SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q/A


Amendment
No. 1




x QUARTERLY REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934




For the
quarterly period ended: December 31, 2008




 ̈ TRANSITION REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934




For the
transition period from ___________ to _____________




Commission
File Number: 000-50283




RADIANT LOGISTICS,
INC.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
                  
                  04-3625550(State
      or Other Jurisdiction of
                    Incorporation
      or Organization)
                  
                  (IRS
      Employer Identification
No.)





1227 120th Avenue
N.E., Bellevue, WA 98005





(Address
of Principal Executive Offices)





(425)943-4599





(Issuer’s
Telephone Number, including Area Code)





N/A





(Former
Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)





Indicate
by check mark whether the registrant: (1) has  filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
accelerated filer  ̈                                                                             
Accelerated filer  ̈


Non-accelerated
filer    ̈                                                            Smaller
reporting company x


(Do not
check if a smaller reporting company)





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





There
were 34,701,960 issued and outstanding shares of the registrant’s common stock,
par value $.001 per share, as of February 10, 2009.





Explanatory
Note





Radiant
Logistics, Inc. (the "Company") is filing this Amendment No. 1 (the “Amendment”)
to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2008, initially filed with the Securities and Exchange Commission
(the "SEC") on February 13, 2009 (the "Original Filing") in response to a
comment letter received from the SEC in connection with its review of the
Company’s filings with the SEC.  This Amendment reflects restatements
of the condensed consolidated financial statements as of and for the three
and six month periods ended December 31, 2008, and the notes related
thereto.  For a more detailed description of these restatements, see
Note 2 - Restatement of Previously Issued Financial Statements to the
accompanying unaudited interim condensed consolidated financial
statements contained in Item 1 of Part I of this
Amendment.  Corresponding revisions to Item 2 of Part I, Management's
Discussion and Analysis of Financial Condition and Results of Operation, have
also been amended to reflect the effects of the restatement.





With
the exception of the events set forth in Note 2 appearing in Item 1 of Part I of
this Amendment, this Amendment does not reflect events that have occurred after
February 13, 2009, the date the Original Filing was filed with the SEC, nor does
it modify or update the disclosures set forth in the Original Filing, except to
reflect the effects of the restatement of the consolidated financial statements
for the period ended December 31, 2008 and corresponding changes to Item 2 of
Part I.  Information with respect to any such events has been or will
be set forth, as appropriate, in the Company’s filings with the SEC subsequent
to February 13, 2009.  Accordingly, this Amendment should be read in
conjunction with the Company’s other filings with the SEC.  The
Company has supplemented Item 6 of Part II of this Amendment to include current
dated certifications from the Company’s Chief Executive Officer and Chief
Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002.  The certifications of the Company’s Chief Executive Officer
and Chief Financial Officer are attached to this Amendment as Exhibits 31.1 and
32.1.  The remaining information contained in this Amendment, which
consists of all other information originally contained in the Original Filing,
is not amended hereby, but is included for the convenience of the
reader.




2




RADIANT
LOGISTICS, INC.


TABLE
OF CONTENTS




PART
      I. FINANCIAL INFORMATIONItem
      1.
                                      
                                      Condensed
      Consolidated Financial Statements  -
    UnauditedCondensed
      Consolidated Balance Sheets at December 31, 2008 (Unaudited) and June 30,
      2008
                                      
                                      
                                      4Condensed
      Consolidated Statements of Operations for the three months and six months
      ended December 31, 2008 and 2007 (Unaudited)
                                      
                                      
                                      5Condensed
      Consolidated Statement of Stockholders’ Equity (Deficit) for the six
      months ended  December 31, 2008 (Unaudited)
                                      
                                      
                                      6Condensed
      Consolidated Statements of Cash Flows for the six months ended December
      31, 2008 and 2007 (Unaudited)
                                      
                                      
                                      7Notes
      to Condensed Consolidated Financial Statements
                                      
                                      
                                      8Item
      2.
                                      
                                      Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operations
                                      
                                      
                                      22Item
      4T.
                                      
                                      Controls
      and Procedures
                                      
                                      
                                      39PART
      II OTHER INFORMATIONItem
      1.
                                      
                                      Legal
      Proceedings
                                      
                                      
                                      40Item
      6.
                                      
                                      Exhibits
                                      
                                      
                                      40




3




RADIANT
LOGISTICS, INC.


Condensed
Consolidated Balance Sheets




(unaudited)





December 31, 2008
                  
                  
                  June 30, 2008ASSETSCurrent
      assets -Cash
      and cash equivalents
                  
                  $
                  1,023,812
                  
                  
                  $
                  392,223Accounts
      receivable, net of allowance for doubtful accounts of $994,439 at December
      31, 2008 and $513,479 at June 30, 2008
                  
                  
                  21,047,684
                  
                  
                  
                  14,404,002Current
      portion of employee loan receivable and other receivables
                  
                  
                  704,576
                  
                  
                  
                  68,367Prepaid
      expenses and other current assets
                  
                  
                  381,609
                  
                  
                  
                  425,657Income
      tax deposit
                  
                  
                  2,037,642
                  
                  
                  
                  -Deferred
      tax asset
                  
                  
                  -
                  
                  
                  
                  292,088Total
      current assets
                  
                  
                  25,195,323
                  
                  
                  
                  15,582,337Property
      and equipment, net
                  
                  
                  977,495
                  
                  
                  
                  717,542Acquired
      intangibles, net
                  
                  
                  3,877,353
                  
                  
                  
                  1,242,413Goodwill
                  
                  
                  -
                  
                  
                  
                  7,824,654Employee
      loan receivable
                  
                  
                  40,000
                  
                  
                  
                  40,000Investment
      in real estate
                  
                  
                  40,000
                  
                  
                  
                  40,000Deposits
      and other assets
                  
                  
                  397,125
                  
                  
                  
                  131,496Minority
      interest
                  
                  
                  26,931
                  
                  
                  
                  24,784Total
      long term assets
                  
                  
                  4,381,409
                  
                  
                  
                  9,303,347Total
      assets
                  
                  $
                  30,554,227
                  
                  
                  $
                  25,603,226LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      liabilities -Notes
      payable – current portion of long term debt
                  
                  $
                  633,333
                  
                  
                  $
                  113,306Accounts
      payable and accrued transportation costs
                  
                  
                  12,340,748
                  
                  
                  
                  9,914,831Commissions
      payable
                  
                  
                  1,361,060
                  
                  
                  
                  1,136,859Other
      accrued costs
                  
                  
                  903,162
                  
                  
                  
                  221,808Income
      taxes payable
                  
                  
                  -
                  
                  
                  
                  498,142Deferred
      tax liability
                  
                  
                  1,112,965
                  
                  
                  
                  -Due
      to former Adcom shareholder
                  
                  
                  2,201,849
                  
                  
                  
                  -Total
      current liabilities
                  
                  
                  18,553,117
                  
                  
                  
                  11,884,946Long
      term debt
                  
                  
                  12,049,790
                  
                  
                  
                  4,272,032Deferred
      tax liability
                  
                  
                  800,232
                  
                  
                  
                  422,419Total
      long term liabilities
                  
                  
                  12,850,022
                  
                  
                  
                  4,694,451Total
      liabilities
                  
                  
                  31,403,139
                  
                  
                  
                  16,579,397Stockholders'
      equity (deficit):Preferred
      stock, $0.001 par value, 5,000,000 shares authorized; no shares issued or
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $0.001 par value, 50,000,000 shares authorized; issued and
      outstanding: 34,701,960 at December 31, 2008 and 34,660,293 at June 30,
      2008
                  
                  
                  16,158
                  
                  
                  
                  16,116Additional
      paid-in capital
                  
                  
                  7,796,392
                  
                  
                  
                  7,703,658Retained
      earnings (deficit)
                  
                  
                  (8,661,462
                  )
                  
                  
                  1,304,055Total
      stockholders’ equity (deficit)
                  
                  
                  (848,912
                  )
                  
                  
                  9,023,829Total
      liabilities and stockholders’ equity (deficit)
                  
                  $
                  30,554,227
                  
                  
                  $
                  25,603,226


The
accompanying notes form an integral part of these condensed consolidated
financial statements.


4


RADIANT
LOGISTICS, INC.


Condensed
Consolidated Statements of Operations


(unaudited)





THREE MONTHS ENDED
                                          DECEMBER
      31,
                                        
                                        
                                        SIX
      MONTHS ENDED
                                          DECEMBER
      31,2008
                                        
                                        
                                        2007
                                        
                                        
                                        2008
                                        
                                        
                                        2007Revenue
                                        
                                        $
                                        42,513,263
                                        
                                        
                                        $
                                        23,108,798
                                        
                                        
                                        $
                                        74,907,962
                                        
                                        
                                        $
                                        48,666,031Cost
      of transportation
                                        
                                        
                                        29,023,751
                                        
                                        
                                        
                                        14,712,256
                                        
                                        
                                        
                                        50,235,011
                                        
                                        
                                        
                                        31,828,629Net
      revenues
                                        
                                        
                                        13,489,512
                                        
                                        
                                        
                                        8,396,542
                                        
                                        
                                        
                                        24,672,951
                                        
                                        
                                        
                                        16,837,402Agent
      commissions
                                        
                                        
                                        9,000,585
                                        
                                        
                                        
                                        6,154,416
                                        
                                        
                                        
                                        16,553,457
                                        
                                        
                                        
                                        12,006,234Personnel
      costs
                                        
                                        
                                        2,110,217
                                        
                                        
                                        
                                        1,090,305
                                        
                                        
                                        
                                        3,723,841
                                        
                                        
                                        
                                        2,637,240Selling,
      general and administrative expenses
                                        
                                        
                                        1,026,362
                                        
                                        
                                        
                                        740,164
                                        
                                        
                                        
                                        2,125,384
                                        
                                        
                                        
                                        1,435,032Depreciation
      and amortization
                                        
                                        
                                        472,709
                                        
                                        
                                        
                                        241,734
                                        
                                        
                                        
                                        788,066
                                        
                                        
                                        
                                        481,602Goodwill
      impairment
                                        
                                        
                                        11,403,342
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        11,403,342
                                        
                                        
                                        
                                        -Restructuring
      charges
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        220,000
                                        
                                        
                                        
                                        -Total
      operating expenses
                                        
                                        
                                        24,013,215
                                        
                                        
                                        
                                        8,226,619
                                        
                                        
                                        
                                        34,814,090
                                        
                                        
                                        
                                        16,560,108Income
      (loss) from operations
                                        
                                        
                                        (10,523,703
                                        )
                                        
                                        
                                        169,923
                                        
                                        
                                        
                                        (10,141,139
                                        )
                                        
                                        
                                        277,294Other
      income (expense):Interest
      income
                                        
                                        
                                        5,429
                                        
                                        
                                        
                                        1,200
                                        
                                        
                                        
                                        6,417
                                        
                                        
                                        
                                        2,400Interest
      expense
                                        
                                        
                                        (72,381
                                        )
                                        
                                        
                                        (48,131
                                        )
                                        
                                        
                                        (98,077
                                        )
                                        
                                        
                                        (73,871
                                        )Other
      – non recurring
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,918,146
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,918,146Other
                                        
                                        
                                        108
                                        
                                        
                                        
                                        13,005
                                        
                                        
                                        
                                        35,104
                                        
                                        
                                        
                                        (6,738
                                        )Total
      other income (expense)
                                        
                                        
                                        (66,844
                                        )
                                        
                                        
                                        1,884,220
                                        
                                        
                                        
                                        (56,556
                                        )
                                        
                                        
                                        1,839,937Income
      (loss) before income tax (expense) benefit
                                        
                                        
                                        (10,590,547
                                        )
                                        
                                        
                                        2,054,143
                                        
                                        
                                        
                                        (10,197,695
                                        )
                                        
                                        
                                        2,117,231Income
      tax (expense) benefit
                                        
                                        
                                        382,690
                                        
                                        
                                        
                                        (744,269
                                        )
                                        
                                        
                                        230,031
                                        
                                        
                                        
                                        (736,537
                                        )Income
      (loss) before minority interest
                                        
                                        
                                        (10,207,857
                                        )
                                        
                                        
                                        1,309,874
                                        
                                        
                                        
                                        (9,967,664
                                        )
                                        
                                        
                                        1,380,694Minority
      interest
                                        
                                        
                                        (7,843
                                        )
                                        
                                        
                                        14,334
                                        
                                        
                                        
                                        2,147
                                        
                                        
                                        
                                        31,946Net
      income (loss)
                                        
                                        $
                                        (10,215,700
                                        )
                                        
                                        $
                                        1,324,208
                                        
                                        
                                        $
                                        (9,965,517
                                        )
                                        
                                        $
                                        1,412,640Net
      income (loss)  per common share – basic
                                        
                                        $
                                        (.29
                                        )
                                        
                                        $
                                        .04
                                        
                                        
                                        $
                                        (.29
                                        )
                                        
                                        $
                                        .04Net
      income  (loss) per common share – diluted
                                        
                                        $
                                        (.29
                                        )
                                        
                                        $
                                        .04
                                        
                                        
                                        $
                                        (.29
                                        )
                                        
                                        $
                                        .04Weighted
      average shares outstanding:Basic
      shares
                                        
                                        
                                        34,701,960
                                        
                                        
                                        
                                        33,961,639
                                        
                                        
                                        
                                        34,698,563
                                        
                                        
                                        
                                        33,961,639Diluted
      shares
                                        
                                        
                                        34,701,960
                                        
                                        
                                        
                                        34,078,947
                                        
                                        
                                        
                                        34,698,563
                                        
                                        
                                        
                                        34,260,955




The
accompanying notes form an integral part of these condensed consolidated
financial statements.


5




RADIANT
LOGISTICS, INC.


Condensed
Consolidated Statement of Stockholders’ Equity (Deficit)




(unaudited)





ADDITIONAL
                
                
                RETAINED
                
                
                TOTALCOMMON
      STOCK
                
                
                PAID-IN
                
                
                EARNINGS
                
                
                STOCKHOLDERS'SHARES
                
                
                AMOUNT
                
                
                CAPITAL
                
                
                (DEFICIT)
                
                
                EQUITY (DEFICIT)Balance
      at June 30, 2008
                
                
                34,660,293
                
                
                $
                16,116
                
                
                $
                7,703,658
                
                
                $
                1,304,055
                
                
                $
                9,023,829Share
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                80,692
                
                
                
                -
                
                
                
                80,692Shares
      issued for investor relations services
                
                
                41,667
                
                
                
                42
                
                
                
                12,042
                
                
                
                
                
                
                
                12,084Net
      loss for the six months ended December 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9,965,517
                )
                
                
                (9,965,517
                )Balance
      at December 31, 2008
                
                
                34,701,960
                
                
                $
                16,158
                
                
                $
                7,796,392
                
                
                $
                (8,661,462
                )
                
                $
                (848,912
                )




The
accompanying notes form an integral part of these condensed consolidated
financial statements.


6




RADIANT
LOGISTICS, INC.


Condensed
Consolidated Statements of Cash Flows


(unaudited)





For six months ended December 31,2008
                  
                  
                  2007CASH
      FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:Net
      income (loss)
                  
                  $
                  (9,965,517
                  )
                  
                  $
                  1,412,640ADJUSTMENTS
      TO RECONCILE NET INCOME(LOSS)TO NET CASH PROVIDED BY (USED FOR) OPERATING
      ACTIVITIES:non-cash
      compensation expense (stock options)
                  
                  
                  80,692
                  
                  
                  
                  93,102stock
      issued for investor relations services
                  
                  
                  12,084
                  
                  
                  
                  -amortization
      of intangibles
                  
                  
                  565,060
                  
                  
                  
                  273,680change
      in deferred taxes
                  
                  
                  566,866
                  
                  
                  
                  (674,847
                  )depreciation
                  
                  
                  223,005
                  
                  
                  
                  193,087goodwill
      impairment
                  
                  
                  11,403,342
                  
                  
                  
                  -amortization
      of bank fees
                  
                  
                  7,979
                  
                  
                  
                  14,306tax
      indemnity
                  
                  
                  -
                  
                  
                  
                  (486,694
                  )minority
      interest in loss of subsidiaries
                  
                  
                  (2,147
                  )
                  
                  
                  (31,946
                  )provision
      for doubtful accounts
                  
                  
                  149,095
                  
                  
                  
                  215,904CHANGE
      IN ASSETS AND LIABILITIES -accounts
      receivable
                  
                  
                  3,657,072
                  
                  
                  
                  1,927,468employee
      receivable and other receivables
                  
                  
                  (36,813
                  )
                  
                  
                  (91,417
                  )prepaid
      expenses and other assets
                  
                  
                  161,670
                  
                  
                  
                  377,827accounts
      payable and accrued transportation costs
                  
                  
                  (6,518,887
                  )
                  
                  
                  (3,486,772
                  )commissions
      payable
                  
                  
                  224,201
                  
                  
                  
                  4,636other
      accrued costs
                  
                  
                  130,571
                  
                  
                  
                  (153,475
                  )income
      taxes payable
                  
                  
                  (498,142
                  )
                  
                  
                  1,038,789income
      tax deposits
                  
                  
                  (1,952,614
                  )
                  
                  
                  -Net
      cash provided by (used for) operating activities
                  
                  
                  (1,792,483
                  )
                  
                  
                  626,288CASH
      FLOWS USED FOR INVESTING ACTIVITIES:issuance
      of notes receivable
                  
                  
                  (214,520
                  )
                  
                  
                  -payments
      of notes receivable
                  
                  
                  4,276acquisition
      of automotive assets
                  
                  
                  -
                  
                  
                  
                  (1,925,000
                  )acquisition
      of Adcom Express, Inc net of acquired cashincluding
      and additional $62,246 cost incurred post closing
                  
                  
                  (4,839,040
                  )
                  
                  
                  -purchase
      of technology and equipment
                  
                  
                  (191,096
                  )
                  
                  
                  (185,338
                  )Net
      cash used for investing activities
                  
                  
                  (5,240,380
                  )
                  
                  
                  (2,110,338
                  )CASH
      FLOWS PROVIDED BY FINANCING ACTIVITIES:proceeds
      from note payable – acquisition of automotive assets
                  
                  
                  -
                  
                  
                  
                  120,000payments
      to former shareholders of Airgroup
                  
                  
                  (113,306
                  )
                  
                  
                  (500,000
                  )net
      proceeds from credit facility
                  
                  
                  7,777,758
                  
                  
                  
                  1,340,923Net
      cash provided by financing activities
                  
                  
                  7,664,452
                  
                  
                  
                  960,923NET
      INCREASE (DECREASE) IN CASH
                  
                  
                  631,589
                  
                  
                  
                  (523,127
                  )CASH,
      BEGINNING OF THE PERIOD
                  
                  
                  392,223
                  
                  
                  
                  719,575CASH,
      END OF PERIOD
                  
                  $
                  1,023,812
                  
                  
                  $
                  196,448SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Income
      taxes paid
                  
                  $
                  1,695,150
                  
                  
                  $
                  372,674Interest
      paid
                  
                  $
                  98,077
                  
                  
                  $
                  73,871


The
accompanying notes form an integral part of these condensed consolidated
financial statements.


7




RADIANT
LOGISTICS, INC.


Condensed
Consolidated Statements of Cash Flows


(unaudited)





Supplemental
disclosure of non-cash investing and financing activities:





In
November 2008, the Company recorded $633,333 as an accrued payable and an
increase to goodwill for the final annual earnout payment due to the former
Airgroup shareholders for the Company’s acquisition of Airgroup.





In
December 2008, the Company completed its quarterly analysis of allowance for
doubtful accounts.  Included in the analysis of doubtful accounts was
$205,462 relating to receivables acquired in the Adcom
transaction.  Pursuant to the purchase agreement of Adcom – the
$205,462 was offset against amounts otherwise due to the former Adcom
shareholder.





In
December 2008, the Company the paid $333,277 to the former Airgroup shareholders
for the earnout payment recorded on the books for the year ending June 30,
2008.  The earnout payment was recorded at June 30, 2008 in the amount
of $416,596, and payable in Company shares.  The payment was
discounted by $83,319 as the former Airgroup shareholders agreed to receive cash
rather than Company shares.    The effect of this
transaction was a decrease to goodwill and the amount owed to the former
Airgroup shareholders.





In
November 2008, the Company finalized its purchase price allocation resulting in
a decrease of net assets acquired by $62,694 due to unutilized transaction
costs.  The effect of this transaction was a decrease to goodwill and
a decrease to accrued payables.


8




RADIANT
LOGISTICS, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





NOTE
1 – THE COMPANY AND BASIS OF PRESENTATION





The
Company





Radiant
Logistics, Inc. (the “Company”) is a Bellevue, Washington based non-asset based
logistics company providing domestic and international freight forwarding
services through a combination of company-owned stations and a network of
exclusive agent stations across North America. Operating under the Airgroup and
Adcom brands, the Company services a diversified account base including
manufacturers, distributors and retailers using a network of independent
carriers and international agents positioned strategically around the
world.





By
implementing a growth strategy, the Company intends to build a leading global
transportation and supply-chain management company offering a full range of
domestic and international freight forwarding and other value added supply chain
management services, including order fulfillment, inventory management and
warehousing.





As a
non-asset based provider of third-party logistics services, the Company seeks to
limit its investment in equipment, facilities and working capital through
contracts and preferred provider arrangements with various transportation
providers who generally provide the Company with favorable rates, minimum
service levels, capacity assurances and priority handling status.  The
Company’s non-asset based approach allows it to maintain a high level of
operating flexibility and leverage a cost structure that is highly variable in
nature while the volume of flow of freight enables the Company to negotiate
attractive pricing with its transportation providers.





Interim
Disclosure





The
condensed consolidated financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations, although the Company’s
management believes that the disclosures are adequate to make the information
presented not misleading.  The Company’s management suggests that
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company’s Annual Report on Form
10-K for the year ended June 30, 2008.





The
interim period information included in this Quarterly Report on Form 10-Q
reflects all adjustments, consisting of normal recurring adjustments, that are,
in the opinion of the Company’s management, necessary for a fair statement of
the results of the respective interim periods.  Results of operations
for interim periods are not necessarily indicative of results to be expected for
an entire year.





Basis
of Presentation





The
consolidated financial statements also include the accounts of Radiant
Logistics, Inc. and its wholly-owned subsidiaries as well as a single
variable interest entity, Radiant Logistics Partners LLC which is 40% owned by
Airgroup, a wholly owned subsidiary of the Company, whose accounts are included
in the consolidated financial statements in accordance with Financial Accounting
Standards Board (“FASB”) Interpretation No. 46(R) consolidation of “Variable
Interest Entities” (See Note 7). All significant inter-company balances and
transactions have been eliminated.





NOTE
2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS


Subsequent
to the issuance of the unaudited interim condensed consolidated financial
statements as of and for the three and six month periods ended December 31,
2008, the Company received a comment letter from the SEC in connection with its
review of the Company’s filings with the SEC stating that the condensed
consolidated financial statements contained a presentation error related to
the goodwill impairment recognized in accordance with Financial Accounting
Standards Board (“FASB”) Statement of Financial Accounting Standard (“SFAS”) No.
142 “Goodwill and Other Intangible Assets” (“SFAS 142”). This required the
Company to present the goodwill impairment as a separate line item in operating
expenses rather than as a part of other income (expense).  As a
result, the Company has restated its unaudited interim condensed consolidated
financial statements as of and for the three and six month periods ended
December 31, 2008, included herein (the "restatement"). For further discussion,
see Note 3, Summary of Significant Accounting Policies, of the unaudited interim
condensed consolidated financial statements.





9




This
change in presentation resulted in an $11.4 million increase in operating
expenses and decrease in other expense for the three and six month periods ended
December 31, 2008, The restatement had no financial impact on assets,
liabilities, equity, net revenues, net income (loss) or net income (loss) per
share.





Components
of this restatement are detailed in the following table:





Condensed
Consolidated Statements of Operations





THREE MONTHS ENDED
                              DECEMBER 31, 2008
                            
                            
                            SIX MONTHS ENDED
                              DECEMBER 31, 2008As reported
                            
                            
                            As restated
                            
                            
                            As reported
                            
                            
                            As restatedOperating
      Expenses:Agent
      commissions
                            
                            $
                            9,000,585
                            
                            
                            $
                            9,000,585
                            
                            
                            $
                            16,553,457
                            
                            
                            $
                            16,553,457Personnel
      costs
                            
                            
                            2,110,217
                            
                            
                            
                            2,110,217
                            
                            
                            
                            3,723,841
                            
                            
                            
                            3,723,841Selling,
      general and administrative expenses
                            
                            
                            1,026,362
                            
                            
                            
                            1,026,362
                            
                            
                            
                            2,125,384
                            
                            
                            
                            2,125,384Depreciation
      and amortization
                            
                            
                            472,709
                            
                            
                            
                            472,709
                            
                            
                            
                            788,066
                            
                            
                            
                            788,066Restructuring
      charges
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            220,000
                            
                            
                            
                            220,000Goodwill
      impairment
                            
                            
                            -
                            
                            
                            
                            11,403,342
                            
                            
                            
                            -
                            
                            
                            
                            11,403,342Total
      operating expenses
                            
                            $
                            12,609,873
                            
                            
                            $
                            24,013,215
                            
                            
                            $
                            23,410,748
                            
                            
                            $
                            34,814,090Other
      income (expense):Interest
      income
                            
                            $
                            5,429
                            
                            
                            $
                            5,429
                            
                            
                            $
                            6,417
                            
                            
                            $
                            6,417Interest
      expense
                            
                            
                            (72,381
                            )
                            
                            
                            (72,381
                            )
                            
                            
                            (98,077
                            )
                            
                            
                            (98,077
                            )Other
      – non recurring
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Goodwill
      impairment
                            
                            
                            (11,403,342
                            )
                            
                            
                            -
                            
                            
                            
                            (11,403,342
                            )
                            
                            
                            -Other
                            
                            
                            108
                            
                            
                            
                            108
                            
                            
                            
                            35,104
                            
                            
                            
                            35,104Total
      other income (expense)
                            
                            $
                            (11,470,186
                            )
                            
                            $
                            (66,844
                            )
                            
                            $
                            (11,459,898
                            )
                            
                            $
                            (56,556
                            )





NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





a)           Use
of Estimates





The
preparation of financial statements and related disclosures in accordance with
accounting principles generally accepted in the United States of America
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
revenue and expenses during the reporting period. Such estimates include revenue
recognition, accruals for the cost of purchased transportation, accounting for
the issuance of shares and share based compensation, fair value of acquired
assets and liabilities, the assessment of the recoverability of long-lived
assets (specifically goodwill and acquired intangibles), the establishment of an
allowance for doubtful accounts and the valuation allowance for deferred tax
assets. Estimates and assumptions are reviewed periodically and the effects of
revisions are reflected in the period that they are determined to be necessary.
Actual results could differ from those estimates.


10




b)           Cash
and Cash Equivalents





For
purposes of the statements of cash flows, cash equivalents include all highly
liquid investments with original maturities of three months or less which are
not securing any corporate obligations.





c)           Concentration





The
Company maintains its cash in bank deposit accounts, which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.





d)
Accounts
Receivable





The
Company’s receivables are recorded when billed and represent claims against
third parties that will be settled in cash. The carrying value of the Company’s
receivables, net of the allowance for doubtful accounts, represents their
estimated net realizable value.   The Company evaluates the
collectability of accounts receivable on a customer-by-customer basis. The
Company records a reserve for bad debts against amounts due to reduce the net
recognized receivable to an amount the Company believes will be reasonably
collected. The reserve is a discretionary amount determined from the analysis of
the aging of the accounts receivables, historical experience and knowledge of
specific customers.





e)  Property &
Equipment





Technology
(computer software, hardware, and communications), furniture, and equipment are
stated at cost, less accumulated depreciation over the estimated useful lives of
the respective assets. Depreciation is computed using five to seven year lives
for vehicles, communication, office, furniture, and computer equipment and the
double declining balance method. Computer software is depreciated over a three
year life using the straight line method of depreciation. For leasehold
improvements, the cost is depreciated over the shorter of the lease term or
useful life on a straight line basis. Upon retirement or other disposition of
these assets, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss, if any, is reflected in other income or
expense. Expenditures for maintenance, repairs and renewals of minor items are
charged to expense as incurred. Major renewals and improvements are
capitalized.




Under the
provisions of Statement of Position 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use”, the Company
capitalizes costs associated with internally developed and/or purchased software
systems that have reached the application development stage and meet
recoverability tests. Capitalized costs include external direct costs of
materials and services utilized in developing or obtaining internal-use
software, payroll and payroll-related expenses for employees who are directly
associated with and devote time to the internal-use software project and
capitalized interest, if appropriate. Capitalization of such costs begins when
the preliminary project stage is complete and ceases no later than the point at
which the project is substantially complete and ready for its intended
purpose.




Costs for
general and administrative, overhead, maintenance and training, as well as the
cost of software that does not add functionality to existing systems, are
expensed as incurred.





f)           Goodwill





The
Company follows the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an
annual impairment test for goodwill and intangible assets with indefinite lives.
Under the provisions of SFAS No. 142, the first step of the impairment test
requires that the Company determine the fair value of its reporting unit, and
compare the fair value to the reporting unit's carrying amount. The Company has
only one reporting unit.  To the extent the reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform a second more detailed
impairment assessment. The second impairment assessment involves allocating the
reporting unit’s fair value to all of its recognized and unrecognized assets and
liabilities in order to determine the implied fair value of the reporting unit’s
goodwill as of the assessment date. The implied fair value of the reporting
unit’s goodwill is then compared to the carrying amount of goodwill to quantify
an impairment charge as of the assessment date. The Company performs its annual
impairment test effective as of April 1 of each year, unless events or
circumstances indicate, an impairment may have occurred before that
time.


11




During
the second quarter of fiscal 2009, in connection with the preparation of the
condensed consolidated financial statements included herein the Company
concluded that indicators of potential impairment were present due to the
sustained decline in the Company’s share price which resulted in the market
capitalization of the Company being less than its book value.  The
Company conducted an impairment test during the second quarter of fiscal 2009
based on the facts and circumstances at that time and its business strategy in
light of existing industry and economic conditions, as well as taking into
consideration future expectations. As the Company has significantly grown the
business since its initial acquisition of Airgroup, it has also grown its
customer relationship intangibles as the Company added additional
stations.  Through its impairment testing and review, the Company
concluded that its discounted cashflow analysis supports a valuation of its
identifiable intangible assets well in excess of their carrying
value.  Factoring this with management’s assessment of the fair value
of other assets and liabilities results in no residual implied fair value
remaining to be allocated to goodwill.  However, SFAS 142 does not
allow the Company to recognize the previously unrecognized intangible assets in
connection with these new stations.  As a result, at December 31,
2008, the Company recorded a non-cash goodwill impairment charge of
$11.4 million. The Company does not expect this non-cash charge to have any
impact on the Company’s compliance with the financial covenants in its credit
agreement.





g)  Long-Lived
Assets




Acquired
intangibles consist of customer related intangibles and non-compete agreements
arising from the Company’s acquisitions. Customer related intangibles are
amortized using accelerated methods over approximately 5 years and non-compete
agreements are amortized using the straight line method consistent with the term
of the underlying agreement which generally extends for a period of 4 to 5
years.  See Notes 3, 4 and 5.





The
Company follows the provisions of SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets,” which establishes accounting standards for
the impairment of long-lived assets such as property, plant and equipment and
intangible assets subject to amortization. The Company reviews long-lived assets
to be held-and-used for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. If the
sum of the undiscounted expected future cash flows over the remaining useful
life of a long-lived asset is less than its carrying amount, the asset is
considered to be impaired. Impairment losses are measured as the amount by which
the carrying amount of the asset exceeds the fair value of the asset. When fair
values are not available, the Company estimates fair value using the expected
future cash flows discounted at a rate commensurate with the risks associated
with the recovery of the asset. Assets to be disposed of are reported at the
lower of carrying amount or fair value less costs to sell. Management has
performed a review of all long-lived assets and has determined that no
impairment of the respective carrying value has occurred as of December 31,
2008.





h)  Commitments





The
Company has operating lease and capital lease commitments, some of which are for
office and warehouse space and equipment rentals and are under non-cancelable
operating leases expiring at various dates through December 2012. Future annual
commitments for years ending June 30, 2009 through 2013 are, respectively,
$519,314, $300,636, $144,628, $32,281, and $23,393.





i)  Income
Taxes




Taxes on
income are provided in accordance with SFAS No. 109, “Accounting for
Income Taxes.” Deferred income tax assets and liabilities are recognized for the
expected future tax consequences of events that have been reflected in the
consolidated financial statements. Deferred tax assets and liabilities are
determined based on the differences between the book values and the tax bases of
particular assets and liabilities. Deferred tax assets and liabilities are
measured using tax rates in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided to offset the net
deferred tax assets if, based upon the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be
realized.


12




The
Company accounts for uncertain income tax positions in accordance with FAS
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement 109” (“FIN 48”), which was adopted by the
Company on July 1, 2007. Accordingly, the Company reports a liability for
unrecognized tax benefits resulting from uncertain income tax positions taken or
expected to be taken in an income tax return. Estimated interest and penalties
are recorded as a component of interest expense or other expense,
respectively.





j)  Revenue
Recognition and Purchased Transportation Costs





The
Company recognizes revenue on a gross basis, in accordance with Emerging Issues
Task Force ("EITF") 91-9, "Reporting Revenue Gross versus Net," as a result of
the following: The Company is the primary obligor responsible for providing the
service desired by the customer and is responsible for fulfillment, including
the acceptability of the service(s) ordered or purchased by the customer. At the
Company’s sole discretion, it sets the prices charged to its customers, and is
not required to obtain approval or consent from any other party in establishing
its prices. The Company has multiple suppliers for the services it sells to its
customers, and has the absolute and complete discretion and right to select the
supplier that will provide the product(s) or service(s) ordered by a customer,
including changing the supplier on a shipment-by-shipment basis. In most cases,
the Company determines the nature, type, characteristics, and specifications of
the service(s) ordered by the customer. The Company also assumes credit risk for
the amount billed to the customer.




As a
non-asset based carrier, the Company does not own transportation assets. The
Company generates the major portion of its air and ocean freight revenues by
purchasing transportation services from direct (asset-based) carriers and
reselling those services to its customers. Based upon the terms in the contract
of carriage, revenues related to shipments where the Company issues a House
Airway Bill ("HAWB") or a House Ocean Bill of Lading ("HOBL") are recognized at
the time the freight is tendered to the direct carrier at origin. Costs
related to the shipments are also recognized at this same time based upon
anticipated margins, contractual arrangements with direct carriers, and other
known factors. The estimates are routinely monitored and compared to actual
invoiced costs. The estimates are adjusted as deemed necessary by the Company to
reflect differences between the original accruals and actual costs of purchased
transportation.





This
method generally results in recognition of revenues and purchased transportation
costs earlier than the preferred methods under generally accepted accounting
principles ("GAAP") which do not recognize revenues until a proof of delivery is
received or which recognize revenues as progress on the transit is made. The
Company’s method of revenue and cost recognition does not result in a material
difference from amounts that would be reported under such other
methods.





k)  Share based
Compensation





The
Company follows the provisions of SFAS No. 123R, "Share Based Payment,” a
revision of FASB Statement No. 123 ("SFAS 123R"). This statement requires that
the cost resulting from all share-based payment transactions be recognized in
the Company’s consolidated financial statements. In addition, the Company
follows the guidance of the Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin No. 107, "Share-Based Payment" ("SAB 107"). SAB 107 provides
the SEC’s staff’s position regarding the application of SFAS 123R and certain
SEC rules and regulations, and also provides the staff’s views regarding the
valuation of share-based payment arrangements for public companies. SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations based on their
fair values.





For the
three months ended December 31, 2008, the Company recorded a share based
compensation expense of $32,779, which, net of income taxes, resulted in a
$20,323 net reduction of net income. For the three months ended December 31,
2007, the Company recorded a share based compensation expense of $31,844, which,
net of income taxes, resulted in a $21,017 net reduction of net
income.  For the six months ended December 31, 2008, the Company
recorded a share based compensation expense of $80,692, which, net of income
taxes, resulted in a $50,029 net reduction of net income. For the six months
ended December 31, 2007, the Company recorded a share based compensation expense
of $93,102, which, net of income taxes, resulted in a $61,447 net reduction of
net income.


13




l)
              Basic
      and Diluted Income Per Share





The
Company uses SFAS No. 128, "Earnings Per Share" for calculating the basic and
diluted income per share. Basic income per share is computed by dividing net
income attributable to common stockholders by the weighted average number of
common shares outstanding. Diluted income per share is computed similar to basic
income per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the potential
common shares, such as stock options, had been issued and if the additional
common shares were dilutive.





For the
three months ended December 31, 2008 and 2007, the weighted average outstanding
number of dilutive common shares totaled 34,701,960 and 34,078,947,
respectively.  Options to purchase 3,360,000 shares of common stock
were not included in the diluted EPS computation for the three months ended
December 31, 2008 as there was a loss for the period and they are thus
anti-dilutive.  Options to purchase 1,375,000 shares of common stock
were not included in the diluted EPS computation for the three months ended
December 31, 2007 as the exercise prices of those options were greater than the
market price of the common shares and are thus anti-dilutive.





For the
six months ended December 31, 2008 and 2007, the weighted average outstanding
number of dilutive common shares totaled 34,698,563 and 34,260,955,
respectively.  Options to purchase 3,360,000 shares of common stock
were not included in the diluted EPS computation for the six months ended
December 31, 2008 as there was a loss for the period and they are thus
anti-dilutive.  Options to purchase 1,375,000 shares of common stock
were not included in the diluted EPS computation for the six months ended
December 31, 2007 as the exercise prices of those options were greater than the
market price of the common shares and are thus anti-dilutive.





The
following table reconciles the numerator and denominator of the basic and
diluted per share computations for earnings per share as follows.





Three months
                          ended
                          December 31,
                          2008
                        
                        
                        Three months
                          ended
                          December 31,
                          2007
                        
                        
                        Six months
                          ended
                          December 31,
                          2008
                        
                        
                        Six months
                          ended
                          December 31,
                          2007Weighted average basic shares
      outstanding
                        
                        
                        34,701,960
                        
                        
                        
                        33,961,639
                        
                        
                        
                        34,698,563
                        
                        
                        
                        33,961,639Options
                        
                        
                        -
                        
                        
                        
                        117,308
                        
                        
                        
                        -
                        
                        
                        
                        299,316Weighted average dilutive shares
      outstanding
                        
                        
                        34,701,960
                        
                        
                        
                        34,078,947
                        
                        
                        
                        34,698,563
                        
                        
                        
                        34,260,955





m)           Reclassifications





Certain
amounts for prior periods have been reclassified in the consolidated financial
statements to conform to the classification used in fiscal 2008.





NOTE
4 – ACQUISITION OF ASSETS – AUTOMOTIVE





In May, 2007, the
Company launched a new logistics service offering focused on the automotive
industry through its wholly owned subsidiary, Radiant Logistics Global Services,
Inc. (“RLGS”).  The Company entered into an Asset Purchase Agreement
(the “APA”) with Mass Financial Corporation (“Mass”) to acquire certain assets
formerly used in the operations of the automotive division of Stonepath Group,
Inc. (the “Purchased Assets”).  Pursuant to the initial APA, the
agreement of the transaction was valued at up to $2.75 million.


14




Concurrent
with the execution of the APA, the Company also entered into a Management
Services Agreement (“MSA”) with Mass, whereby it agreed to operate the Purchased
Assets within its automotive services group during the interim period pending
the closing under the APA.  As part of the MSA, Mass agreed to
indemnify the Company from and against any and all expenses,
claims  and damages arising out of or relating to any use by any of
the Company’s subsidiaries or affiliates of the Purchased Assets and the
operation of the business utilizing the Purchased Assets.





Shortly
after commencing operation of the Purchased Assets pursuant to the MSA, a
judgment creditor of Stonepath (the “Stonepath Creditor”) issued garnishment
notices to the automotive customers being serviced by the Company disputing the
priority and superiority of the underlying security interests of Mass in the
Purchased Assets and asserting that the Company was in possession of certain
accounts receivable of other assets covered by a garnishment
notice.  This resulted in a significant disruption to the automotive
business and the Company exercised an indemnity claim against Mass resulting in
a restructured transaction with Mass.





In
November 2007,the
purchase price of the purchased assets was reduced to $1.56 million, consisting
of cash of $560,000 and a $1.0 million credit in satisfaction of indemnity
claims asserted by the Company arising from its interim operation of the
Purchased Assets since May 22, 2007. Of the cash component of the transaction,
$100,000 was paid in May of 2007, $265,000 was paid at closing and a final
payment of $195,000 was to be paid in November of 2008, subject to off-set of up
to $75,000 for certain qualifying expenses incurred by the
Company.  Net of qualifying expenses and a discount for accelerated
payment, the final payment was reduced to $95,000 and paid in June of
2008.





The
Company finalized its purchase price allocation in November 2008 resulting in a
decrease of net assets acquired by $63,000 due to unutilized transaction
costs.  The total net assets acquired were $1.84
million.  The purchase price of the acquired assets was comprised of
the $1.56 million purchase price less $25,000 for the early payment of the note,
and an additional $302,306 in acquisition expenses.  Given the nature
of the transaction and the disruption to the business caused by the garnishment
proceedings, there were no covenant not to compete arrangements, continuing
customer contracts or similar amortizable intangibles associated with this
transaction. The following table summarizes the allocation of the purchase price
based on the estimated fair value of the acquired assets at November 1,
2007.  No liabilities were assumed in connection with the
transaction:




Furniture
      and equipment
                  
                  $
                  24,165Goodwill
                  
                  
                  1,813,141Total
      acquired assets
                  
                  
                  1,837,306Total
      acquired liabilities
                  
                  
                  -Net
      assets acquired
                  
                  $
                  1,837,306





The
results of operations related to these assets are included in the Company’s
statement of income from the date of acquisition in November 2007.





NOTE
5 – ACQUISITION OF ADCOM





On
September 5, 2008, the Company entered into and closed a Stock Purchase
Agreement (the “Agreement”) pursuant to which it acquired 100% of the issued and
outstanding stock of Adcom Express, Inc., d/b/a Adcom Worldwide (“Adcom”), a
privately held Minnesota corporation. For financial accounting purposes, the
transaction was deemed to be effective as of September 1, 2008. The stock was
acquired from Robert F. Friedman, the sole shareholder of Adcom.  The
total value of the transaction was $11,050,000, consisting of: (i) $4,750,000 in
cash paid at the closing; (ii) $250,000 in cash payable shortly after the
closing, subject to adjustment, based upon the working capital of Adcom as of
August 31, 2008; (iii) up to $2,800,000 in four “Tier-1 Earn-Out Payments” of up
to $700,000 each, covering the four year earn-out period through June 30, 2012,
based upon Adcom achieving certain levels of “Gross Profit Contribution” (as
defined in the Agreement), payable 50% in cash and 50% in shares of Company
common stock (valued at delivery date); (iv) a “Tier-2 Earn-Out Payment” of up
to $2,000,000, equal to 20% of the amount by which the Adcom cumulative Gross
Profit Contribution exceeds $16,560,000 during the four year earn-out period;
and (v) an “Integration Payment” of $1,250,000 payable on the earlier of the
date certain integration targets are achieved or 18 months after the closing,
payable 50% in cash and 50% in shares of Company common stock (valued at
delivery date). The Integration Payment, the Tier-1 Earn-Out Payments and
certain amounts of the Tier-2 Payments may be subject to acceleration upon
occurrence of a “Corporate Transaction” (as defined in the Agreement), which
includes a future sale of Adcom or the Company, or certain changes in corporate
control. The cash component of the transaction was financed through a
combination of existing funds and the proceeds from the Company’s revolving
credit facility.


15





Founded
in 1978, Adcom provides a full range of domestic and international freight
forwarding solutions to a diversified account base including manufacturers,
distributors and retailers through a combination of three company-owned and
twenty-seven independent agency locations across North America.





The
acquisition was accounted for as a purchase and accordingly, the results of
operations and cash flows of Adcom have been included in the Company’s condensed
consolidated financial statements prospectively from the date of
acquisition.  At September 30, 2008, the total purchase price
consisted of an initial payment of $4,750,000, an additional $136,796 in
acquisition expenses and net of an offset of $110,000 for certain liabilities
assumed in connection with the transaction.  As part of the
acquisition we recorded   $220,000 in restructuring charges that
are anticipated to be paid over the course of a year.  Also included
in the acquisition is $1,250,000 in future integration payments (included in
current liabilities) and $394,408 in working capital and other
adjustments.  In the second fiscal quarter ended December 31, 2008, we
incurred an additional $35,437 of integration costs.  The following
table summarizes the preliminary allocation of the purchase price based on the
estimated fair value of the acquired assets at August 31, 2008.




Current
      Assets
                    
                    $
                    11,980,440Furniture
      & Equipment
                    
                    
                    291,862Notes
      Receivable
                    
                    
                    343,602Intangibles
                    
                    
                    3,200,000Goodwill
                    
                    
                    3,091,369Other
      Assets
                    
                    
                    325,295Total
      acquired assets
                    
                    
                    19,232,568Current
      Liabilities assumed
                    
                    
                    11,559,927Long
      Term Deferred Tax Liability
                    
                    
                    1,216,000Total
      acquired liabilities
                    
                    
                    12,775,927Net
      assets acquired
                    
                    $
                    6,456,641





The above
allocation is still preliminary and the Company expects to finalize it prior to
the September 2009 anniversary of the acquisition as required per SFAS
141.





The
following information is based on estimated results for the three and six months
ended December 31, 2008 and 2007 as if the acquisition of the Adcom had occurred
as of July 1, 2007 (in thousands, except earnings per share):





Three months ending December 31,2008
                    
                    
                    2007Total
      revenue
                    
                    $
                    42,513
                    
                    
                    $
                    38,815Net
      income (loss)
                    
                    $
                    (10,216
                    )
                    
                    $
                    1,306Earnings
      per share:Basic
                    
                    $
                    (.29
                    )
                    
                    $
                    .04Diluted
                    
                    $
                    (.29
                    )
                    
                    $
                    .04




16




Six months ending December 31,2008
                    
                    
                    2007Total
      revenue
                    
                    $
                    87,052
                    
                    
                    $
                    78,763Net
      income (loss)
                    
                    $
                    (10,084
                    )
                    
                    $
                    1,292Earnings
      per share:Basic
                    
                    $
                    (.29
                    )
                    
                    $
                    .04Diluted
                    
                    $
                    (.29
                    )
                    
                    $
                    .04




NOTE
6 – ACQUIRED INTANGIBLE ASSETS





The table
below reflects acquired intangible assets related to the acquisitions of
Airgroup, Purchased Assets in Detroit and the acquisition of
Adcom.  The information is for the six months ended December 31, 2008
and year ended June 30, 2008.





Six
      months ended
                          December
      31, 2008
                        
                        
                        Year
      ended
                          June
      30, 2008Gross
                          carrying
                          amount
                        
                        
                        Accumulated
      Amortization
                        
                        
                        Gross
                          carrying
                          amount
                        
                        
                        Accumulated
      AmortizationAmortizable
      intangible assets:Customer
      related
                        
                        $
                        5,752,000
                        
                        
                        $
                        2,003,594
                        
                        
                        $
                        2,652,000
                        
                        
                        $
                        1,454,587Covenants
      not to compete
                        
                        
                        190,000
                        
                        
                        
                        61,053
                        
                        
                        
                        90,000
                        
                        
                        
                        45,000Total
                        
                        $
                        5,942,000
                        
                        
                        $
                        2,064,647
                        
                        
                        $
                        2,742,000
                        
                        
                        $
                        1,499,587Aggregate
      amortization expense:For
      six months endedDecember
      31, 2008
                        
                        
                        
                        
                        
                        $
                        565,060For
      six months endedDecember
      31, 2007
                        
                        
                        
                        
                        
                        $
                        273,680Aggregate
      amortization expense for the years ended June 30:2009
      – For the remainder of the year
                        
                        
                        
                        
                        
                        
                        698,3102010
                        
                        
                        
                        
                        
                        
                        1,159,2862011
                        
                        
                        
                        
                        
                        
                        827,7622012
                        
                        
                        
                        
                        
                        
                        769,7722013
                        
                        
                        
                        
                        
                        
                        374,3442014
                        
                        
                        
                        
                        
                        
                        47,879Total
                        
                        
                        
                        
                        
                        $
                        3,877,353





For the
six months ended December 31, 2008, the Company recorded an expense of $565,060
from amortization of intangibles and an income tax benefit of $202,782 from
amortization of the long term deferred tax liability; arising from the Airgroup
and Adcom acquisitions.  For the six months ended December 31, 2007,
the Company recorded an expense of $273,680 from amortization of intangibles and
an income tax benefit of $93,052; both arising from the acquisition of
Airgroup.  The Company expects the net reduction in income, from the
combination of amortization of intangibles and long term deferred tax liability
will be $444,894 for the remainder of 2009, $738,082 in 2010, $519,700 in 2011,
$477,259 in 2012, $232,093 in 2013 and $29,688 in 2014.


17




NOTE
7 – VARIABLE INTEREST ENTITY





FIN46(R)
clarifies the application of Accounting Research Bulletin No. 51 “Consolidated
Financial Statements,” to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have the
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties (“variable interest
entities”). Radiant Logistics Partners LLC (“RLP”) is 40% owned by Airgroup
Corporation and qualifies under FIN46(R) as a variable interest entity and is
included in the Company’s consolidated financial statements. RLP commenced
operations in February 2007. Minority interest recorded on the income statement
for the three months ended December 31, 2008 was an expense of
$7,844.  Minority interest recorded on the income statement for the
six months ended December 31, 2008 was a benefit of $2,146.  Minority
interest recorded on the income statements for the three and six months ended
December 31, 2007 was a benefit of $14,334 and $31,946,
respectively.





NOTE
8 – RELATED PARTY





RLP is
owned 40% by Airgroup and 60% by an affiliate of the Chief Executive Officer of
the Company, Radiant Capital Partners (RCP). RLP is a certified minority
business enterprise which was formed for the purpose of providing the Company
with a national accounts strategy to pursue corporate and government accounts
with diversity initiatives. As currently structured, RCP’s ownership interest
entitles it to a majority of the profits and distributable cash, if any,
generated by RLP. The operations of RLP are intended to provide certain benefits
to the Company, including expanding the scope of services offered by the Company
and participating in supplier diversity programs not otherwise available to the
Company. As the RLP operations mature, the Company will evaluate and approve all
related service agreements between the Company and RLP, including the scope of
the services to be provided by the Company to RLP and the fees payable to the
Company by RLP, in accordance with the Company’s corporate governance principles
and applicable Delaware corporation law. This process may include seeking the
opinion of a qualified third party concerning the fairness of any such agreement
or the approval of the Company’s shareholders. Under FIN46(R), RLP is
consolidated in the financial statements of the Company (see Note
6).





NOTE
9 – PROPERTY AND EQUIPMENT





Property
and equipment consists of the following:





December 31,
                              
                              
                              June
      30,2008
                              
                              
                              2008Vehicles
                              
                              $
                              33,788
                              
                              
                              $
                              3,500Communication
      equipment
                              
                              
                              1,353
                              
                              
                              
                              1,353Office
      equipment
                              
                              
                              310,224
                              
                              
                              
                              261,633Furniture
      and fixtures
                              
                              
                              55,581
                              
                              
                              
                              47,191Computer
      equipment
                              
                              
                              531,194
                              
                              
                              
                              290,135Computer
      software
                              
                              
                              881,522
                              
                              
                              
                              738,566Leasehold
      improvements
                              
                              
                              42,200
                              
                              
                              
                              30,5261,855,862
                              
                              
                              
                              1,372,904Less:  Accumulated
      depreciation and amortization
                              
                              
                              (878,367
                              )
                              
                              
                              (655,362
                              )Property
      and equipment – net
                              
                              $
                              977,495
                              
                              
                              $
                              717,542





Depreciation
and amortization expense for the six months ended December 31, 2008 was
$223,005, and for the six months ended December 31, 2007 was
$193,087.


18





NOTE
10 – LONG TERM DEBT





In
September 2008, the Company’s $10 million revolving credit facility (Facility)
was increased from $10 million to $15 million.  The Facility is
collateralized by accounts receivable and other assets of the Company and its
subsidiaries. Advances under the Facility are available to fund future
acquisitions, capital expenditures or for other corporate purposes. Borrowings
under the facility bear interest, at the Company’s option, at the Bank’s prime
rate minus .15% to 1.00% or LIBOR plus 1.55% to 2.25%, and can be adjusted up or
down during the term of the Facility based on the Company’s performance relative
to certain financial covenants. The Facility provides for advances of up to 80%
of the Company’s eligible accounts receivable.





The terms
of the Facility are subject to certain financial and operational covenants which
may limit the amount otherwise available under the Facility. The first covenant
limits funded debt to a multiple of 3.00 times the Company’s consolidated EBITDA
measured on a rolling four quarter basis (or a multiple of 3.25 at a reduced
advance rate of 75.0%). The second financial covenant requires the Company to
maintain a basic fixed charge coverage ratio of at least 1.1 to 1.0. The third
financial covenant is a minimum profitability standard that requires the Company
not to incur a net loss before taxes, amortization of acquired intangibles and
extraordinary items in any two consecutive quarterly accounting
periods.




Under the
terms of the Facility, the Company is permitted to make additional acquisitions
without the lender's consent only if certain conditions are satisfied. The
conditions imposed by the Facility include the following: (i) the absence of an
event of default under the Facility, (ii) the company to be acquired must be in
the transportation and logistics industry, (iii) the purchase price to be paid
must be consistent with the Company’s historical business and acquisition model,
(iv) after giving effect for the funding of the acquisition, the Company must
have undrawn availability of at least $1.0 million under the Facility, (v) the
lender must be reasonably satisfied with projected financial statements the
Company provides covering a 12 month period following the acquisition, (vi) the
acquisition documents must be provided to the lender and must be consistent with
the description of the transaction provided to the lender, and (vii) the number
of permitted acquisitions is limited to three per calendar year and shall not
exceed $7.5 million in aggregate purchase price financed by funded debt. In the
event that the Company is not able to satisfy the conditions of the Facility in
connection with a proposed acquisition, it must either forego the acquisition,
obtain the lender's consent, or retire the Facility. This may limit or slow the
Company’s ability to achieve the critical mass it may need to achieve its
strategic objectives.





The
co-borrowers of the Facility include Radiant Logistics, Inc., Airgroup
Corporation, Radiant Logistics Global Services Inc. (“RLGS”), Radiant Logistics
Partners, LLC (“RLP”), and Adcom Express, Inc. (d/b/a Adcom Worldwide). RLP is
owned 40% by Airgroup and 60% by an affiliate of the Chief Executive Officer of
the Company, Radiant Capital Partners. RLP has been certified as a minority
business enterprise, and focuses on corporate and government accounts with
diversity initiatives. As a co-borrower under the Facility, the accounts
receivable of RLP and RLGS are eligible for inclusion within the overall
borrowing base of the Company and all borrowers will be responsible for
repayment of the debt associated with advances under the Facility, including
those advanced to RLP. At December 31, 2008, the Company was in compliance with
all of its covenants.





In
November 2008, the Company amended the Airgroup Stock Purchase Agreement and
agreed to unconditionally pay the former Airgroup shareholders an Earn-Out
payment of $633,333 for the Earn-Out Period ending June 30, 2009 to be paid on
or about October 1, 2009 and to be paid 100% by delivery of shares of the common
stock of the Company.  This liability is recorded as Notes Payable –
current portion of long term debt.





As of
December 31, 2008, the Company had $7,895,440 in advances under the
Facility and $4,154,350 in outstanding checks, which had not yet been presented
to the bank for payment. The outstanding checks have been reclassified from
cash, as they will be advanced from, or against, the Facility when presented for
payment to the bank.  These amounts total long term debt of
$12,049,790.





At
December 31, 2008, based on available collateral and $205,000 in outstanding
letter of credit commitments, there was $3,391,664 available for borrowing under
the Facility based on advances outstanding.


19




NOTE
11 – PROVISION FOR INCOME TAXES





Deferred
income taxes are reported using the liability method. Deferred tax assets are
recognized for deductible temporary differences and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.





For the
three months ended December 31, 2008, the Company recognized net income tax
benefit of $382,690 consisting of current income tax benefit of $901,616 and
deferred income tax expense of $518,926.





For the
six months ended December 31, 2008, the Company recognized net income tax
benefit of $230,031 consisting of current income tax benefit of $796,897 and
deferred income tax expense of $566,866.





For the
three months ended December 31, 2007, the Company recognized net income tax
expense of $744,269 consisting of current income tax expense of $1,350,778 and
deferred income tax benefit of $606,509.





For the
six months ended December 31, 2007, the Company recognized net income tax
expense of $736,537 consisting of current income tax expense of $1,411,384 and
deferred income tax benefit of $674,847.





The
difference between the income tax benefit computed using statutory tax rates and
the income tax benefit recorded for the three and six months ended December 31,
2008, was due to permanent differences related to the goodwill
impairment.





NOTE
12 – STOCKHOLDERS’ EQUITY





Preferred
Stock





The
Company is authorized to issue 5,000,000 shares of preferred stock, par value at
$.001 per share. As of December 31, 2008, none of the shares were issued or
outstanding.





Common
Stock





In May
2008, the Company issued 250,000 shares of common stock to a financial advisor
who provided investor relations and financial advisory services for the periods
February 2008 through July 2008. The services for the period through June 2008
were recorded in the prior fiscal year, and as such, only the value of 41,667
shares has been recorded during the six months ended December 31,
2008.





NOTE
13 – SHARE BASED COMPENSATION




During
the three and six months ended December 31, 2008, the Company issued employee
options to purchase 100,000 shares of common stock at $0.20 per share in October
2008.  The options vest 20% per year over a five year
term.




Share
based compensation costs recognized during the three and six months ended
December 31, 2008, includes compensation cost for all share-based payments
granted to date, based on the grant-date fair value estimated in accordance with
the provisions of SFAS 123R. No options have been exercised as of December 31,
2008.





During
the six months ended December 31, 2008, the weighted average fair value per
share of employee options granted in October 2008 was $.11.  The fair
value of options granted were estimated on the date of grant using the
Black-Scholes option pricing model, with the following assumptions for each
issuance of options:


20








October2008Dividend
      yield
                  
                  NoneVolatility
                  
                  
                  64.7
                  %Risk
      free interest rate
                  
                  
                  2.67
                  %Expected
      lives
                  
                  5.0
      years





In
accordance with SFAS123R, the Company is required to estimate the number of
awards that are ultimately expected to vest.





During
the six months ended December 31, 2008 and 2007, the Company recognized stock
option compensation costs of $80,692 and $93,102, respectively, in accordance
with SFAS 123R.  The following table summarizes activity under the
plan for the six months ended December 31, 2008.





Number
      of
                                                              shares
                                                            
                                                            
                                                            
                                                            Weighted
                                                              Average
                                                              exercise
      price
                                                              per
      share
                                                            
                                                            Weighted
                                                              average
                                                              remaining
                                                              contractual
                                                              life
                                                            
                                                            Aggregate
                                                              intrinsic
                                                              valueOutstanding
      at June 30, 2008
                                                            
                                                            3,410,000
                                                            
                                                            
                                                            $
                                                            0.539
                                                            
                                                            7.97
      years
                                                            
                                                            $
                                                            -Options
      granted
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            0.20
                                                            
                                                            -
                                                            
                                                            
                                                            -Options
      exercised
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            -
                                                            
                                                            
                                                            -Options
      forfeited
                                                            
                                                            (150,000
                                                            )
                                                            
                                                            
                                                            0.55
                                                            
                                                            -
                                                            
                                                            
                                                            -Options
      expired
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            -
                                                            
                                                            
                                                            -Outstanding
      at December 31, 2008
                                                            
                                                            3,360,000
                                                            
                                                            
                                                            $
                                                            0.529
                                                            
                                                            7.51
      years
                                                            
                                                            $
                                                            -Exercisable
      at December 31, 2008
                                                            
                                                            1,441,000
                                                            
                                                            
                                                            $
                                                            0.607
                                                            
                                                            6.93
      years
                                                            
                                                            $
                                                            -


The
aggregate intrinsic value for all outstanding options as of December 31, 2008
was $0 due to the strike price of all outstanding options exceeding the market
price of the Company’s stock.  The aggregate intrinsic value for all
vested options was $0 due to the strike price of all vested options exceeding
the market price of the Company’s stock.





NOTE
14 – RECENT ACCOUNTING PRONOUNCEMENTS





No new
accounting pronouncements are expected to have a material impact on the
Company.





NOTE
15 – SUBSEQUENT EVENTS





Burke
Proceedings





On
February 9, 2009, Douglas Burke (“Burke”) and Radiant Logistics Global Services,
Inc. (“RLGS”) entered into a Release and Settlement Agreement pursuant to which
RLGS (1) dismissed its objections to writs of garnishment entered in favor of
Burke (2) withdrew as an intervening party to the matter which was pending in
the Circuit Court for the County of Wayne, State of Michigan, Case No.
04-433025-CA (the “State Court Action”) and (3) agreed to take no further action
or position as a party to the State Court Action.   In
consideration of the foregoing, Burke (1) released RLGS from any and all claims
related to the writs of garnishment or the underlying judgment (2) consented to
suit Burke filed against RLGS pending in the United States District Court for
the Eastern District of Michigan, Case No. 08-0581 being dismissed with
prejudice, and (3) agreed that his recovery, if any, with respect to RLGS will
be limited to the letter of credit posted by Mass Financial
Corporation.


21





ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS





The
following discussion and analysis of our financial condition and result of
operations should be read in conjunction with the financial statements and the
related notes and other information included elsewhere in this
report.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This
report includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding future operating performance,
events, trends and plans. All statements other than statements of historical
fact contained herein, including, without limitation, statements regarding
future financial position, business strategy, budgets, projected revenues and
costs, and plans and objectives of management for future operations, are
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as “may,” “will,”
“expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or
“believes” or the negative thereof or any variation thereon or similar
terminology or expressions. We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are not guarantees and are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. While it
is impossible to identify all of the factors that may cause our actual operating
performance, events, trends or plans to differ materially from those set forth
in such forward-looking statements, such factors include the inherent risks
associated with our ability to: (i) to use Airgroup as a “platform” upon which
we can build a profitable global transportation and supply chain management
company; (ii) retain and build upon the relationships we have with our exclusive
agency offices; (iii) continue the development of our back office infrastructure
and transportation and accounting systems in a manner sufficient to service our
expanding revenues and base of exclusive agency locations; (iv) maintain the
future operations of Adcom in a manner consistent with its past practices, (v)
integrate the operations of Adcom with our existing operations, (vi) continue
growing our business and maintain historical or increased gross profit margins;
(vii) locate suitable acquisition opportunities; (viii) secure the financing
necessary to complete any acquisition opportunities we locate; (ix) assess and
respond to competitive practices in the industries in which we compete, (x)
mitigate, to the best extent possible, our dependence on current management and
certain of our larger exclusive agency locations; (xi) assess and respond to the
impact of current and future laws and governmental regulations affecting the
transportation industry in general and our operations in particular; and (xii)
assess and respond to such other factors which may be identified from time to
time in our Securities and Exchange Commission (SEC) filings and other public
announcements including those set forth in Part 1 Item 1A of our Annual Report
on Form 10-K for the fiscal year ended June 30, 2008. All subsequent written and
oral forward-looking statements attributable to us, or persons acting on our
behalf, are expressly qualified in their entirety by the foregoing. 
Readers are cautioned not to place undue reliance on our forward-looking
statements, as they speak only as of the date made. Except as required by law,
we assume no duty to update or revise our forward-looking
statements.





Restatement





The
financial information within the following Management's Discussion and Analysis
of Financial Condition and Results of Operations has been updated to reflect the
effects of the restatement as further described in Note 2 to the unaudited
interim condensed consolidated financial statements included in Item I, Part I
of this Form 10-Q/A.





Overview





We are a
Bellevue, Washington based non-asset based logistics company providing domestic
and international freight forwarding services through a network of exclusive
agent offices across North America. Operating under the Airgroup and Adcom
brands, we service a diversified account base including manufacturers,
distributors and retailers using a network of independent carriers and
international agents positioned strategically around the world.





By
implementing a growth strategy, we intend to build a leading global
transportation and supply-chain management company offering a full range of
domestic and international freight forwarding and other value added supply chain
management services, including order fulfillment, inventory management and
warehousing.


22




As a
non-asset based provider of third-party logistics services, we seek to limit our
investment in equipment, facilities and working capital through contracts and
preferred provider arrangements with various transportation providers who
generally provide us with favorable rates, minimum service levels, capacity
assurances and priority handling status.  Our non-asset based approach
allows us to maintain a high level of operating flexibility and leverage a cost
structure that is highly variable in nature while the volume of our flow of
freight enables us to negotiate attractive pricing with our transportation
providers.





Our
growth strategy continues to focus on both organic growth and acquisitions. From
an organic perspective, we are focused on strengthening existing and expanding
new customer relationships.  One of the drivers of our organic growth
will be retaining existing, and securing new exclusive agency locations as well
as enhancing our back-office infrastructure and transportation and accounting
systems.





As we
continue to build out our network of exclusive agent locations to achieve a
level of critical mass and scale, we are executing an acquisition strategy to
develop additional growth opportunities.  We continue to identify a
number of additional companies as suitable acquisition candidates and have
completed two material acquisitions over the past twelve
months.   In November 2007, we purchased certain assets in
Detroit, Michigan to service the automotive industry.  In September
2008, we acquired Adcom Express, Inc. d/b/a Adcom Worldwide (“Adcom”). Adcom is
a Minneapolis, Minnesota based logistics company contributing an additional 30
locations across North America and augmenting our overall domestic and
international freight forwarding capabilities.





We will
continue to search for targets that fit within our acquisition
criteria.  Successful implementation of our growth strategy depends
upon a number of factors, including our ability to: (i) continue developing new
agency locations; (ii) locate acquisition opportunities; (iii) secure adequate
funding to finance identified acquisition opportunities; (iv) efficiently
integrate the businesses of the companies acquired; (v) generate the anticipated
economies of scale from the integration; and (vi) maintain the historic sales
growth of the acquired businesses in order to generate continued organic growth.
There are a variety of risks associated with our ability to achieve our
strategic objectives, including the ability to acquire and profitably manage
additional businesses and the intense competition in the industry for customers
and for acquisition candidates.





Performance
Metrics




Our
principal source of income is derived from freight forwarding services. As a
freight forwarder, we arrange for the shipment of our customers’ freight from
point of origin to point of destination. Generally, we quote our customers a
turn key cost for the movement of their freight. Our price quote will often
depend upon the customer’s time-definite needs (first day through fifth day
delivery), special handling (needs heavy equipment, delicate items,
environmentally sensitive goods, electronic components, etc.) and the means of
transport (truck, air, ocean or rail). In turn, we assume the responsibility for
arranging and paying for the underlying means of transportation.





Our
transportation revenue represents the total dollar value of services we sell to
our customers. Our cost of transportation includes direct costs of
transportation, including motor carrier, air, ocean and rail services. We act
principally as the service provider to add value in the execution and
procurement of these services to our customers. Our net transportation revenue
(gross transportation revenue less the direct cost of transportation) is the
primary indicator of our ability to source, add value and resell services
provided by third parties, and is considered by management to be a key
performance measure. In addition, management believes measuring its operating
costs as a function of net transportation revenue provides a useful metric, as
our ability to control costs as a function of net transportation revenue
directly impacts operating earnings.





Our
operating results will be affected as acquisitions occur. Since all acquisitions
are made using the purchase method of accounting for business combinations, our
financial statements will only include the results of operations and cash flows
of acquired companies for periods subsequent to the date of
acquisition.


23





Our GAAP
based net income will be affected by non-cash charges relating to the
amortization of customer related intangible assets and other intangible assets
arising from completed acquisitions. Under applicable accounting standards,
purchasers are required to allocate the total consideration in a business
combination to the identified assets acquired and liabilities assumed based on
their fair values at the time of acquisition. The excess of the consideration
paid over the fair value of the identifiable net assets acquired is to be
allocated to goodwill, which is tested at least annually for impairment.
Applicable accounting standards require that we separately account for and value
certain identifiable intangible assets based on the unique facts and
circumstances of each acquisition. As a result of our acquisition strategy, our
net income will include material non-cash charges relating to the amortization
of customer related intangible assets and other intangible assets acquired in
our acquisitions. Although these charges may increase as we complete more
acquisitions, we believe we will actually be growing the value of our intangible
assets (e.g., customer relationships). Thus, we believe that earnings before
interest, taxes, depreciation and amortization, or EBITDA, is a useful financial
measure for investors because it eliminates the effect of these non-cash costs
and provides an important metric for our business. Further, the financial
covenants of our credit facility adjust EBITDA to exclude costs related to share
based compensation expense and other non-cash charges. Accordingly, we intend to
employ EBITDA and adjusted EBITDA as management tools to measure our historical
financial performance and as a benchmark for future financial
flexibility.




Our
operating results are also subject to seasonal trends when measured on a
quarterly basis. The impact of seasonality on our business will depend on
numerous factors, including the markets in which we operate, holiday seasons,
consumer demand and economic conditions. Since our revenue is largely derived
from customers whose shipments are dependent upon consumer demand and
just-in-time production schedules, the timing of our revenue is often beyond our
control. Factors such as shifting demand for retail goods and/or manufacturing
production delays could unexpectedly affect the timing of our revenue. As we
increase the scale of our operations, seasonal trends in one area of our
business may be offset to an extent by opposite trends in another area. We
cannot accurately predict the timing of these factors, nor can we accurately
estimate the impact of any particular factor, and thus we can give no assurance
that historical seasonal patterns will continue in future periods.  In
addition, our historical trends may be even less relevant in light of the
current global economic downturn. We can offer no assurance that these
conditions either will improve in the near future or will not
worsen.





Results
of Operations





Basis
of Presentation





The
results of operations discussion that appears below has been presented utilizing
a combination of historical and, where relevant, pro forma information to
include the effects on our consolidated financial statements of our recently
completed acquisition of Adcom.  The pro forma information has been
presented for three and six months ended December 31, 2008 and 2007 as if we had
acquired Adcom as of July 1, 2007.  The pro forma results are also
adjusted to reflect a consolidation of the historical results of operations of
Airgroup and the Company as adjusted to reflect the amortization of acquired
intangibles and are also provided in the condensed consolidated financial
statements included within this report.





The pro
forma financial data are not necessarily indicative of results of operations
that would have occurred had this acquisition been consummated at the beginning
of the periods presented or that might be attained in the future.





For
the three months ended December 31, 2008 (actual and unaudited) and December 31,
2007 (actual and unaudited)




We
generated transportation revenue of $42.5 million and $23.1 million and net
transportation revenue of $13.5 million and $8.4 million for the three months
ended December 31, 2008 and 2007, respectively.  Net loss was
$10,216,000 for the three months ended December 31, 2008 compared to net income
of $1,324,000 for the three months ended December 31, 2007.




24


We had
adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
of $1,382,000 and $534,000 for three months ended December 31, 2008 and 2007,
respectively. EBITDA, is a non-GAAP measure of income and does not include the
effects of interest and taxes, and excludes the “non-cash” effects of
depreciation and amortization on current assets. Companies have some discretion
as to which elements of depreciation and amortization are excluded in the EBITDA
calculation. We exclude all depreciation charges related to property, plant and
equipment, and all amortization charges, including amortization of leasehold
improvements and other intangible assets. We then further adjust EBITDA to
exclude extraordinary items and costs related to share based compensation
expense, goodwill impairment charges and other non-cash charges consistent with
the financial covenants of our credit facility. As explained above, we believe
that EBITDA is useful to us and to our investors in evaluating and measuring our
financial performance.  While management considers EBITDA and adjusted
EBITDA useful in analyzing our results, it is not intended to replace any
presentation included in our consolidated financial statements.  Set
forth below is a reconciliation of EBITDA and adjusted EBITDA to net income, the
most directly comparable GAAP measure for the three months ended December 31,
2008 and 2007.





Three months ended December 31,
                
                
                Change2008
                
                
                2007
                
                
                Amount
                
                
                PercentNet
      income (loss)
                
                $
                (10,216
                )
                
                $
                1,324
                
                
                $
                (11,540
                )
                
                
                (871.6
                )%Income
      tax expense (benefit)
                
                
                (383
                )
                
                
                744
                
                
                
                (1,127
                )
                
                
                (151.5
                )%Interest
      expense – net
                
                
                67
                
                
                
                47
                
                
                
                20
                
                
                
                42.6
                %Depreciation
      and amortization
                
                
                473
                
                
                
                242
                
                
                
                231
                
                
                
                95.5
                %EBITDA
      (Earnings before interest, taxes, depreciation and
      amortization)
                
                $
                (10,059
                )
                
                $
                2,357
                
                
                $
                (12,416
                )
                
                
                (526.8
                )%Share
      based compensation and other non-cash costs
                
                
                38
                
                
                
                95
                
                
                
                (57
                )
                
                
                60.0.
                %Change
      in estimate of liabilities assumed in Airgroup acquisition
                
                
                -
                
                
                
                (1,431
                )
                
                
                1,431
                
                
                
                (100.0
                )%Tax
      indemnity
                
                
                -
                
                
                
                (487
                )
                
                
                487
                
                
                
                (100.0
                )%Goodwill
      impairment
                
                
                11,403
                
                
                
                -
                
                
                
                11,403
                
                
                NMAdjusted
      EBITDA
                
                $
                1,382
                
                
                $
                534
                
                
                $
                848
                
                
                
                158.8
                %





The
following table summarizes December 31, 2008 (actual and unaudited) and December
31, 2007 (actual and unaudited) transportation revenue, cost of transportation
and net transportation revenue (in thousands):




Three months ended December 31,
                        
                        
                        Change2008
                        
                        
                        2007
                        
                        
                        Amount
                        
                        
                        PercentTransportation
      revenue
                        
                        $
                        42,513
                        
                        
                        $
                        23,109
                        
                        
                        $
                        19,404
                        
                        
                        
                        84.0
                        %Cost
      of transportation
                        
                        
                        29,024
                        
                        
                        
                        14,712
                        
                        
                        
                        14,312
                        
                        
                        
                        97.3
                        %Net
      transportation revenue
                        
                        $
                        13,489
                        
                        
                        $
                        8,397
                        
                        
                        $
                        5,092
                        
                        
                        
                        60.6
                        %Net
      transportation margins
                        
                        
                        31.7
                        %
                        
                        
                        36.3
                        %





Transportation
revenue was $42.5 million for the three months ended December 31, 2008, an
increase of 84.0% over transportation revenue of $23.1 million for the three
months ended December 31, 2007.  Domestic transportation revenue
increased by 49.2% to $22.0 million for the three months ended December 31, 2008
from $14.7 million for the three months ended December 31, 2007. The increase
was primarily due to additional domestic revenues associated with the Adcom
acquisition.  Excluding the Adcom acquisition, domestic revenues for
the three months ended December 31, 2008 would have decreased by 6.2% to $13.8
million $14.7 million for the three months ended December 31, 2007.
International transportation revenue increased by 145.3% to $20.5 million for
the three months ended December 31, 2008 from $8.4 million for the comparable
prior year period, mainly attributed to additional international revenues and
the inclusion of international revenues associated with the Adcom acquisition.
Excluding the Adcom acquisition, international revenue for the three months
ended December 31, 2008 would have increased by 41.8% to $11.9 million from $8.4
million for the three months ended December 31, 2007.


25





Cost of
transportation increased to $29.0 million for the three months ended December
31, 2008 compared to $14.7 million for the three months ended December 31, 2007
as a result of additional revenues associated with the Adcom
transaction.





Net
transportation margins decreased to 31.7% of transportation revenue for the
three months ended December 31, 2008 as compared to 36.3% of transportation
revenue for the three months ended December 31, 2007.  The net
transportation margins decreased in the current quarter due to the acquisition
of Adcom which has a higher percentage of international sales which generally
have lower margins.





The
following table compares certain December 31, 2008 (unaudited) and December 31,
2007 (unaudited) condensed consolidated statement of income data as a percentage
of our net transportation revenue (in thousands):





Three months ended December 31,2008
                                  
                                  
                                  2007
                                  
                                  
                                  ChangeAmount
                                  
                                  
                                  Percent
                                  
                                  
                                  Amount
                                  
                                  
                                  Percent
                                  
                                  
                                  Amount
                                  
                                  
                                  PercentNet
      transportation revenue
                                  
                                  $
                                  13,489
                                  
                                  
                                  
                                  100.0
                                  %
                                  
                                  $
                                  8,397
                                  
                                  
                                  
                                  100.0
                                  %
                                  
                                  $
                                  5,092
                                  
                                  
                                  
                                  60.6
                                  %Agent
      commissions
                                  
                                  
                                  9,001
                                  
                                  
                                  
                                  66.7
                                  %
                                  
                                  
                                  6,154
                                  
                                  
                                  
                                  73.3
                                  %
                                  
                                  
                                  2,847
                                  
                                  
                                  
                                  46.3
                                  %Personnel
      costs
                                  
                                  
                                  2,110
                                  
                                  
                                  
                                  15.6
                                  %
                                  
                                  
                                  1,090
                                  
                                  
                                  
                                  13.0
                                  %
                                  
                                  
                                  1,020
                                  
                                  
                                  
                                  93.6
                                  %Other
      selling, general and administrative
                                  
                                  
                                  1,026
                                  
                                  
                                  
                                  7.6
                                  %
                                  
                                  
                                  741
                                  
                                  
                                  
                                  8.8
                                  %
                                  
                                  
                                  285
                                  
                                  
                                  
                                  38.5
                                  %Depreciation
      and amortization
                                  
                                  
                                  473
                                  
                                  
                                  
                                  3.5
                                  %
                                  
                                  
                                  242
                                  
                                  
                                  
                                  2.9
                                  %
                                  
                                  
                                  231
                                  
                                  
                                  
                                  95.5
                                  %Goodwill
      impairment
                                  
                                  
                                  11,403
                                  
                                  
                                  
                                  84.5
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0.0
                                  %
                                  
                                  
                                  11,403
                                  
                                  
                                  NMTotal
      operating costs
                                  
                                  
                                  24,013
                                  
                                  
                                  
                                  178.0
                                  %
                                  
                                  
                                  8,227
                                  
                                  
                                  
                                  98.0
                                  %
                                  
                                  
                                  15,786
                                  
                                  
                                  
                                  191.9
                                  %Income
      (loss) from operations
                                  
                                  
                                  (10,524
                                  )
                                  
                                  
                                  (78.0
                                  )%
                                  
                                  
                                  170
                                  
                                  
                                  
                                  2.0
                                  %
                                  
                                  
                                  (10,694
                                  )
                                  
                                  
                                  (6,290.6
                                  )%Other
      income (expense)
                                  
                                  
                                  (67
                                  )
                                  
                                  
                                  (0.5
                                  )%
                                  
                                  
                                  1,884
                                  
                                  
                                  
                                  22.4
                                  %
                                  
                                  
                                  (1,951
                                  )
                                  
                                  
                                  (103.6
                                  )%Income
      before income taxes andminority
      interest
                                  
                                  
                                  (10,591
                                  )
                                  
                                  
                                  (78.5
                                  )%
                                  
                                  
                                  2,054
                                  
                                  
                                  
                                  24.4
                                  %
                                  
                                  
                                  (12,645
                                  )
                                  
                                  
                                  (615.6
                                  )%Income
      tax (expense) benefit
                                  
                                  
                                  383
                                  
                                  
                                  
                                  (2.8
                                  )%
                                  
                                  
                                  (744
                                  )
                                  
                                  
                                  8.9
                                  %
                                  
                                  
                                  1,127
                                  
                                  
                                  
                                  151.5
                                  %Income
      (loss) before minority interest
                                  
                                  
                                  (10,208
                                  )
                                  
                                  
                                  (75.7
                                  )%
                                  
                                  
                                  1,310
                                  
                                  
                                  
                                  15.6
                                  %
                                  
                                  
                                  (11,518
                                  )
                                  
                                  
                                  (879.2
                                  )%Minority
      interest
                                  
                                  
                                  (8
                                  )
                                  
                                  
                                  (0.1
                                  )%
                                  
                                  
                                  14
                                  
                                  
                                  
                                  0.2
                                  %
                                  
                                  
                                  22
                                  
                                  
                                  
                                  (157.1
                                  )%Net  income
      (loss)
                                  
                                  $
                                  (10,216
                                  )
                                  
                                  
                                  (75.7
                                  )%
                                  
                                  $
                                  1,324
                                  
                                  
                                  
                                  15.8
                                  %
                                  
                                  $
                                  (11,540
                                  )
                                  
                                  
                                  (871.6
                                  )%





Agent
commissions were $9.0 million for the three months ended December 31, 2008, an
increase of 46.3% from $6.2 million for the three months ended December 31,
2007.  Agent commissions as a percentage of net transportation revenue
decreased to 66.7% for three months ended December 31, 2008 from 73.3% for the
comparable prior year period as a result of the introduction of Company owned
operations in Detroit, and Newark, NJ as well as three Company owned stores
within the Adcom network where operations were not subject to agent
commissions.


26





Personnel
costs were $2.1 million for the three months ended December 31, 2008, an
increase of 93.6% from $1.1 million for the three months ended December 31,
2007.  Personnel costs as a percentage of net transportation revenue
increased to 15.6% for three months ended December 31, 2008 from 13.0% for the
comparable prior year period primarily as a result of increased personnel costs
associated with new Company owned stores and the increased head count associated
with the Adcom transaction.





Other
selling, general and administrative costs were $1 million for the three months
ended December 31, 2008, an increase of 38.5% from $741,000 for the three months
ended December 31, 2007.  The increase resulted primarily from the
increase in Company owned stations and the acquisition of Adcom. As a percentage
of net transportation revenue, other selling, general and administrative costs
decreased to 7.6% for three months ended December 31, 2008 from 8.8% for the
comparable prior year period.





Depreciation
and amortization costs were approximately $473,000 and $242,000 for the three
months ended December 31, 2008 and 2007, respectively.  Depreciation
and amortization as a percentage of net transportation revenue increased to 3.5%
for the three months ended December 31, 2008 from 2.9% for the comparable prior
year period, primarily due to increased amortization costs associated with the
Adcom transaction.





In the
quarter ended December 31, 2008 the Company recorded an impairment charge to
goodwill in the amount of $11,403,000.





Loss
from operations was $10,524,000 for the three months ended December 31, 2008
compared to income from operations of $170,000 for the three months ended
December 31, 2007.





Other
expense was $67,000 for the three months ended December 31, 2008 compared to
other income of $1,884,000 for the three months ended December 31,
2007.  In the quarter ended December 31, 2007, the Company recorded a
$1.4 million change in estimate of the liabilities assumed in the acquisition of
Airgroup combined with an additional $487,000 in income recognized as a result
of the related tax indemnity.





Net loss
was $10,216,000 for the three months ended December 31, 2008, compared to net
income of $1,324,000 for the three months ended December 31, 2007.




Supplemental
Pro Forma Information





The
following table provides a reconciliation of December 31, 2008 (pro forma and
unaudited) and December 31, 2007 (pro forma and unaudited) adjusted EBITDA to
net income, the most directly comparable GAAP measure in accordance with SEC
Regulation G (in thousands):





Three months ended December 31,
                          
                          
                          Change2008
                          
                          
                          2007
                          
                          
                          Amount
                          
                          
                          PercentNet
      income (loss)
                          
                          $
                          (10,216
                          )
                          
                          $
                          1,305
                          
                          
                          $
                          (11,521
                          )
                          
                          
                          (882.8
                          )%Income
      tax expense (benefit)
                          
                          
                          (383
                          )
                          
                          
                          745
                          
                          
                          
                          (1,128
                          )
                          
                          
                          (151.4
                          )%Interest
      expense – net
                          
                          
                          67
                          
                          
                          
                          82
                          
                          
                          
                          (15
                          )
                          
                          
                          (18.3
                          )%Depreciation
      and amortization
                          
                          
                          473
                          
                          
                          
                          275
                          
                          
                          
                          198
                          
                          
                          
                          72.0
                          %EBITDA
      (Earnings before interest, taxes, depreciation and
      amortization)
                          
                          $
                          (10,059
                          )
                          
                          $
                          2.407
                          
                          
                          $
                          (12,466
                          )
                          
                          
                          (517.9
                          )%Share
      based compensation and other non-cash costs
                          
                          
                          11,441
                          
                          
                          
                          (1,823
                          )
                          
                          
                          13,264
                          
                          
                          
                          (727.6
                          )%Adjusted
      EBITDA
                          
                          $
                          1,382
                          
                          
                          $
                          584
                          
                          
                          $
                          798
                          
                          
                          
                          136.6
                          %




27





The
following table summarizes December 31, 2008 (pro forma and unaudited) and
December 31, 2007 (pro forma and unaudited) transportation revenue, cost of
transportation and net transportation revenue (in thousands):




Three months ended December 31,
                        
                        
                        Change2008
                        
                        
                        2007
                        
                        
                        Amount
                        
                        
                        PercentTransportation
      revenue
                        
                        $
                        42,513
                        
                        
                        $
                        38,815
                        
                        
                        $
                        3,698
                        
                        
                        
                        9.5
                        %Cost
      of transportation
                        
                        
                        29,024
                        
                        
                        
                        24,776
                        
                        
                        
                        4,248
                        
                        
                        
                        17.1
                        %Net
      transportation revenue
                        
                        $
                        13,489
                        
                        
                        $
                        14,039
                        
                        
                        $
                        (550
                        )
                        
                        
                        (3.9
                        )%Net
      transportation margins
                        
                        
                        31.7
                        %
                        
                        
                        36.2
                        %





Pro forma
transportation revenue was $42.5 million for the three months ended December 31,
2008, an increase of 9.5% over pro forma transportation revenue of $38.8 million
for the three months ended December 31, 2007.





Pro forma
cost of transportation increased to $29.0 million for the three months ended
December 31, 2008 an increase of 17.1% over pro forma costs of transportation of
$24.8 million for the three months ended December 31, 2007.





Pro forma
net transportation margins declined to 31.7% for the three months ended December
31, 2008 compared to pro forma transportation margins of 36.2% for the three
months ended December 31, 2007. The net transportation margins decreased in the
current quarter due to the acquisition of Adcom which has a higher percentage of
international sales which generally have lower margins.





The
following table compares certain December 31, 2008 (pro forma and unaudited) and
December 31, 2007 (pro forma and unaudited) condensed consolidated statement of
income data as a percentage of our net transportation revenue (in
thousands):





Three months ended December 31,2008
                                    
                                    
                                    2007
                                    
                                    
                                    ChangeAmount
                                    
                                    
                                    Percent
                                    
                                    
                                    Amount
                                    
                                    
                                    Percent
                                    
                                    
                                    Amount
                                    
                                    
                                    PercentNet
      transportation revenue
                                    
                                    $
                                    13,489
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    14,039
                                    
                                    
                                    
                                    100.0
                                    %
                                    
                                    $
                                    (550
                                    )
                                    
                                    
                                    (3.9
                                    )%Agent
      commissions
                                    
                                    
                                    9,001
                                    
                                    
                                    
                                    66.7
                                    %
                                    
                                    
                                    10,527
                                    
                                    
                                    
                                    75.0
                                    %
                                    
                                    
                                    (1,526
                                    )
                                    
                                    
                                    (14.5
                                    )%Personnel
      costs
                                    
                                    
                                    2,110
                                    
                                    
                                    
                                    15.6
                                    %
                                    
                                    
                                    1,894
                                    
                                    
                                    
                                    13.5
                                    %
                                    
                                    
                                    216
                                    
                                    
                                    
                                    11.4
                                    %Other
      selling, general and administrative
                                    
                                    
                                    1,026
                                    
                                    
                                    
                                    7.6
                                    %
                                    
                                    
                                    1,120
                                    
                                    
                                    
                                    8.0
                                    %
                                    
                                    
                                    (94
                                    )
                                    
                                    
                                    (8.4
                                    )%Depreciation
      and amortization
                                    
                                    
                                    473
                                    
                                    
                                    
                                    3.5
                                    %
                                    
                                    
                                    275
                                    
                                    
                                    
                                    2.0
                                    %
                                    
                                    
                                    198
                                    
                                    
                                    
                                    72.0
                                    %Goodwill
      impairment
                                    
                                    
                                    11,403
                                    
                                    
                                    
                                    84.5
                                    %
                                    
                                    
                                    -
                                    
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    11,403
                                    
                                    
                                    NMTotal
      operating costs
                                    
                                    
                                    24,013
                                    
                                    
                                    
                                    178.0
                                    %
                                    
                                    
                                    13,816
                                    
                                    
                                    
                                    98.4
                                    %
                                    
                                    
                                    10,197
                                    
                                    
                                    
                                    73.8
                                    %Income
      (loss) from operations
                                    
                                    
                                    (10,524
                                    )
                                    
                                    
                                    (78.0
                                    )%
                                    
                                    
                                    223
                                    
                                    
                                    
                                    1.6
                                    %
                                    
                                    
                                    (10,747
                                    )
                                    
                                    
                                    (4,819.3
                                    )%Other
      income (expense)
                                    
                                    
                                    (67
                                    )
                                    
                                    
                                    (0.5
                                    )%
                                    
                                    
                                    1,813
                                    
                                    
                                    
                                    12.9
                                    %
                                    
                                    
                                    1,880
                                    
                                    
                                    
                                    (103.7
                                    %Income
      (loss) before income taxes andminority
      interest
                                    
                                    
                                    (10,591
                                    )
                                    
                                    
                                    (78.5
                                    )%
                                    
                                    
                                    2,036
                                    
                                    
                                    
                                    14.5
                                    %
                                    
                                    
                                    (12,627
                                    )
                                    
                                    
                                    (620.2
                                    )%Income
      tax (expense) benefit
                                    
                                    
                                    383
                                    
                                    
                                    
                                    2.8
                                    %
                                    
                                    
                                    (745
                                    )
                                    
                                    
                                    (5.3
                                    )%
                                    
                                    
                                    1,128
                                    
                                    
                                    
                                    (151.5
                                    )%Income
      (loss) before minority interest
                                    
                                    
                                    (10,208
                                    )
                                    
                                    
                                    (75.7
                                    )%
                                    
                                    
                                    1,291
                                    
                                    
                                    
                                    9.2
                                    %
                                    
                                    
                                    (11,499
                                    )
                                    
                                    
                                    (890.7
                                    )%Minority
      interest
                                    
                                    
                                    8
                                    
                                    
                                    
                                    0.1
                                    %
                                    
                                    
                                    (14
                                    )
                                    
                                    
                                    (0.1
                                    )%
                                    
                                    
                                    22
                                    
                                    
                                    
                                    (157.1
                                    )%Net  income
      (loss)
                                    
                                    $
                                    (10,216
                                    )
                                    
                                    
                                    (75.7
                                    )%
                                    
                                    
                                    1,305
                                    
                                    
                                    
                                    9.3
                                    %
                                    
                                    $
                                    (11,521
                                    )
                                    
                                    
                                    (882.8
                                    )%




28




Pro forma
agent commissions were $9.0 million for the three months ended December 31,
2008, a decrease of 14.5% from $10.5 million for the three months ended December
31, 2007.  Pro forma agent commissions as a percentage of net
transportation revenue declined to 66.7% for three months ended December 31,
2008 compared to 75.0% for the comparable prior year period as a result of the
introduction of Company owned operations in Detroit, and Newark NJ as well as
three Company owned stores within the Adcom network where operations were not
subject to agent commissions.





Pro forma
personnel costs were $2.1 million for the three months ended December 31, 2008,
an increase of 10.5% from $1.9 million for the three months ended December 31,
2007.  Pro forma personnel costs as a percentage of net transportation
revenue increased to 15.6% for three months ended December 31, 2008 from 13.5%
for the primarily as a result of increased personnel costs associated with new
Company owned stores.





Pro forma
other selling, general and administrative costs were $1 million for the three
months ended December 31, 2008, a decrease of 8.4% from $1.1 million for the
three months ended December 31, 2007.  As a percentage of net
transportation revenue, pro forma other selling, general and administrative
costs decreased to 7.6% for three months ended December 31, 2008 from 8.0% for
the comparable prior year period.





Pro forma
depreciation and amortization costs were approximately $473,000 and $275,000 for
the three months ended December 31, 2008 and 2007, respectively.  Pro
forma depreciation and amortization as a percentage of net transportation
revenue increased to 3.5% for the three months ended December 31, 2008 from 2.0%
for the comparable prior year period.





For
the three months ended December 31, 2008 the Company recorded an impairment
charge to goodwill in the amount of $11.4 million.





Pro
forma loss from operations was $10,524,000 for the three months ended December
31, 2008 compared to income from operations of $223,000 for the three months
ended December 31, 2007.





Pro
forma other expense was $67,000 for the three months ended December 31, 2008
compared to other income of $1,813,000 for the three months ended December 31,
2007.  For the three months ended December 31, 2007, the Company
recorded a $1.4 million change in estimate of the liabilities assumed in the
acquisition of Airgroup combined with an additional $487,000 in income
recognized as a result of the related tax indemnity.





Pro
forma net loss was $10,216,000 for the three months ended December 31, 2008,
compared to pro forma net income of $1,306,000 for the three months ended
December 31, 2007.





For
the six months ended December 31, 2008 (actual and unaudited) and December 31,
2007 (actual and unaudited)




We
generated transportation revenue of $74.9 million and $48.7 million and net
transportation revenue of $24.7 million and $16.8 million for the six months
ended December 31, 2008 and 2007, respectively.  Net loss was
$9,965,000 for the six months ended December 31, 2008 compared to net income of
$1,413,000 for the six months ended December 31, 2007.





We had
adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
of $2,176,000 and $961,000 for six months ended December 31, 2008 and 2007,
respectively. EBITDA, is a non-GAAP measure of income and does not include the
effects of interest and taxes, and excludes the “non-cash” effects of
depreciation and amortization on current assets. Companies have some discretion
as to which elements of depreciation and amortization are excluded in the EBITDA
calculation. We exclude all depreciation charges related to property, plant and
equipment, and all amortization charges, including amortization of leasehold
improvements and other intangible assets. We then further adjust EBITDA to
exclude extraordinary items and costs related to share based compensation
expenses, goodwill impairment charges and other non-cash charges consistent with
the financial covenants of our credit facility. As explained above, we believe
that EBITDA is useful to us and to our investors in evaluating and measuring our
financial performance.  While management considers EBITDA and adjusted
EBITDA useful in analyzing our results, it is not intended to replace any
presentation included in our consolidated financial statements.  Set
forth below is a reconciliation of EBITDA and adjusted EBITDA to net income, the
most directly comparable GAAP measure for the six months ended December 31, 2008
and 2007.


29




Six months ended December 31,
                      
                      
                      Change2008
                      
                      
                      2007
                      
                      
                      Amount
                      
                      
                      PercentNet
      income (loss)
                      
                      $
                      (9,966
                      )
                      
                      $
                      1,413
                      
                      
                      $
                      (11,379
                      )
                      
                      
                      (805.3
                      )%Income
      tax expense (benefit)
                      
                      
                      (230
                      )
                      
                      
                      737
                      
                      
                      
                      (967
                      )
                      
                      
                      (131.2
                      )%Interest
      expense – net
                      
                      
                      92
                      
                      
                      
                      71
                      
                      
                      
                      21
                      
                      
                      
                      29.6
                      %Depreciation
      and amortization
                      
                      
                      788
                      
                      
                      
                      481
                      
                      
                      
                      307
                      
                      
                      
                      63.8
                      %EBITDA
      (Earnings before interest, taxes, depreciation and
      amortization)
                      
                      $
                      (9,316
                      )
                      
                      $
                      2,702
                      
                      
                      $
                      (12,018
                      )
                      
                      
                      (444.8
                      )%Share
      based compensation and other non-cash costs
                      
                      
                      89
                      
                      
                      
                      177
                      
                      
                      
                      (88
                      )
                      
                      
                      (49.7
                      )%Change
      in estimate of liabilities assumed in Airgroup
    acquisition
                      
                      
                      -
                      
                      
                      
                      (1,431
                      )
                      
                      
                      (1,431
                      )
                      
                      
                      (100.0
                      )%Tax
      indemnity
                      
                      
                      -
                      
                      
                      
                      (487
                      )
                      
                      
                      (487
                      )
                      
                      
                      (100.0
                      )%Goodwill
      impairment
                      
                      
                      11,403
                      
                      
                      
                      -
                      
                      
                      
                      11,403
                      
                      
                      NMAdjusted
      EBITDA
                      
                      $
                      2,176
                      
                      
                      $
                      961
                      
                      
                      $
                      1,215
                      
                      
                      
                      126.4
                      %





The
following table summarizes December 31, 2008 (actual and unaudited) and December
31, 2007 (actual and unaudited) transportation revenue, cost of transportation
and net transportation revenue (in thousands):




Six months ended December 31,
                        
                        
                        Change2008
                        
                        
                        2007
                        
                        
                        Amount
                        
                        
                        PercentTransportation
      revenue
                        
                        $
                        74,908
                        
                        
                        $
                        48,666
                        
                        
                        $
                        26,242
                        
                        
                        
                        53.9
                        %Cost
      of transportation
                        
                        
                        50,235
                        
                        
                        
                        31,829
                        
                        
                        
                        18,406
                        
                        
                        
                        57.8
                        %Net
      transportation revenue
                        
                        $
                        24,673
                        
                        
                        $
                        16,837
                        
                        
                        $
                        7,836
                        
                        
                        
                        46.5
                        %Net
      transportation margins
                        
                        
                        32.9
                        %
                        
                        
                        34.6
                        %





Transportation
revenue was $74.9 million for the six months ended December 31, 2008, an
increase of 53.9% over transportation revenue of $48.7 million for the six
months ended December 31, 2007.  Domestic transportation revenue
increased by 24.7% to $39.8 million for the six months ended December 31, 2008
from $31.9 million for the six months ended December 31, 2007.  The
increase was primarily due to additional domestic revenues associated with the
Adcom acquisition. Excluding the Adcom acquisition, domestic revenues for the
six months ended December 31, 2008 would have decreased by 9.4% to $28.9 million
from $31.9 million for the six months ended December 31,
2007.  International transportation revenue increased by 109.3% to
$35.2 million for the six months ended December 31, 2008 from $16.8 million for
the comparable prior year period, mainly attributed to increased international
revenues and the inclusion of international revenues associated with the Adcom
acquisition.  Excluding the Adcom acquisition, international revenue
for the six months ended December 31, 2008 would have increased by 41.2% to
$23.7 million from $16.8 million for the six months ended December 31,
2007.


30





Cost of
transportation increased to $50.2 million for the six months ended December 31,
2008 compared to $31.8 million for the six months ended December 31, 2007 as a
result of additional revenues associated with the Adcom
transaction.





Net
transportation margins decreased to 32.9% of transportation revenue for the six
months ended December 31, 2008 as compared to 34.6% of transportation revenue
for the six months ended December 31, 2007.  The net transportation
margins decreased in the current period due to the acquisition of Adcom which
has a higher percentage of international sales which generally have lower
margins.





The
following table compares certain December 31, 2008 (unaudited) and December 31,
2007 (unaudited) condensed consolidated statement of income data as a percentage
of our net transportation revenue (in thousands):





Six months ended December 31,2008
                                    
                                    
                                    2007
                                    
                                    
                                    ChangeAmount
                                    
                                    
                                    Percent
                                    
                                    
                                    Amount
                                    
                                    
                                    Percent
                                    
                                    
                                    Amount
                                    
                                    
                                    PercentNet
      transportation revenue
                                    
                                    $
                                    24,673
                                    
                                    
                                    
                                    100.0
                                    %
                                    
                                    $
                                    16,837
                                    
                                    
                                    
                                    100.0
                                    %
                                    
                                    $
                                    7,836
                                    
                                    
                                    
                                    46.5
                                    %Agent
      commissions
                                    
                                    
                                    16,553
                                    
                                    
                                    
                                    67.1
                                    %
                                    
                                    
                                    12,006
                                    
                                    
                                    
                                    71.3
                                    %
                                    
                                    
                                    4,547
                                    
                                    
                                    
                                    37.9
                                    %Personnel
      costs
                                    
                                    
                                    3,724
                                    
                                    
                                    
                                    15.1
                                    %
                                    
                                    
                                    2,636
                                    
                                    
                                    
                                    15.6
                                    %
                                    
                                    
                                    1,088
                                    
                                    
                                    
                                    41.3
                                    %Other
      selling, general and administrative
                                    
                                    
                                    2,125
                                    
                                    
                                    
                                    8.6
                                    %
                                    
                                    
                                    1,435
                                    
                                    
                                    
                                    8.5
                                    %
                                    
                                    
                                    690
                                    
                                    
                                    
                                    48.1
                                    %Depreciation
      and amortization
                                    
                                    
                                    788
                                    
                                    
                                    
                                    3.2
                                    %
                                    
                                    
                                    482
                                    
                                    
                                    
                                    2.9
                                    %
                                    
                                    
                                    306
                                    
                                    
                                    
                                    63.5
                                    %Restructuring
      charge
                                    
                                    
                                    220
                                    
                                    
                                    
                                    0.9
                                    %
                                    
                                    
                                    -
                                    
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    220
                                    
                                    
                                    NMGoodwill
      impairment
                                    
                                    
                                    11,403
                                    
                                    
                                    
                                    46.2
                                    %
                                    
                                    
                                    -
                                    
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    11,403
                                    
                                    
                                    NMTotal
      operating costs
                                    
                                    
                                    34,813
                                    
                                    
                                    
                                    141.1
                                    %
                                    
                                    
                                    16,559
                                    
                                    
                                    
                                    98.3
                                    %
                                    
                                    
                                    18,254
                                    
                                    
                                    
                                    110.2
                                    %Income
      (loss) from operations
                                    
                                    
                                    (10,140
                                    )
                                    
                                    
                                    (41.1
                                    )%
                                    
                                    
                                    278
                                    
                                    
                                    
                                    1.7
                                    %
                                    
                                    
                                    (10,418
                                    )
                                    
                                    
                                    (3,747.5
                                    )%Other
      income (expense)
                                    
                                    
                                    (57
                                    )
                                    
                                    
                                    (0.2
                                    )%
                                    
                                    
                                    1,840
                                    
                                    
                                    
                                    10.9
                                    %
                                    
                                    
                                    (1,897
                                    )
                                    
                                    
                                    (103.1
                                    )%Income
      (loss) before income taxes andminority
      interest
                                    
                                    
                                    (10,197
                                    )
                                    
                                    
                                    (41.3
                                    )%
                                    
                                    
                                    2,117
                                    
                                    
                                    
                                    12.6
                                    %
                                    
                                    
                                    (12,314
                                    )
                                    
                                    
                                    (581.7
                                    )%Income
      tax (expense) benefit
                                    
                                    
                                    230
                                    
                                    
                                    
                                    0.9
                                    %
                                    
                                    
                                    (737
                                    )
                                    
                                    
                                    (4.3
                                    )%
                                    
                                    
                                    967
                                    
                                    
                                    
                                    131.2
                                    %Income
      (loss) before minority interest
                                    
                                    
                                    (9,967
                                    )
                                    
                                    
                                    (13.3
                                    )%
                                    
                                    
                                    1,381
                                    
                                    
                                    
                                    8.2
                                    %
                                    
                                    
                                    (11,348
                                    )
                                    
                                    
                                    (821.7
                                    )%Minority
      interest
                                    
                                    
                                    2
                                    
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    32
                                    
                                    
                                    
                                    0.2
                                    %
                                    
                                    
                                    (30
                                    )
                                    
                                    
                                    (93.8
                                    )%Net
      income (loss)
                                    
                                    $
                                    (9,965
                                    )
                                    
                                    
                                    (40.4
                                    )%
                                    
                                    $
                                    1,413
                                    
                                    
                                    
                                    8.4
                                    %
                                    
                                    $
                                    (11,377
                                    )
                                    
                                    
                                    (805.7
                                    )%




Agent
commissions were $16.6 million for the six months ended December 31, 2008, an
increase of 37.9% from $12.0 million for the six months ended December 31,
2007.  Agent commissions as a percentage of net transportation revenue
decreased to 67.1% for six months ended December 31, 2008 from 71.3% for the
comparable prior year period as a result of the introduction of Company owned
operations in Detroit, and Newark, NJ as well as three Company owned stores
within the Adcom network where operations were not subject to agent
commissions.





Personnel
costs were $3.7 million for the six months ended December 31, 2008, an increase
of 41.3% from $2.6 million for the six months ended December 31,
2007.  Personnel costs as a percentage of net transportation revenue
decreased to 15.1% for six months ended December 31, 2008 from 15.6% for the
comparable prior year period primarily as a result of increased personnel costs
associated with new Company owned stores and the increased head count associated
with the Adcom transaction.


31




Other
selling, general and administrative costs were $2.1 million for the six months
ended December 31, 2008, an increase of 48.1% from $1.4 million for the six
months ended December 31, 2007, relating primarily to the increase in Company
owned stations and the acquisition of Adcom. As a percentage of net
transportation revenue, other selling, general and administrative costs
increased slightly to 8.6% for six months ended December 31, 2008 from 8.5% for
the comparable prior year period.





Depreciation
and amortization costs were approximately $788,000 and $482,000 for the six
months ended December 31, 2008 and 2007, respectively.  Depreciation
and amortization as a percentage of net transportation revenue increased to 3.2%
for the six months ended December 31, 2008 from 2.9% for the comparable prior
year period, primarily due to increased amortization costs associated with the
Adcom transaction.





Restructuring
cost incurred in the six months ended December 31, 2008 were $220,000 as a
result of the Adcom acquisition and relate to the elimination of redundant
international personnel and facilities costs.  These restructuring
charges will be paid out over a one year period.  There were no
similar costs for the comparable prior year.





For
the six months ending December 31, 2008 the Company recorded an impairment
charge to goodwill in the amount of $11,403,000.





Loss
from operations was $10,140,000 for the six months ended December 31, 2008
compared to income from operations of $278,000 for the six months ended December
31, 2007.





Other
expense was $57,000 for the six months ended December 31, 2008 compared to other
income of $1,840,000 for the six months ended December 31, 2007.  For
the six months ending December 31, 2007, the Company recorded a $1.4 million
change in estimate of the liabilities assumed in the acquisition of Airgroup
combined with an additional $487,000 in income recognized as a result of the
related tax indemnity.





Net loss
was $9,965,000 for the six months ended December 31, 2008, compared to net
income of $1,413,000 for the six months ended December 31, 2007.




Supplemental
Pro Forma Information





The
following table provides a reconciliation of December 31, 2008 (pro forma and
unaudited) and December 31, 2007 (pro forma and unaudited) adjusted EBITDA to
net income, the most directly comparable GAAP measure in accordance with SEC
Regulation G (in thousands):





Six months ended December 31,
                      
                      
                      Change2008
                      
                      
                      2007
                      
                      
                      Amount
                      
                      
                      PercentNet
      income (loss)
                      
                      $
                      (10,085
                      )
                      
                      $
                      1,292
                      
                      
                      $
                      (11,377
                      )
                      
                      
                      (880.6
                      )%Income
      tax expense (benefit)
                      
                      
                      (222
                      )
                      
                      
                      740
                      
                      
                      
                      (962
                      )
                      
                      
                      (130.0
                      )%Interest
      expense – net
                      
                      
                      165
                      
                      
                      
                      167
                      
                      
                      
                      (2
                      )
                      
                      
                      (1.2
                      )%Depreciation
      and amortization
                      
                      
                      821
                      
                      
                      
                      552
                      
                      
                      
                      269
                      
                      
                      
                      48.7
                      %EBITDA
      (Earnings before interest, taxes, depreciation and
      amortization)
                      
                      $
                      (9,321
                      )
                      
                      
                      2,751
                      
                      
                      $
                      (12,072
                      )
                      
                      
                      (438.8
                      )%Share
      based compensation and other non-cash costs
                      
                      
                      11,492
                      
                      
                      
                      (1,741
                      )
                      
                      
                      13,233
                      
                      
                      
                      (760
                      )%Adjusted
      EBITDA
                      
                      $
                      2,171
                      
                      
                      $
                      1,010
                      
                      
                      $
                      1,161
                      
                      
                      
                      115.0
                      %




32





The
following table summarizes December 31, 2008 (pro forma and unaudited) and
December 31, 2007 (pro forma and unaudited) transportation revenue, cost of
transportation and net transportation revenue (in thousands):




Six months ended December 31,
                        
                        
                        Change2008
                        
                        
                        2007
                        
                        
                        Amount
                        
                        
                        PercentTransportation
      revenue
                        
                        $
                        87,052
                        
                        
                        $
                        78,763
                        
                        
                        $
                        8,289
                        
                        
                        
                        10.5
                        %Cost
      of transportation
                        
                        
                        58,575
                        
                        
                        
                        51,005
                        
                        
                        
                        7,570
                        
                        
                        
                        14.8
                        %Net
      transportation revenue
                        
                        $
                        28,477
                        
                        
                        $
                        27,758
                        
                        
                        $
                        719
                        
                        
                        
                        2.6
                        %Net
      transportation margins
                        
                        
                        32.7
                        %
                        
                        
                        35.2
                        %





Pro forma
transportation revenue was $87.1 million for the six months ended December 31,
2008, an increase of 10.5% over pro forma transportation revenue of $78.8
million for the six months ended December 31, 2007.





Pro forma
cost of transportation increased to $58.6 million for the six months ended
December 31, 2008 an increase of 14.8% over pro forma costs of transportation of
$51.0 million for the six months ended December 31, 2007.





Pro forma
net transportation margins decreased to 32.7% for the six months ended December
31, 2008 compared to pro forma transportation margins of 35.2% for the six
months ended December 31, 2007.  The net transportation margins
decreased in the current six-month period due to the acquisition of Adcom which
has a higher percentage of international sales which generally have lower
margins.





The
following table compares certain December 31, 2008 (pro forma and unaudited) and
December 31, 2007 (pro forma and unaudited) condensed consolidated statement of
income data as a percentage of our net transportation revenue (in
thousands):





Six months ended December 31,2008
                                      
                                      
                                      2007
                                      
                                      
                                      ChangeAmount
                                      
                                      
                                      Percent
                                      
                                      
                                      Amount
                                      
                                      
                                      Percent
                                      
                                      
                                      Amount
                                      
                                      
                                      PercentNet
      transportation revenue
                                      
                                      $
                                      28,477
                                      
                                      
                                      
                                      100
                                      %
                                      
                                      $
                                      27,758
                                      
                                      
                                      
                                      100.0
                                      %
                                      
                                      $
                                      719
                                      
                                      
                                      
                                      2.6
                                      %Agent
      commissions
                                      
                                      
                                      19,525
                                      
                                      
                                      
                                      68.6
                                      %
                                      
                                      
                                      20,289
                                      
                                      
                                      
                                      73.1
                                      %
                                      
                                      
                                      (764
                                      )
                                      
                                      
                                      (3.8
                                      )%Personnel
      costs
                                      
                                      
                                      4,171
                                      
                                      
                                      
                                      14.6
                                      %
                                      
                                      
                                      4,064
                                      
                                      
                                      
                                      14.6
                                      %
                                      
                                      
                                      107
                                      
                                      
                                      
                                      2.6
                                      %Other
      selling, general and administrative
                                      
                                      
                                      2,504
                                      
                                      
                                      
                                      8.8
                                      %
                                      
                                      
                                      2,245
                                      
                                      
                                      
                                      8.1
                                      %
                                      
                                      
                                      259
                                      
                                      
                                      
                                      11.5
                                      %Depreciation
      and amortization
                                      
                                      
                                      821
                                      
                                      
                                      
                                      2.9
                                      %
                                      
                                      
                                      552
                                      
                                      
                                      
                                      2.0
                                      %
                                      
                                      
                                      269
                                      
                                      
                                      
                                      48.7
                                      %Restructuring
      charge
                                      
                                      
                                      220
                                      
                                      
                                      
                                      0.8
                                      %
                                      
                                      
                                      -
                                      
                                      
                                      
                                      0.0
                                      %
                                      
                                      
                                      220
                                      
                                      
                                      NMGoodwill
      impairment
                                      
                                      
                                      11,403
                                      
                                      
                                      
                                      40.0
                                      %
                                      
                                      
                                      -
                                      
                                      
                                      
                                      0.0
                                      %
                                      
                                      
                                      11,403
                                      
                                      
                                      NMTotal
      operating costs
                                      
                                      
                                      38,644
                                      
                                      
                                      
                                      135.7
                                      %
                                      
                                      
                                      27,150
                                      
                                      
                                      
                                      97.8
                                      %
                                      
                                      
                                      11,494
                                      
                                      
                                      
                                      42.3
                                      %Income
      (loss) from operations
                                      
                                      
                                      (10,167
                                      )
                                      
                                      
                                      (35.7
                                      )%
                                      
                                      
                                      608
                                      
                                      
                                      
                                      2.2
                                      %
                                      
                                      
                                      (10,775
                                      )
                                      
                                      
                                      (1,772.2
                                      )%Other
      income (expense)
                                      
                                      
                                      (142
                                      )
                                      
                                      
                                      (0.5
                                      )%
                                      
                                      
                                      1,392
                                      
                                      
                                      
                                      5.0
                                      %
                                      
                                      
                                      (1,534
                                      )
                                      
                                      
                                      (110.2
                                      )%Income
      (loss) before income taxes andminority
      interest
                                      
                                      
                                      (10,309
                                      )
                                      
                                      
                                      (36.2
                                      )%
                                      
                                      
                                      2,000
                                      
                                      
                                      
                                      7.2
                                      %
                                      
                                      
                                      (12,309
                                      )
                                      
                                      
                                      (615.5
                                      )%Income
      tax (expense) benefit
                                      
                                      
                                      222
                                      
                                      
                                      
                                      (0.8
                                      )%
                                      
                                      
                                      (740
                                      )
                                      
                                      
                                      2.7
                                      %
                                      
                                      
                                      962
                                      
                                      
                                      
                                      (130.0
                                      )%Income
      (loss) before minority interest
                                      
                                      
                                      (10,087
                                      )
                                      
                                      
                                      (35.4
                                      )%
                                      
                                      
                                      1,260
                                      
                                      
                                      
                                      4.5
                                      %
                                      
                                      
                                      (11,347
                                      )
                                      
                                      
                                      (900.6
                                      )%Minority
      interest
                                      
                                      
                                      (2
                                      )
                                      
                                      
                                      (0.0
                                      )%
                                      
                                      
                                      (32
                                      )
                                      
                                      
                                      (0.1
                                      )%
                                      
                                      
                                      30
                                      
                                      
                                      
                                      (93.8
                                      )%Net  income
      (loss)
                                      
                                      $
                                      (10,085
                                      )
                                      
                                      
                                      (35.4
                                      )%
                                      
                                      $
                                      1,292
                                      
                                      
                                      
                                      4.7
                                      %
                                      
                                      $
                                      (11,377
                                      )
                                      
                                      
                                      (880.6
                                      )%




33




Pro forma
agent commissions were $19.5 million for the six months ended December 31, 2008,
a decrease of 3.8% from $20.3 million for the six months ended December 31,
2007.  Pro forma agent commissions as a percentage of net
transportation revenue decreased to 68.6% of net transportation revenue the for
six months ended December 31, 2008 compared to 73.1% for the comparable prior
year period as a result of the introduction of Company owned operations in
Detroit, and Newark NJ as well as six Company owned stores within the Adcom
network where operations were not subject to agent commissions.





Pro
forma personnel costs were $4.2 million for the six months ended December 31,
2008, an increase of 2.6% from $4.1 million for the six months ended December
31, 2007.  Pro forma personnel costs as a percentage of net
transportation revenue remained unchanged at 14.6% for the six months ended
December 31, 2008 and for the comparable prior year period.





Pro
forma other selling, general and administrative costs were $2,504,000 for the
six months ended December 31, 2008, an increase of 11.5% from $2,245,000 for the
six months ended December 31, 2007.  As a percentage of net
transportation revenue, pro forma other selling, general and administrative
costs increased to 8.8% for six months ended December 31, 2008 from 8.1% for the
comparable prior year period.





Pro
forma depreciation and amortization costs were approximately $821,000 and
$552,000 for the six months ended December 31, 2008 and 2007,
respectively.  Pro forma depreciation and amortization as a percentage
of net transportation revenue increased to 2.9% for the six months ended
December 31, 2008 from 2.0% for the comparable prior year
period.





Pro
forma restructuring cost incurred in the six months ended December 31, 2008 were
$220,000 as a result of the Adcom acquisition and relate to the elimination of
redundant international personnel and facilities costs.  These
restructuring charges will be paid out over a one year period.  There
were no similar costs for the comparable prior year.





For
the six months ended December 31, 2008 the Company recorded an impairment charge
to goodwill in the amount of $11,403,000.





Pro
forma loss from operations was $10,167,000 for the six months ended December 31,
2008 compared to income from operations of $608,000 for the six months ended
December 31, 2007.





Pro
forma other expense was $142,000 for the six months ended December 31, 2008
compared to other income of $1,362,000 for the six months ended December 31,
2007.  For the six months ending December 31, 2007, the Company
recorded a $1.4 million change in estimate of the liabilities assumed in the
acquisition of Airgroup combined with an additional $487,000 in income
recognized as a result of the related tax indemnity.





Pro forma
net loss was $10,085,000 for the six months ended December 31, 2008, compared to
net income $1,292,000 for the six months ended December 31, 2007.




Liquidity
and Capital Resources





Net cash
used for operating activities for the six months ended December 31, 2008 was
$1,792,000 compared to net cash provided by operating activities for the six
months ended December 31, 2007 of $626,000.  The change was
principally driven by growth resulting in a decrease in working
capital.


34





Net cash
used for investing activities was $5,240,000 for the six months ended
December 31, 2008 compared to net cash used of $2,110,000 for the six months
ended December 31, 2007.  Use of cash for the six months ended
December 31, 2008 consisted primarily of approximately $4.8 million for the
acquisition of Adcom, $191,000 spent on technology and equipment, and $210,244
in net issuance of notes receivable.  Use of cash for the six months
ended December 31, 2007 consisted primarily of $1.9 million for the acquisition
of automotive assets and an additional $185,000 spent on technology and
equipment.





Net cash
provided by financing activities for the six months ended December 31, 2008 was
$7,664,000 compared to net cash provided by financing activities of $961,000 for
the six months ended December 31, 2007.  Net cash provided by
financing activities for the six months ended December 31, 2008, consisted
primarily of borrowings from our credit facility for the acquisition of Adcom
and additional borrowings to support working capital requirements driven by the
growth of the business.  Net cash provided by financing activities for
the six months ended December 31, 2007, consisted primarily of borrowings from
our credit facility offset by payments to our former Airgroup
shareholders.





Acquisitions





Below are
descriptions of material acquisitions made since 2006 including a breakdown of
consideration paid at closing and future potential earn-out
payments.  We define “material acquisitions” as those with aggregate
potential consideration of $1.0 million or more.





Effective
January 1, 2006, we acquired all of the outstanding stock of
Airgroup.  The transaction was valued at up to 14.0 million consisting
of: (i) $9.5 million payable in cash at closing; (ii) a subsequent cash payment
of $0.5 million in cash which was paid on December 31, 2007; (iii) as amended,
an additional base payment of $0.6 million payable in cash, $300,000 of which
was paid on June 30, 2008 and $300,000 was paid on January 1, 2009; (iv) a base
earn-out payment of $1.9 million payable in Company common stock over a six-year
earn-out period based upon Airgroup achieving income from continuing operations
of not less than $2.5 million per year and (v) as additional incentive to
achieve future earnings growth, an opportunity to earn up to an additional $1.5
million payable in Company common stock at the end of a five-year earn-out
period (the “Tier-2 Earn-Out”). Under Airgroup’s Tier-2 Earn-Out, the former
shareholders of Airgroup are entitled to receive 50% of the cumulative income
from continuing operations in excess of $15,000,000 generated during the
five-year earn-out period up to a maximum of $1,500,000.  With respect
to the base earn-out payment of $1.9 million, in the event there is a shortfall
in income from continuing operations, the earn-out payment will be reduced on a
dollar-for-dollar basis to the extent of the shortfall.  Shortfalls
may be carried over or carried back to the extent that income from continuing
operations in any other payout year exceeds the $2.5 million
level.  For the year ended June 30, 2007, the former shareholders of
Airgroup earned $214,000 in base earn-out payments.  For the year
ended June 30, 2008, the former shareholders of Airgroup earned and additional
$417,000 in base earn-out payments.




During
the quarter ended December 31, 2007, we adjusted the estimate of accrued
transportation costs assumed in the acquisition of Airgroup which resulted in
the recognition of approximately $1.4 million in non-recurring
income.  Pursuant to the acquisition agreement, the former
shareholders of Airgroup have indemnified us for taxes of $487,000 associated
with the income recognized in connection with this change in estimate which has
been reflected as a reduction of the additional base payment otherwise payable
to the former shareholders of Airgroup.





In
November 2008, the Company amended the Airgroup Stock Purchase Agreement and
agreed to unconditionally pay the former Airgroup shareholders an earn-out
payment of $633,333 for the earn-out period ending June 30, 2009 to be paid on
or about October 1, 2009 by delivery of shares of common stock of the
Company.  In consideration for the certainty of the earn-out payment,
the former Airgroup shareholders have agreed (i) to waive and release the
Company from any and all further obligations to pay any earn-outs payments on
account of shortfall amounts, if any, that may have accumulated prior to
June 30, 2009; (ii) to waive and release the Company from any and all
further obligation to account for and pay to the Tier-2 earn-out payment; and
(iii) that the earn-out payment to be paid for the earn-out period ending June
30, 2009 will constitute a full and final payment to the former Airgroup
shareholders of any and all amounts due to the former Airgroup shareholders
under the Airgroup Stock Purchase Agreement.


35


In May,
2007, we launched a new logistics service offering focused on the automotive
industry through our wholly owned subsidiary, Radiant Logistics Global Services,
Inc. (“RLGS”).  We entered into an Asset Purchase Agreement (the
“APA”) with Mass Financial Corporation (“Mass”) to acquire certain assets
formerly used in the operations of the automotive division of Stonepath Group,
Inc. (the “Purchased Assets”).  Pursuant to the initial APA, the
original agreement of the transaction was valued at up to $2.75 million, and was
later reduced due to indemnity claims asserted against Mass.





In
November 2007,the
purchase price was reduced to $1.56 million, consisting of cash of $560,000 and
a $1.0 million credit in satisfaction of indemnity claims asserted by us arising
from our interim operation of the Purchased Assets since May 22, 2007. Of the
cash component, $100,000 was paid in May of 2007, $265,000 was paid at closing,
and a final payment of $195,000 was to be paid in November of 2008, subject to
off-set of up to $75,000 for certain qualifying expenses incurred by
us.  Net of qualifying expenses and a discount for accelerated
payment, the final payment was reduced to $95,000 and paid in June of
2008.  For more information, see Note 3 to our consolidated financial
statement included elsewhere herein.





Effective
September 1, 2008, we acquired all of the outstanding stock of Adcom Express,
Inc.  The transaction was valued at up to $11,050,000, consisting of:
(i) $4,750,000.00 in cash paid at the closing; (ii) $250,000 in cash payable
shortly after the closing, subject to adjustment, based upon the working capital
of Adcom as of August 31, 2008; (iii) up to $2,800,000 in four “Tier-1 Earn-Out
Payments” of up to $700,000 each, covering the four year earn-out period through
June 30, 2012, based upon Adcom achieving certain levels of “Gross Profit
Contribution” (as defined in the agreement), payable 50% in cash and 50% in
shares of our common stock (valued at delivery date); (iv) a “Tier-2 Earn-Out
Payment” of up to a maximum of $2,000,000, equal to 20% of the amount by which
the Adcom cumulative Gross Profit Contribution exceeds $16,560,000 during the
four year earn-out period; and (v) an “Integration Payment” of $1,250,000
payable on the earlier of the date certain integration targets are achieved or
18 months after the closing, payable 50% in cash and 50% in our shares of our
common stock (valued at delivery date).





A dispute
has arisen between us and Robert Friedman, the former shareholder of Adcom, in
connection with our purchase of Adcom. Pursuant to the stock purchase agreement
governing the transaction, the final purchase price was to be adjusted
post-closing based upon, among other things, the closing date working capital of
Adcom. As of the date of this report, we have been unable to agree with Mr.
Friedman on the amount of Adcom's closing date working capital. In
addition, based upon information developed after the closing, we have
asserted certain claims which we believe constitute breaches of the
representations and warranties included in the stock purchase agreement. If we
are unable to resolve our differences, we will be caused to seek dispute
resolution in the manner governed by the stock purchase agreement. We have
fully accrued for all amounts potentially due Mr. Friedman in connection with
the stock purchase agreement, but believe these amounts could be reduced by more
than $500,000 pending the resolution of the disputed amounts in our
favor.  Due to the initial stage of the proceedings, we are able
to provide any definitive guidance on the likely outcome of
this matter.  Assuming minimum targeted earnings levels are
achieved, the following table summarizes our contingent base earn-out payments
related to the acquisition of Adcom, for the fiscal years indicated based on
results of the prior year (in thousands):





Estimated
      payment anticipated for fiscal year:
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013Earn-out
      period:
                  
                  9/1/2008
      –
                    6/30/2009
                  
                  
                  7/1/2009
      –
                    6/30/2010
                  
                  
                  7/1/2010
      –
                    6/30/2011
                  
                  
                  7/1/2011
      –
                    6/30/2012Earn-out
      payments:Cash
                  
                  $
                  350
                  
                  
                  $
                  350
                  
                  
                  $
                  350
                  
                  
                  $
                  350Equity
                  
                  
                  350
                  
                  
                  
                  350
                  
                  
                  
                  350
                  
                  
                  
                  350Total
      potential earn-out payments
                  
                  $
                  700
                  
                  
                  $
                  700
                  
                  
                  $
                  700
                  
                  
                  $
                  700Total
      gross margin targets
                  
                  $
                  3,600
                  
                  
                  $
                  4,320
                  
                  
                  $
                  4,320
                  
                  
                  $
                  4,320





(1)
              Earn-out
      payments are paid October 1 following each fiscal year
  end.




36




Credit
Facility





We
currently have a $15 million revolving credit facility (“Facility”) with Bank of
America, NA that expires in 2011. The Facility is collateralized by
accounts receivable and other assets of the Company and our
subsidiaries.  Advances under the Facility are available to fund
future acquisitions, capital expenditures or for other corporate purposes.
Borrowings under the facility bear interest, at our option, at the Bank’s prime
rate minus .15% to 1.00% or LIBOR plus 1.55% to 2.25%, and can be adjusted up or
down during the term of the Facility based on our performance relative to
certain financial covenants. The Facility provides for advances of up to 80% of
our eligible accounts receivable.





The terms
of the Facility are subject to certain financial and operational covenants which
may limit the amount otherwise available under the Facility.  The
first covenant limits funded debt to a multiple of 3.00 times our consolidated
EBITDA measured on a rolling four quarter basis (or a multiple of 3.25 at a
reduced advance rate of 75.0%). The second financial covenant requires that we
maintain a basic fixed charge coverage ratio of at least 1.1 to 1.0. The third
financial covenant is a minimum profitability standard that requires that we not
incur a net loss before taxes, amortization of acquired intangibles and
extraordinary items in any two consecutive quarterly accounting
periods.




Under the
terms of the Facility, we are permitted to make additional acquisitions without
the lender's consent only if certain conditions are satisfied. The conditions
imposed by the Facility include the following: (i) the absence of an event of
default under the Facility, (ii) the company to be acquired must be in the
transportation and logistics industry, (iii) the purchase price to be paid must
be consistent with the our historical business and acquisition model, (iv) after
giving effect for the funding of the acquisition, we must have undrawn
availability of at least $1.0 million under the Facility, (v) the lender must be
reasonably satisfied with projected financial statements that we provide
covering a 12 month period following the acquisition, (vi) the acquisition
documents must be provided to the lender and must be consistent with the
description of the transaction provided to the lender, and (vii) the number of
permitted acquisitions is limited to six per calendar year and shall not exceed
$7.5 million in aggregate purchase price financed by funded debt. In the event
that we are not able to satisfy the conditions of the Facility in connection
with a proposed acquisition, we must either, forego the acquisition, obtain the
lender's consent, or retire the Facility. This may limit or slow our ability to
achieve the critical mass we may need to achieve our strategic
objectives.





Given our
continued focus on the build-out of our network of exclusive agency locations,
we believe that our current working capital and anticipated cash flow from
operations are adequate to fund existing operations. However, continued growth
through strategic acquisitions, will require additional sources of financing as
our existing working capital is not sufficient to finance our operations and an
acquisition program. Thus, our ability to finance future acquisitions will be
limited by the availability of additional capital. We may, however, finance
acquisitions using our common stock as all or some portion of the consideration.
In the event that our common stock does not attain or maintain a sufficient
market value or potential acquisition candidates are otherwise unwilling to
accept our securities as part of the purchase price for the sale of their
businesses, we may be required to utilize more of our cash resources, if
available, in order to continue our acquisition program. If we do not have
sufficient cash resources through either operations or from debt facilities, our
growth could be limited unless we are able to obtain such additional capital. In
this regard and in the course of executing our acquisition strategy, we expect
to pursue an additional equity offering within the next twelve
months.





We have
used a significant amount of our available capital to finance the acquisition of
Adcom.  We currently have approximately $2.7 million in remaining
availability under the Facility to support future acquisitions and our on-going
working capital requirements.  We expect to structure acquisitions
with certain amounts paid at closing, and the balance paid over a number of
years in the form of earn-out installments which are payable based upon the
future earnings of the acquired businesses payable in cash, stock or some
combination thereof.  As we continue to execute our acquisition
strategy, we will be required to make significant payments in the future if the
earn-out installments under our various acquisitions become due. While we
believe that a portion of any required cash payments will be generated by the
acquired businesses, we may have to secure additional sources of capital to fund
the remainder of any cash-based earn-out payments as they become due. This
presents us with certain business risks relative to the availability of capacity
under our Facility, the availability and pricing of future fund raising, as well
as the potential dilution to our stockholders to the extent the earn-outs are
satisfied directly, or indirectly, from the sale of equity.


37




Off
Balance Sheet Arrangements




As of
December 31, 2008, we did not have any relationships with unconsolidated
entities or financial partners, such as entities often referred to as structured
finance or special purpose entities, which had been established for the purpose
of facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As such, we are not materially exposed to any financing,
liquidity, market or credit risk that could arise if we had engaged in such
relationships.





Critical
Accounting Policies





Accounting
policies, methods and estimates are an integral part of the consolidated
financial statements prepared by management and are based upon management's
current judgments. Those judgments are normally based on knowledge and
experience with regard to past and current events and assumptions about future
events. Certain accounting policies, methods and estimates are particularly
sensitive because of their significance to the financial statements and because
of the possibility that future events affecting them may differ from
management's current judgments. While there are a number of accounting policies,
methods and estimates that affect our financial statements, the areas that are
particularly significant include the assessment of the recoverability of
long-lived assets, specifically goodwill, acquired intangibles, and revenue
recognition.





We follow
the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment
test for goodwill and intangible assets with indefinite lives. Under the
provisions of SFAS No. 142, the first step of the impairment test requires that
we determine the fair value of its reporting unit, and compare the fair value to
the reporting unit’s carrying amount. The Company has only one reporting
unit.  To the extent the reporting unit’s carrying amount exceeds its
fair value, an indication exists that the reporting unit’s goodwill may be
impaired and we must perform a second more detailed impairment assessment. The
second impairment assessment involves allocating the reporting unit’s fair value
to all of its recognized and unrecognized assets and liabilities in order to
determine the implied fair value of the reporting unit’s goodwill as of the
assessment date. The implied fair value of the reporting unit’s goodwill is then
compared to the carrying amount of goodwill to quantify an impairment charge as
of the assessment date. We perform our annual impairment test during our fiscal
fourth quarter unless events or circumstances indicate an impairment may have
occurred before that time.





During
the second quarter of fiscal 2009, the Company concluded that indicators of
potential impairment were present due to the sustained decline in the Company’s
share price which resulted in the market capitalization of the Company being
less than its book value.  The Company conducted an impairment test
during the second quarter of fiscal 2009 based on present facts and
circumstances at that time and its business strategy in light of existing
industry and economic conditions, as well as taking into consideration future
expectations. As the Company has significantly grown the business since its
initial acquisition of Airgroup, it has also grown its customer relationship
intangibles as the Company added additional stations.  Through its
impairment testing and review the Company concluded that its discounted cashflow
analysis supports a valuation of its identifiable intangible assets well in
excess of their carrying value.  Factoring this with management’s
assessment of the fair value of other assets and liabilities results in no
residual implied fair value remaining to be allocated to
goodwill.  However, SFAS 142 does not allow the Company to recognize
the previously unrecognized intangible assets in connection with these new
stations.  As a result, at December 31, 2008, the Company
recorded a non-cash goodwill impairment charge of $11.4 million. The
Company does not expect this non-cash charge to have any impact on the Company’s
compliance with the financial covenants in its credit agreement.





Acquired
intangibles consist of customer related intangibles and non-compete agreements
arising from our acquisition. Customer related intangibles will be amortized
using accelerated methods over approximately 5 years and non-compete agreements
will be amortized using the straight line method over a 5 year
period.


38


We follow
the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which establishes accounting standards for the impairment of
long-lived assets such as property, plant and equipment and intangible assets
subject to amortization. We review long-lived assets to be held-and-used for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. If the sum of the
undiscounted expected future cash flows over the remaining useful life of a
long-lived asset is less than its carrying amount, the asset is considered to be
impaired. Impairment losses are measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset. When fair values are
not available, we estimated fair value using the expected future cash flows
discounted at a rate commensurate with the risks associated with the recovery of
the asset. Assets to be disposed of are reported at the lower of carrying amount
or fair value less costs to sell.





As a
non-asset based carrier, the Company does not own transportation assets. The
Company generates the major portion of its air and ocean freight revenues by
purchasing transportation services from direct (asset-based) carriers and
reselling those services to its customers. Based upon the terms in the contract
of carriage, revenues related to shipments where the Company issues a House
Airway Bill ("HAWB") or a House Ocean Bill of Lading ("HOBL") are recognized at
the time the freight is tendered to the direct carrier at origin. Costs
related to the shipments are also recognized at this same time based upon
anticipated margins, contractual arrangements with direct carriers, and other
known factors. The estimates are routinely monitored and compared to actual
invoiced costs. The estimates are adjusted as deemed necessary by the Company to
reflect differences between the original accruals and actual costs of purchased
transportation.





This
method generally results in recognition of revenues and purchased transportation
costs earlier than the preferred methods under generally accepted accounting
principles ("GAAP") which do not recognize revenues until a proof of delivery is
received or which recognize revenues as progress on the transit is made. The
Company’s method of revenue and cost recognition does not result in a material
difference from amounts that would be reported under such other
methods.





We
recognize revenue on a gross basis, in accordance with EITF 99-19, "Reporting
Revenue Gross versus Net", as a result of the following: We are the primary
obligor responsible for providing the service desired by the customer and are
responsible for fulfillment, including the acceptability of the service(s)
ordered or purchased by the customer. We, at our sole discretion, set the prices
charged to our customers, and are not required to obtain approval or consent
from any other party in establishing our prices.  We have multiple
suppliers for the services we sell to our customers, and have the absolute and
complete discretion and right to select the supplier that will provide the
product(s) or service(s) ordered by a customer, including changing the supplier
on a shipment-by-shipment basis. In most cases, we determine the nature, type,
characteristics, and specifications of the service(s) ordered by the customer.
We also assume credit risk for the amount billed to the customer.




Item
4T.           Controls
and Procedures.





An
evaluation of the effectiveness of our "disclosure controls and procedures" (as
such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") as of December 31, 2008 was carried
out by our management under the supervision and with the participation of our
Chief Executive Officer ("CEO") who also serves as our Chief Financial Officer
("CFO"). Based upon that evaluation, our CEO/CFO concluded that, as of December
31, 2008, our disclosure controls and procedures were not effective to provide
reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms and (ii) accumulated and communicated to our
management, including our CEO/CFO, as appropriate to allow timely decisions
regarding disclosure.





In
connection with its review of our quarterly results for the period ended
December 31, 2008, our independent auditor identified a material adjustment that
was required to recognize an impairment to goodwill.  As a result, we
have concluded that there is a material weakness regarding our goodwill and
intangible assets impairment analysis process.  We are currently
evaluating how to effectively remediate this material weakness.  In
this regard, we continue to review our disclosure controls and procedures,
including our internal control over financial reporting, and intend to make
changes aimed at enhancing their effectiveness and to ensure that our systems
evolve with our business.





There
were no changes to our internal control over financial reporting during the
fiscal quarter ended December 31, 2008 that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.


39




PART
II. OTHER INFORMATION




Item
1.  Legal Proceedings.




From time
to time, our operating subsidiary, Airgroup, is involved in legal matters or
named as a defendant in legal actions arising in its ordinary course of
business.  Management believes that these matters will not have a
material adverse effect on our financial statements.





Automotive
Garnishment Proceeding and Burke Proceeding





On June
15, 2007, writs of garnishment issued by Douglas Burke (“Burke”), a judgment
creditor of Stonepath Logistics, Domestic Services, Inc. (“Stonepath”), were
directed to, among others, the automotive customers being serviced by our
Radiant Logistics Global Services, Inc. (“RLGS”) subsidiary pursuant to the
Management Services Agreement between RLGS and Mass Financial Corp.
(“Mass”).  Together with Mass, RLGS intervened in the matter and
objected to the writs of garnishment for the reason that Mass’s interest in the
former Stonepath assets originated as the result of a prior perfected security
interest that was properly foreclosed upon by Mass.  The matter was
pending in the Circuit Court for the County of Wayne, State of Michigan, Case
No. 04-433025-CA (the “State Court Actions).  On August 14, 2007, a
Stipulated Order Regarding Writs of Garnishment was entered whereby Mass posted
a letter of credit in the amount of $2,750,000 for the benefit of
Burke.  Upon posting of that letter of credit, the garnished customers
were released from the writs of garnishment and directed to release all
garnished funds and make all future payments as directed to Mass and our RLGS
subsidiary.





On or
about January 18, 2007, Burke filed a separate suit against RLGS in the 3rd
Circuit Court, Wayne County, Michigan (the “Civil Action”).  In the
complaint, Burke sought to enforce against RLGS a $2.2 million judgment
Burke obtained against Stonepath, the former owners of the assets RLGS purchased
from Mass, under legal theories sounding in successor liability, alter-ego,
piercing the corporate veil, and implied or express agreement. The amount at
issue was secured by a $2.75 million letter of credit provided by Mass in
connection with the acquisition of the purchased assets.  RLGS removed
the matter to the Federal District Court sitting in the Eastern District of
Michigan and filed a motion to dismiss or stay the proceedings pending the
outcome of the related Automotive Garnishment Proceeding described
above.  The court issued a stay of proceedings pending the outcome of
the related Automotive Garnishment Proceeding.





On
February 9, 2009, RLGS entered into a Release and Settlement Agreement with
Burke pursuant to which RLGS (i) dismissed its objections to writs of
garnishment entered in favor of Burke (ii) withdrew as an intervening party to
the State Court Action and (iii) agreed to take no further action or position as
a party to the State Court Action.   In consideration n of the
forgoing, Burke (i) released RLGS from any and all claims related to the writs
of garnishment, the underlying judgment or the Civil Action, (ii) consented to
Civil Action being dismissed with prejudice, and (iii) agreed that his recovery,
if any, with respect to RLGS will be limited to the letter of credit posted by
Mass.





Item
6. Exhibits




Exhibit
                        No.
                      
                      Exhibit
                      
                      Method
      of Filing31.1
                      
                      Certification
      by Principal Executive Officer and Principal Financial Officer pursuant
      to  Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act
      of 1934, as amended, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                      
                      Filed
      herewith32.1
                      
                      Certification
      by the Principal Executive Officer and Principal Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002
                      
                      Filed
      herewith




40


99.1
                              
                              Press
      Release dated February 13, 2009
                              
                              Incorporated
      by reference to Exhibit 99.1 to the Form 10-Q for the quarterly period
      ended December 31, 2008, filed on February 13,
  2009.




41





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




RADIANT
      LOGISTICS, INC.Date:
      October 2, 2009
              
              /s/ Bohn H. CrainBohn
      H. CrainChief
      Executive Officer and Chief Financial Officer
                (Principle
      Accounting Officer)




42




EXHIBIT
INDEX




Exhibit
                    No.
                  
                  Exhibit31.1
                  
                  Certification
      by Principal Executive Officer and Principal Financial Officer pursuant to
      Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
      amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
                  
                  Certification
      by Principal Executive Officer/Principal Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002




43