UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





x
            Annual
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the fiscal year ended September 30, 2010
  or


 ̈
            Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the transition period from to ________.





Commission file number:  333-60608





JANEL
WORLD TRADE, LTD.


(Exact
name of registrant as specified in its charter)





NEVADA
              
              86-1005291(State
      or other jurisdiction
              
              (I.R.S.
      Employerof
      incorporation or organization)
              
              Identification
      No.)150-14 132ndAvenue, Jamaica, NY
              
              11434(Address
      of principal executive offices)
              
              (Zip
      Code)Registrant’s
      telephone number, including area code
              
              (718)
      527-3800





Securities
registered pursuant to Section 12(b) of the Act:





Title of Each Class
              
              Name of Each Exchange on Which
      RegisteredNone
              
              None





Securities
registered pursuant to Section 12(g) of the Act:





Title of
Class


Common
Stock, $0.001 par value





Indicate
by check mark if the registrant is a well-known seasoned issuer (as defined in
Rule 405 of the Act). Yes  ̈No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes  ̈No x





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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 xNo  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes   ̈   No
 ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.   ̈





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


Large
Accelerated Filer  ̈   Accelerated
Filer  ̈   Non-Accelerated
Filer  ̈   Smaller
Reporting Company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes  ̈No x





The
aggregate market value of Common Stock, $0.001 par value, held by non-affiliates
of the registrant based on the closing sales price of the Common Stock on the
Over-The-Counter (OTC) market on March 31, 2010, was $10,258,434.





The
number of shares of Common Stock outstanding as of December 27, 2010 was
20,997,368.





JANEL
WORLD TRADE, LTD.


2010
ANNUAL REPORT ON FORM 10-K





Table of
Contents





PagePART
      IItem
      1.
                                  Business
                                  2Item
      1A.
                                  Risk
      Factors
                                  6Item
      1B.
                                  Unresolved
      Staff Comments
                                  9Item
      2.
                                  Properties
                                  9Item
      3.
                                  Legal
      Proceedings
                                  10PART
      IIItem
      5.
                                  Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                  12Item
      6.
                                  Selected
      Financial Data
                                  13Item
      7.
                                  Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operations
                                  13Item
      8.
                                  Financial
      Statements and Supplementary Data
                                  20Item
      9.
                                  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosures
                                  20Item
      9A.
                                  Controls
      and Procedures
                                  20Item
      9B.
                                  Other
      Information
                                  21PART
      IIIItem
      10.
                                  Directors,
      Executive Officers and Corporate Governance
                                  22Item
      11.
                                  Executive
      Compensation
                                  25Item
      12.
                                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                  27Item
      13.
                                  Certain
      Relationships, Related Transactions and Director
    Independence
                                  29Item
      14.
                                  Principal
      Accountant Fees and Services
                                  29PART
      IVItem
      15.
                                  Exhibits
      and Financial Statement Schedules
                                  31Signatures
                                  33





PART
I





ITEM  1.               BUSINESS





Background





Janel World Trade, Ltd. (“we”, “the
Company” or “Janel”) provides logistics services for importers and exporters
worldwide, through its wholly owned subsidiaries.  Our principal
executive office is located at 150-14 132nd Avenue,
Jamaica, NY 11434, adjacent to the John F. Kennedy International Airport, and
our telephone number is 718-527-3800.  Information about us may be
obtained from our website www.janelgroup.net.  Copies
of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, are available free of charge on the website as soon as they
are filed with the Securities and Exchange Commission (SEC) through a link to
the SEC’s EDGAR reporting system.  Simply select the “Investors” menu
item, then click on the “SEC Filings” link.  The SEC’s EDGAR reporting
system can also be accessed directly at www.sec.gov.  The
Company was incorporated in Nevada in August 2000 as the successor to operations
commenced in 1975 – see history, below.





On
October 4, 2010 (subsequent to the period covered by this report), the Company
acquired the international freight forwarding assets of Ferrara International
Logistics, Inc., a New Jersey corporation (“FIL”) pursuant to the terms of an
Asset Purchase Agreement (the “Purchase Agreement”) between the Registrant and
FIL dated October 4, 2010. The purchase price paid and to be paid under the
terms of the Purchase Agreement consists of (i) cash in an amount equal to 70%
of the annual actual earnings before interest, taxes, depreciation and
amortization (EBITDA) achieved over the three 12-month periods following the
Closing (the “Earn-Out Period”) from revenues generated from the customers
included in the purchased assets, and (ii) 1,714,286 restricted shares of the
Registrant’s Common Stock valued at $600,000 based on the closing market price
of the stock on October 1, 2010 (the “Share Allocation”), issued pursuant to an
exemption from registration set forth in Section 4(2) of the Securities Act of
1933 and Regulation D promulgated there under.  The Share Allocation
is subject to decrease if actual EBITDA from revenues generated from the
customers included in the purchased assets during the Earn-Out Period is below
$2 million, and will be issued in three installments on October 4, 2011, 2012
and 2013.





Description of
Business





The
Company operates its business as two reportable segments.  Primarily
we are a non-asset based third party logistics services company, engaged in
full-service cargo transportation logistics management, including freight
forwarding – via air, ocean and land-based carriers, customs brokerage services,
and warehousing and distribution services.  Our second, smaller
segment is computer software sales, support and maintenance.





Our
traditional freight forwarding and customs brokerage activities include various
value-added logistics services, such as freight consolidation, insurance, a
direct client computer access interface, logistics planning, landed-cost
calculations, in-house computer tracking, product repackaging, online shipment
tracking and electronic billing. The value-added services and systems are
intended to help our customers streamline operations, reduce inventories,
increase the speed and reliability of worldwide deliveries and improve the
overall management and efficiency of the customer’s supply-chain
activities.





We
operate out of five leased locations in the United States: Jamaica
(headquarters) and Lynbrook (accounting) in New York; Elk Grove Village
(Chicago, Illinois); Forest Park (Atlanta, Georgia); and Inglewood (Los Angeles,
California).  Each Janel office is managed independently, with each
manager having over 20 years experience with the Company.  Our
California office has a sales person in Miami, Florida covering our sales
development efforts in Central America.  Janel Shanghai, Janel Hong
Kong and Janel China (Shenzhen) operate as independently owned franchises within
the Company’s network.





Janel
conducts its business through a network of Company-operated facilities and
independent agent relationships in most trading countries. During fiscal 2010
(Janel’s fiscal year ends September 30), the Company handled approximately
36,000 individual import and export shipments, predominately originating or
terminating in the United States, Europe and the Far East. Janel generated gross
revenue of approximately $88.5 million in fiscal 2010, $71.9 million in fiscal
2009 and $82.7 million in 2008. In fiscal 2010, approximately 72% of revenue
related to import activities, 4% to export, 20% to break-bulk and forwarding,
and 4% to warehousing, distribution and trucking. By operating segment, total
2010 revenue was comprised of $87.9 million for transportation logistics and
$57,000 for computer software.


- 2
-





History





Janel
commenced business in 1975 as Janel International Forwarding Company, Inc., a
New York corporation.  In 1976, the “Janel Group” was established in
New York City as a company primarily focused on quality import customs brokerage
and related transportation services. Janel’s initial customer base consisted of
importers and exporters of machines and machine parts, principally through what
was then West Germany. Shortly thereafter, the Company began expanding its
business scope into project transportation and high-value general cargo
forwarding.  In 1979, Janel expanded to the Midwest and West Coast,
opening branches in Chicago and Los Angeles, respectively. Additional locations
were opened in Atlanta (1995) and Miami (franchise agent)(1997). In 1980, C
and  N Corp. was organized as a Delaware corporation to be the
corporate parent of the various Janel Group operating subsidiaries.




In 1990,
Janel agreed to the use of its name by a Bangkok, Thailand office to facilitate
business operations during 1990 and 1992 in which it serviced a United States
cellular communications carrier. In 1997, Janel designed and manufactured
(through a subcontractor) electronic switching equipment shelters, which it sold
to the carrier together with consulting services on transportation logistics and
coordination for construction of cellular telephone sites in
Thailand.




In 2000,
Janel opened the office in Shanghai, China, followed by the opening of the Hong
Kong office in 2001 and the opening of an office in Shenzhen, China in
2003.




In June
and July 2002, the corporate parent, C and N Corp., entered into and completed a
reverse merger transaction with Wine Systems Design, Inc. in which it formally
changed its state of incorporation from Delaware to Nevada, changed its
corporate name to Janel World Trade, Ltd. and became a public company traded on
the Nasdaq Bulletin Board under the symbol “JLWT.”




In
October 2007, 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.




In July 2008, the Company acquired the
customs brokerage “book of business” of Ferrara International Logistics, Inc.
(Ferrara), consisting of books, records, forms, manuals, access codes, goodwill,
customer lists and contact information, telephone and advertising listings for
the expansion of the Company’s international integrated logistics transport
services business.




In October 2010, the Company acquired
the remaining assets of Ferrara (see above for a description of the FIL
transaction), consisting of the international freight forwarding services
associated with the movement of air and ocean shipments, warehousing (handling
and storage) and trucking.




Operations





Freight Forwarding Services.
As a cargo freight forwarder, Janel procures shipments from its customers,
consolidates shipments bound for a particular destination from a common place of
origin, determines the routing over which the consolidated shipment will move,
selects a carrier (air, ocean, land) serving that route on the basis of
departure time, available cargo capacity and rate, and books the consolidated
shipment for transportation with the selected carrier. In addition, Janel
prepares all required shipping documents, delivers the shipment to the
transporting carrier and, in many cases, and arranges clearance of the various
components of the shipment through customs at the final destination. If so
requested by its customers, Janel will also arrange for delivery of the
individual components of the consolidated shipment from the arrival terminal to
their intended consignees.




As a
result of its consolidation of customer shipments and its ongoing volume
relationships with numerous carriers, a freight forwarder is usually able to
obtain lower rates from such carriers than its customers could obtain directly.
Accordingly, a forwarder is generally able to offer its customers a lower rate
than would otherwise be available directly to the customer, providing the
forwarder with its profit opportunity as an intermediary between the carrier and
end-customer.  The forwarder’s gross profit is represented by the
difference between the rate it is charged by the carrier and the rate it, in
turn, charges its customer.


- 3
-




In
fulfilling its intermediary role, the forwarder can draw upon the transportation
assets and capabilities of any individual carrier or combination thereof
comprised of airlines and/or air cargo carriers, ocean shipping carriers and
land-based carriers, such as trucking companies.  Janel solicits
freight from its customers to fill containers, charging rates lower than the
rates that would be offered directly to its customers for similar type
shipments.




Customs Brokerage
Services.  As part of its integrated logistics services, Janel
provides customs brokerage clearance services in the United States and in most
foreign countries.  These services typically entail the preparation
and assembly of required documentation in many instances (Janel provides
in-house translation services into Chinese, Spanish or Italian), the advancement
of customs duties on behalf of importers, and the arrangement for the delivery
of goods after the customs clearance process is
completed.  Additionally, other services may be provided such as the
procurement and placement of surety bonds on behalf of importers and the
arrangement of bonded warehouse services, which allow importers to store goods
while deferring payment of customs duties until the goods are
delivered.




Janel has
over 30 years of experience clearing a wide range of goods through U.S. Customs,
from automobiles to heavy machinery to textiles. The Company currently has seven
fully licensed customs house brokers on staff. Janel is fully certified with
U.S. Customs for both ABI and AES transmissions. The Company has established an
active “correspondent Customs House Broker Network” of individuals specially
chosen for their ability to service customers throughout those locations in the
United States where Janel does not have its own branch office.  In
addition, the Company regularly works with a group of proven independent
attorneys, whose specialization in transportation, U.S. Customs law and
classifications has resulted in substantial savings to customers.




In July
2008, the Company acquired the customs brokerage “book of business” of Ferrara
International Logistics, Inc. (Ferrara), consisting of books, records, forms,
manuals, access codes, goodwill, customer lists and contact information,
telephone and advertising listings 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 a three-year
term agreement, which includes non-competition provisions.




Other Logistic
Services.  In addition to providing air, ocean and land freight
forwarding and customs brokerage services, Janel provides its import and export
customers with an array of fully integrated global logistics services. These
logistics services include warehousing and distribution services, door-to-door
freight pickup and delivery, cargo consolidation and de-consolidation, project
cargo management, insurance, direct client computer access interface, logistics
planning, landed-cost calculations, duty-drawback (recovery of previously paid
duties when goods are re-exported), in-house computer tracking, product
promotion, product packaging and repackaging utilizing Janel mobile packaging
machinery, domestic pickup and forwarding, “hazmat” certifications for hazardous
cargoes, letters of credit, language translation services, online shipment
tracking and electronic billing.




In
October 2007, Janel completed the acquisition of certain assets of Order
Logistics, Inc. (“OLI”), a Delaware corporation, comprised of proprietary
technology, intellectual property (including the brand name “Order Logistics”),
office locations and equipment, and customer relationships, for use in the
management and expansion of Janel’s international integrated logistics transport
services business. The Web-based supply-chain technology acquired by Janel
enables its customers to collaborate in the planning, execution, management and
tracking of shipments, financial settlement, procurement and quality control
activities on a worldwide basis. Janel filed a Form 8-K report regarding the
asset acquisition transaction with the SEC on October 22, 2007.




Information
Systems.  Janel’s information system hardware consists of an
IBM AS 400 system that is utilized by all of its offices in the United States.
The Company’s information technology capabilities also include DCS/HBU Logistics
software (a fully integrated freight forwarding and financial reporting system),
a T-1 online national network, recently acquired Web-based supply-chain
technology, and a nationwide in-house e-mail network. These systems enable Janel
to perform in-house computer tracking and to offer customers landed-cost
calculations and online Internet information availability via the Company’s
websites relative to the tracing and tracking of customer
shipments.  The fully integrated real time performance provides us
with accurate and timely financial information.


- 4
-





Customers, Sales and
Marketing





While Janel’s customer base represents
a multitude of diverse industry groups, the bulk of the Company’s shipments are
related to three principal markets: consumer wearing apparel and textiles,
machines and machine parts, and household appliances. During fiscal 2010, the
Company shipped goods and provided logistics services for approximately 1,700
individual accounts. Janel markets its global cargo transportation and
integrated logistics services worldwide. In markets where the Company does not
operate its own facilities, its direct sales efforts are supplemented by the
referral of business through one or more of the Company’s franchise or agent
relationships. We have two customers that each account for over 10% of our
revenues in fiscal 2010:  The Conair Corporation (which accounts for
approximately 15% of revenue) and H.H. Brown Shoe Company (which accounts for
approximately 12% of revenue).




James N. Jannello and William J. Lally,
the Company’s President, are principally responsible for the marketing of the
Company’s services. Each branch office manager is responsible for sales
activities in their U.S. local market area. Janel attempts to cultivate strong,
long-term relationships with its customers and referral sources through
high-quality service and management.




Competition





Competition within the freight
forwarding industry is intense, characterized by low economic barriers to entry
resulting in a large number of highly fragmented participants around the
world.  Janel competes for customers on the basis of its services and
capabilities against other providers ranging from multinational, multi-billion
dollar firms with hundreds of offices worldwide to regional and local freight
forwarders to “mom-and-pop” businesses with only one or a few
customers.  Many of our customers utilize more than one transportation
provider.





Employees





As of September 30, 2010, Janel
employed 69 people; 31 in its Jamaica, New York headquarters, and Lynbrook, New
York back office; six in Hillside, New Jersey; one in Champaign, Illinois; 11 in
Elk Grove Village, Illinois; 6 in Forest Park, Georgia; one in Miami, Florida;
and 13 in Inglewood, California. Approximately 54 of the Company’s employees are
engaged principally in operations, 10 in finance and administration and five in
sales, marketing and customer service. Janel is not a party to any collective
bargaining agreement and considers its relations with its employees to be
good.




To retain the services of highly
qualified, experienced and motivated employees, Janel management emphasizes an
incentive compensation program and adopted a stock option plan in December
2002.





Currency
Risks




The nature of Janel’s operations
requires it to deal with currencies other than the U.S. Dollar. This results in
the Company being exposed to the inherent risks of international currency
markets and governmental interference. A number of countries where Janel
maintains offices or agent relationships have currency control regulations that
influence its ability to hedge foreign currency exposure. The Company tries to
compensate for these exposures by accelerating international currency
settlements among those offices or agents.





Inflation





We do not believe that the relatively
moderate rates of inflation in the United States in recent years have had a
significant effect on our operations.




Seasonality and Shipping
Patterns




Historically, Janel’s quarterly
operating results have been subject to seasonal trends. The fiscal first quarter
has traditionally been the weakest and the fiscal third and fourth quarters have
traditionally been the strongest. This pattern has been the result of, or
influenced by, numerous factors including climate, national holidays, consumer
demand, economic conditions and other similar and subtle forces. This historical
seasonality has also been influenced by the growth and diversification of
Janel’s international network and service offerings.




A significant portion of Janel’s
revenues are derived from customers in industries with shipping patterns closely
tied to consumer demand and from customers with shipping patterns dependent upon
just-in-time production schedules. Many of Janel’s customers may ship a
significant portion of their goods at or near the end of a quarter. Therefore,
the timing of Janel’s revenues are, to a large degree, affected by factors
beyond the Company’s control, such as shifting consumer demand for retail goods
and manufacturing production delays. The Company cannot accurately forecast many
of these factors, nor can it estimate the relative impact of any particular
factor and, as a result, there is no assurance that historical patterns will
continue in the future.


- 5
-




Environmental
Issues




In the United States, Janel is subject
to federal, state and local provisions regulating the discharge of materials
into the environment or otherwise for the protection of the
environment.  Similar laws apply in many foreign jurisdictions in
which Janel operates. Although current operations have not been significantly
affected by compliance with these environmental laws, governments are becoming
increasingly sensitive to environmental issues and the Company cannot predict
what impact future environmental regulations may have on its business. Janel
does not anticipate making any material capital expenditures for environmental
control purposes during the remainder of the current or succeeding fiscal
years.





Regulation





With respect to Janel’s activities in
the air transportation industry in the United States, it is subject to
regulation by the Department of Transportation as an indirect air carrier. The
Company’s overseas offices and agents are licensed as freight forwarders in
their respective countries of operation. Janel is licensed in each of its
offices as a freight forwarder by the International Air Transport Association.
IATA is a voluntary association of airlines which prescribes certain operating
procedures for freight forwarders acting as agents of its
members.  The majority of the Company’s freight forwarding businesses
is conducted with airlines that are IATA members.




Janel is licensed as a customs broker
by the Department of Homeland Security Customs and Border Service. All U.S.
customs brokers are required to maintain prescribed records and are subject to
periodic audits by the Customs Service. In other jurisdictions in which Janel
performs clearance services, it is licensed by the appropriate governmental
authority.




Janel is registered as an Ocean
Transportation Intermediary and licensed as a NVOCC carrier (non-vessel
operating common carrier) by the Federal Maritime Commission. The FMC has
established certain qualifications for shipping agents, including certain surety
bonding requirements.




Janel does not believe that current
U.S. and foreign governmental regulations impose significant economic restraint
on its business operations.




Cargo
Liability




When acting as an airfreight
consolidator, Janel assumes a carrier’s liability for lost or damaged shipments.
This legal liability is typically limited by contract to the lower of the
transaction value or the released value ($9.07 per pound unless the customer
declares a higher value and pays a surcharge), excepted for loss or damages
caused by willful misconduct in the absence of an appropriate airway bill. The
airline that the Company utilizes to make the actual shipment is generally
liable to Janel in the same manner and to the same extent. When acting solely as
the agent of an airline or shipper, Janel does not assume any contractual
liability for loss or damage to shipments tendered to the airline.




When acting as an ocean freight
consolidator, Janel assumes a carrier’s liability for lost or damaged shipments.
This liability is strictly limited by contract to the lower of a transaction
value or the released value ($500 for package or customary freight unit unless
the customer declares a higher value and pays a surcharge). The steamship line
which Janel utilizes to make the actual shipment is generally liable to the
Company in the same manner and to the same extent. In its ocean freight
forwarding and customs clearance operations, Janel does not assume cargo
liability.




When providing warehouse and
distribution services, Janel limits its legal liability by contract to an amount
generally equal to the lower of fair value or $.50 per pound with a maximum of
$50 per “lot,” defined as the smallest unit that the warehouse is required to
track.  Upon payment of a surcharge for warehouse and distribution
services, Janel would assume additional liability.




The
Company maintains marine cargo insurance covering claims for losses attributable
to missing or damaged shipments for which it is legally liable. Janel also
maintains insurance coverage for the property of others stored in company
warehouse facilities.





ITEM
1A.             RISK
FACTORS





An
investment in our Common Stock is subject to risks inherent to our
business.  The material risks and uncertainties that management
believes affect the Company are described below.  Additional risks and
uncertainties that management is not aware of or focused on or that management
currently deems immaterial may also impair the Company’s business
operations.


- 6
-





Risk
Factors Relating To Our Business Generally





We
face aggressive competition from freight carriers with greater financial
resources and with companies that operate in areas that we plan on expanding to
in the future.





We face intense competition within the
freight industry on a local, regional, national and global
basis.  Many of our competitors have much larger facilities and far
greater financial resources than ours. In the freight forwarding industry, we
compete with a large and diverse group of freight forwarding concerns,
commercial air and ocean carriers and a large number of locally established
companies in geographic areas where we do business or intend to do business in
the future.  The loss of customers, agents or employees to competitors
could adversely impact our ability to maintain profitability.





Failure
to Comply with Governmental Permit and Licensing Requirements, Statutory and
Regulatory Requirements Could Result in Civil and Criminal Sanctions, Fines or
Revocation of Our Operating Authorities, and Changes in These Requirements Could
Adversely Affect Us.





Our operations are subject to various state, local, federal and foreign statutes
and regulations prohibiting various activities, that in many instances require
permits and licenses. Our failure to maintain compliance with applicable law and
regulations, required permits or licenses, or to comply with applicable
regulations, could result in substantial fines or revocation of our operating
authorities. Moreover, government deregulation efforts, “modernization” of the
regulations governing customs clearance and changes in the international trade
and tariff environment could require material expenditures or otherwise
adversely affect us.





Our
Ability to Serve Our Customers Depends on the Availability of Cargo Space from
Third Parties.





Our ability to serve our customers depends on the availability of air and sea
cargo space, including space on passenger and cargo airlines and ocean carriers
that service the transportation lanes that we use. Shortages of cargo space are
most likely to develop around holidays and in especially heavy transportation
lanes. In addition, available cargo space could be reduced as a result of
decreases in the number of passenger airlines or ocean carriers serving
particular shipment lanes at particular times. This could occur as a result of
economic conditions, transportation strikes, regulatory changes and other
factors beyond our control. Our future operating results could be adversely
affected by significant shortages of suitable cargo space and associated
increases in rates charged by passenger airlines or ocean carriers for cargo
space.




Terrorist
attacks and other acts of violence or war may affect any market on which our
shares trade, the markets in which we operate, our operations and our
profitability.





Terrorist acts or acts of war or armed
conflict could negatively affect our operations in a number of
ways.  Primarily, any of these acts could result in increased
volatility in or damage to the U.S. and worldwide financial markets and economy
and could lead to increased regulatory requirements with respect to the security
and safety of freight shipments and transportation.  They could also
result in a continuation of the current economic uncertainty in the United
States and abroad.  Acts of terrorism or armed conflict, and the
uncertainty caused by such conflicts, could cause an overall reduction in
worldwide sales of goods and corresponding shipments of goods.  This
would have a corresponding negative effect on our operations.  Also,
terrorist activities similar to the type experienced on September 11, 2001 could
result in another halt of trading of securities, which could also have an
adverse affect on the trading price of our shares and overall market
capitalization.





We
intend to continue expansion through acquisition.





We have grown through the acquisitions
of other freight forwarders and intend to continue our program of business
expansion through acquisitions.  There can be no assurance that
our:





·
            financial
      condition will be sufficient to support the funding needs of an expansion
      program;


·
            that
      acquisitions will be successfully consummated or will enhance
      profitability; or


- 7
-





·
            that
      any expansion opportunities will be available upon reasonable
      terms.





We expect future acquisitions to
encounter risks similar to the risks that past acquisitions have had such
as:





·
            difficulty
      in assimilating the operations and personnel of the acquired
      businesses;


·
            potential
      disruption of our ongoing business;


·
            the
      inability of management to realize the projected operational and financial
      benefits from the acquisition or to maximize our financial and strategic
      position through the successful incorporation of acquired personnel and
      clients;


·
            the
      maintenance of uniform standards, controls, procedures and policies;
      and


·
            the
      impairment of relationships with employees and clients as a result of any
      integration of new management
personnel.





We expect that any future acquisitions
could provide for consideration to be paid in cash, stock or a combination of
cash and stock.  There can be no assurance that any of these
acquisitions will be accomplished.  If an entity we acquire is not
efficiently or completely integrated with us, then our business, financial
condition and operating results could be materially adversely
affected.





Events
affecting the volume of international trade and international operations could
adversely affect our international operations.




Our international operations are
directly related to and dependent on the volume of international trade,
particularly trade between the United States and foreign nations. This trade, as
well as our international operations, is influenced by many factors,
including:


·
            economic
      and political conditions in the United States and
  abroad;


·
            major
      work stoppages;


·
            exchange
      controls, currency conversion and
fluctuations;


·
            war,
      other armed conflicts and terrorism;
and


·
            United
      States and foreign laws relating to tariffs, trade restrictions, foreign
      investment and taxation.





Trade-related events beyond our
control, such as a failure of various nations to reach or adopt international
trade agreements or an increase in bilateral or multilateral trade restrictions,
could have a material adverse effect on our international operations. Our
operations also depend on the availability of independent carriers that provide
cargo space for international operations.





We
are dependent upon key officers.





Our founder, James N. Jannello,
continues to serve as Executive Vice President and Chief Executive Officer, and
William J. Lally, who replaced the Company’s former President in May 2009,
continues to serve as President and Chief Operating Officer. We believe that our
success is highly dependent on the continuing efforts of Mr. Jannello and the
other executive officers and key employees, as well as our ability to attract
and retain other skilled managers and personnel. None of our officers or key
employees is subject to employment contracts. The loss of the services of any of
our key personnel could have a material adverse effect on us.





Economic
and other conditions in the markets in which we operate can affect demand for
services and results of operations.





Our future operating results are
dependent upon the economic environments of the markets in which we
operate.  Demand for our services could be adversely affected by
economic conditions in the industries of our customers.  Many of our
principal customers are in the fashion, household products, industrial products,
computer and electronics industries.  Adverse conditions in any one of
these industries or loss of the major customers in such industries could have a
material adverse impact upon us.  We expect the demand for our
services (and consequently our results of operations) to continue to be
sensitive to domestic and, increasingly, global economic conditions and other
factors beyond our control.


- 8
-


In addition, the transport of freight,
both domestically and internationally, is highly competitive and price
sensitive.  Changes in the volume of freight transported, shippers
preferences as to the timing of deliveries as a means to control shipping costs,
economic and political conditions, both in the United States and abroad, work
stoppages, United States and foreign laws relating to tariffs, trade
restrictions, foreign investments and taxation may all have significant impact
on our overall business, growth and profitability.




Janel’s
Officers and Directors control the Company.




The officers and directors of the
Company control the vote of approximately 41.8% of the outstanding shares of
Common Stock. The Company’s stock option plan provides 1,600,000 shares of
Common Stock regarding which options may be granted to key employees of the
Company. As a result, the officers and directors of the Company control the
election of the Company’s directors and will have the ability to control the
affairs of the Company.  Furthermore, they will, by virtue of their
control of a large majority of the voting shares, have controlling influence
over, among other things, the ability to amend the Company’s Certificate of
Incorporation and By-Laws or effect or preclude fundamental corporate
transactions involving the Company, including the acceptance or rejection of any
proposals relating to a merger of the Company or an acquisition of the Company
by another entity.





Risk
Factors Relating to our Articles of Incorporation and our Stock





The
liability of our directors is limited.





Our Articles of Incorporation limit
the liability of directors to the maximum extent permitted by Nevada
law.





It
is unlikely that we will issue dividends on our Common Stock in the foreseeable
future.





We have never declared or paid cash
dividends on our Common Stock and do not intend to pay dividends in the
foreseeable future. The payment of dividends in the future will be at the
discretion of our board of directors.




Our
stock price is subject to volatility.




Our Common Stock trades on the OTC
Bulletin Board under the symbol “JLWT”.  The market price of our
Common Stock has been subject to significant fluctuations. Such fluctuations, as
well as economic conditions generally, may adversely affect the market price of
our securities.




We
have no assurance of a continued public trading market.




Janel’s Common Stock is quoted in the
over-the-counter market on the OTC Bulletin Board and is subject to the
low-priced security or so-called “penny stock” rules that impose additional
sales practice requirements on broker-dealers who sell such
securities.  For any transaction involving a penny stock, the rules
require, among other things, the delivery, prior to the transaction, of a
disclosure schedule required by the SEC relating to the penny stock
market.  The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities.  Finally, monthly statements must be
sent disclosing recent price information for the penny stocks held in the
customer’s account. As a result, characterization as a “penny stock” can
adversely affect the market liquidity for the securities.





ITEM
1B.             UNRESOLVED STAFF
COMMENTS





Not
applicable.





ITEM
2.                PROPERTIES





As of September 30, 2010, Janel leased
office and warehouse space in 4 cities located in the United
States.  The executive offices in Jamaica, New York consist of
approximately5,000
square feetof
office space adjoined by 9,000 square feet of warehouse space, all subject to a
lease with a term ending January 31, 2015, with an annual base rent of $160,409.
Its administrative office in Lynbrook, New York is approximately 1,459 square
feet and is occupied under a lease which expires February 28, 2013, with an
annual rent of $45,290 through February 28, 2011, which increases at the rate of
3% per year of the lease. Janel’s Elk Grove Illinois office occupied
approximately 2,063 square feet with an additional 800 square feet of warehouse
space under a month-to-month lease. Janel’s Georgia location occupies
approximately 3,000 square feet of office and warehouse space, under a lease
which expires on August 31, 2012 with an annual rent of $31,368 which increases
to $32,304 on September 1, 2011. Janel’s Los Angeles office occupies
approximately 3,000 square feet of office under a lease which expires on June
30, 2016, with an annual rent of $83,100 through May 31, 2011, and increases
every eighteen (18) months based upon the CPI with a limit of up to 4.5% per
year. Certain of the leases also provide for annual increases based upon
increases in taxes or service charges.


- 9
-





ITEM
3.                LEGAL
PROCEEDINGS





Janel is occasionally subject to claims and lawsuits which typically arise in
the normal course of business. While the outcome of these claims cannot be
predicted with certainty, management does not believe that the outcome of any of
these legal matters will have a material adverse effect on the Company’s
financial position or results of operations.





Subsequent
to the October 2007 acquisition of certain assets of Order Logistics, Inc.
(“OLI”), a Delaware corporation, consisting principally of proprietary
technology, office locations and personnel, and customer relationships, Janel
learned that immediately prior to the closing of the acquisition, OLI had
entered into an undisclosed agreement with a third party (the “Settlement
Agreement”) which permitted that party to use OLI proprietary technology and
customer relationships being purchased by Janel, and to solicit OLI employees in
its South Carolina office. Janel believes that OLI’s failure to disclose the
Settlement Agreement prior to the closing of the asset acquisition was a
material violation of the OLI covenants, representations and warrantees set
forth in the October 18, 2007 Asset Purchase Agreement which has damaged the
value of the assets acquired by Janel.





On
February 11, 2008, Janel World Trade, Ltd. (“Janel”) 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 consisting of
proprietary technology, intellectual property (including the name “Order
Logistics”), office equipment, and customer lists for Janel’s exclusive use in
the management and expansion of Janel’s international integrated logistics
transport services business. The technology was acquired by Janel to enable it
to integrate the tracking of all of the different aspects of the production,
movement and delivery of goods, making the entire process electronically visible
in “real time” by both its managers and clients.





Janel
claims that the defendants made false and misleading statements of material
facts concerning the exclusivity of the rights to the assets which were offered
and 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.





In June
2010, the defendants filed a motion to dismiss the case based upon the
defendants’ claim that the complaint “fails to state a claim upon which relief
may be granted.” The Company filed a brief opposing the defendants’
motion.  In June 2010, the court entered an order denying the
defendants motions to dismiss in their entirety. In April 2009 the defendants
filed answers to the Company’s complaint, and counterclaimed that the Company
breached agreements and withheld payments due to the defendants. In May 2009,
the Company filed replies denying each of the counterclaims as
meritless.





In March
2010, Mr. Griffin and Janel entered into a settlement agreement in which Mr.
Griffin withdrew all of his counterclaims against Janel, and agreed to provide
both testimonial and documentary evidence as a witness for the Company. Janel
withdrew all of its claims in the lawsuit against Mr. Griffin, and issued
489,750 shares of Janel’s Common Stock in April and May 2010, without additional
consideration, to a limited list of persons formerly associated with World
Logistics, not including Mr. Griffin.


- 10
-





On
November 15, 2010 (subsequent to the period covered by this report) Mr. Francis
and Janel entered into a settlement agreement in which Mr. Francis withdrew all
of his counterclaims against Janel and Janel withdrew all of its claims in the
lawsuit against Mr. Francis, and issued 780,000 shares of Janel’s Common Stock
plus cash consideration of $23,359 payable in six equal monthly installments to
Mr. Francis.  As a result, on November 23, 2010 the Janel lawsuit
against World Logistics, Francis and Griffin was dismissed in its
entirety.


- 11
-


PART II





ITEM
      5.
            MARKET FOR THE
      REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY
SECURITIES





The Company’s Common Stock is traded on
the Over-The-Counter (OTC) market under the symbol JLWT.





The
following table sets forth the high and low prices for the Common Stock for each
full quarterly period during the fiscal years indicated.  The prices
reflect the high and low bid prices as available through the OTC market and
represent prices between dealers and do not reflect the retailer markups,
markdowns or commissions, and may not represent actual
transactions.  There have been no dividends declared.





Fiscal Year Ended September 30,
                      2010First
      Quarter
                    
                    High
                    
                    $
                    0.90Low
                    
                    $
                    0.42Second
      Quarter
                    
                    High
                    
                    $
                    0.85Low
                    
                    $
                    0.35Third
      Quarter
                    
                    High
                    
                    $
                    0.84Low
                    
                    $
                    0.25Fourth
      Quarter
                    
                    High
                    
                    $
                    0.75Low
                    
                    $
                    0.30Fiscal
      Year Ended September 30, 2009First
      Quarter
                    
                    High
                    
                    $
                    1.05Low
                    
                    $
                    0.33Second
      Quarter
                    
                    High
                    
                    $
                    1.01Low
                    
                    $
                    0.60Third
      Quarter
                    
                    High
                    
                    $
                    0.85Low
                    
                    $
                    0.41Fourth
      Quarter
                    
                    High
                    
                    $
                    1.25Low
                    
                    $
                    0.71




On December 13, 2010, the Company had
59 holders of record and approximately 353 beneficial holders of its shares of
Common Stock.  The closing price of the Common Stock on that date was
$0.32 per share.


- 12
-


ITEM
6.                SELECTED FINANCIAL
DATA





JANEL
WORLD TRADE, LTD.


(in
thousands, except per share data)





2010
                
                
                2009
                
                
                2008
                
                
                2007
                
                
                2006Statement
      of Operations Data:Revenue
                
                $
                88,486
                
                
                $
                71,853
                
                
                $
                82,745
                
                
                $
                74,947
                
                
                $
                77,220Costs
      and expenses
                
                
                87,425
                
                
                
                71,857
                
                
                
                82,495
                
                
                
                74,300
                
                
                
                76,811Depreciation
      and Amortization
                
                
                246
                
                
                
                553
                
                
                
                703
                
                
                
                99
                
                
                
                108Operating
      income (loss)
                
                $
                815
                
                
                $
                ( 557
                )
                
                $
                ( 453
                )
                
                $
                548
                
                
                $
                301Impairment
      loss
                
                
                -
                
                
                
                (1,066
                )
                
                
                (1,813
                )
                
                
                -
                
                
                
                -Net
      income (loss)
                
                $
                383
                
                
                $
                (1,241
                )
                
                $
                (1,645
                )
                
                $
                323
                
                
                $
                57Net
      income (loss) per common share
                
                $
                0.02
                
                
                $
                ( 0.07
                )
                
                $
                ( 0.10
                )
                
                $
                0.02
                
                
                $
                0.00Balance
      Sheet Data:Total
      assets
                
                $
                11,342
                
                
                $
                10,025
                
                
                $
                13,471
                
                
                $
                8,584
                
                
                $
                6,743Working
      capital
                
                
                1,832
                
                
                
                2,491
                
                
                
                2,651
                
                
                
                4,285
                
                
                
                3,609Current
      liabilities
                
                
                6,613
                
                
                
                4,308
                
                
                
                6,411
                
                
                
                4,032
                
                
                
                2,906Long-term
      liabilities
                
                
                92
                
                
                
                1,585
                
                
                
                2,189
                
                
                
                81
                
                
                
                85Shareholders’
      equity
                
                $
                4,637
                
                
                $
                4,132
                
                
                $
                4,871
                
                
                $
                4,471
                
                
                $
                3,751





ITEM
      7.
            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.  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
this Annual Report. 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 fiscal year ended September 30,
2010, as compared to the results of operations for the fiscal year ended
September 30, 2009 and the fiscal year ended September 30, 2009, as compared to
the results of operations for the fiscal year ended September 30,
2008.  The discussion and analysis then addresses the liquidity and
financial condition of the Company, and other matters.


- 13
-





Results of
Operations





Janel operates its business as two
reportable segments.  The first segment is comprised of full-service
cargo transportation logistics management, including freight forwarding via air,
ocean and land-based carriers, customs brokerage services, warehousing and
distribution services, and other value-added logistics services.  The
second segment is comprised of computer software sales, support and
maintenance.





Years
ended September 30, 2010 and 2009





Revenue.Total revenue for fiscal
2010 was $88,485,931, as compared to $71,852,806 for fiscal 2009, a
year-over-year increase of $16,633,125 or 23.2%.  For fiscal 2010,
transportation logistics accounted for revenue of $88,428,775, while computer
software revenue was $57,156.  The increase in total revenue was
primarily due to the increase in the Company’s transportation logistics segment
revenue which increased by 23.4% to $88,428,775 for fiscal 2010 from $71,663,175
for fiscal 2009.  This increase is mainly the result of the relative
strengthening of the U.S. economy year-over-year, and the consequent increase in
ocean fright and airfreight shipping activity by existing customers between the
two periods.  Net revenue (revenue minus forwarding expenses) in
fiscal 2010 was $8,913,678, an increase of $479,615 (5.7%) as compared to net
revenue of $8,434,063 in fiscal 2009.  Computer software-related
revenue during the period was negatively affected as a result of the Company’s
earlier closing of former World Logistics operations in South Carolina and from
the continuing cutbacks the Company has made in that business
segment.  The Company does not anticipate any future revenue from the
computer software business segment.





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.  For fiscal year 2010, forwarding expense increased by
$16,153,510, or 25.5%, to $79,572,253 as compared to $63,418,743 for fiscal year
2009.  Forwarding expense as a percentage of revenue increased to
89.9% for fiscal year 2010, from 88.3% for fiscal year 2009, a 1.6 percentage
point increase.  This increase is principally the result of ocean
freight shipments accounting for a higher proportion of the overall shipping
activity (versus airfreight) in the fiscal year 2010, as compared to the fiscal
year 2009.





Selling, General and Administrative
Expense.For
the fiscal years ended September 30, 2010 and 2009, selling, general and
administrative expenses were $7,852,123 (8.87% of revenue), and $8,574,504
(11.93% of revenue), respectively.  This represents a year-over-year
decrease of $722,381, or 8.4%.  The year-over-year absolute dollar
decrease in SG&A primarily resulted from cutbacks made as part of the
Company’s ongoing austerity program, during which personnel positions have been
eliminated, workweek reductions were implemented, and all additional overhead
expenses have been tightly monitored.  Primarily because of the higher
revenue base, SG&A as a percentage of revenue decreased by 25.65%, to 8.87%
in fiscal year ended 2010 from 11.93% in fiscal year ended 2009.





Income (Loss) Before
Taxes.Income before taxes in
fiscal year ended 2010 improved by $2,552,093 to $718,895, as compared to a loss
before taxes of ($1,833,198) in the fiscal year ended 2009.  The prior
fiscal year included nonrecurring pretax charges related to the amortization of
intangible assets and to impairment of identifiable intangible assets of
$197,072 and $1,066,240, respectively, the former primarily and the latter
wholly associated with the Company’s acquisition of Order Logistics, Inc. in
October 2007.





Income Taxes.The effective
income tax rate for the fiscal year ended 2010 was 46.7%.  In 2009 the
Company recorded an income tax credit with an effective income tax rate of
32.2%.  Both fiscal periods reflect the U.S. federal statutory rate
and applicable state income taxes.





Net Income (Loss).For the fiscal
year ended September 30, 2010, Janel’s net income improved by $1,624,093 to
$382,895 from a loss of ($1,241,198) in fiscal year ended September 30,
2009.  Net income available to common shareholders for fiscal year
ended 2010 was $367,849, or $0.019 per diluted share, up $1,624,047 as compared
to a net loss available to common shareholders of $(1,256,198), or $(0.07) per
diluted share, for the fiscal year ended 2009.  Included in the
improvement were the nonrecurring charges in 2009 relating to the amortization
and impairment of the Order Logistics, Inc. acquisition.


- 14
-





Years
ended September 30, 2009 and 2008




Revenue.Total
revenue for fiscal 2009 was $71,852,806, as compared to $82,745,383 for fiscal
2008, a year-over-year decrease of $(10,892,577), or (13.2)%. The decrease in
total revenue was primarily due to the decrease in the Company’s transportation
logistics segment as a result of a generally weaker overall environment in
domestic and international trade during fiscal 2009 in all of the principal
industry sectors served by the Company, which include wearing apparel and
finished garments, footwear, household appliances and electronics, and sporting
goods and accessories. Revenue in 2009 was also negatively affected by the
continuing substitution, when possible, of lower-priced ocean freight versus
airfreight by many of our customers. During fiscal 2009, the Company’s overall
business activities with existing clients declined, primarily as a reflection of
the weaker overall economic conditions. Net revenue (revenue minus forwarding
expenses) in fiscal 2009 was $8,434,063, a decrease of $(1,352,079), or (13.8)%,
as compared to $9,786,142 in fiscal 2008.




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. For fiscal year 2009, forwarding expense decreased by
$9,540,498, or 13.1%, to $63,418,743, as compared to $72,959,241 for fiscal year
2008.  The Company’s export business is conducted predominantly by
ocean freight. Continuing customer attention to and improvements in supply-chain
management and inventory planning resulted in a reduced reliance on and
frequency of time-critical shipments which require airfreight. These factors
have resulted in the increased use of lower-cost ocean freight. As a general
rule, ocean freight costs less than airfreight, and is marked up at a lower
percentage 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.




Selling, General and Administrative
Expense.Selling, general and administrative expense decreased
$962,227, or 10.1%, to $8,574,504 in fiscal 2009, as compared to $9,536,731 in
fiscal 2008. As a percentage of revenue, SG&A expense in fiscal 2009 was
11.93% as compared to 11.53% as a percentage of revenue in fiscal 2008. The
year-over-year dollar decrease in SG&A resulted from a general decrease in
most categories of SG&A expenses in fiscal 2009, including, in particular,
lower commissions earned on the lower level of logistics revenue.




Income (Loss) Before
Taxes.Loss before taxes in fiscal 2009 was $(1,833,198),
which represented a year-to-year improvement of $539,229, or 22.7%, as compared
to the loss before taxes of $(2,372,427) in fiscal 2008.  The
principal reasons for the 2009 loss were nonrecurring pretax charges of $197,072
and of $1,066,240 related to amortization of intangible assets and to impairment
of identifiable intangible assets, respectively, the former primarily and the
latter wholly associated with the Company’s acquisition of Order Logistics, Inc.
in October 2007.




Income Taxes (Credit).The
effective income tax rates in fiscal 2009 and fiscal 2008, a credit in each
year, are (32)% and (30)%, respectively.




Net Income (Loss).For fiscal 2009, Janel
reported a net loss of $(1,241,198), an improvement of $404,229, or 24.6%, as
compared to the reported a net loss of $(1,645,427) in fiscal 2008. Janel’s net
(loss) margin (net loss as a percent of net revenue) was (14.72)% in fiscal 2009
as compared to a net (loss) margin of (16.81)% in fiscal 2008. The principal
reasons for the improvement were the decrease in extraordinary charges related
to amortization and impairment taken in 2009 as compared to 2008, as noted
above.





Liquidity and Capital
Resources





General.  Our
ability to satisfy our liquidity requirements, which include satisfying our debt
obligations and funding working capital, day-to-day operating expenses and
capital expenditures depends upon our future performance, which is subject to
general economic conditions, competition and other factors, some of which are
beyond our control.  If we achieve significant near-term revenue
growth, we may experience a need for increased working capital financing as a
result of the difference between our collection cycles and the timing of our
payments to vendors.  Also, as a non-asset based freight forwarder, we
do not have a need for significant capital expenditure.





Janel’s
cash flow performance for the 2010 fiscal year is not necessarily indicative of
future cash flow performance.


- 15
-


As of
September 30, 2010, and compared with the prior fiscal year, the Company’s cash
and cash equivalents declined by $128,238, or 8.7%, to $1,354,912 from
$1,483,150, respectively. During the fiscal year ended September 30, 2010,
Janel’s net working capital (current assets minus current liabilities) decreased
by $659,033, or 26.5%, from $2,491,296 at September 30, 2009, to $1,832,263
at September 30, 2010.





Cash flows from operating
activities. Net cash provided by operating activities was $509,839
for the fiscal year ended September 30, 2010, compared to $713,898 for the
fiscal year ended September 30, 2009.  The change was principally
driven by a decrease in collections of outstanding accounts receivable, which
were more than offset by the change in our net profit, a federal tax refund and
a decrease in payments of outstanding accounts payable.





Cash flows from investing
activities.  Net cash used for investing activities, primarily
capital expenditures for property and equipment, were $17,031 and $12,492 for
the fiscal years ended September 30, 2010 and 2009, respectively.





Cash flows from financing
activities.  Net cash used for financing activities was
$621,046 for the fiscal year ended September 30, 2010, compared to $1,646,354
for the fiscal year ended September 30, 2009.  The cash used in
financing activities for fiscal year ended 2010, consisted primarily of
scheduled repayments under the term loan agreement with JPMorgan Chase
Bank.  The cash used in financing activities for fiscal year ended
2009, consisted primarily of repayments under the term and line note agreements
with JPMorgan Chase Bank.





Community National Bank Borrowing
Facility.  On August 3, 2010, the Company’s Janel Group of New
York, Inc. (“Janel New York”) subsidiary entered into a one year $3.5 million
revolving line of credit agreement with Community National Bank
(“CNB”).  The new credit facility (the “CNB Facility”) replaces Janel
New York’s previous term loan agreement with JPMorgan Chase Bank. The interest
rate of the CNB Facility is the prime rate plus 1%, with a minimum rate of
5%.  Under the CNB Facility, Janel New York may borrow up to $3.5
million limited to 80% of the Company’s aggregate outstanding eligible accounts
receivable.  On August 3, 2010, $951,190 of the CNB Facility was used
to pay off the outstanding balances under the term loan with JPMorgan Chase
Bank. The CNB Facility is for a one year term, expiring on July 31, 2011, and
obligations under the CNB Facility are secured by all of the assets of the
Company, and are guaranteed by the Company and James N. Jannello, the Company’s
Chief Executive Officer.  As of September 30, 2010, there were
outstanding borrowings of $951,336 under the CNB Facility (which represented
35.6% of the amount available thereunder) out of a total amount available for
borrowing under the CNB Facility of approximately $2,673,000.





Working Capital
Requirements.The Company’s cash needs are currently met by
the CNB Facility and cash on hand.  As of September 30, 2010, the
Company had $1,721,645 available under its $3.5 million CNB Facility and
$1,354,912 in cash from operations and cash on hand.  We believe that
our current financial resources will be sufficient to finance our operations and
obligations (current and long-term liabilities) for the long and short
terms.  However, our actual working capital needs for the long and
short terms will depend upon numerous factors, including our operating results,
the cost associated with growing the Company either internally or through
acquisition, competition, and the availability of a revolving credit facility,
none of which can be predicted with certainty.





Current
Outlook





Janel’s
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. The Company cannot accurately forecast many of these factors nor
can the Company estimate accurately the relative influence of any particular
factor and, as a result, there can be no assurance that historical patterns, if
any, will continue in future periods.





On
October 4, 2010 (subsequent to the period covered by this report), the Company
acquired the international freight forwarding assets of Ferrara International
Logistics, Inc., a New Jersey corporation (“FIL”) pursuant to the terms of an
Asset Purchase Agreement between the Company and FIL dated October 4,
2010.  Refer to Note 20 to the Consolidated Financial Statements for a
further description of this transaction.


- 16
-


In addition, Janel is progressing with
the implementation of its business plan and strategy to grow its revenue and
profitability for fiscal 2011 and beyond through other avenues. The Company’s
strategy for growth includes plans to: open, as warranted, additional branch
offices domestically and/or outside the continental United States; introduce
additional revenue streams for its existing headquarters and branch locations;
proceed with negotiations and due diligence with privately held
transportation-related firms which may ultimately lead to their acquisition by
the Company; expand its existing sales force by hiring additional
commission-only sales representatives with established customer bases; increase
its focus on growing revenue related to export activities; evaluate direct entry
into the trucking and warehouse distribution business as a complement to the
services already provided to existing customers; and continue its focus on
containing current and prospective overhead and operating expenses, particularly
with regard to the efficient integration of any additional offices or
acquisitions.





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 long-term 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.





Contractual Obligations and
Commitments





Contractual Obligations and
Commitments.  The following table presents, as of September 30,
2010, our significant fixed and determinable contractual obligations to third
parties by payment date.  Further discussion of the nature of each
obligation is included in Notes 10 and 14 to the consolidated financial
statements.





Payments Due by Fiscal Year
                      (in thousands)2011
                    
                    
                    2012
                    
                    
                    2013
                    
                    
                    2014
                    
                    
                    2015 and
                      thereafter
                    
                    
                    TotalAmounts
      reflected in Balance Sheet:Long
      term debt (1)
                    
                    $
                    14
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    14Other
      amounts not reflected in Balance Sheet:Operating
      leases (2)
                    
                    
                    321
                    
                    
                    
                    321
                    
                    
                    
                    263
                    
                    
                    
                    243
                    
                    
                    
                    199
                    
                    
                    $
                    1,347Total
                    
                    $
                    335
                    
                    
                    $
                    321
                    
                    
                    $
                    263
                    
                    
                    
                    243
                    
                    
                    
                    199
                    
                    
                    $
                    1,361





(1)
            Represents
      principal payments only.


(2)
            Operating
      leases represent future minimum lease payments under non-cancelable
      operating leases (primarily the rental of premises) at September 30,
      2010.  In accordance with accounting principles generally
      accepted in the United States, our operating leases are not recorded in
      our balance sheet.





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, accruals for cargo insurance, and
deferred income taxes.  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 more fully described in Note 1 of the Notes to the Consolidated Financial
Statements.





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.


- 17
-





Revenue
Recognition





A.
Full-Service Cargo Transportation Logistics Management





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





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





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





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





Customs brokerage and other services
involves provide multiple services at destination including clearing shipments
through customs by preparing required documentation, calculating and providing
for payment of duties and other charges on behalf of the customers, arranging
for any required inspections, and arranging for final delivery.  These
revenues are recognized upon completion of the services.





The movement of freight may require
multiple services. In most instances the Company may perform multiple services
including destination break bulk and value added services such as local
transportation, distribution services and logistics management.  Each
of these services has separate fee that is recognized as revenue upon completion
of the service.





Customers will frequently request an
all-inclusive rate for a set of services that is known in the industry as
“door-to-door services.”  In these cases, the customer is billed a
single rate for all services from pickup at origin to delivery.  The
allocation of revenue and expense among the components of services when provided
under an all inclusive rate are done in an objective manner on a fair value
basis in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue
Arrangements with Multiple Deliverables.”





B.
Computer Software Sales, Support and Maintenance





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


- 18
-




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


c.
            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.





Recent Accounting
Pronouncements




In June
2009, the FASB issued an accounting standard amending the accounting and
disclosure requirements for transfers of financial assets. This accounting
standard requires greater transparency and additional disclosures for transfers
of financial assets and the entity’s continuing involvement with them and
changes the requirements for derecognizing financial assets. In addition, it
eliminates the concept of a qualifying special-purpose entity (“QSPE”). This
accounting standard is effective for financial statements issued for fiscal
years beginning after November 15, 2009. The adoption of this ASU did not have a
material impact on our consolidated financial statements.





In June
2009, the FASB also issued an accounting standard amending the accounting and
disclosure requirements for the consolidation of variable interest entities
(“VIEs”). The elimination of the concept of a QSPE, as discussed above, removes
the exception from applying the consolidation guidance within this accounting
standard. Further, this accounting standard requires a company to perform a
qualitative analysis when determining whether or not it must consolidate a VIE.
It also requires a company to continuously reassess whether it must consolidate
a VIE. Additionally, it requires enhanced disclosures about a company’s
involvement with VIEs and any significant change in risk exposure due to that
involvement, as well as how its involvement with VIEs impacts the company’s
financial statements. Finally, a company will be required to disclose
significant judgments and assumptions used to determine whether or not to
consolidate a VIE. This accounting standard is effective for financial
statements issued for fiscal years beginning after November 15, 2009. The
adoption of this ASU did not have a material impact on our consolidated
financial statements.





In
December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of
Financial Assets. This Accounting Standards Update amends the FASB Accounting
Standards Codification for the issuance of FASB Statement No. 166, Accounting
for Transfers of Financial Assets—an amendment of FASB Statement No. 140. The
amendments in this Accounting Standards Update improve financial reporting by
eliminating the exceptions for qualifying special-purpose entities from the
consolidation guidance and the exception that permitted sale accounting for
certain mortgage securitizations when a transferor has not surrendered control
over the transferred financial assets. In addition, the amendments require
enhanced disclosures about the risks that a transferor continues to be exposed
to because of its continuing involvement in transferred financial assets.
Comparability and consistency in accounting for transferred financial assets
will also be improved through clarifications of the requirements for isolation
and limitations on portions of financial assets that are eligible for sale
accounting. The adoption of this ASU did not have a material impact on our
consolidated financial statements.


- 19
-


In
January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair
Value Measurements. This update provides amendments to Subtopic 820-10 that
requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A
reporting entity should disclose separately the amounts of significant transfers
in and out of Level 1 and Level 2 fair value measurements and describe the
reasons for the transfers. 2) Activity in Level 3 fair value measurements. In
the reconciliation for fair value measurements using significant unobservable
inputs (Level 3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements (that is, on a gross basis rather
than as one net number). This update provides amendments to Subtopic 820-10 that
clarifies existing disclosures as follows: 1) Level of disaggregation. A
reporting entity should provide fair value measurement disclosures for each
class of assets and liabilities. A class is often a subset of assets or
liabilities within a line item in the statement of financial position. A
reporting entity needs to use judgment in determining the appropriate classes of
assets and liabilities. 2) Disclosures about inputs and valuation techniques. A
reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements. Those disclosures are required for fair value measurements that
fall in either Level 2 or Level 3. The adoption of this guidance did not have a
material impact on our consolidated financial statements.





In
February 2010, FASB issued ASU No. 2010-9 –Amendments to Certain Recognition and
Disclosure Requirements. This update addresses certain implementation issues
related to an entity’s requirement to perform and disclose subsequent-events
procedures, removes the requirement that public companies disclose the date of
their financial statements in both issued and revised financial statements.
According to the FASB, the revised statements include those that have been
changed to correct an error or conform to a retrospective application of U.S.
GAAP. The adoption of this ASU did not have a material impact on our
consolidated financial statements.





In March
2010, FASB issued ASU No. 2010-11 –Scope Exception Related to Embedded Credit
Derivatives. Embedded credit-derivative features related only to the transfer of
credit risk in the form of subordination of one financial instrument to another
are not subject to potential bifurcation and separate accounting as clarified by
recently issued FASB guidance. Other embedded credit-derivative features are
required to be analyzed to determine whether they must be accounted for
separately. This update provides guidance on whether embedded credit-derivative
features in financial instruments issued by structures such as collateralized
debt obligations (CDOs) and synthetic CDOs are subject to bifurcation and
separate accounting. The guidance is effective at the beginning of a company’s
first fiscal quarter beginning after June 15, 2010. We do not expect the
adoption of this ASU to have a material impact on our consolidated financial
statements.





In April
2010, the FASB issued ASU No. 2010-13, Compensation – Stock Compensation: Effect
of Denominating the Exercise Price of a Share-Based Payment Award in the
Currency of the Market in Which the Underlying Equity Security Trades. ASU
2010-13 clarifies that a share-based payment award with an exercise price
denominated in the currency of a market in which a substantial portion of the
entity’s equity securities trades should not be considered to contain a
condition that is not a market, performance, or service condition. Therefore,
such an award should not be classified as a liability if it otherwise qualifies
as equity. ASU 2010-13 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010, with early adoption
permitted. We are currently evaluating the potential impact of this ASU;
however, we do not expect the adoption of this ASU to have a material impact on
our consolidated financial statements.





ITEM
8.               FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA





The financial statements and
supplementary data required by this Item 8 are included in our Consolidated
Financial Statements and set forth in the pages indicated in Item 15(a) of this
Annual Report.





ITEM
      9.
            CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES





None.





ITEM
9A.            CONTROLS AND
PROCEDURES





Evaluation
of Disclosure 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 us in the reports that we file or submit under the Securities and Exchange
Act of 1934, as amended (“Exchange Act”), 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, Chief
Operating Officer and Chief Financial Officer have evaluated this system of
disclosure controls and procedures as of the end of the period covered by this
annual report, and have concluded that the system is effective.


- 20
-





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management, including our Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer, is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of our financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles
(GAAP).  Internal control over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with US GAAP, and that the Company’s receipts
and expenditures are being made only in accordance with authorizations of
management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on
the financial statements. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with policies or procedures may
deteriorate.





Our Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on this evaluation, management concluded
that the Company’s internal control over financial reporting was effective as of
September 30, 2010.




This Annual Report does not include an
attestation report of our registered public accounting firm regarding internal
control over financial reporting.  Management’s report was not subject to attestation
by our registered public accounting firm pursuant to rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this Annual
Report.





Changes in Internal Control
Over Financial Reporting





There
have been no changes in our internal control over financial reporting during the
fourth quarter of fiscal 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





ITEM
9B.             OTHER
INFORMATION





None.


- 21
-


PART III





ITEM
10.              DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE





Directors and Executive
Officers





The executive officers and directors
of the Registrant are as follows:




Name
                    
                    Age
                    
                    PositionJames
      N. Jannello
                    
                    66
                    
                    Executive
      Vice President,
                      Chief
      Executive Officer and DirectorWilliam
      J. Lally
                    
                    57
                    
                    President,
      Chief Operating
                      Officer
      and DirectorNicholas
      V. Ferrara
                    
                    53
                    
                    DirectorNoel  J.
      Jannello
                    
                    39
                    
                    Director
      and Vice PresidentVincent
      Iacopella
                    
                    43
                    
                    DirectorRuth
      Werra
                    
                    69
                    
                    SecretaryPhilip
      J. Dubato
                    
                    54
                    
                    Executive
      Vice President of Finance and Chief Financial and Accounting
      Officer




James N. Jannello is the
Executive Vice President and a director, and has been the Chief Executive
Officer of Janel since it was founded in 1974.  Mr. Jannello’s
principal function is the overseeing of all of the Company’s operations,
management of the import side of the business and the setting of billing rates
and charges, and the maintenance of relationships with overseas agents
worldwide.  Mr. Jannello is a licensed Customs House Broker and the
father of Noel J. Jannello.




Mr. Jannello is well qualified to
serve as a member of the Company’s Board based on his extensive experience in
the freight forwarding business and his management position with the Company
since its founding.




William J. Lally has been the
President of Janel since May 2009.  Mr. Lally is the Chief Operating
Officer and is principally engaged in sales and marketing and also manages the
export side of the Company’s business. Mr. Lally has been employed by Janel
since 1975, first in New York and later in Chicago, Illinois.  Since
1979, Mr. Lally has served as the President of the Janel Group of Illinois,
Inc.  Mr. Lally became a director of the Company in July
2002.




Mr. Lally is well qualified to serve
as a member of the Company’s Board based on his extensive experience in the
freight forwarding business and his management positions within the Company
since 1975.




Nicholas V. Ferrara became a
director and employee of the Company on October 4, 2010 in conjunction with the
Company’s acquisition of the assets of Ferrara International Logistics, Inc. on
the same date (Refer to Note 20 to the Consolidated Financial
Statements.  Mr. Ferrara’s principal function is the management and
oversight of the Company’s New Jersey operations and sales
initiatives.  Prior to joining Janel, Mr. Ferrara was the President,
CEO and sole stockholder of Ferrara International Logistics, Inc. since
1994.




Mr. Ferrara is well qualified to
serve as a member of the Company’s Board based on his extensive experience in
the freight forwarding business.




Noel J. Jannello has been
employed by Janel since 1995, and has been a Vice President and operations
executive since 2003.  His principal function is the overseeing of the
Company’s U.S. operations.  Mr. Jannello is a graduate of Bradley
University (B.A., Advertising & Marketing, 1993), and is the son of James N.
Jannello.




Mr. Jannello is well qualified to
serve as a member of the Company’s Board based on his extensive experience in
the freight forwarding business.


- 22
-




Vincent Iacopella has been
the Managing Director of The Janel Group of Los Angeles since 2004, and was the
driving force in reorganizing the Los Angeles office into profitable
operation.  Prior to joining Janel, Mr. Iacopella was the Managing
Director and President of the California subsidiary of Delmar Logistics,
Inc.  Mr. Iacopella is a member of the board of directors of Los
Angeles Customs Brokers Freight Forwarders Association, and is the Secretary of
The Pacific Coast Council of Customs Brokers and Freight Forwarders
Associations, Inc.  Mr. Iacopella attended New York University, and is
a licensed customs broker.




Mr. Iacopella is well qualified to
serve as a member of the Company’s Board based on his extensive experience in
the freight forwarding business and leadership positions within the
industry.




Ruth Werra has been the
Secretary of Janel since 1994 and has been employed by the Company since 1975.
She is the office manager of the New York executive office and oversees the
maintenance of Janel’s corporate records.  Mrs. Werra also oversees
the entry and clearance of all personal effects shipments handled by the New
York office.




Philip J. Dubato has been the
Executive Vice President of Finance since May 2010.  Mr. Dubato is the
Chief Financial and Accounting Officer and oversees all accounting operations
for the Company.  From 1997 through 2007, Mr. Dubato was Vice
President and Chief Financial Officer, Secretary and Treasurer, and from 1998
through 2007 a director of Target Logistics, Inc., a domestic and international
freight forwarder publicly traded on the American Stock
Exchange.  From 2007 through May 2010, Mr. Dubato was a consultant in
the freight forwarding industry and a private investor.




Directors hold office until the next
annual meeting of shareholders and thereafter until their successors have been
duly elected and qualified. The executive officers are elected by the Board of
Directors on an annual basis and serve under the direction of the board.
Executive officers devote all of their business time to the Company’s
affairs.




Janel’s Board of Directors does not
yet include any “independent” directors, and the Company does not have any
standing Audit, Compensation or Nominating Committees.





Board
of Directors





Board of
Directors.  During the fiscal year ended September 30, 2010,
the Board of Directors met one time.  No incumbent director attended
fewer than 75% of the total number of meetings of the Board of Directors of the
Company held during the year.





Our Board
of Directors has not established any committees.  There is no Audit
Committee, Compensation Committee, or Nominating Committee, or any committee
performing similar functions, and no charters have been adopted with respect to
these functions.  The functions which would have been assigned to those
committees are undertaken by the entire board as a whole.





Audit Function.  In
its audit function, the Board oversees the Company’s accounting, financial
reporting and internal control functions and the audit of the Company’s
financial statements.  The audit responsibilities include, among
others, direct responsibility for hiring, firing, overseeing the work of and
determining the compensation for the Company’s independent
auditors.  The Board does not include an “audit committee financial
expert” (as defined in applicable Securities and Exchange Commission (SEC)
rules), because the Board believes that the benefits provided by the addition to
the Board of an individual who meets the SEC criteria at this time do not
justify the cost of retaining such an individual.





Nominating
Function.The Company’s full Board of Directors acts as a
nominating committee for the annual selection of its nominees for election as
directors.  The Board of Directors held one meeting during the past
fiscal year in order to make nominations for directors.  The Board
believes that the interests of the Company’s stockholders are served by
relegating the nominations process to the full Board.  While the Board
of Directors will consider nominees recommended by stockholders, it has not
actively solicited recommendations from the Company’s stockholders for nominees,
nor established any procedures for this purpose.  In considering
prospective nominees, the Board of Directors will consider the prospect’s
relevant financial and business experience, familiarity with and participation
in the Company’s industry and market area, the integrity and dedication of the
prospect and other factors the Board deems relevant.  The Board of
Directors will apply the same criteria to nominees recommended by stockholders
as those recommended by the full Board.


- 23
-





Compensation
Function.  The Company’s full Board of Directors acts as a
compensation committee for Company.  The Board believes that, due to
the size of the Company and its management team, the interests of the Company’s
stockholders are served by relegating the compensation process to the full
Board.





The
primary objective of our compensation and benefits program is to attract,
motivate and retain our quality executive talent, and support our business goals
within the limits arising out of the Company’s revenue and profitability.
 Our executive compensation structure is comprised of limited a small group
of only six executives, and the amount of their compensation is principally
based on the available funds and the achievement of our goals for growth and
profitability.





Our compensation approach is
necessarily tied to our stage of development as a company. Historically, our
Company is one of the smaller freight logistics businesses whose securities are
traded in the public market, with the result that our compensation program is
limited to cash compensation depending upon the funds available, and is lower
than the level of compensation of the public companies in our business group.
 Our Board of Directors reviews and approves executive compensation, bonus,
and benefits policies on a case-by-case basis, often based on the recommendation
of our Chief Executive Officer’s subjective assessment of the funding reasonably
available for executive compensation.





Director
Compensation





Our
directors are reimbursed for their reasonable expenses as members of the Board
of Directors, but they do not receive any compensation for serving as
such.





Code
of Ethics





Due to
its small size, the Company has not yet adopted a code of ethics.





Communications
with the Board





Any shareholder desiring to contact the
Board, or any specific director(s), may send written communications to: Board of
Directors (Attention: (Name(s) of director(s), as applicable)), c/o the
Company’s Secretary, 150-14 132nd Avenue,
Jamaica, New York 11434.  Any proper communication so received will be
processed by the Secretary.  If it is unclear from the communication
received whether it was intended or appropriate for the Board, the Secretary
will (subject to any applicable regulatory requirements) use his judgment to
determine whether such communication should be conveyed to the Board or, as
appropriate, to the member(s) of the Board named in the
communication.





Leadership
Structure and Risk Oversight





While the Board believes that there are
various structures which can provide successful leadership to the Company, the
Company’s executive functions are shared by the Company’s Chief executive
Officer and President/Chief Operating Officer.  Both individuals serve
on the Company’s Board of Directors and they, together with the other directors
bring experience, oversight and expertise to the management of the
Company.  The Board believes that, due to the small size of the
Company, this leadership structure best serves the Company and its
stockholders.





Management is responsible for the
day-to-day management of risks the Company faces, while the Board, as a whole
has responsibility for the oversight of risk management.  In its risk
oversight role, the Board has the responsibility to satisfy itself that the risk
management processes designed and implemented by management are adequate and
functioning as designed.  To do this, management discusses with the
Board members strategy and the risks facing the Company.


- 24
-


Compliance
with Section 16(a) of the Exchange Act





Section 16(a) of the Securities
Exchange Act, as amended, requires that the Company’s directors and executive
officers and each person who owns more than 10% of the Company’s Common Stock,
file with the Securities and Exchange Commission in a timely manner an initial
report of beneficial ownership and subsequent reports of changes in beneficial
ownership of the Shares.  During the month of October 2010, an initial
report of beneficial ownership was filed for the first time by our directors and
executive officers (James N. Jannello, William J. Lally, Nicholas V. Ferrara,
Noel J. Jannello, Vincent Iacopella, Ruth Werra and Philip J. Dubato) and by
Stephen P. Cesarski an owner of more than 10% of the Company’s
Shares.  In addition, Mr. Cesarski and Mr. Ferrara filed one report
each for changes in beneficial ownership.  To the Company’s knowledge,
all reports are now up to date although they were not filed on a timely
basis.





Audit
Committee Report





The Board of Directors in its audit
function has reviewed and discussed with management the annual audited financial
statements of the Company and its subsidiaries.





The Board of Directors in its audit
function has discussed with Paritz & Company, P.A., the independent auditors
for the Company for the fiscal year ended September 30, 2010, the matters
required to be discussed by Statement on Auditing Standards 61, as amended, as
adopted by the Public Company Accounting Oversight Board in Rule
3200T.  The Board has received the written disclosures and the letter
from the independent auditors required by Rule 3526, Communication with Audit
Committees Concerning Independence, as adopted by the Public Company Accounting
Oversight Board and has discussed with the independent auditors the independent
auditors’ independence.





Based on the foregoing review and
discussions, the Board of Directors approved the inclusion of the audited
financial statements in the Company’s Annual Report on Form 10-K for the fiscal
year ended September 30, 2010 for filing with the Securities and Exchange
Commission.





The
      Board of DirectorsJames
      N. Jannello
                William
      J. LallyNicholas
      V. Ferrara
                Noel
      J. JannelloVincent
      Iacopella





ITEM
      11.
            EXECUTIVE
      COMPENSATION





Introduction





The individuals who served as the
Company’s principal executive officers during the fiscal year ended September
30, 2010, two individuals (other than principal executive officers) who were the
Company’s most highly compensated executive officers as of September 30, 2010,
and up to two additional individuals who were the Company’s most highly
compensated employees whose total compensation during the fiscal year exceeded
$100,000 (listed in the Summary Compensation Table below), are referred to in
the following discussion as the “named executive officers”.  The
following compensation discussion and analysis, executive compensation tables
and related narrative describe the compensation awarded to, earned by or paid to
the named executive officers for services provided to the Company during the
fiscal year ended September 30, 2010.





Employment
Agreements





We have not entered into any written
employment agreements with our officers and directors. We do not contemplate
entering into any employment agreements until such time as the Board of
Directors concludes that such agreements would be appropriate under the
circumstances.





Long-Term
Incentive Plan Awards





We do not have any long-term incentive
plans that provide compensation intended to serve as incentive for
performance.





The Company has a defined contribution
profit sharing plan covering eligible employees.  The Plan is
voluntary with respect to participation and is subject to the provisions of
ERISA.  The plan provides for participant contributions of up to 25%
of annual compensation, as defined by the plan.  The Company
contributes an amount equal to 25% of the participant’s first 5% of
contributions.  The Company may contribute an additional amount from
its profits as authorized by the Board of Directors.  The Company made
no additional contributions in 2010.  Participants in the plan are
vested over six years from hire date in the Company’s contributions, plus actual
earnings thereon.  The Company’s 2010 contributions to the plan on
behalf of named executive officers are included in the “All Other Compensation”
column in the “Summary Compensation Table” below.


- 25
-





Summary
Compensation Table




The following table sets forth
information regarding the total compensation paid or earned by the named
executive officers as compensation for their services in all capacities during
the fiscal years ended September 30, 2010 and 2009.





Name and
                                          Principal Position
                                          (a)
                                        
                                        Year
                                          (b)
                                        
                                        Base Salary
                                          $
                                          (c)
                                        
                                        
                                        Bonus
                                          $
                                          (d)
                                        
                                        
                                        Stock
                                          Awards
                                          $
                                          (e)
                                        
                                        
                                        Option
                                          Awards
                                          $
                                          (f)
                                        
                                        
                                        All Other
                                          Compensation
                                          $(i)
                                        
                                        
                                        Total
                                          $
                                          (j)James
      N. Jannello,
                                        
                                        2010
                                        
                                        
                                        170,404
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        53,288
                                        (1)
                                        
                                        
                                        223,693EVP
      and CEO
                                        
                                        2009
                                        
                                        
                                        185,000
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        47,088
                                        (1)
                                        
                                        
                                        232,088Philip
      J. Dubato,
                                        
                                        2010
                                        
                                        
                                        66,298
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        6,871
                                        (2)
                                        
                                        
                                        73,169EVP
      of Finance and CFO
                                        
                                        2009
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        (2)
                                        
                                        
                                        0William
      J. Lally
                                        
                                        2010
                                        
                                        
                                        90,537
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        15,229
                                        (3)
                                        
                                        
                                        105,766President
                                        
                                        2009
                                        
                                        
                                        99,712
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        21,183
                                        (3)
                                        
                                        
                                        120,895Noel
      J. Jannello
                                        
                                        2010
                                        
                                        
                                        173,385
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        29,350
                                        (4)
                                        
                                        
                                        202,735Vice
      President
                                        
                                        2009
                                        
                                        
                                        182,180
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        27,377
                                        (4)
                                        
                                        
                                        209,557Vincent
      Iacopella
                                        
                                        2010
                                        
                                        
                                        114,038
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        12,393
                                        (5)
                                        
                                        
                                        126,430Director
                                        
                                        2009
                                        
                                        
                                        127,662
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        13,955
                                        (5)
                                        
                                        
                                        141,617











(1)
            Includes
      $15,995 and $12,953 of medical insurance premiums paid on behalf of such
      individual for each of the fiscal years ended 2010 and 2009, respectively,
      $35,335 and $31,974 for automobile and automobile-related costs, including
      insurance, incurred on behalf of such individual, for each of the fiscal
      years ended 2010 and 2009, respectively, and $1,958 and $2,161 of 401K
      paid on behalf of such individual for each of the fiscal years ended 2010
      and 2009, respectively.




(2)
            Includes
      $4,581 of medical insurance premiums reimbursed on behalf of such
      individual and $2,290 for an automobile
  allowance.




(3)
            Includes
      $15,229 and $21,183 for automobile and automobile-related costs, including
      insurance, incurred on behalf of such individual for each of the fiscal
      years ended 2010 and 2009,
respectively.




(4)
            Includes
      $6,600 and $6,000 of medical insurance premiums paid on behalf of such
      individual for each of the fiscal years ended 2010 and 2009, respectively,
      $21,476 and $19,973 for automobile and automobile-related costs, including
      insurance, incurred on behalf of such individual, for each of the fiscal
      years ended 2010 and 2009, respectively, and $1,274 and $1,404, of 401K
      paid on behalf of such individual for the fiscal year ended 2010 and 2009,
      respectively.




(5)
            Includes
      $849 and $2,215 of medical insurance premiums paid on behalf of such
      individual for each of the fiscal years ended 2010 and 2009, respectively,
      $11,543 and $11,670 for automobile and automobile-related costs, including
      insurance, incurred on behalf of such individual, for each of the fiscal
      years ended 2010 and 2009, respectively, and $70 of 401K paid on behalf of
      such individual for the fiscal year ended
2009.




Savings
and Stock Option Plans




401(k) and Profit-Sharing
Plan.




The Company maintains an Internal
Revenue Code Section 401(k) salary deferral savings and profit-sharing plan (the
“Plan”) for all of its eligible employees who have been employed for at least
one year and are at least 21 years old.  Subject to certain
limitations, the Plan allows participants to voluntarily contribute up to 15% of
their pay on a pre-tax basis.  Under the Plan, the Company may make
matching contributions on behalf of the pre-tax contributions made up to a
maximum of 25% of the participant’s first 5% of compensation contributed as
Elective Deferrals in the year. All participants are fully vested in their
accounts in the Plan with respect to their salary deferral contributions, and
are vested in company matching contributions at the rate of 20% after two years
of service, 40% after three years of service, 60% after four years of service,
80% after five years of service, with 100% vesting after six years of
service.


- 26
-


Stock Option
Plan.




On December 12, 2002, Janel’s Board of
Directors and majority of its shareholders approved and adopted the Janel World
Trade, Ltd. Stock Option Incentive Plan (the “Option Plan”) providing for
options to purchase up to 1,600,000 shares of Common Stock for issuance to
valued employees and consultants of the Company as an incentive for superior
performance.




To date, 23,750 options have been
granted under the Option Plan. The Option Plan is administered by the Board of
Directors, which is authorized to grant incentive stock options and non
qualified stock options to selected employees and consultants of the Company and
to determine the participants, the number of options to be granted and other
terms and provisions of each option.




The exercise price of any incentive
stock option or nonqualified option granted under the Option Plan may not be
less than 100% of the fair market value of the shares of Common Stock of the
Company at the time of the grant.  In the case of incentive stock
options granted to holders of more than 10% of the voting power of the Company,
the exercise price may not be less than 110% of the fair market
value.




Under the terms of the Option Plan, the
aggregate fair market value (determined at the time of grant) of shares issuable
to any one recipient upon exercise of incentive stock options exercisable for
the first time during any one calendar year may not exceed
$100,000.  Options granted under the Option Plan may be exercisable in
either one, two or three equal annual installments at the discretion of the
Board of Directors, but in no event may a stock option be exercisable prior to
the expiration of six months from the date of grant, unless the grantee dies or
becomes disabled prior thereto.  Stock options granted under the
Option Plan have a maximum term of 10 years from the date of grant, except that
with respect to incentive stock options granted to an employee who, at the time
of the grant, is a holder of more than 10% of the voting power of the Company,
the stock option shall expire not more than five years from the date of the
grant.  The option price must be paid in full on the date of exercise
and is payable in cash or in shares of Common Stock having a fair market value
on the date the option is exercised equal to the option price, as determined by
the Board of Directors.




If a grantee’s employment by, or
provision of services to, the Company shall be terminated,  the Board
of Directors may, in its discretion, permit the exercise of stock options for a
period not to exceed one year following such termination
of  employment  with respect to incentive  stock
options and for a period not to extend beyond the expiration date with respect
to non qualified options,  except that no incentive stock option may
be exercised after three months following the grantee’s termination of
employment, unless due to death or permanent disability, in which case the
option may be exercised  for a period of up to one year following such
termination.





ITEM
      12.
            SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS





The following tables set forth
information concerning beneficial ownership of shares of Common Stock
outstanding as of September 30, 2010.  For purposes of calculating
beneficial ownership, Rule 13d-3 of the Securities Exchange Act requires
inclusion of shares of Common Stock that may be acquired within sixty days of
the stated date.  Unless otherwise indicated in the footnotes to a
table, beneficial ownership of shares represents sole voting and investment
power with respect to those shares.





Certain
Beneficial Owners





The following table reflects the names
and addresses of the only persons known to the Company to be the beneficial
owners of 5% or more of the Shares outstanding as September 30,
2010.


- 27
-





Name and Address
                    of Beneficial Owner
                  
                  Shares
                    Beneficially Owned
                  
                  
                  Percent
                    of ClassJames
      N. Jannello
                    150-14
      132nd Avenue
                    Jamaica,
      NY 11434
                  
                  
                  5,500,000
                  (1)
                  
                  
                  26.19
                  %Stephen
      P. Cesarski
                    150-14
      132nd Avenue
                    Jamaica,
      NY 11434
                  
                  
                  5,490,000
                  (1)
                  
                  
                  26.15
                  %Nicholas
      V. Ferrara
                    1319
      North Broad Street
                    Hillside,
      NJ 07205
                  
                  
                  2,234,947
                  (1)
                  
                  
                  10.64
                  %







(1)
All of these shares are owned of record.





Management





The following table sets forth
information with respect to the beneficial ownership of the shares of Common
Stock as of September 30, 2010 by (i) each executive officer of the Company
named in the Summary Compensation Table included elsewhere in this Annual
Report, (ii) each current director and each nominee for election as a director
and (iii) all directors and executive officers of the Company as a
group.  An asterisk (*) indicates ownership of less than
1%.





Name of
                          Beneficial Owner
                        
                        Shares
                          Beneficially Owned
                        
                        
                        Percent
                          of ClassJames
      N. Jannello
                        
                        
                        5,500,000
                        
                        
                        
                        26.19
                        %William
      J. Lally
                        
                        
                        1,000,000
                        
                        
                        
                        4.76
                        %Nicholas
      V. Ferrara
                        
                        
                        2,234,947
                        
                        
                        
                        10.64
                        %Noel
      J. Jannello
                        
                        
                        25,000
                        
                        
                        
                        *Vincent
      Iacopella
                        
                        
                        0
                        
                        
                        
                        *Ruth
      Werra
                        
                        
                        25,000
                        
                        
                        
                        *Philip
      J. Dubato
                        
                        
                        0
                        
                        
                        
                        *All
      directors and executive officersas
      a group (7 persons)
                        
                        
                        8,784,947
                        
                        
                        
                        41.84
                        %





Equity
Compensation Plan Information





The following table provides
information, as of September 30, 2010, with respect to all compensation
arrangements maintained by the Company under which shares of Common Stock may be
issued:





Plan Category
                            
                            Number of securities
                              to be issued upon
                              exercise of
                              outstanding options,
                              warrants and rights
                            
                            
                            Weighted-average exercise
                              price of outstanding
                              options, warrants and
                              rights
                            
                            
                            Number of securities
                              remaining available for
                              future issuance under
                              equity compensation plans
                              (excluding securities
                              reflected in column (a)(a)
                            
                            
                            (b)
                            
                            
                            (c)Equity
      compensation plans approved by security holders
                            
                            
                            23,750
                            *
                            
                            $
                            1.00
                            
                            
                            
                            1,576,250
                            *Equity
      compensation plans not approved by security holders
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            0Total
                            
                            
                            23,750
                            *
                            
                            $
                            1.00
                            
                            
                            
                            1,576,250
                            *





*    Shares are
issuable pursuant to options granted under the Company’s 2002 Option
Plan.


- 28
-





ITEM
      13.
            CERTAIN RELATIONSHIPS,
      RELATED TRANSACTIONS AND DIRECTOR
  INDEPENDENCE





Janel’s Board of Directors does not yet
include any “independent” directors.




On October 4, 2010 (subsequent to the
period covered by this report), the Company acquired the international freight
forwarding assets of Ferrara International Logistics, Inc., a New Jersey
corporation (“FIL”) pursuant to the terms of an Asset Purchase Agreement (the
“Purchase Agreement”) between the Company and FIL, a company owned by Nicholas
V. Ferrara, dated October 4, 2010.  Mr. Ferrara became a director of
the Company following the closing. The purchase price paid and to be paid
under the terms of the Purchase Agreement consists of (i) cash in an amount
equal to 70% of the annual actual earnings before interest, taxes, depreciation
and amortization (EBITDA) achieved over the three 12-month periods following the
Closing (the “Earn-Out Period”) from revenues generated from the customers
included in the purchased assets, and (ii) 1,714,286 restricted shares of the
Company’s Common Stock valued at $600,000 based on the closing market price of
the stock on October 1, 2010 (the “Share Allocation”), issued pursuant to an
exemption from registration set forth in Section 4(2) of the Securities Act of
1933 and Regulation D promulgated thereunder.  The Share Allocation is
subject to decrease if actual EBITDA from revenues generated from the customers
included in the purchased assets during the Earn-Out Period is below $2 million,
and will be issued in three installments on October 4, 2011, 2012 and
2013.




Furthermore, in connection with the
2008 purchase by the Company from FIL of FIL’s customs brokerage business, the
Company deferred payment of $435,000 of the purchase price until 2011. On
October 4, 2010, the Company paid this outstanding amount in
full.





ITEM
      14.
            PRINCIPAL ACCOUNTANT
      FEES AND SERVICES





The firm
of Paritz & Company, P.A. (the “Auditor”) has served as the Company’s
independent public accountants since 2002.  The following is a
description of the fees billed to the Company by the Auditor during the fiscal
years ended September 30, 2010 and 2009:





Audit
Fees





Audit
fees include fees paid by the Company to the Auditor in connection with the
annual audit of the Company’s consolidated financial statements, and review of
the Company’s interim financial statements.  Audit fees also include
fees for services performed by the Auditor that are closely related to the audit
and in many cases could only be provided by the Auditor.  Such
services include consents related to SEC and other regulatory
filings.  The aggregate fees billed to the Company by the Auditor for
audit services rendered to the Company for the years ended September 30, 2010
and 2009 totaled $62,137 and $55,000, respectively.





Audit
Related Fees





Audit
related services include due diligence services related to accounting
consultations, internal control reviews, and employee benefit plan
audits.  The Auditor did not bill any fees to the Company for audit
related services rendered to the Company for the years ended September 30, 2010
and 2009.





Tax
Fees





Tax fees
include corporate tax compliance, counsel and advisory services.  The
aggregate fees billed to the Company by the Auditor for the tax related services
rendered to the Company for the years ended September 30, 2010 and 2009 totaled
$7,050 and $5,000, respectively.





All
Other Fees





The
aggregate fees billed to the Company by the Auditor for all other fees for the
year ended September 30, 2010 and 2009 totaled $4,750 and $5,612,
respectively.  These “other fees” were for services related to
abandoned acquisitions.





Approval
of Independent Auditor Services and Fees





The
Company’s Chief Executive Officer and Chief Financial Officer review all fees
charged by the Company’s independent auditors, and actively monitor the
relationship between audit and non-audit services provided.  The Chief
Executive Officer must pre-approve all audit and non-audit services provided by
the Company’s independent auditors and fees charged.


- 29
-


PART IV





ITEM
      15.
            EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES





(a)  1.     Financial
Statements





PageReport
      of Registered Independent Public Accounting Firm
                      
                      F-1Consolidated
      Balance Sheets as of September 30, 2010 and 2009
                      
                      F-2Consolidated
      Statements of Operations for the Years Ended September 30, 2010, 2009, and
      2008
                      
                      F-3Consolidated
      Statements of Shareholders’ Equity for the Years EndedSeptember
      30, 2010, 2009, and 2008Consolidated
      Statements of Cash Flows for the Years Ended September 30, 2010, 2009, and
      2008
                      
                      F-5Notes
      to Consolidated Financial Statements
                      
                      F-6





(a)  2.     Financial Statement
Schedules





Schedule
      II - Schedule of Valuation and Qualifying Accounts
                  
                  S-1





All other
schedules are omitted because they are not applicable, are not required, or
because the required information is included in the consolidated financial
statements or notes thereto.





(a)  3.     Exhibits required to be
filed by Item 601 of Regulation S-K





Exhibit
No.


3.1
            Articles
      of Incorporation of Wine Systems Design, Inc. (predecessor name)
      (incorporated by reference to Exhibit 3A to Wine Systems Design, Inc.
      (predecessor name) Registration Statement on Form SB-2 filed May 10, 2001,
      File No. 333-60608)


3.2
            Restated
      and Amended By-Laws of Janel World Trade,
Ltd.


3.3
            Certificate
      of Designation of Series A Convertible Preferred Stock (incorporated by
      reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed
      January 17, 2007 File No.
333-60608)


3.4
            Certificate
      of Designations of Series B Convertible Stock (incorporated by reference
      to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October
      22, 2007, File No. 333-60608)


10.1
            Janel
      Stock Option Incentive Plan adopted December 12, 2002 (incorporated by
      reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K
      Report for the year ended September 30, 2002, File No.
      333-60608)


10.2
            Asset
      Purchase Agreement between Janel World Trade, Ltd. and Ferrara
      International Logistics, Inc. dated October 4, 2010 (incorporated by
      reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed October 8, 2010, File No.
333-60608)


10.3
            Sales
      Agency and Service Agreement between Janel World Trade, Ltd. and Ferrara
      International Logistics, Inc. entered into May 19, 2008 (incorporated by
      reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K
      filed May 22, 2008, File No.
333-60608)


10.4
            Promissory
      Note dated August 2, 2010 made by Registrant’s subsidiary, The Janel Group
      of New York, Inc., payable to Community National
  Bank*


10.5
            Business
      Loan Agreement dated August 2, 2010 between Registrant’s subsidiary, The
      Janel Group of New York, Inc., and Community National
  Bank*


10.6
            Commercial
      Guaranty dated August 2, 2010 made by Registrant with respect to the
      obligation of Registrant’s subsidiary, The Janel Group of New York, Inc.,
      to Community National Bank*


10.7
            Commercial
      Security Agreement dated August 2, 2010 made by Registrant for the benefit
      of Community National Bank, securing Registrant’s obligations under its
      guaranty of the obligation of Registrant’s subsidiary, The Janel Group of
      New York, Inc., to Community National
Bank*


21
            Subsidiaries
      of the Registrant*


23
            Consent of Paritz & Company,
      P.A.*


- 30
-


31.1
            Rule 13a-14(a)/15d-14(a)
      Certification of Chief Executive
Officer*


31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Operating
    Officer*


31.3
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer*


32.1
            Section
      1350 Certifications*


99.1
            Press
      release dated December 29,
2010*


- 31
-


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, thereto duly authorized.





JANEL
      WORLD TRADE, LTD..Date:  December
      28, 2010
              By:
              /s/ James N. JannelloJames
      N. JannelloExecutive
      Vice President andChief
      Executive Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.





Signature
                
                Title
                
                Date/s/ James N. Jannello
                
                Executive
      Vice President, Chief
                
                December
      28, 2010James
      N. Jannello
                
                Executive
      Officer and Director/s/ William J. Lally
                
                President,
      Chief Operating
                
                December
      28, 2010William
      J. Lally
                
                Officer
      and Director/s/ Philip J. Dubato
                
                Executive
      Vice President of
                
                December
      28, 2010Philip
      J. Dubato
                
                Finance
      and Chief Financialand
      Accounting Officer/s/ Noel J. Jannello
                
                Vice
      President and Director
                
                December
      28, 2010Noel
      J. Jannello/s/ Vincent Iacopella
                
                Director
                
                December
      28, 2010Vincent
      Iacopella/s/ Nicholas V. Ferrara
                
                Director
                
                December
      28, 2010Nicholas
      V. Ferrara/s/ Ruth Werra
                
                Secretary
                
                December
      28, 2010Ruth
      Werra


- 32
-




Paritz
& Company, P.A.
  JANEL
      WORLD TRADE LTD. AND SUBSIDIARIESCONSOLIDATED
      FINANCIAL STATEMENTSWITHREPORT
      OF INDEPENDENT REGISTERED ACCOUNTING FIRM
 
 
  Paritz
      & Company, P.A.
                    15
      Warren Street, Suite 25
                      Hackensack,
      New Jersey 07601
                      (201)342-7753
                      Fax:
      (201) 342-7598
                      E-Mail:
      paritz @paritz.comCertified
      Public Accountants
  REPORT
OF INDEPENDENT REGISTERED ACCOUNTING FIRM
 
 Board of
Directors
 Janel
World Trade Ltd. and Subsidiaries
 Jamaica,
New York
  We have
audited the accompanying consolidated balance sheets of Janel World Trade Ltd.
and Subsidiaries as of September 30, 2010 and 2009 and the related consolidated
statements of operations, changes in stockholders’ equity and cash flows for
each of the three years in the period ended September 30, 2010.  These
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Janel World Trade Ltd. and
Subsidiaries as of September 30, 2010 and 2009 and the results of its operations
and its cash flows for each of the three years in the period ended September 30,
2010 in conformity with accounting principles generally accepted in the United
States of America.
 
 Paritz
& Company, P.A
 
 Hackensack,
New Jersey
 December
6, 2010
 
 F-1
 
 JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
 
 CONSOLIDATED
BALANCE SHEETS
 
 SEPTEMBER 30,2010
                                                    
                                                    
                                                    2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents (
      Note 1)
                                                    
                                                    $
                                                    1,354,912
                                                    
                                                    
                                                    $
                                                    1,483,150Accounts
      receivable, net of allowance fordoubtful
      accounts of $106,987 in 2010 and $85,368 in 2009
                                                    
                                                    
                                                    6,841,607
                                                    
                                                    
                                                    
                                                    4,616,244Marketable
      securities (Note
      3)
                                                    
                                                    
                                                    54,748
                                                    
                                                    
                                                    
                                                    52,100Loans
      receivable - officers (Note 4)
                                                    
                                                    
                                                    97,092
                                                    
                                                    
                                                    
                                                    114,616- other
                                                    
                                                    
                                                    583
                                                    
                                                    
                                                    
                                                    4,908Prepaid
      expenses and sundry current assets
                                                    
                                                    
                                                    96,608
                                                    
                                                    
                                                    
                                                    239,437Tax
      refund receivable (Note
      12)
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    289,000TOTAL
      CURRENT ASSETS
                                                    
                                                    
                                                    8,445,550
                                                    
                                                    
                                                    
                                                    6,799,455Property and equipment,
      net (Note
      6)
                                                    
                                                    
                                                    111,478
                                                    
                                                    
                                                    
                                                    179,779OTHER
      ASSETS:Intangible
      assets, net (Note
      7)
                                                    
                                                    
                                                    1,714,702
                                                    
                                                    
                                                    
                                                    1,875,754Security
      deposits
                                                    
                                                    
                                                    53,688
                                                    
                                                    
                                                    
                                                    55,991Deferred
      income taxes (Note
      12)
                                                    
                                                    
                                                    1,017,000
                                                    
                                                    
                                                    
                                                    1,114,000TOTAL
      OTHER ASSETS
                                                    
                                                    
                                                    2,785,390
                                                    
                                                    
                                                    
                                                    3,045,745$
                                                    11,342,418
                                                    
                                                    
                                                    $
                                                    10,024,979LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESNote
      payable – bank (Note
      9)
                                                    
                                                    $
                                                    951,335
                                                    
                                                    
                                                    
                                                    --
      other (Note
      2A)
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    125,000Accounts
      payable – trade
                                                    
                                                    
                                                    4,516,547
                                                    
                                                    
                                                    
                                                    3,116,830-
      related party (Note
      5)
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    100,078Accrued
      expenses and taxes payable
                                                    
                                                    
                                                    564,386
                                                    
                                                    
                                                    
                                                    422,110Current
      portion of long-term debt (Note
10)
                                                    
                                                    
                                                    581,019
                                                    
                                                    
                                                    
                                                    544,141TOTAL
      CURRENT LIABILITIES
                                                    
                                                    
                                                    6,613,287
                                                    
                                                    
                                                    
                                                    4,308,159OTHER
      LIABILITIES:Long-term
      debt (Note
      10)
                                                    
                                                    
                                                    13,889
                                                    
                                                    
                                                    
                                                    1,506,096Deferred
      compensation
                                                    
                                                    
                                                    78,568
                                                    
                                                    
                                                    
                                                    78,568TOTAL
      OTHER LIABILITIES
                                                    
                                                    
                                                    92,457
                                                    
                                                    
                                                    
                                                    1,584,664STOCKHOLDERS’
      EQUITY (Note 11)
                                                    
                                                    
                                                    4,636,674
                                                    
                                                    
                                                    
                                                    4,132,156TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                    
                                                    $
                                                    11,342,418
                                                    
                                                    
                                                    $
                                                    10,024,979
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 
 F-2
 
 JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 YEAR
      ENDED SEPTEMBER 30,2010
                                                        
                                                        
                                                        2009
                                                        
                                                        
                                                        2008REVENUES  (Note
      1)
                                                        
                                                        $
                                                        88,485,931
                                                        
                                                        
                                                        $
                                                        71,852,806
                                                        
                                                        
                                                        $
                                                        82,745,383COSTS
      AND EXPENSES:Forwarding
      expenses
                                                        
                                                        
                                                        79,572,253
                                                        
                                                        
                                                        
                                                        63,418,743
                                                        
                                                        
                                                        
                                                        72,959,241Selling,
      general and administrative
                                                        
                                                        
                                                        7,852,122
                                                        
                                                        
                                                        
                                                        8,438,189
                                                        
                                                        
                                                        
                                                        9,400,903Depreciation
      and amortization
                                                        
                                                        
                                                        246,205
                                                        
                                                        
                                                        
                                                        552,707
                                                        
                                                        
                                                        
                                                        838,674TOTAL
      COSTS AND EXPENSES
                                                        
                                                        
                                                        87,670,580
                                                        
                                                        
                                                        
                                                        72,409,639
                                                        
                                                        
                                                        
                                                        83,198,818INCOME
      (LOSS) FROM OPERATIONS
                                                        
                                                        
                                                        815,351
                                                        
                                                        
                                                        
                                                        (556,833
                                                        )
                                                        
                                                        
                                                        (453,435
                                                        )OTHER
      ITEMS:Impairment
      loss (Note
      2)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (1,066,240
                                                        )
                                                        
                                                        
                                                        (1,812,750
                                                        )Interest
      and dividend income
                                                        
                                                        
                                                        4,959
                                                        
                                                        
                                                        
                                                        14,581
                                                        
                                                        
                                                        
                                                        43,147Interest
      expense
                                                        
                                                        
                                                        (101,415
                                                        )
                                                        
                                                        
                                                        (224,706
                                                        )
                                                        
                                                        
                                                        (149,389
                                                        )TOTAL
      OTHER ITEMS
                                                        
                                                        
                                                        (96,456
                                                        )
                                                        
                                                        
                                                        (1,276,365
                                                        )
                                                        
                                                        
                                                        (1,918,992
                                                        )INCOME
      (LOSS) BEFORE INCOME TAXES
                                                        
                                                        
                                                        718,895
                                                        
                                                        
                                                        
                                                        (1,833,198
                                                        )
                                                        
                                                        
                                                        (2,372,427
                                                        )Income taxes
      (credit) (Note
      12)
                                                        
                                                        
                                                        336,000
                                                        
                                                        
                                                        
                                                        (592,000
                                                        )
                                                        
                                                        
                                                        (727,000
                                                        )NET
      INCOME (LOSS)
                                                        
                                                        
                                                        382,895
                                                        
                                                        
                                                        
                                                        (1,241,198
                                                        )
                                                        
                                                        
                                                        (1,645,427
                                                        )Preferred stock
      dividends (Note
      11)
                                                        
                                                        
                                                        15,046
                                                        
                                                        
                                                        
                                                        15,000
                                                        
                                                        
                                                        
                                                        15,000NET
      INCOME (LOSS) AVAILABLE TOCOMMON
      STOCKHOLDERS
                                                        
                                                        $
                                                        367,849
                                                        
                                                        
                                                        $
                                                        (1,256,198
                                                        )
                                                        
                                                        $
                                                        (1,660,427
                                                        )OTHER
      COMPREHENSIVE INCOMENET
      OF TAX:Unrealized
      gain (loss) from availablefor sale
      securities
                                                        
                                                        $
                                                        2,469
                                                        
                                                        
                                                        $
                                                        (197
                                                        )
                                                        
                                                        $
                                                        (25,270
                                                        )Basic
      earnings (loss) per share
                                                        
                                                        $
                                                        .02
                                                        
                                                        
                                                        $
                                                        (.07
                                                        )
                                                        
                                                        $
                                                        (.10
                                                        )Fully
      diluted earnings (loss) per share
                                                        
                                                        $
                                                        .02
                                                        
                                                        
                                                        $
                                                        (.07
                                                        )
                                                        
                                                        $
                                                        (.10
                                                        )Basic
      weighted average number of shares outstanding
                                                        
                                                        
                                                        18,223,942
                                                        
                                                        
                                                        
                                                        17,545,712
                                                        
                                                        
                                                        
                                                        17,011,278Fully
      diluted weighted average number of shares outstanding
                                                        
                                                        
                                                        20,843,733
                                                        
                                                        
                                                        
                                                        17,945,712
                                                        
                                                        
                                                        
                                                        17,431,552
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 
 F-3
 
 JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 CAPITAL STOCK
                                                                                  
                                                                                  
                                                                                  PREFERRED STOCKSHARES
                                                                                  
                                                                                  
                                                                                  $
                                                                                  
                                                                                  
                                                                                  SHARES
                                                                                  
                                                                                  
                                                                                  $
                                                                                  
                                                                                  
                                                                                  TREASURY
                                                                                    STOCK
                                                                                  
                                                                                  
                                                                                  ADDITIONAL
                                                                                    PAID-IN
                                                                                    CAPITAL
                                                                                  
                                                                                  
                                                                                  RETAINED
                                                                                    EARNINGS
                                                                                  
                                                                                  
                                                                                  ACCUMULATED
                                                                                    OTHER
                                                                                    COMPREHENSIVE
                                                                                    GAIN (LOSS)
                                                                                  
                                                                                  
                                                                                  TOTALBALANCE-SEPTEMBER
      30, 2007
                                                                                  
                                                                                  
                                                                                  17,043,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,043
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,000,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  (65,812
                                                                                  )
                                                                                  
                                                                                  
                                                                                  1,416,558
                                                                                  
                                                                                  
                                                                                  
                                                                                  3,090,470
                                                                                  
                                                                                  
                                                                                  
                                                                                  11,660
                                                                                  
                                                                                  
                                                                                  
                                                                                  4,470,919Net
      loss
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1,645,427
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1,645,427
                                                                                  )Common
      stock issuance
                                                                                  
                                                                                  
                                                                                  520,661
                                                                                  
                                                                                  
                                                                                  
                                                                                  521
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  629,479
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  630,000Convertible
      preferred stock issuance
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  285,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  285
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,424,715
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,425,000Retirement
      of treasury stock
                                                                                  
                                                                                  
                                                                                  (137,000
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (137
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  65,812
                                                                                  
                                                                                  
                                                                                  
                                                                                  (65,675
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -Dividends
      to preferred shareholders
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,000
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,000
                                                                                  )Deferred
      financing charges related to Issuance of convertible debt
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  33,600
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  33,600Purchase
      of 2,500 shares treasury stock
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (2,743
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (2,743
                                                                                  )Other
      comprehensive gains (losses):Unrealized
      gains (losses) on available-for-sale marketable securities
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (25,270
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (25,270
                                                                                  )BALANCE-SEPTEMBER
      30, 2008
                                                                                  
                                                                                  
                                                                                  17,426,661
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,427
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,285,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,285
                                                                                  
                                                                                  
                                                                                  
                                                                                  (2,743
                                                                                  )
                                                                                  
                                                                                  
                                                                                  3,438,677
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,430,043
                                                                                  
                                                                                  
                                                                                  
                                                                                  (13,610
                                                                                  )
                                                                                  
                                                                                  
                                                                                  4,871,079Net
      loss
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1,241,198
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1,241,198
                                                                                  )Common
      stock issuance
                                                                                  
                                                                                  
                                                                                  586,671
                                                                                  
                                                                                  
                                                                                  
                                                                                  587
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  508,159
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  508,746Dividends
      to preferred shareholders
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,000
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,000
                                                                                  )Options
      issued
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,249
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  17,249Purchase
      of 12,676 shares treasury stock
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (8,523
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (8,523
                                                                                  )Other
      comprehensive gains (losses):Unrealized
      gains (losses) on available-for-sale marketable securities
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (197
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (197
                                                                                  )BALANCE-SEPTEMBER
      30, 2009
                                                                                  
                                                                                  
                                                                                  18,013,332
                                                                                  
                                                                                  
                                                                                  
                                                                                  18,014
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,285,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,285
                                                                                  
                                                                                  
                                                                                  
                                                                                  (11,266
                                                                                  )
                                                                                  
                                                                                  
                                                                                  3,964,085
                                                                                  
                                                                                  
                                                                                  
                                                                                  173,845
                                                                                  
                                                                                  
                                                                                  
                                                                                  (13,807
                                                                                  )
                                                                                  
                                                                                  
                                                                                  4,132,156Net
      income
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  382,895
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  382,895Dividends
      to preferred shareholders
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,046
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (15,046
                                                                                  )Other
      comprehensive gains (losses):Unrealized
      gains (losses) on available-for-sale marketable securities
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,469
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,469Issuance
      of stock options as compensation
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  9,200
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  9,200Settlement
      of litigation (Note 15)
                                                                                  
                                                                                  
                                                                                  489,750
                                                                                  
                                                                                  
                                                                                  
                                                                                  490
                                                                                  
                                                                                  
                                                                                  
                                                                                  (69,475
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (69
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  124,579
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  125,000BALANCE–SEPTEMBER
      30, 2010
                                                                                  
                                                                                  
                                                                                  18,503,082
                                                                                  
                                                                                  
                                                                                  $
                                                                                  18,504
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,215,525
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,216
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (11,266
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  4,097,864
                                                                                  
                                                                                  
                                                                                  $
                                                                                  541,694
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (11,338
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  4,636,674
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 
 F-4
 
 JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 YEAR ENDED SEPTEMBER 30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2008OPERATING
      ACTIVITIES:Net
      income (loss)
                                    
                                    $
                                    382,895
                                    
                                    
                                    $
                                    (1,241,198
                                    )
                                    
                                    $
                                    (1,645,427
                                    )Adjustments
      to reconcile net income (loss) to net cash
      provided by (used in) operating activities:Depreciation
      and amortization
                                    
                                    
                                    246,205
                                    
                                    
                                    
                                    552,707
                                    
                                    
                                    
                                    838,674Amortization
      of imputed interest
                                    
                                    
                                    27,528
                                    
                                    
                                    
                                    46,860
                                    
                                    
                                    
                                    13,332Deferred
      income taxes
                                    
                                    
                                    97,000
                                    
                                    
                                    
                                    (360,000
                                    )
                                    
                                    
                                    (754,000
                                    )Issuance
      of options
                                    
                                    
                                    9,200
                                    
                                    
                                    
                                    17.249
                                    
                                    
                                    
                                    -Impairment
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,066,240
                                    
                                    
                                    
                                    1,812,750Changes
      in operating assets and liabilities:Accounts
      receivable
                                    
                                    
                                    (2,225,363
                                    )
                                    
                                    
                                    1,485,961
                                    
                                    
                                    
                                    (758,247
                                    )Tax
      refund receivable
                                    
                                    
                                    289,000
                                    
                                    
                                    
                                    (206,000
                                    )
                                    
                                    
                                    (83,000
                                    )Prepaid
      expenses and sundry current assets
                                    
                                    
                                    142,829
                                    
                                    
                                    
                                    (69,038
                                    )
                                    
                                    
                                    (53,597
                                    )Accounts
      payable and accrued expenses
                                    
                                    
                                    1,538,242
                                    
                                    
                                    
                                    (573,693
                                    )
                                    
                                    
                                    163,146Security
      deposits
                                    
                                    
                                    2,303
                                    
                                    
                                    
                                    (5,190
                                    )
                                    
                                    
                                    (1,766
                                    )NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
                                    
                                    
                                    509,839
                                    
                                    
                                    
                                    713,898
                                    
                                    
                                    
                                    (468,135
                                    )INVESTING
      ACTIVITIES:Acquisition
      of subsidiaries (Note
      2)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (423,867
                                    )Acquisition
      of property and equipment, net
                                    
                                    
                                    (16,852
                                    )
                                    
                                    
                                    (12,239
                                    )
                                    
                                    
                                    (57,036
                                    )Purchase
      of marketable securities
                                    
                                    
                                    (178
                                    )
                                    
                                    
                                    (253
                                    )
                                    
                                    
                                    (6,434
                                    )NET
      CASH USED IN INVESTING ACTIVITIES
                                    
                                    
                                    (17,030
                                    )
                                    
                                    
                                    (12,492
                                    )
                                    
                                    
                                    (487,337
                                    )FINANCING
      ACTIVITIES:Dividends
      paid
                                    
                                    
                                    (11,296
                                    )Proceeds
      from (repayment of) bank loan
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (750,000
                                    )
                                    
                                    
                                    750,000Repayment
      of long-term debt
                                    
                                    
                                    (531,522
                                    )
                                    
                                    
                                    (893,169
                                    )
                                    
                                    
                                    (84,764
                                    )Repayment
      (issuance) of loans receivable
                                    
                                    
                                    21,849
                                    
                                    
                                    
                                    48,682
                                    
                                    
                                    
                                    (3,772
                                    )Purchase
      of treasury stock
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (8,523
                                    )
                                    
                                    
                                    (2,743
                                    )Proceeds
      from (repayment of) loans receivable (payable) – related
    party
                                    
                                    
                                    (100,078
                                    )
                                    
                                    
                                    (43,344
                                    )
                                    
                                    
                                    111,700Proceeds
      from loans payable – related party
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    143,422NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                                    
                                    
                                    (621,047
                                    )
                                    
                                    
                                    (1,646,354
                                    )
                                    
                                    
                                    913,843DECREASE
      IN CASH AND CASH EQUIVALENTS
                                    
                                    
                                    (128,238
                                    )
                                    
                                    
                                    (944,948
                                    )
                                    
                                    
                                    (41,629
                                    )CASH
      AND CASH EQUIVALENTS – BEGINNING OF YEAR
                                    
                                    
                                    1,483,150
                                    
                                    
                                    
                                    2,428,098
                                    
                                    
                                    
                                    2,469,727CASH
      AND CASH EQUIVALENTS – END OF YEAR
                                    
                                    $
                                    1,354,912
                                    
                                    
                                    $
                                    1,483,150
                                    
                                    
                                    $
                                    2,428,098SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the year for:Interest
                                    
                                    $
                                    73,887
                                    
                                    
                                    $
                                    87,312
                                    
                                    
                                    $
                                    177,583Income
      taxes
                                    
                                    $
                                    7,239
                                    
                                    
                                    $
                                    134,753
                                    
                                    
                                    $
                                    200,788Non-cash
      activities:Unrealized
      gain (loss) on marketable securities
                                    
                                    $
                                    2,469
                                    
                                    
                                    $
                                    (197
                                    )
                                    
                                    $
                                    (25,270
                                    )Dividends
      declared to preferred shareholders
                                    
                                    $
                                    15,046
                                    
                                    
                                    $
                                    15,000
                                    
                                    
                                    $
                                    15,000Issuance
      of common stock, convertible preferred stock andnotes
      payable in connection with business acquisitions
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    2,941,632Deferred
      financing charges
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    58,267 -
                                    
                                    
                                    $
                                    33,600Conversion
      of debt to equity
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    508,746
                                    
                                    
                                    $
                                    -Cancellation
      of note payable – other
                                    
                                    $
                                    125,000
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
 The
accompanying notes are an integral part of these consolidated financial
statements
 
 F-5
 
 JANEL
WORLD TRADE LTD. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  
  1
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 Business
description
 
 Janel
World Trade Ltd. and Subsidiaries (“the Company” or “Janel”) operates its
business as two reportable segments comprised of: A) full-service cargo
transportation logistics management, including freight forwarding – via air,
ocean and land-based carriers – custom brokerage services, warehousing and
distribution services, and other value-added logistics services, and B) computer
software sales, support and maintenance.
 
 Basis
of consolidation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned.  All
intercompany transactions and balances have been eliminated in
consolidation.
 
 Uses
of estimates in the preparation of financial statements
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses during each reporting
period.  Actual results could differ from those
estimates.
 
 Cash
and cash equivalents
 
 Cash and
cash equivalents consist of cash and highly liquid investments with remaining
maturities of less than ninety days at the date of purchase.
 
 The
Company maintains cash balances at various financial
institutions.  Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $250,000.  The Company’s accounts
at these institutions may, at times, exceed the federally insured
limits.  The Company has not experienced any losses in such
accounts.
 
 Marketable
securities
 
 The
Company classifies all of its short-term investments as available-for-sale
securities.  Such short-term investments consist primarily of mutual
funds which are stated at market value, with unrealized gains and losses on such
securities reflected as other comprehensive income (loss) in stockholders’
equity.  Realized gains and losses on short-term investments are
included in earnings and are derived using the specific identification method
for determining the cost of securities.  Therefore, all securities are
considered to be available for sale and are classified as current
assets.
 
 Property
and equipment and depreciation policy
 
 Property
and equipment are recorded at cost.  Depreciation is provided for in
amounts sufficient to amortize the costs of the related assets over their
estimated useful lives on the straight-line and accelerated methods for both
financial reporting and income tax purposes.
 
 Maintenance,
repairs and minor renewals are charged to expense when
incurred.  Replacements and major renewals are
capitalized.
 
 F-6
  
 Revenues
and 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 to the Company for carrying the shipments when the
Company acts as a freight consolidator.  Ocean freight revenues
include the charges to the Company for carrying the shipments when the Company
acts as a Non-Vessel Operating Common Carrier (NVOCC).  In each
case,   the Company is acting as an indirect
carrier.  When acting as an indirect carrier, the Company will issue a
House Airway Bill (HAWB) or a house Ocean Bill of Lading (HOBL) to customers as
the contract of carriage.  In turn, when the freight is physically
tendered to a direct carrier, the Company receives a contract of carriage known
as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of
Lading for ocean shipments.   At this point the risk of loss
passes to the carrier, however, in order to claim for any such loss, the
customer is first obligated to pay the freight charges.
 
 Based
upon the terms in the contract of carriage, revenues related to shipments where
the Company issues a HAWB or a HOBL are recognized at the time the freight is
tendered to the direct carrier.  Costs related to the shipments are
recognized at the same time.
 
 Revenues
realized when the Company acts as an agent for the shipper and does not issue a
HAWB or a HOBL include only the commission and fees earned for the services
performed.  These revenues are recognized upon completion of the
services.
 
 Customs
brokerage and other services involves 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 breakbulk and
value added services such as local transportation, distribution services and
logistics management.  Each of these services has a separate fee which
is recognized as revenue upon completion of the service.
 
 Customers
will frequently request an all inclusive rate for a set of services, which 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 service when provided under an all inclusive rate are done in an objective
manner on a fair value basis.
 
 (b)         Computer
software sales, support and maintenance
 
 The
Company recognizes revenue, including multiple element arrangements, in
accordance with current authoritative guidance.   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.
 
 F-7
 Income
per common share
 
 Basic net
income per common share is calculated by dividing net income available to common
shareholders by the weighted average of common shares outstanding during the
period.  Diluted net income per common share is calculated using the
weighted average of common shares outstanding adjusted to include the
potentially dilutive effect of stock options and warrants.
 
 Comprehensive income
 
 Comprehensive
income encompasses all changes in stockholders’ equity other than those arising
from stockholders, and generally consists of net income and unrealized gains and
losses on unrestricted available-for-sale marketable equity
securities.  As of September 30, 2009, accumulated other comprehensive
income consists of unrealized gains on unrestricted available-for-sale
marketable equity securities.
 
 Deferred income taxes
 
 The
Company accounts for income taxes in accordance with current authoritative
guidance which requires that deferred tax assets and liabilities be recognized
for future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.  In addition, current authoritative guidance
requires recognition of future tax benefits, such as carryforwards, to the
extent that realization of such benefits is more likely than not and that a
valuation allowance be provided when it is more likely than not that some
portion of the deferred tax asset will not be realized.
 
 Goodwill,
other intangibles and long-lived assets
 
 The
Company records as goodwill the excess of purchase price over the fair value of
the tangible and identifiable intangible assets acquired.  Current
authoritative guidance requires goodwill to be tested for impairment annually as
well as when an event or change in circumstance indicates an impairment may have
occurred.  Goodwill is tested for impairment by comparing the fair
value of the Company’s individual reporting units to their carrying amount to
determine if there is a potential goodwill impairment.  If the fair
value of the reporting unit is less than its carrying value, an impairment loss
is recorded to the extent that the implied fair value of the goodwill of the
reporting unit is less than its carrying value.
 
 Long-lived
assets, including fixed assets and intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable.  In reviewing for impairment,
the carrying value of such assets is compared to the estimated undiscounted
future cash flows expected from the use of the assets and their eventual
disposition.  If such cash flows are not sufficient to support the
asset’s recorded value, an impairment charge is recognized to reduce the
carrying value of the long-lived asset to its estimated fair
value.  The determination of future cash flows, as well as the
estimated fair value of long-lived assets, involve significant estimates on the
part of management.  In order to estimate the fair value of a
long-lived asset, the Company may engage a third-party to assist with the
valuation.  If there is a material change in economic conditions or
other circumstances influencing the estimate of future cash flows or fair value,
the Company could be required to recognize impairment charges in the future.
(See Note 2A).
 
 Fair
value of financial instruments
 
 The
carrying values of cash and cash equivalents, receivables, prepaid expenses and
other assets, accounts payable, accrued expenses and other liabilities are
reasonable estimates of their fair values because of the short-term nature of
these instruments.
 
 F-8
 
 Recent
accounting pronouncements
  In June
2009, the FASB issued an accounting standard amending the accounting and
disclosure requirements for transfers of financial assets. This accounting
standard requires greater transparency and additional disclosures for transfers
of financial assets and the entity’s continuing involvement with them and
changes the requirements for derecognizing financial assets. In addition, it
eliminates the concept of a qualifying special-purpose entity (“QSPE”). This
accounting standard is effective for financial statements issued for fiscal
years beginning after November 15, 2009. The adoption of this ASU did not have a
material impact on our consolidated financial statements.
  In June
2009, the FASB also issued an accounting standard amending the accounting and
disclosure requirements for the consolidation of variable interest entities
(“VIEs”). The elimination of the concept of a QSPE, as discussed above, removes
the exception from applying the consolidation guidance within this accounting
standard. Further, this accounting standard requires a company to perform a
qualitative analysis when determining whether or not it must consolidate a VIE.
It also requires a company to continuously reassess whether it must consolidate
a VIE. Additionally, it requires enhanced disclosures about a company’s
involvement with VIEs and any significant change in risk exposure due to that
involvement, as well as how its involvement with VIEs impacts the company’s
financial statements. Finally, a company will be required to disclose
significant judgments and assumptions used to determine whether or not to
consolidate a VIE. This accounting standard is effective for financial
statements issued for fiscal years beginning after November 15, 2009. The
adoption of this ASU did not have a material impact on our consolidated
financial statements.
  In
December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of
Financial Assets. This Accounting Standards Update amends the FASB Accounting
Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of
Financial Assets—an amendment of FASB Statement No. 140.The amendments
in this Accounting Standards Update improve financial reporting by eliminating
the exceptions for qualifying special-purpose entities from the consolidation
guidance and the exception that permitted sale accounting for certain mortgage
securitizations when a transferor has not surrendered control over the
transferred financial assets. In addition, the amendments require enhanced
disclosures about the risks that a transferor continues to be exposed to because
of its continuing involvement in transferred financial assets. Comparability and
consistency in accounting for transferred financial assets will also be improved
through clarifications of the requirements for isolation and limitations on
portions of financial assets that are eligible for sale accounting. The adoption
of this ASU did not have a material impact on our consolidated financial
statements.
  In
January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair
Value Measurements. This update provides amendments to Subtopic 820-10 that
requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A
reporting entity should disclose separately the amounts of significant transfers
in and out of Level 1 and Level 2 fair value measurements and describe the
reasons for the transfers. 2) Activity in Level 3 fair value measurements. In
the reconciliation for fair value measurements using significant unobservable
inputs (Level 3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements (that is, on a gross basis rather
than as one net number). This update provides amendments to Subtopic 820-10 that
clarifies existing disclosures as follows: 1) Level of disaggregation. A
reporting entity should provide fair value measurement disclosures for each
class of assets and liabilities. A class is often a subset of assets or
liabilities within a line item in the statement of financial position. A
reporting entity needs to use judgment in determining the appropriate classes of
assets and liabilities. 2) Disclosures about inputs and valuation techniques. A
reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements. Those disclosures are required for fair value measurements that
fall in either Level 2 or Level 3. The adoption of this guidance did not have a
material impact on our consolidated financial statements.
  F-9
 
 In
February 2010, FASB issued ASU No. 2010-9 –Amendments to Certain Recognition and
Disclosure Requirements. This update addresses certain implementation issues
related to an entity’s requirement to perform and disclose subsequent-events
procedures, removes the requirement that public companies disclose the date of
their financial statements in both issued and revised financial statements.
According to the FASB, the revised statements include those that have been
changed to correct an error or conform to a retrospective application of U.S.
GAAP. The adoption of this ASU did not have a material impact on our
consolidated financial statements.
  In March
2010, FASB issued ASU No. 2010-11 –Scope Exception Related to Embedded Credit
Derivatives. Embedded credit-derivative features related only to the transfer of
credit risk in the form of subordination of one financial instrument to another
are not subject to potential bifurcation and separate accounting as clarified by
recently issued FASB guidance. Other embedded credit-derivative features are
required to be analyzed to determine whether they must be accounted for
separately. This update provides guidance on whether embedded credit-derivative
features in financial instruments issued by structures such as collateralized
debt obligations (CDOs) and synthetic CDOs are subject to bifurcation and
separate accounting. The guidance is effective at the beginning of a company’s
first fiscal quarter beginning after June 15, 2010. We do not expect the
adoption of this ASU to have a material impact on our consolidated financial
statements.
  In April
2010, the FASB issued ASU No. 2010-13, Compensation – Stock Compensation: Effect
of Denominating the Exercise Price of a Share-Based Payment Award in the
Currency of the Market in Which the Underlying Equity Security Trades. ASU
2010-13 clarifies that a share-based payment award with an exercise price
denominated in the currency of a market in which a substantial portion of the
entity’s equity securities trades should not be considered to contain a
condition that is not a market, performance, or service condition. Therefore,
such an award should not be classified as a liability if it otherwise qualifies
as equity. ASU 2010-13 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010, with early adoption
permitted. We are currently evaluating the potential impact of this ASU;
however, we do not expect the adoption of this ASU to have a material impact on
our consolidated financial statements.
  2           ACQUISITIONS
AND IMPAIRMENT LOSSES
 
 (A)           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.
 
 The
purchase price for the acquired assets was $3,888,429 and was comprised of
$2,338,429 cash paid at closing, the issuance of a $125,000 note payable due
March 30, 2008 (see Note 15B) 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.
 
 F-10
 
 The
Company, with the assistance of a third party, performed a goodwill impairment
test effective as of September 30, 2008 and determined that there was no
impairment of the goodwill relating to OLI.  The Company also
performed an impairment test on the other identifiable intangible assets
acquired relating to OLI and determined that, due to changes in economic
circumstances relating to OLI, the carrying value of certain intangible assets
exceeded their estimated undiscounted future cash flows and their eventual
disposition.  Accordingly, the Company recorded an impairment loss of
$1,812,750 as of September 30, 2008 representing the write-off of:
 
 Customer
      relationships
                      
                      $
                      414,451Software
      valuation
                      
                      
                      508,299Development
      agreement
                      
                      
                      890,000$
                      1,812,750
 
 The
Company, with the assistance of a third party, performed a goodwill impairment
test effective as of September 30, 2009 and determined that there was full
impairment of the intangible assets relating to the acquisition of certain
assets of OLI.  Accordingly, the Company recorded an impairment loss
of $1,066,240 as of September 30, 2009 representing the write-off
of:
 
 Customer
      relationships
                    
                    $
                    96,250Software
      valuation
                    
                    
                    280,000Development
      agreement
                    
                    
                    226,678Goodwill
                    
                    
                    463,312$
                    1,066,240
 
 (B)        FERRARA
INTERNATIONAL LOGISTICS, INC.
 
 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 $2,077,070 (including transaction
costs of $85,438 and net of imputed interest of $108,368), comprised of a
$600,000 payment by the Company at closing, the issuance of 520,661 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 common stock in
the Over-The-Counter market on the Friday immediately preceding the closing
date, a non-interest bearing $435,000 payment due one year after closing, and a
non-interest bearing $435,000 payment due three years after the
closing.  The Company has imputed interest on these obligations at 7%
per annum.  The Company issued $400,000 of fixed rate convertible
promissory notes to unrelated third parties, in part, fund this acquisition (see
Note 8).  The balance of the cash portion was paid from existing
cash.
 
 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 note is not 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.
 
 F-11
 
 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.
 
 (C)        PURCHASE
PRICE ALLOCATION
 
 In
accordance with the acquisition method of accounting, the Company allocated the
consideration to the net tangible and identifiable intangible assets, based on
their estimated fair values.  Goodwill represents the excess of the
purchase price over the fair value of the underlying net tangible and
identifiable intangible assets.  The factors that contributed to the
recognition of goodwill included securing buyer-specific synergies that increase
revenue and profits and are not otherwise available to a marketplace
participant, and the acquisition of a talented workforce.
 
 The consideration has been allocated as
follows:
 
 ORDER
                      LOGISTICS, INC.
                    
                    
                    FERRARA
                      INTERNATIONAL
                      LOGISTICS, INC.Tangible
      assets:Furniture
      and equipment
                    
                    $
                    165,117
                    
                    
                    $
                    -Intangible
      assets:Identifiable
      intangibles, subject to amortization
                    
                    
                    3,260,000
                    
                    
                    
                    1,530,000Goodwill
                    
                    
                    463,312
                    
                    
                    
                    547,0703,723,312
                    
                    
                    
                    2,077,070Purchase
      price
                    
                    $
                    3,888,429
                    
                    
                    $
                    2,077,070
 The
following table provides unaudited pro forma results of operations for the
fiscal years ended September 30, 2008 as if the acquisitions had been
consummated as of the beginning of the period presented.  The pro
forma results include the effect of certain purchase accounting adjustments,
such as the estimated changes in depreciation and amortization expense on the
acquired intangible assets.  However, pro forma results do not include
any anticipated cost savings or other effects of the planned integration of the
companies.  Accordingly, such amounts are not necessarily indicative
of the results if the acquisition has occurred on the dates indicated, or which
may occur in the future.
 
 (Unaudited)
                      
                      Pro FormaResults(Dollars in Thousands except per share data)
                      
                      Year ended September 30,
                        2008Revenues
                      
                      $
                      86,735Loss
      before income taxes (exclusive of impairment loss for
2008)
                      
                      $
                      (33
                      )Fully
      diluted earnings per share
                      
                      $
                      (.01
                      )
  F-12
  
 
 3           MARKETABLE
SECURITIES
 
 Marketable
securities consist of the following:
 
 Cost
                    
                    
                    Unrealized
                      Holding
                      Gains (Losses)
                    
                    
                    Fair ValueAs
      of September 30, 2010:Mutual
      Funds
                    
                    $
                    52,279
                    
                    
                    $
                    2,469
                    
                    
                    $
                    54,748As
      of September 30, 2009:Mutual
      Funds
                    
                    $
                    52,297
                    
                    
                    $
                    (197
                    )
                    
                    $
                    52,100
 
 4           LOANS
RECEIVABLE – OFFICERS
 
 The loans
receivable – officers bear interest at 4% per annum and are due on
demand.
 
 On July
22, 2009, Vincent Iacopella, a director of the Company, obtained a short-term
personal loan of $16,500 from the Janel Group of Los Angeles, Inc., a
wholly-owned subsidiary of the Company. Mr. Iacopella had previously been issued
a Janel corporate credit card from the Janel Group of Los Angeles, Inc. for his
use in the course of Janel business activities.  Mr. Iacopella had
used the corporate credit card for business charges and also personal charges
amounting to approximately $3,500.  Neither Janel senior management
nor Mr. Iacopella were aware that the short-term personal loan to Mr. Iacopella
or the personal charges on his business credit card might be a violation of the
Sarbanes-Oxley act until November 22, 2009.  On December 2, 2009, Mr.
Iacopella repaid his personal loan from Janel with interest and reimbursed the
Company for the personal expenses charged to Mr. Iacopella’s corporate credit
card.
 
 Section
402 of the Sarbanes-Oxley Act makes it unlawful for any public company, directly
or indirectly, to extend credit, maintain credit or arrange for the extension of
credit in the form of a personal loan to or for the benefit of any director or
executive officer, except for loan transactions completed prior to July 30,
2002, when the Sarbanes-Oxley Act was signed into law.
 
 Violations
of Section 402 of the Sarbanes-Oxley Act are also violations of Section 13(K) of
the Securities Exchange Act of 1934.  Such violations can result in
sanctions ranging from civil cease-and-desist proceedings to the prosecution of
criminal proceedings, depending upon the nature and seriousness of the
violation.
 
 5           LOAN
PAYABLE – RELATED PARTY
 
 The loan
payable – related party is due from a company owned by Janel’s Executive Vice
President.  The loan bears interest at 6% per annum and is due on
demand.
 
 6           PROPERTY
AND EQUIPMENT
 
 A summary
of property and equipment and the estimated lives used in the computation of
depreciation and amortization is as follows:
 
 September 30,2010
                      
                      
                      2009
                      
                      LifeFurniture
      and fixtures
                      
                      $
                      204,720
                      
                      
                      $
                      224,661
                      
                      5-7 yearsComputer
      equipment
                      
                      
                      469,825
                      
                      
                      
                      503,514
                      
                      5 years674,545
                      
                      
                      
                      728,175Less
      accumulated depreciation and Amortization
                      
                      
                      563,067
                      
                      
                      
                      548,396$
                      111,478
                      
                      
                      $
                      179,779
 
 F-13
 
 7           INTANGIBLE
ASSETS
 
 A summary
of intangible assets resulting from the Ferrara acquisition and the estimated
useful lives used in the computation of amortization is as follows:
 
 Customer
      relationships
                      
                      $
                      1,530,000
                      
                      9.5
      yearsGoodwill
                      
                      
                      547,0702,077,070Less
      accumulated amortization
                      
                      
                      201,316$
                      1,875,754
 
 A summary
of the changes in intangible assets is as follows:
 
 Ferrara
      International
                        Logistics,
      Inc.2010
                      
                      
                      2009Balance
      – beginning of year
                      
                      $
                      1,875,754
                      
                      
                      $
                      2,036,807Amortization
                      
                      
                      (161,052
                      )
                      
                      
                      (161,053
                      )Balance
      – end of year
                      
                      $
                      1,714,702
                      
                      
                      $
                      1,875,754
 
 8           CONVERTIBLE
PROMISSORY NOTES
 
 In July
2008 the Company issued $400,000 of fixed rate convertible promissory notes
which were due in July 2009 and bear interest at a weighted average interest
rate of 8.25% per annum, payable at maturity. In July 2009 the $400,000
convertible promissory notes plus accrued interest of $40,000 were converted
into 586,671 shares of common stock.
 
 9           NOTE
PAYABLE – BANK
 
 In August
2010, the Company’s subsidiary Janel Group of New York, Inc. (“Janel New York”)
entered into a one-year $3.5 million revolving line of credit agreement with
Community National Bank (“CNB”).  The new credit facility (the “CNB
Facility”) replaces Janel New York’s previous term loan agreement with JPMorgan
Chase Bank.  The interest rate of the CNB Facility is the prime rate
plus 1%, with a minimum rate of 5%.  Under the CNB Facility, Janel New
York may borrow the lesser of $3.5 million or 80% of the Company’s aggregate
outstanding eligible accounts receivable.  Janel New York’s
obligations under the CNB Facility are secured by all of the assets of the
Company and are guaranteed by the Company and James N. Jannello, the Company’s
Chief Executive Officer.  The CNB Facility is for a one year term
expiring on July 31, 2011.  On August 3, 2010, $951,190 of the CNB
Facility was used to repay  the outstanding balances under the term
loan with JPMorgan Chase Bank. As of September 30, 2010, there were outstanding
borrowings of $951,336 under the CNB facility.
 
 F-14
 
 10    
     LONG-TERM DEBT
 
 Long-term
debt consists of the following:
 
 September 30,2010
                        
                        
                        2009Term
      loan payable, as amended.
                        
                        $
                        -
                        
                        
                        $
                        1,316,191Non-interest
      bearing note payable, net of imputed interest, in payments of $435,000 in
      July 2011 (see Note 2B).
                        
                        
                        414,352
                        
                        
                        
                        386,824Term
      loan payable in monthly installments of $13,889, plus interest at a bank’s
      prime rate minus .50% per annum.  The loan is collateralized by
      substantially all assets of a subsidiary of the Company.
                        
                        
                        180,556
                        
                        
                        
                        347,222594,908
                        
                        
                        
                        2,050,237Less
      current portion
                        
                        
                        581,019
                        
                        
                        
                        544,141$
                        13,889
                        
                        
                        $
                        1,506,096
 
 These
obligations mature as follows:
 
 2011
                        
                        $
                        581,0192012
                        
                        
                        13,889$
                        594,908
 
 11          STOCKHOLDERS’
EQUITY
 
 Janel is
authorized to issue 225,000,000 shares of common stock, par value
$.001.  In addition, the Company is authorized to issue 5,000,000
shares of preferred stock, par value $.001.  The preferred stock is
issuable in series with such voting rights, if any, designations, powers,
preferences and other rights and such qualifications, limitations and
restrictions as may be determined by the Company’s board of directors or a duly
authorized committee thereof, without stockholder approval.  The board
may fix the number of shares constituting each series and increase or decrease
the number of shares of any series.
 
 A.          Issuance
of convertible preferred stock
 
 (1)           On
January 10, 2007, the Company sold 1,000,000 unregistered shares of
newly-authorized $0.001 par value 3% Series A Convertible Preferred Stock (the
“Series A Stock”) for a total of $500,000.  The shares are convertible
into shares of Janel’s $0.001 par value common stock at any time on a one-share
for one-share basis.
 
 (2)           See
Notes 2 and 15(c)(2) in connection with the issuance of Series B Preferred
Stock.
 
 B.          Stock
repurchase program
 
 On
October 12, 2006, the Company’s Board of Directors authorized the purchase of up
to 300,000 shares of the Company’s common stock, subject to certain
conditions.  The repurchase plan may be suspended by the Company at
any time.  As of September 30, 2010, 152,176 shares of the Company’s
common stock have been repurchased under the plan at a cost of
$77,078.
 
 F-15
 12     
    INCOME TAXES
 
 Income taxes consist of the
following:
 Year Ended September 30,2010
                          
                          
                          2009
                          
                          
                          2008Federal
      – current
                          
                          $
                          146,000
                          
                          
                          $
                          (267,500
                          )
                          
                          $
                          (83,000
                          )-
      deferred
                          
                          
                          97,000
                          
                          
                          
                          (360,000
                          )
                          
                          
                          (754,000
                          )State
      and local
                          
                          
                          93,000
                          
                          
                          
                          35,500
                          
                          
                          
                          110,000$
                          336,000
                          
                          
                          $
                          (592,000
                          )
                          
                          $
                          (727,000
                          )
 
 The
reconciliation of income tax computed at the Federal statutory rate to the
provision for income taxes is as follows:
 
 Year Ended September 30,2010
                        
                        
                        2009
                        
                        
                        2008Federal
      taxes (credits) at statutory rates
                        
                        $
                        252,000
                        
                        
                        $
                        (627,500
                        )
                        
                        $
                        (811,160
                        )Non-deductible
      expenses
                        
                        
                        20,400
                        
                        
                        
                        11,740
                        
                        
                        
                        11,560State
      and local taxes, net of Federal benefit
                        
                        
                        63,600
                        
                        
                        
                        23,760
                        
                        
                        
                        72,600$
                        336,000
                        
                        
                        $
                        (592,000
                        )
                        
                        $
                        (727,000
                        )
 
 The
deferred tax asset represents the tax effect of timing differences relating to
amortization of intangible assets and the related impairment loss.
 
 13      
   PROFIT SHARING AND 401(k) PLANS
 
 The
Company maintains a non-contributory profit sharing and 401(k) plan covering
substantially all full-time employees.  The expense charged to
operations for the years ended September 30, 2010, 2009, and 2008 aggregated
approximately $17,500, $24,000 and $30,000, respectively.
 
 14   
      RENTAL COMMITMENTS
 
 The
Company conducts its operations from leased premises.  Rental expense
on operating leases for the years ended September 30, 2010, 2009 and
2008  was approximately$362,000, $412,000, and $404,000,
respectively.
 
 Future
minimum lease commitments (excluding renewal options) under noncancelable leases
are as follows:
 Year
      ended September 30, 2011
                    
                    $
                    321,0002012
                    
                    
                    321,0002013
                    
                    
                    263,0002014
                    
                    
                    243,0002015
                    
                    
                    199,000
  F-16
 
 15         RISKS
AND UNCERTAINTIES
 
 (a)
              Currency
      risks
 
 The
nature of Janel’s operations requires it to deal with currencies other than the
U.S. Dollar. This results in the Company being exposed to the inherent risks of
international currency markets and governmental interference.  A
number of countries where Janel maintains offices or agent relationships have
currency control regulations that influence its ability to hedge foreign
currency exposure.  The Company tries to compensate for these
exposures by accelerating international currency settlements among those
officers or agents.
 
 (b)         Concentration
of credit risk
 
 The
Company’s assets that are exposed to concentrations of credit risk consist
primarily of cash and receivables from customers.  The Company places
its cash with financial institutions that have high credit
ratings.  The receivables from clients are spread over many
customers.  The Company maintains an allowance for uncollectible
accounts receivable based on expected collectibility and performs ongoing credit
evaluations of its customers’ financial condition.
 
 (c)         Legal
proceedings
 
 (1)           Janel
is occasionally subject to claims and lawsuits which typically arise in the
normal course of business.  While the outcome of these claims cannot
be predicated with certainty, management does not believe that the outcome of
any of these legal matters will have a material adverse effect on the Company’s
financial position or results of operations.
 
 (2)           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.
 
 In May
2008, the defendants filed a motion to the court asking it to dismiss the case
based upon the defendants’ claim that the complaint “fails to state a claim upon
which relief may be granted”.  The Company, in turn, filed a brief in
opposition to the defendants’ motion showing that it is meritless and should be
denied. In March 2009 the court entered an order denying the defendants’ motions
to dismiss in their entirety.
 
 F-17
 
 In April
2009 the defendants Francis and Griffin filed answers to the Janel complaint and
they each counterclaimed that Janel breached agreements and withheld payments
from them.  In May 2009 Janel filed replies denying each of the
counterclaims as meritless.
 
 In March
2010 the Company reached a settlement agreement and mutual general release with
Brian Griffin.  Terms of the settlement include the issuance of
489,750 shares of Janel’s common stock, surrender of 69,475 shares of preferred
stock, elimination of a $125,000 note payable to the defendant and a release of
any and all claims and demands of the defendant.
 
 See Note
20(B) and (C).
 
 (d)         Relationships
with officers
 
 Janel’s
former President and Chief Operating Officer and Executive Vice President and
Chief Executive Officer, jointly own FCL/LCL International Inc., (“FCL/LCL”) a
New York Corporation which is a consolidating indirect carrier that executed
paperwork for Janel, from which they each received $3,000 and $14,000 from
FCL/LCL for the years ending 2010 and 2009. FCL/LCL discontinued its operations
in November, 2009.
 
 These
relationships involve actual or potential conflicts of interest between Janel
and its officers.
 
 (e)         Concentration
of sales
 
 Sales to
two major customers were approximately 27%, 16.5% and 19.9% of consolidated
sales for the years ended September 30, 2010, 2009 and 2008,
respectively.  Amounts due from these customers aggregated
approximately $1,130,000, $399,000 and $162,000 at September 30, 2010, 2009 and
2008, respectively.
 
 16         QUARTERLY
RESULTS OF OPERATIONS (Unaudited)
 First
                        
                        
                        Second
                        
                        
                        Third
                        
                        
                        FourthFiscal
      2010Net
      sales
                        
                        $
                        16,997,932
                        
                        
                        $
                        19,270,955
                        
                        
                        $
                        21,004,703
                        
                        
                        $
                        31,212,341Operating
      income (loss)
                        
                        
                        (28,016
                        )
                        
                        
                        174,084
                        
                        
                        
                        359,288
                        
                        
                        
                        309,995Net
      income (loss)
                        
                        
                        (50,037
                        )
                        
                        
                        106,084
                        
                        
                        
                        170,430
                        
                        
                        
                        156,418Per
      share data (1):Basic
      earnings per share
                        
                        $
                        (0.003
                        )
                        
                        $
                        0.007
                        
                        
                        $
                        0.009
                        
                        
                        $
                        0
      .008Diluted
      earnings per share
                        
                        $
                        (0.003
                        )
                        
                        $
                        0.006
                        
                        
                        $
                        0.009
                        
                        
                        $
                        0.007Fiscal
      2009Net
      sales
                        
                        $
                        21,266,128
                        
                        
                        $
                        17,151,773
                        
                        
                        $
                        15,524,769
                        
                        
                        $
                        17,910,136Operating
      income (loss)
                        
                        
                        (96,104
                        )
                        
                        
                        (360,818
                        )
                        
                        
                        (81,857
                        )
                        
                        
                        (18,054
                        )Net
      income (loss)
                        
                        
                        (115,490
                        )
                        
                        
                        (284,735
                        )
                        
                        
                        (105,847
                        )
                        
                        
                        (735,126
                        )Per
      share data (1):Basic
      earnings per share
                        
                        $
                        (.01
                        )
                        
                        $
                        (.02
                        )
                        
                        $
                        (.01
                        )
                        
                        $
                        (.04
                        )Diluted
      earnings per share
                        
                        $
                        (.01
                        )
                        
                        $
                        (.02
                        )
                        
                        $
                        (.01
                        )
                        
                        $
                        (.04
                        )
 
 (1)
earnings per share were computed independently for each of the periods
presented.  Therefore, the sum of the earnings per share amounts for
the quarters may not equal the total for the year.
  F-18
 
 17         BUSINESS
SEGMENT INFORMATION
 
 The
Company operates in two reportable segments which are full service cargo
transportation logistics management and supplying computer software sales,
support and maintenance.
 
 The
following table presents financial information about the Company’s reportable
segments as of and for the years ended September 30, 2010 and 2009.
 
 2010
                    
                    Consolidated
                    
                    
                    Transportation
                      Logistics
                    
                    
                    Computer
                      SoftwareTotal
      revenues
                    
                    $
                    88,485,931
                    
                    
                    $
                    88,428,775
                    
                    
                    $
                    57,156Net
      revenues
                    
                    $
                    8,913,678
                    
                    
                    $
                    8,856,522
                    
                    
                    $
                    57,156Operating
      income (loss)
                    
                    $
                    815,351
                    
                    
                    $
                    942,248
                    
                    
                    $
                    (126,897
                    )Identifiable
      assets
                    
                    $
                    11,342,418
                    
                    
                    $
                    11,288,383
                    
                    
                    $
                    54,035Capital
      expenditures
                    
                    $
                    16,852
                    
                    
                    $
                    16,852
                    
                    
                    $
                    -Depreciation
      and amortization
                    
                    $
                    246,205
                    
                    
                    $
                    213,579
                    
                    
                    $
                    32,626Equity
                    
                    $
                    4,636,674
                    
                    
                    $
                    9,838,287
                    
                    
                    $
                    (5,201,613
                    )
 
 2009
                      
                      Consolidated
                      
                      
                      Transportation
                        Logistics
                      
                      
                      Computer
                        SoftwareTotal
      revenues
                      
                      $
                      71,852,806
                      
                      
                      $
                      71,663,175
                      
                      
                      $
                      189,631Net
      revenues
                      
                      $
                      8,434,063
                      
                      
                      $
                      8,244,432
                      
                      
                      $
                      189,631Operating
      income (loss)
                      
                      $
                      (556,833
                      )
                      
                      $
                      99,871
                      
                      
                      $
                      (656,704
                      )Identifiable
      assets
                      
                      $
                      10,024,979
                      
                      
                      $
                      9,902,506
                      
                      
                      $
                      122,473Capital
      expenditures
                      
                      $
                      12,239
                      
                      
                      $
                      10,701
                      
                      
                      $
                      1,538Depreciation
      and amortization
                      
                      $
                      552,706
                      
                      
                      $
                      301,770
                      
                      
                      $
                      250,936Equity
                      
                      $
                      4,132,156
                      
                      
                      $
                      8,934,203
                      
                      
                      $
                      (4,802,047
                      )
 
 18         SHARE
BASED COMPENSATION
 
 The
Company accounts for other based compensation in accordance with ASC
718-10.  Under the provisions of this statement the compensation costs
relating to share-based payment transactions are to be recognized in the
Company’s consolidated financial statements based on their fair
values.
 
 
 19         STOCK
OPTIONS
 
 On June
30, 2010, the Company issued options to purchase 23,750 shares of common stock
at an exercise price of $1.00 per share, in partial satisfaction of half of the
finder’s fees associated with the hiring of two new sales executives on May 17,
2010.  The remaining obligation in the amount of $23,750 was paid in
cash.
 
 The fair
value of the options was determined using a Black Scholes Option Pricing Model
was $9,200 which, net of income taxes, resulted in a $5,428 reduction of net
income
 
 The
Company has no other stock options outstanding.
  F-19
 
 20         SUBSEQUENT
EVENTS
 
 (A)           On
October 4, 2010, the Company acquired the international freight forwarding
business of Ferrara  pursuant to the terms of an Asset Purchase
Agreement (the “Purchase Agreement”) between the Company and Ferrara dated
October 4, 2010.
 
 The
purchase price paid and to be paid under the terms of the Purchase Agreement
consists of (i) cash in an amount equal to 70% of the annual actual earnings
before interest, taxes, depreciation and amortization (EBITDA) achieved over the
three 12-month periods following the Closing (the “Earn-Out Period”) from
revenues generated from the customers included in the purchased assets, and (ii)
1,714,286 restricted shares of the Company’s Common Stock valued at $600,000
based on the closing market price of the stock on October 1, 2010 (the “Share
Allocation”).   The Share Allocation is subject to decrease if
actual EBITDA from revenues generated from the customers included in the
purchased assets during the Earn-Out Period is below $2 million, and will be
issued in three installments on October 4, 2011, 2012 and 2013.
 
 Purchase
price allocation
 
 In
accordance with the purchase acquisition of accounting the Company has initially
allocated the consideration to the net tangible and identifiable intangible
assets, based on their estimated fair values.  Goodwill represents the
excess of the purchase price over the fair value of the underlying net tangible
and identifiable intangible assets.
 
 The
initial consideration estimated at $1,840,000 consists of $600,000 of common
stock and $1,400,000 of future cash to be paid, net of imputed interest of
$160,000.  The consideration has been allocated as
follows:
 
 Intangible
      assets:Customer
      relationships subject to amortization
                      
                      $
                      1,220,000Goodwill
                      
                      
                      620,000Total
      fair value
                      
                      $
                      1,840,000
 Pursuant
to the terms of the Purchase Agreement, Nicholas V. Ferrara, the principal owner
of Ferrara, will be employed by the Company at an annual salary of $182,000 plus
benefits.
  (B)           In
November 2010 the Company reached a settlement agreement and mutual general
releases with Richard Francis.  Terms of the settlement include the
issuance of 780,000 shares to Mr. Francis, as well as payments totaling
$23,359.  Upon issuance and delivery of the settlement shares and
payment of the cash settlement, both signed a stipulation and Order of Dismissal
ending all claims made in their entirety.
 
 (C)           On
December 3, 2010 the former “CFO” of Janel filed a complaint through the U.S.
Equal Employment Opportunity Commission alleging, among other things,
discrimination by the Company.  No damages were claimed in the
complaint.  The Company’s response to the complaint is due on January
3, 2011.  The Company intends to vigorously defend this
claim.
  F-20




SCHEDULE
II





SCHEDULE
OF VALUATION AND QUALIFYING ACCOUNTS


(in
thousands)





Balance at
                  Beginning
                  of Year
                
                
                Charged to
                  Costs and
                  Expenses
                
                
                Charged to
                  Other
                  Accounts
                
                
                Deductions
                
                
                Balance at
                  End of YearFor
      the fiscal year ended September 30, 2008Allowance
      for doubtful accounts
                
                $
                43
                
                
                $
                131
                
                
                $
                -
                
                
                $
                (44
                )
                
                $
                130For
      the fiscal year ended September 30, 2009Allowance
      for doubtful accounts
                
                $
                130
                
                
                $
                192
                
                
                $
                -
                
                
                $
                (237
                )
                
                $
                85For
      the fiscal year ended September 30, 2010Allowance
      for doubtful accounts
                
                $
                85
                
                
                $
                271
                
                
                $
                -
                
                
                $
                (249
                )
                
                $
                107
  S-1