JANEL CORP - Quarter Report: 2008 December (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: December 31, 2008

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 132nd 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 ¨ Accelerated filer ¨ 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: 17,426,661.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

(a) Janel’s unaudited, interim financial statements for its first fiscal quarter (the three months ended December 31, 2008) have been set forth below. Management’s discussion and analysis of the company’s financial condition and the results of operations for the third quarter will be found at Item 2, following the financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2008

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	DECEMBER 31, 2008		SEPTEMBER 30, 2008
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,531,702	$	2,428,098
Accounts receivable, net of allowance for doubtful
accounts of $89,495 at December 31, 2008 and
$129,953 at September 30, 2008		5,941,065		6,102,205
Marketable securities		41,435		52,044
Loans receivable - officers		144,383		142,574
- other		24,817		25,632
Prepaid expenses and sundry current assets		208,915		228,664
Tax refund receivable		83,000		83,000
TOTAL CURRENT ASSETS		7,975,317		9,062,217

PROPERTY AND EQUIPMENT, NET		275,146		303,855

OTHER ASSETS:
Intangible assets, net		3,210,587		3,300,119
Security deposits		50,801		50,801
Deferred income taxes		810,000		754,000
TOTAL OTHER ASSETS		4,071,388		4,104,920

TOTAL ASSETS	$	12,321,851	$	13,470,992

CURRENT LIABILITIES:
Convertible promissory note	$	400,000	$	400,000
Note payable - bank		750,000		750,000
- other		125,000		125,000
Accounts payable - trade		3,249,255		3,902,719
- related party		1,653		143,422
Accrued expenses and taxes payable		166,105		303,659
Current portion of long-term debt		804,083		786,308
TOTAL CURRENT LIABILITIES		5,496,096		6,411,108

OTHER LIABILITIES:
Long-term debt		2,014,738		2,110,237
Deferred compensation		78,568		78,568
TOTAL OTHER LIABILITIES		2,093,306		2,188,805

STOCKHOLDERS’ EQUITY		4,732,449		4,871,079

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	12,321,851	$	13,470,992

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	THREE MONTHS ENDED DECEMBER 31,
	2008			2007

REVENUES	$	21,266,128		$	20,067,346

COSTS AND EXPENSES:
Forwarding expenses		18,976,688			17,548,463
Selling, general and administrative		2,277,613			2,300,540
Amortization of intangible assets		107,931			161,812
		21,362,232			20,010,815

OPERATING INCOME (LOSS)		(96,104	)		56,531

OTHER ITEMS:
Interest and dividend income		3,876			17,254
Interest expense		(58,262	)		(33,636	)
TOTAL OTHER ITEMS		(54,386	)		(16,382	)

INCOME (LOSS) BEFORE INCOME TAXES		(150,490	)		40,149

Income taxes (credit)		(35,000	)		18,100

NET INCOME (LOSS)		(115,490	)		22,049

Preferred stock dividends		3,750			3,750

NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS	$	(119,240	)	$	18,299

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized loss from available for sale securities	$	(10,867	)	$	(7,008	)
Basic earnings (loss) per share	$	(.01	)	$	.0011
Fully diluted earnings (loss) per share	$	(.01	)	$	.0011
Basic weighted number of shares outstanding		17,514,738			16,906,000
Fully diluted weighted number of shares outstanding		17,914,738			17,306,000

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

BALANCE – SEPTEMBER 30, 2008		17,426,661	$	17,427		1,285,000	$	1,285	$	(2,743	)	$	3,438,677	$	1,430,043		$	(13,610	)	$	4,871,079

Net income		-		-		-							-		(115,490	)		-			(115,490	)

Purchase of 12,676 shares of treasury stock		-		-		-		-		(8,523	)		-		-			-			(8,523	)

Dividends to preferred shareholders		-		-		-		-		-			-		(3,750	)		-			(3,750	)

Other comprehensive gains (losses):
Unrealized gains (losses) on available-for-sale marketable securities		-		-		-		-		-			-		-			(10,867	)		(10,867	)

BALANCE – DECEMBER 31, 2008		17,426,661	$	17,427		1,285,000	$	1,285	$	(11,266	)	$	3,438,677	$	1,310,803		$	(24,477	)	$	4,732,449

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

BALANCE – SEPTEMBER 30, 2007		17,043,000	$	17,043		1,000,000	$	1,000	$	(65,812	)	$	1,416,558	$	3,090,470		$	11,660		$	4,470,919

Net income		-		-		-							-		22,049			-			22,049

Convertible preferred stock issuance		-		-		285,000		285		-			1,424,715		-			-			1,425,000

Dividends to preferred shareholders		-		-		-		-		-			-		(3,750	)		-			(3,750	)

Other comprehensive gains (losses):
Unrealized gains (losses) on available-for-sale marketable securities		-		-		-		-		-			-		-			(7,008	)		(7,008	)

BALANCE – DECEMBER 31, 2007		17,043,000	$	17,043		1,285,000	$	1,285	$	(65,812	)	$	2,841,273	$	3,108,769		$	4,652		$	5,907,210

See notes to financial statements

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	THREE MONTHS ENDED DECEMBER 31,
	2008			2007

OPERATING ACTIVITIES:
Net income (loss)	$	(115,490	)	$	22,049
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization		123,164			193,136
Amortization of imputed interest		11,715			-
Deferred income taxes		(56,000	)		(44,900	)
Changes in operating assets and liabilities:
Accounts receivable		161,140			(252,721	)
Loans receivable		-			(5,955	)
Prepaid expenses and sundry current assets		19,751			91,536
Accounts payable and accrued expenses		(794,768	)		(315,545	)
NET CASH USED IN OPERATING ACTIVITIES		(650,488	)		(312,400	)

INVESTING ACTIVITIES:
Acquisition of intangible assets		-			(2,173,312	)
Acquisition of property and equipment, net		(4,925	)		(171,496	)
Purchase of marketable securities		(258	)		(6,438	)
NET CASH USED IN INVESTING ACTIVITIES		(5,183	)		(2,351,246	)

FINANCING ACTIVITIES:
Proceeds received from bank loan		-			1,700,000
Repayment of long-term debt		(89,439	)		(946	)
Repayment (issuance) of loans receivable		(994	)		-
Purchase of treasury stock		(8,523	)		-
Repayment of loans payable – related party		(141,769	)		-
Issuance of long-term debt		-			500,000
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(240,725	)		2,199,054

DECREASE IN CASH AND CASH EQUIVALENTS		(896,396	)		(464,592	)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD		2,428,098			2,469,727
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	1,531,702		$	2,005,135

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	23,979		$	20,747
Income taxes	$	21,000		$	30,988
Non-cash financing activities:
Unrealized gain (loss) on marketable securities	$	(10,867	)	$	(7,008	)
Dividends declared to preferred stockholders	$	(3,750	)	$	(3,750	)
Issuance of convertible preferred stock and note
payable issued in connection with business acquisition	$	-		$	1,550,000

See notes to financial statements

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2008

(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 January 14, 2009.

2	BUSINESS SEGMENT INFORMATION

Statement of Financial Accounting (SFAS) No. 131, “Disclosure about Segments of an Enterprise and Related Information” establishes standards for the way that public companies report selected information about segments in their financial statements.

The Company is organized into two reportable segments, full service cargo transportation logistics management and computer software sales, support and maintenance.

Three Months Ended December 31, 2008	Consolidated			Transportation Logistics		Computer Software

Total revenues	$	21,266,128		$	21,143,054	$	123,074
Net revenues	$	2,289,440		$	2,166,366	$	123,074
Operating income (loss)	$	(96,104	)	$	31,459	$	(127,563	)
Identifiable assets	$	12,321,851		$	10,863,223	$	1,458,628
Capital expenditures	$	4,925		$	4,925	$	-
Depreciation and amortization	$	134,879		$	72,222	$	62,657
Equity	$	4,732,449		$	7,818,108	$	(3,085,659	)

Three Months Ended December 31, 2007	Consolidated		Transportation Logistics		Computer Software

Total revenues	$	20,067,346	$	19,812,047	$	255,299
Net revenues	$	2,518,883	$	2,263,584	$	255,299
Operating income (loss)	$	56,531	$	186,255	$	(129,724	)
Identifiable assets	$	12,032,614	$	8,015,340	$	4,017,274
Capital expenditures	$	171,496	$	6,379	$	165,117
Depreciation and amortization	$	193,136	$	23,068	$	170,068
Equity	$	5,907,210	$	6,036,934	$	(129,724	)

3	LONG-TERM DEBT

Long-term debt consists of the following:

	December 31, 2008		September 30, 2008

Term loan payable in monthly installments of $20,238, plus interest at the bank’s prime rate plus .75% per annum, or LIBOR plus 2% per annum with a final payment April 1, 2013. The loan is collateralized by substantially all assets of the Company and is personally guaranteed by certain stockholders of the Company.	$	1,558,334	$	1,619,048

Non-interest bearing note payable of $435,000 due in July 2009 and July 2011 net of imputed interest.		786,679		774,964

Term loan payable in monthly installments of $13,889, plus interest at a bank’s prime rate minus .50% per annum. The loan is collateralized by substantially all assets of a subsidiary of the Company.		472,222		500,000

Other		1,586		2,533
		2,818,821		2,896,545
Less current portion		804,083		786,308
	$	2,014,738	$	2,110,237

These obligations mature as follows:

2009	$	804,083
2010		381,996
2011		802,976
2012		242,856
2013		242,856
Thereafter		344,054
	$	2,818,821

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 January 15, 2008. 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 December 31, 2008, as compared to the results of operations for the three months ended December 31, 2007. 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 two reportable segments comprised of 1) 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, and 2) computer software sales, support and maintenance.

Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007

Revenue. Revenue for the first quarter of fiscal 2009 was $21,266,128, as compared to $20,067,346 for the same period of fiscal 2008, a year-over-year increase of $1,198,782, or 6.0%. The increased level of revenue resulted principally from an increase of $1,331,007, or 6.7%, in transportation logistics revenue due to a greater level of overall shipping activity by existing customers, primarily related to ocean imports, partially offset by a decrease of $132,225, or 51.8%, from the Company’s computer software segment (See Note 2 to financial statements).

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 first quarter of fiscal 2009, forwarding expense increased by $1,428,225, or 8.1%, to $18,976,688, as compared to $17,548,463 for the first quarter of fiscal 2008. The percentage increase in forwarding expense was slightly more than the 6.7% increase in transportation logistics revenue year-over-year, yielding an unfavorable increase of 1.2 percentage points in the measure of forwarding expense as a percentage of transportation logistics revenue to 89.8% in the first quarter of fiscal 2009, from 88.6% for the first fiscal quarter of 2008. This is principally the result of a higher proportion of revenue generated in the 2009 quarter from ocean freight shipments (which carry a lower average profit margin) in the Company’s transportation logistics segment.

Selling, General and Administrative Expense. Selling, general and administrative expense in first quarter of fiscal 2009 decreased by $(22,927), or (1.0)%, to $2,277,613, as compared to $2,300,540 in the first quarter of fiscal 2008. The year-over-year dollar decrease in SG&A primarily resulted from both an increased level of financial controls which the Company has specifically implemented to contain computer software-related administrative expenses, as well as from a reduction in corporate headcount during the 2009 quarter. As a result, SG&A as a percentage of revenue decreased by 75 basis points from 11.46% in the first quarter of fiscal 2008, to 10.71% in the first quarter of fiscal 2009.

Income (Loss) Before Taxes. Janel’s results for the first quarter of fiscal 2009 fell from an income before taxes of $40,149 in the first quarter of fiscal 2008, to a loss before taxes of $(150,490) in the first quarter of fiscal 2009, a decrease of $(190,639), or (474.8)%. The principal reason for the decrease in income before taxes was the decline in net revenue (gross transportation logistics revenue minus forwarding expense) as a percentage of gross transportation logistics revenue, as discussed above. In its 2008 fiscal fourth quarter, the Company booked an impairment loss of $1,812,750 relative to intangible assets associated with its earlier acquisition of Order Logistics, Inc., in October 2007. As a result of this write-down, amortization of intangible assets declined by $53,881 year-over-year in first quarter 2009 as compared to first quarter 2008, and was a partial offset to decline in net revenue margin.

Income Taxes. The effective income tax rate in both the 2009 and 2008 periods reflects the U.S. federal statutory rate and applicable state income taxes.

Net Income (Loss). Net loss available to common shareholders for the first quarter of fiscal 2009 was $(119,240), or $0.(0.01) per fully diluted share, as compared to net income available to common shareholders of $18,299, or $0.0011 per fully diluted share, in the first quarter of fiscal 2008.

Liquidity and Capital Resources

Janel’s ability to meet its liquidity requirements, which include satisfying its debt obligations and funding working capital, day-to-day operating expenses and capital expenditures depends upon its future performance, and is subject to general economic conditions and other factors, some of which are beyond its control.

During the three months ended December 31, 2008, Janel’s net working capital (current assets minus current liabilities) decreased by approximately $(171,888), or (6.5)%, reflecting an decrease in cash of approximately $(896,000), and a decrease in accounts receivable of approximately $(161,000). The asset declines were largely offset by lower accounts payable of approximately $795,000. Janel’s cash flow performance for the quarter is not necessarily indicative of future cash flow performance.

In July 2005, Janel decreased its line of credit from $3,000,000 to $1,500,000, because cash flow had become adequate for financing its receivables, and because it obtained a reduced interest rate. During the first quarter of 2008, to help finance the Company’s acquisition of certain assets of Order Logistics, Inc., the Company borrowed $1,700,000 (including a temporary increase of $200,000) under this existing line of credit. The $1,700,000 was then converted to a term loan bearing interest at prime plus three-quarters of one percent (0.75%) per annum and collateralized by substantially all assets of Janel and personal guarantees of certain shareholders of the company. The Company also issued a note payable in the amount of $125,000. In addition, Janel entered into a term loan agreement with a different bank in the amount of $500,000 bearing interest at prime minus one-half of one percent (0.50%) per annum and collateralized by substantially all the assets of a subsidiary of the Company. The company then renewed its line of credit with the bank for $1,500,000. Advances under this facility bear interest at prime minus three-quarters of one percent (0.75%). As of December 31,2008 borrowings under this credit line totaled $750,000. To finance the acquisition of certain assets of Ferrara International Logistics, Inc the Company issued a non-interest bearing note payable, net of imputed interest, with payments of $435,000 in July 2009 and July 2011 (see Note 2 to financial statements).

Management believes that anticipated cash flow are sufficient to meet its current working capital and operating needs. However, the Company is also proceeding with its comprehensive growth strategy for fiscal 2008 and beyond, which encompasses a number of potential elements, as discussed below under “Current Outlook.” To successfully execute several of these growth strategy elements in the coming months, the Company may need to secure additional financing estimated at up to $10,000,000. There is no assurance 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 and in the business of computer software sales, support and maintenance. 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.

Management has been engaged in reviewing the profitability of various customer accounts with a view toward eliminating accounts which are only marginally profitable, and focusing on accounts that are more profitable, with a view to increasing its overall profit margin. Based upon the results for the three months ended December 31, 2008, and its current expectations for the remainder of fiscal 2009, Janel projects that gross revenue from its currently existing accounts and businesses for its fiscal year ending September 30, 2009, will grow by approximately 7-10% to approximately $88-$91 million.

Janel is continuing to implement its business plan and strategy to increase revenue and profitability through its fiscal year ending September 30, 2009 and beyond. The Company’s strategy, some of which has been implemented, includes plans to: open additional branch offices both domestically and in Southeast Asia; increase profit margins by avoiding low-margin business; 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 efforts to reduce current and prospective overhead and operating expenses, particularly with regard to the efficient integration of any additional offices or acquisitions.

Certain elements of the Company’s growth strategy, principally proposals for acquisition, are contingent upon the availability of adequate financing at terms acceptable to the Company. The Company is continuing in its efforts to secure long-term financing, but has to date been unable to complete any such financing transactions at terms it deems acceptable, and cannot presently anticipate when or if financing on acceptable terms will become available. Therefore, the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated timing.

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, 2008.

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.

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.”

B. Computer Software Sales, Support and Maintenance

The Company recognizes revenue, including multiple element arrangements, in accordance with the provisions of the SEC's Staff Accounting bulletin ("SAB") No. 104, Revenue Recognition, and the Financial Accounting Standards Board's ("FASB"), and EITF 00-21, Revenue Agreements with Multiple Deliverables. Revenue from the sale of the Company's products and services are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or services have been rendered), the price is fixed or determinable, and collectability is reasonably assured. Amounts billed in excess of revenue recognized are recorded as deferred revenue in the balance sheet."

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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On February 11, 2008, Janel filed a lawsuit in the United States District Court for the Southern District of New York against World Logistics Services, Inc. (“World Logistics”), Richard S. Francis ("Francis”), the President of World Logistics, and Brian P. Griffin (“Griffin”), who was the Chief Executive Officer of World Logistics when Janel completed an acquisition in October 2007 of certain World Logistics assets consisting of proprietary technology, intellectual property, office equipment, and customer lists for Janel's exclusive use in the management and expansion of Janel’s international integrated logistics transport services business. The technology was acquired by Janel to enable it to integrate the tracking of all of the different aspects of the production, movement and delivery of goods, making the entire process electronically visible in “real time” by both its managers and clients. Additional information regarding the lawsuit is reported in Janel's Form 10-K report filed with the SEC on January 14, 2009.

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

(a) There have been no sales of unregistered equity securities by the Company during the first fiscal quarter ended December 31, 2008.

ISSUER PURCHASES OF EQUITY SECURITIES

Period

(a) Total

Number of

Shares (or

Units)

Purchased

(b) Average

Price Paid per

Share (or Unit)

Number of

Shares (or

Units)

Purchased as
Part of

Publicly
Announced

Plans or

Programs

(d) Maximum

Number (or

Approximate

DollarValue) of

Shares (or Units)

that May Yet Be

Purchased Under

the Plans or

Programs

Month #1 (identify beginning and ending dates)

10-1-08/

10-31-08

9363

.714083

9363

151,137

Month #2 (identify beginning and ending dates)	11-1-08/ 11-30-08 3313	.554528	3313	147,824
Month #3 (identify beginning and ending dates)	12-1-08/ 12-31-08 -0-	-0-	-0-	147,824
Total	12,676	.672382	12,676	147,824

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.

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 did not file any report on Form 8-K during the first fiscal quarter ended December 31, 2008.

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.

February 17, 2009

	JANEL WORLD TRADE, LTD.


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