JANEL CORP - Quarter Report: 2008 June (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: June 30, 2008

¨	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 ¨

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 ¨ No x

State the number of shares outstanding of each of the issuer's class of common equity, as of the latest practicable date: 16,977,188.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

(a) Janel’s unaudited, interim financial statements for its third fiscal quarter (the three and nine months ended June 30, 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 fiscal quarter will be found at Item 2, following the financial statements.

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	JUNE 30, 2008		SEPTEMBER 30, 2007
	(Unaudited)		(Audited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,588,759	$	2,469,727
Accounts receivable, net of allowance for doubtful
accounts of $60,295 at June 30, 2008 and
$42,600 at September 30, 2007		6,059,593		5,343,958
Marketable securities		62,302		70,880
Loans receivable - officers		148,679		142,440
- related party		71,421		111,700
- other		18,459		21,994
Prepaid expenses and sundry current assets		147,496		156,802
TOTAL CURRENT ASSETS		8,096,709		8,317,501

PROPERTY AND EQUIPMENT, NET		333,126		217,528

OTHER ASSETS:
Intangible assets, net		3,237,876		-
Security deposits		49,035		49,035
Deferred income taxes		140,000		-
TOTAL OTHER ASSETS		3,426,911		49,035

TOTAL ASSETS	$	11,856,746	$	8,584,064

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Note payable - other	$	125,000	$	-
Accounts payable		3,686,272		3,822,677
Accrued expenses and taxes payable		205,607		205,555
Current portion of long-term debt		360,447		3,795
TOTAL CURRENT LIABILITIES		4,377,326		4,032,027

OTHER LIABILITIES:
Long-term debt		1,825,795		2,550
Deferred compensation		78,568		78,568
TOTAL OTHER LIABILITIES		1,904,363		81,118

STOCKHOLDERS’ EQUITY:		5,575,057		4,470,919

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	11,856,746	$	8,584,064

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		NINE MONTHS ENDED JUNE 30,					THREE MONTHS ENDED JUNE 30,
		2008			2007		2008			2008


REVENUES	$	58,312,144		$	53,882,658	$	19,962,837		$	18,851,199


COSTS AND EXPENSES:
Forwarding expenses		51,097,175			47,864,647		17,613,732			16,720,066
Selling, general and administrative		7,046,743			5,658,942		2,379,938			1,903,699
Amortization of intangible assets		485,439			-		161,814			-
TOTAL COSTS AND EXPENSES		58,629,357			53,523,589		20,155,484			18,623,765


INCOME (LOSS) FROM OPERATIONS		(317,213	)		359,069		(192,647	)		227,434

OTHER ITEMS:
Interest and dividend income		38,066			43,637		9,151			19,056
Interest expense		(87,437	)		-		(24,317	)		-
TOTAL OTHER ITEMS		(49,371	)		43,637		(15,166	)		19,056

INCOME (LOSS) BEFORE INCOME TAXES		(366,584	)		402,706		(207,813	)		246,490

Income taxes		(71,984	)		173,000		(53,984	)		106,000

NET INCOME (LOSS)		(294,600	)		229,706		(153,829	)		140,490

Preferred stock dividends		11,250			7,083		3,750			3,750

NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS	$	(305,850	)	$	222,623	$	(157,579	)	$	136,740

OTHER COMPREHENSIVE INCOME
NET OF TAX:
Unrealized gain(loss) from available for sale securities	$	(15,012	)	$	6,897	$	138		$	5,273
Basic earnings (loss) per share	$	(.018	)	$	.013	$	(.009	)	$	.008
Fully diluted earnings (loss) per share	$	(.018	)	$	.013	$	(.009	)	$	.008
Weighted number of shares outstanding		16,906,000			16,999,766		16,906,000			16,955,837
Fully diluted weighted number of shares outstanding		17,306,000			17,399,766		17,306,000			17,355,837

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																ACCUMULATED
				PREFERRED							ADDITIONAL					OTHER
	CAPITAL STOCK			STOCK				TREASURY			PAID-IN		RETAINED			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 (loss)	-		-	-		-		-			-		(294,600	)		-			(294,600	)

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

Dividends to preferred shareholders	-		-	-		-		-			-		(11,250	)		-			(11,250	)

Other comprehensive gains (losses):
Unrealized losses on
available-for-sale marketable securities	-		-	-		-		-			-		-			(15,012	)		(15,012	)

BALANCE - JUNE 30, 2008	17,043,000	$	17,043	1,285,000	$	1,285	$	(65,812	)	$	2,841,273	$	2,784,620		$	(3,352	)	$	5,575,057

See notes to financial statements

JANEL WORLD TRADE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																	ACCUMULATED
					PREFERRED							ADDITIONAL					OTHER
	CAPITAL STOCK				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		-		-		-							-		229,706			-		229,706
Convertible preferred stock issuance,
net of expenses of $35,605		-		-		1,000,000		1,000					463,395		-			-		464,395
Purchase of 117,000 shares of
treasury stock		-		-		-		-		(56,892	)		-		-			-		(56,892	)
Dividends to preferred shareholders		-		-		-		-		-			-		(7,083	)		-		(7,083	)
Other comprehensive gains:
Unrealized gains on available-for-sale
marketable securities		-		-		-		-		-			-		-			6,897		6,897

BALANCE - JUNE 30, 2007		17,043,000	$	17,043		1,000,000	$	1,000	$	(56,892	)	$	1,416,558	$	3,000,947		$	9,660	$	4,388,316

See notes to financial statements

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	NINE MONTHS ENDED JUNE 30,
	2008			2007
OPERATING ACTIVITIES:
Net income (loss)	$	(294,600	)	$	229,706
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization		583,135			5,831
Deferred income taxes		(140,000	)		-
Changes in operating assets and liabilities:
Accounts receivable		(715,635	)		(819,818	)
Loans receivable		37,575			-
Prepaid expenses and sundry current assets		9,306			(4,753	)
Accounts payable and accrued expenses		(147,603	)		751,603
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(667,822	)		162,569

INVESTING ACTIVITIES:
Acquisition of intangible assets		(2,173,313	)		-
Acquisition of property and equipment		(213,296	)		(16,971	)
Purchase of marketable securities		(6,434	)		(2,744	)
NET CASH USED IN INVESTING ACTIVITIES		(2,393,043	)		(19,715	)

FINANCING ACTIVITIES:
Proceeds received from bank loan		1,700,000			-
Issuance of long-term debt		500,000			-
Repayment of long-term debt		(20,103	)		(6,289	)
Issuance of loans receivable		-			4,747
Repurchase of treasury stock		-			(56,892	)
Proceeds from sale of preferred stock, net of related expense of $35,605		-			464,395
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,179,897			405,961

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(880,968	)		548,815
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		2,469,727			1,341,952
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	1,588,759		$	1,890,767

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	87,437		$	422
Income taxes	$	176,280		$	256,525
Non-cash financing activities:
Unrealized gain (loss) on marketable securities	$	(15,012	)	$	6,897
Dividends declared to preferred stockholders	$	(11,250	)	$	7,083
Issuance of convertible preferred stock and note payable
in connection with business acquisition	$	1,550,000		$	-

See notes to financial statements

JANEL WORLD TRADE, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 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, 2008.

2	ACQUISITION OF ORDER LOGISTICS INC.

On October 18, 2007, Janel World Trade, Ltd. (the “Company”) acquired certain assets of Order Logistics, Inc. (“OLI”) consisting of proprietary technology, intellectual property (including the name “Order Logistics”), office locations and equipment and customer lists for use in the management and expansion of the Company’s international integrated logistics transport services business. The technology acquired by the Company enables it to integrate all of the different aspects of movement and delivery of goods, making the entire process electronically visible in “real time”. The Agreement includes non-competition provisions restricting OLI from competing with Janel, and requiring OLI to change its name.

The purchase price for the acquired assets was $3,888,429 and is comprised of $2,338,429 cash paid at closing, the issuance of a $125,000 note payable and the issuance of 285,000 restricted shares of Janel’s newly-authorized $.001 par value Series B Convertible Preferred Stock (“Series B”), each share of which is convertible into ten shares of Janel’s $.001 par value common stock at any time after October 18, 2009. In connection therewith, the Company borrowed $1,700,000 under its existing line of credit and entered into a term loan agreement for $500,000 with a different bank. The balance of the cash portion was paid from existing cash.

On February 11, 2008, The Company filed a lawsuit in the United States District Court for the Southern District of New York against defendants World Logistics Services, Inc. (“World Logistics”), a Delaware Corporation formerly known as “Order Logistics, Inc.” 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.

Janel claims that the defendants made false and misleading statements of material facts concerning the exclusivity of the rights to the assets which were sold to Janel by having concealed and withheld the provisions of a settlement agreement with a third-party business associate and creditor made only two days before the closing of the asset sale, in which World Logistics agreed to the cancellation of a restrictive covenant which had prevented the creditor from using World Logistics proprietary computer software, or soliciting its list of valuable customers and employees.

Janel has charged that the defendants violated the anti-fraud provisions of the Federal securities laws, committed common law fraud, breach of contract and other wrongdoing, with the specific intent to defraud Janel and obtain 285,000 shares of its newly authorized Class B convertible preferred stock, and more than $2,300,000 in payments by Janel of the defendants’ long overdue obligations to suppliers, creditors and tax authorities.

3	BUSINESS SEGMENT INFORMATION

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

Nine Months Ended June 30, 2008		Consolidated			Transportation Logistics		Computer Software

Total revenues	$	58,312,144		$	57,928,492	$	383,652
Net revenues	$	7,214,969		$	6,831,317	$	383,652
Operating income (loss)	$	(317,213	)	$	495,186	$	(812,399	)
Identifiable assets	$	11,856,746		$	8,147,854	$	3,708,892
Capital expenditures	$	213,296		$	46,815	$	166,481
Depreciation and amortization	$	583,135		$	72,758	$	510,377
Equity	$	5,575,057		$	6,331,745	$	(756,688	)

Nine Months Ended June 30, 2007		Consolidated		Transportation Logistics		Computer Software

Total revenues	$	53,882,658	$	53,882,658	$	-
Net revenues	$	6,018,011	$	6,018,011	$	-
Operating income	$	359,069	$	359,069	$	-
Identifiable assets	$	8,132,511	$	8,132,511	$	-
Capital expenditures	$	71,221	$	71,221	$	-
Depreciation and amortization	$	60,081	$	60,081	$	-
Equity	$	4,388,316	$	4,388,316	$	-

Three Months Ended June 30, 2008		Consolidated			Transportation Logistics		Computer Software

Total revenues	$	19,962,837		$	19,897,384	$	65,453
Net revenues	$	2,349,105		$	2,283,652	$	65,453
Operating income (loss)	$	(192,647	)	$	172,003	$	(364,650	)
Identifiable assets	$	11,856,746		$	8,147,854	$	3,708,892
Capital expenditures	$	23,999		$	23,999	$	-
Depreciation and amortization	$	195,853		$	25,683	$	170,170
Equity	$	5,575,057		$	6,331,745	$	(756,688	)

Three Months Ended June 30, 2007		Consolidated		Transportation Logistics		Computer Software

Total revenues	$	18,851,199	$	18,851,199	$	-
Net revenues	$	2,131,133	$	2,131,133	$	-
Operating income	$	227,434	$	227,434	$	-
Identifiable assets	$	8,132,511	$	8,132,511	$	-
Capital expenditures	$	32,205	$	32,205	$	-
Depreciation and amortization	$	22,467	$	22,467	$	-
Equity	$	4,388,316	$	4,388,316	$	-

4	LONG-TERM DEBT

Long-term debt consists of the following:

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 and becomes due April 1, 2013. The loan is collateralized by substantially all assets of the Company and is personally guaranteed by certain stockholders of the Company.	$	1,679,762

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 the company.		500,000

Other		6,480
		2,186,242
Less current portion		360,447
	$	1,825,795

These obligations mature as follows:

2008	$	360,447
2009		409,524
2010		409,524
2011		298,412
2012		242,856
Thereafter		465,479
	$	2,186,242

In addition, the Company secured an additional line of credit from the bank in the amount of $1,500,000, bearing interest at .75% per annum below the bank’s prime rate and due March 31, 2009.

5	SUBSEQUENT EVENT

Asset purchase agreement and unregistered sale of equity securities

On July 18, 2008 the Company acquired the customs brokerage “book of business”, as defined, of Ferrara International Logistics, Inc. (“Ferrara”), consisting of books, records, forms, manuals, access codes, goodwill, customer lists and contact information, telephone and advertising listings (the “Business”) for the expansion of the Company’s international integrated logistics transport services business. Ferrara will provide the Company with related marketing, advertising, sales, and related administrative services pursuant to the May 19, 2008 Sales Agency and Service Agreement (the “Sales Agreement”), which has a three-year term and non-competition provisions restricting Ferrara from competing with the Company.

The purchase price for the acquired assets was $2,100,000, comprised of a $600,000 payment by the Company at closing, the issuance of 520,661 of restricted shares of the Company’s $0.001 common stock (the “Shares”) valued at $630,000, based upon the $1.21 per share closing price of the Company’s $0.001 par value common stock in the Over-The-Counter market on the Friday immediately preceding the closing date, a $435,000 payment one year after closing, and a $435,000 payment on three years after the closing.

If the aggregate earnings of the Business before interest, taxes, depreciation and amortization (“EBITDA”) for the three years immediately following the closing fails to equal $2,100,000, the Company will be entitled to a reduction of the purchase price in an amount equal to three times the total three year EBITDA shortfall (the “Shortfall”). If the final installment of the cash payment is sufficient to satisfy the Shortfall, the appropriate number of Shares, valued at the closing market price on the third anniversary of the closing date, will be cancelled and returned to the Company’s authorized and unissued stock.

The compensation payable to Ferrara pursuant to the Sales Agreement is contingent upon the aggregate EBITDA of the Business for the three years immediately following the closing exceeding $2,100,000, in which event the Company will pay Ferrara 40% of the excess amount for that period, and for the following three years pay Ferrara 40% of the excess amount of annual EBITDA exceeding $700,000.

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 and nine months ended June 30, 2008, as compared to the results of operations for the three and nine months ended June 30, 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 June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenue. Revenue for the third quarter of fiscal 2008 was $19,962,837, as compared to $18,851,199 for the same period of fiscal 2007, a year-over-year increase of $1,111,638, or 5.9%. For the three months of fiscal 2008, transportation logistics accounted for revenue of $19,897,384, while computer software revenue was $65,453, generated during the quarter from the Company’s October 18, 2007 acquisition of certain assets of Order Logistics Inc. There was no comparable computer software-related revenue in the fiscal 2007 period. The increased level of transportation logistics revenue reflected relatively greater overall shipping activity by existing customers between the two periods. The Company’s transfer of Order Logistics’ operations from South Carolina to Janel’s Chicago facilities began in the second fiscal quarter of 2008, and was completed during the third quarter. As a result, computer software-related revenue was negatively affected during both periods, but is expected to recover during the fourth quarter of fiscal 2008, and thereafter.

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 third quarter of fiscal 2008, forwarding expense increased by $893,666, or 5.3%, to $17,613,732, as compared to $16,720,066 for the third quarter of fiscal 2007. The percentage increase in forwarding expense was less than the percentage increase in transportation logistics revenue, up 5.5%, year-over-year, yielding a favorable decrease of 17 basis points in the measure of forwarding expense as a percentage of transportation logistics revenue to 88.52% in the third quarter of fiscal 2008, from 88.69% for the third fiscal quarter of 2007. This is principally the result of increased average margins earned by the Company on ocean freight shipments in the fiscal 2008 quarter, which also accounted for a higher proportion of the quarter’s shipping activity.

Selling, General and Administrative Expense. Selling, general and administrative expense in third quarter of fiscal 2008 increased by $476,239, or 25.0%, to $2,379,938, as compared to $1,903,699 in the third quarter of fiscal 2007. The year-over-year dollar increase in SG&A primarily resulted from the incremental expenses related to additional employees added to the Company’s payroll during the fiscal 2008 first quarter as a result of its asset acquisition during that period. SG&A as a percentage of revenue increased by 182 basis points from 10.10% in the third quarter of fiscal 2007, to 11.92% in the third quarter of fiscal 2008.

Income (Loss) Before Taxes. Janel’s results fell from an income before taxes of $246,490 in the third quarter of fiscal 2007 to a loss before taxes of $(207,813) in the third quarter of fiscal 2008. Third quarter 2008 charges of $161,814 related to amortization of intangible assets pertaining essentially to the Company’s asset acquisition in October 2007, and incremental interest expense during the fiscal 2008 third quarter of $24,317, pertaining principally to acquisition financing (see Note 2 to financial statements) essentially accounted for the reported quarterly pretax loss.

Income Taxes. The effective income tax rate in both the 2008 and 2007 fiscal periods reflects the U.S. federal statutory rate and applicable state income taxes.

Net Income. Net loss available to common shareholders for the third quarter of fiscal 2008 was $(157,579), or $(0.009) per fully diluted share, as compared to net income available to common shareholders of $136,740, or $0.008 per fully diluted share, in the third quarter of fiscal 2007. The same principal factors as described above for the third fiscal quarter 2008 loss before taxes contributed to the period’s net loss.

Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30, 2007

Revenue. Revenue for the nine months ended June 30, 2008 was $58,312,144, as compared to $53,882,658 for the same period of fiscal 2007, a year-over-year increase of $4,429,486, or 8.2%. The higher level of revenue primarily reflected a net year-over-year rise 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. In addition, total nine months’ revenue in 2008 benefitted from the Company’s computer software segment acquired in October 2007. For the nine months of 2008, transportation logistics accounted for revenue of $57,928,492, while computer software revenue was $383,652.

Forwarding Expense. For the nine months ended June 30, 2008, forwarding expense was $51,097,175, as compared to $47,864,647 for the same period of fiscal 2007, a year-over-year increase of $3,232,528, or 6.8%. The percentage increase was somewhat less than the increase in transportation logistics revenue, up 7.5%, for the nine months ended June 30, 2008 as compared to fiscal 2007, resulting in forwarding expense as a percentage of transportation logistics revenue declining 62 basis points to 88.21% as compared to the year-earlier 88.83%. This is principally the result of increased average margins earned by the Company on ocean freight shipments in the fiscal 2008 nine months, which also accounted for a higher proportion of the nine month’s shipping activity.

Selling, General and Administrative Expense. For the nine-month periods ended June 30, 2008 and 2007, selling, general and administrative expenses were $7,046,743 (12.08% of total revenue) and $5,658,942 (10.50%), respectively. This represents a year-over-year increase of $1,387,801, or 24.5%. The year-over-year dollar increase in SG&A resulted from incremental expenses related to additional employees added to the Company’s payroll during the fiscal 2008 first nine months as a result of its asset acquisition in October 2007.

Income (Loss) Before Taxes. Janel reported a loss before taxes of $(366,584) for the nine months ended June 30, 2008 as compared to income before taxes of $402,706 for the nine months ended June 30, 2007. Charges in the first nine months of 2008 were $485,439 related to amortization of intangible assets pertaining essentially to the Company’s asset acquisition in October 2007, and incremental interest expense during the 2008 first half of $87,437, pertaining principally to acquisition financing, (see Note 2 to financial statements), accounted for significantly more than the reported nine-months pretax loss.

Income Taxes. The effective income tax rate in both the 2008 and 2007 fiscal periods reflects the U.S. federal statutory rate and applicable state income taxes.

Net Income. Janel reported net loss available to common shareholders for the nine months ended June 30, 2008 of $(305,850), or $(0.018) per diluted share, down $528,473 as compared to a net income available to common shareholders of $222,623 or $0.013 per diluted share, for the nine months ended June 30, 2007. The same principal factors as described above for the first nine months of 2008 loss before taxes contributed to the period’s net loss.

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 nine months ended June 30, 2008, Janel’s net working capital (current assets minus current liabilities) decreased by approximately $(566,000), or (13.2)%, reflecting an decrease in cash and cash equivalents of approximately $881,000, plus increases in notes payable and the current portion of long-term debt totaling $481,000, partially offset by increased accounts receivable of approximately $715,000. Janel’s cash flow performance for the nine months is not necessarily indicative of future cash flow performance.

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, while also issuing 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 (see Note 2 to financial statements). The outstanding balance of notes payable of $1,825,000 bears interest at prime plus three-quarters of one percent (0.75%) per annum and is collateralized by substantially all the assets of Janel and personal guarantees by certain shareholders of the Company. As of December 31, 2008, the Company had taken down the full $500,000 of available borrowing under its three-year term loan agreement, bearing interest at prime plus one-half of one percent (0.50%) per annum, collateralized by substantially all the assets of Order Logistics, Inc. In April 2008, the outstanding bank note payable of $1,700,000 was converted into a term loan payable in monthly installments of $20,238 plus interest at the bank’s prime rate plus 0.75% per annum, or LIBOR plus 2% per annum. In addition, the bank gave the Company a new credit line of $1,500,000, which expires on March 31, 2009.

Management believes that anticipated cash flow is 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 nine months ended June 30, 2008, and its current expectations for the final quarter of fiscal 2008, Janel projects that gross revenue from its currently existing accounts and businesses for its fiscal year ending September 30, 2008, will grow by approximately 5-10% to approximately $78-$82 million.

Janel is continuing to implement its business plan and strategy to increase revenue and profitability through its fiscal year ending September 30, 2008 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, 2007.

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 involve providing 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.

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) There have been no sales of unregistered equity securities by the Company during the third fiscal quarter ended June 30, 2008.

(c) Issuer Purchases of Equity Securities.

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 (4-1-08 / 4-30-08)		-0-		-0-		-0-		163,000

Month #2 (5-1-08 / 5-31-08)		-0-		-0-		-0-		163,000

Month #3 (6-1-08 / 6-30-08)		-0-		-0-		-0-		163,000

Total		-0-		-0-		-0-		163,000

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 third fiscal

quarter ended June 30, 2008.

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 two reports on Form 8-K during the third fiscal quarter ended June 30, 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.

August 14, 2008

	JANEL WORLD TRADE, LTD.

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