,086 | |
Accrued expenses and other current liabilities | |
| 597,179 | | |
| 314,889 | |
Current portion of long-term debt - related party, net of imputed interest of $11,405 and $32,932, respectively | |
| 488,595 | | |
| 467,068 | |
TOTAL CURRENT LIABILITIES | |
| 13,453,388 | | |
| 12,822,428 | |
LONG-TERM DEBT - related party, net of imputed interest of imputed interest of $94,783 and $134,596, respectively | |
| 905,217 | | |
| 865,404 | |
DEFERRED COMPENSATION | |
| 78,568 | | |
| 78,568 | |
TOTAL OTHER LIABILITIES | |
| 983,785 | | |
| 943,972 | |
STOCKHOLDERS' EQUITY (DEFICIENCY): | |
| | | |
| | |
Preferred Stock, $0.001 par value; 100,000 shares authorized: | |
| | | |
| | |
Series A; 20,000 shares authorized; 20,000 and 20,000 shares issued and outstanding, respectively | |
| 20 | | |
| 20 | |
Series B; 5,700 shares authorized; 1,271 and 1,271 shares issued and outstanding, respectively | |
| 2 | | |
| 2 | |
Series C; 7,000 shares authorized; 5,500 shares issued and 5,500 shares issued and outstanding, respectively | |
| 6 | | |
| 6 | |
Common Stock, $0.001 par value; 4,500,000 shares authorized; 559,926 and 554,211 shares issued and outstanding, respectively | |
| 560 | | |
| 554 | |
Paid-in Capital | |
| 8,367,488 | | |
| 8,307,961 | |
Accumulated deficit | |
| (5,348,985 | ) | |
| (5,360,408 | ) |
STOCKHOLDERS' EQUITY | |
| 3,019,091 | | |
| 2,948,135 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 17,456,264 | | |
$ | 16,714,535 | |
See
notes to these consolidated financial statements included in the Company's Form 10-Q
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