JANEL CORP - Quarter Report: 2008 March (Form 10-Q)
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, 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
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
¨
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 second fiscal quarter
(the three and six months ended March 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 second fiscal quarter will be found at Item 2, following
the
financial statements.
2
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 six months ended March 31, 2008, as compared to the results of
operations for the three and six months ended March 31, 2007. The discussion
and
analysis then addresses the liquidity and financial condition of the Company,
and other matters.
3
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 March 31, 2008 Compared to Three Months Ended March 31,
2007
Revenue.
Revenue
for the second quarter of fiscal 2008 was $18,281,961, as compared to
$18,303,590 for the same period of fiscal 2007, a year-over-year decrease
of
$(21,629), or (0.1)%. For the three months of fiscal 2008, transportation
logistics accounted for revenue of $18,219,061, while computer software revenue
was $62,900, generated during the quarter from the Company’s October 18, 2007
acquisition of certain assets of World Logistics, Inc. (formerly named "Order
Logistics Inc"). There was no comparable computer software-related revenue
in
the fiscal 2007 period. The essentially flat level of transportation logistics
revenue reflected the relative equality of overall shipping activity by existing
customers between the two periods. Computer software-related revenue during
the
period was negatively affected as the Company closed former World Logistics
operations in South Carolina, which were then consolidated into the Company’s
Chicago operations.
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 2008, forwarding expense decreased by $405,347,
or
2.5%, to $15,934,980, as compared to $16,340,327 for the second quarter of
fiscal 2007. The percentage decrease in forwarding expense was greater than
the
percentage decrease in transportation logistics revenue, down 0.5%,
year-over-year, yielding a favorable decline of 2.1 percentage points in
the
measure of forwarding expense as a percentage of revenue to 87.2% in the
second
quarter of fiscal 2008, from 89.3% for the second 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 second quarter of fiscal 2008 increased
by
$455,521, or 23.8%, to $2,366,265, as compared to $1,910,744 in the second
quarter of fiscal 2007. The year-over-year dollar increase in SG&A primarily
resulted from the additional 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 250 basis points from 10.44% in the second quarter of fiscal
2007,
to 12.94% in the second quarter of fiscal 2008.
4
Income
(Loss) Before Taxes. Janel’s
results fell from an income before taxes of $64,018 in the second quarter
of
fiscal 2007 to a loss before taxes of $(198,920) in the second quarter of
fiscal
2008. Second quarter 2008 charges of $161,813 related to amortization of
intangible assets and $10,797 related to increased depreciation, both pertaining
essentially to the Company’s asset acquisition in October 2007, and incremental
interest expense during the fiscal 2008 second quarter of $29,343, pertaining
principally to acquisition financing, (see Note 2 to financial statements),
more
than 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 second quarter of fiscal 2008 was
$(166,570), or $(0.0096) per fully diluted share, as compared to net income
available to common shareholders of $33,685, or $0.005 per fully diluted
share,
in the second quarter of fiscal 2007. The same principal factors as described
above for the second fiscal quarter 2008 loss before taxes contributed to
the
period’s net loss.
Six
Months Ended March 31, 2008 Compared to Six Months Ended March 31,
2007
Revenue.
Revenue
for the six months ended March 31, 2008 was $38,349,307, as compared to
$35,031,459 for the same period of fiscal 2007, a year-over-year increase
of
$3,317,848, or 9.5%. 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. For the six months of 2008, transportation logistics
accounted for revenue of $38,031,108, while computer software revenue was
$318,199.
Forwarding
Expense. For
the
six months ended March 31, 2008, forwarding expense was $33,483,443, as compared
to $31,144,581 for the same period of fiscal 2007, a year-over-year increase
of
$2,338,862, or 7.5%. The percentage increase was somewhat less than the increase
in transportation logistics revenue, up 8.6%, for the six months ended March
31,
2008 as compared to fiscal 2007, resulting in forwarding expense as a percentage
of revenue declining marginally to 87.3% as compared to the year-earlier
88.9%,
an improvement of 1.6 percentage points. This is principally the result of
increased average margins earned by the Company on ocean freight shipments
in
the fiscal 2008 six months, which also accounted for a higher proportion
of the
half’s shipping activity.
Selling,
General and Administrative Expense. For
the
six-month periods ended March 31, 2008
and
2007, selling, general and administrative expenses were $4,666,805 (12.17%
of
revenue) and $3,754,920 (10.72%), respectively. This represents a year-over-year
increase of $911,885, or 24.3%. The year-over-year dollar increase in SG&A
resulted from a additional expenses related to additional employees added
to the
Company’s payroll during the fiscal 2008 first half as a result of its asset
acquisition in October 2007.
5
Income
(Loss) Before Taxes. Janel
reported a loss before taxes of $(158,771) for the six months ended March
31,
2008 as compared to income before taxes of $156,216 for the six months ended
March 31, 2007. First half 2008 charges of $323,625 related to amortization
of
intangible assets and $26,043 related to increased depreciation, both pertaining
essentially to the Company’s asset acquisition in October 2007, and incremental
interest expense during the 2008 first half of $62,797, pertaining principally
to acquisition financing, (see Note 2 to financial statements), accounted
for
significantly more than the reported six-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 six months ended
March 31, 2008 of $(148,271), or $(0.0086) per diluted share, down $234,154
as
compared to a net income available to common shareholders of $85,883 or $0.005
per diluted share, for the six months ended March 31, 2007. The same principal
factors as described above for the first half 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 six months ended March 31, 2008, Janel’s net working capital (current assets
minus current liabilities) decreased by approximately $(1,902,086), or (44.4)%,
reflecting an decrease in cash and cash equivalents of approximately $872,000,
plus the addition of notes payable totaling $1,700,000, only partially offset
by
lower accounts payable of approximately $727,000. Janel’s cash flow performance
for the six months 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 World 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).
At March 31, 2008, Janel had no remaining available borrowing under its line
of
credit. The outstanding balance of notes payable of $1,700,000 bears interest
at
prime less a 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 five-year term
loan agreement, bearing interest at 7.25% per annum, collateralized by
substantially all the assets of Janel and personal guarantees by certain
shareholders of the Company. As a subsequent event, 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.
6
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 six months ended March
31,
2008, and its current expectations for the remainder 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.
7
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.
8
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.
9
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:
|
a.
|
accounts
receivable valuation;
|
|
b.
|
the
useful lives of long-term assets;
|
|
c.
|
the
accrual of costs related to ancillary services the Company provides;
and
|
|
d.
|
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.
10
PART
II -
OTHER INFORMATION
Item
1. Legal Proceedings.
Not
Applicable
Item
2. Unregistered Sale of Equity Securities and Use of
Proceeds.
| (a) |
Not
applicable.
|
| (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 (identify beginning and ending dates)
|
1-1-08/1-
31-08
-0-
|
-0-
|
-0-
|
163,000
|
|||||||||
|
Month
#2 (identify beginning and ending dates)
|
2-1-08/2-
29-08
-0-
|
-0-
|
-0-
|
163,000
|
|||||||||
|
Month
#3 (identify beginning and ending dates)
|
3-1-08/3-
31-08
-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 first fiscal
quarter
ended March 31, 2008.
11
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 has not filed any reports on Form 8-K during the second fiscal quarter
ended March 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.
May
15,
2008
|
JANEL
WORLD TRADE, LTD.
|
|
|
By:
|
/s/
James N. Jannello
|
|
James
N. Jannello
|
|
|
Chief
Executive Officer
|
|
12
JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
MARCH 31, 2008
|
SEPTEMBER 30, 2007
|
||||||
|
(Unaudited)
|
(Audited)
|
||||||
|
ASSETS
|
|||||||
|
CURRENT
ASSETS:
|
|||||||
|
Cash
and cash equivalents
|
$
|
1,597,609
|
$
|
2,469,727
|
|||
|
Accounts
receivable, net of allowance for doubtful accounts of $48,923 at
March 31,
2008 and $42,600 at September 30, 2007
|
5,421,324
|
5,343,958
|
|||||
|
Marketable
securities
|
62,164
|
70,880
|
|||||
|
Loans
receivable - officers
|
145,760
|
142,440
|
|||||
|
-
related party
|
115,151
|
111,700
|
|||||
|
-
other
|
27,033
|
21,994
|
|||||
|
Prepaid
expenses and sundry current assets
|
145,088
|
156,802
|
|||||
|
TOTAL
CURRENT ASSETS
|
7,514,129
|
8,317,501
|
|||||
|
PROPERTY
AND EQUIPMENT, NET
|
343,168
|
217,528
|
|||||
|
OTHER
ASSETS:
|
|||||||
|
Intangible
assets, net
|
3,399,688
|
-
|
|||||
|
Security
deposits
|
49,035
|
49,035
|
|||||
|
Deferred
income taxes
|
67,000
|
-
|
|||||
|
TOTAL
OTHER ASSETS
|
3,515,723
|
49,035
|
|||||
|
TOTAL
ASSETS
|
$
|
11,373,020
|
$
|
8,584,064
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
CURRENT
LIABILITIES:
|
|||||||
|
Note
payable - bank
|
$
|
1,700,000
|
$
|
-
|
|||
|
-
other
|
125,000
|
-
|
|||||
|
Accounts
payable
|
3,095,753
|
3,822,677
|
|||||
|
Accrued
expenses and taxes payable
|
136,749
|
205,555
|
|||||
|
Current
portion of long-term debt
|
73,239
|
3,795
|
|||||
|
TOTAL
CURRENT LIABILITIES
|
5,130,741
|
4,032,027
|
|||||
|
OTHER
LIABILITIES:
|
|||||||
|
Long-term
debt
|
431,213
|
2,550
|
|||||
|
Deferred
compensation
|
78,568
|
78,568
|
|||||
|
TOTAL
OTHER LIABILITIES
|
509,781
|
81,118
|
|||||
|
STOCKHOLDERS’
EQUITY:
|
5,732,498
|
4,470,919
|
|||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
11,373,020
|
$
|
8,584,064
|
|||
See
notes
to financial statements
JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
|
SIX MONTHS ENDED MARCH 31,
|
THREE MONTHS ENDED MARCH 31,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
REVENUES
|
$
|
38,349,307
|
$
|
35,031,459
|
$
|
18,281,961
|
$
|
18,303,590
|
|||||
|
COSTS
AND EXPENSES:
|
|||||||||||||
|
Forwarding
expenses
|
33,483,443
|
31,144,581
|
15,934,980
|
16,340,327
|
|||||||||
|
Selling,
general and administrative
|
4,666,805
|
3,754,920
|
2,366,265
|
1,910,744
|
|||||||||
|
Amortization
of intangible assets
|
323,625
|
-
|
161,813
|
-
|
|||||||||
|
TOTAL
COSTS AND EXPENSES
|
38,473,873
|
34,899,501
|
18,463,058
|
18,251,071
|
|||||||||
|
INCOME
(LOSS) FROM OPERATIONS
|
(124,566
|
)
|
131,958
|
(181,097
|
)
|
52,519
|
|||||||
|
OTHER
ITEMS:
|
|||||||||||||
|
Interest
and dividend income
|
28,915
|
24,581
|
11,661
|
11,640
|
|||||||||
|
Interest
expense
|
(63,120
|
)
|
(323
|
)
|
(29,484
|
)
|
(141
|
)
|
|||||
|
TOTAL
OTHER ITEMS
|
(34,025
|
)
|
24,258
|
(17,823
|
)
|
11,499
|
|||||||
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
(158,771
|
)
|
156,216
|
(198,920
|
)
|
64,018
|
|||||||
|
Income
taxes
|
(18,000
|
)
|
67,000
|
(36,100
|
)
|
27,000
|
|||||||
|
NET
INCOME (LOSS)
|
(140,771
|
)
|
89,216
|
(162,820
|
)
|
37,018
|
|||||||
|
Preferred
stock dividends
|
7,500
|
3,333
|
3,750
|
3,333
|
|||||||||
|
NET
INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
(148,271
|
)
|
$
|
85,883
|
$
|
(166,570
|
)
|
$
|
33,685
|
|||
|
OTHER
COMPREHENSIVE INCOME NET OF TAX:
|
|||||||||||||
|
Unrealized
gain(loss) from available for sale securities
|
$
|
(15,150
|
)
|
$
|
1,624
|
$
|
(8,142
|
)
|
$
|
927
|
|||
|
Basic
earnings (loss) per share
|
$
|
(.0088
|
)
|
$
|
.005
|
$
|
(.0099
|
)
|
$
|
.005
|
|||
|
Fully
diluted earnings (loss) per share
|
$
|
(.0086
|
)
|
$
|
.005
|
$
|
(.0096
|
)
|
$
|
.005
|
|||
|
Weighted
number of shares outstanding
|
16,906,000
|
17,021,973
|
16,906,000
|
17,007,167
|
|||||||||
|
Fully
diluted weighted number of shares outstanding
|
17,306,000
|
17,421,973
|
17,306,000
|
17,407,167
|
|||||||||
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
|
-
|
-
|
-
|
-
|
(140,771
|
)
|
-
|
(140,771
|
)
|
|||||||||||||||||||
|
Convertible
preferred stock issuance
|
-
|
-
|
285,000
|
285
|
-
|
1,424,715
|
-
|
-
|
1,425,000
|
|||||||||||||||||||
|
Dividends
to preferred shareholders
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,500
|
)
|
-
|
(7,500
|
)
|
|||||||||||||||||
|
Other
comprehensive gains (losses):
|
||||||||||||||||||||||||||||
|
Unrealized
gains (losses) on available-for-sale marketable securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,150
|
)
|
(15,150
|
)
|
|||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
BALANCE
- MARCH 31, 2008
|
17,043,000
|
$
|
17,043
|
1,285,000
|
$
|
1,285
|
$
|
(65,812
|
)
|
$
|
2,841,273
|
$
|
2,942,199
|
$
|
(3,490
|
)
|
$
|
5,732,498
|
||||||||||
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
|
SHARES
|
|||||||||||||||||||||
|
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 financial statements
JANEL
WORLD TRADE, LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
SIX MONTHS ENDED MARCH 31,
|
|||||||
|
2008
|
2007
|
||||||
|
OPERATING
ACTIVITIES:
|
|||||||
|
Net
income (loss)
|
$
|
(140,771
|
)
|
$
|
89,216
|
||
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|||||||
|
Depreciation
and amortization
|
387,282
|
37,614
|
|||||
|
Deferred
income taxes
|
(67,000
|
)
|
-
|
||||
|
Changes
in operating assets and liabilities:
|
|||||||
|
Accounts
receivable
|
(77,366
|
)
|
197,993
|
||||
|
Loans
receivable
|
(11,810
|
)
|
-
|
||||
|
Prepaid
expenses and sundry current assets
|
11,714
|
42,693
|
|||||
|
Accounts
payable and accrued expenses
|
(803,230
|
)
|
247,350
|
||||
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
(701,181
|
)
|
614,866
|
||||
|
INVESTING
ACTIVITIES:
|
|||||||
|
Acquisition
of intangible assets
|
(2,173,313
|
)
|
-
|
||||
|
Acquisition
of property and equipment
|
(189,297
|
)
|
(27,876
|
)
|
|||
|
Purchase
of marketable securities
|
(6,434
|
)
|
(2,726
|
)
|
|||
|
NET
CASH USED IN INVESTING ACTIVITIES
|
(2,369,044
|
)
|
(30,602
|
)
|
|||
|
FINANCING
ACTIVITIES:
|
|||||||
|
Proceeds
received from bank loan
|
1,700,000
|
-
|
|||||
|
Issuance
of long-term debt
|
500,000
|
-
|
|||||
|
Repayment
of long-term debt
|
(1,893
|
)
|
(4,193
|
)
|
|||
|
Issuance
of loans receivable
|
-
|
4,568
|
|||||
|
Repurchase
of treasury stock
|
-
|
(28,122
|
)
|
||||
|
Proceeds
from sale of preferred stock, net of related expense of
$35,605
|
-
|
464,395
|
|||||
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
2,198,107
|
436,648
|
|||||
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(872,118
|
)
|
1,020,912
|
||||
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
2,469,727
|
1,341,952
|
|||||
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
$
|
1,597,609
|
$
|
2,362,864
|
|||
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||||||
|
Cash
paid during the period for:
|
|||||||
|
Interest
|
$
|
63,120
|
$
|
(323
|
)
|
||
|
Income
taxes
|
$
|
151,448
|
$
|
-
|
|||
|
Non-cash
financing activities:
|
|||||||
|
Unrealized
gain (loss) on marketable securities
|
$
|
(15,150
|
)
|
$
|
1,624
|
||
|
Dividends
declared to preferred stockholders
|
$
|
(7,500
|
)
|
$
|
(3,333
|
)
|
|
|
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
MARCH
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, 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.
|
Six
Months Ended
March
31, 2008
|
Consolidated
|
Transportation
Logistics
|
Computer
Software
|
|||||||
|
Total
revenues
|
$
|
38,349,307
|
$
|
38,031,108
|
$
|
318,199
|
||||
|
Net
revenues
|
$
|
4,865,864
|
$
|
4,547,665
|
$
|
318,199
|
||||
|
Operating
income (loss)
|
$
|
(124,566
|
)
|
$
|
323,183
|
$
|
(447,749
|
)
|
||
|
Identifiable
assets
|
$
|
11,373,020
|
$
|
7,623,097
|
$
|
3,749,923
|
||||
|
Capital
expenditures
|
$
|
189,297
|
$
|
22,816
|
$
|
166,481
|
||||
|
Depreciation
and amortization
|
$
|
387,282
|
$
|
47,077
|
$
|
340,205
|
||||
|
Equity
|
$
|
5,732,498
|
$
|
6,180,247
|
$
|
(447,749
|
)
|
|||
|
Six
Months Ended
March
31, 2007
|
Consolidated
|
|
Transportation
Logistics
|
|
Computer
Software
|
|||||
|
Total
revenues
|
$
|
35,031,459
|
$
|
35,031,459
|
$
|
-
|
||||
|
Net
revenues
|
$
|
3,886,878
|
$
|
3,886,878
|
$
|
-
|
||||
|
Operating
income
|
$
|
131,635
|
$
|
131,635
|
$
|
-
|
||||
|
Identifiable
assets
|
$
|
7,513,361
|
$
|
7,513,361
|
$
|
-
|
||||
|
Capital
expenditures
|
$
|
27,876
|
$
|
27,876
|
$
|
-
|
||||
|
Depreciation
and amortization
|
$
|
37,614
|
$
|
37,614
|
$
|
-
|
||||
|
Equity
|
$
|
4,275,073
|
$
|
4,275,073
|
$
|
-
|
||||
|
Three
Months Ended
March
31, 2008
|
Consolidated
|
Transportation
Logistics
|
Computer
Software
|
|||||||
|
Total
revenues
|
$
|
18,281,961
|
$
|
18,219,061
|
$
|
62,900
|
||||
|
Net
revenues
|
$
|
2,346,981
|
$
|
2,284,081
|
$
|
62,900
|
||||
|
Operating
income (loss)
|
$
|
(181,097
|
)
|
$
|
499,122
|
$
|
(318,025
|
)
|
||
|
Identifiable
assets
|
$
|
11,373,020
|
$
|
7,623,097
|
$
|
3,749,923
|
||||
|
Capital
expenditures
|
$
|
17,801
|
$
|
16,437
|
$
|
1,364
|
||||
|
Depreciation
and amortization
|
$
|
194,146
|
$
|
24,010
|
$
|
170,136
|
||||
|
Equity
|
$
|
5,732,498
|
$
|
6,180,247
|
$
|
(447,749
|
)
|
|||
|
Three
Months Ended
March
31, 2007
|
Consolidated
|
Transportation
Logistics
|
Computer
Software
|
|||||||
|
Total
revenues
|
$
|
18,303,590
|
$
|
18,303,590
|
$
|
-
|
||||
|
Net
revenues
|
$
|
1,963,263
|
$
|
1,963,263
|
$
|
-
|
||||
|
Operating
income
|
$
|
52,378
|
$
|
52,378
|
$
|
-
|
||||
|
Identifiable
assets
|
$
|
6,743,091
|
$
|
6,743,091
|
$
|
-
|
||||
|
Capital
expenditures
|
$
|
22,095
|
$
|
22,095
|
$
|
-
|
||||
|
Depreciation
and amortization
|
$
|
19,540
|
$
|
19,540
|
$
|
-
|
||||
|
Equity
|
$
|
4,275,073
|
$
|
4,275,073
|
$
|
-
|
||||
| 4 |
SUBSEQUENT
EVENT
|
In
April
2008, the outstanding note payable - bank 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 .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.