JANEL CORP - Quarter Report: 2007 March (Form 10-Q)

Unassociated Document

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: March 31, 2007

o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 333-60608

JANEL WORLD TRADE, LTD.

(Exact name of registrant as specified in its charter)

NEVADA	86-1005291
(State of incorporation)	(I.R.S. Employer Identification Number)

150-14 132^nd Avenue, Jamaica, NY	11434
(Address of principal executive offices)	(Zip Code)

(718) 527-3800

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer” and “accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-Accelerated filer x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

State the number of shares outstanding of each of the issuer's class of common equity, as of the latest practicable date: 16,986,000.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

(a) Janel’s unaudited, interim financial statements for its second fiscal quarter (the three and six months ended March 31, 2007) have been set forth below. Management’s Discussion and Analysis of the Company’s Financial Condition and the Results of Operations for the second fiscal quarter will be found at Item 2, following the financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	MARCH 31, 2007		SEPTEMBER 30, 2006
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$2,362,864		$1,341,952
Accounts receivable, net of allowance for doubtful
accounts of $43,117 at March 31, 2007 and
$28,350 at September 30, 2006		4,611,331		4,809,324
Marketable securities		63,572		59,222
Loans receivable – officers		147,015		144,530
- other		26,815		33,868
Prepaid expenses and sundry current assets		83,985		126,678
TOTAL CURRENT ASSETS		7,295,582		6,515,574

PROPERTY AND EQUIPMENT, NET		168,361		178,099

SECURITY DEPOSITS		49,418		49,418

TOTAL ASSETS	$	7,513,361	$	6,743,091

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,130,342	$	2,714,086
Accrued expenses and taxes payable		19,990		185,563
Current portion of long-term debt		4,944		7,244
TOTAL CURRENT LIABILITIES		3,155,276		2,906,893

OTHER LIABILITIES:
Long-term debt		4,444		6,337
Deferred compensation		78,568		78,568
TOTAL OTHER LIABILITIES		83,012		84,905

STOCKHOLDERS’ EQUITY:		4,275,073		3,751,293

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,513,361	$	6,743,091

See Notes to Consolidated Financial Statements, which are an integral part of these financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		SIX MONTHS ENDED MARCH 31,					THREE MONTHS ENDED MARCH 31,
		2007		2006			2007		2006
REVENUES	$	35,031,459	$	37,572,917		$	18,303,590	$	18,791,602

COSTS AND EXPENSES:
Forwarding expenses		31,144,581		33,759,593			16,340,327		16,920,846
Selling, general and administrative		3,755,243		3,625,156			1,910,885		1,835,411
Stock based compensation		-		226,180			-		226,180
TOTAL COSTS AND EXPENSES		34,899,824		37,610,929			18,251,212		18,982,437

		131,635		(38,012	)		52,378		(190,835	)

OTHER ITEMS:
Interest and dividend income		24,581		6,191			11,640		3,559

INCOME (LOSS) BEFORE
INCOME TAXES (CREDITS)		156,216		(31,821	)		64,018		(187,276	)

Income taxes (credits)		67,000		39,714			27,000		(27,086	)

NET INCOME (LOSS)		89,216		(71,535	)		37,018		(160,190	)

Preferred stock dividends		3,333		-			3,333		-

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	85,883	$	(71,535	)	$	33,685	$	(160,190	)

OTHER COMPREHENSIVE INCOME
NET OF TAX :
Unrealized gain from available for sale securities	$	1,624	$	2,680		$	927	$	4,443
Basic earnings (loss) per share	$	.005	$	(.004	)	$	.005	$	(.009	)
Fully diluted earnings (loss) per share	$	.005	$	(.004	)	$	.005	$	(.009	)
Weighted number of shares outstanding		17,021,973		16,867,176			17,007,167		16,891,889
Fully diluted weighted number of shares outstanding		17,421,973		16,915,527			17,407,167		16,989,666

See Notes to Consolidated Financial Statements, which are an integral part of these financial statements.

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		SIX MONTHS ENDED MARCH 31,
OPERATING ACTIVITIES:		2007			2006
Net income (loss)	$	89,216		$	(71,535	)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization		37,614			51,380
Stock issued in lieu of compensation		-			452,360
Changes in operating assets and liabilities:
Accounts receivable		197,993			326,362
Prepaid expenses and sundry current assets		42,693			(147,801	)
Accounts payable and accrued expenses		247,350			312,116
Deferred compensation		-			(226,180	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		614,866			696,702

INVESTING ACTIVITIES:
Acquisition of property and equipment, net		(27,876	)		(32,617	)
Purchase of marketable securities		(2,726	)		(2,300	)
NET CASH USED IN INVESTING ACTIVITIES		(30,602	)		(34,917	)

FINANCING ACTIVITIES:
Decrease (increase) in loans receivable		4,568			(26,373	)
Repayment of long-term debt, net		(4,193	)		(3,623	)
Proceeds from sale of preferred stock, net of related expense of $35,605		464,395			-
Repurchase of treasury stock		(28,122	)		-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		436,648			(29,996	)

INCREASE IN CASH		1,020,912			631,789

CASH - BEGINNING OF PERIOD		1,341,952			793,238

CASH - END OF PERIOD	$	2,362,864		$	1,425,027

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest	$	323		$	657
Income taxes	$	191,633		$	241,654
Non-cash investing activities:
Unrealized gain on marketable securities	$	1,624		$	2,680
Dividends declared to preferred shareholders	$	3,333		$	-

See Notes to Consolidated Financial Statements, which are an integral part of these financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

										ACCUMULATED
					ADDITIONAL					OTHER
	CAPITAL STOCK				PAID-IN		RETAINED			COMPREHENSIVE
	SHARES		$		CAPITAL		EARNINGS			GAIN (LOSS)		TOTAL

BALANCE - SEPTEMBER 30, 2005	16,843,000	$	16,843	$	501,003	$	2,721,329		$	1,616	$	3,240,791

Net income	-		-		-		(71,535	)		-		(71,535	)
Stock based compensation	200,000		200		452,160		-			-		452,360
Other comprehensive gains:
Unrealized gains on available-for-sale
marketable securities	-		-		-		-			2,680		2,680

BALANCE - MARCH 31, 2006	17,043,000	$	17,043	$	953,163	$	2,649,794		$	4,296	$	3,624,296

See Notes to Consolidated Financial Statements, which are an integral part of these financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																ACCUMULATED
											ADDITIONAL					OTHER
	CAPITAL STOCK			PREFERRED STOCK				TREASURY			PAID-IN		RETAINED			COMPREHENSIVE
	SHARES		$	SHARES		$		STOCK			CAPITAL		EARNINGS			GAIN (LOSS)		TOTAL

BALANCE - SEPTEMBER 30, 2006	17,043,000	$	17,043	-	$	-	$	-		$	953,163	$	2,778,324		$	2,763	$	3,751,293

Net income	-		-	-							-		89,216			-		89,216
Convertible preferred stock issuance,
net of expenses of $35,605	-		-	1,000,000		1,000					463,395		-			-		464,395
Purchase of 57,000 shares of treasury stock	-		-	-		-		(28,122	)		-		-			-		(28,122	)
Dividends to preferred shareholders	-		-	-		-		-			-		(3,333	)		-		(3,333	)
Other comprehensive gains:
Unrealized gains on available-for-sale
marketable securities	-		-	-		-		-			-		-			1,624		1,624

BALANCE - MARCH 31, 2007	17,043,000	$	17,043	1,000,000	$	1,000	$	(28,122	)	$	1,416,558	$	2,864,207		$	4,387	$	4,275,073

See Notes to Consolidated Financial Statements, which are an integral part of these financial statements.

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007

(Unaudited)

1 BASIS OF PRESENTATION

The attached consolidated financial statements have been prepared pursuant to the rules and regulations 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. 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, 2006.

2 STOCK REPURCHASE PLAN

On October 12, 2006, the Company’s Board of Directors authorized the repurchase of up to 300,000 shares of the Company’s common stock, subject to certain conditions. It is expected that purchases under the program will depend upon prevailing market conditions and other factors such as the Company’s cash position. The repurchase plan may be suspended by the Company at any time. During the six months ended March 31, 2007 57,000 shares were repurchased under this plan at a cost of $28,122.

3 ISSUANCE OF CONVERTIBLE PREFERRED STOCK

On January 10, 2007, Janel World Trade, Ltd. (“Janel”) entered into a Securities Purchase agreement with an Institutional Purchaser, pursuant to which Janel sold an aggregate of one million unregistered shares of newly-authorized $0.001 par value 3% Series A Convertible Preferred Stock (the “Series A Stock”) for a total purchase price of $500,000. The shares are convertible into shares of Janel’s $0.001 par value common stock at any time on a one-share for one-share basis.

Janel simultaneously entered into a Registration Rights Agreement with the Institutional Purchaser requiring the underlying shares of common stock issuable upon conversion of the Series A Stock to be included in the next securities registration statement (except for a registration statement on Forms S-4 or S-8) filed by Janel with the securities and Exchange Commission (“SEC”), and listed (if possible) on NASDAQ or a National Securities Exchange. The registration statement must be filed no later than nine months from closing, for an offering made on a continuous basis pursuant to SEC Rule 415, and become effective within ninety days after filing. Janel has agreed that none of its officers or directors will enter into any transaction for the disposition of any Janel shares owned by them or their affiliates until the expiration of nine months following the effective date of the required registration statement.

In addition, Janel agreed to pay the purchasers an advisory fee of $2,000 per month for twelve months beginning March 1, 2007.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

The statements contained in all parts of this document that are not historical facts are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, those relating to the following: the effect and benefits of the company’s reverse merger transaction; Janel’s plans to reduce costs (including the scope, timing, impact and effects thereof); potential annualized cost savings; plans for direct entry into the trucking and warehouse distribution business (including the scope, timing, impact and effects thereof); the company's ability to improve its cost structure; plans for opening additional domestic and foreign branch offices (including the scope, timing, impact and effects thereof); the sensitivity of demand for the company's services to domestic and global economic and political conditions; expected growth; future operating expenses; future margins; fluctuations in currency valuations; fluctuations in interest rates; future acquisitions and any effects, benefits, results, terms or other aspects of such acquisitions; ability to continue growth and implement growth and business strategy; the ability of expected sources of liquidity to support working capital and capital expenditure requirements; future expectations and outlook and any other statements regarding future growth, cash needs, operations, business plans and financial results and any other statements that are not historical facts.

When used in this document, the words "anticipate," "estimate," "expect," "may," "plans," "project," and similar expressions are intended to be among the statements that identify forward-looking statements. Janel’s results may differ significantly from the results discussed in the forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the company's dependence on its ability to attract and retain skilled managers and other personnel; the intense competition within the freight industry; the uncertainty of the company's ability to manage and continue its growth and implement its business strategy; the company's dependence on the availability of cargo space to serve its customers; effects of regulation; its vulnerability to general economic conditions and dependence on its principal customers; accuracy of accounting and other estimates; risk of international operations; risks relating to acquisitions; the company's future financial and operating results, cash needs and demand for its services; and the company's ability to maintain and comply with permits and licenses; as well as other risk factors described in Janel’s Annual Report on Form 10-K filed with the SEC on December 29, 2006. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.

Overview

The following discussion and analysis addresses the results of operations for the three months ended March 31, 2007, as compared to the results of operations for the three months ended March 31, 2006, and for the six months ended March 31, 2007, as compared to the six months ended March 31, 2006. The discussion and analysis then addresses the liquidity and financial condition of the company, and other matters.

Results of Operations

Janel operates its business as a single segment comprised of full-service cargo transportation logistics management, including freight forwarding - via air, ocean and land-based carriers - customs brokerage services, warehousing and distribution services, and other value-added logistics services.

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

Revenue. Total revenue for the second quarter of fiscal 2007 was $18,303,590, as compared to $18,791,602 for the same period of fiscal 2006, a year-over-year decrease of $488,012, or 2.6%. Management attributes the decreased level of revenue in the second quarter of fiscal 2007 to continuing softness in the global logistics industry and, in particular, to softer retail imports into the United States as a result of a generally weaker dollar.

Forwarding Expense. Forwarding expense 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. Forwarding expense also includes any duties and/or trucking charges related to the shipments. As a general rule, revenue received by the company for shipments via ocean freight are marked up at a lower percentage versus their related forwarding expense than are shipments via airfreight, i.e., forwarding expense as a percentage of revenue is generally higher (and the company earns less) for ocean freight than for airfreight.

For the second quarter of fiscal 2007, forwarding expense decreased by $580,519, or 3.4%, to $16,340,327, as compared to $16,920,846 for the second quarter of fiscal 2006. The percentage decrease was slightly greater than the decrease in total revenue year over year. This yielded a favorable decrease of 77 basis points in the measure of forwarding expense as a percentage of revenue to 89.27% from 90.04% for the second fiscal quarter of 2006. An improvement (i.e., decrease) in this measure would typically result from a somewhat higher proportion of airfreight versus ocean freight in the company’s revenue mix during the period. Net revenue (revenue minus forwarding expenses) in the second quarter of fiscal 2007 was $1,963,263, an increase of $92,507, or 4.9%, as compared to $1,870,756 in the second quarter of fiscal 2006.

Selling, General and Administrative Expense. Selling, general and administrative expense in second quarter of fiscal 2007 increased by $75,474 (4.1%) to $1,910,885, or 10.44% of total revenue, as compared to $1,835,411, or 9.77% of total revenue, in the second quarter of fiscal 2006. The year-over-year dollar increase in SG&A resulted primarily from increases in accounting, legal and investor relations expenses.

Income Before Taxes. Janel’s income before taxes increased from a loss of $(187,276) in the second quarter of fiscal 2006 to a profit of $64,018 in the second quarter of fiscal 2007, an increase of $251,294. The principal reason for the improvement was the absence in the 2007 second quarter of a stock-based compensation expense of $226,180 in the comparable 2006 period.

Income Taxes. The effective income tax rate in both the 2007 and 2006 periods reflects the U.S. federal statutory rate and applicable state income taxes.

Net Income. Net income available to common shareholders for the second quarter of fiscal 2007 was $33,685, or $0.00494 per fully diluted share, as compared to a net loss of $(160,190), or $(0.00943) per fully diluted share in the second quarter of fiscal 2006, a year-over-year gain of $193,875, or $0.01437 per fully diluted share.

Six Months Ended March 31, 2007 Compared to Six Months Ended March 31, 2006

Revenue. Revenue for the six months ended March 31, 2007 was $35,031,459, as compared to $37,572,917 for the same period of fiscal 2006, a year-over-year decrease of $2,541,458, or 6.8%. The lower level of revenue primarily reflected a net year-over-year decline in shipping activity by existing customers as the generally weaker dollar has hampered the level of imports to a greater extent than it has benefited exports.

Forwarding Expense. For the six months ended March 31, 2007, forwarding expense was $31,144,581, as compared to $33,759,593 for the same period of fiscal 2006, a year-over-year decrease of $2,615,012, or 7.7%. The percentage decrease was somewhat greater than the decrease in revenue for the six months ended March 31, 2007 as compared to 2006, resulting in forwarding expense as a percentage of revenue declining marginally to 88.90% as compared to the year-earlier 89.85%.

Selling, General and Administrative Expense. For the six-month periods ended March 31, 2007 and 2006, selling, general and administrative expenses were $3,755,243 (10.72%) and $3,625,156 (9.65%), respectively. This represents a year-over-year increase of $130,087, or 3.6%. The year-over-year dollar increase in SG&A resulted from a general increase in accounting, legal and investor relations expenses.

Income Before Taxes. Janel reported income before taxes of $156,216 for the six months ended March 31, 2007 as compared to a loss before taxes of $(31,821) for the six months ended March 31, 2006, an increase of $188,037 year-over-year. The absence of stock-based compensation expense included in the first six months of fiscal 2006 ($226,180) but not in the first six months of fiscal 2007 accounted for more than the total year-over-year dollar increase in income from operations and pretax profitability.

Income Taxes. The effective income tax rate in both the 2007 and 2006 periods reflects the U.S. federal statutory rate and applicable state income taxes.

Net Income. Janel reported net income available to common shareholders for the six months ended March 31, 2007 of $85,883, or $0.00493 per diluted share, up $157,418 as compared to a net loss available to common shareholders of $(71,535), or $(0.00424) per diluted share, for the six months ended March 31, 2006.

Liquidity and Capital Resources

Janel’s ability to meet its liquidity requirements, which include satisfying its debt obligations, funding working capital, day-to-day operating expenses and capital expenditures depends upon its future performance, which is subject to general economic conditions and other factors, some of which are beyond its control. As of March 31, 2007, Janel’s net working capital (total current assets less total current liabilities) was $4,140,306, an increase of $531,625, or 14.7% as compared to the company’s prior fiscal year-end on September 30, 2006.

At March 31, 2007, cash and cash equivalents increased by $1,020,912, or 76.1%, to $2,362,864 from $1,341,952 at September 30, 2006. For the six months ended March 31, 2007, Janel’s principal generators of cash were a decrease in accounts receivable and increase in accounts payable yielding an approximate combined $445,000 along with the sale of convertible preferred stock during the period which yielded net proceeds of approximately $464,000.

In July 2005, Janel decreased its line of credit from $3,000,000 to $1,500,000, because its cash flow is adequate for financing its receivables, and it obtained a reduced interest rate. At March 31, 2007, Janel had $1,500,000 of available borrowing under its line of credit, bearing interest at prime less one-half of one percent (0.5%) per annum, collateralized by substantially all the assets of Janel and personal guarantees by certain shareholders of the company.

On January 10, 2007, Janel sold an aggregate of 1,000,000 shares of Class A Convertible Preferred Stock to an institutional investor for an aggregate purchase price of $500,000. A discussion of this transaction is set forth in the company’s Form 8-K Report filed January 17, 2007.

Management believes that anticipated cash flow, and availability under its existing line of credit are sufficient to meet its current working capital and operating needs. However, the company is also proceeding with its comprehensive growth strategy for fiscal 2007 and beyond, which encompasses a number of potential elements, as detailed below under “Current Outlook.” To successfully execute various of these growth strategy elements in the coming months, the company will need to secure additional financing estimated at up to $10,000,000. There is no assurance either that such additional capital as necessary to execute the company’s business plan and intended growth strategy will be available or, if available, will be extended to the company at mutually acceptable terms.

Current Outlook

Janel is primarily engaged in the business of providing full-service cargo transportation logistics management, including freight forwarding - via air, ocean and land-based carriers - customs brokerage services, warehousing and distribution services, and other value-added logistics services. Its 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.

Based upon the results for the fiscal year ended September 30, 2006, the first six months of fiscal 2007, and its current operations, Janel projects that gross revenue from its currently existing accounts and businesses for its fiscal year ending September 30, 2007 will be marginally lower (within 5%) than reported gross revenue for fiscal 2006.

In addition, Janel is progressing with the implementation of its business plan and strategy to grow its revenue and profitability for fiscal 2007 and beyond through other avenues. The company’s strategy for growth includes plans to: open additional branch offices domestically and/or outside the continental United States; introduce additional revenue streams for its existing headquarters and branch locations; proceed with negotiations and due diligence with privately held transportation-related firms which may ultimately lead to their acquisition by the company; 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; evaluate direct entry into the trucking and warehouse distribution business as a complement to the services already provided to existing customers; 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.

Should there be an expansion of the global economy and/or a stabilization or strengthening of the U.S. dollar positively affecting domestic imports, the company believes that gross revenue for fiscal 2007 will be commensurately more in line with its gross revenue for fiscal 2006. In addition, the company expects its full year profitability in fiscal 2007 to continue to show a year-over-year increase as compared to its fiscal 2006 results.

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, and accruals for cargo insurance. 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 described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2006.

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

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.

The movement of freight may require multiple services. In most instances the company may perform multiple services including destination breakbulk 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 income:

accounts receivable valuation;

the useful lives of long-term assets;

the accrual of costs related to ancillary services the company provides; and

accrual of tax expense on an interim basis.

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 3 Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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 the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, 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 believe 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, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.

(a) Information regarding an unregistered sale of equity securities by the Company on January 10, 2007 is set forth in the Company’s Form 8-K Report filed January 17, 2007.

(c) Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 (January 1, 2007 – January 31, 2007)	20,000	.45	20,000	263,000
Month #2 (February 1, 2007 – February 28, 2007)	-0-	0	0	263,000
Month #3 (March 1, 2007 – March 31, 2007	20,000	.507	20,000	243,000
Total	40,000	.4785	40,000	243,000

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of shareholders during the first fiscal quarter ended March 31, 2007.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits required by item 601 of Regulation S-K.

Exhibit Number		Description of Exhibit

31		Rule 13(a)-14(a)/15(d)-14(a) Certifications.

32		Section 1350 Certification.

(b) Reports on Form 8-K. The Company filed a report on Form 8-K during the second fiscal quarter ended March 31, 2007 on January 17, 2007.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

May 15, 2007


	JANEL WORLD TRADE, LTD.

	By:	/s/ James N. Jannello
		Chief Executive Officer