ACQUISITIONS

12 Months Ended

Sep. 30, 2022

2.	ACQUISITIONS

2022 Acquisitions

Life Sciences

On August 15, 2022, the Company completed a business combination whereby it acquired all of the membership interests of ECM Biosciences LLC (“ECM”), for $850, net of $16 cash received. At closing, the former member of ECM was paid $600 in cash and an additional $250 was due to the former member which is included in accrued expenses and other current liabilities. In connection with the combination, the Company recorded an aggregate of $24 in goodwill and $222 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations. The results of operations of the acquired businesses are included in the Janel’s consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations individually or in aggregate.

2021 Acquisitions

Logistics

On September 21, 2021, the Company completed the acquisition of all of the membership interests of ELFS and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS. The purchase price for the membership interests was $19,000, subject to certain closing adjustments as set forth in the related purchase agreement. Further earnout payments in an amount not anticipated to exceed $4,500 will be due to the former members of ELFS based on the operating profit earned by ELFS. Upon the closing of the transaction, the former members of ELFS were paid $13,000 in cash and were issued an aggregate amount of $6,000 in subordinated promissory notes. Refer to Note 8 to the Condensed Consolidated Financial Statements for ELFS subordinated promissory notes information.

The ELFS acquisition was funded with cash provided by normal operations, borrowings under the Amended Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) dated September 21, 2021, as well as subordinated promissory notes issued to the former members of ELFS. This acquisition was completed to expand our product offerings in our Logistics segment. The preliminary fair value of the consideration transferred of $21,437 was valued a of the date of the acquisition as follows: cash - $13,000; earnout payments - $3,600; and subordinated promissory notes - $4,837 (preliminary net of working capital adjustment of $1,163). In March 2022, the fair value of the consideration transferred was adjusted to $21,700, and the fair value of the subordinated promissory notes was adjusted to $5,100, in each case due to a change in the net working capital adjustment of $263.

ELFS provides a variety of logistics services, which include domestic and international freight shipping and forwarding and hazardous material warehousing and distribution. The Company is headquartered in Houston, Texas and also has other offices in Texas, Louisiana, Colorado and Oklahoma and has dedicated agents, who work in specific areas to assist in logistics, in the following locations: Texas, Louisiana, North Dakota and Oklahoma.

Purchase price allocation

In accordance with the acquisition method of accounting, the Company allocated the consideration paid for ELFS to the net tangible and identifiable intangible assets based on their estimated fair values. The Company’s valuation of assets acquired and liabilities assumed, and the fair value amounts noted, are in the table below. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets (in thousands).

	Fair Value
Accounts Receivable	$	11,017
Prepaid expenses and other current assets		2,252
Property & equipment, net		59
Security deposits and other long-term assets		322
Operating lease right of use asset		901
Goodwill		2,643
Intangible assets		10,000
Accounts payable		(2,399	)
Current portion of operating lease liabilities		(445	)
Accrued expenses and other current liabilities		(2,194	)
Long-term operating lease liabilities		(456	)
Total Consideration Paid	$	21,700

The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Logistics Segment for the years ended September 30, 2021 assuming the acquisition of ELFS was made on October 1, 2020 (in thousands).

	2021
Revenues	$	199,017
Forwarding expense		158,859
Gross profit		40,158
Selling, general and administrative expenses		34,011
Income from operations	$	6,147

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition occurred on October 1, 2020, nor are they necessarily indicative of future results. The pro forma financial information includes the impact of purchase accounting and other nonrecurring items directly attributable to the acquisition, which include:

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Amortization expense of acquired intangibles

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Adjustments to interest expense to remove historical ELFS interest costs and reflect Janel’s current debt profile

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The related tax impact of the above referenced adjustments

The pro forma results do not include any cost savings or operational synergies that may be generated or realized due to the acquisition of ELFS.

On December 31, 2020, through the Company’s Logistics segment, which is comprised of several wholly-owned subsidiaries completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W. R. Zanes, a logistics services provider with two U.S. locations. The aggregate purchase price for this acquisition was $1,282. At closing, $1,182 was paid in cash and $100 was placed in escrow for a period of twelve months for the purpose of securing the indemnification obligations of former stockholders. The Company recorded an aggregate of $304 in goodwill and $531 in other identifiable intangibles. The acquisition was funded with cash provided by normal operations, funds available under the Santander Credit Facility. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. This acquisition was completed to expand our product offerings in our Logistics segment.

Life Sciences

On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”) for an aggregate purchase price of $3,419, net of $105 cash received. At closing, $1,628 was paid in cash and a subordinated promissory note in the amount of $1,850 was issued to the former owner. The Company recorded the present value of $1,760 for the subordinated promissory note. The Company recorded an aggregate of $1,438 in goodwill and $1,430 in other identifiable intangibles. Subsequent to closing, the Company recorded an additional $30 purchase price adjustment related to an I.R.S Code Section 338(h)(10) election that was made in connection with the ICT acquisition. The ICT acquisition will be treated as an asset purchase for income tax purposes, which will allow for the tax deduction of ICT’s goodwill. The acquisition was funded with cash provided by normal operations along with a note to the former owner. The results of operations of the acquired businesses are included in Janel’s condensed consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. ICT is a developer and manufacturer of cell viability assay kits, ELISA buffers and fluorescent reagents for use in research and diagnostics. ICT was founded in 1994. The acquisition of ICT was completed to expand our product offerings in our Life Sciences segment.