Summary of JANEL WORLD TRADE LTD

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/A filed with the SEC on July 24, 2009. 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, 2009, as compared to the results of operations for the three and nine months ended June 30, 2008. 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, 2009 Compared to Three Months Ended June 30, 2008

Revenue. Revenue for the third quarter of fiscal 2009 was $15,524,769, as compared to $19,962,837 for the same period of fiscal 2008, a year-over-year decrease of $(4,438,068), or (22.2)%. For the three months of fiscal 2009, transportation logistics accounted for revenue of $15,515,608 (as compared to $19,897,384 in fiscal 2008), while computer software revenue was $9,161 (as compared to $65,453 in fiscal 2008), generated during the quarter from the Company's October 18, 2007 acquisition of certain assets of Order Logistics Inc. The decreased level of transportation logistics revenue primarily reflected significantly reduced freight rates (in some cases up to 35-40% lower) charged by both air and ocean carriers to Janel. As the rates the Company pays to its carriers are then marked up and passed through to customers, lower freight rates translate into lower Company revenue and net revenue (logistics revenue less forwarding expenses). In addition, the ongoing recession-related effect of reduced overall economic activity in the third quarter also negatively affected the volume of shipping by existing customers between the two periods. The year-over-year decline in computer software revenue reflects the substantially reduced level of sales activity undertaken in this business during the most recent quarter as the Company continues to reorganize the segment and assess its continuing viability.

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 2009, forwarding expense was $13,614,681, a decrease of $3,999,051, or 22.7%, as compared to $17,613,732 for the third quarter of fiscal 2008. The decline primarily reflected significantly reduced freight rates (in some cases up to 35-40% lower year-over-year) charged in general by both air and ocean carriers in response to the recessionary slowdown in demand for overall freight services. Nonetheless, the percentage decrease in forwarding expense was greater than the percentage decrease in transportation logistics revenue, down (22.0)%, year-over-year, yielding a favorable decrease of 77 basis points in the measure of forwarding expense as a percentage of transportation logistics revenue to 87.75% in the third quarter of fiscal 2009, from 88.52% for the third fiscal quarter of 2008. This is principally the result of increased average margins earned by the Company on ocean freight shipments in the fiscal 2009 quarter, which have accounted for a higher proportion of the Company's shipping activity as customers switched to this lower-cost (versus air) freight alternative.

Selling, General and Administrative Expense. Selling, general and administrative expense in third quarter of fiscal 2009 decreased by $477,449, or 20.1%, to $1,902,489, as compared to $2,379,938 in the third quarter of fiscal 2008. The year-over-year dollar decrease in SG&A primarily resulted from the austerity program implemented by the Company in February 2009. This expense reduction program has included the year-over-year reduction in Company headcount of up to 11 individuals as well as the imposition of a four-day work week for many continuing staff positions. As a result of these actions, the Company's SG&A expenses are tracking at a rate of $100,000 or more per month below earlier levels. Primarily as a result of the somewhat greater effect on the Company's revenue base from the industry's lower freight rate structure, SG&A as a percentage of total revenue increased by 33 basis points to 12.25% in the third quarter of fiscal 2009 from 11.92% in the third quarter of fiscal 2008..

Loss Before Taxes. Janel's results improved $71,966, or 34.6% from a loss before taxes of $(207,813) in the third quarter of fiscal 2008 to a loss before taxes of $(135,847) in the third quarter of fiscal 2009. Charges related to the amortization of intangible assets pertaining essentially to the Company's asset acquisition in October 2007 declined to $89,456 in third quarter 2009, as compared to third quarter 2008 charges of $161,814. The lower year-over-year amortization charge reflected the $1.8 million impairment loss write-down of OLI assets taken in the fourth quarter of fiscal 2008. In addition, interest expense during the fiscal 2009 third quarter increased to $56,181 as compared to fiscal 2008 third quarter interest expense of $24,317. The interest expense in both periods pertained principally to acquisition financing (see Note 2 to financial statements). The combined amortization and incremental interest charges essentially accounted for the reported quarterly pretax loss in both fiscal third quarters.

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

Net Loss. Net loss available to common shareholders for the third quarter of fiscal 2009 was $(109,597), or $(0.006) per fully diluted share, as compared to net loss available to common shareholders of $(157,579), or $(0.009) per fully diluted share, in the third quarter of fiscal 2008. 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, 2009 Compared to Nine Months Ended June 30, 2008

Revenue. Revenue for the nine months ended June 30, 2009 was $53,942,670, as compared to $58,312,144 for the same period of fiscal 2008, a year-over-year decrease of $(4,369,474), or (7.5)%. The lower level of revenue primarily reflected, as mentioned above for the third quarter comparisons, both a lower prevailing freight rate structure by air and ocean carriers as well as a net year-over-year decline in shipping activity by existing customers as a result of the ongoing recessionary environment affecting the U.S. economy throughout the current year. For the nine months of 2009, transportation logistics accounted for revenue of $53,773,801, as compared to $57,928,492 in the nine months of 2008, while computer software revenue was $168,869 in 2009 as compared to $383,652 in 2008.

Forwarding Expense. For the nine months ended June 30, 2009, forwarding expense was $47,703,356, as compared to $51,097,175 for the same period of fiscal 2008, a year-over-year decrease of $3,393,819, or 6.6%. As in the third quarter, the year-over-year decline primarily reflected significantly reduced average freight rates being charged by both air and ocean carriers during the most recent period. However, because the percentage decrease was somewhat less than the decrease in transportation logistics revenue, down 7.2%, for the nine months ended June 30, 2009 as compared to fiscal 2008, forwarding expense as a percentage of transportation logistics revenue increased 50 basis points to 88.71% as compared to the year-earlier 88.21%.

Selling, General and Administrative Expense. For the nine-month periods ended June 30, 2009 and 2008, selling, general and administrative expenses were $6,509,575 (12.07% of total revenue) and $7,046,743 (12.08%), respectively. This represents a year-over-year decrease of $537,168, or 7.6%. Nine-month SG&A declined year-over-year primarily for the same reasons mentioned above for the third quarter variances.

Loss Before Taxes. Janel reported a loss before taxes of $(691,072) for the nine months ended June 30, 2009 as compared to loss before taxes of $(366,584) for the nine months ended June 30, 2008. Charges related to amortization of intangible assets pertaining essentially to the Company's 2007 asset acquisition were $268,518 in the first nine months of 2009, $216,921, or 44.7%, less than the $485,439 of such charges in the first nine months of 2008. Interest expense during the first nine months of 2009 was $165,864, as compared to $87,437 in the first nine months of 2008, both pertaining principally to acquisition financing, (see Note 2 to financial statements).

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

Net Loss. Janel reported net loss available to common shareholders for the nine months ended June 30, 2009 of $(517,322), or $(0.028) per diluted share, down $211,472 as compared to a net loss available to common shareholders of $(305,850) or $(0.018) per diluted share, for the nine months ended June 30, 2008. For both the 2009 and 2008 nine-month periods, most if not all of the loss before taxes was attributable to the charge for amortization of intangible assets and the period's interest expense.

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, 2009, Janel's net working capital (current assets minus current liabilities) decreased by approximately $(731,000), or
(27.6)%, primarily reflecting decreases in accounts receivable and cash and cash equivalents of approximately $1,585,000 and $851,000, respectively, partially offset by a decrease in accounts payable of approximately $1,261,000 and a decrease in bank note payable of approximately $624,000. Janel's cash flow performance for the nine 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 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). At June 30, 2008, Janel had no remaining available borrowing under its line of credit. 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 expired on March 31, 2009. To finance the acquisition of certain assets of Ferrara International Logistics, Inc., the Company issued a non-interest bearing note payable, net of imputed interest, with payments of $435,000 in July 2009 and July 2011.

In May 2009, Janel, its subsidiaries and affiliated companies, together with James N. Jannello and Stephen Cesarski, entered into a forbearance agreement with J.P. Morgan Chase Bank, N.A. (the Agreement") to resolve a default on the part of the Company in: (a) making timely payment upon maturity of a promissory note due to the bank (the "Line Note") in the sum of $250,868.06 on March 31, 2009 (Messrs. Jannello and Cesarski are guarantors of payment of the Line Note); and (b) the Debt Service Coverage Ratio covenant in the Credit Agreement with the bank. The Agreement provides that the bank will refrain from exercising its collection rights against the company and guarantors, provided that the company delivers full payment of all principal, interest and late fees due to the bank on the Line Note, amounting to approximately $252,000.00, on or before July 31, 2009.

The Agreement also provides that beginning May 22, 2009, interest on the Line Note, and on a Term Note in the principal sum of $1,457,142.80, will accrue at a rate per annum which will equal the CD Floating Rate plus three percent (3.0%) based upon the actual number of days the principal is outstanding over a year of 360 days. The company is required to furnish the bank with a projection of monthly cash receipts and disbursements prepared and certified by the company's chief financial officer for the twelve (12) month period beginning July 2009. The company may not prepay any indebtedness to any person without the prior written consent of the bank. If the company or the guarantors default in payment of the amounts required to be paid to the bank under the terms of the Agreement or the loan documents, if a petition for bankruptcy under any chapter of the United States bankruptcy code or any other debt relief law against the company or the guarantors, or any other judicial action is taken with respect to the company or the guarantors by any creditor, if any representation or warranty made to the bank by the company in untrue, incorrect or misleading in any material respect, if any judgment is filed against or with respect to any collateral securing the company's obligations to the bank in excess of $100,000.00, or there is any substantial impairment of the prospect of the company's full ,satisfaction of its obligations to the bank or substantial impairment of the value of the collateral or the priority of the bank's security interest in or lien upon any collateral, the forbearance will be terminated, and all outstanding obligations will be immediately due and payable at the bank's sole option. However, the company will continue to be in technical default of the terms of the Term Note while it is not in compliance with the Debt Service Coverage Ratio covenant in the Credit Agreement with the bank.

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 2009 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, 2009, and its current expectations for the final quarter of fiscal 2009, Janel has revised its projection of gross revenue from its currently existing accounts and businesses for its fiscal year ending September 30, 2009. The Company now expects gross revenue for the year will decline by approximately 12-15% to approximately $70-$72 million. The majority of this year-over-year decline will be attributable to the lower freight rates passed through by Janel to its customers and secondarily to the lower level of overall freight shipments during the year as influenced by the ongoing recessionary economy.

Janel is continuing to implement its business plan and strategy to increase revenue and profitability through its fiscal year ending September 30, 2009 and beyond. The Company's strategy, some of which has been implemented, includes plans to: open additional branch offices both domestically and in Southeast Asia; increase profit margins by avoiding low-margin business; introduce additional revenue streams for its existing headquarters and branch locations; proceed with negotiations and due diligence with privately held transportation-related firms which may ultimately lead to their acquisition by the Company; expand its existing sales force by hiring additional commission-only sales representatives with established customer bases; increase its focus on growing revenue related to export activities; evaluate direct entry into the trucking and warehouse distribution business as a complement to the services already provided to existing customers; and continue its efforts to reduce current and prospective overhead and operating expenses, particularly with regard to the efficient integration of any additional offices or acquisitions.

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

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such difference may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily allowance for doubtful accounts, accruals for transportation and other direct costs, and accruals for cargo insurance. Management bases its estimates on historical experience and on various assumptions which are believed to be reasonable under the circumstances. We reevaluate these significant factors as facts and circumstances change. Historically, actual results have not differed significantly from our estimates. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2008.

Management believes that the nature of the Company's business is such that there are few, if any, complex challenges in accounting for operations. Revenue recognition is considered the critical accounting policy due to the complexity of arranging and managing global logistics and supply-chain management transactions.

Revenue Recognition

A. Full Service Cargo Transportation Logistics Management

Revenues are derived from airfreight, ocean freight and custom brokerage services. The Company is a non-asset-based carrier and accordingly does not own transportation assets. The Company generates the major portion of its air and ocean freight revenues by purchasing transportation services from direct carriers (airlines, steam ship lines, etc.) and reselling those services to its customers. By consolidating shipments from multiple customers and availing itself of its buying power, the Company is able to negotiate favorable rates from the direct carriers, while offering to its customers lower rates than the customers could obtain themselves.

Airfreight revenues include the charges for carrying the shipments when the Company acts as a freight consolidator. Ocean freight revenues include the charges for carrying the shipments when the Company acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case, the Company is acting as an indirect carrier. When acting as an indirect carrier, the Company will issue a House Airway Bill (HAWB) or a House Ocean Bill of Lading (HOBL) to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, the Company receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. At this point the risk of loss passes to the carrier, however, in order to claim for any such loss, the customer is first obligated to pay the freight charges.

Based upon the terms in the contract of carriage, revenues related to shipments where the Company issues a HAWB or a HOBL are recognized at the time the freight is tendered to the direct carrier. Costs related to the shipments are recognized at the same time.

Revenues realized when the Company acts as an agent for the shipper and does not issue a HAWB or a HOBL include only the commission and fees earned for the services performed. These revenues are recognized upon completion of the services.

Customs brokerage and other services 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.

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